Orica Limited · ASX:ORI
Orica — FY2011 Earnings Presentation
54 slides from Orica's earnings presentation, 2011
Slide 1: 2011 Full Year Results
2011 Full Year Results Presentation for Overseas Investor meetings
Slide 2: Orica - overview
Orica - overview Mining Services – The world’s largest supplier of commercial explosives, blasting systems and blast-based services to the mining, quarrying and infrastructure sectors. Minova – A leading manufacturer and supplier of chemical- based consumables, bolts, equipment, accessories and serv
Slide 3: Group safety and environmental performance
Group safety and environmental performance1 Full Year Full Year 2011 2010 Fatalities 1 - AWRCR2 0.47 0.63 Distribution incidents 30 22 CO2e emissions (million tonnes) 2.6 2.9 1 2010 excludes DuluxGroup. 2 All Worker Recordable Case Rate is calculated as the number of injuries and illnesses per 200,0
Slide 4: Results overview
Results overview • EBIT1 up 2% and NPAT1 up 4% • EPS1 and operating cash flow2 up 2% FINANCIAL • Gearing3 and interest cover at 26.6% and 6.4 times4 respectively • Rolling TWC to Rolling sales at 13.2% • Strong demand conditions across some mining markets OPERATING • Productivity benefits across all
Slide 5: Divisional Performance and Capital Management
Divisional Performance and Capital Management
Slide 6: Group EBIT from continuing operations
Group EBIT from continuing operations EBIT 2% A$M 1,250 1,200 36 4 (60) 46 1,150 (55) 86 1,100 (21) (17) 1,028 1,050 1,009 1,000 950 900 850 800 2010 EBIT Net Volume Margin Productivity / Corporate Net FX Fixed costs / KI Ammonia Ammonia 2011 EBIT Improvement Synergies Support/Other Depreciation Pla
Slide 7: EBIT by business
EBIT by business Mining Services Minova 900 25% 160 20% 800 140 20% 16% 700 120 EBIT MARGIN EBIT MARGIN 600 100 EBIT A$M EBIT A$M 15% 12% 500 80 400 8% 10% 60 300 40 200 5% 4% 100 20 0 0% 0 0% 2008 2009 2010 2011 2008 2009 2010 2011 1st Half EBIT 2nd Half EBIT EBIT Margin 1st Half EBIT 2nd Half EBIT
Slide 8: Orica Mining Services
Orica Mining Services Sales $3,938M; EBIT $817M; Average Operating Net Assets $3,039M EBIT 6% A$M 950 25 (44) 44 900 (21) 87 (18) (17) 850 (7) 0 817 800 768 750 700 650 600 2010 EBIT Volume Net Price Productivity Fixed Costs / KI Ammonia Net FX AN / Ammonia Other 2011 EBIT Depreciation Plant Lag Imp
Slide 9: Minova
Minova Sales $822M; EBIT $105M; Average Operating Net Assets $1,514M EBIT 29% A$M 170 8 (30) 160 7 147 150 140 (22) 130 120 (5) 110 105 100 90 80 70 60 50 40 2010 EBIT Volume Productivity / Price Net FX Other 2011 EBIT Synergies Volume growth in Australia and South Africa, Heightened competitor acti
Slide 10: Chemicals
Chemicals Sales $1,510M; EBIT $196M; Average Operating Net Assets $810M EBIT 4% $M 240 3 (20) 4 220 9 16 (4) 200 196 188 180 160 140 120 2010 EBIT Mining General Watercare Productivity Net FX Cyanide 2011 EBIT Chemicals Chemicals Volume Strong demand from mining markets, Disciplined cost management
Slide 11: Corporate centre and other support services
Corporate centre and other support services Full year ended 30 September (A$M) 2011 2010 $ Corporate centre costs (42.0) (42.4) 0.4 Other support costs (47.8) (51.6) 3.8 Total corporate costs (89.8) (94.0) 4.2 Corporate Centre Other support costs In line with prior year Lower environmental expense,
Slide 12: Cash flow
Cash flow 1 Full year ended 30 September (A$M) 2011 2010 $ EBITDA 1,252.5 1,340.8 (88.4) Net interest paid (143.8) (136.6) (7.2) Net tax paid (229.7) (237.2) 7.5 Trade working capital movement 2.8 54.4 (51.6) Non trade working capital movement (51.7) (34.4) (17.3) FX movement on debt/reserves 24.6 (
Slide 13: Rolling trade working capital to sales
Rolling trade working capital to sales%1 20.0% 19.0% 18.0% 17.0% Rolling TWC / Sales % 16.0% 15.0% 14.0% 13.0% 12.0% 11.0% 10.0% HY03 FY03 HY04 FY04 HY05 FY05 HY06 FY06 HY07 FY07 HY08 FY08 HY09 FY09 HY10 FY10 HY11 FY11 Continued focus on management of TWC 1 Rolling 12 months trade working capital (T
Slide 14: Growth capital (excluding M&A)
Growth capital (excluding M&A) FCT ACT EST Planned 2011 capital expenditure 2011 2011 2012 Major growth capital projects >A$10M: M ining Services Bontang Nanling 290 257 150 Kooragang Island M inova China Chemicals plant 20 7 10 Chemicals Mining Chemicals - cyanide plant uprate 95ktpa 25 23 - Mining
Slide 15: Capital management – key measures
Capital management – key measures Full year ended 30 September 2011 2010 Net Debt (A$M) 1,408.1 1,051.6 Net Interest Expense (A$M) 123.5 119.6 Interest Cover (times)1 6.4 7.3 Operating Cash ($)2 758.2 803.7 Cash Conversion3 (%) 81.0% 89.7% Rolling TWC to Rolling Sales4 (%) 13.2% 13.0% Gearing5 (%) 2
Slide 16: Drawn debt maturity profile
Drawn debt maturity profile A$M 450 400 350 300 250 200 150 100 50 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2022 2025 2030 Average tenor on drawn debt of 7.1 years Orica Full Year Results 2011 Page 15
Slide 17: 2012 Hedging
2012 Hedging Major currency hedges include: Foreign Currency* Exposure % Effective Hedged % • USD 78% 74% • CAD 5% 42% • NZD 5% 49% • CNY 3% 75% * Net of all long and short positions in that currency Currency hedging for 2012 has been undertaken using options at a cost of $26M Approximately 60% of t
Slide 18: Environmental provisions
Environmental provisions Environmental Spend (A$M) ACT 2011 EST 2012 EST 2013 EST 2014 Major environmental spend: Botany Groundwater remediation 11 11 11 11 HCB remediation1 43 22 5 2 Botany Mercury remediation 22 23 - - Other 6 15 16 7 Total environmental spend 82 71 32 20 Key Provisions as at 30 S
Slide 19: Strategic Growth Priorities
Strategic Growth Priorities
Slide 20: Orica's business strategy remains unchanged
Orica’s business strategy remains unchanged • Capitalise on and extend global leadership in the provision of high service, critical consumables to the mining and infrastructure markets • Focussed on attractive segments of the mining value chain Exploration Site Set-up Mining Transport Process Market
Slide 21: Attractive industry characteristics
Attractive industry characteristics • Attractive industry structure – considerable consolidation over the last decade • Commodity volumes growing strongly: • Industrialisation / urbanisation in China and India • Declining ore grades and increasing strip ratios • Increasing interest in mine automatio
Slide 22: Multiple avenues for growth
Multiple avenues for growth ORGANIC EXPANSION PROGRESS DURING THE PERIOD • AN plant in Bontang, Indonesia is • AN plant expansion currently commissioning Mining Services • New emulsion plants • New technology • Ammonia plant uprate at Kooragang Island, Australia completed • Sodium cyanide plant Chem
Slide 23: Major projects update – Bontang
Major projects update Bontang – 300ktpa AN plant in Indonesia • Strategically located adjacent to ammonia feedstock • Project continues to be very well managed: • Currently in commissioning phase • Over 10 million site hours worked with only one recordable injury • At the height of construction, the
Slide 24: Major projects update – AN Plant, Peru
Major projects update AN Plant, Peru 400ktpa • Reduce dependence on imported product • Support growth plans of Orica customers in the region • Proposed site in Peru • Ammonia receiving terminal added to project scope removing dependency on 3rd party projects • Environmental Impact Assessment underwa
Slide 25: Major projects update – Kooragang Island ammonia plant
Major projects update Kooragang Island ammonia plant – 65ktpa capacity uprate • Kooragang Island ammonia plant uprate project was completed during the maintenance turnaround in July 2011 • During start-up, an amount of sodium chromate containing hexavalent chromium was released. The plant is current
Slide 26: Major projects update – Nanling
Major projects update Nanling – Initiating systems facility in Hunan Province, China • The Hunan Province IS facility construction continues - approaching 70% complete and currently on track to meet a H2 2012 start up • Equipment installation to start in November • Project costs of $100 million are
Slide 27: Global commodity growth outlook remains strong
Global commodity growth outlook remains strong Global Commodity Growth Rates CAGR - 2012 to 2015 10% 9.2% 9% 7.8% 8% 7% 5.8% 6% 4.9% 4.7% 5% 3.9% 4% 2.8% 3.0% 3% 2.4% 2% 1% 0% Coal - Coal - Copper Gold Iron Ore Nickel Zinc Q&C Other thermal coking Tunneling Metals/O&G 2011 Data (2012-15 avg) Above G
Slide 28: Summary
Summary • Another solid result in challenging conditions • Strong Balance Sheet to support growth • Growth projects tracking well with benefits to flow through from 2012 • Significant growth opportunities with strong market outlook Orica Full Year Results 2011 Page 27
Slide 29: Outlook
Outlook We expect Group net profit after tax (pre individually material items) in 2012 to be higher than that reported in 2011, subject to global economic conditions. Orica Full Year Results 2011 Page 28
Slide 30: Supplementary Information
Doric Supplementary Information ———_—_—s—
Slide 31: Group financial performance overview
Group financial performance overview1 Full year ended 30 September (A$M) 2011 2010 % Sales 6,182.3 5,812.1 6.4 Gross margin 2,717.6 2,654.1 2.4 EBITDA2 1,252.5 1,234.0 1.5 EBIT2 1,028.3 1,009.0 1.9 Net profit after tax pre individually material items 642.3 618.8 3.8 Net profit after tax after indivi
Slide 32: Safety benchmarking
Safety benchmarking All Worker Injury Recordable Case Rate (per 200,000 hours worked) Note: Only Orica, BHP Billiton & Rio Tinto data available for 2010 2.5 2 1.5 1 0.5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Orica BHP Billiton Rio Tinto DuPont Dow BASF Continued focus on long-term
Slide 33: EBIT contribution by business platform
EBIT contribution by business platform1 September 2010 September 2011 Chemicals Chemicals Group Group 15.7% 17.5% Minova 12.3% Minova 9.4% DuluxGroup Mining 7.7% Services 64.3% Mining Services 73.1% 1 Excludes Corporate costs Orica Full Year Results 2011 Page 32
Slide 34: EBIT contribution by geography
EBIT contribution by geography September 20101,2 September 2011 Other Europe 1.3% Other 12.6% Europe 1.5% 10.2% Latin America Australia 9.6% Latin America 40.0% 14.8% Australia North 50.5% America 12.2% North America 12.9% New Zealand Asia Asia 3.2% 13.0% New Zealand 15.2% 3.0% 1 Includes DuluxGroup
Slide 35: Gross sales by geography
Gross sales by geography1 September 20102,3 September 2011 Other Europe Other 1.5% Europe 11.2% 1.8% 10.8% Latin Australia America Latin 34.7% 13.6% Australia America 39.8% 15.7% North North New Zealand America America 3.4% 17.7% New Zealand Asia 15.3% 4.6% 11.6% Asia 18.3% 1 Includes intersegment s
Slide 36: Gross margin growth
Gross margin growth1 A$M 3,200 +11.7% -0.9% +2.4% 2,800 +18.3% 2,400 +19.1% 2,000 +9.2% +12.9% +6.2% 1,600 -1.3% 1,200 800 400 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Compound average growth rate since 2002 is 8.4% 1 Gross margin growth excludes DuluxGroup. Orica Full Year Results 2011 Pag
Slide 37: Productivity
Productivity1 80% 78.9% 76% 75.1% 74.0% 73.2% 72.8% 72% 69.8% 69.0% 68.5% 68% 66.8% 65.3% 64% 60% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2 Continued focus on productivity 1 Productivity is measured as fixed costs (includes depreciation and amortisation) as a percentage of gross margin. 2
Slide 38: Net profit after tax
Net profit after tax1 A$M +4.6% 700 +12.9% -5.0% DLX 600 +15.0% +30.9% 500 +11.8% 400 +20.5% +4.4% 300 +13.0% 200 100 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Compound average growth rate since 2002 is 11.6% NPAT from continuing operations up 4% 1 Pre individually material items. 2 2002 -20
Slide 39: Orica Mining Services
Orica Mining Services Full year ended 30 September (A$M) 2011 2010 % Sales 3,938.0 3,610.7 9.1 EBITDA 965.7 919.1 5.1 EBITDA margin (%) 24.5% 25.5% (3.9) EBIT 817.0 767.7 6.4 EBIT margin (%) 20.7% 21.3% (2.8) Orica Full Year Results 2011 Page 38
Slide 40: Orica Mining Services by geography
Orica Mining Services by geography Australia/Asia North America 500 30% 140 15% 25% 120 400 100 EBIT MARGIN EBIT MARGIN 20% 10% EBIT A$M EBIT A$M 300 80 15% 200 60 10% 5% 40 100 5% 20 0 0% 0 0% 2008 2009 2010 2011 2008 2009 2010 2011 1st Half EBIT 2nd Half EBIT EBIT Margin 1st Half EBIT 2nd Half EBI
Slide 41: Minova
Minova Full year ended 30 September (A$M) 2011 2010 % Sales 821.9 835.5 (1.6) EBITDA 133.6 177.8 (24.9) EBITDA margin (%) 16.2% 21.3% (23.9) EBIT 105.1 147.3 (28.6) EBIT margin (%) 12.8% 17.6% (27.3) Orica Full Year Results 2011 Page 40
Slide 42: Chemicals
Chemicals Full year ended 30 September (A$M) 2011 2010 % Sales 1,510.0 1,427.4 5.8 EBITDA 235.4 224.0 5.1 EBITDA margin (%) 15.6% 15.7% (0.6) EBIT 196.0 188.0 4.3 EBIT margin (%) 13.0% 13.2% (1.5) Orica Full Year Results 2011 Page 41
Slide 43: Cash conversion
Cash conversion Full year ended 30 September (A$M) 2011 2010 EBITDA 1,252.5 1,340.8 TWC movement 2.8 54.4 Sustenance (240.9) (192.3) Cash Conversion 1,014.4 1,202.9 Cash Conversion %1 81.0% 89.7% 1 2010 includes DuluxGroup. Orica Full Year Results 2011 Page 42
Slide 44: Changes to 2010 segment information – Mining Services
Changes to 2010 segment information – Mining Services 2010 2010 Restated Original EBIT Disclosure Disclosure Australia/Asia 435 436 North America 105 128 Latin America 118 121 EMET 74 83 Other 35 - OMS TOTAL 768 768 2010 2010 Restated Original Decreased margins in North America and Latin America due
Slide 45: Net interest expense
Net interest expense Full year ended 30 September (A$M) 2011 2010 $ Net interest expense1 123.5 119.6 3.9 Comprising: Net interest on net debt 147.1 129.6 17.5 Add: Unwinding of discount on provisions 12.7 6.2 6.5 Add: Major external finance leases 1.1 3.2 (2.1) Less: Capitalised interest (37.4) (19
Slide 46: Interest cover
Interest cover Full year ended 30 September (A$M) 2011 2010 $ Financial expense1,2 193.3 167.9 25.4 Financial income2 (32.4) (28.9) (3.5) Net financing costs 160.9 139.0 21.9 EBIT2 1,028.3 1,009.0 19.3 Interest cover (times)3 6.4 7.3 (0.9) 1 Financial expense for 2011 includes $37.4M of capitalised
Slide 47: Impact of Step-Up Preference Securities – earnings per share
Impact of Step-Up Preference Securities (SPS) – earnings per share1 Reported per Accounts A$M Reported net profit 663.4 Less: Net profit attributable to non controlling interests (21.1) After tax distributions to SPS holders2 (22.2) Adjusted net profit 620.1 Weighted average ordinary shares on issue
Slide 48: Impact of SPS – gearing
Impact of SPS – gearing (A$M) Reported per SPS SPS Accounts Adjusted Repurchased3 Current borrowings 76.5 76.5 76.5 Non-current borrowings 1,678.5 1,678.5 2,178.5 SPS adjustment 2 - 250.0 - Less: Cash (346.9) (346.9) (346.9) Net Debt 1,408.1 1,658.1 1,908.1 Parent entity equity 1 3,754.3 3,754.3 3,2
Slide 49: Reconciliation of net profit after tax
Reconciliation of net profit after tax ($M) 2011 2010 Continuing Discontinued Consolidated Continuing Discontinued Consolidated EBIT 1,028.3 - 1,028.3 1,009.0 92.4 1,101.4 Net financing costs (123.5) - (123.5) (119.6) (8.0) (127.6) Profit before income tax expense 904.8 - 904.8 889.4 84.4 973.8 Inco
Slide 50: Rebased dividends following DuluxGroup demerger
Rebased dividends following DuluxGroup demerger1 2011 2010 1HY 1HY % 2HY 2HY % Full year 1HY 1HY % 2HY 2HY % Full year EBIT Mining Services 334.5 482.5 817.0 331.2 436.5 767.7 Minova 55.4 49.7 105.1 66.1 81.2 147.3 Chemicals 94.7 101.3 196.0 93.6 94.4 188.0 Corporate centre & other support costs (47
Slide 51: Debt profile
Debt profile (as at 30 September 2011) Drawn Debt Other Debt Maturity Profile $24M Bank Loans $185M A$M Drawn Undrawn Total Export Finance < 1 year 77 152 229 $102M 1 – 2 years 180 403 583 2 – 5 years 383 1,513 1,896 > 5 years 1,115 11 1,126 Total 1,755 2,079 3,834 USPP $1,444M Average maturity on d
Slide 52: Individually material items after tax and non-controlling interests
Individually material items after tax and non-controlling interests Year ended 30 September (A$M) 2011 2010 Pharmaceuticals tax case - (97.8) Mercury remediation environmental provision - (31.5) HCB remediation environmental provision - (12.7) Minova/Excel integration costs - (8.9) DuluxGroup demerg
Slide 53: Sodium cyanide demand
Sodium cyanide demand • Outlook for gold production remains strong • With much of the gold production growth coming from higher volumes of lower grade ores, the demand for sodium cyanide continues to strengthen • Global sodium cyanide production is estimated to be running close to full capacity with
Slide 54: Disclaimer
Disclaimer 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 as the basis for making an i