Orica Limited

Orica's 2025 full year results. I'm Delphine Cassidy, Chief Communications Officer, and I'm delighted to have you with us today. In the room with me is Sanjeev Gandhi, our Managing Director and CEO, and James Crowe, known as Jamie, our CFO. Both Jamie and Sanjeev will be presenting shortly. We thank you for your support and value your participation and interest in Orica. As for normal, there's ample time for questions after both Jamie and Sanjeev present, so feel free to queue up and we'll address your questions as soon as possible. I can confirm that the materials that we'll be covering today have been lodged with the ASX and can be found on the ASX and RFL websites. Before we start, can I ask you to have a look at the disclaimer on slide two? Thank you. And with that, I hand it over to Sanjeev.

Thank you, Delphine. Good morning, everyone, and thank you all for joining the call today. We'll start very quickly with page three, which is just a very brief recap of who we are, the world's leading mining and infrastructure solutions company. Let me start with our number one priority, safety, on slide number five. I am extremely pleased to report that this year we've had zero fatalities across our operations and our serious injury case rate has fallen to 0.093, the lowest ever on record for Orica. This outcome reflects our focus on safety leadership wherever we operate. We have empowered our people to speak up and stop work whenever they identify risks. While we celebrate this amazing improvement, we remain absolutely vigilant. Safety is non-negotiable given the environment that we operate in. We are continuing our targeted safety programs, for example, focusing on preventing vehicle and equipment collisions to ensure every Orica employee and contractor goes home safe. I'm also pleased to note that we recorded zero significant environmental incidents in FY 2025, underscoring our commitment to operating responsibly in every community where we work. Turning now to sustainability on slide six. There is a small typo, and I'd like you to correct that, which is under the scope 3 column. In the second last line, the word phase is missing, so it should read as reduction pathways as part of the next phase of decarbonization. I'm sorry about that. Our commitment to decarbonization is delivering measurable results. We have significantly cut our greenhouse gas emissions. and have already eliminated 1 million tonnes of CO2 equivalents at our Kurgan Island site alone through new abatement technology. Overall, our gross Scope 1 and 2 emissions are now 51% below 2019 levels, well ahead of schedule, and we are firmly on track to meet our interim target of a 45% net reduction by 2030, This puts us in a strong position as we work our way towards our ambitions of net zero emissions by 2050. During the year, we completed the first full year of tertiary abatement at Yavin and commenced sourcing renewable electricity in Australia and in Canada, lifting our renewable power coverage to 22%. Renewable electricity procurement in Australia and Canada is currently supporting our goal of achieving 100% renewable electricity by 2040. We continue to explore emerging low-carbon technologies from renewable hydrogen to alternative raw materials to carbon capture and utilization. These efforts demonstrate that our focus on sustainability is not only the right thing to do for the planet, but it's also supporting efficiency and innovation in our business. Turning now to our financial results for FY 2025 on slide 7. Financial performance in FY 2025 has been outstanding. Double-digit profit growth, strong free cash flow, and value generation for shareholders, all while strengthening our balance sheet. This gives us a great platform to build on for the future. Let me walk you through the highlights. Our EBIT rose 23% to $992 million year-on-year. This is the highest earnings we have achieved in the last 13 years. This reflects the strength of our strategy, the resilience of our business model, and the outstanding execution of our global teams. Net profit before significant items increased 32% to $541 million, and earnings per share rose by 29% to 111.8 cents. This represents the value we are delivering to shareholders through disciplined growth and operational excellence. Notably, we've seen earnings growth across all three of our core segments and across all of our regions. Blasting solutions, digital solutions and specialty mining chemicals have contributed to this strong earnings growth. This demonstrates the strength and resilience of our diversified portfolio and the success of our beyond blasting strategy. Our cash generation remains robust with net operating cash flow up 18% to $949 million. Leverage ratio is now at 1.39 times. Return on net assets has improved to 13.8%, reflecting our continued focus on capital efficiency, asset utilization, and profitability. The growth in earnings has translated into higher returns for shareholders, enabling the board to declare an increased final dividend for FY 2025, bringing our full-year dividend well within our targeted range of 40-70% payout ratio. We are pleased to share our success with investors in this way. In addition, our on-market buyback of up to 400 million is nearly complete, and the Board has approved an increase of the buyback by a further 100 million to a total of 500 million to be completed by March next year. This capital management initiative, our first ever share buyback in more than a decade, reflects our confidence in Orica's future, and our commitment to maximizing shareholder value. Jamie will talk more on the financial performance shortly. Looking at the earnings across our segments and our regions, earnings were up across all regions and all business segments. Starting with Australia, Pacific, and Asia, APA delivered EBIT of $658 million last up 23% on the prior year in an environment with significant weather events in Australia and also in Asia. In blasting solutions, growth was driven by higher demand for value-added products and services, which improved our product mix and margins. We benefited from successful contract renewals and wins and increased manufacturing output due to the non-repeat of the major turnaround at Coorigan Island in the prior year. These gains more than offset some softness in demand in some areas, for example, lower thermal coal volumes in Indonesia. We also realized a one-off 15 million benefit from selling carbon credits generated by our abatement projects in Australia. In digital solutions, robust fundamentals in gold and copper fueled greater uptake of our Axis mining intelligence products, and we saw significant customer adoption of Opro and Opro 3D for blast modeling. In mining chemicals, strong gold demand drove record sodium cyanide sales, supported by new customer wins, and our ability to reliably supply customers through our global network of assets. Moving to North America. North America reported EBIT of $212 million, up 15% year-on-year. Our technology leadership and focus on future-facing commodities like copper and gold has provided a strong platform for growth in this region. Demand for our premium blasting products remains strong, and adoption of our patented WebGen wireless blasting system accelerated, driving growth in the region. These positives helped offset external headwinds, including reduced demand from the U.S. thermal coal sector and a subdued quarry and construction market in the United States. We continue to maintain disciplined cost control in our business. In digital solutions, North America saw an uplift in demand for blast measurement tools like Fractrack and for in-situ geotechnical monitoring instruments. In mining chemicals, we successfully completed major safety upgrades at the Vinamaka cyanide plant in Nevada, which will support higher production going forward. The integration of the Cyanco acquisition in North America is substantially complete, and we are already unlocking customer synergies between explosives and the cyanide business. In EMEA, which is Europe, Middle East, and Africa, EBIT delivery was 101 million, which is up 18% on prior year. This strong result was underpinned by increased demand for advanced solutions in underground mining, as well as a pickup in construction and mining activity in key markets across this region. Leveraging our global experience, we achieved deeper penetration in important emerging markets across Africa and Central Asia. At the same time, We maintained a firm focus in commercial discipline and strategic portfolio optimization, which improved the quality of our earnings. In digital solutions, EMEA's earnings benefited from new contracts in major growth regions, and several new partnerships were executed for environmental monitoring solutions. We also saw growing uptake of old Pro and old Pro 3D software, and continued growth in ground probe radar deployments and services across the region. In mining chemicals, better customer mix and the use of our multi-supply sources boosted cyanide margins, and we expanded our emulsifier products into new emerging markets. Finally, to LATAM. Latin America's EBIT was $90 million, up 4% on the prior year. This was a good outcome given the challenges in this region. we achieved rapid customer adoption of new blasting technology, notably increased use of webgen wireless blasts and 4D tailored explosives. While the competitive dynamics remains challenging in this region, good progress has been made on securing new business and new contract wins. The Latin American team have also implemented portfolio adjustments and operational improvements aimed at managing costs and the ongoing supply challenges. In digital solutions, Latin America saw a very strong uptake of our Rhino monitoring technology and continued growth in ground probe and access product sales. We are leveraging the Terra Insights acquisition synergies to accelerate adoption of our GeoSolutions products. In mining chemicals, we successfully expanded into new high-growth mining regions in Latin America and benefited from customer synergies between Orica and Scienco, which are driving higher market penetration for our cyanide and blasting offerings. We also ramped up our scientific technical services in the region, providing added value to our gold mining customers. Moving to a segment view starting on slide number nine. Starting with blasting solutions across all our regions, the core explosives and blasting services business performed exceptionally well. A bid for blasting solutions was $868 million, up 15% year-on-year. We achieved margin expansion by shifting further towards higher-value premium products and by deploying more of our patented energy, and the non-repeat of last year's ammonia shutdown at Kurging Island contributed to the earnings uplift. Moving to digital solutions on slide number 10. The digital solution segment is rapidly scaling up and has firmly established itself as a key growth engine for Orica. EBIT from digital solutions was $92 million, up 32% versus prior year. This step up in growth reflects accelerating customer adoption of our digital products and the integration of the recent acquisitions. All parts of the digital portfolio contributed strongly. In all-body intelligence, improved exploration activity draw higher demand for our access analyzers and sensors. We are also advancing a strong pipeline of new products for release in 2026, focused on gold and copper exploration and production. In blast design and execution, recurring software and sensor subscriptions are growing steadily. supported by robust gold prices that encourage mining customers to invest in ore precision tools like OrePro and OrePro 3D. In geo solutions, cross-selling is driving growth with many blasting customers also adopting our monitoring systems. GroundPoE's recurring monitoring services revenue continues to increase. Terra Insights, which we acquired last year, delivered earnings ahead of its investment case. Cross-selling opportunities are being realized, for example, by offering monetary customers. The combination of growing revenue streams and high customer retention demonstrates Orica's delivery of technology-focused growth, reinforcing our position as a leader in digital mining solutions, and clear demonstration of growing beyond blessing. Turning now to slide 11, which demonstrates how Orica is driving growth by expanding not only our addressable market, but also deepening our market penetration in the digital space. We continue to see robust fundamentals in the digital space. Exploration activity is accelerating and the mining industry's rapid digitization is driving demand for advanced instrumentation and integrated digital solutions, areas where Orica is setting the pace. Orica's innovation and R&D are not just responding to market needs, They are actively creating new markets. By bringing innovative solutions to the mining sector, we are expanding offerings to our customers and, in turn, growing the total addressable market itself. Our total addressable market has expanded at a 39% compounded annual growth rate since 2023, driven by both organic innovation and the successful integration of strategic acquisitions, Axis and Terra Insights. driven by both organic innovation and the successful integration of strategic acquisitions Axis and Terra Insights. Digital solutions revenue has grown even faster at a 30% compounded average growth rate after adjusting for the timing of the acquisitions. The years following the Axis and Terra Insights acquisition have delivered clear synergy benefits, accelerating both our TAM and the revenue growth. As shown on the previous slide, the high proportion of recurring revenue and low churn demonstrates the value and stickiness of our offerings and the strength of our customer relationships. Moving on to specialty mining chemicals on slide number 12. EBIT was $101 million, up 47% on the prior year. Robust gold market fundamentals with gold prices and demand hitting all-time highs have driven significant demand for sodium cyanide and our services. We achieved strong sales volume supported by new customer wins and by leveraging Orica's unrivaled global manufacturing and distribution network to ensure reliable supply. Our integration of Cyanco, which we acquired in 2024, has progressed very well. and we are beginning to realize the synergy benefits across the blasting and the cyanide businesses. During the year, and as previously disclosed, we completed planned safety upgrades at the liquid cyanide facility at the Vinamaka plant on plan. Similar safety upgrades are being completed on the solid cyanide facility in October. We expect full production at Vinamaka from FY2027 onwards and we expect to start up the Vinamaka site with full production from the end of next week. Our Yavin and Alvin cyanide plants ran at record rates and despite undertaking major safety and maintenance upgrades at our Vinamaka plant, our global supply chain allowed us to meet customer needs without any interruptions. We have continued to expand our emulsifier product portfolio increasing exposure to copper and iron ore markets and entering into new regions and growing our revenue streams. We've launched a new opti-ore range of mineral processing reagents targeting future facing commodities like copper and critical minerals. Our scientific technical services offering for gold processing has seen steady uptake, providing extra value to customers beyond the chemical itself. In summary, Our specialty mining chemicals business today is the world's largest mining-focused sodium cyanide producer with an integrated sodium cyanide production network of approximately 240,000 tons annually. This, along with the positive outlook and demand for gold, underpins the continued growth forecast in the medium term. I will now hand over to Jamie to talk about our financial performance in detail.

Thank you, Sanjeev. Good morning everyone and thank you again for joining us today. I'll move to the key financial metrics shown on slide number 14. As Sanjeev mentioned earlier, the continued successful execution of our strategy is reflected in our financial performance. Whilst top line sales revenue grew by 6% to $8.1 billion this year, our earnings before interest and tax rose to $992 million, an increase of 23% compared to the prior year. I'll provide more details on this in the next slide. Net profit after tax pre-individually significant items increased by 32% to $541 million. As previously disclosed at the half-year and our business update in September, significant items totalling $379 million after tax have been recognised this year primarily relating to impairment and restructuring of our Latin America blasting business, in addition to litigation costs. Of the total significant items, approximately $235 million is non-cash in nature, mainly relating to the Latin America impairment. After inclusion of these significant items, statutory net profit after tax finished at $162 million for the year. Net operating cash flow finished at $949 million, an increase of 18% versus the prior year, reflecting continued strong cash generation across the business, in addition to disciplined working capital management. Return on net assets improved to 13.8%, an increase from 12.8% in the prior year. Our strong performance in 2025 has enabled us to deliver continued improvement in EPS, pre-significant items, to 111.8 cents per share, an increase of 25.4 cents per share, or 29%, from last financial year. A key highlight of our results throughout 2025 is the strong alignment between improved earnings, stronger cash generation, and importantly, maximising total shareholder returns over time, in line with our refreshed capital management framework. Turning now to slide number 15. We shared our refreshed capital management framework in March this year, and the framework is designed to provide clarity and transparency in how we think about deploying capital across the business and through the cycle. We've applied the framework consistently throughout this year, and the quality of our earnings demonstrates a number of proof points. These include continued strong operating cash flow, efficient working capital management, disciplined capital expenditure and investment, and importantly, we have safeguarded the strength of our balance sheet, and as a result, delivered increased returns to shareholders. A clear example is our successful on-market share buyback. In March, we announced an on-market buyback of up to $400 million to take place over the following 12 months. I'm pleased to share that this initial program is substantially complete, with $399 million of shares repurchased to date, representing 4.1% of issued capital. Given our robust position, the Orica Board have approved an increase of up to an additional $100 million to the existing on-market buyback for a total program of up to $500 million. The buyback is expected to be fully completed by March 2026. Over the coming slides, I'll talk to the key aspects of our 2025 results in more detail, which highlight the continued successful application of our capital management framework. Turning now to the EBIT bridge on slide number 16, where you can see that we've delivered improved earnings across all reporting segments. Starting with blasting solutions, volume, mix and margin increased by 81 million from the prior year, inclusive of 15 million of proceeds from the sale of carbon credits, recognised in the first half. This was driven by continued strong demand for our higher margin premium products and technology solutions, a positive re-contracting cycle and continued commercial discipline. Growth in volume mix and margin slowed in the second half due to lower sales volumes in Indonesia and the US due to reduced thermal coal demand. Margin growth from our blasting solutions technology product range increased by 46% in 2025, on top of the 55% increase delivered in 2024, with strong continued demand for the safety, efficiency, environmental and cost benefits delivered to customers through our WebGen wireless blasting, 4D and Fortest specialty emulsion ranges. In the digital solutions segment, earnings increased 32% to $92 million, an increase of $23 million from the prior year. Growth was underpinned by strong customer uptake of our digital platforms and sensor technology, and acceleration in global exploration activity, particularly in the gold and copper segments, and increasing recurring revenue. We also benefited from the full-year contribution of the Terra Insights acquisition, continuing to realise the benefits of cross-selling opportunities across the GeoSolutions portfolio, with the integration of GroundProbe and Terra essentially complete. Our FragTrak, AllPro and AllPro3D products continue to attract significant customer demand, together with our access mining technology business, acquired at the bottom of the cycle, well positioned to support existing business and new contract wins, in line with strong metals exploration activity. In the specialty mining chemical segment, earnings increased by $32 million to $101 million, an increase of 47% from the prior year. This growth reflects the full-year contribution from the Scienco acquisition, a critical investment supporting continued strong demand for sodium cyanide amidst sustained high gold prices, together with new contract wins in both the cyanide and emulsifier product ranges. Pleasingly, our recent acquisitions have created opportunities to further bundle digital monitoring and optimisation services with cyanide supply. As Sanjeev mentioned earlier, scientific and opti-or provide opportunities to expand revenue streams and importantly, grow the segment beyond cyanide. Across our blasting solutions and specialty mining chemicals manufacturing assets, we've also delivered improved performance versus the prior year. Earnings increased by $36 million, primarily attributable to the non-repeat of costs incurred from the six-year Leucurigang Island ammonia plant turnaround conducted in the first half of 2024. Pleasingly, the strong production performance at our Yarwin cyanide facility continued throughout the second half, which is important, as we progressed through critical safety upgrades at our Sianco Winnemucca production facility. Maintaining uninterrupted supply to our customers and having the flexibility to adapt supply points across our chemical supply chain reinforces Orica's position as the world leader in the mining-focused production of sodium cyanide. And finally, global support costs are lower than the prior year, primarily due to the classification of litigation costs as a significant item in 2025, some small property sales and ongoing disciplined cost management. In summary, our earnings growth has been broad-based, supported by increased contributions from every segment, with a continued focus on execution and commercial discipline. Consistent with our capital management framework, this demonstrates our objective of resilient, through-cycle performance and, pleasingly, this has continued into the start of the new financial year. Turning now to trade working capital on slide number 17. Encouragingly, the improvements that we've focused on over the past 18 months have been maintained this financial year. Total trade working capital cycle days on a 12-month rolling basis are in line with the prior year. Day sales outstanding remained consistent at 46 days, reflecting our sustained commercial discipline as sales revenue grew by 482 million or 6% during the year. Days inventory held increased by two days, seen as a prudent measure given significant geopolitical uncertainty, particularly in the US, and raw material shortages occurring through 2025. Importantly, we've been able to fully offset this through a two-day improvement in rolling days payable, closing at 51 days and moving us closer to top quartile total trade working capital performance relative to industry benchmarks. Absolute trade working capital finished at $620 million. Foreign exchange had a $30 million unfavourable impact, partly offset by $14 million in efficiency improvements, with ending trade working capital to sales finishing the financial year at 7.6%, improving from 7.9% at September last year. This disciplined working capital result supported the increase in net operating cash flow. and remains a key focus area for the organisation. Turning now to slide number 18. Total capital expenditure for 2025 was $460 million, broadly in line with the prior year. Of this, $286 million was allocated to sustenance capital expenditure. This included successful completion of turnaround events at our Carslan and Cooringang Island sites in the first half, and the Winnemucca and Elven facilities in the second half. We continue to invest in our mining services downstream business, including enhancements to our mobile delivery systems fleet in growing markets to support increased sales of specialist emulsions, such as 4D, together with investments in our cyanide sparge fleet to support increased sales. Allocation to growth capital expenditure was slightly higher this year, with $172 million invested in line with our strategy of supporting growth in the digital solutions segment, capacity expansions and efficiency improvements in our continuous manufacturing plants, and further development of technology-focused blasting solutions. Growth capital expenditure is closely managed in line with the capital management framework where investment must achieve hurdle rates significantly above our pre-tax weighted average cost of capital as evidenced in our growing margins this financial year. Sustainability related capital expenditure was $2 million following completion of key projects such as tertiary catalyst abatement across our nitric acid plants. We expect 2026 capital expenditure to remain broadly in line with the prior year. Moving now to slide 19 on the balance sheet and liquidity. We continue to strengthen our balance sheet during the year with a number of key funding initiatives successfully executed. During the year, we refinanced or extended $461 million of existing committed bank debt facilities and added a new $90 million debt facility. In July, we also announced the successful issuance of $390 million US dollars in the long-term notes in the US private placement market. As an indicator of how Orica's balance sheet is viewed externally, investor demand for the notes was strong, with a total order book of circa $4 billion US dollars, and this resulted in funding at favourable pricing. As a result, at 30 September, the average tenor of drawn debt was 5.5 years, an increase from 4.7 years at the end of September 2024. Net debt ended at $1.9 billion, excluding lease liabilities, an increase of $304 million from the prior year. This increase was driven by cash outflows including $630 million of on-market share buybacks and dividends, together with $415 million of strategic capital investment. This was partly offset by our strong operating cash inflows. Consistent with our capital management framework, our leverage ratio is 1.39 times EBITDA and sits comfortably within the lower half of our target range of 1.25 to 2 times. We maintained a robust liquidity position. At year end, we had $747 million in cash and $1.6 billion in undrawn committed facilities. And in December 2024, Standard & Poor's reaffirmed OREC's BBB stable investment grade credit rating. In summary, our balance sheet is strong. It positions us well to weather external volatility, support continued delivery of our strategy and ultimately increase returns to shareholders. Turning now to the dividend slide on page 20. Under our capital framework, we have maintained our target dividend payout range of 40 to 70% of underlying earnings. The Orica Board of Directors today have declared a final dividend of $0.32 per share, which brings the full year dividend to $0.57 per share, unfranked, representing a full year payout ratio of 50.2%. This represents a $0.10 per share or 21% increase on the 2024 full-year dividend of $0.47 per share. This increase, together with the successful on-market share buyback, demonstrates our commitment to delivering enhanced returns to shareholders in a sustainable and disciplined manner, consistent with our capital management framework. In closing, Orica's outstanding financial performance and disciplined capital management have positioned us for sustainable and enduring growth and to maximise shareholder returns. Our resilient strategy, talented global team and commitment to innovation ensure we are well prepared for future opportunities and to drive continued success for all of our stakeholders. With that, I'll now hand back to Sanju.