Orica Limited

Good morning everyone and thank you for joining us for Orica's first half 2026 results presentation. My name is Natalie Worley and joining me here today in Melbourne are Sanjeev Gandhi, Managing Director and CEO, and Jamie Crowe, CFO. Both Sanjeev and Jamie will be presenting shortly before we move to Q&A. Before we start the presentation, I kindly ask you take a moment to read the disclaimer on slide two. And with that, I'll pass over to Sanjeev. Thank you.

Thank you, Natalie, and welcome all. Thank you all for joining the call. Let me start with our number one priority, safety. We are at Orica deeply saddened by the fatal vehicle-related incident involving one of our colleagues in North America in late November 2025. Our thoughts and deepest condolences continue to be with their family, friends, and colleagues. We have now completed a full investigation and are implementing critical learnings across our organization that such events do not happen again. Our people are the foundation of our company. We remain absolutely committed to the prevention of harm and to supporting the physical and psychosocial well-being of our people and our stakeholders. While our serious injury case rate remains on target, we are focused on preventing high-risk events particularly through our major hazard management and next-gen safety leadership programs. On sustainability, we achieved our 2026 emission reduction targets of 30 percent decrease in net scope one and two emissions, and we continue to progress towards a longer-term ambition of net zero by 2050. Turning now to slide five and our key first-half highlights. We have delivered a record first half financial performance. Earnings momentum continued from the last financial year with EBIT and NPAT pre-significant items up 5% and 8% respectively versus the PCP. This reflects ongoing strategic execution, business resilience, the strength of our global manufacturing and supply network, and the outstanding delivery by our people. This has translated into higher shareholder returns, with the board declaring an interim increased dividend of 28.5 cents per share, which is well within our 40 to 70 percent payout range, and the completion of the 500 million on-market share buyback program. Return on net assets improved to 14.7 percent, which is a 13-year high, reflecting our disciplined approach to capital management, and efficient asset utilization. Our balance sheet remains strong and provides us with resilience and capacity to support further investments in our strategic priorities. Leverage at 1.53 times is near the lower end of our target range. Importantly, we progressed several strategic priorities to strengthen ORECA's platform for sustainable growth in this half. The Nelson Brothers and Danafloat acquisitions align with our strategy and reflect our commitment to disciplined growth and building high-quality earnings over time across our three business segments. We continue to see strong demand for our high-margin premium products and technology solutions underpinned by solid fundamentals across our core gold and copper markets and critical commodities. While these conditions remain supportive, we are not complacent. During the half, ORECA commenced a cost reduction program targeting at least 100 million of annualized savings over the next three years. This program is focused on structurally lowering costs and improving how efficiently we operate while continuing to prioritize safety and support future growth. We also made progress towards securing long-term diversified ammonium nitrate supply in North America while removing ongoing uncertainty and settling the US litigation. This shift will strengthen Orica's resilience and support security of supply for our customers. Moving on, I'll briefly touch on the key highlights of each region. Australia, Pacific, and Asia delivered EBIT of 332 million, demonstrating strong resilience despite external impacts including a temporary reduction in coal production quotas in Indonesia, and unfavorable foreign exchange movement. In blasting solutions, earnings grew 4% when you exclude the 15 million of one-off carbon credit sales in the prior period, driven by sustained demand for higher margin premium products, advanced technologies, a very successful contract renewal cycle, and strong commercial discipline. In digital solutions, exploration activity remains very high, with listed exploration companies raising record new funding in Q4 2025, supporting strong demand for access mining technology, while the geo solutions business benefited from cross-selling across the portfolio. In specialty mining chemicals, Yavin continues to perform strongly with new reliability and production benchmarks, and we are seeing positive early sales momentum in the Opti-Or mining chemicals range, supporting our strategy to grow beyond sodium cyanide. Turning to North America, EBIT of $113 million increased by 18% year-on-year, reinforcing the region as a key growth market for Orica. In blasting solutions, demand for premium products continued, with strong adoption of web-gen wireless blasting, supported by disciplined cost management. However, this was partly offset by the appreciation of the Australian dollar. Earlier today, we successfully closed the acquisition of the Nelson Brothers Mining Services business. I'll speak a bit more on that later. In digital solutions, earnings growth was driven by strong uptake of blast measurement products like Fractrack, increased cross-selling, and growing demand for geotechnical sensors and heap leach monitoring services in copper and gold. In specialty mining chemicals, we completed the planned safety upgrades at Vinamaka site, with all production lines now running reliably and at capacity. Turning now to Europe, Middle East, and Africa. Across our business, We are not experiencing any material constraints related to the conflict in the Middle East so far, but we continue to monitor the situation very closely. EMEA delivered EBIT of 51 million, up 3% on the prior period. Blasting Solutions delivered a strong underlying earnings performance supported by increased mining activity in key regions including Africa and Central Asia, and a continued focus on cost management. In digital solutions, we saw increased adoption of blast measurement products and radar sales, and momentum in key regions such as Africa and Turkey. In specialty mining chemicals, we continue to expand our footprint into jurisdictions with major gold basins, and with the acquisition of Dana Float, we have broadened exposure to copper and zinc going forward. Latin America EBIT was 47 million, up 1% on the prior year. In blasting solutions, earnings were supported by continued demand for high-margin premium products, emerging new growth opportunities, and disciplined cost management. In digital solutions, we are building on Orpro's strong performance in gold, seeking increased uptake with copper customers, and have partnered with a large driller in the region, creating further growth potential for access products. In specialty mining chemicals, we expanded into new, high-growth mining regions in Latin America supported by strong gold fundamentals. Turning now to slide seven, I will talk about the three reporting segments. Starting with blasting solutions, the underlying blasting business performed exceptionally well, with earnings up nearly 4% across all regions except for Indonesia, which was down due to the temporary reduction in coal production quotas mandated by the Indonesian government. We continue to see strong momentum in the adoption of premium products and advanced blasting technology, notably increased use of our wireless webgen systems and 4D-tailored explosives. Quality of earnings continue to improve, reflecting a successful contract renewal cycle and strong commercial discipline and cost management. Manufacturing performance across our continuous plants remain consistent, with the major cast and turnaround underway and progressing to plan. As previously disclosed, we recently settled the U.S. litigation, removing uncertainty and allowing Orica to establish a new, customized, diversified supply chain in North America. Moving now to slide eight, I will provide further details on our strategic actions in North America. North America is a critical growth market for Orica, and we have taken decisive actions to strengthen our position significantly. Firstly, the acquisition of Nelson Brothers Explosives business significantly expands our exposure to the U.S. quarries and construction sector and provides Orica direct channels to market and a platform for further cross-selling opportunities across the three segments. Nelson Brothers' explosives business includes a suite of high-quality assets that are strategically located near key end markets. The transaction is expected to be EPA-secretive in the first full year of ownership and provides an annual earnings before interest and tax contribution of approximately $35 million once fully integrated. I am very excited to welcome the 400-plus people from Nelson Brothers into the Eureka family and to work even closer together to serve our U.S. customers. We have already made progress towards securing long-term diversified ammonium nitrate supply in North America. This process will run for the next few months with a view to have new supply contracts in place during this second half. We are very encouraged by the interest to date, and this remains a top priority for the North American business. Collectively, these actions strengthen resilience, security of supply, and customer outcomes in the North American region. Turning now to digital solutions on slide nine. The digital solution segment continued to scale rapidly, underpinned by growing contracted recurring revenues and strong customer retention in line with high growth, high margin mining technology benchmarks. Digital solutions EBIT was 51 million, up 25% on the prior period, reflecting sustained customer adoption and operating leverage as the business scales up. Performance was broad-based across the portfolio. highlighting the depth, diversification, and synergies of the digital solutions products. In all-body intelligence, elevated exploration activity and our improved driller and geology integrated workflow increase the installed base of Access Gyros, while Access Connect is now at 190 projects already within 18 months of launch, positioning us for further adoption across the exploration workflow. In blast design and execution, growth was driven by strong gold and copper fundamentals and continued adoption of OPRO grade control and FractTrack measurement solutions. GeoSolutions performed very well on ongoing demand for slope stability monitoring. The new Series 5 ground probe radars extend our technology leadership in safety-critical monitoring, and TerraInsights continues to outperform the original investment case. demonstrating the scalability and channel synergies of our geotechnical offerings. This year, we have provided additional information to illustrate the quality and sustainability of digital solutions earnings. Turning now to slide 10. Recurring revenue is now over 60% of digital solutions revenue, improving earning stability and cash flow predictability. Hardware sales and leasing at 67% create a physical and data-embedded footprint at customer sites and delivers differentiated mission-critical insights. This is complemented by software at 23%, enabling improved decision-making, and services at 10%, supporting sustained value delivery, altogether driving margin expansion and deeper long-term relationships. Cross-selling into our core blasting customer base remained a key growth driver. During the half, cross-selling increased by a further 3%, with significant opportunity to expand share of wallet as customers adopt multiple digital solutions over time. Ongoing investment in next generation of technologies will continue to expand our addressable market, extend contract duration, and support long-term earnings growth, also driven by new technologies like AI. Moving now to specialty mining chemicals on slide 11. The specialty mining chemicals delivered a bit of $57 million, up 20% on the prior period, above our medium-term forecast, despite the unfavorable foreign exchange impacts. Sodium cyanide sales were strong, reflecting robust demand and our focus on reliable production and operational execution across our three continuous manufacturing plants in the U.S. and Australia. We also continue to unlock customer synergies across the blasting and the sodium cyanide business. During the half, we successfully completed plant safety upgrades at the Vinamaka solids plant, and the plant is now operating reliably and at capacity. We continue to see new mine developments which are supportive of potential future capacity expansions, both at Vinamaka and the Yavin sites in the midterm. In April, we announced the acquisition of the Danafloat product range, a suite of high-performance collectors with an established mining industry customer base across EMEA and LATAM. This expands Orica's portfolio beyond our leading position in sodium cyanide for gold into sulfide ore processing, including copper and other future-facing commodities. It aligns with structural demand for copper and future-facing commodities driven by electrification, the energy transition, and AI-related infrastructure build-out. Dynafloat is highly complementary to our proprietary OptiOil range, together offering a differentiated suite of solutions tailored to specific ore mineralogy and circuit conditions. This diversifies specialty mining chemicals beyond sodium cyanide into copper, zinc, and other future-facing commodities. 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 on the call today. I'll move to the key financial metrics shown on slide number 14. Consistent with our first half business update provided in March, continued strong business performance throughout the first half is reflected in our key financial metrics. While top line sales revenue was marginally lower than the first half of 2025, our earnings before interest and tax has risen to $512 million, an increase of 5% compared to the prior corresponding period. I'll provide more details on this in the coming slides. Net profit after tax pre-individually significant items increased by 8% to $283 million. As previously announced in March, significant items totalling $284 million have been recognised during the half, primarily relating to litigation costs and settlement expense of the CF Industries litigation, incremental supply costs following the 5th of November incident at the CF Industries Yazoo City facility, and restructuring costs associated with the organisation-wide cost reduction program. This has resulted in a statutory net loss after tax of $1 million. Net operating cash flow was again strong during the half, finishing at $231 million. Continued strong cash generation across the business was partly offset by movements in foreign exchange and US litigation costs that have now been resolved and temporary higher sourcing costs in North America. Return on net assets improved to 14.7%, an increase from 13.1% in the prior corresponding period. And approximately 1% of the increase is a result of increased earnings, with the balance a result of changes in rolling net operating assets. Our strong first half results have enabled us to deliver continued improvement in EPS, pre-significant items, to 60.7 cents per share, an increase of 6.7 cents per share, or 12%, versus the prior half. Turning now to slide number 15. We shared our refreshed capital management framework in March of last year, and this half is a good demonstration of the framework in action. We've delivered resilient operating performance despite ongoing geopolitical and market volatility, with this half earnings the highest in over 20 years. Continued operating efficiency and capital productivity is evidenced in our improved return on net assets. Our business delivered another strong operating cash and trade working capital result, supported by consistent, disciplined allocation of capital expenditure. Our balance sheet remains strong and importantly, we continue to increase returns to shareholders. This half's interim ordinary dividend is the highest paid since the target payout ratio was introduced in 2016. In March, we successfully completed the $500 million on-market share buyback, the first to be fully completed in over 10 years. In terms of capital and portfolio management, during the half, we've progressed the sale of surplus land at our Deer Park site in Victoria, and also ended agreements to acquire the Nelson Brothers Explosives and Darnafloat Chemicals businesses, as Sanjeev detailed earlier, with both acquisitions expected to deliver returns well above risk-adjusted weighted average cost of capital. Turning now briefly to slide number 16. Pleasingly, the strong alignment between improved earnings, strong cash generation and application of our framework has translated into increased returns to shareholders, with underlying growth in earnings per share and ordinary dividends during the half outpacing growth in earnings. This demonstrates sustained positive momentum from the prior year and also continued successful execution of our strategy and the financial resilience that we continue to build across the business. Turning now to the EBIT bridge on slide number 17, where you can see underlying earnings growth this half has continued across all segments. Starting with the blasting solution segment, volume, mix and margin increased by 24 million, normalising for 15 million of proceeds from the sale of carbon credits recognised in the prior half and movements in foreign exchange. This was driven by continued demand for our higher margin premium products, advanced blasting technologies, a successful re-contracting cycle and continued strong commercial discipline. Margin growth from our blasting solutions technology product range increased by 16% versus the prior period with continued strong demand for the safety, efficiency, environmental and cost benefits delivered to customers through our webgen wireless blasting, 4D and Fortis specialty emulsion ranges. In the digital solution segment, earnings increased by 25% to $51 million versus the prior period. The segment continues to scale rapidly, underpinned by contracted and growing recurring revenue and strong customer retention. And pleasingly, growth in the half was ahead of plan. Driven by significant customer demand for our FragTrack, Allpro and Allpro 3D digital platforms, together with the rapid scale-up of our access mining technology business, supported by an acceleration in global exploration activity, particularly in the gold and copper segments. Within the geosolutions business, early customer demand for the recently launched Series 5 radar has been strong. The segment continues to realise cross-selling benefits, leveraging our core blasting customer base as a key growth driver. In the specialty mining chemical segment, again, growth in the first half was ahead of plan. Earnings increased by 20% to $57 million versus the prior half. Volume mix and margin increased by $5 million as strong gold fundamentals persist and continue to drive robust demand for sodium cyanide. The Yarwin and Winnemucca solids plants are fully utilised as sales opportunities are outrunning production availability with earnings increasing by $5 million as a result of improved manufacturing performance during the half. And we've commenced very early engineering works to explore de-bottlenecking opportunities at Yarmouth and Winnemucca, with the business currently securing third-party tons to support new sales opportunities across the global network. And multi-year supply agreements are also being made at improved pricing as strong demand growth continues. Global support costs decreased by 3 million versus the prior half, reflecting ongoing disciplined cost management, including savings generating from the recently announced organisational-wide cost reduction program. In summary, this is a very pleasing half-year result. We've continued to deliver earnings growth despite a number of challenging external market factors. These results demonstrate the resilience of our business and our focus on broad-based earnings growth, that is sustainable through the cycle. Turning now to trade working capital on slide number 18. Encouragingly, the improvements that we've focused on over the past two years have continued into the first half of 2026. Total trade working capital cycle days on a 12-month rolling basis have reduced by two days from September 2025 and are in line with the prior half. Day sales outstanding improved to 45 days, reflecting our sustained commercial discipline, and important to note, this was achieved in an environment of continued higher product pricing. Pleasingly, days payable outstanding improved to 52 days, despite shorter product payment terms in some regions. Days inventory held remained consistent with September and increased two days relative to the prior half, in part due to critical pre-stocking ahead of the April and May cars on turnaround and also seen as a prudent measure given current geopolitical and energy market uncertainty and the continued premium placed on security of supply. Absolute trade working capital finished at $677 million, a decrease of $6 million from the prior corresponding period. Foreign exchange had a favourable impact of 31 million, partly offset by 25 million underlying increase as at 31 March. This result reflects our continued strong focus on working capital efficiency, and this remains a key focus area for the organisation. Turning now to slide number 19. Total capital expenditure for the first half was $165 million, broadly in line with the prior corresponding period. Of this, $105 million was allocated to sustenance capital expenditure, and this included successful completion of three turnaround events within the Specialty Mining Chemicals business at our Winnemucca, Elven and Yarwin sites. We also continue to prioritise investment in our downstream businesses, including 4D technology enhancements to our global mobile delivery fleet. $60 million was also directed towards growth capital expenditure in line with strategy, with this supporting continued strong growth in the digital solutions earnings, manufacturing efficiency improvements at our Yarmoune and Luhrin sites, and further investment to expand our advanced blasting technology product range. During the half, we also made a further investment in our strategic partnership with Alpha HBA, directing growth capital expenditure towards the build-out of supporting infrastructure at the adjacent Yarwin facility. As outlined in our business update in March, we anticipate existing business capital expenditure will be more heavily weighted towards the second half, with total spend for the 2026 financial year to be broadly in line with 2025. Turning now to slide number 20 on the balance sheet and liquidity. During the first half, we successfully refinanced or extended $359 million of existing committed bank debt facilities for an average period of five years. We also established a new senior unsecured syndicated loan facility of $500 million in the Asian term loan market, a new loan market for Orica, comprising a $225 million five-year revolving credit facility and a $275 million seven-year term loan facility. The average tenor of our total committed debt facilities at 31 March was 4.7 years. Net debt increased by $237 million from September to approximately $2.2 billion. This increase was driven by cash outflows of $312 million, partially offset by a favourable foreign exchange impact on net debt of $75 million. Consistent with our capital management framework, our leverage ratio at 31 March is 1.53 times EBITDA, within the lower half of our target range of 1.25 to 2 times. Our liquidity position remains robust, with cash of $769 million, supported by undrawn committed bank debt facilities of $1.6 billion at 31 March. In December 2025, Standard & Poor's reaffirmed Orica's BBB stable investment-grade credit rating. As previewed in our announcement on the 15th of March, a one-off cash payment was made on the 30th of April of US $169.5 million in full settlement of the CF Industries litigation. This matter is now resolved and it's anticipated that our leverage ratio will finish the 2026 financial year at a similar point to that of 31 March, as I outlined earlier. In summary, our balance sheet is strong. It positions us well to manage external market volatility, execute on Orica's strategic priorities and long-term growth plans, and importantly, continue to deliver increasing returns to shareholders. Turning now to slide number 21. During the half, we've commenced an organisation-wide program to deliver an enduring step change in the cost base of the business to best position the company for the next phase of sustained profitable growth. This program will deliver at least 100 million of annualized cost savings over the next three years relative to our September 2025 cost base. Through the program, we've concentrated on the most efficient ways in which we go to market across all of our operating segments, benchmarked best practice cost to serve and supply chain costs, together with lean functional structures to support this. Cost savings delivered from the program are expected to be realised progressively from the second half of this financial year, with the majority of savings expected to be realised throughout 2027 and beyond. Turning now to the dividend slide on page number 22. Under our capital management framework, we have maintained our target dividend payout range of 40 to 70% of underlying earnings. The Orica Board of Directors today have declared an interim ordinary dividend for the 2026 half year of 28.5 cents per share, unfranked, representing a dividend payout ratio of 46.6%. This represents a 3.5 cents per share or 14% increase on the prior year interim dividend. Pleasingly, our consistent and improving financial performance and strong balance sheet continues to translate into meaningful increases in total shareholder returns. With that, I'll now hand back to Sanjeev.