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Annual Report 2009

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Annual Report 2009 Orica Annual Report 2009 Report Annual Orica Orica Limited Shareholder updates ABN 24 004 145 868 We are committed to keeping all our Registered address and head‑office: shareholders well‑informed and regularly Level 3, 1 Nicholson Street update our website at orica.com with: East Melbourne Victoria 3002 • Orica Share Price – Australia updated every 15 minutes Postal address: • ASX Releases GPO Box 4311 • Investor presentations Melbourne Victoria 3001 • Financial performance Telephone: +613 9665 7111 • Half‑yearly and annual results webcasts Facsimile: +613 9665 7937 • Annual Reports Email: [email protected] • Sustainability and SHE Annual Report Website: www.orica.com 2009 Contents Shareholder Timetable* About Orica 1 31 March 2010 Orica Half Year End Chairman’s Report 2 3 May 2010 Half year profit and interim dividend announced Managing Director’s Report 3 14 May 2010 Books close for Step‑Up Preference distribution Review of Operations and Financial Performance 4 31 May 2010 Step‑Up Preference distribution paid Review of Business Segment Performance 8 1 June 2010 Books close for 2010 interim ordinary dividend Board Members 12 2 July 2010 Interim ordinary dividend paid Group Executive 13 30 September 2010 Orica Year End Corporate Governance 14 8 November 2010 Full year profit and final dividend announced Sustainability 18 15 November 2010 Books close for Step‑Up Preference distribution Financial Report 19 16 November 2010 Books close for 2010 final ordinary dividend Director’s Report 21 30 November 2010 Step‑Up Preference distribution paid Remuneration Report 24 10 December 2010 Final ordinary dividend paid Lead Auditor’s Independence Declaration 40 16 December 2010 Annual General Meeting 2010 Income Statements 41 * Timing of events is subject to change Statements of Recognised Income and Expense 42 Balance Sheets 43 Statements of Cash Flows 44 Notes to the Financial Statements 45 Director’s Declaration on the Financial Report set out on pages 39 to 120 121 Auditor’s Report 122 Shareholder’s Statistics 124 Ten Year Financial Statistics 126 Shareholder Information 128 Orica Limited ABN 24 004 145 868 About Orica Orica Mining Services Chemicals World’s leading supplier of Leading manufacturer, trader commercial explosives and and distributor of chemicals to blasting systems. the mining, water treatment and other industrial markets. Minova DuluxGroup Manufacturer and marketer Marketer and manufacturer of high quality speciality of premium branded products chemicals and bolts to support supported by world class underground mining and innovation capability. tunnel operations. The way we do business Orica’s journey to become a market leader across all of its business platforms has been very deliberate. Begun more than a decade ago, this has seen us divest dozens of businesses and gradually acquire others to position ourselves in a world where demand for our products and expertise will continue to steadily grow. This portfolio reshaping combined with financial and strategic discipline has been important to our success. Guiding Orica through this gradual evolution has been what we consider to be three critical enablers to our success, namely Growth, Productivity and Culture. Growth Productivity Culture Our growth has come from building Improving productivity, measured by Orica as Orica’s 15,000 employees are located in and consolidating leadership around the the ratio of total fixed costs to gross margin, more than 50 countries, reflecting diverse core things we do well and is guided by is a key element to how we do business. We cultural, language and workplace relations three criteria: aim to improve productivity year-on-year by backgrounds. They are united by a strong • Market leadership – our aim is to be way of efficiency, effectiveness or leveraging culture and common understanding about the market leader in each business and our fixed cost base. the way we do business, which is essential to ensure that we have the competitive A keen focus on manufacturing and supply to our continued success. The ‘Deliver the advantage to sustain that position. chain improvements and adoption of Six Promise’ culture program, adopted by all • Grow ‘close to the core’ – we pursue Sigma methodology is important in achieving employees, supports the performance based opportunities in related businesses where our productivity improvement targets. environment upon which we are measured. we can use our knowledge and expertise It revolves around four key principles: Safety, and achieve synergies. Health and the Environment; Commercial • Invest in the ‘winners’ – we only grow Ownership; Creative Customer Solutions; and our best performing businesses that meet Working together. These principles empower financial performance targets and have employees to strive for excellence and achieve earned the right to grow. long-term, sustainable results. 1 Chairman’s Report I am pleased to report that this year your woodcare company based in Shanghai. projects. A worldscale ammonium nitrate company continued to perform well, This provides a platform for growth in the plant in Bontang Indonesia is progressing achieving double digit profit growth and region through the expansion of paints and well. Feasibility work has continued for the delivering its eighth consecutive year of introduction of Selleys products. uprate of our ammonia plant at Kooragang profit improvement. The newest addition to the Orica portfolio, Island along with assessing the feasibility for Despite very challenging market conditions Minova, has performed well in the face of ammonium nitrate expansion opportunities and a generally subdued global economy, very difficult market conditions this year. With in Australia and Latin America. Minova has your company’s underlying earnings for the the increasing trend towards underground very recently opened a new coal bolt facility year improved with net profit after tax before mining and a greater focus on safety in at its Arndell Park site in New South Wales individually material items up 13% on the full emerging mining regions, the business is and DuluxGroup will benefit from a new year result for 2008 to a record $646 million. complementary to the larger Orica Mining powder coatings plant opened in Australia Net profit after tax and significant items Services business. They share some common this year. DuluxGroup has begun work on was up by 0.4% to $542 million from the customers but do not have complete a new protective coatings plant in Australia previous year. geographic overlap. With its roots in North and an upgrade of the water-based paints plant in New Zealand. The Board has declared a final dividend America, the business this year has extended of 57 cents per ordinary share, franked at its footprint in Eastern Europe and its Chinese Orica pursues these growth plans with 20 cents per share, representing an increase business has achieved record volume and the confidence that comes from having of 2 cents on the 2008 final dividend. sales growth. Taking advantage of the market shaped a portfolio of businesses that are penetration achieved by Mining Services, each leaders in markets where demand for The fallout from the crisis in global financial we see terrific growth potential in South its products and services will steadily grow. markets has tested all companies and Orica America and elsewhere. That confidence is supported by a prudently has not been immune. Through strategic managed balance sheet. The board remains portfolio reshaping and a strong culture Orica Mining Services achieved record profits and sales this year and secured a number of committed to a BBB+ rating. This year the of financial discipline, Orica has been company successfully renegotiated $2 billion deliberately designed to withstand tougher new contracts. Ammonium nitrate volumes showed considerable resilience with volume in debt facilities and received great support tests than those presented by the market in in financial markets. recent times. In a year of extreme volatility in growth in gold and thermal coal markets, in global markets, Orica’s strategy of pursuing large part offsetting declines in other sectors In 2009 earnings per share (EPS) before leadership positions in markets offering – an endorsement of the clear strategy to individually material items increased 3% over long term, sustainable growth with limited expose the business to the volume side of the 2008 full year to 174.6 cents. This is the exposure to the vagaries of commodity price mining rather than the inconsistency of eighth consecutive year of EPS growth. cycles has been tested and reaffirmed. commodity prices. This very good result was It has been my pleasure to serve as Chairman assisted by cost and productivity efficiencies. That strategy has seen your company become of the Orica Board for the past eight years increasingly focussed on the mining and Chemicals achieved record profit reflecting and I welcome Peter Duncan as the incoming infrastructure sectors which offer long term, strong demand for sodium cyanide. With Chairman. On behalf of the Board I would resilient earnings. An important part of that a strong competitive position as a global like to thank each of the Orica employees journey was the Board’s decision to demerge leader in the supply of this product to around the world who have worked hard, the consumer products business, now known the gold mining sector, the business also demonstrating great skill and discipline to as DuluxGroup. Although the separation has achieved record
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