Full Year 2024 Orica Ltd Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Owen Birrell - RBC Capital Markets - Analyst : Good morning guys. Yes. Just a quick question with regards to the -- I guess, the beyond blasting strategy. You talked about an aspirational target of getting to 50% from blasting and call it, 50% from non -- from beyond blasting. At current levels, that sort of requires, I call it, a 5 times increase in your non-blasting earnings. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 14, 2024 / 12:00AM, ORI.AX - Full Year 2024 Orica Ltd Earnings Call I wonder if you can give us a sense of -- acknowledging that it's an aspirational target, but what sort of time frame do you sort of envisage to be getting to this sort of outcome? And given the current portfolio and asset base that you have, how much of this can be delivered organically versus the need to be acquired?

Question: Owen Birrell - RBC Capital Markets - Analyst : And let me, I guess, ask a second question on that then. In terms of the the mix of the 50% from beyond blasting, do you think that's going to skew either to digital or to specialty chems? Or is there -- is it fairly even between the two?

Question: Owen Birrell - RBC Capital Markets - Analyst : And just finally, are you able to give us a sense of -- is this going to be particularly capital intensive to deliver this outcome? Or again, is it just very much scalable on what you...

Question: Brook Camber Crawford - Barrenjoey - Analyst : Yes, good morning. Thanks for taking my question. First one I had was just on slide 15. There's a $101 million benefit in FY24 from mix and margin. And Sanjeev, if you commented on the call that momentum is to continue. So I guess how should we think about that bar into FY25? Do you think you can replicate that level of growth again? Or are there reasons why perhaps you might think that should be a lower delta into FY25 effects? Thanks.

Question: Brook Camber Crawford - Barrenjoey - Analyst : That's great. And I guess a similar question to Owen just around digital growth. It was really strong and FY24 is sort of 29% EBIT growth. I think Terra was a pretty small contribution, so that's mostly organic. Do you think that pace of growth should continue over the next couple of years? Or should we think about something one-off in '24 that drove that head size growth? Or any reason why that might slow down?

Question: Brook Camber Crawford - Barrenjoey - Analyst : Great. Maybe just one final one on depreciation and amortization, a really large step up there next year if you compare it to the annualized second half, which had Terra five months of Cyanco, which I think is a good starting point. The guidance of '25 is a 9% increase on that second half annualized figure. What's driving that increase, please, would be helpful.

Question: Daniel Kang - CLSA - Analyst : Good morning. I just want to -- just a clarification on slide 41, where you've detailed your maintenance and turnaround schedule. I think you've included KI and Carseland for this half. Have these already been completed? And can you just estimate the FY25 earnings impact from the maintenance and turnaround work?

Question: Daniel Kang - CLSA - Analyst : Thank you Sanjeev. And just on the recontracting cycle where you've indicated the full year benefits of recent contract settlements. I guess, two questions here, two parts. Historically, Orica has recontracted around, I think, 20% to 25% of your book each year. Does this decline going forward given that your terms -- your contract terms have extended? And then if you can just talk about the new recontracting cycle, how it's shaping up at current IPP levels?

Question: Daniel Kang - CLSA - Analyst : And then I'll jump back in the queue.

Question: Reinhardt van der Walt - BofA Securities - Analyst : Good morning folks. Thanks for taking my question. First one, this could be a very simple answer, but the Cyanco turnaround that was brought forward for next year. Can I just check to see if that was a view that you took on demand or whether it was a more technical requirement to bring the turnaround forward?

Question: Reinhardt van der Walt - BofA Securities - Analyst : Understood. No, that's perfectly fair. And can I just check after you identified this issue at the one specific plant. Have you done any kind of review across the rest of the portfolio that you acquired to see if there are any other issues that need to be resolved?

Question: Reinhardt van der Walt - BofA Securities - Analyst : Perfect. Understood. And just on AN or maybe KI specifically, I understand there's a couple of tranches of gas contracts that are coming up for repricing. Can you just remind us again on just the timings of those when the contracts were signed and when the repricings will kick in?

Question: Reinhardt van der Walt - BofA Securities - Analyst : Thank you. And so I'm assuming you've made some kind of assumption around with the pricing lands on those gas contracts and cost to serve recovery when you were releasing your RONA target.

Question: Reinhardt van der Walt - BofA Securities - Analyst : Perfect. Thank you. One final one. Origin Energy is slinking away from their hydrogen ambitions in Hunter Valley Can I just see what does this mean for your end of the project? Does this mean that your green hydrogen aspiration basically on hold for now? Or is there any way that you can pursue this by yourself?

Question: Reinhardt van der Walt - BofA Securities - Analyst : Perfect, understood. Thank you very much.

Question: John Purtell - Macquarie Research - Analyst : Just a couple of questions, if I can. Just picking up on Dan sort of like...

Question: John Purtell - Macquarie Research - Analyst : Sorry, just further to Dan's question, just in terms of the pricing cycle in Australia. So you're still seeing sort of runway for pricing improvement in your Australian business relative to IBP, notwithstanding that you've obviously had a pretty good last few years.

Question: John Purtell - Macquarie Research - Analyst : Thank you. And this is the second one in relation to sort of acquisitions. Obviously, you called out Terra that there was minimal net EBITDA impact there in the second half, just given the integration costs. But how should we sort of think about integration costs for the acquisitions into '25? And obviously, there's purchase price accounting as well. So just trying dimension and quantify possible those types of impacts.

Question: Scott Ryall - Rimor Equity Research Pty - Analyst : Thank you. My question is hopefully pretty quick. I just wanted to confirm that the new RONA spread under 15% range is actually aligned with the LTI. And the second question is with your more rapid decarbonization, do you expect to generate safeguard credits in the next couple of years?

Question: Scott Ryall - Rimor Equity Research Pty - Analyst : So Sanjeev, just to confirm the range that's shown in the annual report this year, which admittedly is for last year's LTI plan is still the 12% to 14% for the scheme starting this financial year, it's going to be third and if you...

Question: Scott Ryall - Rimor Equity Research Pty - Analyst : Okay. Thank you. That's all I had.

Question: Nathan Reilly - UBS Investment Bank - Analyst : Thanks for taking the questions. Just coming back to the depreciation and amortization increase that you're asking us to model, bit of a technical question, but I'm just wondering how much of that increase is related to acquired contract intangible amortization, please?

Question: Nathan Reilly - UBS Investment Bank - Analyst : Sorry, so it's very little overall? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 14, 2024 / 12:00AM, ORI.AX - Full Year 2024 Orica Ltd Earnings Call

Question: Nathan Reilly - UBS Investment Bank - Analyst : Okay. Thank you. Then finally, just in relation to the manufacturing EBIT impact, which you've bridged out in your FY23 to FY24 EBIT bridge. I think you're calling out it looks like $15 million in terms of an EBIT impact in relation to the manufacturing downtime. That looks a little bit lower than what you were talking to at the first half and is also a little bit lower relative to the heavy type of language that you were using in relation to describing the load this year. Am I missing something there? Can you maybe sort of talk me through what might have been impacting that number of $15 million?

Question: Nathan Reilly - UBS Investment Bank - Analyst : Very good. Yeah, thanks very much for clearing that up.

Question: Niraj Shah - Goldman Sachs Group, Inc. - Analyst : Hi, good afternoon. Sanjeev, I think you mentioned in the prepared remarks a review of the capital framework, I know you asked us to be patient until the next half for the outcomes. But I just wanted to better understand what's under consideration? What are the key parameters you're looking at? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 14, 2024 / 12:00AM, ORI.AX - Full Year 2024 Orica Ltd Earnings Call

Question: Niraj Shah - Goldman Sachs Group, Inc. - Analyst : I appreciate that. And coming back, I'm just following up on Nathan's last question on the manufacturing impacts. If I look at the half year, it was a negative $19 million impact, I think, within the draw and blast business. On the full year, it was negative [9]. So I just wanted to better understand what the positive [10], I guess, is in the manufacturing in the second half of fiscal '24.

Question: Niraj Shah - Goldman Sachs Group, Inc. - Analyst : Got it. That's clear. Thank you.