Managing Director's Message
Managing Director and CEO
2016 was characterised by continued challenging markets across certain markets, such as the thermal coal industry in the USA, and persistent strip ratios in the mining sector that were below the long term norm. As a result, our overall explosives volumes were 5.7% lower than the previous year. Earnings before interest and tax of $642 million, was 6% lower than 2015.
To offset these market impacts, we have undertaken a number of business improvement initiatives to minimise the impact where we could.These delivered net benefi ts of $76 million in 2016, with more to come in 2017.
Positively, we have started to see a slow recovery within the mining sector during the last months of the 2016 fi nancial year, which may indicate that explosives volumes will now stabilise.
Safety, environment and culture
The safety of Orica’s people and communities is paramount, and it saddened everyone in Orica that in September an accidental explosion in our packaged manufacturing plant in Antofagasta, Chile, resulted in the deaths of two of our people. Any fatality is tragic and unacceptable, and underscores why safety must take precedence over everything. We conducted a thorough investigation into the cause of the accident and will ensure the lessons learned are shared throughout the business. While our Total Recordable Injury Frequency Rate continued to improve, we are determined to do better and to be ever vigilant about recognising and controlling all our risks. We understand deeply the far reaching impact for loved ones when someone does not return safely from work, and we resolutely focused on preventing any serious injuries or loss of life at our operations.
In our environmental performance, Orica has continued its Nitrous Oxide reduction programs and recycled water programs. This has delivered a reduction of more the 630,000 tonnes of carbon dioxide equivalent compared to 2010 baseline levels and a reduction in potable water use by more than 2 billion litres.
Our Culture has been a core focus of mine since being appointed CEO in May 2015. At that time, I committed to our people that we would foster in Orica a culture of respect, transparency, collaboration and performance. During 2016, thousands of our people across the globe took part in workshops, interviews, an online survey and other engagement mechanisms to create an Orica Charter, which clearly articulates Orica’s purpose and strategy and the values all our stakeholders can expect us to live up to in all our actions.
Business improvement initiatives
Our focus in 2016 was on steadying our financial performance, while continuing with initiatives to deliver sustainable benefi ts to best position your Company for the long term.
These initiatives included: embedding our new operating model, ensuring clear regional and functional accountabilities and responsibilities, with transparent measurement and reporting; a streamlining of the customer facing touchpoints, to help us simplify and improve the effectiveness of the way we interact with customers; the introduction of a new capital management framework to ensure greater rigour around – and evaluation of – capital decisions; and a major project to pursue effi ciencies across our global manufacturing network. Together, all our initiatives delivered net benefits of $76 million for the year.
While there has been some external optimismon market conditions, we remain conservative on the outlook, and expect the external environment to remain challenging in the near term. Therefore, in FY17 we will continue to focus on business, improvement initiatives that improve profi tablility and shareholder value, and go towards offsetting market headwinds.
Throughout FY17 and beyond, our new Charter will also be deeply embedded in every Orica site globally. We expect our stakeholders – inside and outside Orica – to feel free to hold us to account in living the values of our Charter.
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