Half Year 2025 Orica Ltd Earnings Call Transcript

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

Question: Ramoun Lazar - Jefferies Financial Group Inc. - Analyst : Good morning, Sanjeev, Jamie and team. Just a couple of questions for me, if I may. Just one you -- maybe if you can comment on the seasonality you see between the first half and second half and how that -- how we should think about the full year given the historic 45%, 55% split?

Question: Ramoun Lazar - Jefferies Financial Group Inc. - Analyst : Great. And just one more for me. Just on the premiumization and the rollout of some of these blasting solutions like WebGen and 4D. I guess where are you with that in terms of the rollout broadly across the geographical footprint, how to think about, I guess, the benefits from things like WebGen and 4D coming through over the next few periods? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 08, 2025 / 1:00AM, ORI.AX - Half Year 2025 Orica Ltd Earnings Call

Question: Jakob Cakarnis - Jayden Australia - Analyst : Hey, Sanjeev, hey, Jamie, just wanted to focus a little bit on the first question, maybe just teasing that out a little bit more. Can you just explain to us the impacts of the Wanamaker if it's there at the first half and second half impacts equal to that? And I guess as we look into FY26, as you catch up the total $20 million that you've called out, that's in combination with Yarwun, are we expecting that, that comes back and a little bit more as the networks up and running in 2016, please?

Question: Jakob Cakarnis - Jayden Australia - Analyst : Can I just confirm nameplates around that 100, 110,000 mark, is that right?

Question: Jakob Cakarnis - Jayden Australia - Analyst : That's helpful. Just while I've got you, Sanjay, one more. I'm just wondering about the persistent remixing away from thermal coal and whether or not as you come back to have a look at maybe how the world's changed or is changing whether that strategy still makes sense? And I guess where I'm going with that, are you seeing upside either from customer engagement in your own financing costs or anything from continuing down that path, even though demand and market dynamics might be more favorable in that market than they have been historically, please?

Question: Andrew Scott - Morgan Stanley - Analyst : Good mornig, Sanjeev, if I can just follow on from Jakob first question. You talked about 340,000 tonnes of capacity when we clear the turnarounds, where do you -- what do you see in terms of excess capacity relative to current demand when we do get that clean year in FY25?

Question: Andrew Scott - Morgan Stanley - Analyst : Great, thank you. That's helpful. Jamie, just one for you, the $5 million of carbon credits in the period. I just want to understand what exactly does that represent? And what I mean by that, is it just one year of production? Have you done any forward selling? And then can you just give us some thoughts about how you're going to go to market with these credits in the future?

Question: Andrew Scott - Morgan Stanley - Analyst : Thank you. I'll hand it over.

Question: Owen Birrell - RBC Capital Markets - Analyst : Yeah, thanks guys. Just one question from me on B -- just wondering if you can provide us any sort of color on the new contract duration volumes. -- hopefully, price. I know that it started from the first of January, so three-month contribution, if you can give us a sense of what that contribution was in the half as well, that would be appreciated.

Question: Owen Birrell - RBC Capital Markets - Analyst : Can I ask in terms of just, I guess, how we can think about it, should we assume that it has -- I guess, a floating rate style price to it such that the margin that you're gaining on that contract should be relatively fixed through time? Or should we see the margins fluctuate around because it's more of a fixed style price?

Question: Owen Birrell - RBC Capital Markets - Analyst : Are you able to give us a sense of what that period of the contract is, what the duration is? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 08, 2025 / 1:00AM, ORI.AX - Half Year 2025 Orica Ltd Earnings Call

Question: Owen Birrell - RBC Capital Markets - Analyst : No expiration on it?

Question: Owen Birrell - RBC Capital Markets - Analyst : Okay, that's fine, thank you.

Question: John Purtell - Macquarie Group Limited - Analyst : Hey, Sanjeev and Jamie, I hope you both well. Just had a couple of questions, please. Look, firstly, I'd be interested in what you're seeing from your mining customers at the moment as we move into a slowing global growth period. Is there any change in behavior retake-up of value-added products or any change in activity across your different regions to call out?

Question: John Purtell - Macquarie Group Limited - Analyst : That's helpful. Appreciate it. And just a second question on Digital Solutions. Just confirming that the result was sort of broadly in line with your expectations. Were there some integration costs taken above the line for Terra? And just as far as the second half outlook goes, are you expecting a stronger second half versus the first.

Question: John Purtell - Macquarie Group Limited - Analyst : Thank you

Question: Brook Crawford - Barrenjoey - Analyst : Thanks for taking my question. Just to follow up on your comment, Sanjeev, about very strong digital growth. I guess it was sort of $11 million increase in EBIT year-over-year. If you strip out carat,was the underlying organic growth consistent with the low double-digit target? And if you can confirm that, that would be great.

Question: Brook Crawford - Barrenjoey - Analyst : Yes. Great. No, we'll do. And just one on the explosives business and just like SDA look beyond the second half. There is concern in the market. And I guess, your stock valuation would reflect is that perhaps the growth profile in the Explosives business could slow from FY26. And do you, I guess, have a line of sight on continued strong growth in blasting in FY26? Or do you think the market's concerns are fair and you'll see more modest or low growth in blasting next year?

Question: Nathan Reilly - UBS Group AG - Analyst : Sanjeev, just focusing in on the North American blasting solutions business, volumes touched off there in the first half. I'm just curious some perspectives on your expectations for demand for that business in the second half, please?

Question: Nathan Reilly - UBS Group AG - Analyst : Thanks very much.

Question: Daniel Kang - CLSA Ltd - Analyst : Good morning, everyone. Sanjeev, just given the strength of gold markets, I'm just interested in your thoughts on the supply demand and pricing outlook for sodium cyanide. Can you also remind us of the pricing and contract terms for the segment?

Question: Daniel Kang - CLSA Ltd - Analyst : Just one follow-up, if I can, on Digital Solutions, and there's been a lot of commentary on that already. But I get that there's been integration costs that may have impacted margins, which slipped to touch to 23% from 25% last year. It sounds like from your comments that there should be a pickup in the second half. But can you just comment on the longer-term, I guess, aspirational levels of where margins should be?

Question: Niraj Shah - Goldman Sachs - Analyst : Hey, guys, just two for me. One on KI. I was just wondering how much capacity you've unlocked at that plant post turnaround. Just noting that I think it was about a $19 million, $20 million drag in manufacturing a year ago. And this period, you've had a $32 million uplift from nonrecurrence?

Question: Niraj Shah - Goldman Sachs - Analyst : Okay. And secondly, over a couple of years now, I guess, you've sort of described the Australian AN supply demand balances. Well, as the market is pretty balanced, if not tight, and everything seemed pretty disciplined. I was just wondering if there are any changes there that you're seeing or if it's pretty consistent?

Question: Niraj Shah - Goldman Sachs - Analyst : Thank you.

Question: Scott Ryall - Rumo Equity Research - Analyst : Thank you so much, the first question is very quick, hopefully. You've talked to the carbon credit to $15 million, I think, was the number. And am I right that, that's mostly Safeguard credits, and therefore, it comes into the blasting solutions in APA division, please?

Question: Scott Ryall - Rumo Equity Research - Analyst : Perfect. And then the second one may take a little longer. So I'm looking at RONA, and I'm looking at the compendium that you've sent out just in terms of the summary numbers. And the denominator there, the asset number rolling operating assets, it has gone up by roughly $1.5 billion. And I'm just trying to reconcile that with some of the balance sheet items where working capital virtually unchanged, PP&E is up about 400 intangibles of about 600. And I'm looking on a 12-month basis. Could you just help me understand why the nominator has gone up so much as well? And I guess the follow-on to that is can you tell me when that denominator, the asset number actually starts to stabilize and you'll start to see the benefits of increased RHINO as well as the very strong EBIT growth that you've been delivering over the last couple of years, please?

Question: Scott Ryall - Rumo Equity Research - Analyst : Could you just help me know, James, and just in terms of reconciling the denominator though. So if the rolling operating assets -- sorry, I forget, I know I've got the wrong technology there, but the rolling operating assets that you put in there are up by $1.5 billion, PP&E and intangibles are only up about $1 billion. I know it's an average number, but where is the extra $500 million coming from? Because I just am struggling to reconcile it with your balance sheet.

Question: Scott Ryall - Rumo Equity Research - Analyst : Tahnk you, and that might help just in terms of the comments you've made, as you said, the accretion to Ron. I mean at the end of the day, you've kept ranaflat while you've made those acquisitions. So I'm kind of just wondering when you get the acceleration then of Rina to kind of catch up with acceleration. I'm happy to part.

Question: Scott Ryall - Rumo Equity Research - Analyst : Okay, thank you.