Slide 1: 2019 Half Year Results
9 MAY 2019 2019 HALF 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 Aligned with Orica’s core values Safety is our priority. Always. Safety & health Environment We respect • Sustained fatality free operations, our • No environmental incidents (category 3+) and value all. primary goal • CHC intensity remains stable • Evolving and strength
Slide 4: Results summary
Results summary Stronger first half operating performance Total AN product volumes up 3%, mainly Underlying from Australia Pacific Asia (APA) and Latin AN volumes EBIT NPAT1 America regions EBIT significantly higher supported by: 1.88mt $301m $167m • strong performance across all regions +3% +20% +3
Slide 5: Australia Pacific & Asia
Australia Pacific & Asia Increased market share from continued growth 1H 2H EBIT margin Volumes • AN market share increase with continued growth AN volume (kt) EBIT and EBIT margin ($m) across most of the region, despite impact of weather on the coal sector 884 215 • Higher Electronic Blasting Syste
Slide 6: Burrup update
Burrup update Permanent fix progressing; fundamentals remain strong Rectification works • All critical components (heat exchangers, drying drums and absorption column) being manufactured by suppliers, with delivery scheduled in September 2019 • Rectification program being closely managed • Plant sch
Slide 7: North America
North America Steady contribution across region 1H 2H EBIT margin Volumes AN volume (kt) EBIT and EBIT margin ($m) • AN volumes stable with stronger demand in Canada offsetting lower volumes in Mexico – Quarry & construction volume slightly lower due to 575 546 560 553 560 97 98 94 unfavourable weat
Slide 8: Latin America
Latin America Business performance recovery earlier than expected 1H 2H EBIT margin Volumes AN volume (kt) EBIT and EBIT margin ($m) • Volumes up 10% with increased demand in Colombia and Peru • Cyanide sales remain low due to customer mine plan 333 331 304 301 317 32 changes 29 24 19 19 EBIT 7% • E
Slide 9: Europe, Middle East & Africa
Europe, Middle East & Africa Strong, sustainable performance from refocused business 1H 2H EBIT margin Volumes AN volume (kt) EBIT and EBIT margin ($m) • Strong AN volume in key growth regions including Kazakhstan and Russia and Africa partially offsetting 44 lower volumes in Turkey due to continued
Slide 10: Auxiliaries
Auxiliaries 1 GroundProbeTM delivering above expectations 1H 2H EBIT margin Sales Revenue ($m) EBIT and EBIT margin ($m) • Increased GroundProbeTM market share globally • Entry into tunnels market 55 10 • Early wins for innovation award winning high precision laser products 41 6 26 15% 18% EBIT • St
Slide 11: Minova
Minova Turnaround starting to deliver sustainable benefits 1H 2H Sales Revenue ($m) EBIT ($m) Revenue by commodity • +20% increase in revenue in America, Canada, 6% 2% Australia and India due to a combination of increased market share and higher demand from existing 7 Coal mining customers 280 291 2
Slide 12: Financial Performance
FINANCIAL PERFORMANCE CHRISTOPHER DAVIS, CHIEF FINANCIAL OFFICER 2019 HALF YEAR RESULTS | 12
Slide 13: Financial result
Financial result Improvement in key financial metrics Half year ended 31 March ($m) HY19 HY18 % Sales revenue 2,829 2,532 12% Underlying EBITDA 1 437 379 15% Underlying EBIT 2 301 252 20% Underlying NPAT 3 167 124 35% Statutory net profit /(loss) after tax 33 (229) 114% Effective tax rat
Slide 14: Individually significant items
Individually significant items Non-cash one-off adjustments Items ($m) Gross (before tax) Net (after tax) Write down of defective Burrup assets (155.0) (108.5) Impairment of IT assets (36.1) (25.3) Total individually significant items (191.1) (133.8) 2019 HALF YEAR RESULTS | 14
Slide 15: EBIT bridge
EBIT bridge Strong performance across all regions and improved manufacturing drives 20% increase in EBIT Orica Group EBIT ($m) 1H18 to 1H19 2019 HALF YEAR RESULTS | 15
Slide 16: Capital expenditure
Capital expenditure Disciplined approach to capital management Capital expenditure in line with expectations Capital expenditure1 ($m) • Sustaining and Growth – Maintenance at the Kooragang Island and Yarwun plants in Australia and Bontang, Indonesia 350 322 – Ongoing investment in the global Mobile
Slide 17: Cash flow
Cash flow Significant improvement in operating cash flow Net Operating Cash Flow ($m) Cash Conversion (%) 615 90.5 72.1 466 66.5 312 586 37.4 184 155 29 FY17 FY18 FY19 1H18 1H19 1H18 1H19 1H 2H Incl. Sustaining Capital1 Excl. Sustaining Capital2 1. (EBITDA add/less movement in trade working capital
Slide 18: Net debt & gearing
Net debt & gearing Maintaining a strong and flexible balance sheet through the cycle Net debt & gearing ($m) Movement in net debt ($m) Net impact $64m 1,906 1,768 54 1,712 56 1,648 118 41 1,768 1,648 38 36 1H18 FY18 1H19 FY18 Dividends Net Sub-total Non-cash 1H19 closing paid cash movements closing
Slide 19: Strategic Priorities
STRATEGIC PRIORITIES ALBERTO CALDERON, MANAGING DIRECTOR AND CEO 2019 HALF YEAR RESULTS | 19
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: Continuous plants
Continuous plants Improved AN manufacturing performance over past 18 months Progress to date AN plant OEE performance vs benchmark • Continued improvements in Overall Equipment 100% Effectiveness (OEE)1,2 • Improved turnaround management approach embedded 90% – Planned turnarounds at Yarwun, Bontang
Slide 22: Initiating Systems and Packaged Emulsion plants
Initiating Systems and Packaged Emulsion plants New technology implementation and substantial reduction in SKUs Progress to date • WebGenTM production commenced • New EBS production line built at existing Initiating Systems plant in Helidon, Queensland • >50% SKU reduction. The initial phase of the
Slide 23: Customer adoption of technology solutions
Customer adoption of TM technology solutions Wireless blasting - WebGen WebGenTM Units fired Blasts by region • Growing market interest for wireless initiation technology 3 53 – +130 blasts fired globally +600% – Several commercial services contracts secured – Demonstrations underway currently acros
Slide 24: Customer adoption of technology solutions
Customer adoption of technology solutions Digitally transforming blasting Orica’s Digital Solutions Implementations Uptake by region • 18 implementations of Next Generation BlastIQ™ 3 5 • 15 customers1, including tier 1 miners • 10 trials in progress +450% • 2 major product releases 5 5 Bulkmaster™
Slide 25: Outlook
OUTLOOK ALBERTO CALDERON, MANAGING DIRECTOR AND CEO 2019 HALF YEAR RESULTS | 25
Slide 26: Outlook
OUTLOOK 2019 financial year: • The outlook for the full year result remains unchanged from our prior guidance in November 2018 with our earnings weighted approximately 45/55 across the halves • Lower utilisation from the Burrup plant in the second half is expected to be mitigated by accelerated busi
Slide 27: Supplementary Information
SUPPLEMENTARY INFORMATION 2019 HALF YEAR RESULTS | 27
Slide 28: FY19 outlook (as disclosed November 2018)
FY19 outlook (as disclosed on 2 November 2018) 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 produ
Slide 29: Explosives volumes
Explosives volumes Variance – 1H19 volumes Half year ended 31 March 1H19 volumes vs. 1H18 volumes ‘000 tonnes AN 1 Emulsion Total AN 1 Emulsion Total products2 products2 Australia Pacific & Asia 312 461 773 12% 0% 4% North America 285 275 560 (5%) 6% 0% Latin America 111 220 331 27% 3% 10% Europe, M
Slide 30: Segment analysis
Segment analysis Half year ended 31 March 1H19 1H18 EBIT % $m Revenue 1 EBIT Revenue 1 EBIT change Australia Pacific & Asia 986 174 896 167 4% North America 783 94 689 88 7% Latin America 451 19 437 19 0% Europe, Middle East & Africa 440 30 391 19 58% Auxiliaries 55 10 26 (1) >100% Minova 291 7 239
Slide 31: Diversified global business
Diversified global business Geographic portfolio By commodity By product/service offering % of 1H19 revenue 1 % of 1H19 revenue 1 % of 1H19 revenue 1 4% 10% 16% 2% 17% 10% 26% 33% Thermal Coal AN/ANFO 15% Australia Pacific & Asia Coking Coal 5% Bulk Emulsion 13% North America Iron Ore Packaged Produ
Slide 32: Interest cover
Interest cover Half year ended 31 March ($m) 1H19 1H18 Change EBIT before individually significant items 301 252 49 Net financing costs 56 54 2 Interest cover (times) 5.4x 4.6x 0.8x 2019 HALF YEAR RESULTS | 32
Slide 33: Foreign exchange exposure
Foreign exchange exposure EBIT composition (FX transaction) HY19 FX movements EBIT sensitivity1 % of HY19 EBIT % change from pcp +/- $m per 1% change United States 7.9% 0.6 8% 22% 11% Canada 4.1% 0.6 Australia United States Latin America (4.4%) 0.6 Canada Latin America 19% EMEA 2 (4.1%) 0.3 EMEA Asi
Slide 34: Debt profile
Debt profile Facility headroom ($m) Drawn debt maturity profile ($m) Average tenor at March 2019 – 4.8 years 700 600 1,383 1,230 500 400 300 2,163 2,232 200 100 0 Sep-18 Mar-19 FY19 FY20 FY21 FY22 FY23 FY25 FY26 FY27 FY31 Drawn Undrawn Committed bank facilities US private placement Export credit fin
Slide 35: Net debt & gearing
Net debt & gearing Financial year ended 31 March ($m) 1H19 Movement in net debt ($m) EBITDA 437 Net impact $64m Movement in trade working capital (55) 1,768 Movement in non trade working capital (88) 1,712 56 Net interest & tax paid (139) 1,648 117 Non cash items & foreign exchange 29 (184) 129 Net
Slide 36: Non-IFRS reconciliation
Non-IFRS reconciliation Half year ended 31 March ($m) 1H19 1H18 % Statutory net profit/(loss) after tax 33 (229) 114% Add back: Individually significant items after tax 134 353 62% Underlying profit after tax 167 124 35% Adjust for the following: Net financing costs 56 54 (4%) Income tax expense 1
Slide 37: Definitions
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 Appendix 4D – Capital e