15 Nov 2021

2021 Full Year Results Investor Presentation

2021 FULL YEAR FINANCIAL RESULTS PRESENTATION 15 November 2021 Incitec Pivot Limited ABN 42 004 080 264 ASX Code: IPL OTC: INCZY 1 2 ACKNOWLEDGEMENT OF COUNTRY “I begin today by acknowledging the Traditional Custodians of the land on which we meet today and pay my respects to their Elders past and present. I extend that respect to Aboriginal and Torres Strait Islander peoples here today.” 2 3 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 for making an investment decision. This presentation has been prepared without taking into account the inve stm ent objectives, financial situation or particular needs of any particular person. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the i nfo rmation, opinions and conclusions contained in this presentation. To the maximum extent permitted by law, none of IPL, its directors, emp loyees or agents, nor any other person accepts any liability, including, without limitation, any liability arising out of fault or n egl igence 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, l ike lihood of achievement or reasonableness of any forecasts, prospects or returns (“forward - looking statements”) contained in this presentati on nor is any obligation assumed to update such information. Such forward - looking statements are based on information and assumptions known to date and are by their nature subject to significant uncertainties and contingencies. Actual results, performance or achievements could be significantly different from those expressed in, or implied by, this presentation. Forward - looking stateme nts are not guarantees of future performance. Before making an investment decision, you should consider, with or without the assistance of a financial adviser, whether an inv estment is appropriate in light of your particular investment needs, objectives and financial circumstances. Past performance is no guar antee of future performance. Incitec Pivot Limited ABN 42 004 080 264 4 OVERVIEW Managing Director & Chief Executive Officer Jeanne Johns 4 5 0.94 0.80 0.58 0.87 FY18 FY19 FY20 FY21 Total Recordable Injury Frequency Rate (TRIFR) (1) Target: 0.70 27 33 19 24 5 14 FY18 FY19 FY20 FY21 Process Safety Incidents (4) Manufacturing Customer Facing 27 33 24 9 17 6 7 33 16 28 29 FY18 FY19 FY20 FY21 Potential High Severity Incidents (2) Manufacturing Customer Facing (1) Significant Environmental Incidents as assessed against IPL’s internal risk matrix with potential consequences of 5 or higher on a 6 - level scale. (2) Potential High Severity Incidents (excluding near misses and hazards) with potential safety consequences of 5 or higher on a 6 - l evel scale. (3) TIRFR is calculated as the number of recordable injuries per 200,000 hours worked and includes contract workers. (4) Tier 1 and Tier 2 Process Safety Incidents as defined by the Center for Chemical Process Safety. (5) Employee Assistance Pro gra m. Zero Harm COVID - 19 impact - Refreshed programs to drive improvement 1 3 1 0 FY18 FY19 FY20 FY21 Significant Environmental Incidents (1) Target: Nil Target: Sustainable Improvement 42 33 34 36 38 Output Metrics Initiatives • Safety program refresh – focus on hazard awareness, incident reporting and investigation to root cause • Process safety metrics – increased awareness driving improved reporting • Operating rigour – reinforcing mechanisms to improve understanding and conformance to standards / procedures • Critical preventative maintenance – Improved processes and tracking with increased resources applied COVID - 19 Management • Standardised COVID - 19 response plan embedded globally • COVID - 19 fatigue / distraction – Proactive check - ins & increased leader attention • COVID - 19 safety – Continuing focus on COVID - 19 safe operating environments • Global employee survey – 96% indicated IPL had done a good job managing COVID - 19 • Blanket testing implemented in high risk areas for early detection • Key focus on physical and mental wellbeing of our people 6 Earnings pre - IMIs up 51% to $566m - Strong 2H ? Improved Explosives 2H performance - technology momentum ? Fertilisers capturing commodity upswing Improved manufacturing performance in 2H ? Strong second half manufacturing performance ? Waggaman clean cold restart post Hurricane Ida Continued progress on strategic agenda ? Momentum in technology continues ? Evolution in Fertilisers to Soil Health Company ? Increased commitments on climate change ? Response Plan delivered ahead of schedule ? 4 Turnarounds completed & transition to regional structure ? Gibson island transition to import model, lack of affordable gas ? High quality green ammonia partnerships FY21 Overview 7 5.8% Full Year Dividend (CPS 2 ) FY21 Financial Overview Strong second half delivered $566M Earnings Before Interest & Tax (EBIT) ex IMIs 1 51% on FY20 9.3 1) Excluding Individually Material Items (IMIs) of $293M ($209M after tax). 2) Cents per share. Final dividend of 8.3cps to be paid in December 2021 3) Net Debt comprises the net of interest - bearing liabilities, cash and cash equivalents, and the fair value of derivative instrume nts economically hedging the Group’s interest - bearing liabilities and excludes lease liability. Net Debt / EBITDA ratio (for debt covenant purposes) - EBITDA is calculated using 12 month rolling EBITDA ex IMIs, minus lease d epreciation. Net Debt is translated at the 12 month average AUD:USD FX rate. No dividend declared in 2020 Return on Invested Capital (ROIC) 61% on FY20 Strong momentum entering FY22 $359M Net Profit After Tax (NPAT) ex IMIs 1 91% on FY20 Net Debt / EBITDA 3 1.1x Improved from 1.4x at FY20 Operating Cashflows $ 650 M 19% on FY20 7 8 Safety: Industry leadership in safety Sustainability: Accelerating our emissions targets & creating new commercial opportunities in line with decarbonisation DYNO: Growth through leading technology solutions for our customers in existing and new footprints IPF: Strengthen base business and build soil health services for farmers, while capturing strong commodity markets Manufacturing: High quality assets close to our customers in attractive markets & sectors Two strong businesses well positioned for the future Industry leader in attractive markets with leading technology 8 9 SUSTAINABILITY Managing Director & Chief Executive Officer Jeanne Johns 9 10 (1) Fortescue Future Industries Long standing commitment to sustainability Connection of the Gibson Island manufacturing facility to a recycled water source Participation in DJSI, CDP, Bloomberg GEI (scores soon to be released) FTSE, with EcoVadis rating increase Partnership with Keppel Infrastructure & Temasek to investigate Green Ammonia production ? Newcastle ? Gladstone Release of IPL’s first stand - alone TCFD aligned Climate Change Report Sustainability - linked syndicated 3 - year term debt facility secured Partnership with FFI (1) to investigate green ammonia production at Gibson Island 11 Step Change on Climate Change ? Strong governance structures established: • Board & Executive level commitment • Climate change strategy linked to Executive Remuneration ? Embedding climate change in strategy across commercial opportunities and risk ? Technology and advanced products and services to reduce customer emissions ? Increased commitments to decarbonisation ? Released first ever standalone TCFD aligned report, including potential Net Zero pathway OUR AMBITION: NET ZERO 2050 ENSURING STRONG GOVERNANCE LINK TO STRATEGY: Talented and Engaged People 1 REDUCING OPERATIONAL EMISSIONS LINK TO STRATEGY: Manufacturing Excellence 2 DELIVERING PRODUCTS THAT REDUCE CUSTOMER EMISSIONS LINK TO STRATEGY: Leading Technology solutions Customer Focus 3 MANAGING STRATEGIC BUSINESS RISKS AND OPPORTUNITIES LINK TO STRATEGY: Profitable Growth Zero Harm 4 12 Commitment to Decarbonisation New short and medium term targets to achieve ambition Potential Pathway to Net Zero by 2050 (1) Our short and medium - term targets are absolute reductions against our 2020 baseline year operational (Scope 1 and Scope 2) e missions (2) Subject to economic feasibility of Carbon Capture, Utilisation & Storage at Waggaman, Louisiana (3) Our ambiti on to achieve net zero emissions by 2050 is based on the assumptions that: green hydrogen reaches economic parity with natural gas for hydrogen prod uct ion by 2040; US grid decarbonisation is achieved by 2035 - 2040; Australian grid decarbonisation is achieved by 2040; and carbon o ffsets are available for residual emissions that are not practical to abate Long Term Ambition Net Zero by 2050, or sooner if practicable Short & Medium Term Targets Accelerated 2025 target & introduced new 2030 target Actions underway to underpin both targets A Just Transition Protect & sustain the employment opportunities we provide and the communities that depend on these 2025 SHORT TERM TARGET: 5% absolute reduction (1) 2030 MEDIUM TERM TARGET: 25% absolute reduction (2) 2050 LONG TERM AMBITION: NET ZERO (3) 12 13 Potential Pathway to Net Zero by 2050 (1) Restated due to improved measurement of N2O process emissions from our nitric acid plant at Louisiana, Missouri (LOMO) as a result of the installation of Continuous Process Emissions Monitoring (CPEM) technology in 2021. (2) Nitrous oxide, released in the making of nitric acid (3) Nationally Determined Contributions under the 2015 Paris Agreem ent 4. Grid decarbonisation ? E xpected in the US by 2030 under current US NDCs (3) ? Australia expected to be later Key Enablers of decarbonisation technologies 1. Secondary/tertiary abatement of N 2 O (2) and ? Policy incentives 2. Carbon capture, utilisation & storage (CCU/CCS) ? Securing CCU/CCS offtake contracts, primarily in the US 3. Renewable hydrogen for ammonia production ? Large amounts of low - cost grid solar & wind ? Reductions in electrolyser capital costs ? Well designed policy incentives 14 STRATEGIC AGENDA Managing Director & Chief Executive Officer Jeanne Johns 14 15 Strong Progress on Strategic Agenda Strong businesses with Sustainability Opportunities 15 Explosives Fertiliser • Market leading technology earnings growth • CAGR (1) >25% in gassed emulsions revenue • CAGR (1) >35% in electronic detonator systems • Wireless technology commercialised ? 2 active customers ? Trials planned for Americas • Growth in high quality end markets • Growth in Metals and Q&C • Chile trials proving value in use • Captured ~$240m in EBIT value from the recovery in commodity prices (net of FX) • Leading Soil Health Company • Growth in Agronomy and Soil Health services • Liquid fertiliser growth • Technology partnership with Uni. of Melbourne • Strong Supply Chains and Distribution Networks • Gibson Island - Switch to import model • Long term Urea supply: Perdaman (2) • Hydrogen green energy opportunity • Gibson Island green ammonia study • Newcastle & Gladstone green ammonia study Sustainability • Climate Change • Pathway to Net Zero • Inaugural Climate Change Report • Aligned to TCFD (1) Compound Annual Growth Rate since FY17 (2) Supply from the Perdaman facility remains subject to Perdaman Industries rea chi ng a final investment decision on the project 16 COMPETITIVE ADVANTAGE Best premium technology in the market today, ideally suited for growth markets/sectors Strategically located assets close to quality customers STRONG EXPLOSIVES MARGINS ~ 13% EBIT margin 2 , reflecting value add premium technology and markets DIVERSIFIED CATEGORY EXPOSURE Exposure to critical commodities in t wo best mining markets in the world Base & Precious Metals, Quarry & Construction, Coal QUALITY CUSTOMER BASE AUSTRALIA’S LARGEST INTEGRATED SUPPLIER OF FERTILISERS INNOVATION AND HIGHEST QUALITY EXPOSURE TO EXPLOSIVES (1) FY21 IPL Group EBIT split excluding eliminations & corporate costs (2) FY21 Explosives EBIT margins (3) versus FY20 (4 ) Ammonium Phosphates LEADER IN EAST COAST MARKET Extensive distribution platform with stable distribution volumes DIVERSIFIED CATEGORY EXPOSURE Dairy, Sugar, Cotton, Grains, Horticulture >> Precision Agriculture LEVERAGED TO GROWING GLOBAL FERTILISER MARKETS > 73% increase (3) in realised AP (4) prices and >50% increase (3) in realised Urea prices LARGEST AUSTRALIAN FERTILISERS PRODUCER Manufacturing provides security of supply today and in the future Category Leadership 55% EBIT (1) 45% EBIT (1) 16 17 GROUP FINANCIAL RESULTS Chief Financial Officer Nick Stratford 17 18 Good Progress Against Finance Objectives Balance Sheet simplified and de - levered ? SFA renewed for 3 years - Sustainability wrap ? Balance Sheet hedging removed ahead of plan ? Financial Indebtedness down $384m, Net Debt/EBITDA (1) at 1.1x Response Plan delivered ahead of plan ? $40m of savings in FY21, $60m for FY20 / FY21 period Solid conversion of EBITDA into Operating Cash ? Good TWC reduction despite rising commodity prices ? Cash focus across all areas of the business – embedded discipline Strong cash flows underpinning dividend payout Net Debt / EBITDA ratio (for debt covenant purposes) - EBITDA is calculated using 12 month rolling EBITDA ex IMIs, minus lease d epreciation. Net Debt is translated at the 12 month average AUD:USD FX rate. 19 Profit & Loss IPL Group (1) FY21 A$M FY20 A$M Change % Revenue 4,349 3,942 10 EBIT ex IMI 566 375 51 Net Borrowing Cost (113) (136) 17 Tax Expense (95) (51) nm NPAT ex IMI 359 188 91 IMIs after tax (209) (65) nm NPAT 149 123 21 Earnings per share ex IMIs (cents) 18.5 10.9 70 Dividend per share (cents) 9.3 – nm Return on Invested Capital (ROIC) 5.8% 3.6% 61% Summary of Corporate Costs, Borrowing Cost and Taxation Net Borrowing Costs down $23M to $113M ? Lower average debt balances ? One - off cost related to repurchase of higher cost long - term bonds. Payback ~2.9 years Tax Expense up $44M from pcp ? Effective tax rate on operating profit of 21%, consistent with prior year Individually Material Items of $209M (2) ? Non - cash impairment of Cheyenne manufacturing assets $79M ? Gibson Island manufacturing plant closure $130M ($58M cash cost) Dividend ? Final dividend of 8.3 cps, 14% franked, representing 50% of NPAT (ex IMIs), in line with dividend policy Return on Invested Capital ? ROIC improved to 5.8%, up from 3.6% in FY20 nm = not meaningful. (1) Numbers subject to rounding (2) After tax 20 Cash Flows Cash flow FY21 A$M FY20 A$M Change A$M EBITDA 935 731 204 Interest paid (109) (136) 27 Tax paid (33) (14) (19) Trade Working Capital (126) (8) (118) Net Other (17) (28) 11 Operating cash flow 650 545 105 Growth capital (51) (60) 9 Sustenance (304) (218) (86) (Payments)/proceeds from derivatives - (75) 75 Net Other 13 (26) 39 Investing cash flow (342) (379) 37 Dividends paid (19) (31) 12 Lease liability payments (41) (42) 1 Share issue - 646 (646) Debt translation & derivatives (223) (77) (146) Financing Cash Flow (283) 496 (779) Change to Net Debt 25 662 (637) Opening balance Net Debt (1,029) (1,691) 662 Closing balance Net Debt (1,004) (1,029) 25 Strong second half cash generation expected to continue in FY22 EBITDA ex IMIs up 28% vs pcp ? Strong cashflows - commodity cycle upswing & response plan ? Partially offset by planned and unplanned manufacturing outages & unfavourable FX movements Trade Working Capital (TWC) ? Increase in reported TWC due to decrease in TWC facilities of $80m, consistent with communicated plan to reduce reliance ? Increase in underlying TWC (ex facilities) of $46m as a result of higher commodity prices on fertiliser inventories. Underlying TWC as % of sales improved 2% to 16% Capital Expenditure ? Sustenance capital spend is above pcp primarily due to FY21 turnarounds at Waggaman, Moranbah, St Helens and Mt. Isa Reduction of Net Debt related Derivatives ? Unwinding of non - cash derivatives, ensuring reported Net Debt aligns with businesses cash position 21 Net debt 30 Sep 2021 A$M 30 Sep 2020 A$M Drawn debt facilities 1,654 1,810 Other borrowings 15 60 Total interest bearing facilities 1,669 1,870 Cash and cash equivalents (652) (554) Net debt (excluding hedges) 1,017 1,316 Fair value of hedges (1) (13) (287) Reported Net debt (2) 1,004 1,029 Focus on Balance Sheet Strength Balance Sheet de - leveraging expected to continue in FY22 Financial Indebtedness ? Strong operating cash flows driven by efficient conversion of favourable commodity price uplift ? Close out of non - cash derivatives of $161m ? Reduction in TWC financing facilities by $80m to $332m. Represents a $25m reduction from HY21 to a level that is considered sustainable Debt facilities ? No material debt maturities until FY24 Credit metrics improved ? Net debt / EBITDA (3) ex IMIs of 1.1x reduced vs pcp of 1.4x ? Forecast strong cash flows to provide options for growth or capital management post FY22 (1) The fair value of hedges includes derivatives that hedge the interest rate exposure of the Group’s borrowings. (2) Net De bt comprises the net of interest - bearing liabilities, cash and cash equivalents, and the fair value of derivative instruments econo mically hedging the Group’s interest bearing liabilities and excludes lease liabilities. (3) Net debt/EBITDA ratio (for debt covenant purposes). EBITDA is calculated using 12 month rolling EBITDA ex IMIs, minus lease depreciation. Net Debt is translated at the 12 month average AUD:USD FX rate. (4) Interest Cover = 12 month r olling EBITDA (minus lease depreciation) ex IMIs/net interest expense before accounting adjustments. Committed Debt Facilities 30 September 2021 A$ million Facility Drawn Undrawn Total debt 2,422 1,654 768 Average tenor 5.1 years Credit metrics 30 Sep 2021 30 Sep 2020 Net debt / EBITDA ex IMIs (times) (3) 1.1 1.4 Interest Cover (times) (4) 9.7 6.1 Credit ratings 30 Sep 2021 30 Sep 2020 Standard & Poor’s BBB (Stable) BBB (Stable) Moody’s Baa2 (Stable) Baa2 (Stable) Financial Indebtedness A$M 30 Sep 2021 A$M 30 Sep 2020 A$M Change A$M Net debt (excluding hedges) 1,017 1,316 (299) Lease liabilities 243 248 (5) Trade working capital financing facilities 332 412 (80) Total Financial Indebtedness 1,592 1,976 (384) 22 Financial Framework Committed to strong Balance Sheet, disciplined capital management and improving returns Focus on Balance Sheet strength • Reduction and maintenance of lower Net Debt through improved free cash flow generation • Commitment to sustainable investment grade credit profile • Simplified debt funding & hedging structures Free Cash Flow generation • Strong focus on cost, trade working capital and sustenance capital • Response Plan to reset sustainable cost base and drive operational efficiency • Capital spend efficiency to be largely driven by Manufacturing Performance Target higher returns • ROIC (2) targets and actions in place to drive improvement in medium term • Excess capital to be balanced between investments and shareholder returns • Increased returns from Plants driven by improved Manufacturing Performance Status 19% improvement in operating cashflows Balance Sheet simplification completed – balance sheet hedges closed out, TWC facilities materially reduced SFA refinancing completed, strong balance sheet with strong prevailing market conditions Status Response Plan delivered 12 months ahead of target - $60m in sustainable earnings Underlying TWC (1) 2% below pcp Sustenance Capex – FY21 & FY22 circa $320m (net) due to heavy turnaround schedule – target 80% of depreciation from FY23 FY21 Positive technology growth momentum driving higher returns on growth capital Growth capital to be increasingly influenced by sustainability metrics Completion of current turnaround cycle to drive higher plant returns (1) Trade working capital as a percentage of sales (excluding financing facilities) (2) Return on invested capital. ~ 23 OPERATING PERFORMANCE Managing Director & Chief Executive Officer Jeanne Johns 23 24 Summary of Segment Financial Performance FY21 Performance Commentary ? Strong Australian manufacturing performance allowed Fertilisers to capture benefits of upswing in fertiliser commodity cycle ? Response Plan completed 12 months ahead of schedule, $40M of sustainable cost savings delivered in FY21 (FY21 target $30M) ? DNA Explosives achieved significant growth in Metals and from COVID - 19 recoveries, offset by unplanned manufacturing outages and coal bankruptcies ? Waggaman plant earnings adversely impacted by planned turnaround and unplanned plant outages, including a voluntary shut to protect plant against potential damage from hurricane Ida (all previously disclosed) ? Ag&IC earnings (DNA) benefited from strong commodity prices ? Moranbah turnaround negatively impacted DNAP earnings by $15m. Response plan savings & margin improvements from technology sales more than offset impacts of re - contracting (now complete), COVID - 19 (largely international) and weather EBIT (1) A$ million FY21 FY20 Change Dyno Nobel Americas 190 231 (41) Dyno Nobel Asia Pacific 140 149 (9) Dyno Nobel 330 380 (50) Fertilisers Asia Pacific 268 26 242 Corporate & Eliminations (32) (31) (1) Total EBIT excl IMIs 566 375 191 EBIT US$ million FY21 FY20 Change DNA – Explosives 126 121 5 DNA – Waggaman 4 33 (29) DNA – Ag&IC 11 1 10 Total EBIT excl IMIs 141 155 (14) Dyno Nobel America’s EBIT Split (1) Segment results exclude IMIs, which are reported at Group earnings level. 25 2H21 v 2H20 DYNO NOBEL AMERICAS EBIT (1) US$ million 2H21 2H20 Change Explosives 83 66 +27% Waggaman 22 14 +57% Ag&IC 13 0 N/A Total DNA EBIT excl IMIs 118 80 +48% Recovery from COVID - 19 lows Dyno Nobel Americas ? Second half 2021 Explosives earnings recovered to pre - COVID - 19 levels ? Waggaman and AG&IC benefitting from commodity cycle upswing ? Waggaman & St. Helens running well post turnarounds Dyno Nobel Asia Pacific ? Second half 2021 earnings impacted by Moranbah turnaround (A$15M) Fertilisers Asia Pacific ? Strong manufacturing performance capturing commodity cycle upswing (1) Segment results exclude IMIs, which are reported at Group earnings level. Asia Pacific EBIT (1) A$ million 2H21 2H20 Change Dyno Nobel Asia Pacific 70 78 - 10% Fertilisers Asia Pacific 248 36 +589% Total Asia Pacific EBIT excl IMIs 318 114 179% 26 90 100 110 120 130 140 150 FY16 FY17 FY18 FY19 FY20 FY21 Explosives – EBIT ( US$m ) Americas Explosives Performance FY21 Performance ? Strong customer growth, particularly in underground and Base & Precious Metals segment ? Q&C volumes remained stable - upside potential for FY22 ? Coal volumes down approximately 12% vs pcp - an improvement from 1st half ? Unplanned outages at Louisiana and Cheyenne Ammonium Nitrate plants impacted earnings by US$12M. Both plants have returned to normal operations ? Strong momentum in technology with sales of Premium Emulsion up 22% and EDS up 18% Adjusted for manufacturing outages EBIT of US$127M, 5% vs pcp EBIT of A$170M, 6% vs pcp EBIT of US$139M , 15% vs pcp EBIT of A$187M, 4% vs pcp Technology led diversification into quality markets supporting earnings growth 26 Adjusted for manufacturing performance COVID - 19 27 Americas Explosives Markets Base & Precious Metals ? Strong Gold and Copper prices supporting volume growth as mines recover from COVID - 19 closures ? Growth in DNA volumes and margins expected, driven by mine recoveries and technology driven market share gains. Expected volumes growth 3% to 5% Quarry & Construction ? Market volumes expected to grow in low to mid single digits as economy recovers from COVID - 19 and infrastructure spending increases ? DNA volumes expected to trend in line with, or above, market growth rates, as technology share gains continue Coal ? Coal markets expected to stabilise in short term driven by favourable gas economics, but longer term decline to continue ? For DNA, coal bankruptcies in Powder River and Illinois Basins are expected to limit volume growth Diversification into quality markets supporting earnings growth 27 FY21 Revenue Coal 18% B&PM 39% Q&C 43% Non - Coal 82% 28 Waggaman Performance ? Plant has performed well since the June 1 restart ? Nameplate production post restart (1) ? 2H EBIT US$22m v 1H US$(18)m loss v 2H20 US$14m Reliability Cooler replacement • No material deterioration detected to date • Replacement to align with Steam (if possible) Steam & Power • Engineering underway • Steam installation planned 1H FY23 • Power timing to be determined Performance Resourcing Site management ? New senior management team ? Greater level of accountability ? Improved operating rigour ? More robust operating model Taskforce ? Repair team – Work completed and resources redeployed ? Re - Start team – Integrated into plant workforce ? successful cold re - start post hurricane Ida ? Reliability taskforce – Continuing work on Cooler replacement, steam & power independence and redundancy risks B&PM 39% Q&C 43% Strong start to FY22 – Nameplate production YTD (1) Excluding controlled shut related to Hurricane Ida EBIT of US$4M, 89% vs pcp EBIT of A$6M, 90% vs pcp 28 29 EBIT of A$140M, 6% vs pcp Asia Pacific Explosives Performance FY21 Performance ? Continued growth in technology product margins (+$14M) outpacing impacts from re - contracting ( - $12M) ? WA contract losses (as previously disclosed in 2018) accounted for $3M earnings reduction ? Response Plan savings (+$9M) more than offsetting COVID - 19 impacts on international markets ( - $2M) ? Continued growth in Electronic Detonator Systems - Up 22% vs pcp ? Premium emulsion sales gaining momentum – FY21 impacted by the loss of a medium - sized Metals customer ? Strong Moranbah manufacturing performance in last phase of four - year operating campaign and post turnaround. FY21 reliability 90% (100% post turnaround) ? As previously disclosed, Moranbah turnaround negatively impacted results by $15M Strong technology driven growth post recontracting 29 A$M -35 -30 -25 -20 -15 -10 -5 0 5 10 15 20 FY20 FY21 YoY Change in EBIT (1)(2) Price Price Tech Tech Net (1) Net (2) (1) For FY20 - excluding EBIT movements related to manufacturing performance (+$5m), market volumes ( - $10m) and previously discl osed W.A. contracts ( - $10m) (2) For FY21 - excluding earnings impacts related to Moranbah turnaround ( - $15m), international ea rnings ( - $2m), response plan (+$9m) and previously disclosed W.A. contracts ( - $3m) 30 Asia Pacific Explosives Markets Metallurgical Coal ? Market volume growth (~1% year on year) expected in Metallurgical Coal production. Markets in India, Europe and South America replacing tonnes previously sold to China ? Market conditions continue to support Moranbah’s sold out position Base & Precious Metals ? Iron Ore prices declined from recent highs. Australian production expected to increase marginally in FY22 (<1%) ? Benefit expected from higher sales of EDS (2) and emulsion products ? New customer wins tied to premium technology offering International ? Higher demand from China expected to support increased coal production ? DNAP is expected to benefit into FY22 as volumes return to pre - COVID - 19 level Well positioned to leverage value from market leading technology 30 FY21 Revenue 51% Coal (mostly Metallurgical) 40% B&PM International 9% 31 -40 0 40 80 120 160 200 FY18 FY19 FY20 FY21 Fertiliser EBIT A$m Distribution (Steady demand) Manufacturing (Globally priced) EBIT of A$268M, $242M vs pcp Fertilisers Asia Pacific Performance FY21 Performance ? Solid volume growth in a competitive market ? Margins impacted by increased investment in distribution assets ? Strong manufacturing performance (+$3M excluding turnaround impact) ? Benefit of the commodity price upswing (+$312M) partially offset by unfavourable foreign exchange movements ($ - 75M) – net of hedging ? Response Plan savings (+$25M) predominantly from sustainable reductions in operational expenses at Phosphate Hill and Gibson Island ? Response Plan savings more than offsetting increased depreciation ( - 10M) and Gibson Island PDC investments ( - $5M) ? Good progress on soil health strategy setting up future growth Soil health strategy setting foundation for earnings growth 31 A$M (1 Adjusted for impact of one - off external event in FY19 related to Queensland rail outage (1) 32 0.0 0.5 1.0 1.5 2.0 2.5 3.0 FY19 FY20 FY21 EBIT $m Nutrient Advantage 0 10 20 30 40 50 60 70 80 90 FY18 FY19 FY20 FY21 ‘000 tonnes Liquid Sales Volume Fertilisers Asia Pacific Markets Strong commodity price outlook Favourable Agronomic Conditions Cotton ? Water availability supporting improved summer crop market Broadacre Grain ? Nutrient depletion from prior year supportive for FY22 demand Extensive Pasture ? Strong beef and sheep meat prices supportive of fertiliser demand (growers investing in pasture upgrades) Sugar ? Expect consistent year on year demand Conditions support strong demand for premium products and services 32 86% increase 30% increase 33 TECHNOLOGY Managing Director & Chief Executive Officer Jeanne Johns 33 34 0 1 2 3 4 5 6 7 FY18 FY19 FY20 FY21 0 100 200 300 400 FY18 FY19 FY20 FY21 Technology Driving Future Growth (1) Technology driven estimated growth in Explosives EBIT between FY20 and FY22 , assuming no significant deterioration in current market conditions. (thousand metric tonnes sold) +26% (million units sold) +36% Premium Emulsion Electronic Detonator Systems +12% +19% Targeting technology driven Explosives EBIT growth (1) of 10% by FY22 Electronic Detonators Systems represent a small proportion of global detonator sales – significant scope for future growth Chile customer trials progressing well and delivering superior blasting outcomes Customer growth and retention from delivering technology solutions that address customer needs 35 Base raw materials, support and services Technology Strategy Progress Digital integration, data and a connected bench Advanced products, systems and services Conventional products and systems Our Technology Strategy Our Vision Brought To Life Remote loading equipment with cloud enabled Universal control system fully developed and in trials CyberDet1 TM (1) wireless detonators commercialised – CyberDet2 TM in trial late 2021 Positive customer feedback on CyberDet1 TM (1) Next generation Delta E systems released: Strong take up in Indonesia Universal control system and truck data management added Phase stabilised bulk Ammonium Nitrate commercialised to underpin international expansion Nobel Fire digital platform: now in use across 80% of our North Americas customer base Fracture density model (FDM) fully commercialised and in use by major customer Geologic Element Motion (GEM) model development on track Moving from development to commercialisation 35 (1) This proprietary technology is held by DetNet South Africa (Proprietary) Limited, in which IPL holds a 50% interest. 36 MANUFACTURING Managing Director & Chief Executive Officer Jeanne Johns 36 37 Manufacturing Regional Model ? Resources close to assets ? Improved responsiveness ? Greater local accountability ? Increased oversight Underpinned by global standards Regional model and focus on operating discipline is contributing to improved reliability Operating Discipline ? Training ? Procedural discipline ? Local oversight / assurance ? Standard operating procedures ? Management of change Local accountability Standards and procedures Engineering, Maintenance & TA (1) ? Risk Management ? Critical controls ? Critical equipment ? Preventative maintenance ? Asset life management ? Turnaround planning Regional centres of excellence Global alignment 37 (1) Turnarounds Driving improved reliability 37 38 Manufacturing Plant FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 Phosphate Hill, QLD Cheyenne, WY Moranbah, QLD St, Helens Waggaman, LA Turnaround schedule 38 38 Long term turnaround schedule less concentrated post COVID - 19 delays 38 39 OUTLOOK & STRATEGIC PRIORITIES Managing Director & Chief Executive Officer Jeanne Johns 39 40 Outlook – FY22 Strong base business – Positioned for growth: ? DNA above market growth expectation for Metals and Q&C ? DNAP growth leveraging technology – recontracting complete ? Fertilisers growth from Precision Agriculture & farming conditions Favourable market conditions – Commodity tailwinds Upside from manufacturing: ? FY21 included $122M impact from turnarounds & $79M from outages ? FY22 impact from turnarounds ~$76M, increase in depreciation of ~$22M ? WALA expected to run at nameplate Commodity FY21 Realised Price US$/mt Spot Price US$/mt Ammonia 381 825 (1) DAP 524 749 - 760 (2) Urea 373 950 3) (1) Tampa CFR as at 12 November 2021. (2) China FOB as at 12 November 2021 (3) Middle East as at 12 November 2021. Leverage benefits of stronger base business, value adding technology solutions and commodity cycle 41 Platform growth: Driven by operational improvements Sources of base business earnings growth + metal demand and recovery + infrastructure investment + population and consumption trends Business growth: Consistent technology & customer growth Technology and capital light geographic expansion Soil Health – Precision Agriculture & sustainable products Manufacturing Excellence – Target $40 - $50m by FY23 FY22: End of Turnaround cycle Future growth: Leverage green ammonia competency Partner of choice for low carbon ammonia production Gibson Island (FFI); Newcastle & Gladstone (Keppel Infrastructure & Temasek) Growth through efficiency Customer and margin growth Resilient and growing demand Commercialise green ammonia opportunities Notes: 1. Underlying business unit economics, excluding the impacts of large commodity price movements, temporary turnarounds an d non - reoccurring events. Market growth: Steady single digit underlying market growth 1 2 3 4 42 0 50 100 150 200 250 300 350 400 450 FY18 FY19 FY20 FY21 EBIT Fertiliser - Distribution Dyno Manufacturing Safety: Industry leadership in safety Sustainability: Accelerating our emissions targets & creating new commercial opportunities in line with decarbonisation DYNO: Growth through leading technology solutions for our customers in existing and new footprints IPF: Strengthen base business and build soil health services for farmers, while capturing strong commodity markets Manufacturing: High quality assets close to our customers in attractive markets & sectors Two strong businesses well positioned for the future Industry leader in attractive markets with leading technology 42 A$M (1) Waggaman, St. Helens, Gibson Island & Phosphate Hill – Adjusted for impact of one - off external event in FY19 related to Que ensland rail outage (1) 43 QUESTIONS & ANSWERS 43 44 APPENDIX 44 45 Group Result FY21 Group EBIT Movements (A$m) EBIT (1) of A$566M, 51% vs pcp (1) Excluding Individually Material Items (IMIs) of $293M ($210M after tax). 46 Dyno Nobel Americas – EBIT Waterfall DNA 47 Dyno Nobel Asia Pacific – EBIT Waterfall Dyno Nobel Asia Pacific ( A$m ) 48 Fertilisers Asia Pacific – EBIT Waterfall Fertilisers Asia Pacific ( A$m ) 49 GIBSON ISLAND MANUFACTURING CLOSURE One - off financial impact (1) : • Cash cost of closure ~$58m • Non - cash write down of assets ~$72m Annual impact on IPL earnings (post December 2022 closure): • Earnings will cease • Moranbah cost base increases by $5m to 10m (2) • Stranded Corporate and insurance costs ~$10m Optimise land value: • Green Ammonia MOU being explored with FFI as preferred option • If land not held for strategic purpose, proceeds from land sales up to net $45m (3) Financial Impacts (1) After tax (2) Based on purchasing 20kmt of ammonia or ammonium nitrate at FY21 market prices, including import handling cha rges (3) The ability to achieve the upper end of this range is dependent upon a change to the current land use classificati on at the site 49 2021 FULL YEAR FINANCIAL RESULTS PRESENTATION 15 November 2021 Incitec Pivot Limited ABN 42 004 080 264 ASX Code: IPL OTC: INCZY 50
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