Slide 1: 2016 Full Year Results
For personal use only 2016 FULL YEAR RESULTS 4 November 2016 Alberto Calderon, Managing Director and CEO Tom Schutte, CFO
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 Thomas Schutte Financial Performance Chief Financial Officer Alberto Calderon Outlook Managing Director & CEO Questions 3 © Orica Limited Group 3
Slide 4: Safety and Environment
SAFETY AND ENVIRONMENT For personal use only Safety Performance • Tragically an explosion in the packaged manufacturing plant in Antofagasta, Chile, resulted in the deaths of two of our people – Thorough investigation into the cause of accident completed; 3 3 – Lessons learned being shared throughou
Slide 5: Results Demonstrating Earnings and Cashflow Resilience
RESULTS DEMONSTRATING EARNINGS AND CASHFLOW RESILIENCE • Total AN product volumes of 3.54 million tonnes (pcp: 3.76 million tonnes) For personal use only • Underlying EBIT1 of $642 million (pcp: $685 million) – EBIT margin of 12.6% • Underlying EBITDA1 of $908 million (pcp: $978 million) • NPAT2 of
Slide 6: Executing to Plan
EXECUTING TO PLAN… For personal use only Strategic initiatives Delivered to date… New Operating Model embedded Customer focused Clear regional and functional accountabilities and responsibilities business Improved transparency and streamlined reporting Highly experienced Executive and Senior
Slide 7: Australia, Pacific & Indonesia: Improved Margins
AUSTRALIA, PACIFIC & INDONESIA: IMPROVED MARGINS • AN volume down 6% from pcp; 13% up from first half For personal use only AN volume and EBIT margin – Improved volume in Indonesia and the Pilbara region partly offset 800 30% lower demand in Queensland coal and the metals regions in south west Austr
Slide 8: North America: Strong Growth in Canada; Margin Maintained in 2H
NORTH AMERICA: STRONG GROWTH IN CANADA; MARGIN MAINTAINED IN 2H • AN volume down 7% For personal use only AN volume and EBIT margin 800 20% – Gold and quarry & construction (Q&C) markets remained strong due to high gold prices and continued infrastructure projects 600 – Lower margin volumes through
Slide 9: Latin America: Volumes Stabilised and Margin Maintained in 2H
LATIN AMERICA: VOLUMES STABILISED AND MARGIN MAINTAINED IN 2H • AN volume down 8%; stabilised in 2H16 For personal use only AN volume and EBIT margin 400 20% – Lower explosives volumes in Chile and Argentina due to lower demand and weather issues; offset by improved volumes in copper and iron ore in
Slide 10: Europe, Africa & Asia: Strategic Growth Initiatives Deliver Improved Margin
EUROPE, AFRICA & ASIA: STRATEGIC GROWTH INITIATIVES DELIVER IMPROVED MARGIN • AN volumes in line with pcp For personal use only AN volume and EBIT margin – Improved demand in Orica’s high growth regions of Africa and 400 20% CIS, as well as Turkey, offset by reduced lower margin volumes in India – I
Slide 11: Minova: Turnaround Progressing Well
MINOVA: TURNAROUND PROGRESSING WELL • Challenging market environment with weak For personal use only Revenue and EBITDA margin commodity pricing and lower domestic demand – Steel volumes down 36% due to lower coal volumes and 300 6% strategic exit from low margin accounts – Resins and powders down 3
Slide 12: Financial Performance
For personal use only FINANCIAL PERFORMANCE Thomas Schutte Chief Financial Officer
Slide 13: Financial Result
FINANCIAL RESULT For personal use only Full year ended 30 September ($m) 2016 2015 % 2 Continuing Operations1 Sales revenue 5,092 5,653 (10) $ EBITDA2 908 978 (7) $ EBIT3 642 685 (6) $ NPAT4 389 417 (7) $ NPAT and individually material items 343 (1,274) nm # Interest cover (times)5 7.6x 8.3x (0.7x)
Slide 14: Business Improvements Exceed Target
BUSINESS IMPROVEMENTS EXCEED TARGET • Business initiative net incremental benefits exceed For personal use only Net Benefits ($m) targets; offsetting market impacts 94 – Further rationalisation and optimisation of AN and Initiating 76 Systems network ~38% 50-60 – Improvement in plant productivity –
Slide 15: Initiatives Reduce Market Impacts
INITIATIVES REDUCE MARKET IMPACTS For personal use only Orica Group EBIT – Continuing Operations ($m) FY15 to FY16 Net impact ($88m) Market impacts self-help -$164m +$76m 15 © Orica Limited Group
Slide 16: Disciplined Capital Expenditure
DISCIPLINED CAPITAL EXPENDITURE For personal use only Capital Expenditure1 • Disciplined approach to capital management $m – Establishment of a capital and investment management framework 780 – Classification of growth and sustenance expenditure aligned to priorisation tools 204 – All license to ope
Slide 17: Reduced Debt
REDUCED DEBT For personal use only Trade Working Capital Cash Conversion (% of revenue) (%) • Strong net operating and investing cash flow of $633 million, up 80% 11 106 87 – Improved trade working capital particularly in receivables 9 81 and inventory levels 6 – Net investing cash flows down 63% re
Slide 18: Sustainable Dividend Policy
SUSTAINABLE DIVIDEND POLICY For personal use only Historic Payout ratio • Progressive dividend policy replaced with payout % ratio policy within range of 40% - 70%: 90 – Prudent approach to delivering sustainable returns through the cycle 80 – Balance to be weighted towards the final dividend 70 60
Slide 19: Outlook
For personal use only OUTLOOK Alberto Calderon Managing Director & CEO
Slide 20: Controlling Operational Headwinds
CONTROLLING OPERATIONAL HEADWINDS For personal use only • Price reset impact in FY17 – ~$60m forecast flow on impact from FY16 price resets plus FY17 impact • Impact from previously negotiated input material contracts – ~$50 – 70m increase expected from commencement of new gas agreement announced in
Slide 21: New Business Improvement Initiatives
NEW BUSINESS IMPROVEMENT INITIATIVES For personal use only New business improvement initiatives Outcomes… • Improved value selling and better understanding of customer needs Commercial • Improve margin mix • Reduce margin leakage • Increase raw material yields Operations • Rationalise footprint • Im
Slide 22: FY17 Outlook Assumptions
FY17 OUTLOOK ASSUMPTIONS We will continue to focus on business improvement initiatives that improve profitability and shareholder value. For personal use only Key assumptions for FY17 are: Explosives • Global AN product volumes in the range of 3.5 million tonnes ± 5% • Focused on improving performan
Slide 23: Looking Forward
LOOKING FORWARD For personal use only Despite tough market conditions, our differentiated strategy will enable us to create greater value for our shareholders and customers While there has clearly been some external optimism on the market conditions, we remain conservative and will continue to f
Slide 24: Supplementary Information
For personal use only SUPPLEMENTARY INFORMATION
Slide 25: Explosives Volumes
EXPLOSIVES VOLUMES For personal use only FY16 volumes Variance – FY16 volumes vs. FY15 volumes ‘000 tonnes AN1 Emulsion Total AN1 Emulsion Total products2 products2 Australia/Pacific and Indonesia 509 695 1,204 6% (13%) (6%) North America 707 459 1,166 (14%) 8% (7%) Latin America 223 392 615 (12%) (
Slide 26: Segment Analysis
SEGMENT ANALYSIS For personal use only FY16 FY15 $m Revenue1 EBIT Revenue1 EBIT EBIT % Change Australia/Pacific and Indonesia 1,544.7 315.1 1,718.6 353.6 (11%) North America 1,360.0 196.5 1,490.8 212.4 (7%) Latin America 920.0 69.2 1,053.3 98.1 (29%) Europe, Africa and Asia 1,141.3 116.5 1,128.1 111
Slide 27: Diversified Global Business
DIVERSIFIED GLOBAL BUSINESS For personal use only Diverse geographic portfolio By commodity By product / services offering2 % of FY16 revenue¹ % of FY16 revenue¹ % of FY16 revenue¹ 3% 8% 7% 16% 17% 23% 29% 13% 22% 13% 4% 5% 30% 17% 16% 21% 17% 24% 7% 8% Australia Pacific & Indonesia Thermal coal Cok
Slide 28: Cash Conversion
CASH CONVERSION For personal use only Full year ended 30 September ($m) 2016 2015 Continuing Operations EBITDA 908.1 977.5 TWC movement 196.5 (0.9) Sustaining Capital (144.8) (184.8) Cash Conversion 959.8 790.8 Cash Conversion %1 105.7% 81.0% 1. Cash Conversion/EBITDA 28 © Orica Limited Group
Slide 29: Interest Cover
INTEREST COVER For personal use only Full year ended 30 September ($m) 2016 2015 Change Continuing Operations EBIT before individually material items 642.2 684.8 (42.6) Net financing costs 1 84.3 82.2 2.1 Interest cover (times) 7.6x 8.3x (0.7x) Interest cover (times) excluding capitalised borrowing
Slide 30: FX Exposure
FX EXPOSURE For personal use only EBIT Composition FY16 FX movements EBIT Sensitivity to FX Movement1 (FX Translation) (% change from pcp) 1% change +/- (%) USD 2.0 m Asia USD Canada 4% 8% EMEA 1.1 m United Latin States America EMEA 11% 33% LATAM 0.7 m LATAM CAD 0.4 m EMEA 17% CAD ASIA 0.3 m Austral
Slide 31: Debt Profile
DEBT PROFILE For personal use only Facility Headroom Drawn Debt Maturity Profile A$m A$m Average tenor at September 2016 - 5.4 years Average tenor at September 2015 - 5.8 years 700 $3,970 600 $3,644 500 1,670 1,767 400 300 200 2,300 1,877 100 0 Sep-16 Sep-15 FY17 FY18 FY19 FY20 FY21 FY23 FY25 FY26 F
Slide 32: Net Debt Position
NET DEBT POSITION For personal use only Full year ended 30 September (A$m) 2016 Movement in net debt (A$m) FY15 to FY16 EBITDA 908 Movement in trade working capital 197 Net impact ($377m) Movement in non trade working capital 89 Net interest & tax paid (256) 2,026 Non cash items & foreign exchange (
Slide 33: Environmental Provisions
ENVIRONMENTAL PROVISIONS For personal use only Provision Spend Profile Environmental Provisions ($m) FY16 FY15 ($m) 61 Botany groundwater remediation 64 64 11 50 Botany hexachlorobenzene (HCB) 35 34 remediation 13 16 Deer Park remediation 37 33 34 10 6 Yarraville remediation 31 32 17 5 12 17 8 4 2 2
Slide 34: Non IFRS Reconciliation
NON IFRS RECONCILIATION For personal use only Full year ended 30 September ($m) 2016 2015 % 2 Continuing Operations1 Statutory profit after tax 342.8 (1,274.4) >(100) Add back: Individually material items after tax 46.3 1,691.6 >100 Underlying profit after tax 389.1 417.2 (7) Adjust for the followin
Slide 35: Non IFRS Reconciliation
NON IFRS RECONCILIATION For personal use only Full year ended 30 September ($m) 2016 2015 % 2 Consolidated Group1 Statutory profit after tax 342.8 (1,267.4) >(100) Add back: Individually material items after tax 46.3 1,691.6 >100 Underlying profit after tax 389.1 424.2 (8) Adjust for the following:
Slide 36: Disclosures and Definitions
DISCLOSURES AND DEFINITIONS For personal use only Term Definition AN volume Includes Ammonium Nitrate (AN) prill and solution and Emulsion products include bulk emulsion and packaged emulsion Equivalent to net profit for the period after income tax expense before individually material items attribut