Slide 1: 2017 Full Year Results
For personal use only IKON TM III 2017 FULL YEAR RESULTS 6 November 2017 Alberto Calderon, Managing Director and CEO Tom Schutte, 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 Tom Schutte Financial Performance Chief Financial Officer Alberto Calderon Business Improvement Initiatives Managing Director & CEO Alberto Calderon Outlook Managing Director & CEO Questions 3 © Orica Limited Group 3
Slide 4: Safety and Environment
SAFETY AND ENVIRONMENT SAFETY REMAINS ORICA’S TOP PRIORITY • Two fatalities during the year For personal use only Safety performance • Major Hazards Initiative (MHI) program initiated and 3 good progress made: Total Recordable Injury Frequency - Achieved >99% verification of prioritised key controls
Slide 5: Results Summary
RESULTS SUMMARY FOCUS AND DISCIPLINED APPROACH DRIVES SOUND RESULT For personal use only • Total AN product volumes of 3.65 million tonnes (pcp: 3.54 million tonnes) • Stabilised underlying EBIT of $635 million (pcp: $642 million) – EBIT margin of 12.6% (pcp: 12.6%) • Underlying EBITDA of $896 milli
Slide 6: Australia, Pacific & Indonesia
AUSTRALIA, PACIFIC & INDONESIA TURNAROUND IN REVENUE AND EBIT For personal use only Revenue by commodity1 AN volume & EBIT margin 1,322 • AN volume up 10% 1,279 1,204 - Improved volume from normalisation of mine plans and 9% 4% strip ratios 21.9% 20.6% 8% Thermal coal 20.4% - Volume growth across th
Slide 7: North America
NORTH AMERICA BUSINESS INITIATIVES OFFSET COST HEADWINDS For personal use only Revenue by commodity1 AN volume & EBIT margin % • AN volumes marginally lower 1,249 1,166 1,121 - Quarry & construction (Q&C) markets continue to remain 11% 21% strong 4% Thermal coal Coking coal - Improved volumes in Can
Slide 8: Latin America
LATIN AMERICA REVENUE AND EBIT RECOVERY IN SECOND HALF For personal use only Revenue by commodity1 AN volume & EBIT margin % • AN volume up 4% 7% 670 - Higher volumes from mine plan changes and new 14% 615 637 5% business in Colombia, offset by lower demand in Peru Thermal coal Gold • EBS sales up 1
Slide 9: Europe, Africa & Asia
EUROPE, AFRICA & ASIA UNDERLYING GROWTH OFFSET BY SAFETY IMPACT For personal use only Revenue by commodity1 AN volume & EBIT margin % • AN volumes up 3% - Strong growth in CIS and Western Europe offset by 19% 19% 559 556 570 reduced volumes in tunnelling and the Philippines Thermal coal Gold • Impro
Slide 10: Minova
MINOVA TURNAROUND CONTINUES BUT SLOWER THAN EXPECTED For personal use only Revenue by sector1 Revenue & EBIT Margin % • Revenue up 12% 566 456 - Improved steel and resins volumes in hard rock and 407 7% coal business in Australia 7% Coal 2.9% - Improved volumes in construction in North America Hard
Slide 11: Financial Performance
For personal use only Mobile Manufacturing Unit (MMU), Malaysia FINANCIAL PERFORMANCE Tom Schutte Chief Financial Officer
Slide 12: Financial Result
FINANCIAL RESULT For personal use only Year ended 30 September ($m) 2017 2016 % 2 Sales revenue 5,039 5,092 (1) $ EBITDA1 896 908 (1) $ EBIT2 635 642 (1) $ NPAT3 386 389 (1) $ Statutory Net Profit After Tax 386 343 13 # Interest cover (times)4 8.9x 7.6x 1.3x # Effective Tax Rate5 29% 28% 1pt # Earni
Slide 13: EBIT Bridge
EBIT BRIDGE INITIATIVES OFFSET HEADWINDS For personal use only Orica Group EBIT $m FY16 to FY17 642 (44) 635 (15) 9 1 19 (18) 13 (29) (59) 127 (54) EBIT FX & Material Pricing Net Explosives Cyanide - Minova Other EBIT 2016 Inflation1on input Business - Volume/ Volume/ EBIT 2017 Overheads costs Impro
Slide 14: Capital Expenditure
CAPITAL EXPENDITURE CAPITAL SPEND REFLECTS IMPACTS OF TURNAROUNDS For personal use only Capital Expenditure1 • Continued disciplined approach to capital management $m - All licence to operate capital expenditure (safety, 504 environment, regulatory) has been approved 443 - Ranking of capital priorit
Slide 15: Reduced Debt
REDUCED DEBT CAPITAL MANAGEMENT FRAMEWORK CONTINUES TO DELIVER BALANCE SHEET BENEFITS For personal use only Cash conversion • Cash conversion decreased in 2017 % (40pts) - Higher sustaining capital spend on scheduled planned 106 maintenance shutdowns at key plants including 81 Kooragang Island and Y
Slide 16: Business Improvement Initiatives
For personal use only Kooragang Island, manufacturing facility BUSINESS IMPROVEMENT INITIATIVES Alberto Calderon, Managing Director and CEO
Slide 17: Net Sustainable Benefits
NET SUSTAINABLE BENEFITS SUSTAINABLE SUPPLY CHAIN & COMMERCIAL EFFICIENCIES • $127 million in net benefits offset headwinds For personal use only • Supply chain benefits - Product cost savings (input cost margins, volume rebates) 32% - Sourcing and network (utilisation, booster network sourcing) FY1
Slide 18: Strengthening Customer Relationships
STRENGTHENING CUSTOMER RELATIONSHIPS For personal use only Net Promoter Score (NPS)1 • “Voice of Customer” program launched early in the year: - Better understand our customers’ needs and improve customer service - Enable a rapid customer response mechanism • Favourable Net Promoter Score2 -100 +100
Slide 19: Step-Change Technology
STEP-CHANGE TECHNOLOGY For personal use only • Critical pre-cursor to automating drill and blast loading - Unprecedented safety and productivity improvement - Flexible blasting with greater reliability - Trials completed, expansion into new markets (Latin America) • Predictive blast outcomes - Data
Slide 20: Continuous Improvement on Applied Technology
CONTINUOUS IMPROVEMENT ON APPLIED TECHNOLOGY For personal use only • Outperform conventional boosters - Delivering improved safety, quality and performance - Australian manufacturing commenced; increased security of supply - Product rationalisation leading to supply chain cost advantage • Smart deli
Slide 21: Outlook
For personal use only unitronic 600 OUTLOOK Alberto Calderon, Managing Director and CEO
Slide 22: FY18 Outlook Assumptions
FY18 OUTLOOK ASSUMPTIONS For personal use only Key assumptions for FY18 are: Explosives • Global AN product volumes in the range of 3.65 million tonnes ± 5% • FY17 headwinds to extend into FY18: Headwinds - ~$50 - $55 million impact from contract rollovers and FY17 price resets flow on; and and - ~$
Slide 23: Looking Forward
LOOKING FORWARD For personal use only • We will continue to focus on embedding business initiatives that make Orica a more efficient and effective business • Increased investment in our people and technology will consolidate our industry leading position and drive future value for our customers and
Slide 24: Supplementary Information
For personal use only SUPPLEMENTARY INFORMATION 24 © Orica Limited Group
Slide 25: Explosives Volumes
EXPLOSIVES VOLUMES For personal use only Variance – FY17 volumes FY17 volumes vs. FY16 volumes ‘000 tonnes AN1 Emulsion Total AN1 Emulsion Total products2 products2 Australia/Pacific and Indonesia 548 774 1,322 8% 11% 10% North America 621 500 1,121 (12%) 9% (4%) Latin America 204 433 637 (9%) 11% 4
Slide 26: Segment Analysis
SEGMENT ANALYSIS For personal use only FY17 FY16 EBIT % $m Revenue1 EBIT Revenue1 EBIT change Australia/Pacific and Indonesia 1,565 344 1,545 315 9% North America 1,363 187 1,360 197 (5%) Latin America 916 61 920 69 (11%) Europe, Africa and Asia 1,026 102 1,141 116 (13%) Minova 456 13 407 - 100% Glo
Slide 27: Diversified Global Business
DIVERSIFIED GLOBAL BUSINESS For personal use only Geographic portfolio By commodity By product/service offering % of FY17 revenue¹ % of FY17 revenue¹ % of FY17 revenue¹ 2% 9% 9% 16% 17% 26% 30% AN/ANFO Australia Pacific & Thermal Coal 13% 19% Bulk Emulsion Indonesia North America Coking Coal Package
Slide 28: Cash Conversion
CASH CONVERSION For personal use only Year ended 30 September ($m) 2017 2016 EBITDA 896 908 TWC movement (46) 197 Sustaining Capital1 (255) (145) Cash Conversion 595 960 Cash Conversion %2 66.4% 105.7% 1. Includes the SAP project 2. Cash Conversion/EBITDA 28 © Orica Limited Group
Slide 29: Interest Cover
INTEREST COVER For personal use only Year ended 30 September ($m) 2017 2016 Change EBIT before individually material items 635 642 (7) Net financing costs 1 72 84 (12) Interest cover (times) 8.9x 7.6x # 1.3x Interest cover (times) excluding capitalised borrowing costs 6.2x 5.4x # 0.8x 1. Financing c
Slide 30: Foreign Exchange Exposure
FOREIGN EXCHANGE EXPOSURE For personal use only EBIT composition (FX transaction) FY17 FX movements EBIT sensitivity1 % of FY17 EBIT % change from pcp +/- $m per 1% change United States (3.7%) 2.2 8% 8% 2 EMEA (5.1%) 1.1 United States 35% Australia Latin America (4.3%) 0.8 13% EMEA Latin America Can
Slide 31: Debt Profile
DEBT PROFILE For personal use only Facility Headroom Drawn Debt Maturity Profile $m $m Average tenor at September 2017 - 6.1 years 3,644 3,537 600 500 1,767 1,579 400 300 200 1,877 1,958 100 0 Sep-16 Sep-17 FY17 FY18 FY19 FY20 FY21 FY23 FY25 FY26 FY27 FY31 Drawn Undrawn Committed Bank Facilities US
Slide 32: Net Debt Position
NET DEBT POSITION For personal use only Year ended 30 September ($m) 2017 Movement in net debt $m FY16 to FY17 EBITDA 896 Movement in trade working capital (46) Movement in non trade working capital (38) Net impact ($47m) 1,549 Net interest & tax paid (289) 1,502 Non cash items & foreign exchange (5
Slide 33: Environmental Provisions
ENVIRONMENTAL PROVISIONS For personal use only Provision Spend Profile Environmental Provisions ($m) FY17 FY16 $m 68 Botany groundwater remediation 1 63 64 13 Botany hexachlorobenzene (HCB) 41 35 remediation 8 41 Deer Park remediation 25 37 19 12 29 29 Yarraville remediation 30 31 8 12 12 17 4 Other
Slide 34: Non IFRS Reconciliation
NON IFRS RECONCILIATION For personal use only Year ended 30 September ($m) 2017 2016 % 2 Statutory profit after tax 386 343 13 Add back: Individually material items after tax - 46 Underlying profit after tax 386 389 (1) Adjust for the following: Net financing costs 72 84 (15) Income tax expense1 164
Slide 35: Disclosures and Definitions
DISCLOSURES AND DEFINITIONS For personal use only Term Definition AN volume Includes Ammonium Nitrate (AN) prill and solution as well as Emulsion products including bulk emulsion and packaged emulsion Equivalent to profit after income tax expense before individually material items attributable to sh