Slide 1: 2018 Full Year Results
2 NOVEMBER 2018 2018 FULL YEAR RESULTS ALBERTO CALDERON, MANAGING DIRECTOR AND CEO CHRISTOPHER DAVIS, CHIEF FINANCIAL OFFICER
Slide 2: Disclaimer
Disclaimer Forward looking statements This presentation has been prepared by Orica Limited. The information contained in this presentation is for informational purposes only. The information contained in this presentation is not investment or financial product advice and is not intended to be used a
Slide 3: Safety, health & environment
Safety, health & environment Orica’s core values Safety is our priority. Always. Safety & health Environment We respect • Stable Total Recordable Injury Frequency • No environmental incidents (category 3+) and value all. Rate • New catalyst trial at Kooragang Island in • Safety Leadership program em
Slide 4: Highlights
Highlights • Significant uplift in second half EBIT from first half • Strong volume growth particularly from the APA region in the second half • Substantial volume mix/margin improvement including benefits from new contracts • Full year EBIT lower than last year due to “one-off” impacts in the first
Slide 5: Results summary
Results summary Strong volume growth • Total AN product volumes up 5%, Underlying reflecting strong demand from new and AN volumes EBIT NPAT existing customers, particularly in Australia and Indonesia 3.82mt $618m $324m • EBIT lower due to previously disclosed +5% -3% -16% one-off impacts and headwi
Slide 6: Australia Pacific & Asia
Australia Pacific & Asia Strong result with continued volume growth and improved pricing Volumes AN volume EBIT & EBIT margin (%) • Volumes up 14% yoy, from: kt $m 215 – the Pilbara region (~20%), impacted by Burrup 884 197 748 742 179 – Indonesia (~40%), typically at lower margins; Bontang fully 69
Slide 7: Burrup update
Burrup update Short term challenges; fundamentals remain strong Strategic 30+ year asset • Plant located in the Pilbara region of Western Australia; strong 5-year growth in materials moved (i.e. strip ratio) • 50% JV with distinct responsibilities; Yara operates the plant, Orica is responsible for s
Slide 8: North America
North America Improved manufacturing and services deliver stronger second half Volumes AN volume EBIT & EBIT margin (%) kt $m • AN volumes up 5% from pcp, excluding impact of JV partner sourcing arrangements in 1H18 572 594 102 575 546 560 553 95 97 98 • Volume growth with increased market share in
Slide 9: Europe, Middle East & Africa
Europe, Middle East & Africa Improved 2H performance from contract wins Volumes AN volume EBIT & EBIT margin (%) kt $m • Higher volumes in 2H18 from new contract wins in CIS offsetting lower volumes in Turkey 55 235 224 244 227 235 • Strong EBS growth across all regions, reflecting shift 212 44 from
Slide 10: Latin America
Latin America Region impacted by short term challenges; long term fundamentals remain strong Volumes AN volume EBIT & EBIT margin (%) kt $m • Lower demand in Colombia and Argentina partially offset by higher volumes in Chile 36 304 311 304 333 301 317 33 32 • Lower cyanide sales due to customer mine
Slide 11: Minova
Minova Turnaround starting to deliver benefits Sales Revenue EBIT & EBIT margin (%) $m $m • ~14% increase in revenue across all regions 280 244 239 8 EBIT 211 196 212 • Brand re-established and business restructured 5 2 4% 2% 2 • Substantial reduction in overheads -2 1% -4 1% • Pricing initiatives i
Slide 12: Auxiliaries
Auxiliaries* GroundProbe™ delivers above investment case Sales Revenue EBIT 2H16 & EBIT margin 2H17 (%) $m 1H16 $m 1H17 1H18 2H18 • Leveraging Orica’s global reach with >100 Orica 41 customers 6 • Early wins for innovation award winning high precision 26 laser products. 20% 16% 15% 14% 14% EBIT 9 9
Slide 13: Financial Performance
FINANCIAL PERFORMANCE CHRISTOPHER DAVIS, CHIEF FINANCIAL OFFICER
Slide 14: Financial result
Financial result Financial year ended 30 September ($m) FY18 FY17 % 2 Sales revenue 5,374 5,039 7% # Underlying EBITDA 1 885 896 (1%) $ Underlying EBIT 2 618 635 (3%) $ Underlying NPAT 3 324 386 (16%) $ Statutory net profit /(loss) after tax (48) 386 (112%) $ Effective tax rate 4 32% 29% 3pts # Earn
Slide 15: Individually significant items
Individually significant items Items ($m) Gross (before tax) Net (after tax) Impairment of Minova business (204) (204) Botany environmental provision expense (115) (80) Write down of US deferred tax assets - (48) Impairment of other assets (21) (15) Restructuring (35) (26) Individually significant i
Slide 16: EBIT bridge
EBIT bridge Improved volumes and mix offset headwinds Orica Group EBIT $m FY17 to FY18 635 (25) 1 (12) (26) 618 (26) (16) 70 32 (15) 2 (27) EBIT FX & Headwinds Pricing Volume Global Burrup Minova Auxiliaries Reduced EBIT FY17 inflation on – material Mix manufacturing plant overheads FY18 overheads i
Slide 17: Capital expenditure
Capital expenditure Disciplined approach to capital management Capital expenditure in line with expectations Capital expenditure 1 • Sustaining $m – Sustaining capital includes maintenance at the 443 Kooragang Island and Yarwun plants in Australia 75 5% – Ongoing investment in the global Mobile Manu
Slide 18: Cash conversion & debt
Cash conversion & debt Targeted improvement in cash conversion Cash conversion 1 Net debt % $m 207 106 1,648 1pt 1,549 1,441 70 71 FY16 FY17 FY18 FY16 FY17 FY18 Cash conversion slightly higher than the pcp Net debt • Strong second half performance • Increase in net debt given investing cash outflow
Slide 19: Strategic Priorities
STRATEGIC PRIORITIES ALBERTO CALDERON, MANAGING DIRECTOR AND CEO
Slide 20: Our strategic priorities
Our strategic priorities Be the market leader in chosen segments; deliver superior returns on investment; and generate strong free cash Disciplined capital allocation across the portfolio Manufacturing and Supply Blasting Field Services Productivity Solutions Cost leader Market leader Value differen
Slide 21: Manufacturing & supply
Manufacturing & supply Focus on improved reliability and operational efficiency Overall Equipment Efficiency (%) by site 100% FY18 achievements • Continuous Manufacturing 90% 89% – Overall Equipment Efficiency (OEE) 1 improvements for 85% 86% 80% 82% all plants in second half 80% OEE Target 75% – Bo
Slide 22: Blasting field services
Blasting field services Capturing value from our core business FY18 achievements • Higher uptake of new technology products globally NT5: Revenue from new technology 1 NT5 by product/service offering 2 - >30% yoy growth in NT5 achieved - Significant contract wins due to differentiated offering >30%
Slide 23: BlastIQ Commercialisation Case Study
TM BlastIQ Improving safety and productivity Commercialisation Case Study Digital, cloud based platform • Reduce cost of drill and blast operations • Improved productivity • Next generation BlastIQ™ launched Customer benefits • Reduced drill costs ~10% • ~5% increased productivity in drill and blast
Slide 24: Bulkmaster Commercialisation Case Study
Bulkmaster 7 TM Digitally enabled better blasting Commercialisation Case Study TM Next generation MMU • Premium product, released to specific customers • Productivity minimises assets and labour required • Automates delivery process and formulation management TM • Seamless integration and operationa
Slide 25: Productivity solutions
Productivity solutions Investment in market led technology drives sales and returns FY18 achievements • GroundProbe™ acquisition – Purchase and critical integration activities completed – Regional sales workshops held with Orica commercial teams • WebGen™ 100 – First commercial contracts signed, fur
Slide 26: WebGen Commercialisation Case Study
WebGen TM Improved reliability and operational efficiency Commercialisation Case Study World first wireless initiation system • Elimination of exposure to high risk activities • Next generation will be suitable for open cut mines Customer benefits • Elimination of exposure to high risk activities •
Slide 27: Outlook
OUTLOOK ALBERTO CALDERON – MANAGING DIRECTOR AND CEO
Slide 28: FY19 outlook
FY19 outlook Improved operating leverage underpins a stronger FY19 result Higher revenue and EBIT will be underpinned by increased demand and manufacturing improvements, with earnings skewed to the second half of the year. Key assumptions for FY19: • Global AN product volumes expected to be ~3% high
Slide 29: Beyond FY19
Beyond FY19 Delivering improved returns Manufacturing and Supply Field Services Productivity Solutions • Benefits from operational and fully • Demand for explosives volumes to • WebGen™ 200 commercialisation loaded Burrup plant expected outstrip key commodity production and evolution to automation d
Slide 30: Supplementary Information
SUPPLEMENTARY INFORMATION 30
Slide 31: Explosives volumes
Explosives volumes Variance – FY18 volumes Financial year ended 30 September FY18 volumes vs. FY17 volumes ‘000 tonnes AN 1 Emulsion Total AN 1 Emulsion Total products2 products2 Australia Pacific & Asia 623 1,003 1,626 13% 15% 14% North America 575 537 1,112 (7%) 7% (1%) Europe, Middle East & Afric
Slide 32: Segment analysis
Segment analysis Financial year ended 30 September FY18 FY17 EBIT % $m Revenue 1 EBIT Revenue 1 EBIT change Australia Pacific & Asia 1,944 382 1,726 368 4% North America 1,430 185 1,363 187 (1%) Europe, Middle East & Africa 807 55 812 75 (26%) Latin America 900 43 916 61 (30%) Minova 519 (2) 456 13
Slide 33: Diversified global business
Diversified global business Geographic portfolio By commodity By product/service offering % of FY18 revenue 1 % of FY18 revenue 1 % of FY18 revenue 1 1% 4% 10% 15% 18% 9% 24% 36% Thermal Coal AN/ANFO 15% Australia Pacific & Asia Coking Coal 5% 13% Bulk Emulsion North America Iron Ore Packaged Produc
Slide 34: Cash conversion
Cash conversion Financial year ended 30 September ($m) FY18 FY17 EBITDA 885 896 TWC movement 1 (48) (46) Sustaining capital 2 (206) (226) Cash conversion 631 624 Cash conversion % 3 71.3% 69.6% 1. Excludes trade working capital from acquisitions 2. Excludes the SAP project 3. Cash Conversion/EBITDA
Slide 35: Interest cover
Interest cover Financial year ended 30 September ($m) FY18 FY17 Change EBIT before individually significant items 618 635 (17) Net financing costs 121 72 49 Capitalised interest 5 31 (26) Unwinding of discount on provisions (8) (1) (7) Adjusted net interest expense 118 102 16 Interest cover (times)
Slide 36: Foreign exchange exposure
Foreign exchange exposure EBIT composition (FX transaction) FY18 FX movements EBIT sensitivity 1 % of FY18 EBIT % change from pcp +/- $m per 1% change United States 0.8% 1.5 8% 12% Canada 2.5% 0.8 30% Australia United States Latin America (6.6%) 0.8 Canada 13% Latin America EMEA 2 (1.5%) 0.8 EMEA As
Slide 37: Debt profile
Debt profile Facility headroom Drawn debt maturity profile $m $m Average tenor at September 2018 - 5.0 years 3,537 3,546 600 500 1,383 1,579 400 300 200 2,163 1,958 100 0 Sept 17 Sept 18 FY19 FY20 FY21 FY22 FY23 FY25 FY26 FY27 FY31 Drawn Undrawn Committed bank facilities US private placement Export
Slide 38: Net debt position
Net debt position Movement in net debt Financial year ended 30 September ($m) FY18 $m FY17 to FY18 EBITDA 885 Movement in trade working capital 1 (48) Net impact $93m Movement in non trade working capital (8) 1,648 Net interest & tax paid (184) 1,534 1,441 114 Non cash items & foreign exchange (30)
Slide 39: Non-IFRS reconciliation
Non-IFRS reconciliation Financial year ended 30 September ($m) FY18 FY17 % 2 Statutory net profit/(loss) after tax (48) 386 (112%) Add back: Individually significant items after tax 372 - 100% Underlying profit after tax 324 386 (16%) Adjust for the following: Net financing costs 121 72 (69%) Income
Slide 40: Disclosures and definitions
Disclosures and definitions Term Definition AN Includes Ammonium Nitrate prill and solution as well as Emulsion products including bulk emulsion and packaged emulsion Comprises total payments for property, plant and equipment and intangibles as disclosed in the Statement of Cash Flows within Capital