Orica Limited · ASX:ORI
Orica — Non-Deal Roadshow (June 2004)
33 slides from Orica's roadshow presentation, June 2004
Slide 1: Orica Limited USA Roadshow June 2004
Orica Limited USA Roadshow June 2004 Jim Hall - Executive Director Finance Noel Meehan - Group Investor Relations Manager
Slide 2: Contents
CONTENTS • Orica Background • Business Overview • Efficiency, Strategy and Culture • Recent Financials • Outlook 2
Slide 3: Orica - Background
ORICA - BACKGROUND
Slide 4: Orica – snapshot
Orica – snapshot • Australian owned publicly listed company trading on the Australian Stock Exchange (ORI) • Market capitalisation of A$4bn (US$2.7 bn) • Ranked in top 50 Australian companies based on market capitalisation • Operates in over 35 countries - 9000 employees • Comprises four business pl
Slide 5: Orica – Group Executive
Orica – Group Executive Malcolm Malcolm Broomhead Broomhead Managing Managing Director Director && CEO CEO Graeme Graeme Liebelt Liebelt James James Hall Hall Executive Executive Director Director && Executive Executive Director Director CEO International CEO International Finance Finance Explosives
Slide 6: Orica – what we do
Orica – what we do Mining Services Market • Commercial explosives plus blast Leadership management Chemicals Leading • Niche chemical manufacturing plus Brands chemical trading, value add and Businesses distribution united by chemical Strong assets Consumer Products sciences • Paint, paint preparati
Slide 7: Orica – business dimensions in 2003
Orica – business dimensions in 2003 ORICA Sales Revenue $4 Bn $442 M EBIT Net Assets $2.5 Bn Employees 9,000+ 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Mining Fertilisers OCP Chemicals Note: Fertilisers comprises 8 months of Incitec Fertilizers plus 4 months of the merged Incitec Pivot (effective
Slide 8: Business Overview
BUSINESS OVERVIEW
Slide 9: Orica – business characteristics
Orica – business characteristics Mining Services Chemicals • Global business • Largest Chemical business in • Largest commercial explosives Australia and New Zealand company in the world • Strong asset positions • Superior assets & technology • Leading technology • Complete product offering • Cost a
Slide 10: Orica – business drivers
Orica – business drivers Mining Services Chemicals • Economic activity • GDP • Country development • Weather • Power generation • International chemical prices • Mining volumes Consumer Products Fertilisers • Discretionary income • Weather • GDP • Agricultural commodity prices • Housing renovation a
Slide 11: What makes our businesses attractive
Orica - what makes our businesses attractive • Our businesses operate largely in good industry structures • Our businesses have a record of delivering consistent steady returns • We have privileged asset position in Australia and overseas • Our businesses are market leaders - brands and technology C
Slide 12: Why should you invest?
Orica - why should you invest? • Orica is positioning to be the number one global “niche”chemical company through: – market leadership in niche markets and/or selected geographies – significant expansion opportunities – the delivery of consistent economic profits • We have strict financial investmen
Slide 13: Approach to how we do things
Orica - Approach to how we do things Cu cy ien ltu re fic Ef Strategy 13
Slide 14: What our approach has delivered
Orica - What our approach has delivered Orica NPAT and Share Price 300 16 250 14 Share Price A$M NPAT A$M 200 12 150 10 100 8 50 6 0 4 Jun-02 Jun-03 Mar-02 Mar-03 Mar-04 Sep-01 Dec-01 Sep-02 Dec-02 Sep-03 Dec-03 NPAT Share price 30 September year end FIX UP, CLEAN UP, GROW 14
Slide 15: Creating value for shareholders
Orica - CREATING VALUE FOR SHAREHOLDERS Relative performance (base = 100) Orica share price performance compared to Australian All Ordinaries 380 340 300 260 220 180 140 100 60 Aug-02 Aug-03 Apr-02 Apr-03 Apr-04 Jun-02 Jun-03 Jun-04 Oct-01 Oct-02 Oct-03 Feb-02 Feb-03 Feb-04 Dec-01 Dec-02 Dec-03 Oric
Slide 16: Strategy
STRATEGY
Slide 17: Strategy and execution
Orica – strategy and execution EP/FE “Build on Strength” “Earn the right to Grow” 0 EP ( = 18% RONA) Growth EFFICIENCY IMPROVEMENT AND GROWTH 17
Slide 18: Simple strategy, superior results
Orica – simple strategy, superior results Free cash applied to fund growth M&A Bolt on acquisitions and geographic expansion Capital Plant expansions that meet IRR 15% & Expenditure 18% RONA minimum Growth in Productivity = earnings Improvements Organic growth and productivity gains will generate In
Slide 19: Where do growth opportunities lie?
Orica - Where do growth opportunities lie? Mining Services Chemicals • New geographies • Leverage off existing acquisitions • Plant expansions • Organic and acquisitive growth • Organic growth • Commercialisation of new technologies Consumer Products Fertilisers • Further category expansion • Captur
Slide 20: Recent growth scorecard
Orica - recent growth scorecard A$M 2003 2004 Mergers and Acquisitions - Incitec minorities buyout Ferts 326 - Fernz Chems 60 - Welvic & Engineering Plastics Chems 14 - Initiating Explosives Systems Mining 16 - Indian Explosives Mining 30 622 - Yates OCP 45 - Znamja JV in FSU Mining 4 - Bronson and
Slide 21: Culture
Orica - culture • SH&E • Commercial Ownership • Creative Customer Solutions • Working Together DELIVER THE PROMISE 21
Slide 22: Recent Financials
RECENT FINANCIALS
Slide 23: Financial Summary
FINANCIAL SUMMARY Mar-04 Sep-03 Mar-03 Sep-02 Underlying Results: Sales Revenue A$M 2,054 3,959 1,842 4,085 NPAT (excluding significant items) A$M 122 270 97 239 EBIT (excluding significant items) A$M 216 442 167 410 Results including significant items: Significant items after tax A$M - (170) (140)
Slide 24: Long term EBIT trend of existing businesses
Orica – Long term EBIT* trend of existing 4 businesses A$M 500 450 400 350 300 250 200 150 100 50 0 HY04 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 BUSINESS IS NO LONGER DEEPLY CYCLICAL 24 * excluding corporate costs
Slide 25: Shareholder Scorecard
SHAREHOLDER SCORECARD Mar-04 Sep-03 Mar-03 Sep-02 Underlying Results: Earnings per share cents 44.2 97.2 34.8 86.0 Return on shareholders' funds % 18.0 19.6 14.6 18.0 Returns to Shareholders Dividends cents 23 52 18 44 Payout ratio % 52 53 52 51 On 11 May 2004, 5% on market buyback completed. 13,954
Slide 26: Cash Flow
CASH FLOW Mar-04 Sep-03 Mar-03 Sep-02 Net operating cashflows A$M 106 500 155 343 Net investing cashflows A$M (139) (385) (360) 12 Net financing cashflows A$M 62 (173) 185 (333) Net increase/(decrease) in cash A$M 29 (58) (20) 22 Working Capital Inventories A$M 728 583 610 548 Trade debtors A$M 569
Slide 27: Financial Position (A$M)
FINANCIAL POSITION (A$M) March Sept March 2004 2003 2003 Trade working capital 751 671 571 Net property, plant & equipment 1,450 1,437 1,326 Net other assets 363 350 391 Net debt (1,029) (877) (979) Net Assets 1,535 1,581 1,309 Orica shareholders' equity 1,338 1,385 1,281 Outside equity interests 19
Slide 28: Net Debt, Gearing and Interest Cover
Net Debt, Gearing and Interest Cover 1200 45% 40% 1100 Target 35% Gearing Range 1000 30% Net debt (A$M) Gearing 25% 900 20% 800 15% 10% 700 5% 600 0% HY01 FY01 HY02 FY02 HY03 FY03 HY04 ? Gearing 40.1%, target gearing range of 30 - 40% ? Interest cover 5.9x. Target > 5x STRONG COVERAGE RATIOS 28
Slide 29: Foreign Currency - Risk Management
FOREIGN CURRENCY- Risk Management Derivative Typical use Instrument A$ call options Exposures greater than 12 months Foreign exchange Exposures less than contracts 12 months INSURANCE APPROACH 29
Slide 30: Foreign Currency - Snapshot
FOREIGN CURRENCY-Snapshot A$ Call Options: Hedging of USD Exposure (as at 31 March 2004) Offshore Business Manufactured Hedge Sales Nitrogen Product Premium Year Cover Strike Cover Strike expense A$M Rate A$M Rate (full year) 2004 53 59 cents # # $3M 2005 88 61 cents 59 68 cents $6M 2006 54 67 cents
Slide 31: Foreign Currency - Sensitivity
FOREIGN CURRENCY- Sensitivity Assuming a AUD/USD exchange rate of 72 cents every one cent movement in the exchange rate will impact EBIT: 2005 +/- $1M 2006 +/- $1M - $2M ACTIVE RISK MANAGEMENT 31
Slide 32: Outlook for 2004
OUTLOOK FOR 2004 • We normally have a second half bias due to seasonally higher demand for mining services and fertilisers, and that will occur again this year. • There are three caveats, which will determine the extent of the bias: – extent and timing of rainfall; – amount of additional spending on
Slide 33: Disclaimer
Disclaimer In addition to historical information, this report contains forward-looking statements. Such statements include those concerning Orica Limited’s (“the Company”) expected financial performance and its strategic and operational plans, as well as all assumptions, expectations, predictions, i