Dyno Nobel Limited · ASX:DNL
Dyno Nobel — Incitec Pivot — H1 2008 Earnings Presentation
30 slides from Dyno Nobel's earnings presentation, May 5, 2008
Slide 1: 2008 Half Year Results
2007 Annual Results Incitec Pivot Limited Incitec Pivot Limited 2008 Half Year Results 14 November 2007 5 May 2008 1
Slide 2: Julian Segal, Managing Director & CEO
Julian Segal Julian Segal Managing ManagingChief Director & Director & Executive Officer Chief Executive Officer 2 2
Slide 3: Step change in financial performance
Step change in financial performance NPAT - A$m* (bars) & EPS - cps* (line) 6 months to 31 March 2008 339 171.1 98 47 30 49.6 17.2 27.5 2005 2006 2007 2008 Result driven by strategy 3 * excluding individually material items 3
Slide 4: IPL is executing on its growth strategy
IPL is executing on its growth strategy Merger of Tardis Southern Southern Incitec Dyno 1&2 Cross & GI Cross Int & Nobel renewal Pivot Lowest Lowest Lowest Lowest Cost Cost Cost Cost Base Base Base Base Market Own the Own the Own the Own the Supply Supply Leader Supply Product/ Supply Product/ Chain
Slide 5: Strategy Scorecard: Lowest cost base
Strategy Scorecard Strategy What we have delivered: “Lowest cost base” 9 Tardis benefits delivered and banked - $143.1M total program benefits – program now closed 9 2007 Exit rate reflected in the 1H profit: $28.2M H1 2008 Strategy delivered 5 5
Slide 6: Strategy Scorecard: Own the product/resource
Strategy Scorecard Strategy What we have delivered: 9 Repositioning of IPL to give “Own the exposure to the soft commodity product / resource” super cycle 9 > 80% of earnings from manufacturing across portfolio 9 Step change in the inherent value of installed capacity 8 Plant reliability in H1 2008
Slide 7: Strategy Scorecard: Trading model
Strategy Scorecard Strategy What we have delivered: “Trading model” 9 $27M earnings in 1H 9 Strong returns in booming global price environment Strategy delivered 7 7
Slide 8: Strategy Scorecard: Supply Chain
Strategy Scorecard Strategy What we have delivered: “Supply Chain” 9 Working capital held at 2007 levels despite step change in global fertiliser prices 9 $150M step change in working capital maintained Strategy delivered 8 8
Slide 9: Growth
Growth What When Dyno Nobel acquisition Completion June 2008 Moranbah Decision Q3 2008 Metex Investment MOU signed May 2008 Southern Cross: 9 Debottlenecking Approval 2008 9 Plant expansion Approval 2008/09 Disciplined, returns focused approach 9 9
Slide 10: Dyno Nobel Update
Dyno Nobel Update Update: • 13.2% Stake • Proposed purchase at $2.80 per share • Scheme Vote 22 May 2008 / Completion June 2008 Status: • Strong support from shareholders • Integration planning well advanced • IPL bench strength enhanced to facilitate business growth Next Update: • Moranbah decision
Slide 11: James Fazzino, Finance Director & CFO
James Fazzino James Fazzino Finance Finance Director & Director & Chief Financial Officer Chief Financial Officer 11 11
Slide 12: 1H Results Summary Key Financials
1H Results Summary Key Financials 6 Months Ended 31 March A$M 2008 2007 Change Sales revenue 749.3 543.6 38% EBIT(1) 250.0 83.9 198% EBIT Margin(1) 33.4% 15.4% NPAT(1) 171.1 49.6 245% NPAT incl. individually material items 169.8 57.2 197% Delivering on our promises 12 (1) excluding individually mate
Slide 13: Incitec Pivot EBITDA Waterfall 1H 2007 to 1H 2008
Incitec Pivot EBITDA Waterfall – 1H 2007 to 1H 2008 2008 1H EBITDA: $269.0M 38.7 6.6 2007 1H EBITDA: $102.1M 1.8 269.0 27.0 (5.0) (8.5) 28.2 78.0 102.1 2007 1H Southern Cross Tardis Fert Trading Nitrogen/SSP Nitrogen Mfg Domestic Growth Other 2008 1H EBIT EBITDA excl Tardis Manufacturing Fx volume E
Slide 14: Southern Cross EBITDA Waterfall H1 2007 to H1 2008
Southern Cross EBITDA Waterfall – H1 2007 to H1 2008 179.7 2008 1H EBITDA: $133.0M 2007 1H EBITDA: $69.7M (48.4) 3.3 192.5 (31.9) (3.9) 133.0 (59.5) 17.7 6.3 69.7 2007 1H Tardis Freight DAP Price - Forex = Sales Vol - Sulphuric Other 2008 1H Inter-coy 2008 1H EBITDA (pre US$658t v USD/AUD Down 117kt
Slide 15: 1H Results Summary Shareholder returns
1H Results Summary Shareholder returns 6 Months Ended 31 March A$M 2008 2007 Change Shareholder returns: EPS(1) (cps) 339 98 245% Dividend (cps) 204 69 196% Share price (31 March) 141.15 49.50 185% Capital Management: Underlying(2) Net Debt 272 400 32% Underlying(2) Net Debt/EBITDA 0.5x 1.9x 73% Und
Slide 16: 2008 Outlook for DAP Pricing
2008 Outlook for DAP Pricing $1,400 200 $1,225/t $1,200 150 Sales Volume - 000's $1,000 $926 $1,100/t DAP US$/t $516 $749 $800 100 $589 $600 $470 50 $400 $415 $200 0 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Sales Volume - Actual YTD / Forecast YTG Actual Realised DAP Price Consensus of Fertil
Slide 17: Disciplined Capital Management: Trade Working Capital
Disciplined Capital Management Working Capital ¾ Working capital at 2007 $ levels 400 29% 30% despite $180m 28% negative price Trade Working Capital - A$M 26% impact on TWC to Rolling Sales - % 26% inventory 350 24% 20% 22% balances 300 335 20% 16% 18% ¾ Working Capital 251 16% to rolling sales of 2
Slide 18: Disciplined Capital Management: Net Debt
Disciplined Capital Management Net Debt – Half Year A$M ¾ Tax payments lag profit – 529 2007 tax paid 1H 2008 500 400 400 ¾ Dividends paid lag profits 257 ¾ Earnings delivered and 174 300 200 200 banked 138 155 100 272 ¾ Interest incurred on Dyno 71 stake funding 0 2005 2006 2007 2008 Core SCF acqui
Slide 19: Disciplined Capital Management: Dividends
Disciplined Capital Management Dividends 300 ¾ Payout of 100% of 250 available franking 231 credits cents per share 200 204 150 ¾ Payout range of 55 – 100 65% consistent with 81 peers 50 50 69 0 21 22 ¾ Retention of cash in 2005 2006 2007 2008 business for growth Interim Final Optimising shareholder
Slide 20: Julian Segal, Managing Director & CEO
Julian Segal Julian Segal Managing ManagingChief Director & Director & Executive Officer Chief Executive Officer 20 20
Slide 21: Southern Oscillation Index
Southern Oscillation Index 21 21
Slide 22: Probable return to normal rainfall conditions
Probable return to normal rainfall conditions : Rainfall (May to July 2008) 22 Promising but uncertain outlook 22
Slide 23: Outlook Second Half 2008
Outlook Second Half 2008 9 Continued strength in global fertiliser prices – DAP and Urea 9 Record soft commodity prices U Strong Currency ~ 93 cents ? Uncertain domestic trading conditions with the winter break yet to occur ? Timing of Latin American & India buyers returning to the market ? Status o
Slide 24: Summary
Summary 9 1H earnings represent a step change in profitability driven by our strategy 9 Manufacturing generating > 80% of earnings 9 Proposed acquisition of Dyno Nobel 9 Planning for post acquisition integration of Dyno Nobel well advanced 9 Step change in global commodity and fertiliser prices 9 Co
Slide 25: Q&A Questions?
Q&A Questions? 25 25
Slide 26: Q&A Appendices
Q&A Appendices 26 26
Slide 27: Business Structure post Dyno Nobel acquisition
Business Structure post Dyno Nobel acquisition Legal, Finance, HR, Corporate Business Development Manufacturing Fertiliser Explosives Trading Global Services Australia Asia Pacific Global N. America operations N. America Asia Pacific operations Global Initiating Systems & Packaged Ex
Slide 28: 1H 2008 Sales Volumes
1H 2008 Sales Volumes Sales volume up 5% or 65kt to 1,373kt: Trading: Down 26% or 107kt - Lower sales due to production interruptions Industrial: Up 40% or 39kt - increased ammonia sales to industrial customers Sugar: Down 15% or 38kt - poor sugar price and stronger Australian dollar Summer Crop: Up
Slide 29: 2008 Sensitivities
2008 Sensitivities Key Sensitivities • +/- US$10 DAP price ~ A$9.7m EBIT • +/- US$10 Urea price ~ A$3.6m EBIT • +/- AUD/USD 1c ~ A$8.3m Assumptions: • Based on guidance provided on 6 March 2008 • 900kt DAP sales at base price US$775/t @ 93.2 cents • 349kt urea/urea equivalent sales at base price US$
Slide 30: Disclaimer
Disclaimer This presentation has been prepared by Incitec Pivot Limited for professional and sophisticated investors. The information contained in this presentation is for information purposes only and does not constitute an offer to issue, or arrange to issue, securities or other financial products