ANNUAL REPORT 2016 OUR GLOBAL PRESENCE Gyttorp, Sweden Appley Bridge, UK Brownsburg, Canada Troisdorf, Germany Denver, USA Dubai, UAE Singapore Orica Global Presence Major Offi ces Technical Centres Johannesburg, South Africa Santiago, Chile Perth, Australia Kurri Kurri, Australia Melbourne, Australia Major Manufacturing Sites Ammonium Nitrate Sodium Cyanide Ammonium Nitrate Emulsion Minova Packaged Explosives Initiating Systems CONTENTS 02 24 31 57 115 124 Charter Sustainability Directors’ Report – Balance Directors’ Corporate Remuneration Report Sheet Declaration Directory (audited) 04 26 58 116 Chairman’s Board 54 Statement of Independent Message Members Auditor’s Independence Changes in Equity Auditor’s Report Declaration 05 27 59 118 Managing Director’s Executive 55 Statement Five Year Message Committee Income of Cash Flows Financial Statistics Statement 06 28 60 120 Review of Directors’ 56 Notes to the Shareholder Operations Report Statement of Financial Statements Information Comprehensive Income Orica Annual Report 2016 | 01 “Our focus in 2016 was on steadying our fi nancial performance, while continuing with initiatives to deliver sustainable benefi ts to best position your Company for the long term.“ Alberto Calderon Managing Director and CEO 140+ NO.1 YEARS OF GLOBAL SUPPLIER EXPERIENCE OF COMMERCIAL AND INNOVATION EXPLOSIVES OVER 1,500 11,500 BLASTS PER EMPLOYEES SERVING DAY ON OUR CUSTOMERS ACROSS MORE CUSTOMERS’ SITES THAN 100 COUNTRIES 02 | Orica Annual Report 2016 CHARTER Our Charter Orica has a long and proud history spanning more than We are Orica, the global leader in mining 140 years. From humble beginnings as a supplier of explosives and civil blasting. to the Victorian gold fi elds in Australia in 1874, to being the global leader in mining and civil blasting today, our success Our purpose is predicated on partnering with our customers to support Our purpose is to make our customers their businesses. successful, every day, all around the world. We take pride in operating safely, responsibly Orica has a range of different stakeholder groups and sustainably. Together, these enable across the globe, each with certain expectations us to grow and create enduring value for of what to expect from the Company. Orica’s our shareholders. customers want to know that they can count on the Company to deliver what they need, when they need it. Communities want to know Our strategy that Orica takes its obligations and responsibilities OUR as a community member and corporate citizen We aim to be the trusted partner of choice CHARTER seriously. Orica’s own employees want to trust for our customers, by creating, developing IT STARTS that the Company they have committed to shares and delivering mining and civil blasting and WITH US the same values. Shareholders expect responsible ground control solutions that help them governance, a keen ambition, and a commitment be more productive and manage their critical to delivering value. risks. We do this by bringing together: the best people; high quality products and services; Orica’s Charter clearly articulates the Company safe, secure and reliable supply; and unmatched purpose and strategy, and fi rmly embeds the values technology that creates value for our customers, and behaviours that all employees must live by. today and tomorrow. Orica Annual Report 2016 | 03 “Our Charter, when lived every day all around the world, will drive our success, today and into the future. It will guide us in all our interactions and our stakeholders can expect us to live up to our values consistently.” Alberto Calderon, Managing Director and CEO Our values Safety is our priority. Always Together we succeed We are committed to excellence The most important thing is that we all Collaboration makes us better, We take accountability for our business return home, safely, every day. individually and collectively. and for delivering outstanding results. We care and take accountability for We freely share information and We bring our best effort every everyone’s safety and wellbeing, ideas with our colleagues. day and trust our colleagues including our own. to do the same. We are a team. We take We recognise the risks we face in our accountability and responsibility We understand our tasks and work and follow all safety controls. for our team’s performance. how we contribute to Orica’s overall success. We speak up when we see hazards We partner with our customers for or causes of potential harm. a better understanding and result. We look for ways to deliver higher performance and adapt swiftly to changing needs. We respect and value all We act with integrity Our care for each other, our customers, We are open and honest, and we do communities and the environment what is right. builds trusted relationships. We are transparent in all our We treat everyone fairly, with dignity communications. and we value diversity. We always demonstrate ethical We work with our local communities conduct and sustainable practices. to contribute positively. We are trusted because we do what We fi nd ways to minimise our impact we say we will. on the environment in all our actions. 04 | Orica Annual Report 2016 CHAIRMAN’S MESSAGE Since joining your Board in December 2015, A more disciplined approach to capital I have been reminded of the extraordinary management has been introduced, with reach, depth and breadth of the Orica business. the aim of maximising shareholder value While there remains a signifi cant way to go to through growth and cash returns on all new restore Orica’s performance to what you should projects, while maintaining safe and reliable expect, I believe the foundations of the operations. The Board and management company provide us with a basis for optimism. team have also agreed on the appropriate metrics to measure future capital investments, 2016 was a challenging year as management with an agreed return on net assets in excess focused on stabilising Orica’s operational of 20% for all new growth capital projects. and fi nancial performance, while positioning This is important because it refl ects your the business for longer term growth. Board’s and management team’s commitment One area that has been disappointing and to a return to rigour in fi nancial investments concerning for your Board is safety, with two and analysis. fatalities at an Orica facility in Chile. The Board The management is also delivering on its and management were devastated at this event, commitment to embed positive cultural change “2016 was a challenging knowing that two families’ lives have been throughout Orica, with the introduction of irrevocably damaged. Safety is the Board’s a new Charter, representing a promise to all year as management paramount concern, always. Your Board our stakeholders of the values we will uphold focused on stabilising believes that the CEO and management team in everything we do. Your Board will hold the have been appropriately focused on both fi nding management team to account for each and Orica’s operational and the cause of the Chile accident to ensure they every one of those values. can understand and share lessons across the fi nancial performance, business to prevent a similar recurrence, and while positioning the in revisiting your Company’s overall approach to safety management to reinforce the critical Board renewal business for longer importance of health and safety at Orica. Orica’s commitment to continued Board term growth.” Most importantly, in ensuring our high risk renewal was reinforced during the year activities are managed to the highest safety with the appointment of Karen Moses as standards, consistently. a non-executive director from 1 July 2016. Ms Moses has more than 30 years’ experience in upstream and downstream energy industries, Performance as a senior executive in fi nance and strategy functions. Her experience provides valuable Orica’s 2016 net profi t after tax before additional insight into our customer base, FULL YEAR individually material items (NPAT) was while also adding additional fi nancial and $389 million, 7% lower than 2015, and strategy capacity to the Board. DIVIDEND earnings before interest and tax was $642 million, representing a decline Finally, on behalf of the Orica Board I would of 6% on the prior year. like to thank all our shareholders for your support. I am proud to be Chairman of your The Board declared a fi nal dividend of Company, representing your interests. 49.5c 29 cents per ordinary share, bringing the full year dividend to 49.5 cents per share. The fi nancial results were delivered in the midst of a challenging market, which is expected to continue throughout the 2017 fi nancial year. Despite this, the management team is taking Malcolm Broomhead the right steps to ensure Orica is positioned Chairman for growth over the longer term. Business improvement initiatives are also creating greater effi ciencies, delivering net benefi ts of $76 million for the year, with the expectation of more to come in the 2017 fi scal year. Orica today has a strong management team in place, and the right strategy and operating model to enable us to capture new – and build on existing – opportunities to deliver improved and sustainable shareholder value. Orica Annual Report 2016 | 05 MANAGING DIRECTOR’S MESSAGE 2016 was characterised by continued challenging markets across certain markets, such as the Business improvement initiatives thermal coal industry in the USA, and persistent Our focus in 2016 was on steadying our fi nancial strip ratios in the mining sector that were below performance, while continuing with initiatives the long term norm. As a result, our overall to deliver sustainable benefi ts to best position explosives volumes were 5.7% lower than the your Company for the long term. previous year. Earnings before interest and tax of $642 million, was 6% lower than 2015.