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J P Morgan ConferenceJ.P. Morgan ConferenceSeptember 30, 2010EdinburghEdinburgh
►Graeme Liebelt►M i Di t & CEO►Managing Director & CEO
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Orica presentation outlineOrica presentation outline
1. Leading market positions and clear strategy
2 Favourable industry characteristics2. Favourable industry characteristics
3. Significant long-term growth opportunities
4. Financial discipline and strong earnings performance
5. Strong organisational culture
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1. Leading market positions and clear strategy
2. Favourable industry characteristics
3. Significant long-term growth opportunities
4. Financial discipline and strong earnings performance
5. Strong organisational cultureg g
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Orica – 3 market leading platforms
W ld’ l di li Gl b l k t l d i A l di li fWorld’s leading supplier of commercial explosives and blasting systems
C t i i i
Global market leader in strata support systems, ventilation, water control and geotechnical solutions
A leading supplier of cyanide for use in gold extraction
A t li d NCustomers in mining, quarrying and infrastructure markets
and geotechnical solutions
Customers in underground mining and tunnelling
Australia and New Zealand’s largest supplier of chemical products to mining, water treatment tunnelling mining, water treatment and other industrial markets
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A global company
Orica employs more than 14,000 people with operations in over 50 countries and customers in over 100 countries
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Orica’s business evolution
Major acquisitions, investments and divestments of non-core assets have sharpened Orica’s focus on the mining services sectorhave sharpened Orica s focus on the mining services sector
Acquisitions and Dyno
N b l Minova Excel Samex Bontang Nanling Ruichy Black Acquisitions and
Acquisitions and Dyno
N b l Minova Excel Samex Bontang Nanling Ruichy Black and investments Nobel Minova Excel Samex Bontang Nanling Ruichy Explosives
and investments
and investments Nobel Minova Excel Samex Bontang Nanling Ruichy Explosives
2006 2007 2008 2009 20102006 2007 2008 2009 2010
Divestments/Demergers Qenos Incitec
PivotAdhesives & Resins
DuluxGroupDivestments/Demergers
Divestments/Demergers Qenos Incitec
PivotAdhesives & Resins
DuluxGroup
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Note: Years refer to Orica’s financial years (ending 30 September)
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Orica’s earnings mix – a mining focus
Orica’s portfolio is now predominantly focused on mining services sectors
EBIT (2005) EBIT (2009) *
Other Non‐ Other Non-Other NonMining32%
Other Non-Mining12%
Mining53%
Mining53%
DuluxGroup
g88%
DuluxGroup15%
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* EBIT (excluding individually material items) for Orica excluding DuluxGroup
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Orica’s business strategy
Capitalise on and extend global leadership in the provision of high
Orica s business strategy
service, critical consumables to the mining and infrastructure markets
Focussed on attractive segments of the mining value chain
Leveraged to increases in production and development volumes
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Business overview – Orica Mining ServicesSales 2009FY $4.0B
Business Characteristics
Sales 2009FY $4.0B
Clear global leader in a A$16B (approx) commercial explosives market
O l i l l i id ith l b l f t i tOnly commercial explosives provider with a global footprint
Privileged assets and strong manufacturing position
Market leading technology with R&D investment 7-8 times other industry players
Superior application experience and technical knowledge
Global number 1 with superior product offering and market leading technology
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Business overview – MinovaSales 2009FY $0.9B
Business Characteristics
Sales 2009FY $0.9B
Clear global leader in a A$7B (approx) underground stabilisation market
Recognised brand and strong reputation with globalRecognised brand and strong reputation with global geographic footprint
Comprehensive and superior product suiteComprehensive and superior product suite
Well positioned in emerging markets
I d f t h l d i tiIncreased focus on technology and innovation
Low capital intensity and high cash conversion
Global number 1 with the largest and most comprehensive product range
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Business overview – Orica Mining ChemicalsSales 2009FY $0.3B
Business Characteristics
Sales 2009FY $0.3B
Leading producer and global supplier of cyanide and other chemicals to the mining industry
World scale sodium cyanide manufacturing facility with scope for future expansion
Customer value-add through technical support and innovative supply chain
Committed to safe and efficient international supply chainCommitted to safe and efficient international supply chain –ISO 9002 and foundation signatory to International Cyanide Management Code
Leading global producer well positioned for above average growth
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1. Leading market positions and clear strategy
2. Favourable industry characteristics
3. Significant long-term growth opportunities
4. Financial discipline and strong earnings performance
5. Strong organisational cultureg g
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Industry characteristics
Attractive industry structure – considerable consolidation over the last decade
High growth in commodity volumes, driven by industrialisation and urbanisation
Declining ore grades and increasing strip ratios
Strong growth in tunnelling
Mine safety standards lifting rapidly
Greater focus on efficiency and productivity driving demand for innovative products
Favourable industry characteristics and strong growth potential
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Urbanisation in China a strong driver of commodity growth
Tiered city structure – 2005123
Urbanisation rate for selected countriesPercentPercent
Tiered city structure – 2025123
► Tier 1 city defined as registered population >4.5 m and GDP/capita >USD3,000, ► Tier 2 city defined as either registered population >4.5 m or GDP/capita >USD3,000
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► Tier 3 city defined as registered population 1.5-4.5 m and GDP/capita USD1,500-3,000
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Strong growth in global commodity volumes
7 0%
8.0%
9.0%
10.0%
% C
AG
R
6.0%
4.3%5.0%
4.0%
5.2%
4.0%
5.0%
6.0%
7.0%
mne
gro
wth
1.1%1.0%
2.0%
3.0%
Volu
m
0.0%Thermal Coal Metallurgical
CoalIron Ore Copper Other Base
MetalGold
Above average GDP growth in most commodities
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Sources: Wood Mackenzie and CRU
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Strip ratios and ore grade
Consumption of Orica products is impacted by volume of material moved not volume of commodity extractedy
Trend to higher strip ratios and lower ore grades will drive growth higher than growth in underlying commodities
GLOBAL SODIUM CYANIDE DEMANDIndex (2009 = Average Ore Grade (gm/Tonne)
The growth rate in global gold ore production is reflected in cyanide demand
600
800
00 tn
CAGR 4.4%
80
100
120
140
(100)
0 60
0.80
1.00
1.20
1.40
1
200
400
2000 2002 2004 2006 2008 2010
'00
0
20
40
60
2000 2002 2004 2006 2008 2010 2012 20140.00
0.20
0.40
0.601
Higher strip ratios and lower ore grades driving increased demand
Global Gold Ore Production (LHS) Global Ore Grade gpt (RHS)
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AN growth versus mine output
Australian AN Demand versus Mine Output (Relative Performance Base = 100)
1000
1200CAGR 8%
600
800
AN Demand
200
400 Mine OutputCAGR 4%
0
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
Higher growth in AN demand
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Tunnelling and infrastructure
Of the ~1,070 km/year of planned global tunnels for the next 15 yearsglobal tunnels for the next 15 years ~37% will be constructed in China, which equates to ~6,000km of road and rail tunnels
Other national projects require major t lli d d dtunnelling and underground construction, including West to East gas pipelines, South to North water diversion and National strategic oil reserves
High market growth in Asia tunnelling
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1. Leading market positions and clear strategy
2. Favourable industry characteristics
3. Significant long-term growth opportunities
4. Financial discipline and strong earnings performance
5. Strong organisational cultureg g
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Multiple avenues for growth
1. Expansion in manufacturingp g
AN expansion – Indonesia and Kooragang Island
Sodium cyanide expansion - Yarwun
Resin and bolt capacity expansion
Future AN opportunities – LATAM and Yarwun
2 Geographic expansion2. Geographic expansion
Africa
ChinaChina
Eastern Europe
3. Technical and service innovation
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Technology and innovation – a competitive edge
Technology leadership supported by extensive research partnerships and p palliances
Next generation initiating systems –revolutionary wireless boosters
Next generation chemicals and bolts -i l di Thi S d Li Q i kb ltincluding Thin Sprayed Liner, Quickbolt
Investment in leading edge technology companies e g 25% ownership of FiRePcompanies e.g. 25% ownership of FiReP
World class bolt R&D centre to be opened in October 2010
Differentiation through investment in technology and innovation
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1. Leading market positions and clear strategy
2. Favourable industry characteristics
3. Significant long-term growth opportunities
4. Financial discipline and strong earnings performance
5. Strong organisational cultureg g
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Financial discipline – our guiding principles
Aim for top quartile returnsCorporate Target
Aim for top quartile returns
Maintain BBB+ credit rating
Financial Hurdle Target 15% IRR on investments
Business Imperatives
Gross margin growth
Productivity
Cash conversion
Disciplined growth and financial management
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Gross margin growth
A$M
g g
+16.4%+16.2%
+10.7%
2,8003,2003,600
0.1%+13.9% +4.3% +7.6%
1 2001,6002,0002,400
Half 2
Half 1
0400800
1,200
02002 2003 2004 2005 2006 2007 2008 2009
Compound average growth rate from 2002 to 2009 of 10%
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Productivity 1
85%
78.9%
75.1%
80%
69.8%
72.8%73.2%74.0%
69.0%68 5%
70%
75%
68.5%
65%
60%2002 2003 2004 2005 2006 2007 2008 2009
Continuous improvement in productivity
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1 Productivity is measured as fixed costs (incl. depreciation and amortisation) as a percentage of gross margin.
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Net profit after tax 1p
A$M
+15.0%+12.9%
650
750
+4.4%+11.8%
+20 5%
+30.9%
450
550
Half 2
Half 1
+13.0%+20.5%
250
350 +11.0%2
50
150
2002 2003 2004 2005 2006 2007 2008 2009 2010
Compound average growth rate from 2002 to 2009 of 15%
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1 Pre individually material items2 H1 2010 versus H1 2009
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Focus on cash conversion – improvements in working capital
19.0%
20.0%
17.0%
18.0%
19.0%
es %
14.0%
15.0%
16.0%
ng T
WC
/ Sa
le
12.0%
13.0%Rol
lin
10.0%
11.0%
HY02 FY02 HY03 FY03 HY04 FY04 HY05 FY05 HY06 FY06 HY07 FY07 HY08 FY08 HY09 FY09 HY10
Solid improvements in trade working capital management
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Progressive dividends
120
DPScents/share
+5.6% +3.2%+20.3%100
120
+18.2%
+4.4% +4.2%+30.8%
60
80
20
40
0
20
2002 2003 2004 2005 2006 2007 2008 2009
Continuous growth in dividends per share
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1. Leading market positions and clear strategy
2. Favourable industry characteristics
3. Significant long-term growth opportunities
4. Financial discipline and strong earnings performance
5. Strong organisational cultureg g
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Values driven organisation
Our four "Deliver the Promise" principles support our performance-based culture:
Safety, Health and the Environment
Working Togetherg g
Commercial Ownership
Creative Customer Solutions
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Safety focusy
Full Year Full Year2009 2008
AWRCR 1 0.69 0.72
Recordable cases 146 144
Distribution incidents 43 24Distribution incidents 43 24
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1 All Worker Recordable Case Rate is calculated as the number of injuries and illnesses per 200,000 hours worked.
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Safety benchmarking
2.5Injury Rate (Recordable)
1 5
2
1
1.5
0.5
02000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Orica BHP Billiton Rio Tinto DuPont Dow BASFOrica BHP Billiton Rio Tinto DuPont Dow BASF
Continued focus on long-term, sustainable improvements in safety performance
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Sustainability
Challenge 2010 AchievementsChallenge 2010 Achievements
Versus 2004 BaselineEnergy efficiency 19% improvementgy y p
Greenhouse gas emissions 46% reduction
Water consumption 37% reduction
Waste generation 68% reduction
Challenge 2010 targets exceeded. Continued focus on a sustainable future.
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Why Invest In Orica?Why Invest In Orica?
1. Leading market positions and clear strategy
2 Favourable industry characteristics2. Favourable industry characteristics
3. Significant long-term growth opportunities
4. Financial discipline and strong earnings performance
5. Strong organisational culture
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Questions
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A diAppendix
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Business dimensions2009FY: Sales of A$7.4B, EBIT (pre individually material items) of $1.1B and NPAT (pre individually material items) of A$646M
Chemicals Oth
Businesses (2009) 1 Geographies (2009) 2
Chemicals Group16.0%
Australia
Europe16.0%
Other1.0%
Minova14.0%
Australia38.0%
Latin America
13.0%
Mining Services New North70.0% Zealand
3.0%Asia
10.0%
North America
19.0%
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1. EBIT (excluding individually material items) excluding DuluxGroup and Corporate Costs for the financial year ended 30 September 20092. EBIT (excluding individually material items) for Orica excluding DuluxGroup for the financial year ended 30 September 2009
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Broad End Market Diversity
Broad end market diversity across commodities and customer type reduces earnings volatility
Customer Exposure * Commodity Exposure *
Quarries & Construction
19%Thermal coal
29%Q i &
Other9%
Open Cut
29%Quarries & Construction
19%
52%
Underground29% Copper
Met coal9%
13%
Gold18%
9%Iron ore
3%
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* 2010F Orica Mining Revenue
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Manufacturing Expansion Opportunities Indonesia – Bontang AN Project•Construction of a 300ktpa AN plant•Construction of a 300ktpa AN plant•Project approximately 65% complete•Commissioning planned for late 2011•Total project cost of approximately US$550M
Australia•Yarwun sodium cyanide uprate•Proposed uprate to 95ktpa capacity (from 80ktpa) at a cost of approximately A$25M
•Kooragang Island AN expansion•Proposed uprate to 750ktpa capacity (from 430ktpa)•Likely timing of 2014/2015Project cost approximately A$600M $750M
Peru - AN Manufacturing•Working on several options for AN capacity expansion in Latin AmericaP f d l ti i M P
China – Initiating Systems•Joint Venture (Orica 51%) with Nanling to manufacture specific non-electric d t t f th Chi
•Project cost approximately A$600M-$750M
•Kooragang Island ammonia uprate•Uprate of 65ktpa at cost of approximately A$110M
•Preferred location is Marcona, Peru•Project would include a world scale AN plant (300ktpa)
detonators for the Chinese underground & tunnelling markets•Planned commissioning in 2011 at a cost of approximately A$100M
•Planned commissioning in late 2011 •Uprated capacity will be sufficient to support the proposed AN plant expansion to 750ktpa
•Yarwun AN expansionYarwun AN expansion•Opportunity to further uprate Yarwun AN facility (currently 570kt) as demand requires
Significant organic growth opportunities
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Strong balance sheet and disciplined capital management
Half year ended 31 March 2010 2009Half year ended 31 March 2010 2009
Net Debt (A$M) 1,228.9 1,477.0
$Net Interest Expense (A$M) 70.6 71.5
Interest Cover (times) 7.0 6.6
Operating Cash ($) 268.8 217.3
Cash Conversion 1 (%) 86.2 73.4
Rolling TWC to Rolling Sales (%) 13.5 14.6
Gearing (%) 24.9 25.7
1 Cash conversion is calculated as EBITDA add/less movement in trade working capital less sustenance capital spend, as a percentage of EBITDA. 2 Gearing recalculated with Hybrid shares notionally reclassified as 50% equity and 50% debt.
Gearing Adjusted 2 (%) 29.9 30.0
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Debt profile
Debt Maturity Profile (at 31 March 2010)Drawn Debt
A$M Drawn Undrawn Total
< 1 year 524 - 524
1 2 years 784 784
a ebt
Bank Loans $190M
Other $63M
1 – 2 years - 784 784
2 – 5 years 205 1,366 1,571
> 5 years 774 - 774Commercial Paper $244M
Total 1,503 2,150 3,653USPP $1,006M
Paper $244M
Investment grade rating BBB+
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DisclaimerThis 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 d i i Thi i h b d i h ki i h investment decision. This presentation has been prepared without taking into account the investment objectives, financial situation or particular needs of any particular person.
N t ti t i li d i d t th f i No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this presentation. To the maximum extent permitted by law, none of Orica Limited, its directors, employees or agents, nor any other person accepts any liability, including, without limitation, any p y g , y p p y y, g, , yliability arising out of fault or negligence, for any loss arising from the use of the information contained in this presentation. In particular, no representation or warranty, express or implied, is given as to the accuracy, completeness or correctness, likelihood of achievement or reasonableness of any forecasts prospects or returns contained in this presentation Such forecasts prospects or of any forecasts, prospects or returns contained in this presentation. Such forecasts, prospects or returns are by their nature subject to significant uncertainties and contingencies.
Before making an investment decision you should consider with or without the assistance of a Before making an investment decision, you should consider, with or without the assistance of a financial adviser, whether an investment is appropriate in light of your particular investment needs, objectives and financial circumstances. Past performance is no guarantee of future performance.
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