Dyno Nobel Limited · ASX:DNL
Dyno Nobel — Incitec Pivot — H1 2011 Earnings Presentation
31 slides from Dyno Nobel's earnings presentation, May 9, 2011
Slide 1: Incitec Pivot Limited 2011 Interim Results
Incitec Pivot Limited 2011 Interim Results 9 May 2011
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by Incitec Pivot Limited (“IPL”). The information contained in this presentation is for information purposes only. The information contained in this presentation is not investment or financial product advice and is not intended to be used as the basis f
Slide 3: Presentation outline
Presentation outline IPL Group performance James Fazzino, Managing Director & CEO Business Unit performance James Fazzino • Explosives • Fertilisers Strategy James Fazzino Capital Management Frank Micallef, Chief Financial Officer Outlook James Fazzino Summary James Fazzino 3
Slide 4: James Fazzino, Managing Director & CEO
James Fazzino Managing Director & CEO
Slide 5: IPL Group performance Overview
IPL Group performance Overview Group NPAT(1) excluding IMIs ↑ 22% to $178.6M Explosives business – EBIT 12% ↑ to $146.9M Americas up 32% in US$ - Velocity and modest market recovery Asia Pacific Business up 6% notwithstanding weather Fertiliser business – EBIT 30%↑ to $138.6M SCI up by 48% - ↑ globa
Slide 6: IPL Group financial performance Results summary
IPL Group financial performance Results summary Half year ended 31 March (A$M) 2011 2010 Change Revenue 1,424.4 1,236.4 15% EBIT(1) 273.8 230.1 19% NPAT(2) – excluding individually 178.6 146.5 22% material items NPAT(2) – including individually 165.6 132.4 25% material items Operating cashflow 85.3
Slide 7: IPL Group performance NPAT bridge
IPL Group performance NPAT - 1H 10 : A$146.5M v 1H 11 : A$178.6M 220.0 35.6 200.0 (2.8) 178.6 180.0 (6.0) (10.4) 4.6 A$M 11.1 160.0 146.5 140.0 120.0 100.0 1H2010 NPAT DNA DNAP SCI IPF Corporat e / Elim / Tax/ Int erest 1H2011NPAT Minorit y int erest s balanced earnings – 51% Explosives; 49% Fertili
Slide 8: Explosives scorecard
Explosives scorecard EBIT - 1H 10 : A$131.7M v 1H 11 : A$146.9M 170.0 9.9 160.0 16.3 150.0 146.9 7.5 (16.0) 140.0 (2.5) A$M 131.7 130.0 120.0 110.0 100.0 1H2010 EBIT Volume Velocit y Commodit y / FX Weat her Depr eciat ion / Ot her 1H2011EBIT Pr ices ( Ref er Appendix 1) Modest recovery in US volume
Slide 9: Fertilisers scorecard
Fertilisers scorecard EBIT - 1H 10 : A$106.9M v 1H 11 : A$138.6M 200.0 3.6 78.9 180.0 160.0 (18.3) 138.6 A$M 140.0 (24.0) (8.5) 120.0 106.9 100.0 80.0 Fer t s 1H2010 EBIT Commodit y/ FX pr ices Quant um Weat her / Yasi Manuf act ur ed Sales Depr eciat ion / Ot her Fer t s 1H2011EBIT ( Ref er Appendi
Slide 10: IPL Strategy in action
IPL Strategy in action Incitec Pivot’s strategy is to leverage the industrialisation and urbanisation of Asia through hard commodities (explosives) and soft commodities (fertilisers), leveraging IPL’s core nitrogen based chemical manufacturing competency. right strategy – delivered through People, C
Slide 11: Report card: people
Report card: people What we promised: What we delivered: Zero harm: ✗ Safety performance flat “zero means zero” reduction in severity of incidents Moranbah - 1.5M construction hours LTI free enhanced HSE global management system being rolled out, Leadership training in progress People - deliver a st
Slide 12: Report card: customers
Report card: customers What we promised: What we delivered: Complete Moranbah: 100% of project committed “underpins DNAP business Customers reliably supplied during and provides foundation construction period (including Bajool for further growth” upgrade) Growth aligned to the Development of $40M em
Slide 13: Moranbah update
Moranbah update Zero Harm – 1.5M construction hours LTI free Project status: 75% complete today Operational readiness ahead of plan ✗ Beneficial operation – delayed until end of June 2012 • Challenging engineering and construction landscape in Australia • Wettest season for 50 years, including Cyclo
Slide 14: Report card: efficiency
Report card: efficiency What we promised: What we delivered: Velocity: 1H: US$14.8M 2011: US$34M Program benefits to date: US$155M Total project: $204M on track for US$204M by end of 2012 Progress to next phase of Continuous improvement methodology business improvement selected “Lean: people- driven
Slide 15: Report card: efficiency
Report card: efficiency What we promised: What we delivered: ✗ GI performance pre-turnaround Continue to improve GI shut completed plant reliability St Helens running at record rates following desulphurization project Significant progress on risk based sustenance spend ✗ Phosphate Hill “Eagle Rock”
Slide 16: Frank Micallef, Chief Financial Officer
Frank Micallef Chief Financial Officer
Slide 17: Capital management outcomes – Net debt
Capital management outcomes – Net debt Net debt increased by A$259M since September 2010 to A$1,356M Operating cash flow up 8% on pcp to A$85.3M ✗ Working capital build A$215.4M Effective interest rate 5.1% US debt strategy – A$73.7M gain Moranbah spending on target A$143.1M seasonal net debt increa
Slide 18: US Debt strategy delivers
US Debt strategy delivers 12 month rolling average Drawn Funds at 31 March 2011 interest rate of 5.1% on a Finance tight average balance Leases, Other, A$18M A$228M Maintains debt/EBITDA as US$ depreciates 144A, Partially hedges US$ A$1,226M earnings translation exposure disciplined financial manage
Slide 19: Strong investment grade credit metrics
Strong investment grade credit metrics March 2011 March 2010 Target range Net debt / EBITDA(1) 1.6x 1.9x < 2.5x Interest cover(2) 11.2x 9.5x >6.0x Gearing Ratio(3) 28% 27% Headroom (including cash) $1.2Bn Average tenor of drawn funds 7 years (1) Based on last 12 month historical EBITDA / Net debt at
Slide 20: Value-adding risk management – FX exposures
Value-adding risk management – FX exposures Transaction exchange exposure – AP’s and urea FY 2011: 95% hedged at no worse than 92 cents, fully participating to 84 cents(1) FY 2012: 75% hedged at no worse than 98 cents, fully participating to 90 cents(1) (1) Assuming DAP @ US$588/tne and 950ktpa; ure
Slide 21: James Fazzino, Managing Director & CEO
James Fazzino Managing Director & CEO
Slide 22: 2011 Outlook – second half
2011 Outlook – second half 2H earnings bias consistent with prior years Explosives: • Gradual improvement in Americas explosives market • Dry season in Asia Pacific Positive outlook for Fertilisers: • soft commodity prices and fertiliser economics • favourable domestic growing conditions (water) • h
Slide 23: Summary
Summary 1H Good result: right strategy and relentless focus on execution • NPAT up 22% • Balanced business portfolio (51/49 explosives/fertilisers) • Disciplined financial management Continued earnings momentum in 2H 23
Slide 24: Questions?
SouthernCross Questions ? Incitec Pivot
Slide 25: Appendices
SouthernCross Appendices Incitec Pivot
Slide 26: Appendix 1: FX and commodity pricing movements - Explosives
Appendix 1: FX and commodity pricing movements - Explosives Commodity Prices A$M Nitrogen pricing 5.2 Moranbah – costs to serve (net of movement in 11.3 16.5 Provision release) FX Rate Translation of US$ earnings (99.6c vs 90.7c) (6.6) FX & Commodity Prices – Explosives 9.9 Interest benefit resultin
Slide 27: Appendix 2: FX and commodity pricing movements - Fertilisers
Appendix 2: FX and commodity pricing movements - Fertilisers Commodity Prices A$M DAP US$588 vs US$371 87.5 Urea US$366 vs US$285 10.1 Freight - DAP (6.4) Sulphur /rail freight/ royalties etc (7.2) 84.0 FX Rate DAP 91.0 vs 89.8 (4.1) Urea (1.0) (5.1) FX & Commodity Prices - Fertilisers 78.9 27
Slide 28: Appendix 3: Capital management - Interest cost
Appendix 3: Capital management - Interest cost Half year ended 31 March (A$M) 2011 2010 Total borrowing costs 52.0 41.7 Less unwinding of discount on 9.4 5.6 provisions Interest cost before capitalisation 42.6 36.1 12 month rolling average net debt A$1,500M 12 month rolling average interest rate 5.1
Slide 29: Appendix 4: Debt Maturity Profile
Appendix 4: Debt Maturity Profile 1,000 900 800 700 600 A$M 500 400 300 200 100 0 Sep 11 Sep 12 Sep 13 Sep 14 Sep 15 Sep 16 Sep 17 Sep 18 Sep 19 Mar 20 Sep 20 Syndicated Facility Participation Facilities 144A / Reg S 7 years average tenor of drawn funds Headroom including cash $1.2Bn tenor and diver
Slide 30: Appendix 5: 2011 full year EBIT sensitivities
Appendix 5: 2011 full year EBIT sensitivities Urea – Middle East Granular Urea (FOB)(1) +/- US$10/t = +/- A$4.5M DAP – Di-Ammonium Phosphate Tampa (FOB)(2) +/- US$10/t = +/- A$10.4M FX – transactional (DAP & Urea)(3) +/- 1 cent = A$8.4M FX – translation of Explosives US$ earnings(4) +/- 1 cent = A$1
Slide 31: Appendix 6: Freight market pricing movement
Appendix 6: Freight market pricing movement Source: Baltic Exchange Information Services Ltd 31