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Edited Transcript of ORI.AX earnings conference call or presentation 1-Nov-19 12:00am GMT

Full Year 2019 Orica Ltd Earnings Presentation

East Melbourne, Victoria Nov 20, 2019 (Thomson StreetEvents) -- Edited Transcript of Orica Ltd earnings conference call or presentation Friday, November 1, 2019 at 12:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Alberto Calderon Zuleta

Orica Limited - MD, CEO & Executive Director

* Christopher Roger Davis

Orica Limited - CFO

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Conference Call Participants

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* Alexander George Philip Karpos

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Daniel Kang

Citigroup Inc, Research Division - VP & Head of Chemicals and Packaging Equity Research

* Grant Saligari

Crédit Suisse AG, Research Division - Head of the Consumer Staples, Discretionary Retail & Agriculture and Director

* John Purtell

Macquarie Research - Analyst

* Richard Johnson

Jefferies LLC, Research Division - Equity Analyst

* Scott Ryall

Rimor Equity Research Pty Ltd - Principal

* Sophie Spartalis

BofA Merrill Lynch, Research Division - VP and Senior Resources Analyst

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Presentation

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [1]

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Good morning all. Thank you for joining us here in the room, on the phone and on the webcast. I will ask you to quickly glance at the disclaimer.

Nothing is more important to Orica than keeping our people safe, making sure that every single Orica site remains fatality-free is our primarily goal. Once again, there have been no fatalities across the group. During the year, a global pilot for the Major Hazards management process was launched, which seeks to take the day-to-day management of major hazards to the next level.

In the 2019 financial year, over 9,300 key control verifications were conducted. Results consistently confirm that the major hazard key controls were 100% effective 100% of the time.

As you are already aware, we have complemented our traditional totable recordable injury frequency rate measured with a new metric called Serious Injury Case Rate. This measure enables a better understanding of the severity of injuries and illness in the business and drives a focus on investigations, improvement opportunities and learning in these areas.

The small increase in our TRIFR performance is due to an increase in low-severity injuries, with the vast majority of these events being at the lower end of the severity spectrum. We will continue to work on reducing the severity of injuries and illness in the business.

Environmental programs continue to be embedded across the business. There has been a 6% reduction in Scope 1 and Scope 2 greenhouse gas emissions and intensity continues to improve against 2000 levels.

Our approach to risk also remains strong with the recent Risk Culture Index score outperforming all global benchmarks.

During the year, we also conducted an organizational health survey, with the majority of our staff around the world participating in the survey. Some of the key findings included our workforce is positive and engaged, and our safety culture is strong.

Turning to our 2019 financial performance. This is a pleasing set of results for Orica with improvements in all of our financial metrics. Importantly, it demonstrates the continued momentum in profitable growth. AN volumes were up 9 -- 4% to 3.97 million tonnes through new business and higher demand in Latin America, Australia, Canada and the CIS.

EBIT was significantly up by 8% to $665 million, in line with market expectations. Each of the regions, particularly EMEA, delivered a strong result. As I previously flagged, we expect Minova and GroundProbe to outperform, and they both have. Importantly, we are beginning to see the benefits of our investment in technology-based products. I will talk more about each of these shortly.

Our balance sheet remains strong. Chris will talk more about it later. RONA, return on net assets, one of our key measures, has improved from 13.4% -- has improved to 13.5% from 12.5% in 2018, so about 1 point. That's not easy to do.

The Board has declared a final dividend of $0.33 per share, franked at $0.05 per share, which states that total dividend for 2019 year to $0.55 per share, an increase of $0.035 per share from the last financial year.

Turning to the performance of each of the regions. Volumes, so we start with Australia Pacific and Asia. Volumes were up across most regions in APA, underpinned by growth and higher activity in the Pilbara and strong demand from the coal segment in Australia. Our AN share in APA, which includes direct sales plus sales to competitors, has risen from 31% in fiscal year 2018 to an expected and mostly contracted 37% in fiscal year '20 based on volumes already contracted, as I said.

EBS volumes were up by around 10% from increased demand and customer conversion, particularly in Indonesia.

We continue to make good progress on the introduction of our technology-based products. I'm pleased to say that we reached a key milestone a few weeks ago. We successfully completed the world's largest open-cut stratablast here in Australia, using around 2,000 WebGen units in 1 single blast. I will go through this later in the presentation.

As mentioned in the previous results, we expected the last of the material contract prices renewals to be completed this year. Improved volume and mix, increased services from existing and new customers and a higher cyanide contribution have offset that impact.

The ongoing Burrup sourcing and increased arbitration costs have also negatively impacted EBIT. Despite this, EBIT margin has improved from the first half.

The outlook for this region remains strong. The Australian AN market is tight until Burrup is fully commissioned and is then expected to be in balance within the next 2 years. Pricing is expected to remain strong. The forward sales book is highly contracted at over 75% in fiscal year 2021, providing a platform for margin improvement through our value-added contracts, and about 86% for this year.

We expect EBIT margin overall to increase in fiscal year 2020 and beyond, following the removal of the temporary impact of price resets, continued manufacturing reliability improvement, increased penetration of our new technologies and Burrup coming online in the second half of 2020.

Burrup. Burrup rectification works are continuing in line with the schedule, which we previously advised to the market. Since the last update to the market in July, the main construction contractor was appointed and mobilized on site in late July. The TAN plant was then shut down, allowing construction work to commence in August. All the defective major equipment, heat exchangers, absorption column and drying drums, have been dismantled and removed from the plant. High-quality replacement equipment has been sourced from European suppliers. All the replacement heat exchangers are on site, with installation nearing completion. The new absorption column was delivered to site in September, and installation is close to completion. All 4 drying drums are on site and are being installed. Construction works are being undertaken 7 days a week, including night shifts, with the workforce expected to peak at around 350. The key objective is to ensure that the plant is capable of reliable and continuous operation from the second half of 2020. We expect the plant to produce around 150,000 tonnes in fiscal year '20 and fiscal year '21. Production is forecast at around 290,000 tonnes based on our current contracts.

Our optimism around the role of the plant will play remains unchanged. We expect the plant to deliver a positive EBIT following the commencement of operations in the second half of 2020, as previously announced. The plant remains a strategic asset located in the Pilbara region to take advantage of the local market.

North America. This region has delivered a steady contribution this year and during the last years. AN in volumes in Canada were up by over 7%, with strong demand in Canada. However, AN volumes in Mexico were significantly impacted by community issues at a key customer site that the market is well aware of. This most problematic community issue now seems to be resolved, so we should expect to see an improvement in 2020.

EBS detonator sales increased by around 7%, predominantly in Canada and Mexico, due to a shift into more advanced products. The introduction of WebGen in the Canadian underground segment continued with a number of service-based contracts signed.

EBIT for the region was up 3%. Together with strong volume growth, EBIT in Canada benefited from favorable product mix as the incremental volumes were largely of higher-margin emulsion products. Improved product mix, successful conversion of new technology trials and higher services across the region also contributed to this increase in EBIT. The continuing community issues in Mexico offset some of the foreign exchange gains.

Looking forward, new market growth across the gold, copper and Q&C sectors, along with a continued focus on technology offerings and further overhead cost efficiency, will continue to drive a strong EBIT performance.

Europe, Middle East and Africa. The positive momentum from the second half of '18 for EMEA has continued into this year. Higher and profitable demand in the CIS, particularly new contract wins in Kazakhstan and Russia; growth in Africa; and higher sales in the Middle East; have offset lower activity in Turkey, which was adversely impacted by continued political and economic uncertainty.

EBS remains extremely strong in this region with a 20% increase from last year from higher market penetration in Africa and the Nordics. There has been a significant 24% EBIT improvement this year from EBS growth, higher volumes in CIS and Africa and further sustainable overhead cost reductions offset by additional investment in technology. We expect this growth to continue into fiscal year 2020.

Latin America. The improved business performance in Latin America is pleasing. Volumes were up 16% from last year, underpinned by strong growth in Colombia and Peru. This growth more than offset the decline in Chile from a partial contract loss in the second half of last year that the market is well aware of.

EBIT was slightly ahead of last year despite the contract loss in Chile and continued competitive pricing pressures on explosive. The improved business performance was achieved through stronger contribution in Colombia and Peru from improved AN volumes, increased customer activity and higher service revenue. Overhead efficiencies from strategic initiatives also contributed positively to the result.

Looking forward, we expect the high gold price to support volume growth for explosives and cyanide. Renewed customer focus and engagement will drive increased product and technology penetration. The new management team have worked hard on effective cost control, and this will continue to deliver overhead efficiencies in the region.

GroundProbe's earnings were ahead of the investment case expectation and delivered over a 10% RONA in the 2019 financial year. EBIT performance was supported by higher demand for services and Radars, entry into the tunnel markets as well as a nonrepeat of acquisition costs in 2018.

Going forward, EBIT is expected to grow, benefiting from further expansion of laser products into the mining and civil industries, deployment of a new premium radar and continued growth through geotechnical support services.

GroundProbe remains on track to deliver 15% RONA in the 2020 fiscal year, and we remain confident that this will increase to 20% within the next 2 years thereafter.

Minova. Good progress, finally, has been made on the turnaround with initiatives undertaken to increase revenues, improve margins and production efficiency and reduce overheads. Revenue has materially increased in the U.S.A., Canada and Australia due to a combination of increased market share, increased pricing, higher demand from existing customers and increased steel and chemical sales.

EBIT increased significantly in 2019. Higher volumes, improved pricing, lower fixed manufacturing costs from plant rationalization and sustainable overhead reduction contributed to this improvement.

Looking forward, we expect the growth momentum to continue into the 2020 fiscal year. Growth from new sectors, including hard rock, oil and gas, tunneling and infrastructure and across expanded service offerings will deliver additional revenue and contribution.

I will now hand you over to Chris to take you through the financials.

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Christopher Roger Davis, Orica Limited - CFO [2]

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Thanks, Alberto. Looking at the key financial metrics for the year. Sales revenue of almost $5.9 billion was up 9% from the prior comparable period with growth across all segments of the business from a combination of higher volumes from increased demand and new contract wins, increased service revenue, increased penetration of technology-based products and favorable FX. This stronger performance is reflected in underlying EBITDA, which has increased 6%, and underlying EBIT, which has increased 8%, over the same period. This reflects the stronger contribution across the group, including from GroundProbe and Minova, which have had standout performances in the year.

Underlying NPAT of $372 million has increased 15% over the prior comparable period driven by higher earnings. The substantial uplift in underlying NPAT has resulted in earnings per share increasing to $0.979 per share, up 14% from the 2018 financial year.

Whilst statutory NPAT of $245 million was significantly higher than last year, it has been adversely impacted by individually significant items, which I'll talk to on the next slide.

The effective tax rate of 32% was in line with expectations.

The final dividend of $0.33 per share will be franked at $0.05 per share, which is approximately 15% of the final dividend. This takes the total dividend for the 2019 financial year to $0.55 per share, representing a 56% dividend payout ratio, which is within our 40% to 70% dividend payout ratio policy.

As a reminder, at the half year, we recognized $134 million after-tax of significant items, which included the noncash derecognition of certain defective assets of the Burrup plant that needed to be replaced and the noncash impairments of IT assets that would no longer be utilized within the business following the implementation of our single SAP project.

Earlier this year, Orica formed a new explosives initiating systems and blasting services joint venture in China with Guizhou Jiulian Industrial Explosives. The joint venture was formed via a respective contribution of assets by both Orica and our joint venture partner. As a result of the difference between the value of the shares received in the newly formed joint venture and the carrying amount of the assets contributed by Orica, a $45 million after-tax accounting gain has been recognized.

As part of our 2018 year-end results, we flagged that we had commenced a streamlining of the business across each of the operating regions, which resulted in an overall reduction in headcount. This has continued in 2019 with a further reduction in headcount. And as a result, we have accounted for the after-tax restructuring costs of $15 million as a significant item, in line with prior periods. This restructure is expected to deliver benefits of $10 million in 2020.

Finally, we continue to evaluate and update our obligations for environmental remediation of legacy sites based on new information as it becomes available. This has resulted in the $23 million after-tax increase in the provision for environmental remediation driven by an increase in costs and materials used in the remediation process as well as changes in assumptions associated with phasing.

Looking at the EBIT bridge at a high level. The $16 million one-off impact relates to higher asset and business sales in 2018 that have not repeated in 2019. Inflation on overheads had an adverse impact of $29 million, which is in line with our expectations.

Volume improved by $27 million. In this respect, ammonium nitrate volumes increased 4%. This was driven by new business and higher demand from existing customers in Latin America, Australia, Canada and the CIS countries. This was partly offset by lower volumes in Mexico due to the ongoing community issues at a customer mine site and in Turkey as a result of continued political and economic uncertainty.

Sales volumes of our higher-value, more advanced electronic blasting systems increased 7% on the prior comparable period across most regions.

Mix and margin increased by $2 million. Increased service activity and improved margins, most notably in EMEA and the Australia Pacific, Asia business, has contributed positively to EBIT. Within the EMEA business, this has been delivered through new rock on ground contracts in the CIS and higher service margins on new seismic contracts in the Middle East. A conversion of customers to higher-value products has had a favorable mix impact on the Australia Pacific, Asia business. These benefits have been offset by the impact of price on previously disclosed contract renewals and lower margins from cyanide due to the regional sales mix and increased spot sales into Mexico.

Global manufacturing impacts. Improved reliability and performance across the continuous and initiating system network has contributed $15 million in EBIT compared to the prior period. This reflects the focus on operating discipline and efficiency and the nonrepeats of the unplanned maintenance shutdowns that occurred at Kooragang Island and Yarwun in the prior year. This was partly offset by a planned turnaround at the Yarwun cyanide plant and disruption of utility suppliers at Bontang in the first half of the year. Furthermore, a deliberate slowing down of production took place in the second half of the year at Brownsburg as a result of our strategic initiative to optimize inventory levels at the plant.

In terms of the Burrup plant, Alberto has previously given a comprehensive update on the rectification works taking place. At the half year results, we reported an adverse impact of $3 million for the half. This has remained at $3 million, with the increased administration and arbitration costs in the second half of the year being offset by lower sourcing costs as a result of the temporary production during the testing phase of the plant.

Orica Monitor includes our GroundProbe and Nitro Consult businesses. As Alberto has already mentioned, GroundProbe has delivered a strong performance in its first full year of ownership, ahead of our investment case assumptions. Nitro Consult, a blasting consultancy business servicing the construction industry, delivered a stable EBIT contribution.

Turning to Minova. We are pleased with the turnaround of the Minova business, which has delivered an increase in EBIT of $18 million over the prior comparable period. This improvement has been driven by increased sales from new sectors and expanded products and services range and sustainable reductions in overhead costs.

In November, I mentioned that we expected to deliver an incremental $25 million per annum in benefits from reduced overheads as we continue to streamline the business. At the 2019 half year results, $13 million of this benefit had already been achieved. Whilst we have successfully completed this program and realized the $25 million benefit, we have built additional capability and increased headcount in both technology to support further rollout of our technology offerings, and on a temporary basis, we have increased headcount to support the implementation of our single SAP project. This has resulted in a net benefit year-on-year of $15 million in overheads.

Turning now to capital expenditure. We continue to have a disciplined approach to capital expenditure. As mentioned over the past few years, at all times, we will ensure that capital allocations related to safety and environmental obligations are not restricted. All other capital requirements continue to be subject to financial metrics and a rigorous review and approval process.

Excluding the impact of the capital required to replace the defective Burrup assets, total capital expenditure for the year is $387 million, which is above our previously stated expectation of $350 million. The increase is driven by the timing of the ramp-up in spend on the SAP project. Additionally, increased spend has taken place on growth capital to support both increased investment in technology and new contracts in Australia, Kazakhstan and Russia, which will contribute to an increase in future earnings.

Sustaining capital expenditure is in line with previous years, reflecting the maintenance spend at our manufacturing plants and investment in our MMU fleet.

In 2020, capital expenditure is expected to be in the range of $370 million to $390 million. Whilst this is higher than the previous guidance of $360 million, this reflects a number of attractive growth opportunities in the business that will contribute to future earnings.

I cannot emphasize enough, we remain committed to capital discipline and the maintenance of a strong balance sheet. With the improved performance in the business and better cash generation, we will continue to look for attractive growth capital opportunities to deliver future profitable growth.

Depreciation and amortization for 2020 is expected to be up to 15% higher due to the commencement of depreciation on our investment in IT and our MMU fleets as well as the impact of the commencement of depreciation on the Burrup plant in the second half of the 2020 financial year. Importantly, this increase excludes the impact of the new lease accounting standard, which will see leases brought onto the balance sheet in 2020.

The generation of strong cash flows remains a key priority for the business. In 2019, this was no exception with Orica generating operating cash flow of $746 million, a 21% improvement on the prior comparable period. This improved result was underpinned by stronger earnings for the year and an improvement in working capital management across the group.

Cash conversion at just over 101% reflects the improvement in trade working capital management during the year. As I previously reported in the 2019 Investor Day presentation, we expect a decline in cash conversion in 2020. This will be driven by an increase in inventory levels as a result of the Burrup rectification works and the associated requirement to freight AN product from the East Coast to the West Coast of Australia to ensure that our customer needs are met.

With the pending implementation of a single SAP system, we are also planning an appropriate increase in safety stock levels as a conservative contingency as we migrate to a new operating environment.

Finally, with the discipline, simplification and standardization that the new single SAP system will bring to Orica, we expect an alignment across our supplier base on contractual terms as well as an improvement in our payment processes. Importantly, the impacts on inventory are temporary in nature, with inventory levels expected to correct once Burrup and the SAP system has stabilized and the surplus inventory is worked out of the network.

Turning to net debt and gearing. Our balance sheet remains strong. In March this year, we renegotiated $715 million of committed debt facilities with existing group relationship banks, including a refinancing of $340 million of 2019 maturities and a prefinancing of a further $375 million of 2020 maturities. This positions us well to take an opportunistic approach in evaluating options to refinance our next bond maturity due in October 2020.

Importantly, our current cost of funds has reduced to 4.4%, which has resulted in a lower interest cost in the financial year. Net debt has reduced slightly and sits at $1.6 billion despite the negative impact of $156 million of FX on our U.S. dollar-denominated debt. Our average debt -- drawn debt tenure is 4.7 years. Gearing at 34.9% is comfortably within our revised target range of 30% to 40%. We remain committed to maintaining a strong and flexible balance sheet through the cycle.

With that, I'll now hand you back to Alberto. Thank you.

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [3]

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Thank you, Chris. Okay. As discussed at our recent Investor Day, Orica's 2 engines leverage our global leadership. Growth in the core engine remains positive. Mining of all major commodities is forecast to increase globally in the coming years. For Orica, the material move metric is of most importance because our explosive products and blasting services are a critical input into this activity.

With strip ratios continuing to climb, miners are having to remove increasing volumes of overburden to access the underlying valuable ore. The world is expected to extract around 3.6 billion tonnes more material in 2023 compared to what was achieved last year. However -- or furthermore, ore deposits are becoming increasingly difficult to access, often found in remote, difficult-to-reach parts of our world and sometimes in the harshest of settings. This is where Orica's technical expertise, logistics network and proven experience comes into play. Best-in-class technology-based solutions and a more efficient and effective business enable creating value for our customers around the world. We will continue to focus on our growth engine where we can expect high double-digit growth and margins well beyond what the core can achieve.

Technology is not just aspirational at Orica. We have moved from the lab to the operational site. We are now starting to see significant growth in WebGen awareness and adoption around the world, and importantly, customers are realizing and validating the value of the technology. Since its release, more than 325 WebGen wireless plus have been executed globally in both the surface and underground mining. We have also secured selling commercial contracts with up to 34 demonstration sites currently active or planned for year-end around the world.

We're also making good progress on producing the next-generation WebGen 200 specifically designed for broad market application in surface mining and a critical enabler towards full automation of the drill and blast process. Next-generation WebGen 200 is expected to venture trials in mid-2020, with commercial release expected thereafter.

Orica's digital fragmentation measurement technology, FRAGTrack, has been recently recognized for Excellence in Innovation and Excellence in Design at the 2019 Hunter Manufacturing Awards. With its unique integration with BlastIQ, FRAGTrack captures real-time fragmentation measurement data for optimizing drill and blast operations and improving downstream efficiencies in the mining process.

We have also recently released ORETrack, enabling miners to track the ore from the pit to the plant so that better operational decisions can be made around how the ore is handled and processed.

These products, plus many more from our best-in-class technology suite, this is the outcome of years and years of continuous investment in technology. Our ambition to drive change through technology is underpinned by a strong track record of innovation and our long-standing commitment to R&D investment. This investment positions us today to deliver against the industry's blasting needs, creates value for our customers and drives financial performance for Orica.

As mentioned earlier, we hit another important milestone with our best-in-class technology. We successfully delivered a world record WebGen blast in October at BMC's Poitrel coal mine southeast of Moranbah in Queensland. It included wireless in-hole primers initiated by a firing command that communicates through rock, water and air. This blast holds the crown of the world's largest open-cut stratablast initiated with 1,920 WebGen 100 units, 534 holes with a sleep time of 18 days. A quote from one of the Poitrel mine supervisors following the blast sums it up very well, from BHP. He stated, "It's really the new way forward in mine blasting, and I'm sure the rest of the world is going to grab hold of this product as well. So we are really excited about being on the front foot with this and to be part of the world first." This was really exciting for BMC's Poitrel coal mine and an important milestone for Orica in surface mining.

Passing to manufacturing. Orica's global manufacturing footprint is a competitive advantage for our business. Strategically, it supports our value proposition of secure, reliable supply and enable us to have a more agile supply chain.

Improving the performance of our continuous plans has been a critical strategic priority, specifically given the benefits this will deliver as the AN market moves towards supply/demand balance and pricing improves.

OEE performance has improved on all continuous plants over the past 12 months. Average OEE for our continuous plants is just over 81%, with the ammonia plant being 92% for the year.

For EBS, we are building capacity to support demand growth with new manufacturing sites in Australia and Colombia. Furthermore, we are driving a strategy to reduce network lead time by focusing on regional assembly lines of EBS in LatAm and EMEA.

For our conventional IS products, utilization has increased to an average of 60%, with a target to achieve 80% utilization over the next couple of years. This will be achieved by improved OEE in automated sites, selected manufacturing consolidation, SKU rationalization and strategic make-versus-buy arrangements.

We are making good progress in the optimization of our product portfolio. This chart illustrates the progress of some of the many initiative examples. The SKU rationalization has been a critical area of focus over the past years. We have now commenced the second phase of this program, with targets reductions in raw materials and conversion costs and lower levels of carried inventory. To date, we have reduced SKUs by over 20,000 since the program commenced in 2018, and we will further reduce to under 9,000 units by 2022. So roughly from 4,000 -- 40,000 to around 9,000.

Another example is the elimination of a particular type of shock tube, which has been superseded for some time but still being offered to a handful of customers. We have now converted most of these customers to alternative products.

Cumulatively, all these initiatives will deliver benefits of over $30 million over the next 3 years.

The outlook. Turning now to the outlook for the 2020 financial year. As I mentioned at the start of the presentation, the substantial improvements in all our financial metrics in 2019 demonstrate the continuing momentum in profitable growth. We expect this to continue in 2020.

Higher EBIT in the 2020 financial year will be underpinned by further penetration of our technology-based solutions, increased demand across all regions and a fully operational Burrup plant in the second half of the year. We expect this EBIT growth to come from at least 5% growth in AN volumes from already secured contracts and growth, especially in EMEA and Canada; contribution from new advanced products and service contracts and service margin growth from targeted initiatives; further improvements in GroundProbe and Minova; and positive contribution from Burrup in the second half of 2020 and subsequent years. Based on Burrup being operational in the second half, increased 4S operating costs and the normal seasonality skew, we expect the split for the first half and second half for fiscal year '20 to be more towards 44-56, which is not a material change from 2019.

Looking beyond 2020, we believe that we now have a solid platform in place to deliver superior returns. We will have in place a fully operational and loaded Burrup plant for the second half of 2020 onwards; strong penetration of our new technology translating to an EBIT uplift; and a continued focus on efficiencies, including supply chain efficiencies, manufacturing reliability and overheads, all supported by a single SAP system.

In closing, I would like to repeat what we said at the Investor Day on the 3 key metrics our success should be measured on. One, safety. We're doing all that we can -- are we doing all that we can to protect our people, partners, customers and communities? Two, profitability. Are we showing consistently strong profitable growth riding the bumps of the commodity cycle? Three, return on net assets. Are we deploying scarce group resources to the right projects to achieve an optimal RONA? I think a RONA of 13.5% in the current interest market is starting to become quite attractive.

I believe we have the platform in place to deliver on these metrics as we continue to be committed to delivering value to our shareholders.

So we now open to Qs and As.

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Questions and Answers

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Richard Johnson, Jefferies LLC, Research Division - Equity Analyst [1]

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Yes. Richard Johnson from Jefferies. Alberto, could you talk a little bit about the AN pricing environment in Australia, particularly in light of the fact that the numbers you reported today include a pretty big negative price reset in them?

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [2]

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This negative, which we flagged a long time ago, was just probably the last of the big contracts. And in particular, we spent a lot of time negotiating that contract. So if you look at the mix and margin in Page 15, you see $2 million, but that's really about $30 million of improvements in services and mix and margin across the world and about $28 million of that negative impact. So what we're seeing right now, we're really not seeing any significant further down pressure, and that's why we're not calling any price resets. There's some pressure probably in -- a bit of pressure in North America from consolidation. Consolidation, you immediately -- all the benefits of mergers or consolidation means squeezed suppliers, but we're not flagging it. It's nothing significant.

So overall, across the world, the pricing environment is -- the market fundamentals are better, but we're not expecting any, let's say, any positive from that. It's just now no more headwinds from that side. On the aggregate, the pluses or minus, we should be fine. But the improvements we're flagging is around volume and Burrup and improvement in efficiencies and productivity.

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Richard Johnson, Jefferies LLC, Research Division - Equity Analyst [3]

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That's helpful. Just a couple for Chris, if I might. D&A in '19 was a little bit lower than you'd guided to in -- at the half year. So wondering if you could take me through the moving parts and perhaps quantify what the accounting standard change would be in '20.

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Christopher Roger Davis, Orica Limited - CFO [4]

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Okay. Richard, so if you look at consensus, we're roughly 3% to 4% below consensus from a depreciation perspective. And that's really being driven by the timing of the capital expenditure, which has been weighted towards the second half of the year, and that's across all of our businesses.

In terms of the impact of the accounting standard, what will happen is, as you know, leases will now be brought on to our balance sheet. So we will take onboard about a $254 million liability. We will also have a right-of-use asset of $250 million. And then from a P&L perspective, we'll take $55 million out of our lease operating expenditure. $50 million will go into depreciation and then $5 million into interest. So you'll see a lift in our interest costs going forward.

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Richard Johnson, Jefferies LLC, Research Division - Equity Analyst [5]

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Great. And then just finally, could you just clarify for me exactly what the P&L impact of the Chinese JV will be in '20?

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Christopher Roger Davis, Orica Limited - CFO [6]

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Yes. So previously, in the past, we used to consolidate 100% of the EBIT of the China joint venture. As a result of it now being equity accounted and we have a 49% interest, we take 49% of the NPAT in our EBIT line. So we end up with a reduction of about $9 million.

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [7]

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From -- questions from over the phone.

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Operator [8]

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(Operator Instructions) And your first question today comes from the line of Daniel Kang from Citigroup.

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Daniel Kang, Citigroup Inc, Research Division - VP & Head of Chemicals and Packaging Equity Research [9]

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First question is just in regards to your comment on volume growth, at least 5%. You sort of mentioned EMEA and Canada. Can you talk about your expectations of volume growth in APA and the other regions?

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [10]

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Look, I -- so bulk of the volume growth of that 5% probably will come from 2 regions, which is Australia Pacific and Asia and EMEA. We expect North America will have some growth, but probably more stable. Canada, we have had a very good year and very high market share, but there's, yes, nothing that I could call for that it would be an unusual model, the typical North American 2% or 3%.

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Daniel Kang, Citigroup Inc, Research Division - VP & Head of Chemicals and Packaging Equity Research [11]

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Go it. If you can provide us with an update on the East Coast gas contract negotiations beyond 2021, please?

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [12]

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So we basically are -- have secured contracts. It's -- they're different, staggered, but we have contracts for the next 2 years. And after that, we are in negotiations right now. But I'm sort of -- we are comfortable that the prices that we're paying right now are going to be roughly LNG imports, if they -- if that's the solution, the unfortunate solution that we come to would come at around the current prices that we are in. So we don't expect any further impact from that. And I -- there are conversations with big domestic suppliers around other options. So this is not -- I think we are -- I wouldn't expect even in 2022 and '23 to have further deteriorations from today, and maybe a bit of upside. The unfortunate thing, it's a pass-through through our customers but it does reduce significantly our competitiveness. And that's why we will keep working to, hopefully, improve the situation from what we have right now. But it's not going to get worse than today, it's our pretty clear view.

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Daniel Kang, Citigroup Inc, Research Division - VP & Head of Chemicals and Packaging Equity Research [13]

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Very useful. And just one for Chris. In terms of your 2020 CapEx guidance, what proportion of that $370 million to $390 million would you classify growth versus sustainable? And if you can -- I'm not sure if you provided this already, but what's the expectation of your CapEx with Burrup?

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Christopher Roger Davis, Orica Limited - CFO [14]

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Okay. So of the $390 million, how you should look at this is that the sustenance spend will stay pretty flat year-on-year, so that's at about the $200 million mark. You've then got a further roughly $19 million related to the SAP, the final implementation of the SAP system. And then the balance would be towards growth capital, so probably another $100 million. The one thing I do want to make very clear is that, that is our stated guidance range. To the extent that there's attractive growth capital in the business that will contribute to future earnings, we will continue to look for that.

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [15]

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How I see it in the long, long -- if you look at it after 2021 where we don't expect Burrup or SAP, we would go back to previous guidance, except if there's better growth capital, and then that would be -- but so it will be sustaining the $200 million and then plus growth capital. So if we can get to the $350 million that's fine, but we will be very vigilant on the -- obviously, on the returns. But we expect some positive growth momentum, and we will be happy to finance it.

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Operator [16]

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Your next question comes from the line of Grant Saligari from Crédit Suisse.

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Grant Saligari, Crédit Suisse AG, Research Division - Head of the Consumer Staples, Discretionary Retail & Agriculture and Director [17]

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Just a couple from me, if I could. Alberto, I thought there was a real note of pride in the way you talked about the stratablast and particularly emphasized the location being south of Moranbah. I mean what you're saying there is that your technology enables you to go to place even where bulk product can't be delivered efficiently by Orica. Is that what you're sort of trying to say that this sort of frees you up in terms of generating earnings sort of outside of the delivery radius of the manufacturing plants?

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [18]

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This was more than the location around, obviously, the customer. All the -- so it is BHP, and that they were willing on open pit. We have done good progress on underground, but they were willing to change their mine plans and to really put the whole of BMC on trying this because they are so convinced of the benefits in today that it can offer, and so that's probably why we emphasize it.

It is -- there's a nice video, if you've seen it. BHP put it in their website. But putting a -- for the technicians, they can talk on and on, our technical people, but a single blast of 2,000 units through 1 kilometer with 0 misfires, and we have all sorts of measurements to understand that it's 0 misfires on stratablast. So stratablast -- by definition, a stratablast has misfires, and that's because it fires on different timing. So the part that is closer to the coal fires last. And so there's usually lines broken and some misfires. And that's in some video. You will hear that -- it's on their website.

So I think that it's -- this is just an illustration that it's here, WebGen. It's not for the next 5 years. And we will then -- if you look at the graph that we show of units, we're multiplying by 7 or 8 is what we expect the geometric increase in the units sold of WebGen in the next years. That's probably what we were going to flag. And you are right, we will be able to go anywhere independent of the AN.

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Grant Saligari, Crédit Suisse AG, Research Division - Head of the Consumer Staples, Discretionary Retail & Agriculture and Director [19]

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Okay. The other question I just wanted to ask and sort of clarify a comment that Chris made about capital investment opportunities -- or growth capital investment opportunities. And so I just wondered whether you could give us a sense of the type of opportunities to invest capital that you would potentially be interested in wherein the value chain and the like.

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [20]

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The growth that Chris is talking about really is around our core sort of business. So we will see. We are -- for example, you see in EMEA, the growth is quite spectacular. And if you could divide it in CIS, we are growing. We have tripled the EBIT in the last years, and we expect to keep growing over there. The -- all of those projects have very high returns. So as long as they keep delivering like that, all of the CapEx around small emulsion plants, trucks, et cetera, we will fund that. That's really what Chris was referring to. Now that's not -- that growth capital, that's not in technology, that's a different type of capital that we're talking about. We will, however, keep investing in technology. And we are investing about 1% of our revenue, and that's something that we, obviously, will also keep doing.

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Grant Saligari, Crédit Suisse AG, Research Division - Head of the Consumer Staples, Discretionary Retail & Agriculture and Director [21]

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Okay. And just one final one. If I could just clarify just on the comment around mix and margin. So on that Slide 15, there was a plus 2% from mix and margin. And I think based on the previous guidance and your comments that in -- within that, there's a negative $25 million from price. Is that correct?

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Christopher Roger Davis, Orica Limited - CFO [22]

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There's a negative, actually, $28 million to be more precise, and there's a positive $30 million. And the positive $30 million comes from services, greater services, greater mix, and then there's a negative on a price reset. So if you look at our guidance, we talked -- it's not the same number, but we will -- we expect to continue to making gains on services and margin, and we don't expect negative price resets.

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Operator [23]

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(Operator Instructions) And your next question comes from the line of Sophie Spartalis from Merrill Lynch.

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Sophie Spartalis, BofA Merrill Lynch, Research Division - VP and Senior Resources Analyst [24]

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I just wanted to follow up on that last question. So just in regards to the FY '20 contract renegotiation, just to clarify, you said earlier that there were no more pricing headwinds. Can you just maybe talk through, of the portfolio, how much is being renegotiated in FY '20? Because I understand the vast majority is getting renegotiated in FY '21.

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [25]

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Thanks, Sophie. Yes, we have -- I would say, across the world, we will have a low negotiating year in fiscal year 2020. So probably most of them are around -- in big numbers, above 80%. There's probably some things that are spot in EMEA but very sticky. So that's what we are seeing. In fiscal year 2021, the number in Australia that is just very important drops to about 75%. So we expect to begin negotiations. But -- and that will start having some impact in '21 and '22, but the bulk of that -- of any impact on price will be on '22.

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Sophie Spartalis, BofA Merrill Lynch, Research Division - VP and Senior Resources Analyst [26]

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Okay. And then just a question if we just go back to Slide 15, the EBIT bridge. Can you just again clarify the difference in the buckets of inflation on overheads and reduced overheads? Sort of the differences that's included in that minus $29 million and positive $15 million?

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [27]

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So the inflation of overheads, what we define that is that, that is the one that -- it's support, global support, regional support. So we can't really pass it on to the customers, so it doesn't go through revenue. And that's illustrated in the sense that that's what we -- every year, we have to compensate for efficiencies and, in some way or form, compensate for that inflation that is coming through. The reduced overheads is a net number. It's actually -- and that is probably the number of people, mostly from support, that we have reduced through the year. That number is probably higher than that $15 million. We have, however, in the second half, put -- if you look at the first half, that number was around $13 million, but we have increased some people temporarily for the 4S for the SAP deployment, we're really ramping up, and also in technology. So the net for the year is $15 million.

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Sophie Spartalis, BofA Merrill Lynch, Research Division - VP and Senior Resources Analyst [28]

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Okay. So just to -- as we look forward into FY '20...

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [29]

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Chris wants to clarify something.

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Christopher Roger Davis, Orica Limited - CFO [30]

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Sorry, Sophie, if I can just add to that. So the inflation on overheads is effectively just the inflation on people's pay package, so you get an increase each year. Whereas the benefit of the reduction in the second bucket has been we've actually taken people out of the equation.

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [31]

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That's -- yes.

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Sophie Spartalis, BofA Merrill Lynch, Research Division - VP and Senior Resources Analyst [32]

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Okay. So if we -- just the extent of that, the increase in the people pay, what geographical area is really driving that?

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [33]

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It's worldwide, but Latin America average is about 6%. So that's -- and we put it there because in modeling, that's basically, it will -- we expect that to -- it's been pretty stable through the years. It's about at $29 million, probably with a bit less people, it's going to drop to $27 million, but that's something that we just have to face every year.

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Sophie Spartalis, BofA Merrill Lynch, Research Division - VP and Senior Resources Analyst [34]

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Okay. So then just to confirm, going and looking at sort of a potential EBIT bridge into FY '20, we can expect that inflation on overheads to continue going into '20. And then that reduced overhead, it'll basically spike in '20 given the SAP project, and then it will come back down in '21. Is that fair to say?

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [35]

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No. We actually expect to keep having some improvements in that bucket, too, in 2020. We are not giving guidance on the number, but we expect to keep, again, driving efficiencies in 2020.

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Operator [36]

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Your next question comes from the line of Scott Ryall from Rimor Equity Research.

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Scott Ryall, Rimor Equity Research Pty Ltd - Principal [37]

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I wanted to refer to Slides 5 and 7, I think it is. The -- we showed the charts on the Asia Pac and North American businesses. The charts are really helpful because it's exactly to my question. You've got volumes growing in both businesses. You got revenue growing in both businesses over the last couple of years, but the EBIT margin has gone backwards in both businesses. I'm just wondering how you can reconcile that with the fact that these are the businesses that have what I would have thought would be the most operational leverage given the extent of the asset base that you've got there. And I know we've had some manufacturing issues in Australia that now and theoretically has come on in '19. So it shouldn't have been a drag that it was in '18. Yes, we've got Burrup, which will impact this year, impact first half of next year. But what I'm really wondering is given prices have stabilized, revenues are growing by greater than volumes, how could you not be growing EBIT margins in those businesses, please? And I would've thought that in the downturn a few years ago that if you'd put in place the efficiencies that I think you're saying you had, then you would be seeing that operational leverage now.

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [38]

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Thanks. So it's always tricky to look at that EBIT margins. And I've always cautioned that it's a good guidance but there's a lot of complexities goes in. Remember, we have rises and falls in our contracts. And so the -- with rises and falls, what happens is that if costs go significantly up, the revenue goes up but the EBIT stays the same, and hence, the EBIT margin drops. So that's just one general caveat. For example, gas costs have gone significantly up in Australia. I would expect that those gas increases, even though our EBIT has stayed the same, has dropped the EBIT margin by about 0.5 point.

In this case, it's different. It is related to the fall in Mexico. The impact of Mexico was significant, and that's why we flagged it. Those are very high-margin tonnes. The team in North America was able to compensate by increase in cyanide, but cyanide has a much lower margin. And we also had higher volumes in Canada, and those are also a lower margin. So when you put all of that together, that's what we explained. They were able to stabilize EBIT, but the EBIT margin that you say slightly drops.

So it's -- let me put it this way. If we hadn't had the strike in Peñasquito, that EBIT margin and that EBIT would have gone significantly up in North America. But that's what you get in a portfolio like that. You -- when you get a high EBIT margin impact, then that's what happens.

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Scott Ryall, Rimor Equity Research Pty Ltd - Principal [39]

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Okay. So can you help out and actually quantify what that margin would have gone up by?

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [40]

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Well, the impact of the decrease in EBIT in whole of Mexico was about $15 million. So you can make the calculations.

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Scott Ryall, Rimor Equity Research Pty Ltd - Principal [41]

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Sorry, $15 million? 1-5 or 5-0, sorry?

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [42]

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1-5.

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Scott Ryall, Rimor Equity Research Pty Ltd - Principal [43]

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Okay. And then can you quantify the same on Burrup?

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [44]

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What would you want me to quantify?

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Scott Ryall, Rimor Equity Research Pty Ltd - Principal [45]

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Well, once -- let's say, in the second half, when you're fully loaded and your sourcing comes locally from the Burrup plant as opposed to bringing them in through the Pilbara separately, and I know the BHP contract hasn't started, it's starting now. So you haven't got any impact in '19 of the additional costs you're going to incur, presumably, in the first half to get the volumes into the Pilbara. But if I look just for this year, what does it cost you in order to get the volumes into the Pilbara that you needed to?

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [46]

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Look, you can complicate these calculations a lot. And I can probably tell you, you'll get it wrong because there's a lot of pluses and minuses that is happening in the Burrup. There's a simple calculation that we've said. We expect when Burrup versus no-Burrup, when Burrup is functioning the positive impact, asset depreciation and everything, on a full year is between $35 million and $30 million. So for half a year, it's going to be around, let's say, $13 million. So that would -- that's what I would put in the models.

Now there's a lot of things inside there. Yes, we -- in 150,000 tonnes, and we did 40,000 tonnes this year. So that's 110,000 tonnes times $200 of sourcing, that's about $20 million. But then there's also increasing costs in operations, there is all other type of variables, higher -- lower-pricing contracts, et cetera. So I would just recommend that I would use the guidance that we are giving. And so the positive, probably, EBIT contribution for next year is around that 150,000, and then it's half of the guidance that we've said on a net basis after depreciation and everything.

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Scott Ryall, Rimor Equity Research Pty Ltd - Principal [47]

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Yes. Okay. And then so just rating, I guess, a little bit further on both of those businesses, assuming you don't get any more one-offs, you're not comfortable that you should be able to demonstrate operational leverage in both those 2 businesses in fiscal '20. Because I mean that to me is profitable growth. If you're just growing revenue -- to your 3 main targets of what makes Orica a good investment, if you're just growing revenue from volume growth, you're -- to me, if you've got a fixed cost base, you should be growing EBIT faster than revenue. That would be just a simple equation. So is that likely in fiscal '20 and in the second half of '20 for the Asia Pac business?

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [48]

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That's the guidance that we have given, yes. Just to reiterate, and I think the market understands this very well, we had a significant price reset of about $28 million in APA, and then we have the Peñasquito issues, and Mexico in general about $15 million. So when you put that into consideration, you have a quite significant EBIT growth. But just remember that, for us, it's -- we have pass-throughs. And if cost goes up, the EBIT margin is going to go down, but that's not a problem for us.

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Operator [49]

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(Operator Instructions) Your next question comes from the line of John Purtell from Macquarie.

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John Purtell, Macquarie Research - Analyst [50]

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Can you hear us?

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [51]

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No. We lost you for a second.

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John Purtell, Macquarie Research - Analyst [52]

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I just had a couple of questions, assuming you can hear me. Just in terms of going back to APAC, the -- your second half EBIT was down 3%. With the pricing variance at minus 28%, I mean, was that much more manifest in the second half than the first?

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [53]

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Yes.

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John Purtell, Macquarie Research - Analyst [54]

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Correct?

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [55]

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Yes. Correct.

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John Purtell, Macquarie Research - Analyst [56]

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Yes. Okay. So that was the main -- would that have been the main drag explaining that EBIT reduction?

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [57]

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Yes, yes. That would have been a big factor, yes.

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John Purtell, Macquarie Research - Analyst [58]

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Second question just in relation to Burrup. You pushed the timing out it looks like by about a month in terms of your expected production start-up from sort of March through to April. Is there any color on that? And the second part to that is when do you expect commissioning to start for the plant?

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [59]

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No. John, we haven't pushed it. We've been very consistent for about a year that it would be sometime in the first half. So no. If anything, things are going better than we thought they were going to be. It's just -- again, there's no sense in being too precise on -- because the commissioning could always -- there's some -- any hiccup that could come. But if anything, I'm quite happy how -- with how things have progressed, and that's the color that I tried to give before.

I think the fact that 95% of the heat exchangers are in place or the fact that 3 out of the 4 dry drums are in place today or the fact that the absorption column is standing up and in the process of being installed is just -- we're trying to give color to the market that basically the heart of the whole project is almost done by now. And so it gives me confidence that by the end of the December, the plant will be ready. Now how long the commissioning will last, it's something that I've been long enough in projects to know that there will be always some issues. So they're just -- this is just a simple calculation. We've said it -- probably, we said it 6 months ago, 50%. So I'd prefer not to change the guidance. But what I can say is that my -- again, with where we are today, the level of confidence of that guidance has significantly increased. If we can do a bit more, we'll do. But just no use trying to be too precious on this. The point is it's almost done. We have confidence it will be operating in the full half -- or the second half. And let's see where we get in May, and we'll let you know. But it's -- the core of what we wanted to deliver is Burrup is going very well.

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Operator [60]

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Your next question comes from the line of Alex Karpos from Goldman Sachs.

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Alexander George Philip Karpos, Goldman Sachs Group Inc., Research Division - Equity Analyst [61]

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Just a couple of quick ones on Latin America for me. First of all, on the kind of intermediate term, are you expecting any disruptions in 1H '20 from the protests we've seen in Chile?

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [62]

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The answer is no. Having said that, if there is one thing that has surprised me in the last months more than anything is what's happening in Chile. And I think it has -- the extent of the damage and of the violence of that is something that I would've never thought I would see in a country that is model in Latin America. Having said that, the average wage for the miners is about 9 to 10x higher than the minimum wage in Chile. And so even though you hear that there are some signs of solidarity, they want to -- we know that they are -- and this is not for us but for the miners, they're being very careful of not trying to bring too much attention to this situation. So they are really -- the people who work in the copper mines are really quite privileged in Chile in the context of the work that they do. So even though there may be some temporary disruptions, and we still see things and problems in Santiago, we do not believe that there will be any significant long-term damage for the mining in Chile and, hence, not for our operations. So at this stage, we -- even though, again, where our -- we have all of our people and making sure that they have been disrupted and schools and all of that has been disrupted, we are not expecting, again, any significant impact.

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Alexander George Philip Karpos, Goldman Sachs Group Inc., Research Division - Equity Analyst [63]

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Got it. And then just on a more long-term time frame, on the EBITDA margins, we saw them creep up a bit half over half, which is an encouraging sign. But how should we think about margins for this business over the long run? And I guess, if you expect expansion here, what would be the catalyst to see them creep higher from here?

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [64]

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The -- and we will -- it's something that probably -- they should go up. And I've said, for example, in APA, with Burrup functioning in 2021, if we extrapolate versus today, we should go back to 20%, 20.5%.

The numbers of technology should definitely imply higher margins. Then again, costs that leave EBIT unaltered, like gas, has an impact of decreasing the margin, but that's not something that I am particularly worried about. So it's a useful sort of initial indicator, but it has to be used with caution. So what we will do is probably we will be -- flag something like that saying, okay, this is what we expect to see with Burrup, if there's any significant costs that we can neutralize and it's debilitating the margin, we will let you know. Barring that, you should see technology impacts when we talk about 2021 and the impact of, for example, wireless, that should imply higher EBIT margins.

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Alexander George Philip Karpos, Goldman Sachs Group Inc., Research Division - Equity Analyst [65]

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Got it. And sorry, I should've clarified. I was referring more to Latin America specifically. If I look out in 2022, 2023 across the next couple of years of the cycle, how should we think about the headroom there for margins to keep expanding from here?

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [66]

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We should also keep seeing some growth in margins in Latin America. We have the President of Latin America with us, so I'm pretty sure he's very committed to that of slightly increasing the EBIT margins. The problem in Latin America, remember, we have a traded commodity. And so that makes things a bit more complicated, but the RONAs are high. And one thing I'm quite excited about is the penetration of both the digital and wireless in Latin America. That, without a doubt, will lead to some increase in EBIT margins, but it will always be low.

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Operator [67]

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There are no further questions at this time. I will now hand back to Alberto for any closing remarks.

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Alberto Calderon Zuleta, Orica Limited - MD, CEO & Executive Director [68]

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Thank you very much. Thank you.