FY2023 Key Achievements
- Statutory Net Profit After Tax (NPAT)(1) of $295.7 million (FY2022: $60.1 million), including $73.3 million of significant items expense(8) after tax
- Underlying EBIT(2) from continuing operations of $698.1 million, up 24% on the prior corresponding period (pcp), before individually significant items
- Earnings increased in all segments versus the pcp attributable to continued commercial discipline, strong customer demand, and increased earnings from advanced technology offerings
- Digital Solutions earnings doubled compared to the pcp; Axis integration progressing to plan
- Underlying earnings per share(3) of 81.2 cents, up 4.8 cents from the pcp
- Final dividend of 25.0 cents per ordinary share, unfranked, representing a payout ratio(9) of 55%
- RONA on continuing operations(4) of 12.6%, up from 11.4% in FY2022
- Accelerated Scope 1 and Scope 2 emissions targets and set a new Scope 3 emissions reduction ambition (19, 20, 21)
CEO Commentary
Summarising the continuing strong full-year performance, Orica Managing Director and CEO Sanjeev Gandhi said:
Strategy and Performance
“We have delivered another strong performance for the full year with a 24 per cent growth in underlying earnings from continuing operations. Our team remains committed to executing our strategy and has delivered improved performance and growth across all segments this year with a continued focus on quality of earnings.
“Ongoing commercial discipline and strong customer demand for our products and services have driven our performance this year, along with increased adoption and earnings from blasting and digital technologies as customers seek productivity gains and support on achieving their sustainability goals.
“Our Digital Solutions segment has delivered growth, with strong demand, margin improvements and contribution from the completed Axis acquisition, as well as increased recurring revenue across the segment.
“We have worked hard in the second half to deliver improvements in trade working capital and improved operating cash flow in line with stronger earnings.
“The external market conditions, while challenging, have once again demonstrated the strength and resilience of our people and unmatched global asset and product portfolio, enabling us to adapt to and mitigate macro-economics and geopolitical challenges.
Safety and Sustainability
Safety and the prevention of harm is our number one priority at Orica, and for a second consecutive year, we have achieved a reduction in our Serious Injury Case Rate. There were no significant environmental incidents across our global operations. Throughout FY2023, scheduled maintenance turnarounds were completed safely and on budget across our manufacturing facilities in Australia, Canada and Indonesia.
“We have also made good progress towards our climate targets this year as we progress towards our long-term ambition to achieve net zero emissions by 2050. Our net Scope 1 and 2 emissions decreased 9 per cent on the previous year and are 22 per cent below 2019 baseline levels.
“Our achievements give us the confidence to accelerate our climate change commitments and accountability. We announced strengthened climate-related targets, accelerating our pathway towards net zero and driving towards a lower carbon future.
“We have increased our commitment to reduce net operational Scope 1 and 2 emissions under our direct control by at least 45 per cent by 2030 from 2019 levels – an uplift from our previous 40 per cent commitment. Additionally, we’ve committed to partnering with our suppliers and customers to introduce a new ambition of reducing our Scope 3 emissions by 25 per cent by 2035, from 2022 baseline levels. We have also expanded the boundary of our 2050 net zero ambition, to include Scope 3 emissions associated with our purchased goods and services and the use of our products in blasting activities.
Dividend and Capital Management
The Board has declared an unfranked final ordinary dividend of 25.0 cents per share, representing a payout ratio(9) of 55 per cent. The dividend is payable to shareholders on 18 December 2023 and shareholders registered as at the close of business on 17 November 2023 will be eligible for the final dividend. This brings the full year dividend to 43.0 cents per share representing a full year payout ratio of 53 per cent.
Return on net operating assets (RONA), increased from 11.4 per cent in FY2022 to 12.6 per cent in FY2023. This was driven by our improved earnings performance as a result of executing our strategy, and strong market demand.
Gearing at 18.6 per cent at 30 September 2023 is below our target range of 30 to 40 per cent.
Outlook
FY2024
- 2024 financial year EBIT from continuing operations is expected to increase on the pcp attributable to:
- Strong demand for our products and services from continued anticipated growth in global commodities
- Increased adoption of blasting and digital technology offerings
- Further benefits from commercial discipline
- Offset partly by the major, six-yearly ammonia plant turnaround and prill tower scrubber installation at Kooragang Island
- Inflationary pressures, higher energy costs and increasing geopolitical risks will remain an ongoing challenge
- Earnings will be more skewed to the second half compared with FY2023 due to the heavy planned turnaround schedule in the first half and normal seasonality
- Capital expenditure expected to be within the range of $410 million to $430 million, driven by the turnaround schedule as mentioned above; depreciation and amortisation to be slightly higher than the pcp
- Net finance costs expected to be in line with FY2023, subject to interest rate movements
- Effective tax rate to be around 30 per cent
- Continued disciplined approach to growth opportunities
Looking forward
The outlook for the next three years is expected to deliver 3-year average RONA in the range of 12.0 to 14.0(i) per cent (previous range: 10.5 to 13.0(ii) per cent).
Commenting on the FY2024 outlook, Mr Gandhi said: “Our prudent balance sheet positions us well to manage the volatile external environment, to support further business growth and climate change initiatives and to deliver improved shareholder returns.
“Our commercial discipline, strong customer demand, supply security, technology offering, and diversified customer and commodity mix will support our business well into the future and we remain in a strong position to continue the business momentum and drive our strategy for growth.”
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1. Equivalent to net profit/(loss) for the year attributable to shareholders of Orica limited, as disclosed in the Income Statement within the Appendix
2. Equivalent to profit/(loss) before financing costs and income tax as disclosed in Note 1(b) within the Appendix 4E – Preliminary Final Report
3. Basic earnings per share before individually significant items as disclosed in in Note 2 within the Appendix 4E – Preliminary Final Report
4. Return on net operating assets = 12 month EBIT / Rolling 12 month Average Operating Net Assets where Operating Net Assets = Property, Plant & Equipment, Intangibles, Equity Accounted Investees and working capital excluding environmental provisions, excluding Minova.
5. Equivalent to net cash flows from financing activities (as disclosed in the Statement of Cash Flows within Appendix 4E – Preliminary Final Report excluding proceeds and repayment of borrowings.
6. Interest-bearing liabilities – excluding lease liabilities less cash and cash equivalents
7. Net debt / (net debt + total equity), where net debt excludes lease liabilities
8. Significant items as disclosed in Note 1(e) within the Appendix 4E – Preliminary Final Report
9. Dividend payout ratio = Dividend amount / Underlying NPAT before individually significant items
10. Restated for change of segment reporting. Effective 1 October 2022, Orica made changes to its segment reporting to provide transparency of the new Digital Solutions vertical, in line with Orica’s refreshed strategy. Refer Note 1(a) within the Appendix 4E – Preliminary Final Report for more details.
11. Equivalent to profit after income tax expense before individually significant items attributable to shareholders of Orica Limited, as disclosed in Note 1(b) within the Appendix 4E – Preliminary Final Report
12. EBIT before individually significant items and depreciation and amortisation expense
13. Quarry, construction and tunnelling
14. Equivalent to net cash flows from financing activities (as disclosed in the Statement of Cash Flows within Appendix 4E – Preliminary Final Report ) excluding dividends paid to Orica ordinary shareholders and non-controlling interests
15. Equivalent to net increase/(decrease) in cash held, as disclosed in the Statement of Cash Flows within Appendix 4E – Preliminary Final Report
16. Comprises inventories, trade receivables and trade payables, as disclosed in the Balance Sheet within Appendix 4E – Preliminary Final Report
17. Comprises other receivables, other payables, and provisions, as disclosed in the Balance Sheet within Appendix 4E – Preliminary Final Report
18. Dividend amount / NPAT before individually significant items
19. Applies to existing operations and covers more than 95% of Scope 1 and Scope 2 GHG emissions. Base year emissions will be recalculated consistent with GHG Protocol emissions accounting standards if structural changes occur such as acquisitions or divestments
20. Coverage includes all categories of Scope 3 emissions deemed relevant for Orica under the GHG Protocol Corporate Value Chain (Scope 3) Standard (excluding categories 8, 13 and 14). Base year emissions will be recalculated consistent with GHG Protocol emissions accounting standards if methodology or structural changes occur such as acquisitions or divestments.
21. Achieving the net zero and Scope 3 ambition will require effective government policy frameworks, supportive regulation and financial incentives, meaningful and transparent collaboration across value chains and access to new economically viable low-carbon technologies operating at commercial scale