Orica Limited · ASX:ORI
Orica — Deutsche Bank Australia Corporate Day 2017
33 slides from Orica's conference presentation, Mar 14, 2017
Slide 1: Deutsche Bank – Australia Corporate Day
ORICA DEUTSCHE BANK – AUSTRALIA CORPORATE DAY 13-14 March 2017 Tom Schutte, Chief Financial Officer
Slide 2: Disclaimer
DISCLAIMER This Presentation and the information contained in it should be read in conjunction with the Private Placement Memorandum (“Memorandum”) made available to prospective purchasers of Senior Unsecured Notes guaranteed by Orica Limited, and is subject to the Disclaimer set out in the opening
Slide 3: Agenda
AGENDA 1. Orica Overview 4 2. Key Strategic Priorities 11 3. Financial Performance 17 4. Outlook 22 Supplementary Information 25 3 © Orica Limited Group
Slide 4: 1. Orica Overview
1. ORICA OVERVIEW
Slide 5: Global Leader in Mining and Civil Blasting
GLOBAL LEADER IN MINING AND CIVIL BLASTING Scale and efficiency that comes from being the leading supplier of commercial Economies of scale explosives and blasting systems to the mining and infrastructure markets globally Leading brand and Leading supplier of commercial explosives globally with
Slide 6: True Global Footprint
TRUE GLOBAL FOOTPRINT • Operates in over 50 countries and customers in more than 100 countries worldwide 140+ YEARS of experience and innovation No.1 GLOBAL SUPPLIER of commercial explosives 11,500+ EMPLOYEES serving customers across more than 100 countries 1,500 BLASTS PER DAY on our customer sites
Slide 7: Flexible Manufacturing and Sourcing Capability
FLEXIBLE MANUFACTURING AND SOURCING CAPABILITY Orica complements own manufacturing capabilities with flexible global sourcing arrangements: • Highly disciplined approach to the management of the company’s AN manufacturing capacity • c.50% AN volume globally, strategically 3rd party sourced to meet s
Slide 8: Global Market Leader
GLOBAL MARKET LEADER Orica’s global leadership is a key differentiator Unrivalled licensing, scale, facility footprint, and market presence to service large customers in multiple jurisdictions regionally and globally Facility proximity to customer operations provide material cost advantages and
Slide 9: Balanced and Diversified Business
BALANCED AND DIVERSIFIED BUSINESS Geographic Portfolio By Commodity By Product/Services Offering % of FY16 Revenue % of FY16 Revenue % of FY16 Revenue Coking Resins/ Other Minova Coal Powders/ AN/ANFO 3% 17% 8% Australia Iron Ore 4% Steel Pacific & 7% Thermal 7% Europe, Indonesia Coal Africa & 29% 2
Slide 10: Prudent Approach to Capital Management
PRUDENT APPROACH TO CAPITAL MANAGEMENT Recent Key Deliverables S&P affirmed BBB Stable rating December 2016 Maintaining an investment grade credit rating Gearing: 35.8% Leverage 1.7x Net Debt reduced by $0.5bn Capital Preserving the flexibility to facilitate Revised approach to Capex Manag
Slide 11: 2. Key Strategic Priorities
2. KEY STRATEGIC PRIORITIES
Slide 12: A Significant Transformation Is Underway
A SIGNIFICANT TRANSFORMATION IS UNDERWAY Nov 2014 May 2015 Oct 2015 May 2016 Dec 2016 Sale of Chemicals Appointment of new Adoption of Customer Introduction of S&P affirmed Orica’s Business for CEO Alberto Calderon Centric Business sustainable Dividend BBB rating with stable $750 million Model with
Slide 13: Taking Decisive Action
TAKING DECISIVE ACTION Strategic Initiatives Delivered to Date Controlling Instilled business improvement initiatives throughout the company the elements we can Rationalisation of supply to balance the Australian east coast market Transforming Orica Customers are at the heart of everything we
Slide 14: Business Improvement Initiatives Exceeding Target
BUSINESS IMPROVEMENT INITIATIVES EXCEEDING TARGET Cumulative Net EBIT Improvement FY16 Net Benefits by Category A$m (%) Operations and Support Cost program 76 209 94 Supply Chain Original Efficiencies Target: 50–60 39 FY14 FY15 FY16 Cumulative (Total) Key priorities for FY17 Reducing external spen
Slide 15: Reduced Capital Expenditure
REDUCED CAPITAL EXPENDITURE • New approach to capital and investment evaluation drives sustainable reduction Capital Expenditure profile Classification of growth and sustenance (A$m) capital expenditure aligned to prioritisation tools 780 204 Ranking of capital expenditure prioritisation across the
Slide 16: Burrup TAN
BURRUP TAN • The Burrup Technical Ammonium Nitrate “TAN” plant is a 30+ year asset located in the Pilbara region of Western Australia • Major Pilbara based iron ore miners are the world’s lowest cost producers • A strategic decision was taken in 2012 to enter a joint venture with Yara (as operator)
Slide 17: 3. Financial Performance
3. FINANCIAL PERFORMANCE
Slide 18: Safety and Environment
SAFETY AND ENVIRONMENT Safety Performance • Safety is a core value and strongly aligned to our customers’ focus on safety • Key focus on common standards and consistent 3 3 application for major hazards Total Recordable Injury Frequency Rate 1 • Injury performance is steady and in the top quartile o
Slide 19: FY16 Financial Summary
FY16 FINANCIAL SUMMARY Ammonium Nitrate Total Ammonium Nitrate product volumes of 3.54 million tonnes (pcp: 3.76 million tonnes) Volume Revenue Revenue of $5,092 million (pcp: $5,653 million) Earnings Underlying EBITDA1 of $908 million (pcp: $978 million) Capital Management Capital Expenditu
Slide 20: Historical Financials
HISTORICAL FINANCIALS • Margin management has been a core focus across every region and business, with EBIT margin increasing by 50bps in FY16 Revenue1 EBIT1 (excluding individually material items) (A$mm) (A$mm) 5,616 5,739 5,722 5,653 5,092 16.4% 15.2% 15.1% 920 874 863 12.6% 12.1% 685 642 2012 201
Slide 21: Strong Cashflow Performance
STRONG CASHFLOW PERFORMANCE • Operating cash flow over the past five years has averaged in excess of $800 million High Cash Conversion1 2 106% A$m 87% 80% 81% 1200 72% 1,079 1,005 1000 960 918 791 800 Cash Conversion 600 Cash Conversion (%) 2.1x 2.1x 400 2.0x 2.0x Leverage 200 1.7x 0 2012 2013 2014
Slide 22: 4. Outlook
4. OUTLOOK
Slide 23: FY17 Business Improvement Initiatives
FY17 BUSINESS IMPROVEMENT INITIATIVES • The focus on business improvement initiatives is now embedded throughout Orica’s business • With a continuing emphasis on business improvement initiatives, Orica expects to deliver market offsets throughout FY17 Business Improvement Initiatives Outcomes • Impr
Slide 24: FY17 Outlook Assumptions
FY17 OUTLOOK ASSUMPTIONS Orica’s key outlook assumptions for FY17 are: Explosives • Global Ammonium Nitrate product volumes in the range of 3.5 million tonnes ± 5% • Focused on improving performance under the new structure Minova • Expected to remain cash flow positive Sodium Cyanide • Cyanide volum
Slide 25: Supplementary Information
SUPPLEMENTARY INFORMATION
Slide 26: Financial Result
FINANCIAL RESULT Full year ended 30 September (A$m) 2015 2016 % Continuing Operations1 Sales revenue 5,653 5,092 (10) EBITDA 978 908 (7) EBIT 685 642 (6) Net financing costs2 82 84 3 NPAT (before individually material items) 417 389 (7) NPAT (after individually material items) (1,274) 343 nm Interes
Slide 27: Australia, Pacific & Indonesia
AUSTRALIA, PACIFIC & INDONESIA Ammonium Nitrate volume and EBIT margin • Largest region contributing 29% of FY16 group revenue 800 30% • Orica operates three major ammonium nitrate plants and a number of ammonium nitrate emulsion facilities across 600 Australia and Indonesia 20% • Orica operates a s
Slide 28: North America
NORTH AMERICA Ammonium Nitrate volume and EBIT margin • Second largest region contributing 24% of FY16 group revenue and comprises the USA, Canada and Mexico 800 20% • Orica has one major ammonium nitrate plant, a number of 600 ammonium nitrate emulsion facilities in Canada, and a number of initiati
Slide 29: Latin America
LATIN AMERICA Ammonium Nitrate volume and EBIT margin • The Latin American region services customers across 9 countries contributing 17% of FY16 group revenue 400 20% • Orica operates a number of ammonium nitrate emulsion facilities, initiating systems plants and a sodium cyanide transfer station in
Slide 30: Europe, Africa & Asia
EUROPE, AFRICA & ASIA Ammonium Nitrate volume and EBIT margin • Third largest region contributing 22% of FY16 group revenue 400 20% • Orica has a number of ammonium nitrate emulsion, initiating systems and packaged explosives plants across the region. Orica also operates a sodium cyanide transfer 20
Slide 31: Minova
MINOVA Revenue and EBITDA margin • Orica’s smallest segment, contributing 8% of FY16 group revenue • FY16 revenue of $407 million and EBITDA of $15 million, 300 6% down 28% and up 3% respectively YoY 200 4% • Amidst challenging market conditions and resulting lower product volumes, EBITDA performanc
Slide 32: Trade Working Capital
TRADE WORKING CAPITAL • Embedding working capital discipline, including standardising payment terms and better management of inventory and receivables • Resulted in a substantial improvement in trade working capital ($304 million, 40% lower than pcp) • Improvement was delivered across all regions Tr
Slide 33: Disclosures and Definitions
DISCLOSURES AND DEFINITIONS Term Definition Ammonium Nitrate 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 attributable to