Slide 1: 2018 Half Year Results
For personal use only IKON TM III 2018 HALF YEAR RESULTS 7 May 2018 Alberto Calderon, Managing Director and CEO Vince Nicoletti, Chief Financial Officer
Slide 2: Disclaimer
DISCLAIMER For personal use only 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
Slide 3: Agenda
AGENDA For personal use only Alberto Calderon Overview Managing Director & CEO Vince Nicoletti Financial Performance Chief Financial Officer Alberto Calderon Strategic Priorities Managing Director & CEO Alberto Calderon Outlook Managing Director & CEO Questions 3 © Orica Limited Group 3
Slide 4: Safety and Environment
SAFETY AND ENVIRONMENT SAFETY OUR PRIORITY, ALWAYS • Focus on material risk events and process safety For personal use only Safety performance - +18,000 key control verifications completed; substantial % Total Recordable Injury Frequency Rate¹ increase in compliance over 12 months 8 - +1,000 Safety
Slide 5: Results Summary
RESULTS SUMMARY • Total AN product volumes of 1.83 million tonnes (pcp: 1.78 million tonnes) For personal use only • Underlying EBIT of $252 million (pcp: $314 million) – Lower EBIT from previously disclosed one-offs and headwinds – EBIT margin of 9.9% (pcp: 12.9%) • Underlying EBITDA of $379 millio
Slide 6: Australia, Pacific & Asia
AUSTRALIA, PACIFIC & ASIA CONTINUED VOLUME GROWTH IN LARGEST EBIT CONTRIBUTING REGION • Volumes For personal use only Revenue by commodity1 AN volume & EBIT margin % 691 748 742 - Continued AN volume growth trend from 2H17 across the 676 622 Pilbara and Indonesian regions 11% 6% - Substantial new co
Slide 7: North America
NORTH AMERICA STABLE VOLUME AND EBIT CONTRIBUTION • Volumes For personal use only Revenue by commodity1 AN volume & EBIT margin % 594 - Quarry & construction (Q&C) markets remain strong 572 575 8% 546 560 despite labour shortages and weather impact 19% 5% - Improved volumes in Canada and Mexico Ther
Slide 8: Latin America
LATIN AMERICA SHORT TERM EXTERNAL CHALLENGES IMPACT RESULT • Volumes For personal use only Revenue by commodity1 AN volume & EBIT margin 333 % 304 311 304 301 - Higher volumes from mine plan changes in Chile and 7% Brazil; offset by lower demand in Colombia, Peru and 12% 4% Argentina 7.7% 7.4% Therm
Slide 9: Europe, Middle East & Africa
EUROPE, MIDDLE EAST & AFRICA ONE-OFF ITEMS IMPACT 1H; RECOVERY EXPECTED IN 2H • Volumes For personal use only Revenue by commodity1 AN volume & EBIT margin % - Increased demand from Norwegian quarries & tunnels 235 244 3% 2% 212 224 227 and CIS offsetting reduced volumes in Southern Africa 15% and M
Slide 10: Minova
MINOVA TURNAROUND CONTINUES BUT SLOWER THAN EXPECTED • $204 million impairment charge For personal use only Revenue by sector1 Revenue & EBIT Margin % • Revenue 6% 244 239 7% 211 196 212 - ~13% revenue growth across all regions Coal - Increased steel volumes in Australia Pacific and coal Hard Rock 3
Slide 11: Auxiliaries
AUXILIARIES • New business segment incorporating Nitro Consult and For personal use only recently acquired GroundProbe - $208 million acquisition completed January 2018 - Integration activities well progressed, to be completed in FY18 • Highly complementary - Combination of Nitro Consult sound and v
Slide 12: Financial Performance
For personal use only Mobile Manufacturing Unit (MMU), Malaysia FINANCIAL PERFORMANCE Vince Nicoletti Chief Financial Officer
Slide 13: Financial Result
FINANCIAL RESULT For personal use only Half year ended 31 March ($m) 2018 2017 % Sales revenue 2,532 2,437 4% Underlying EBITDA1 379 446 (15%) Underlying EBIT2 252 314 (20%) Underlying NPAT3 124 195 (37%) Statutory Net Profit /(Loss) After Tax (229) 195 (217%) Effective Tax Rate4 31% 28%
Slide 14: Individually Significant Items Have Non-Cash Impact on Balance Sheet
INDIVIDUALLY SIGNIFICANT ITEMS HAVE NON-CASH IMPACT ON BALANCE SHEET For personal use only Asset Gross Net $m (before tax) (after tax) Minova (204) (204) Botany environmental provision (115) (80) Write down of US deferred tax assets - (55) Other assets (21) (15) Individually significant items (340)
Slide 15: EBIT Bridge
EBIT BRIDGE LOWER EBIT FROM ONE-OFFS IN HY17 AND KNOWN HEADWINDS Orica Group EBIT For personal use only $m HY17 to HY18 314 (21) (3) (14) 27 (17) (16) (20) 252 (5) (9) (1) EBIT PPE FX & Headwinds Pricing Explosives Global Minova Other EBIT HY17 & Inflation - Material - Volume Manufacturing HY18 Asse
Slide 16: Capital Expenditure
CAPITAL EXPENDITURE For personal use only Capital Expenditure1 • 1H18 capital expenditure in line with $m expectations 443 - Sustaining capital driven higher by the ramp up of 75 the SAP project 5% - Sustaining capital includes maintenance at the 320 Kooragang Island and Yarwun plants in Australia 3
Slide 17: Increased Debt Supporting Strategic Acquisitions and Working Capital
INCREASED DEBT SUPPORTING STRATEGIC ACQUISITIONS AND WORKING CAPITAL For personal use only Cash conversion • Cash conversion lower than the pcp % - Operational issues impacted EBITDA 74 (20pts) - Trade working capital increased mainly from higher 57 inventory levels 37 - Higher sustaining capital sp
Slide 18: Strategic Priorities
For personal use only Kooragang Island, manufacturing facility STRATEGIC PRIORITIES Alberto Calderon, Managing Director and CEO
Slide 19: Net Sustainable Benefits
NET SUSTAINABLE BENEFITS INCREMENTAL BENEFITS CONTINUE TO BE DELIVERED • $35 million net benefits in 1H18 For personal use only • Supply chain benefits 20% - Strategic ammonia purchasing 37% - Closure of surplus distribution centres HY18 $35 million - Freight reduction net benefits • Commercial bene
Slide 20: Investment in Technology
INVESTMENT IN TECHNOLOGY For personal use only New technology investment threshold (IRR) > 30% 1. Understand the Resource 2. Design for Output 3. Drill and Blast Operations 4. Measured Outcomes Hard Area (Advanced products) $2X+/Hole Soft Area (Conventional products) $1X/Hole Integrate and Learn 20
Slide 21: Returns on Technology
RETURNS ON TECHNOLOGY For personal use only Investment in market led technology drives sales and returns % Revenue from new technology Sales >20% - Introduced NT5 KPI, measuring revenue generated from new technologies as a percentage of our total revenue 12% - NT5 revenue growth was 12% between FY16
Slide 22: Technology Pathway to Drill and Blast Operations Automation
TECHNOLOGY PATHWAY TO DRILL AND BLAST OPERATIONS AUTOMATION For personal use only Differentiated technology providing a step-change in safety, productivity & efficiency • Modifications to conventional mining made possible by wireless blasting - Unprecedented safety and productivity improvement - Fle
Slide 23: Outlook
For personal use only unitronic 600 OUTLOOK Alberto Calderon, Managing Director and CEO
Slide 24: Strong Demand Underpins Outlook for Improved 2H18
STRONG DEMAND UNDERPINS OUTLOOK FOR IMPROVED 2H18 For personal use only 2H18 outlook remains unchanged from the update released on 1 March 20181. • 2H18 global AN volumes expected to increase by around 10% from 1H18 – Full year global AN volumes expected to be at the upper end of stated range (3.65m
Slide 25: Looking Forward
LOOKING FORWARD For personal use only FY19 assumptions: • Stronger run rate from 2H18 expected to continue into FY19 with: – AN volume growth supported by positive commodity growth and mine plan outlook – Firmer AN pricing – Improved manufacturing reliability at Orica plants; however, Burrup perform
Slide 26: Supplementary Information
For personal use only SUPPLEMENTARY INFORMATION 26 © Orica Limited Group
Slide 27: Explosives Volumes
EXPLOSIVES VOLUMES For personal use only Variance – HY18 volumes HY18 volumes vs. HY17 volumes ‘000 tonnes AN1 Emulsion Total AN1 Emulsion Total products2 products2 Australia, Pacific & Asia 279 463 742 11% 9% 10% North America 300 260 560 (11%) 9% (3%) Latin America 87 214 301 (8%) 2% (1%) Europe,
Slide 28: Segment Analysis
SEGMENT ANALYSIS For personal use only HY18 HY17 EBIT % $m Revenue1 EBIT Revenue1 EBIT change Australia, Pacific and Asia 896 167 833 171 (2%) North America 689 88 662 97 (10%) Latin America 437 18 435 29 (36%) Europe, Middle East and Africa 391 19 402 44 (56%) Auxiliaries 26 (1) 9 1 (192%) Minova 2
Slide 29: Diversified Global Business
DIVERSIFIED GLOBAL BUSINESS For personal use only Geographic portfolio By commodity By product/service offering % of HY18 revenue¹ % of HY18 revenue¹ % of HY18 revenue¹ 3% 9% 9% 15% 1% 20% 23% 15% 35% Thermal Coal 13% AN/ANFO Australia Pacific & Asia Coking Coal Bulk Emulsion North America Iron Ore
Slide 30: Cash Conversion
CASH CONVERSION For personal use only Half year ended 31 March ($m) 2018 2017 EBITDA 379 446 TWC movement (127) (93) Sustaining Capital1 (110) (97) Cash Conversion 142 256 Cash Conversion %2 37.4% 57.4% 1. Includes the SAP project 30 © Orica Limited Group 2. Cash Conversion/EBITDA
Slide 31: Interest Cover
INTEREST COVER For personal use only Half year ended 31 March ($m) 2018 2017 Change EBIT before individually significant items 252 314 (62) Net financing costs 1 54 33 21 Interest cover (times) 4.6x 9.5x (4.9x) Interest cover (times) excluding capitalised borrowing costs 4.5x 6.0x (1.5x) 1. Fina
Slide 32: Foreign Exchange Exposure
FOREIGN EXCHANGE EXPOSURE For personal use only EBIT composition (FX transaction) HY18 FX movements EBIT sensitivity1 % of HY18 EBIT % change from pcp +/- $m per 1% change United States (2.3%) 0.7 11% 29% Canada 1.6% 0.4 13% United States 2 Australia EMEA (2.3%) 0.4 Canada 2 EMEA Latin America (7.9%
Slide 33: Debt Profile
DEBT PROFILE For personal use only Facility Headroom Drawn Debt Maturity Profile $m $m Average tenor at March 2018 - 5.2 years 3,537 3,491 600 1,256 500 1,579 400 300 2,235 200 1,958 100 0 Sep 17 Mar 18 FY18 FY19 FY20 FY21 FY23 FY25 FY26 FY27 FY31 Undrawn Drawn Committed Bank Facilities US Private P
Slide 34: Net Debt Position
NET DEBT POSITION For personal use only Half year ended 31 March ($m) HY18 Movement in net debt $m FY17 to HY18 EBITDA 379 Movement in trade working capital (127) Movement in non trade working capital (119) Net impact $452m 1,893 13 1,906 Net interest & tax paid (127) 93 Non cash items & foreign exc
Slide 35: Environmental Provisions
ENVIRONMENTAL PROVISIONS For personal use only Provision Spend Profile Environmental Provisions ($m) HY18 FY17 $m 66 Botany groundwater remediation 1 171 63 Botany hexachlorobenzene (HCB) 53 21 37 41 remediation 14 8 Deer Park remediation 20 25 36 8 7 29 Yarraville remediation 30 30 19 17 11 17 Othe
Slide 36: Non IFRS Reconciliation
NON IFRS RECONCILIATION For personal use only Half year ended 31 March ($m) 2018 2017 % Statutory profit after tax (229) 195 (217%) Add back: Individually significant items after tax 353 - 100% Underlying profit after tax 124 195 (37%) Adjust for the following: Net financing costs 54 33 64% Income
Slide 37: Disclosures and Definitions
DISCLOSURES AND DEFINITIONS Term Definition For personal use only 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 Cas