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Who
we are
Orica is one of the world’s leading
mining and infrastructure solutions
providers. From the production and
supply of explosives, blasting systems,
mining chemicals and geotechnical
monitoring to our cutting-edge
digital solutions and comprehensive
range of services, we sustainably
mobilise the earth’s resources.
We produce a suite of reports to meet the needs of
a wide range of stakeholders including shareholders,
debt investors, customers, suppliers, and government
bodies. The following documents are available at
orica.com/Investors
– FY2021 Full Year Results Investor Presentation
– FY2021 Full Year Results ASX Announcement
– FY2021 Modern Slavery Statement
FY2021 Climate Action Report
FY2021 Sustainability Supplement
Climate-related information aligned to the
recommendations of the Task Force on
Climate-related Financial Disclosures (TCFD).
Supplement to our Annual Report which
includes our sustainability scorecard and
details our materiality assessment process.
FY2021 Corporate
Governance Statement
FY2021 Tax Transparency Report
Made in accordance with the ASX
Council’s Corporate Governance Principles
and Recommendations (4th Edition).
Overview of our approach
to tax, governance structure,
and tax position.
We are on a journey to enhance our reporting and
welcome any feedback you may have regarding our
reporting suite. Please address any questions, comments,
or suggestions to investorrelations@orica.com.
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Contents
Who we are
About this report
IFC
02
Reporting what matters
FY2021 year in review
03
04
10
Our Business
12
Strategy
16
Business
model
22
Technology
and innovation
Letter from our Chairman and Managing Director 06
People and capabilities
Our Business
Strategy
Business model
Operating in a dynamic environment
Our global footprint
Technology and innovation
Our stakeholders
Our Performance
Executive Committee
Financial
Safe and responsible business
Climate and the natural environment
Community and relationships
Governance and Risk
Board of Directors
Managing risk through uncertain times
Material risks and opportunities
Directors’ Report
Remuneration Report
Financial Statements
Other Information
10
12
16
18
20
22
24
26
28
30
42
48
52
64
70
71
76
80
82
86
107
175
ORICA Annual Report 2021 |
01
About
this report
Welcome to our FY2021
Annual Report, which forms
part of our corporate reporting
suite for the 2021 financial year.
STRUCTURE AND CONTENT
The elements of the Directors’ Report,
required by Australian Securities and
Investments Commission (ASIC) Regulatory
Guide 247, are covered on pages 04
to 106. This includes the Operating and
Financial Review (OFR) which is presented
on pages 04 to 69. The basis of
preparation of our financial statements
is outlined on page 114.
This report has been prepared with
reference to elements of the International
Integrated Reporting Council’s (IIRC)
International Integrated Reporting
Framework (IR Framework). We have used
the IR Framework to demonstrate how
our purpose and our values, as well as
consideration of risks and opportunities,
drive our strategy. We have also considered
how our strategy creates value, beyond
financial performance alone. In FY2022,
we expect to further enhance our
disclosures, and introduce a holistic
scorecard of Key Performance Indicators.
This report covers all Orica operations
worldwide over which, unless otherwise
stated, we have control for the financial
year ending 30 September 2021 (collectively
‘the Orica Group’, or ‘the Group’).
Monetary amounts in this document are
subject to rounding and are reported in
Australian dollars, unless otherwise stated.
VERIFICATION AND ASSURANCE
The Remuneration Report (pages 87 to 105)
and Financial Statements (pages 108 to
167) have been independently audited
by KPMG. Detailed information on the
audit process and opinion is provided in
the Audit Report on pages 169 to 174.
We also obtain independent limited
assurance over our greenhouse gas
emissions metrics. Further details,
and the Ernst & Young assurance
statement, are included in our FY2021
Sustainability Supplement.
All unaudited information contained
in this report has been subject to an
internal review and approval process
defined by our Corporate Reporting
Verification Framework.
FORWARD-LOOKING
STATEMENTS
This report contains forward-looking
statements, including statements of current
intention, opinion and predictions regarding
the Group’s present and future operations,
possible future events, and future financial
prospects. While these statements reflect
expectations at the date of this report,
they are, by their nature, not certain and
are susceptible to change. Orica makes no
representation, assurance or guarantee as
to the accuracy of or likelihood of fulfilling
any such forward-looking statements
(whether express or implied) and, except
as required by applicable law or the ASX
Listing Rules, disclaims any obligation
or undertaking to publicly update such
forward-looking statements.
Reporting suite
We have been guided by the Global
Reporting Initiative (GRI) Reporting
Standards and report across a range of
best practice environmental, social, and
governance (ESG) indicators. We have
aligned our reporting to the Financial
Stability Board’s TCFD Framework.
For the first time, we have published
a standalone Climate Action Report.
02
| ORICA Annual Report 2021
Integrating
Sustainability
Sustainability is at the core
of what we do; the decisions
we make, our policies and
processes, and the actions
of our people. To reflect its
importance, we have integrated
our material sustainability
disclosures and metrics into
Our Performance section of
this report to present a more
holistic and transparent view
of our performance. We have
also initiated the transition from
pure environmental and social
reporting towards integrated
reporting by connecting
sustainability directly with our
business model and strategy.
These changes build on
the considerable progress in
recent years to further embed
sustainability into our business
strategy, risk management and
governance processes.
We always strive to do better.
We want to consistently deliver
value for our customers across
the value chain, in a way
that is safe and sustainable.
By leveraging our expertise in
technology and digital solutions,
we are in a unique position
to achieve this.
We have an obligation to
our shareholders, and other
stakeholders, to be transparent
and demonstrate accountability
for how we operate and our
contribution to society, as well
as detail how we are going to
succeed in the mid to long-term
energy transition.
Sustainability and value creation
go hand in hand. In responding
to the challenges of today
and tomorrow, our approach
to sustainability continues
to evolve.
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Reporting
what matters
Each year, we perform
a materiality assessment
to understand the topics
that matter most to
our stakeholders.
This year our materiality assessment was
conducted to align with the IR Framework,
identifying the topics that most affect, or
have the potential to affect, our ability to
operate successfully and to create value.
The results of the assessment inform
our strategic priorities, help us to identify
risks and opportunities, and focus our
reporting on what matters over the short,
medium, and long-term.
We engaged with internal and external
stakeholders, including customers, investor
groups, and senior leaders from Orica,
representing a broad range of interests
covering government and regulatory affairs,
supplier relationships, community, and
non-government organisation views.
Our assessment was also informed by
secondary research such as broader
industry and global trends.
OUR ASSESSMENT INDICATED OVER 30 MATERIAL
TOPICS THAT WE GROUPED INTO SIX THEMES.
Business performance and resilience
Maintaining strong economic performance and growth,
and ensuring that our operations and supply chains remain
resilient by anticipating and managing ongoing disruption
events, including impacts of COVID-19 on our people and
the communities in which we operate.
Safety and security
Ensuring the safety of our people, customers, and communities
in which we operate, and the security of our products and
operations, including managing physical and cyber security risks.
Responsible and ethical business
Operating ethically, fairly, and in accordance with our
operating regulations and values. Managing our social and
environmental impacts through strong corporate governance
and building transparent relationships with stakeholders.
Action on climate
Contributing to the transition to a low-carbon economy
by addressing risks and opportunities associated with the
economic transition and adapting to a changing climate.
Technology, innovation, and products
Investing in technology and innovation to optimise business
performance and deliver innovative solutions that enhance
customer experience and sustainability outcomes.
Supplementary disclosures
The full list of our material topics, as
well as the key steps in the materiality
assessment process, can be found in
our FY2021 Sustainability Supplement.
Responding to communities
Continuing our focus on community engagement through a
shared value approach to community investment, while working
towards enhancing our cultural competency to better engage
with and support First Nations Peoples.
UNITED NATIONS SUSTAINABLE
DEVELOPMENT GOALS
The United Nations Sustainable Development Goals (SDGs)
are a set of 17 interconnected goals that form a global
benchmark for achieving a sustainable future for all. We are
committed to the SDGs, and our role in advancing them.
In FY2021, we mapped our material topics against the
SDGs to determine which goals best reflect our business
context and strategy, our capabilities, as well as our key
risks and impacts across our value chain. We identified
six priority SDGs for Orica to contribute towards. The SDG
goals and targets have informed our sustainability strategy
and scorecard.
ORICA Annual Report 2021 |
03
FY2021
year in review
NPS1
57.6 per cent
improvement since
inception of the
program in 2017
$427M
UNDERLYING
EBIT2
FY2020: $614M3
Zero
SIGNIFICANT
ENVIRONMENTAL
INCIDENTS4
Zero
fatalities
FOR FOUR
CONSECUTIVE
YEARS
Net
Zero
EMISSIONS
AMBITION
BY 20505
04 | ORICA Annual Report 2021
SICR6
INCREASED
BY 0.03 TO 0.19
FY2021 target: 0.14
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
AWARDED
Technology Platform
Solution of the Year
at the National iAwards7 for our Integrated Extraction
Simulator (IES) technology
1 June 2021
LAUNCHED THE
ORICA IMPACT FUND
Directing targeted
community investment
funding towards initiatives
that support critical business
priorities and enable business-
community partnerships
13%
REDUCTION OF
SCOPE 1 AND
SCOPE 2 EMISSIONS
SINCE FY2019
TARGET BASE
YEAR8
FY2020: 9%
34.6%
GEARING9
DIVIDEND
24.0
CPS
(47% payout ratio10)
1 Net Promoter Score. The NPS is calculated from customer
responses to a single question. “On a 0-10 scale: How likely is it
that you would recommend Orica to a friend or colleague?”.
2 Equivalent to profit/(loss) before financing costs and income
tax, as disclosed in Note 1(b) to the financial statements,
before individually significant items. Includes earnings from
Minova which is treated as discontinued operations in the
financial statements.
3 Restated for the retrospective application of a change in
Orica’s accounting policy on AASB 138 Intangible Assets
and AASB 116 Property, Plant and Equipment, following an
International Financial Reporting Interpretations Committee
(‘IFRIC’) agenda decision this year. Refer to note 24 of the
financial statements for further details. Includes earnings
from Minova which is treated as a discontinued operations
in the financial statements.
4 Severity 3 environmental events result in relatively wide-spread
serious environmental damage, with some impairment of
ecosystem function that will recover after remediation.
5 Our net zero emissions ambition covers our global Scope 1
and Scope 2 emissions under our direct control, and material
Scope 3 emission sources. Achieving this ambition will require
effective government policy frameworks, supportive regulation
and financial incentives, and access to new low-carbon
technologies operating at commercial scale. Refer to page
12 for definition of material Scope 3 emissions.
6 Serious injury case rate (unit of measure: per 200,000
hours worked).
7
iAwards is Australia’s longest running and most broadly
scoped innovation recognition program, promoting
excellence in the Australian digital ecosystem.
8 Target to reduce Scope 1 and 2 emissions by at least
40 per cent by 2030, from 2019 levels.
9 Net debt/(net debt + equity), where net debt excludes lease
liabilities, as disclosed in Note 3 to the financial statements.
10 Dividend amount/Net profit after tax before individually
significant items attributable to shareholders of Orica Limited.
ORICA Annual Report 2021 | 05
Letter from our
Chairman and
Managing Director
“It has been a challenging
year, with COVID-19
disruptions, geopolitical
issues, and other external
and internal factors
impacting our results.
Our people have risen to
the challenges and shown
unwavering commitment
and resilience towards each
other, our customers, and
our communities.
With our new Executive
team in place, an improving
business environment in our
core business and future
growth potential, we are
confident in our ability to
navigate our recovery and
deliver profitable growth
and stakeholder returns.
Together, we continue
to address what we can
control and guided by
our values, are advancing
our refreshed strategy to
deliver on our purpose
to sustainably mobilise
the earth’s resources.”
06 | ORICA Annual Report 2021
Sanjeev Gandhi
Managing Director and CEO
Malcolm Broomhead AO
Chairman
KEEPING OUR PEOPLE AND
COMMUNITIES SAFE
At Orica, nothing is more important than
safety and we are pleased to report that,
once again, we had no fatalities across our
operations. Disappointingly, our Serious
Injury Case Rate increased by 0.03 to 0.19.
Preventing serious injuries will remain a
key focus this year.
With COVID-19 continuing to impact
our activities, our focus has remained on
the health and wellbeing of our people.
We have tight COVID-19 infection controls
in place, and we continue to provide
support for employees and their families
in areas most impacted by the pandemic.
Sadly, this year we lost 12 colleagues
to COVID-19. We extend our deepest
condolences to the families and friends
of those who lost their lives.
COVID-19 has also had an impact on
the communities in which we operate.
In response, we have continued community
initiatives and investments, directing
our support to where it is needed most.
Our frontline employees have gone
to extraordinary lengths this year,
working with customers to protect
their workplaces and communities,
and ensure uninterrupted operations.
As we emerge from the pandemic,
we are partnering with customers and
governments to proactively introduce
vaccination standards and programs
across our operations.
OUR PERFORMANCE
Business performance
Our financial performance this year has
been disappointing. We have felt the
impact of COVID-19, a strong Australian
dollar and ongoing trade tensions with
China. Internally we have experienced
delays in stabilising our SAP system.
We announced in September individually
significant items impacting our FY2021
results by $382 million after tax, which
resulted in a statutory Net Loss after Tax
(NLAT) (attributable to shareholders of
Orica) of $174 million, compared to a
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
blastholes in collaboration with a key
customer, improving blast pattern
design efficiency in real-time.
We know that it was a difficult year for
our people through a time of significant
organisational change as we adapted our
business to suit the current operating
environment. However, our people rose to
the challenge, ensuring that the safety of
our operations and fulfilling our customers’
needs remained our top priorities. We are
especially grateful for this commitment
and remain focused on creating a diverse
workplace where our people are energised
and inspired to shape our future together.
“Our frontline employees
have gone to extraordinary
lengths this year, working
with customers to protect
their workplaces and
communities, and ensure
uninterrupted operations.”
Net Profit after Tax (NPAT) of $82 million
in FY2020. Underlying Earnings Before
Interest and Tax (EBIT) were $427 million –
a decrease of 30 per cent from the
prior year.
Positively, we maintained a disciplined
approach to our balance sheet and capital
management, while stepping up our cash
generation and controlling our levels of
debt and gearing.
The final ordinary dividend of 16.5 cents
per share unfranked, brings the total
dividend to 24.0 cents per share, down
9 cents per share compared with FY2020,
reflecting a payout ratio of 47 per cent
of underlying earnings.
Gearing of 34.6 per cent remains within
our target range of 30 to 40 per cent.
We are pleased that in FY2021, our Burrup
plant, a long-term strategic asset positioned
in the Pilbara, became fully operational and
Exsa, Peru’s leading manufacturer and
distributor of industrial explosives, acquired
in May 2020, was successfully integrated
into Orica, and continues to deliver in line
with the business case.
Our discrete network and product
portfolio optimisation programs have
been accelerated, resulting in the closure
of several sites and the exit from a number
of countries that are not strategically
aligned or that could be serviced through
alternate internal distribution channels.
We also commenced the sale of
Minova and non-core landholdings.
The stabilisation of the recently
implemented SAP ERP system continued,
with the integrated platform helping us
in aligning our overheads and operating
model with the current operating
environment.
We achieved our new technology
returns target, despite challenges in
implementation due to COVID-19.
Our digital solutions portfolio continues
to grow and is now active across more
than 200 customer sites globally, as we
expand our scope and capability beyond
blasting. In particular, with our RHINO™
technology, we were able to generate
orebody intelligence while drilling
ORICA Annual Report 2021 |
07
“Our refreshed
strategy and Executive
leadership team have
Orica well-positioned
to navigate our
recovery and deliver
profitable growth,
focused on improving
return on net assets
and value for our
customers and
shareholders through
a simpler and more
efficient organisation.”
08 | ORICA Annual Report 2021
Sustainability performance
Despite COVID-19 and the challenges
associated with our financial performance,
we continued to focus on delivery of our
sustainability commitments. Metrics that
were a particular focus for FY2021 included
greenhouse gas emissions, diversity and
inclusiveness and community investment.
We are pleased to report a 13 per cent
reduction in our combined Scope 1 and 2
greenhouse gas emissions, and we remain
on track to achieve our target of at least
40 per cent reduction in Scope 1 and 2
greenhouse gas emissions by 2030.
We also launched the Orica Impact Fund,
targeting investment to communities most
impacted by COVID-19, essential to our
operations or with a focus on science,
technology, engineering and maths (STEM),
driving long-term benefits and positive social
and environmental impact. For diversity
and inclusiveness, unfortunately, we saw a
drop in the percentage of women in senior
leadership positions as we restructured
the organisation. Despite this, we remain
committed to achieving our 2024 target
of 35 per cent women in senior leadership
and have programs in place that support
achieving this target.
POSITIONING FOR
FUTURE GROWTH
In April 2021, the Board appointed
Sanjeev Gandhi as the new Managing
Director and CEO of Orica Limited.
Our renewed Executive Committee
is now in place, with deep expertise and
experience from across the organisation
focused on driving forward our refreshed
strategy and strategic priorities and
positioning Orica for the future.
Our refreshed strategy
Our refreshed strategy refocuses on
driving profitable growth and creating
enduring value for our shareholders
and other stakeholders.
Our strategy is to deliver solutions and
technology that drive productivity for
our mining and infrastructure customers
across the globe.
It is centred on optimising our operations,
delivering smarter solutions, and partnering
for progress across our core business
and refocusing on our four key business
verticals – mining, quarry and construction,
digital and mining chemicals. This will allow
us to leverage our strengths and create
opportunities for growth beyond blasting.
Organic growth will be pursued from
the core, through four dedicated business
verticals. We will continue to optimise
our manufacturing and supply chains while
maintaining commercial discipline and
accelerating the adoption of our innovative
technologies that promote productivity
for our customers.
In mining, our largest vertical, we aim
to grow our presence in future-facing
commodities as the world continues
to transition to a low-carbon economy,
while increasing the adoption of our
premium blasting solutions.
In quarry and construction, we will deliver
focused technology, specific to the needs
of our customers, diversifying our portfolio
and increasing our presence in high-growth
economies, such as Asia.
Our mining chemicals business offering
will be expanded in high-growth markets
across gold and future-facing commodities.
Building on our superior global supply
chain and customer relationships, we will
unlock further capacity to broaden and
capture growing demand.
We will also continue the adoption and
expansion of our digital solutions, both
upstream and downstream, by providing
best-in-class digital products and integrated
digital workflow solutions, to unlock
greater value for customers across all
segments and drive growth for Orica.
Our technology program will also include
our second-generation fully wireless
technology, WebGen™ 200, which entered
alpha trials with a commercial product this
year. The technology has been engineered
for new markets and applications and
paves the way for the first stages of
blast automation through our world-first
Avatel™ technology.
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
We also unveiled 4D™, our new variable
density bulk explosives system, providing
a step-change in bulk explosives and
value delivery.
With our integrated SAP platform
stabilising, we will start to realise the
benefits and efficiencies, while managing
our cost base and operating model, and
continuing to optimise our operations and
reduce complexity across manufacturing
and supply.
Finally, we need to partner with our
stakeholders in executing our strategy.
Our focus remains on empowering our
people and partnering with customers
and communities to solve shared
challenges and champion for a safer
and more sustainable industry.
Sustainability at Orica
In recognition of the increasing global
focus on tackling climate change, this
year, we took a significant step in our
sustainability journey and established
a net zero ambition by 2050.
Building on our target to reduce Scope 1
and 2 emissions by at least 40 per cent by
2030, this new ambition includes our most
material Scope 3 emission sources and
provides a clear roadmap that prioritises
the decarbonisation of our operations,
low-carbon solutions and partnering
with our stakeholders to move towards
net zero emissions by 2050.
We are a company with a long history
of technical innovation which is already
helping our customers improve mine site
safety, productivity, and efficiency. We will
apply the same approach by deploying
low-emissions technologies to our major
manufacturing sites and working with
our global suppliers and stakeholders to
reduce the footprint of our supply chain.
One example of this innovation in
action is at our Carseland ammonium
nitrate (AN) manufacturing facility in
Canada, which in partnership with the
Alberta Government has commissioned
an industrial tertiary catalyst abatement
process, forecast to reduce emissions
by approximately 83,000 tCO2e per year.
We have assigned approximately
$45 million over the next 5 years in
capital to deploy similar tertiary
abatement technology across our
Australian AN sites, which could deliver
a 750,000 tCO2e reduction annually.
We are also supporting the construction
of a mobile demonstration plant of carbon
capture, utilisation, and storage (CCUS)
technology at our Kooragang Island
manufacturing facility, led by Mineral
Carbonation International (MCi), in
partnership with the Federal Government
and the University of Newcastle.
Our commitment to sustainability
goes beyond just our net zero ambition.
We will continue to evolve our approach
to deliver long-term value for our
stakeholders and will be working to
achieve more in delivering on our key
social, diversity and environmental targets.
OUTLOOK
The fundamentals of our business
remain strong. By controlling what we
can, optimising our operations and supply
chain and embedding our refreshed
strategy and growth drivers, we will seize
opportunities as the market stabilises.
We expect commodity demand to remain
steady throughout FY2022, translating to
stable volume demand for explosives and
related products. Our customer’s appetite
for new technology is high as we look to
capitalise on our expanded offering in
high-growth and future-facing commodities.
Our refreshed strategy and
Executive leadership team have
Orica well-positioned to navigate our
recovery and deliver profitable growth,
focused on improving our return on
net assets (RONA) and value for our
customers and shareholders through a
simpler and more efficient organisation.
On behalf of our Board and the
Executive Team, thank you to the
entire Orica team who have been
exceptional during this challenging time.
Importantly, we thank you, our
shareholders, for your continued support
and investment in Orica.
Malcolm Broomhead AO
Chairman
Sanjeev Gandhi
Managing Director and
Chief Executive Officer
ORICA Annual Report 2021 | 09
Our
Business
10
| ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Our purpose is to sustainably
mobilise the earth’s resources
Our purpose and values
are a fundamental part
of our business.
Mobilising around our purpose drives
our business and sustainability strategies,
our behaviours, and the commitments we
make to all our stakeholders. Uniting our
people with a common goal, which
inspires and harnesses their energy to
innovate and problem-solve is how
we will succeed.
Our impact extends beyond our own
operations and people to our customers,
the natural environment, and the
communities where we operate. That is
why we are committed to operating a
safe and responsible business, making a
positive contribution to society, and to
reducing our environmental impacts.
Our
values
We work as one team, always guided by our values.
As a purpose-led, responsible business, how we
deliver value for our customers, communities and
other stakeholders is as important as what we deliver.
Safety is our
priority. Always
The most important thing is that we
all return home, safely, every day.
We respect
and value all
Our care for each other, our
customers, communities,
and the environment builds
trusted relationships.
Together
we succeed
Collaboration makes us better,
individually, and collectively.
We act with integrity
We are open and honest, and we do what is right.
We are
committed
to excellence
We take accountability for our
business and for delivering
outstanding results.
ORICA Annual Report 2021 |
11
Strategy
How we create value
Orica’s goal is to deliver enduring value to our shareholders and other stakeholders. We leverage our tangible and
intangible assets to create financial, people, societal, customer and environmental value, all with an emphasis on being
a safe and responsible business. This includes utilising technology and innovation, our financial and natural resources,
and our interactions and partnerships across the value chain. Strategic decisions are made in line with our risk appetite
settings, which assist us with the allocation of resources. Our risk appetite is described on page 78.
$
Technology and
innovation
Finance
Responsible
operations
People and
capabilities
Natural
environment
Community and
relationships
Our purpose
Sustainably mobilise the earth’s resources
Our vision
To be the world’s leading mining and
infrastructure solutions company
Our strategy
Deliver solutions and technology that drive
productivity for our customers across the globe
Enabling enduring business
performance through sustainability
To support our core business activities, we have developed a
comprehensive sustainability strategy and roadmap. A core
pillar of this strategy is our stated ambition to achieve net
zero emissions by 20501. Responding to the threat of climate
change is critical to our future success and sustainability is
essential to growth and long-term competitive advantage as
a driver of innovation, cost efficiencies, and talent attraction.
For an overview of our approach and progress refer to the
Our Performance section of this report.
Innovating
sustainable
solutions
Sustainability
Approach
Fostering
relationships and
transparency
Building climate
resilience and
circularity
1 Our net zero emissions ambition covers our global Scope 1 and Scope 2 GHG emissions under our direct control, and material Scope 3 GHG emission sources.
Material means the GHG emissions embodied in purchased ammonia and ammonium nitrate included in the Scope 3 reporting category of purchased goods
and services. These comprise around two-thirds of Orica’s Scope 3 emissions footprint.
We will engage with our suppliers and customers to support technological solutions for decarbonisation. Achieving this ambition will require effective government
policy frameworks, supportive regulation and financial incentives, and access to new low-carbon technologies operating at commercial scale.
12
| ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
How we will win
SMARTER
SOLUTIONS
OPTIMISED
OPERATIONS
PARTNERING
FOR PROGRESS
Excellence in service delivery
Speed to market
Proactively sell solutions
to create and share value
Our scope and capabilities are
being expanded across the value chain.
Recent digital acquisitions like RHINO™ and
OREPro™ 3D push us further upstream to
orebody intelligence, and downstream to
ore processing with tools such as Integrated
Extraction Simulator (IES). We can provide
best-in-class products across the individual
verticals and offer a seamless workflow
solution across the value chain. Rapid
commercialisation of our products and
solutions is key to our technology strategy.
Safe and cost
competitive manufacturing
Optimised, reliable and
secure supply chain
We are continuing to find ways to
improve how we run our business.
Value will be realised through (continual)
overhead cost reduction, reduced
manufacturing costs and supply
chain efficiencies, as well as monetising
non-core land assets. In FY2021,
we confirmed our intent to sell Minova,
and began to exit under-performing
jurisdictions and operations.
Empowering our diverse teams
of talented people
Champion for a safer,and
more sustainable industry
Our strategy is shaped to equip our employees
with the changing skills and competencies
needed to deliver strong performance. Our focus
includes deeper talent management and
supporting the development of capabilities
that drive our competitive advantage.
Collaboration is key, and we will continue to
work with our stakeholders to drive growth and
to solve our shared challenges. Public-private
partnerships can play a significant role in creating
value. This year, we achieved a significant
decarbonisation milestone through government
partnerships in Australia (refer to the
Climate and natural environment section
of this report for more detail).
Across our pillars, we remain committed to seizing organic and inorganic growth opportunities, including the expansion of existing products
into new applications and commodities, new product development across the value chain, and capital investments and operational upgrades.
What sets us apart
SUPERIOR, INNOVATION-LED
CUSTOMER OUTCOMES
The unrivalled experience and expertise of our people
gives us a clear competitive advantage.
With our commitment to deep customer relationships and by
understanding their most challenging needs, we can provide
innovative technologies and solutions to deliver the desired
outcomes and maximise value for our customers. This is evidenced
by continuous improvement in our NPS over the past four years.
SECURE, RELIABLE LOCATIONALLY-
ADVANTAGED SUPPLY
Our globally optimised supply chain of manufacturing plants,
supply alliances and joint ventures around the world ensures the
security of supply for our customers, where and when they need it.
With safety as our number one priority, we comply with
stringent regulatory regimes to ensure our products are stored
and transported securely and always used as intended.
ORICA Annual Report 2021 |
13
Where we will win
Our strategy is centred on optimising our operations, delivering smarter
solutions, and partnering for progress across our core business and refocusing
on our four key business verticals: mining, quarry and construction, digital,
and mining chemicals. This will allow us to leverage our strengths and
create further opportunities for growth beyond blasting.
MINING
Grow our presence in future-facing
commodities as the world continues
to transition to a low-carbon economy,
while increasing the adoption of our
premium blasting solutions.
Thermal and
metallurgical coal
Future-facing
commodities
Quarries
Metals
G
MININ
QUARRY A
N
D
C
O
N
S
T
R
U
C
T
I
O
N
CUSTOMERS
Ore processing
M
I
N
I
N
G
C
H
E
M
IC
A
LS
S
N
L S O LUTIO
A
D I G I T
Chemical
stabilisation
MINING CHEMICALS
Expand in high-growth segments across
gold and future-facing commodities.
Unlock further capacity to broaden and
capture growing demand by building on
our superior global supply chain and
customer relationships.
14
| ORICA Annual Report 2021
Recovery and
treatment
Measurement
and monitoring
QUARRY AND
CONSTRUCTION (Q&C)
Deliver focused technology, specific
to the needs of our customers,
diversifying our portfolio and
increasing our presence in
high-growth economies.
Construction
Tunnelling
Orebody
intelligence
Blast design
and execution
DIGITAL SOLUTIONS
Continue adoption and expansion
of our digital solutions, both
upstream and downstream,
by providing best-in-class digital
products and integrated digital
workflow solutions.
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
“Our refreshed strategy refocuses on driving profitable
growth and creating enduring value for our shareholders
and other stakeholders.”
ORICA Annual Report 2021 |
15
Beyond blasting
Business activities
OREBODY INTELLIGENCE
DESIGN AND MODEL
BLASTING
MEASURE AND MONITOR
ORE PROCESSING
Upstream from blasting, we
are actively taking steps today
to help our customers better
understand the orebody.
Recent digital acquisitions such
as RHINO™ and RIG Technologies
International give us a market
position in orebody intelligence.
We are collaborating with customers and
industry to develop technologies and integrate
vast amounts of complex geotechnical data
into the blast design processes. This is where
our SHOTPlus™ Blast Design and OREPro™ 3D
modelling software comes into play, by helping
to ensure the right explosives are delivered into
the right holes, and initiated at the right time,
to achieve desired customer outcomes.
The blasting segment of the
value chain remains at the core
of our business model and the
convergence of new technologies
and solutions such as WebGen™
and 4D™ is enabling us to
think and mine differently,
and operate more precisely
and responsibly.
Outputs
We have also made significant investments downstream from
blasting in post-blast monitoring, including GroundProbe™ technologies
and measurement technologies that deliver insights around blast
outcomes. FRAGTrack™, for example, captures 2D and 3D blast
fragmentation imagery and data with auto-analysis capability.
Further downstream we are
building capability and technologies
in ore processing with tools like IES.
Digital solutions
Explosives
Blasting systems
Monitoring
Mining chemicals
Service and support
Outcomes
Our success is dependent on our
ability to create value for a broad
range of stakeholders. Refer to the
Our Performance section for our
FY2021 performance, including how
we use technology and innovation to
create or protect value. An overview
of our approach to technology
and innovation is included on
pages 22 and 23.
16
| ORICA Annual Report 2021
$
TECHNOLOGY
AND INNOVATION
Market leadership
Digital transformation
Support customers
growth and
sustainability goals
FINANCE
Maintain investment
grade credit rating
Sustainable dividend
Agility to respond to
growth opportunities
RESPONSIBLE
OPERATIONS
Values-driven
organisational culture
Prevention of harm
(people, product, data)
Transparent
policy positions
Ethical supply chain
PEOPLE AND
CAPABILITIES
Engaged workforce
and inclusive culture
Diversity of thought
Investment in
capability uplift
and talent
NATURAL
ENVIRONMENT
COMMUNITY AND
RELATIONSHIPS
Protection and stewardship
Responsiveness to
of the environment
Management of physical
and transitional climate
change risks
Attraction and retention
of high calibre talent
changing community and
stakeholder expectations
Customer and supplier
relationships
Local economic
investment and growth
Contribution to the
community including
through taxes
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Business activities
OREBODY INTELLIGENCE
DESIGN AND MODEL
BLASTING
MEASURE AND MONITOR
ORE PROCESSING
We have also made significant investments downstream from
blasting in post-blast monitoring, including GroundProbe™ technologies
and measurement technologies that deliver insights around blast
outcomes. FRAGTrack™, for example, captures 2D and 3D blast
fragmentation imagery and data with auto-analysis capability.
Further downstream we are
building capability and technologies
in ore processing with tools like IES.
Upstream from blasting, we
are actively taking steps today
to help our customers better
understand the orebody.
Recent digital acquisitions such
as RHINO™ and RIG Technologies
International give us a market
position in orebody intelligence.
We are collaborating with customers and
The blasting segment of the
industry to develop technologies and integrate
value chain remains at the core
vast amounts of complex geotechnical data
of our business model and the
into the blast design processes. This is where
convergence of new technologies
our SHOTPlus™ Blast Design and OREPro™ 3D
and solutions such as WebGen™
modelling software comes into play, by helping
to ensure the right explosives are delivered into
the right holes, and initiated at the right time,
to achieve desired customer outcomes.
and 4D™ is enabling us to
think and mine differently,
and operate more precisely
and responsibly.
Outputs
Digital solutions
Explosives
Blasting systems
Monitoring
Mining chemicals
Service and support
Outcomes
Our success is dependent on our
ability to create value for a broad
range of stakeholders. Refer to the
Our Performance section for our
FY2021 performance, including how
we use technology and innovation to
create or protect value. An overview
of our approach to technology
and innovation is included on
pages 22 and 23.
$
TECHNOLOGY
AND INNOVATION
Market leadership
Digital transformation
Support customers
growth and
sustainability goals
FINANCE
Maintain investment
grade credit rating
Sustainable dividend
Agility to respond to
growth opportunities
RESPONSIBLE
OPERATIONS
Values-driven
organisational culture
Prevention of harm
(people, product, data)
Transparent
policy positions
Ethical supply chain
PEOPLE AND
CAPABILITIES
Engaged workforce
and inclusive culture
Diversity of thought
Investment in
capability uplift
and talent
NATURAL
ENVIRONMENT
Protection and stewardship
of the environment
Management of physical
and transitional climate
change risks
Attraction and retention
of high calibre talent
COMMUNITY AND
RELATIONSHIPS
Responsiveness to
changing community and
stakeholder expectations
Customer and supplier
relationships
Local economic
investment and growth
Contribution to the
community including
through taxes
ORICA Annual Report 2021 |
17
Operating in a
dynamic environment
Various trends shape our operating environment,
creating both risks and opportunities that impact
how we create value through our business model.
CHANGING COMMODITY DEMAND
Key business
model inputs
$
Changing commodity demand is a strategic
focus for Orica and our customers. This is
supported by analysis on ‘megatrends’
such as urbanisation and decarbonisation,
which will drive high growth across a
diverse range of metals and minerals such
as copper, lithium, iron ore, metallurgical
coal, quarried rock, and nickel. Over time
demand for fossil fuels such as thermal coal
are forecast to flatten and decline. We are
committed to diversifying our commodity
exposure and positioning our portfolio
towards higher growth commodities,
including future-facing commodities.
This is highlighted by our investments in
a joint venture with Yara International on
the Burrup Peninsula (Western Australia)
and the acquisition of Exsa in Peru,
which strengthen our position in the
iron ore, gold, and copper segments.
We also believe quarried rock presents a
significant opportunity, driven by global
infrastructure stimulus linked to the
post-pandemic economic recovery.
We are well-positioned in our core
quarrying regions (North America and
Europe) and will now focus on increasing
our exposure in developing markets
as ongoing urbanisation continues to
drive demand.
We have developed future macroeconomic
and climate scenarios to help us understand
what future trends, opportunities and
risks may emerge as a result of climate
change and the potential financial and
operational impacts on our business
strategy. Our FY2021 Climate Action Report
describes the outcomes of our scenario
planning and planned responses.
DECARBONISATION
Key business
model inputs
$
The transition to a low-carbon economy
is underway, with an increasing number
of countries, private organisations, and
public companies making significant
commitments to decarbonisation and
achieving net zero emissions.
ambition of achieving net zero emissions
by 20501. This transition is underway as
we prioritise tertiary catalyst abatement
initiatives at our Carseland (Canada) and
Australian AN plants, and by progressing
sourcing of renewable energy.
We must adapt to this transition. It will
impact our customers, communities,
and the way we manufacture, and we are
committed to playing our part in the global
response. It is also now widely recognised
that climate change is a risk to long-term
financial stability. In FY2021, Orica has
complemented our emissions reduction
target to reduce Scope 1 and 2 emissions
by at least 40 per cent by 2030 with an
We are also working with our customers
to help achieve their decarbonisation
ambitions as we pursue lower carbon-
intensity AN, support trials in CCU through
MCi and deploy our suite of world-class
digital and blasting solutions to drive
mine site safety and efficiencies.
Further reading:
FY2021 Climate Action Report.
1 Covers our global Scope 1 and Scope 2 GHG emissions under our direct control, and material Scope 3 GHG emission sources.
Material means the GHG emissions embodied in purchased ammonia and ammonium nitrate included in the Scope 3
reporting category of purchased goods and services. These comprise around two-thirds of Orica’s Scope 3 emissions footprint.
18
| ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
TECHNOLOGICAL CHANGE
Key business
model inputs
The pace of technological change continues to
accelerate, with higher customer adoption rates
for mining technology solutions that improve
safety, sustainability, and productivity.
We are leading the market in this transition and
are at the forefront of new blasting technology,
driven by WebGen™, the world’s first fully
wireless initiation system. We have strong
adoption in Canadian underground mines and
our penetration is increasing in the Australian
underground market. We also continue to
bring other blasting technology to the market
including Avatel™ (the world’s first mechanised
development charging system) and 4D™ (next
generation of premium bulk explosives).
We have also developed a strong portfolio
of digital mining solutions, including BlastIQ™
and FRAGTrack™, and are the market leader in
blasting software, modelling and measurement
technologies. Through both acquisitions and
internal product development, we have
expanded our digital capabilities beyond
blasting across the mining value chain, including
orebody intelligence (RHINO™), software (IES)
and monitoring (GroundProbe™).
Our priority is to accelerate the commercialisation
of these technology solutions. To do this, we
have established a dedicated team to work
closely with foundational customers and early
adopters to manage the scale of change and
management required. By capitalising on our
expanded technology offering and an increase
in customers’ appetite for new technology in
high-growth and future-facing commodities,
we expect an increase in adoption of our
technology solutions over the next 12 months.
SOCIAL CHANGE AND DEMOGRAPHICS
Key business
model inputs
The impact businesses have on
people and the natural environment
through their operations, activities,
and products and services, has sparked
deeper stakeholder interest and
increased scrutiny. Businesses are
expected to improve their social, ethical,
and environmental performance to meet
rising stakeholder expectations across a
range of material issues, including cultural
heritage management, modern slavery,
climate action and diversity and inclusion.
To retain the trust of our stakeholders
we are committed to addressing material
issues, providing transparent disclosure
on our performance, and engaging
in regular, meaningful, and inclusive
dialogue with them. Our collaborative,
shared value approach helps us
anticipate, assess, and address risks,
opportunities and impacts relating to
increasing societal expectations.
ORICA Annual Report 2021 |
19
Our global footprint
Our story began in 1874, when we first supplied
explosives to the Victorian goldfields in Australia.
Since then, we have grown to become one
of the world’s leading mining and infrastructure
solutions providers.
13,000+
employees
Gyttorp, Sweden
Non-electric Initiation
Brownsburg,
Canada
Electronic Blasting Systems
and Wireless Electronic
Blasting Systems
Denver, USA
Underground Automation,
Computational Modelling, Novel
Initiation Systems Research,
and Explosives Analysis
GLOBAL REACH
Our global network comprises of continuous
and discrete manufacturing operations,
technical and monitoring centres, and support
offices. It is supported by a network of joint
ventures, AN emulsion plants and bulk depots
strategically located to serve our customers
around the world.
Orica Presence
MAJOR OPERATIONS
Head Office
Regional Head Office
Monitoring Centre
Technology Innovation Centre
Discrete Manufacturing for Initiating Systems
and Packaged Explosives
Continuous Manufacturing Ammonium Nitrate
Continuous Manufacturing Sodium Cyanide
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| ORICA Annual Report 2021
Troisdorf, Germany
Electronic Blasting Systems
Santiago, Chile
Centre of Collaboration
and Innovation
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Customers
in more than
100 countries
Support and
invest in host
communities
$6.21 billion
market
capitalisation
Orica Presence
Head Office
Regional Head Office
Monitoring Centre
Technology Innovation Centre
Discrete Manufacturing for Initiating Systems
and Packaged Explosives
Continuous Manufacturing Ammonium Nitrate
Continuous Manufacturing Sodium Cyanide
Perth, Australia
Orebody Intelligence
Customer Immersion Centre
Kurri Kurri, Australia
Bulk and Packaged Explosives
and Delivery Systems,
Software and Blast Sensors
and Advanced Computational
Blast Modelling
From the production and supply of explosives,
blasting systems, mining chemicals and
geotechnical monitoring to our cutting-edge digital
solutions and comprehensive range of services,
we sustainably mobilise the earth’s resources.
With over 145 years of expertise, our community
of engineers, scientists, technologists, operators,
business specialists and on-site crew support
customers in surface and underground mines,
quarry, construction, and oil and gas operations.
Sustainability is integral to our operations.
Our approach to sustainability begins with
ensuring we operate our business responsibly, and
by prioritising the safety of our people, customers,
and communities. We are in a unique position to
leverage our expertise in technology to create safer
and more responsible solutions and deliver positive
economic, social, and environmental contributions
through our business activities.
Procured goods
and services from
8,500 suppliers in
over 50 countries
Brisbane, Australia
Digital Solutions Customer
Immersion Centre
1 As at 10 November 2021.
ORICA Annual Report 2021 |
21
Technology
and innovation
Today, our industry is being reimagined.
Robotics, automation, and big data are
transforming every element of the mining value
chain. We’re proud to be part of this change
and excited about the critical role we play.
Technology and innovation are crucial
to sustainably mobilising the earth’s
essential resources and maintaining our
competitive advantage. Our ambition
to drive change through technology is
underpinned by our strong track record
of innovation delivery. With over 145 years
of experience and expertise in innovation,
research, and technology development,
we are deeply committed to advancing our
core products and services and progressing
new digital and automated technologies
to create safer operations and unlock
value for our customers across the
mining value chain.
Our Chief Technology Officer oversees
the development and commercialisation
of new and differentiating technologies
and innovations, aligning customer,
business, and technology requirements
throughout the Product Lifecycle
Management (PLM) process. Our extensive
network of technical services engineers,
and more than 250 technology experts
apply our technology and provide support
to deliver value for customers.
Supporting our ambition is a clearly
defined Technology Roadmap that aligns
technologies in development and the
convergence of technologies with our
customers’ needs around the world.
We work closely with customers, industry,
and world-leading academia and invest
in our own research and partnerships
to help solve our shared challenges.
We continuously look for technologies
and innovations that align to our business.
Customers are increasingly demanding
sustainable solutions to help meet their
sustainability goals. Through our Clean
Technology Roadmap, we are focusing
investment on technology to capitalise
on new commercial opportunities in
converging areas of decarbonisation,
automation, and digitisation across
the value chain. This approach also
strengthens our overall customer value
proposition and our competitive advantage
by targeting technologies that improve
safety and productivity, and focus on
renewables, recycled or low-carbon and
circular solutions such as WebGen™, 4D™,
Avatel™ and Cyclo™. With our digital
technologies, we are positioning to quantify
value delivered at every stage of the mining
value chain, including reduced energy
consumption, cost, or emissions, as well
as the ability to manage environmental
factors such as dust and vibration. Our IES
platform is a great example of a digital
technology which can improve the value of
major mine sites through the optimisation
of processing operations.
BOARD FOCUS
A core responsibility of the Innovation
and Technology Committee is
the oversight of investment in
research and development,
as well as overseeing the pace of
commercialisation of new technology
to deliver solutions that will improve
customer performance outcomes.
The Board also continues to focus on
our cyber security resilience, identified
as one of our key operational risks.
22
| ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
INTEGRATED EXTRACTION SIMULATOR (IES)
IES then tasks each design and simulates
its performance for every day of operation
over the life of a mine. This high-resolution
simulation of each design leaves no
stone unturned in the pursuit of optimal
mineral processing.
Orica Senior Manager IES Technology,
Nick Beaton said: “We have demonstrated
that the simulator can improve the value
of major mine sites, this is significant for
the mines using the simulator and for
the whole industry. Optimisation of
processing operations using IES also
enables step-change reductions in power
and water consumption, while greatly
improving recoveries of marginal ores, all
contributing to the future sustainability
of mining operations.”
Orica Vice President Digital Solutions
Rajkumar Mathiravedu said: “From a
technology perspective, we see enormous
synergies with our existing blasting and
measurement solutions, including
BlastIQ, FRAGTrack and ORETrack.
We are integrating our automated,
data science enabled blast design
technology and solutions with IES,
offering end-to-end digitised workflow
solutions from orebody knowledge
through to mineral processing in an
open, secure, and connected platform.”
IES is a cloud-based software platform
designed to reduce the use of energy and
water in mining through the application
of simulation, optimisation, and machine
learning. IES was developed by the
Brisbane-based Cooperative Research
Centre for Optimising Resource Extraction
(CRC ORE).
Following a competitive selection process,
we were selected as the commercialisation
partner for the IES and took the reins of the
platform’s growth strategy in July 2021.
While mine operators can use controlled
blasting techniques as an effective
augmentation of the rock breakage
process, Orica also saw the wider
application of IES as an obvious fit
with its expanding digital solutions offer
across the whole mining value chain.
By harnessing the virtually limitless
scalability available through cloud
computing services, mining companies can
now use IES to configure multiple design
options for a mineral processing plant.
OUR PRODUCTS AND SERVICES PORTFOLIO
Explosives
Blasting services and support
Slope stability and monitoring
– Bulk explosives (e.g., 4D™)
– Technical and specialist services
– Radar and laser-based monitoring systems
– Packaged explosives
– Delivery systems (e.g., Bulkmaster™ 7)
Blasting systems
– Boosters
– Conventional initiating systems
– Electronic blasting systems
(e.g., i-kon™ III)
– Wireless blasting systems
(e.g., WebGen™ 200)
Digital solutions
– Orebody intelligence
(e.g., RHINO™, RIG Technologies)
– Blast design and modelling
(e.g., SHOTPlus™, OREPro™ 3D)
(e.g., GroundProbe™ RGR-Velox)
– Advanced processing and analytic
software (e.g., MonitorIQ™)
Mining chemicals
– Sodium cyanide
– Emulsifiers
– Blast execution
(e.g., BlastIQ™, LOADPlus™)
– Sodium cyanide delivery systems
(e.g., Sparge)
– Blast measurement
(e.g., FRAGTrack™, ORETrack™ 3D)
– Analysers and mineral processing
optimisation (e.g., PROService™)
– Process optimisation (e.g., Integrated
Extraction Simulator – IES)
ORICA Annual Report 2021 |
23
Our
stakeholders
Across the world we interact with a diverse range of stakeholders
with a varied range of interests in our business. We work to build
strong relationships with stakeholders through regular and meaningful
engagement and open and transparent communication.
Stakeholder
What issues are important to them?
How we respond to create value for stakeholders
Employees and
contractors
– Safety, health, and wellbeing
– Skills and capability development to meet
future of work
– Career and progression opportunities
– Leadership
– Diversity and inclusion
Customers
– Superior outcomes, particularly product
performance, reliability, and safety
– Security of supply
– Cost
– Added value through product innovation
and new technologies
– Sustainability of products and services,
from cradle to grave
– Developing a culture of safety, and providing safe systems
of work
– Growing our focus on mental health and wellbeing
– Enabling continuous learning opportunities, with a focus
on skills for the future
– Providing performance-driven rewards and advancement
opportunities
– Building distinctive leadership focused on developing trust
and empowering their teams
– Setting diversity and inclusion targets
– Growing our commercial and operational female talent pipeline
– Delivering on our customer promise to provide the highest
standards of safety, supply reliability, quality, and value
– Leveraging investments in technology to deliver safer
solutions to customers that enable them to improve
productivity and efficiency
– Working in partnership with customers to identify
opportunities to improve sustainability outcomes including
circular business models to maximise the value of chemicals
and materials through their full lifecycle
Suppliers and
business partners
– Business resilience and continuity providing
confidence of long-term opportunities
– Providing ongoing opportunities for suppliers
where possible to provide stability and continuity
– Managing supply chain risks, including ESG risks
– Security of supply
Shareholders,
debt investors
and analysts
– Company performance
– Company strategy and business model, including
resilience of strategy in the short, medium, and long-term
– Management of short, medium, and long-term
risks, including climate change and diversifying
from thermal coal commodity exposure
– Human rights including modern slavery and
rights of Indigenous Peoples
– Corporate governance
– Transparency and disclosure on non-financial
performance
– Providing clear guidance to suppliers on our safety and
sustainability requirements
– Working with suppliers to address growing legislative
requirements and societal expectations on ethical supply
chains, particularly modern slavery issues
– Adapting to a changing environment by leveraging
technology and innovation to maintain performance
outcomes
– Improving disclosure and transparency of financial and
non-financial performance
– Manage impacts relating to our most material sustainability
issues, particularly climate change
– Reducing our exposure to thermal coal by
diversifying our business
– Evolving and improving our approach and performance
on human rights and modern slavery
24
| ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
We undertake a range of activities to engage
our stakeholders that enable us to better
understand their interests and concerns, and
to identify opportunities to better respond to
their needs. Their feedback directly informs
our strategy.
Stakeholder
What issues are important to them?
How we respond to create value for stakeholders
Local
communities
– Product safety and security
– Local operational impacts including water, air,
and noise
– Economic opportunities including employment
and procurement
– Investment in communities
– Ethical business conduct and transparent
communication
– Strong partnerships
– Continuing to foster innovation, research, and development
of technology to increase product safety and security
– Engaging our communities and other stakeholders on our
robust safety approach to management of AN stockpiles,
inventory, and transportation
– Working to improve environmental outcomes
– Supporting our communities impacted by crises including
COVID-19 and extreme weather events
– Increasing our financial contribution and developing
a more targeted community investment approach
– Embedding a shared value approach
Government
and regulators
Industry
associations
Non-government
organisations
(NGOs)
Research,
university and
technical
institutions
– Regulatory compliance, good governance,
– Complying with all relevant legislation and regulation across
and ethical business conduct
– Socio-economic contribution
– Community contribution and impacts
– Innovation, research, and development
our operations globally
– Actively engaging and participating with government and
industry on policy matters, such as anti-dumping
– Providing insight to support evolving energy and climate
policy frameworks particularly in Australia
– Fostering innovation, research and development that
increases product safety and efficiency
– Industry-specific issues and strategy
– Engaging openly and transparently to identify opportunities
for collaboration
– Advocating responsibly and consistently in line with our
policy commitments, including opportunities to raise
industry performance to meet our standards
– Providing input into industry responses to
government consultations
– Ethical business conduct
– ESG performance, particularly action on climate
– Improving ESG disclosures and transparency
– Improving our approach and performance on
material sustainability issues including climate change
– Innovation, research, and development
– Partnerships
– Continuing to collaborate with strategic partners toward
shared commercial and sustainability goals
ORICA Annual Report 2021 |
25
Our
Performance
26
| ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Non-International Financial Reporting Standards
(Non-IFRS) information
This report makes reference to certain non-IFRS financial
information. This information is used by management to
measure the operating performance of the business and
has been presented as this may be useful for investors.
This information has not been reviewed by the Group’s
auditor. The FY2021 Full Year Results presentation includes
non-IFRS reconciliations. Forecast information has been
estimated on the same measurement basis as actual results.
ORICA Annual Report 2021 |
27
Driving performance
Executive Committee
Our Executive Committee supports the CEO to run our
day-to-day operations based on authority delegated
by the Board. The Committee is responsible for
executing our strategy, driving financial performance
and sustainability outcomes, and enabling a supportive
and inclusive culture. The Committee meets weekly
and is chaired by the CEO.
SANJEEV GANDHI
BEng (Chemical Engineering), MBA
Managing Director and Chief Executive Officer
Sanjeev joined Orica in July 2020. He was appointed
Managing Director and Chief Executive Officer in April
2021, after previously holding the role of Group Executive
and President, Australia Pacific, and Asia. Sanjeev is a
former Executive Director of publicly listed German
Chemical company BASF SE. During his 26-year career
with BASF, Sanjeev held several senior marketing,
commercial and business leadership roles including
Head of Asia Pacific and Head of Global Chemicals
Segment (Intermediates & Petrochemicals).
LEAH BARLOW
BEng (Chemical Engineering), BBus (Management
and accounting)
Senior Vice President Discrete Manufacturing
and Supply Chain
Leah was appointed Senior Vice President Discrete
Manufacturing and Supply Chain in April 2021.
Prior to this, Leah held the role of Vice President
Initiating Systems and Packaged Emulsion Global
Manufacturing and has previously held a range of
senior management roles at Orica in both discrete and
continuous manufacturing across Australia and Canada.
JAMES BONNOR
BCom (Economics, Marketing)
President – Europe, Middle East and Africa
DELPHINE CASSIDY
BBus (Accounting), MBA, FAICD
Chief Communications Officer
James was appointed Group Executive and President,
Europe, Middle East, and Africa in July 2021. Prior to
this, he held the role of Group Executive and President,
North America, and has previously held a range of
general management, sales, marketing, strategy and
customer relationship roles across Australia, New Zealand,
Latin America, and North America.
Delphine was appointed Chief Communications Officer in
February 2020, with responsibility for external and internal
communications and brand strategy, in addition to investor
relations which she has led since joining Orica in 2016.
From May 2021, Delphine has also held responsibility for
marketing communications. Prior to this Delphine held a
range of senior investor relations and corporate affairs
roles, including roles at AWB, St Barbara Limited, Orient
Capital and SKILLED Group.
28
| ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
JAMES CROUGH
BCom (Accounting), MBA, FCPA, GAICD
President – North America
CHRISTOPHER DAVIS
BCom, Dip-Acc, GAICD, Chartered Accountant
Chief Financial Officer
BRIAN GILLESPIE
BSc (Hons), MBA, FIET
President – Latin America
James was appointed Group Executive and President,
North America in October 2021. Prior to this, he held
the role of Vice President Finance, Australia Pacific and
Asia including nine months as Interim Group Executive
and President. Before joining Orica, James held senior
financial and executive roles with Incitec Pivot Ltd,
including as Interim Group Executive and President of
Incitec Pivot Fertilisers, and senior management roles
in the areas of international commodity trading, global
manufacturing, and supply chain across markets in
Australia, Asia, and Europe.
Christopher was appointed Chief Financial Officer in
October 2018 and has responsibility for the group
wide finance function, taxation, treasury, sustainability,
government relations, company secretariat, legal, group risk
and assurance, property, and remediation. Before joining
Orica, Christopher held senior financial and executive roles
within Anglo American Plc, including as CFO (from 2008)
and CEO (from 2009 to 2013) of its subsidiary Scaw
Metals Group.
Brian was appointed Group Executive and President,
Latin America in May 2021. Prior to this, he held the role
of Chief Executive Officer of GroundProbe. Before joining
Orica, Brian was the Chief Commercial Officer at DP World
Australia and previously led consulting practices for
Deloitte and PricewaterhouseCoopers (PwC) as the head
of their Australian Energy, Utilities and Mining Practice.
ADAM L. HALL
BCom, LLB (Hons), MBA (HD)
Chief Development Officer
Adam was appointed Chief Development Officer in
June 2019 with responsibility for corporate strategy,
mergers and acquisitions and, from April 2021,
responsibility for Orica’s global cyanide and emulsifiers
business. Prior to joining Orica, Adam held senior
corporate development roles including Vice President,
Corporate Development at CF Industries and
Executive Director, Corporate Strategy at Bunge.
JENNIFER HAVILAND
BCom (Economics), Dip-Enterprise Systems & Analysis,
GAICD, CPA
Chief People Officer
ANGUS MELBOURNE
BEng (Hons) Mechanical Engineering, BSc Applied
Mathematics
Chief Technology Officer
Jennifer was appointed Chief People Officer in January
2021, after having held the role of Vice President Risk
and Assurance. Prior to this, she held a number of senior
finance roles in Group Finance and Manufacturing and
Supply and before joining Orica in 2014, Jennifer spent
over 13 years with Ernst & Young working in Melbourne
and London.
Angus joined Orica in October 2016 as Chief Commercial
Officer and was appointed Chief Technology Officer
in May 2021. He has responsibility for strategic marketing,
research and development, technology commercialisation,
information technology, Orica Digital and Orica Monitor
(including GroundProbe and Nitro Consult). Prior to joining
Orica, Angus held a number of senior executive roles
across his 25-year career at Schlumberger, including
research and development, engineering, manufacturing,
operations, and sales.
GERMÁN MORALES
MSc (Civil Engineering), Executive MBA
President – Australia Pacific and Asia
Germán was appointed Group Executive and President,
Australia Pacific and Asia in April 2021. Previously, he held
the role of Group Executive Latin America. Prior to joining
Orica, Germán spent 18 years at commercial explosives
manufacturer Maxam, holding various leadership roles in
Europe, Africa, the Americas, and Australasia and most
recently, Senior Executive Director and General Manager
civil explosives.
ORICA Annual Report 2021 |
29
$ Financial
Chief Financial Officer’s review
Last year, we reported
our outlook for FY2021
was for significant
improvement across our
markets, particularly in
the second half as the
impacts of COVID-19
were expected to lessen.
The year has proved
more challenging than
we had envisaged.
$427M
UNDERLYING EBIT
FY2020: $614M
Christopher Davis
Chief Financial Officer
$619M
NET CASH
from operating activities
Our financial performance for the year has
been disappointing, reflecting both adverse
external events and under-performance in
areas outside of our control. Underlying
Earnings Before Interest and Tax (EBIT)
reduced by 30 per cent to $427 million
(FY2020: $614 million). Our underlying
results were adversely impacted by a
strong Australian dollar; reduced mining
demand due to trade tensions between
Australia and China; and pricing pressure
resulting from a long ammonium nitrate
market. This was compounded by a highly
competitive environment in Latin America,
rapidly escalating freight costs and the
impact of COVID-19 on customer sites.
Importantly, much of the impact was in
the first half of the year when we reported
an underlying EBIT of $155 million1.
The second half showed a significant
improvement with an increase in sales volumes,
and a focus on cost control that resulted in
EBIT increasing 75 per cent to $272 million.
We recorded a statutory Net Loss after
Tax (NLAT) (attributable to shareholders of
Orica Limited) of $174 million, compared to
a Net Profit after Tax (NPAT) of $82 million
in FY2020. This statutory NLAT was mainly
driven by asset impairments and changes in
accounting standards. More detail about
our financial performance is set out on
pages 32 to 41.
Given the challenges, we accelerated our
overhead cost reduction program. Regrettably,
this program resulted in redundancies
across our corporate functions. We never
take these decisions lightly; but it was
necessary to achieve the efficiencies needed.
“Despite the uncertainty of the external
operating environment, our focus on balance
sheet discipline has ensured strong cash
generation and available liquidity”
1 Underlying earnings including FY2021 earnings from Minova which is treated as a discontinued operation in the
financial statements.
30 | ORICA Annual Report 2021
34.6%
GEARING
47%
DIVIDEND
payout ratio
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Despite the challenges, our teams around the
world have rallied to keep Orica operating
safely and responsibly and stayed focused on
what we could control to start our recovery,
whether it be enabling supply chain continuity
in the regions, successfully integrating the
recently acquired Exsa business in Latin
America, or active management of our liquidity
position by our corporate treasury team.
In this respect I am pleased to report our
progress toward stabilising the SAP system,
a continued focus on debtor collections and
improvements to our procurement processes
has contributed to a reduction in trade
working capital. This allowed us to achieve a
strong cash conversion rate of 127.0 per cent
compared to 74.4 per cent in FY2020, and
strong net cash from operating activities of
$619 million. This strong cash generation,
as well as our focus on monetising
non-core land sales (Villawood and Botany)
of $140 million resulted in gearing of
34.6 per cent (FY2020: 38.2 per cent).
WE HAVE OPERATED WITHIN
A DISCIPLINED CAPITAL
MANAGEMENT FRAMEWORK
OVER THE PAST FIVE YEARS
Our capital management framework is
based on three key objectives:
– Maintaining our investment grade
credit rating;
– Preserving the flexibility for growth
investment and to respond to changes in
the external operating environment; and
– Maximising returns to shareholders.
We maintained our BBB investment grade
credit rating from Standard & Poor’s,
despite revising their outlook to ‘negative
watch’, from ‘stable’, in March 2021.
Our disciplined approach to capital
expenditure continued to support the base
business and pursue growth opportunities.
Total capital expenditure for the year was
$323 million, which was at the lower end
of the guidance range of $320 million to
$360 million. We have ensured sufficient
capital has been allocated to safety and
environmental obligations, as well as
towards maintaining and improving our
existing asset performance.
Capital expenditure allocated to growth
opportunities is subject to rigorous review
and approval processes. This ensures growth
capital is allocated to the opportunities that
provide the best value and returns for Orica.
In FY2021 we spent $121 million in growth
capital and $202 million on sustenance
capital, which includes $14 million towards
reducing our greenhouse gas emissions at
Kooragang Island and Carseland.
While the Burrup plant contributed
positively to our underlying result,
the profit margins are lower than the
East Coast of Australia and did not fully
support its reported carrying value.
During the year, we adopted the
accounting standards interpretation
related to ‘accounting for cloud computing
arrangements’, which requires retrospective
application. This resulted in a large portion
of our previously capitalised investment
in SAP being taken to earnings (in both
current and prior periods). Refer pages
164 to 167 within the financial statements
for further detail.
CONTINUING FOCUS ON
CASH GENERATION
Our focus on cash generation and
managing our capital structure will
continue to be a priority. We will
continue to focus on trade working
capital efficiencies, disciplined capital
expenditure and further sales of non-core
land assets to release cash. In addition,
we will allocate the required investment
to support our decarbonisation pathway.
As we look to the future, we are keeping
our sights set on our vision to be the
world’s leading mining and infrastructure
solutions company. To echo the sentiments
of our Chairman and CEO, I am energised
by our refreshed strategic priorities, and
confident that smarter solutions, optimised
operations and partnering for progress,
realised by our talented people, will create
value for our stakeholders.
Christopher Davis
Chief Financial Officer
Despite difficult operating conditions, our
capital management rigour has delivered
a reduction in net debt to $1,479 million,
a decline of $342 million from FY2020;
our lowest net debt position in four years.
Our liquidity position remains strong,
underpinned by undrawn committed debt
facilities of $1,486 million and cash and
cash equivalents of $594 million.
During the year, we repaid $469 million of
US Private Placement debt and refinanced
and pre-financed a further $365 million
of committed debt facilities. Our average
drawn debt maturity is 5.4 years and
we do not have a material bond maturity
until September 2023. We maintain
the continued support of our group
relationship banks and bondholders.
Gearing at 34.6 per cent is well within
our target range of 30 to 40 per cent
and we have significant headroom
against both our Gearing and Interest
Cover financial covenants.
Orica seeks to pay dividends within the
range of 40 to 70 per cent of underlying
earnings and we have achieved that for the
past five years. I am pleased to report that
despite the challenges and uncertainty of
the pandemic, we have maintained the
dividend payout ratio within policy range
in FY2021 as well.
The dividend for the first half of the year
was 7.5 cents per share. The final dividend
is 16.5 cents per share bringing the full
year dividend to 24.0 cents per share,
a full year payout ratio of 47 per cent.
WE HAVE INCURRED NON-CASH
ADJUSTMENTS ASSOCIATED
WITH ASSET IMPAIRMENTS AND
CHANGES IN ACCOUNTING
STANDARDS
As part of our periodic impairment testing,
and in the context of the challenging
market conditions, we have written off
goodwill of $162 million associated with
the Europe, Middle East, Africa (EMEA)
business segment.
Additionally, we concluded it was
appropriate to impair our interest in
the Pilbara by $277 million after tax.
ORICA Annual Report 2021 |
31
GROUP RESULTS
Year ended 30 September
2021
A$M
Restated
2020
A$M
Change
%
Sales revenue from continuing operations
5,207.9
5,143.0
EBITDA from continuing operations
EBIT from continuing operations
EBIT from Minova (held for sale)
Total EBIT
Net interest expense
Tax expense before individually significant items
Non-controlling interests before individually
significant items
NPAT before individually significant items
Individually significant items after tax
NPAT/(NLAT) after individually significant
items (statutory)
762.7
404.6
22.0
426.6
(105.6)
(102.7)
(9.9)
208.4
(382.2)
913.6
592.9
20.8
613.7
(159.0)
(146.4)
(9.2)
299.1
(216.8)
(173.8)
82.3
1%
(17%)
(32%)
6%
(30%)
34%
30%
(8%)
(30%)
(76%)
GROUP COMMODITY EXPOSURE
Revenue by commodity
from continuing operations1
17% Thermal Coal
7% Metallurgical Coal
8%
Iron Ore
16% Q&C
21% Gold
19% Copper
12% Other2
1 Excludes Minova which is held for sale;
previously included in the “Other” category.
2
Includes Orica Monitor.
The commodity mix reflects Orica’s
diversified portfolio across Coal and
Metals markets, including future-facing
commodities.
Activity in gold markets was consistent
with the prior corresponding period (pcp),
remaining the largest commodity exposure
for Orica and important across all regions,
in both blasting and cyanide offerings.
The growing Q&C market exposure reflects
strengthening in the Northern Hemisphere
in the second half, reflecting both a
seasonal uplift and the commencement
of government infrastructure stimulus.
Copper exposure increased on the pcp
as a result of the inclusion of Exsa results
for the full year, compared to five months
in the pcp.
Thermal coal revenue was impacted by
a sharp decline in Colombia and first half
geopolitical challenges in Australia, offset
by stronger short-term energy demand
in North America.
32
| ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
FY2020 TO FY2021 EBIT
614
(42)
(32)
(31)
(22)
(40)
(27)
12
427
(5)
EBIT
FY20
Restated
Foreign
exchange
SAP
Volume
Manufacturing
Mix &
margin
Rise &
fall lag
Adjacent
businesses
Other
EBIT
FY21
Rise & fall lag
Increases in ammonia input costs, in
particular in the second half of the year,
had a temporary adverse impact on
EBIT in Australia and Asia. While most
of these costs are ultimately passed
through in sales prices, there is a time
delay between rising input cost and the
recovery thereof.
Adjacent businesses
(Orica Monitor and Minova)
The Orica Monitor result was stronger
than the pcp from increased radar sales and
leases, higher services revenue and lower
overhead costs at Nitro Consult following
a successful restructuring.
The result from Minova, which is held
for sale, was slightly higher than the
pcp, from higher customer demand
and the commencement of new
construction projects.
Financial performance
The FY2021 result reflects significant
challenges from adverse market
factors compared to the pcp, including
ongoing uncertainty from the global
COVID-19 pandemic.
Political and economic instability continued
to drive volatility in Mexico and Latin
America, while geopolitical tensions with
China impacted thermal coal exports from
the East Coast of Australia in the first half.
Foreign exchange
In 2021 the Australian dollar strengthened
against most major currencies. This has
resulted in lower EBIT on translation of
foreign-denominated earnings into
Australian dollars.
SAP
Incremental operating costs related
to the SAP system were incurred in line
with expectations.
Volume
Total AN volumes increased 4 per cent on
the pcp, driven by the inclusion of a full year
of Exsa sales. Despite this, the net volume
impact was unfavourable on the pcp given
the reduction of high margin Australian
East Coast volumes from disrupted thermal
coal trade flows, and from lower sales
volumes in Colombia and Chile.
Total initiating system volumes were
in line with the pcp, with an increase
in premium electronic blasting
systems (EBS) offset by a reduction
in conventional detonators.
Cyanide volumes were 6 per cent
down on the pcp, from lower customer
demand and shipping constraints.
Manufacturing
Reduced volumes adversely impacted
manufacturing fixed cost recoveries,
particularly at the large continuous plants.
Following an incident in the first half
at the La Portada manufacturing plant,
increased insurance and sourcing costs
were incurred.
Mix & margin
In the pcp North America benefited from
carbon credits that have not repeated in
FY2021. A competitive environment in
Latin America has resulted in lower contract
pricing to customers, while customers’
cost constraints have also led to temporary
negative mix impacts, particularly in Peru
and across Africa.
Higher sea freight costs impacted earnings
in Latin America and Europe, Middle East,
and Africa (EMEA) where AN product is
sourced offshore.
ORICA Annual Report 2021 |
33
BUSINESS SUMMARY
A summary of the performance of the segments for the 2021 and 2020 financial years is presented below:
Year ended 30 September
A$M
Australia Pacific & Asia (APA)
North America
Latin America
Europe, Middle East & Africa (EMEA)
Orica Monitor
Global Support
Continuing Operations
Minova (held for sale)
Total
External sales
revenue
2021
EBITDA
2,105.9
1,229.6
956.5
801.4
114.5
–
5,207.9
474.3
5,682.2
453.9
168.9
73.3
56.1
43.6
(33.1)
762.7
33.7
796.4
External sales
revenue
2020
EBITDA
2,050.6
1,260.0
855.6
882.8
94.0
–
5,143.0
468.3
5,611.3
522.0
235.7
72.4
96.3
33.1
(45.9)
913.6
32.2
945.8
EBIT
279.7
107.9
28.9
25.0
30.7
(67.6)
404.6
22.0
426.6
EBIT
373.4
165.3
38.4
64.2
20.3
(68.7)
592.9
20.8
613.7
AUSTRALIA PACIFIC & ASIA
External revenue by commodity
33% Thermal Coal
13% Metallurgical Coal
13% Iron Ore
7% Q&C
15% Gold
12% Copper
7% Other
Restated
Year ended 30 September
2021
2020
Change
External sales revenue (A$M)
2,105.9
2,050.6
3%
EBITDA (A$M)
EBIT (A$M)
453.9
522.0
(13%)
279.7
373.4
(25%)
Total AN and Emulsion Volumes
(‘000 tonnes)
1,745
1,763
(1%)
Market conditions
The operating environment across the
region during FY2021 was challenging.
Australian trade tensions with China led
to a reduction in coal production on the
Australian East Coast from October 2020.
Over time, Australian coal producers have
been able to place product in alternative
markets such as India, South Korea,
Japan, and Taiwan.
Asian markets were faced with outbreaks
of COVID-19, which led to some full or
partial mine closures in countries such
as Indonesia, India, Malaysia, Mongolia,
and the Philippines. While conditions have
been relatively stable over recent months,
uncertainty in the Asia region remains.
Global ammonia prices increased
significantly over the second half of
FY2021, with the Fertecon Far East CFR
ammonia index on average approximately
85 per cent higher than the pcp.
34 | ORICA Annual Report 2021
The Australian dollar was stronger against
most major currencies on average during
FY2021 as compared to the pcp.
Segment performance
Explosives volumes were 1 per cent
down on the pcp, mainly as a result of
lower coal production on the Australian
East Coast in the first half due to disrupted
trade flows and the non-repeat of
high margin competitor sales in 2020.
This was partially offset by new business
from Metals customers, both in the
Pilbara and on the Australian East Coast.
EBS demand increased on the pcp,
mainly from new customer contracts
in the Metals business in Australia.
Conventional detonator volumes were lower
than the pcp due to a four-month suspension
of operations at a customer site in the
Philippines following a wall failure incident.
EBIT was down 25 per cent on the
pcp due largely to the unfavourable
market conditions.
The impact of disrupted thermal coal trade
flows which affected high margin volumes
was compounded by the under recovery of
continuous manufacturing plant fixed costs.
Increases in ammonia input costs in the
second half of the year had a temporary
adverse impact on EBIT in Australia and
Asia. While most of these costs are
ultimately passed through in sales prices,
there is a time delay between rising input
costs and the recovery thereof.
The Asia business was impacted by the
adverse foreign exchange movements
compared to the pcp which has resulted
in lower earnings on translation of foreign
currency earnings.
Depreciation on the Burrup plant
commenced in FY2021.
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
NORTH AMERICA
Market conditions
Operating conditions in North America were
varied across the region during FY2021.
Socio-political and economic challenges
continue to constrain the market in Mexico
where mining activity has not yet recovered
to historical levels.
An increase in power consumption in
the USA and high gas prices have seen
a short-term uplift in thermal coal
demand in the second half.
Despite the re-opening of mines and a slow
build in infrastructure activity, ongoing
labour shortages in the USA and Canada
are hampering the region’s recovery from
the worst of the COVID-19 pandemic.
In FY2021, the Australian dollar was
stronger against most major currencies,
including the US dollar, Canadian dollar
and Mexican peso as compared to the pcp.
Segment performance
The 35 per cent EBIT decline on the pcp,
was largely driven by the non-repeat of
carbon credits in 2020 and adverse foreign
exchange impacts.
Explosives volumes were 1 per cent
down on the pcp. Volumes in the USA
were lower due to a decline in coal
production in the Powder River basin
in the first half, partially offset by higher
volumes in Canada as a result of reduced
mining activity in the pcp.
Both EBS and conventional detonator
volumes increased as a result of greater
demand from joint venture partners in the
USA, and from a step up in gold production
and reopening of mines in Canada.
Initiating System sourcing costs were
elevated in the first half, with some
product being temporarily sourced from
third parties following an incident at
the La Portada manufacturing plant.
The planned turnaround at Carseland,
which commenced in the last quarter
of the financial year, resulted in some
AN being sourced from third parties.
This turnaround at the Carseland plant was
successfully completed in October 2021
and included the installation of tertiary
abatement technology to reduce nitrous
oxide emissions.
External revenue by commodity
11% Thermal Coal
4% Metallurgical Coal
9%
Iron Ore
28% Q&C
30% Gold
9% Copper
9% Other
Restated
Year ended 30 September
2021
2020
Change
External sales revenue (A$M)
1,229.6
1,260.0
(2%)
EBITDA (A$M)
EBIT (A$M)
Total AN and Emulsion Volumes
(‘000 tonnes)
168.9
235.7
(28%)
107.9
165.3
(35%)
1,013
1,023
(1%)
ORICA Annual Report 2021 |
35
LATIN AMERICA
Market conditions
Segment performance
The mining sector in Latin America is
showing gradual improvement from the
COVID-19 pandemic, with the exception
of Colombia. The coal market in Colombia
has seen a significant downturn in
production, with many mines moving
into care and maintenance, and one
miner relinquishing their coal mining
licence to the Colombian government.
Political instability continues to impact the
region, as strikes in Chile and social unrest
in Peru, which were disruptive in the first half,
have continued to occur in the second half.
Sea freight costs have increased sharply
on the pcp, particularly in the second half.
The Australian dollar was stronger
against most major currencies on average
during FY2021 as compared to the pcp.
Explosives volumes were 34 per cent up
on the pcp, or 1 per cent up on the pcp
excluding Exsa which was acquired on
30 April 2020.
The reduced coal production in Colombia
significantly impacted AN and initiating
systems demand in the country in FY2021.
Strike action in Chile resulted in significantly
lower explosives demand on the pcp.
In contrast, despite ongoing political
instability, sales of explosives volumes
in Brazil and Peru increased on the
pcp from higher spot sales, demand
from new customers and the full year
contribution from Exsa.
Growth in Peru was predominantly driven
by lower margin entry level products due
to customer cost constraints, mainly in
the first half.
Total initiating systems volumes
increased on the pcp, largely driven
by customer activity in Brazil and the
inclusion of Exsa volumes.
Cyanide volumes were lower than
the pcp from a decline in a customer’s
gold production in Peru as the mine
approaches end of life.
EBIT was 25 per cent down on the pcp
due to unfavourable foreign exchange
movements which has resulted in lower
earnings on translation of foreign
currency earnings and contract pricing in
the highly competitive market, which has
had an impact on margins. Sea freight cost
increases impacted the region given that
all AN and cyanide is sourced offshore.
External revenue by commodity
2% Thermal Coal
4%
Iron Ore
3% Q&C
25% Gold
59% Copper
7% Other
Year ended 30 September
External sales revenue (A$M)
EBITDA (A$M)
EBIT (A$M)
Total AN and Emulsion Volumes
(‘000 tonnes)
Restated
2020
Change
855.6
72.4
38.4
694
12%
1%
(25%)
34%
2021
956.5
73.3
28.9
929
36 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
EUROPE, MIDDLE EAST & AFRICA
External revenue by commodity
1% Thermal Coal
2% Metallurgical Coal
2%
Iron Ore
37% Q&C
26% Gold
8% Copper
24% Other
Year ended 30 September
External sales revenue (A$M)
EBITDA (A$M)
EBIT (A$M)
Total AN and Emulsion Volumes
(‘000 tonnes)
2021
801.4
56.1
25.0
406
Market conditions
Market conditions varied across the region
during FY2021.
Following significant second and third
waves of the COVID-19 pandemic in the
first half, a considerable increase in
vaccination rates across Europe coupled
with government stimulus has led to
improved mining and infrastructure
activity in the second half.
Mining activity in both the CIS and Africa
has been resilient during the pandemic
but has nonetheless been constrained by
quarantine requirements and mine closures
due to outbreaks.
Sea freight costs have increased sharply
on the pcp, particularly in the second half.
The Australian dollar was stronger against
most major currencies on average during
FY2021 as compared to the pcp.
Restated
2020
Change
Segment performance
882.8
(9%)
96.3
64.2
450
(42%)
(61%)
(10%)
Explosives volumes declined 10 per cent on
the pcp, driven predominantly by reduced
mining, tunnelling and construction activity
in Europe and the Middle East.
Initiating Systems volumes were down on
the pcp, mainly from lower demand from
wholesale customers in the Nordics.
Cyanide volumes were lower than the
pcp due to shipment delays to Africa.
EBIT was down 61 per cent on the pcp,
due to unfavourable foreign exchange
movements, lower volumes, and higher
freight costs which affected offshore
sourcing. Further exacerbating this was a
demand shift in Africa to lower margin
products and a reduction in services as
customers sought to reduce costs.
ORICA Annual Report 2021 |
37
ORICA MONITOR
Year ended 30 September
External sales revenue
EBITDA
EBIT
2021
A$M
114.5
43.6
30.7
2020
A$M
94.0
33.1
20.3
Change
22%
32%
51%
The Orica Monitor segment comprises GroundProbe and Nitro Consult businesses.
GroundProbe sales were higher than the pcp, driven by increased demand for radar systems, mainly in Brazil and Africa, the introduction
of new products and remote geotechnical services. EBIT improved on the pcp from positive mix as high margin leases and premium radar
sales increased.
The Nitro Consult EBIT result improved on the pcp, with both increased revenue from new customers and a reduction in costs following
a business restructure that took place in 2020.
GLOBAL SUPPORT
Year ended 30 September
EBIT
2021
A$M
(67.6)
2020
A$M
(68.7)
Change
2%
Global Support costs were in line with the pcp as costs were contained through restructuring activity.
MINOVA (HELD FOR SALE)
Year ended 30 September
External sales revenue
EBITDA
EBIT
2021
A$M
474.3
33.7
22.0
Restated
2020
A$M
468.3
32.2
20.8
Change
1%
5%
6%
Sales volumes were slightly higher than the pcp, due to higher customer demand in the hard rock market in Canada and customer
demand in Europe, offset by lower volumes in the US from the decline in the coal market and the geopolitical tension between Australia
and China, which impacted on sales into the coal segment.
EBIT earnings increased by 6 per cent from the pcp, with strong growth across Canada from increased demand, market share gains and
new construction projects commencing in Europe.
The business remains EBIT and cash flow positive, driving good momentum into the future.
38 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
GROUP BALANCE SHEET
Movement in net assets (A$M)
2,940
201
(271)
(517)
(68)
347
160
2,792
Net assets
30 September
2020
Trade
working
capital
Non
trade working
capital
Net fixed,
intangible
& right of
use assets
Other
net assets
Net debt
(incl. leases)
Minova
net assets
now held
for sale
Net assets
30 September
2021
Trade working capital was $271 million lower than the pcp. $56 million of the reduction relates to the Minova trade working
capital that has been classified as assets held for sale. The reduction of $215 million in the underlying trade working capital is
partially driven by a decrease in trade debtors of $92 million from improved billing and collections. Inventory increased by $84 million
due to increased sales activity towards the end of the year and rising input prices. Trade creditors increased by $207 million driven by
increased purchase activity associated with higher sales volumes as well as tighter credit management and the inclusion of Burrup
creditors which were included in non-trade creditors prior to the plant’s commissioning.
Excluding the transfer of $46 million of non-trade working capital of Minova to assets held for sale, non-trade working capital
liability was $155 million lower due to a $75 million reduction in the defined benefit obligations as a result of an increase in discount
rates and the shift of Burrup creditors into trade creditors post plant commissioning.
Net fixed, intangible & right of use assets decreased by $517 million from the pcp due to depreciation and amortisation expense
of $370 million, impairment charges of $480 million, disposals of $15 million and the transfer of Minova assets of $85 million to
assets held for sale. This was partly offset by additions of $413 million and foreign exchange translation of $19 million.
Other net assets decreased by $68 million from the pcp, driven largely by the revaluation of financial instruments resulting from
the strengthening of the Australian dollar of $113 million and the transfer of Minova other net assets of $34 million to assets held
for sale, offset by a decrease in provision for income tax of $66 million.
DEBT MANAGEMENT AND LIQUIDITY
As at 30 September
Interest bearing liabilities – excluding lease liabilities
Less: Cash and cash equivalents
Net debt
Lease liabilities
Net debt – including lease liabilities
Gearing % – excluding Lease liabilities
2021
A$M
(2,072.7)
593.7
(1,479.0)
(260.4)
(1,739.4)
34.6%
Restated
2020
A$M
(2,741.0)
920.5
(1,820.5)
(298.7)
(2,119.2)
38.2%
Variance
A$M
668.3
(326.8)
341.5
38.3
379.8
–
Interest bearing liabilities of $2,073 million comprise $2,069 million of US Private Placement bonds and $4 million of committed and
other bank facilities. The average tenor of drawn debt is 5.4 years (September 2020 5.0 years).
Cash of $594 million provides for a strong liquidity position, complemented by undrawn committed bank facilities of $1,486 million.
Gearing excluding lease liabilities at 34.6 per cent is within the Group’s target range of 30 to 40 per cent and is well below the 57.5 per cent
covenant default measure. The interest cover ratio at 4.6x also has significant headroom against the debt covenant of 2.0x.
On 2 March 2021, Standard and Poor’s affirmed Orica’s credit rating at ‘BBB’, whilst revising the outlook to ‘negative’ from ‘stable’.
S&P’s rating methodology adjusts Orica’s net debt to incorporate post-retirement benefit obligations, asset retirement obligations
(i.e., environmental, and decommissioning provisions) and leases. Orica’s debt covenants do not include these items.
ORICA Annual Report 2021 |
39
The chart below illustrates the movement in net debt from 30 September 2020.
1,821
Net debt
30 September
2020
(excl. leases)
196
140
1,538
(59)
1,479
(619)
Net operating
cashflows
Net investing
cashflows
Net financing
cashflows
Sub-total
Non cash
movements on
net debt(i)
Net debt
30 September
2021
(excl. leases) (ii)
(i)
Impact of foreign exchange translation.
(ii) The net debt balance at 30 September 2021 excludes Minova cash of $42 million.
INDIVIDUALLY SIGNIFICANT ITEMS
Year ended 30 September 2021
Gain on sale of land
Operating model restructuring
Environmental provision expense
EMEA goodwill impairment
Pilbara impairment
Individually significant items from continuing operations
Individually significant items from Minova (held for sale)
Individually significant items attributable to shareholders of Orica
Gross
A$M
112.4
(45.6)
(39.3)
(162.4)
(317.6)
(452.5)
(1.4)
(453.9)
Tax
A$M
5.7
12.8
11.8
–
41.0
71.3
0.4
71.7
Net
A$M
118.1
(32.8)
(27.5)
(162.4)
(276.6)
(381.2)
(1.0)
(382.2)
Gain on sale of land
Environmental provision expense
EMEA goodwill impairment
Sale of Botany Lot 1 (formerly Lot 9)
In September 2021 Orica completed
the sale of Botany Lot 1 (formerly Lot 9),
resulting in a gain on sale. Due to
the utilisation of carried forward
capital losses, there was no tax
expense on this transaction.
Sale of Villawood
In March 2021, Orica sold its Villawood
property in New South Wales, resulting
in a gain on sale. A net tax benefit was
recognised in respect of the utilisation
of brought forward capital losses.
Operating model restructuring
As part of the global restructuring project,
further redundancy costs were recognised
during the year.
40 | ORICA Annual Report 2021
Botany Groundwater Treatment Plant (GTP)
The performance of trials of remediation
technologies to date has been limited by
lower biological activity than expected.
It is considered unlikely that results will
improve, therefore the assumption of the
future cost saving has been removed from
the provision calculation. This has resulted
in an increase to the environmental
provision with the expense included
as a significant item.
Botany Hexachlorabenzene (HCB) waste
The provision increased due to a
requirement for an additional shipment
to complete waste destruction.
As part of Orica’s periodic impairment
testing, and in the context of the
ongoing challenging market conditions,
a non-cash impairment charge was
recognised on the goodwill in the
EMEA segment. After the recognition
of this impairment charge, $49 million
of goodwill remains in EMEA.
Pilbara impairment
Following the impairment recognised
by Yara Pilbara Nitrates (Pty) Ltd, the joint
venture company that operates the Burrup
plant, Orica has reviewed the carrying
value of its 50 per cent shareholding.
This has resulted in Orica recognising
a non-cash impairment of $158 million
against Goodwill and $160 million
against Property Plant & Equipment.
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
FY2022 OUTLOOK
– Global commodity growth is anticipated to continue, particularly in copper and gold;
and in quarry and construction markets.
– Subject to market conditions, 2022 financial year EBIT is expected to increase
on the pcp from continuing operations:
– Strong momentum in the final quarter of the 2021 financial year has continued,
driving expectations for a stronger first half in 2022 than in the pcp; and
– The result is expected to be weighted towards the second half, reflecting greater
manufacturing plant turnaround activity in the first half.
– Improvement in earnings is expected to be attributable to:
1. Volume growth, expected to be in line with global GDP growth;
2. Increased adoption of advanced technology offerings, particularly digital and monitoring solutions;
3. Key strategic initiatives driving supply chain efficiencies; and
4. Sustainable overhead cost reductions, net of inflation.
– Pricing discipline is expected to broadly mitigate rising input costs and pass-through lag.
– Capital expenditure is expected to be within $340 million to $360 million; the depreciation and amortisation
expense is expected to be up to 5 per cent higher than the pcp.
– A continuing focus on balance sheet and cash flow optimisation, with gearing expected to remain
within stated range of 30 to 40 per cent.
BOARD FOCUS
Financial performance
is a key focus area for the Board
and Board Audit and Risk Committee.
In FY2021, they were involved in:
– Closely monitoring our
financial performance, liquidity,
credit metrics, and associated
financial risks;
– Considering and approving
Orica’s financial reports, audit
reports, market guidance, and
funding requirements;
– Approving our annual and
half year results materials; and
– Approving our capital
management activities.
ORICA Annual Report 2021 |
41
Safe and responsible
business
Safety is our number one priority, always. We pride ourselves on conducting
our business safely and responsibly, from how we work with our suppliers
and manufacture our products, to how we deliver for our customers.
Our approach is governed by robust risk management and corporate
governance frameworks. For more information, see our FY2021 Corporate
Governance Statement and pages 76 to 81 of this report for our risk
management approach.
WORKPLACE SAFETY
While we did not meet all our performance
targets in FY2021, we remain committed
to improving our safety performance by
understanding and addressing the causes
of incident and injury and by enhancing
our safety culture. Implementation of our
five-year Safety, Health, Environment and
Security (SHES) strategic plan commenced
in FY2021.
Safety performance: zero fatalities
but an increase in injuries
For the fourth consecutive year
we achieved zero fatalities and
achieved a reduction in the number
of Serious Life Changing Injuries1.
However, our rate of injury, including
Serious Injuries2 and total recordable
cases, were above target.
Our Serious Injury Case Rate (SICR) was
0.19, with a total of 35 serious injuries
recorded. This is an increase from our
FY2020 performance and above our target
of 0.14 serious injuries per 200,000 hours
worked. While disappointing, we are
committed to maintaining our focus on
injury prevention in FY2022. Our average
days lost per injury reduced by 25 per cent
from FY2020.
We achieved our Serious Life Changing
Injury Case Rate (SLCICR) performance
target. Five of the six cases recorded as life
changing injuries were the result of two
incidents: a passenger transport incident in
a customer-operated vehicle that resulted
in injuries to multiple Orica employees;
and a light vehicle incident. As a result,
controls aligned to transport and
vehicle related incidents will be reviewed.
We continued to enhance our safety
culture and encourage greater reporting
of potential issues, achieving our High
Potential Incident (HPI) Injury Ratio target.
This resulted in a lower number of HPIs
involving injury, when compared to FY2020.
Serious Injury Case Rate
0.19
FY2018
0.22
FY2019
0.16
FY2020
0.19
FY2021
Serious Life Changing Injury Case Rate
0.044
FY2020
0.033
FY2021
New metric in FY2020.
1 Serious life-changing injuries (‘SLCIs’) are a subset of SIs, being those injuries where time was lost and where
there was a potential for fatality or disablement from the injury (regardless of whether it was realised).
2 Serious Injuries (‘SIs’) are those which result in lost work time, and include fatalities, temporary or permanent
disablement, hospitalisations, and less significant injuries where the affected person is unable to attend work
for a day or more.
3
Incidents resulting in injury requiring medical treatment, or fatalities, or loss of security sensitive product,
or significant financial impact.
42
| ORICA Annual Report 2021
Increase in distribution events
There was an increase in Severity 23
transport and distribution events this year
and we did not achieve target. Two of these
events were within our control, however
the remainder were outside our Orica-
controlled network, occurring with product
shipped by third-party providers. We will
continue to implement controls and focus
on addressing third-party transport and
distribution risks.
Distribution incidents
12
9
6
7
1
FY2018
1
FY2019
1
FY2020
2
FY2021
Distribution incidents under Orica control (Severity 2+)
Distribution incidents not under Orica control (Severity 2+)
Cultivating a culture of safety
through our Major Hazard
Management (MHM) Program
Our MHM program is integral to our
strategic safety focus areas, defining key
safety controls and establishing rigorous
verification protocols. This year, our leaders
completed over 10,000 independent
verifications of our key hazard controls.
MHM is reinforced in everyday work
through our Safety Leadership Interaction
program. This leverages the relationship
between supervisor and worker to enhance
communication around safety controls.
In FY2021, we completed over 75,000
interactions.
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
THE IMPACT OF CALLING AN MHM STOP
In February 2021, a Mobile
Manufacturing Unit (MMU™) operator
at a customer site in Penasquito, Zacetas
(Mexico), called a stop to operations
after noticing the bench ground was
unlevel and dangerous to drive and walk
on. Two years earlier, a similar condition
had resulted in an MMU™ roll-over at the
same mine. The customer agreed the
ground was unsafe and the ground was
levelled before operations continued.
Our MHM program has now been
expanded to include contractors through
the Contractor Management Program.
The initial phase was developed and
piloted this year, delivering a systematic
assessment of high-risk contractors
through a pre-qualification process.
Appropriate systems and competencies
are then put in place to ensure any
major hazards that may be present
in their work are managed.
MHM stops are communicated and
celebrated internally, ensuring learnings
are shared and giving our people the
confidence to speak up and call a stop.
Controls are managed through the
implementation of operational protocols
to prevent and mitigate occurrences.
The mental health and wellbeing of our
people continues to be a top priority with
many affected by continued social isolation
and impact on families and communities.
A Global Wellness strategy was developed
to support our people in managing their
mental health, with oversight from
our newly established Global Wellness
working group. A communications strategy
around reducing mental health stigma is
being rolled out with leaders, including
our CEO and members of our Executive
Committee, leading by example and
discussing mental health experiences
and challenges.
Employees are encouraged to reach
out to our Employee Assistance Program
provider for further support.
Creating a culture of safety in which all
employees are empowered, and expected,
to call an immediate stop to work if they
observe a potentially hazardous situation
is core to our MHM program. Over 1,000
stops were called across diverse business
lines and geographies, which is a three-fold
increase from FY2020. This highlighted our
company-wide focus on safety and the
willingness of our people to speak up.
Developing capable safety leaders
Translating our safety goals into results
requires capable leaders. In FY2021, we
launched a bespoke safety leadership
program, Lead@Orica, to advance safety
leadership capacity across all levels of
our organisation. The program is being
developed in collaboration with the Griffith
University Safety Science Innovation Lab
and Queensland University of Technology
(Australia) and is founded on an evidence-
based model for safety leadership.
The program aims to develop, recognise,
and support leaders who can deploy
adaptive leadership styles to drive improved
safety performance on the ground.
FY2022 Priorities
– Enhance our MHM procedure for
collisions (focusing on high occupancy
vehicles and driver distraction) by
understanding incident root causes
and effective interventions.
– Develop contractor management group
procedure and processes.
PHYSICAL AND MENTAL HEALTH
IN THE WORKPLACE
Managing physical health risks
Protecting our people by managing health
risks remains a focus. We implemented a
range of activities including:
– health risk assessments for continuous
manufacturing sites, with controls
developed to prevent and mitigate
exposure to material harmful agents;
– an enhanced management process
for mine dust related health risks by
updating our key controls;
– the creation of a working group on
mine dust exposure to provide additional
oversight; and
– standardised Occupational Exposure
Limits (OELs) and Biological Exposure
Indices (BEI) across the organisation to
align with best practice recommendations
(previously, these differed across regions
in line with local laws and regulations).
Managing the ongoing impacts
of COVID-19 on physical and
mental health
Under the guidance and oversight of
our COVID-19 Vaccination Working group,
we continued to manage the health,
operational, legal, ethical, and social risks
related to the pandemic. This included
enhancing our controls following advice
from relevant international and local
health authorities.
ORICA Annual Report 2021 |
43
APA Wellness program
PRODUCT SECURITY
In our Asia Pacific and Australia region,
a Wellness working group and Wellness
Champions network were established as
part of a strategy to focus on education,
prevention and intervention. The strategy
has four key areas: mental health, physical
health, financial health, and social health.
As part of our focus on mental health,
Yes Psychology were engaged to conduct
an employee wellness survey to determine
the effectiveness of our existing health
and wellbeing activities and identify
improvements. Yes Psychology also
promoted the wellness resources available
to our teams, including Optum, our
Employee Assistance Program provider.
Through Optum’s Live Well website,
employees can access resources
designed to enhance positive mental
health, resiliency, and work/life balance.
As a manufacturer of commercial
explosives and blasting initiating systems,
we have specific responsibilities to ensure
we partner with and sell to organisations
that will use our products for their intended
purpose. We also have a responsibility to
eliminate or minimise any risks to safety,
health, or the environment across the
lifecycle of our products and services.
We take our product security
responsibilities seriously and strive to be
champions of a safe and secure value
chain. We select our partners following
detailed due diligence covering security
across the product lifecycle, from
transport to storage and their final
end-use. No product security incidents
categorised as a Severity 3 or higher
were recorded in FY2021 (FY2020:
zero, FY2019: zero).
We also encouraged our people to
engage in wellness webinars delivered by
Yes Psychology. Topics included handling
change at work, juggling skills for parents,
healthy sleep and lifestyle habits, and
social connectedness.
Of the Severity 2 product security
events that occurred, half were related
to transport. This vulnerability continues
to be an area of focus and is being
addressed through several mechanisms,
including enhancing product traceability.
FY2022 Priorities
– Conduct a pilot of key control
procedures and verification for
dust mitigation/suppression for
mining services.
– Update and communicate our
Health Group Standard to incorporate
standardised OEL and BEI.
– Provide ongoing management
of COVID-19 through strict risk
management protocols.
ADVANCED DETONATOR
SECURITY WITH WEBGEN™
Our wireless blasting system
WebGen™ offers a step change
improvement in detonator security
compared to electric detonators.
Wireless technology provides an
additional level of security by
requiring four 64-bit encryption
codes and a specific voltage for
initiation. To prevent tampering, any
attempt to initiate with the wrong
voltage can destroy the detonator’s
internal systems, rendering it
unusable. The WebGen™ system
also requires a specific transmission
system and antenna which are not
available for consumer purchase.
44 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Product traceability through
‘Track and Trace’ technology
Track and trace technology enables a
product’s status to be captured through the
value chain and to retrospectively identify
and verify its path. We are currently rolling
out the technology across all discrete
manufacturing sites as a priority to enable
our product to be tracked with speed
and recovered in the event of loss or
theft. This further enhances our product
stewardship approach and enables us to
provide greater reassurance to stakeholders
in our management of security risks.
FY2022 Priorities
– Continuing implementation
of track and trace technology.
– Develop and implement a security
training program for the Group
Standard on Security.
CYBER SECURITY
Cyber security procedures and controls are
in place to protect our global information
network and limit the potential likelihood
and impact of a cyber risk event. Our cyber
security strategy is focused on controls
to prevent, detect, respond, or recover
from attacks that could result in critical
services outages or loss of production
and business services.
In FY2021, we continued to mature
our cyber security controls to drive
three key outcomes:
– extend cyber security into customer
and manufacturing systems;
– detect and respond rapidly to
malicious software or intruders
in our network, focusing on
ransomware; and
– increase data security, safeguarding
our own and our customers data.
Assuring and improving controls
across our business activities
We undertook several activities to assess
the efficacy of existing controls and identify
opportunities for improvement across
our business activities. This included:
– commencing a project to audit and
upgrade security of our manufacturing
networks;
– maturing our supply chain assurance
process and continuing to engage with
our material and high-risk third-party
service providers to understand their
cyber security approach and address
control gaps; and
– continued verification and testing of
customer products through security
assessments.
Our cyber security posture is tested with
crisis simulations, penetration testing and
by using external cyber professionals to
perform ‘ethical’ hacking exercises.
ORICA Annual Report 2021 |
45
Increasing security to support
our new way of working
In response to COVID-19 restrictions
around the world, our corporate office
teams transitioned to working from home
arrangements. To ensure our network was
protected and secure, we enhanced and
extended multi-factor authentication to
verify the legitimacy of all employees and
contractors with IT systems access and
updated device security to decrease
ransomware risk by improving detection
and response controls.
These measures were supported through
an enhanced security awareness program
for employees and contractors, including
standard training on security controls
for everyone with IT system access, and
tailored training through, for example,
phishing email simulations.
We continue to evolve legacy network
and security architectures toward a unified
networking and security service that
increases scalability, agility and security
in a user and application environment
that is highly distributed and mobile
across the Internet.
We will continue to enhance our key
cyber security controls in FY2022.
ETHICAL BUSINESS CONDUCT
How we conduct business
Our Code of Business Conduct (Our Code)
brings our values to life and sets out
our expectations for the way we work.
This includes compliance with relevant laws
and regulations, requirements specific to
Orica, and additional company policies,
standards, and procedures. This year, we
commenced a review of Our Code; with an
updated version to be released in FY2022.
The way we work is governed by Our
Code. All employees and contractors
who are subject to the requirements of
Our Code complete mandatory training
upon joining Orica and complete refresher
training every two years.
There are consequences for breaching
Our Code and we encourage people to
speak up where they suspect a breach.
Reporting issues and grievances
Incidents or concerns involving a breach
of Our Code or work-related grievances
can be raised through multiple channels,
including our independent, confidential
Speak-up service, where reports can be
made via telephone or website, or raised
through management, human resources or
other internal channels. Reports can be made
at any time and in multiple languages using
the Speak-up service hotline. Reporters
have the option to remain anonymous.
Our Whistleblower Policy outlines our
commitment to ensuring the identity of
reporters remains confidential and they are
not subject to detrimental conduct as a result
of making a report. This provides protection
for reporters and creates an environment
where people feel safe and encouraged to
report breaches of Our Code, including
unethical, illegal, or improper behaviour.
In FY2021, 73 per cent of cases reported
related to workplace and personnel grievances.
Reports by Category %
Ethics or compliance
10%
Theft, fraud,
security issues
17%
Personnel matters,
misuse of equipment
73%
When concerns are raised through our
available mechanisms, a review process is
undertaken, and a response is determined
according to the framework in our Group
procedure. In FY2021, 25 per cent of reports
were substantiated. Where allegations were
substantiated, appropriate action was taken to
remedy and prevent re-occurrence, including
termination of contract where required.
Reports by Outcome %
Under investigation
8%
Not Pursued1
35%
Inconclusive
5%
Substantiated
25%
Unsubstantiated
27%
46 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Ethics and Compliance program
TAX TRANSPARENCY
Compliance against our high standards
of ethical business conduct is supported
through our Ethics and Compliance
program. This establishes clear
requirements and controls around
key compliance risks, including anti-
corruption, anti-bribery, trade sanctions
and competition (anti-trust) laws.
Benchmarking our program to
promote continuous improvement
We aim to continuously improve our
Ethics and Compliance approach. This year,
we engaged an independent third-party,
the Ethisphere Institute, to benchmark our
Ethics and Compliance program against
international best practice. An improvement
program has been developed in
response to the assessment results, with
implementation to commence in FY2022.
Creating deeper awareness of the
Ethics and Compliance program
Increasing internal awareness of our
key compliance risks and the role of
our Ethics and Compliance program in
managing these was a key focus in FY2021.
We undertook several activities to achieve
this including:
– hosting an ‘Ethics and Compliance Day’,
where regional business and regional
Ethics and Compliance team members
facilitated a variety of activities to
increase knowledge of topical issues
and our approach to compliance; and
– enhancing our online registration
portal and supporting processes for
how we report, assess, and monitor
gifts, entertainment, sponsorships and
donations. The new portal promotes
greater accessibility and ease of use,
automating and streamlining the
approval process across the organisation.
FY2022 Priorities
– Update and rollout of our refreshed
Code of Business Conduct and
associated training.
– Revising our Ethics and Compliance
Group Standard and rollout of
associated training.
– Enhancing our existing Ethics and
Compliance program as identified
in the benchmarking activity.
Tax transparency is a critical element
of ethical business behaviour. We are
committed to complying with all relevant
taxation laws in a responsible manner,
with all taxes properly due, accounted
for and paid. A tax standard and relevant
procedures are in place to ensure our tax
compliance obligations are managed.
Our effective tax rate before individually
significant items is 32.0 per cent, which
is in line with FY2020.
For more information, refer to our
FY2021 Tax Transparency Report.
HUMAN RIGHTS
We are committed to respecting and
upholding the human rights of our
people, and those who may be impacted
by our operations and business activities.
Our approach to respecting human rights
is guided by internationally recognised
standards and embedded within our
Charter, Our Code, risk management
approach and organisational policies.
Rights of Indigenous Peoples
and their cultural heritage
In May 2020, rock shelters at Juukan Gorge,
a significant cultural heritage site for the
Traditional Owners in Western Australia’s
Pilbara region, were destroyed through
blasting activities. Their destruction was a
substantial loss for First Nations Peoples
cultural heritage and Australian history.
Following this event and acknowledging
the risks that our own operations, products
and services pose to cultural heritage sites,
we engaged a third party to perform an
assessment of our current approach to
engaging with First Nations Peoples and
cultural heritage management. Our current
state was benchmarked against the United
Nations Declaration on the Rights of
Indigenous Peoples (UNDRIP) and external
stakeholder expectations.
The assessment identified opportunities
to reduce risk related to the protection of
cultural heritage and more meaningfully
engage with our First Nations communities
through the enhancement of our
governance structure, development of
clear policies, practices, and systems,
and increasing our cultural competency.
A roadmap to enhance our approach to
First Nations engagement will commence
in FY2022.
Empowering our employees
to protect cultural heritage
In addition to safety, we empowered
our employees to stop work at mine sites
if they held other concerns about a blast,
including the risk of cultural heritage
impact. This signals a step change for
how we approach our responsibility when
it comes to cultural heritage protection.
We continue to work collaboratively
with our customers to protect cultural
heritage in Australia and internationally.
Maturing our approach to
managing modern slavery risks
In FY2021, we performed a modern slavery
gap analysis to identify opportunities for
improvement in our existing modern slavery
risk management approach across our
operations and supply chain. While the
gap analysis recognised progress made
to date, including the development and
piloting of a supply chain Modern Slavery
Risk Management Plan and tools, it also
identified opportunities for enhancing our
governance, policy, process, and systems.
The resulting recommendations have been
developed into a future roadmap and
implementation plan, which will be rolled
out from FY2022.
For more information on our approach to
managing modern slavery risks and the
activities undertaken throughout the year,
refer to our FY2021 Modern Slavery
Statement.
BOARD FOCUS
Our Board and Board
Committees are collectively focused
on safety and corporate responsibility
in all aspects of the business.
Some examples that demonstrate
this commitment include promoting
a positive health and safety culture,
oversight of product security risk
and controls, monitoring our cyber
security resilience, and the approval
of commitments around modern
slavery and tax transparency.
1 Reports received through the Speak Up service may not be pursued where they do not raise issues of sufficient substance to warrant investigation, do not provide sufficient information
to undertake an investigation, or are a repeat of an existing allegation which is already subject to investigation.
ORICA Annual Report 2021 |
47
People and
capabilities
The capabilities of our talented workforce are key to our competitive
advantage. We are committed to creating a workplace and culture where
our people are energised by the work they do, empowered to achieve
their full potential, and inspired to have a positive impact on others.
REFLECTING ON A
DIFFICULT YEAR
CHANGES TO OUR
EXECUTIVE COMMITTEE
This year has been difficult for our teams
who continue to deal with the ongoing
disruption caused by the pandemic.
Cost pressures also necessitated a targeted
reduction in our workforce. As we have
said farewell to some of our colleagues,
we are cognisant of the impact of internal
restructuring on our employees.
The safety, health and wellbeing of our
people has been our number one priority.
We are proud of our teams, who have
demonstrated incredible resilience, and
commitment to our purpose and upholding
our values, even in the most challenging
circumstances. For more information on
how we supported our people, refer to
Physical and Mental Health in the
Workplace on page 43.
Several of our initiatives, including our
leadership and development programs and
employee engagement survey, were paused
during FY2021 as we prioritised other
critical business activities. We have used
this time to reset. As part of the broader
business strategy refresh, we reshaped
our people priorities to reflect the short
and long-term business priorities and
to equip our workforce with the skills,
competencies and attributes needed
to enable our future success.
Since Sanjeev Gandhi’s appointment
to Chief Executive Officer in April 2021,
our Executive Committee has undergone
some changes, which include both lateral
moves and internal promotions.
– Germán Morales, previously President –
Latin America, was appointed President –
Australia Pacific, and Asia.
– James Bonnor, previously President –
North America, was appointed President
– Europe, Middle East, and Africa.
– Leah Barlow, previously Vice President
Global Manufacturing, was appointed
to the newly created role of Senior Vice
President Discrete Manufacturing and
Supply Chain, with responsibility for Orica’s
Initiating Systems and Packaged Explosives
plants and global supply chain.
– Brian Gillespie, previously CEO
GroundProbe, was appointed President –
Latin America.
– James Crough, previously Vice President
Finance APA, was appointed President –
North America.
Earlier in the year, Jennifer Haviland joined
the Executive Committee as Chief People
Officer, having previously held the role of
Vice President Risk and Assurance.
We are proud to promote the internal
mobility and career development of our
people, which demonstrates the strength
of our talent engine. Our focus on talent
and career management will continue to
support cross-business moves, deepening
our succession management into the
organisation and the development of
key talent through mentorship.
GOVERNANCE
We are guided by our Code of
Business Conduct, which applies
to anyone who works for, or on
behalf of, Orica and sets out our
expectations for the way we work.
This includes our values, compliance
with relevant laws and regulations,
and requirements specific to Orica.
Our Human Resources (HR) Group
Standard provides the minimum
requirements and expectations
to manage human resources
activities across the Group, and
our processes are enabled through
our globally integrated HR system,
Success Factors.
Our Board Human Resources
and Compensation Committee
monitors progress against key
strategic objectives within
remuneration, culture, diversity
and talent development.
48 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
ORICA Annual Report 2021 |
49
PEOPLE AND CULTURE
STRATEGY REDEFINED:
FOUR KEY PRIORITIES
Our People and Culture strategy has been
reshaped to strengthen our core capabilities
within an efficient operating structure and
foster a performance-driven culture by
equipping our people with the skills,
attributes and competencies needed to
deliver our business strategy and vision.
The refreshed priorities reflect our focus on
becoming a more agile organisation with a
reduced cost base, optimising technology
investment and directing our resources to
scalable and flexible programs and solutions
that reach across our employees and empower
them to shape their careers at Orica.
We have defined four strategic
people priorities:
– Building talent and career
management: a renewed emphasis
on strengthening our talent engine
to ensure identification of key talent,
skills, and capabilities to deliver on
Orica’s growth engines.
– Engaging our People
and enabling a performance
culture: we want to inspire
and connect our people with
our renewed purpose and vision.
This means refocusing on employee
engagement, culture, and our
employee value proposition.
– Developing our core
capabilities: we will focus
on defining and deploying a
capability uplift program with
core capabilities required to
support our strategy including
digital and technology, commercial
capability, and leadership.
– Delivering standardised
and simplified processes: as
SAP stabilises, we are shifting focus
to realising the efficiencies it offers.
Various initiatives are underway
aimed at global standardisation
and simplifying the way we work.
50
| ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Our Diversity and Inclusion Policy can
be found in the Governance section
of the Orica website. This outlines our
vision, commitment, and approach.
Despite our global footprint, cultural
diversity at a senior leadership level declined
from 48.0 per cent to 40.4 per cent in the
number of senior leadership roles held by
people who identify their nationality as
other than Australian or New Zealander.
The same measure, applied to our total
workforce, remained in line with last year
at 82.7 per cent (FY2020: 81.0 per cent).
Women as a percentage of senior
leadership decreased from 30.9 per cent
in FY2020 to 28.3 per cent1 due to the
organisational restructures where more
functional management layers were
removed, which have a greater female
representation. Female representation
on our Board remained at 37.5 per cent
(three of our eight Directors), exceeding
our target of ≥30 per cent.
Progress towards our FY2024 diversity
objectives is driven by the commitment
of our senior leaders. Each Executive
Committee member is setting internal
targets and actions for FY2022 to
further the attraction, development and
retention of key talent including their
commitments towards our diversity
and inclusion objectives.
ORGANISATION-WIDE LISTENING
TO EMPLOYEE VOICE AND
EXPERIENCE IN FY2022
While an enterprise-wide engagement
survey was not conducted in FY2021, a
number of targeted pulse surveys were
deployed along with gathering of insights
and feedback from focus groups to inform
our refreshed purpose, vision, and strategy.
The strategy refresh included a company-
wide survey to understand what motivates
and inspires our employees, and what
we can do to support our future success.
The importance of good leadership
and people development opportunities
(promoting from within and leadership
training) came through strongly.
We will continue listening to employees
in FY2022, deploying an enterprise-wide
survey supplemented with pulse surveys.
ENABLING AN
INCLUSIVE CULTURE
In FY2021, we employed 13,374 people
across 49 countries, representing over
90 nationalities and bringing together
a diverse range of backgrounds,
experiences, and skill sets.
We are committed to enabling an inclusive
work environment, where our differences
are valued and our people feel respected,
connected, and engaged. Fostering a
positive and inclusive culture supports
the growth of a sustainable pipeline of
diverse talent and ensures we have the right
culture and environment to develop and
retain a diverse employee population.
MEASURING WHAT MATTERS
We have evolved our suite of metrics for
FY2022 to reflect our progress to date and
to build on commitments for the future.
We will extend our focus from gender and
cultural diversity across senior leadership
to measure gender balance in the wider
workforce. We will also measure sense
of belonging and inclusion by our people
in the workplace.
Gender representation across the senior
leadership population will be measured
with a slightly tightened definition,
reflecting our most influential population
of decision-makers. A target for gender
representation in the workforce will be
introduced for FY2022 and beyond, along
with the measurement of inclusion in the
workplace in the form of an Inclusion Index.
A full scorecard for FY2021, and
FY2022 targets, are included in our
FY2021 Sustainability Supplement.
BOARD FOCUS
Our Human Resources and
Compensation Committee oversees
human resource strategy and policy,
as well as Director and Executive
remuneration frameworks. Our
People and Culture strategy was
refreshed during the year and has
been reshaped to reflect our short
and long-term business priorities,
and to focus on the key enablers
to improve organisational culture.
For further detail on our
remuneration policies and focus
areas for the FY2021 financial year,
refer to the Remuneration Report
on page 86.
1 Due to the expanded definition of senior leaders from FY2021, our metric for Women in Senior Leadership, reported in our FY2020 Sustainability Report as 25 per cent, has been
adjusted to 30.9 per cent for FY2021.
ORICA Annual Report 2021 |
51
Climate and the
natural environment
We continue to demonstrate strong environmental stewardship across
our value chain. From decarbonising our own operations to innovating
sustainable customer solutions – we are working toward our own
sustainability goals and supporting those of our customers.
OUR PATHWAY
Ambition to achieve
net zero
emissions
by 20501
At least 40%
Scope 1 and Scope 2
emissions reduction
target by 2030,
from 2019 levels
13%
achieved
towards
2030 target
$45M
assigned
for further
decarbonisation
over next 5 years
CLIMATE RESILIENT ECONOMIC GROWTH
This year, we published our first Climate
Action Report in response to investors
looking for more comprehensive
information on our climate performance.
The report details our FY2021 progress
and is aligned to the recommendations
of the TCFD.
We are deploying Orica’s financial
assets and capability to position the
business for a low-carbon economy.
We are focused on investing for
long-term sustainable earnings and
growth, and to deliver increased
returns to shareholders.
This year, solid progress has been
made across each area of focus in
our strategy for climate action.
OUR STRATEGY FOR CLIMATE ACTION
STRATEGIC PILLARS
EMBED CLIMATE IN
OUR STRATEGIC
DECISION-MAKING:
Integrate consideration of
climate change into our
governance, risk management,
and strategic and financial
planning processes
ACCELERATE
DECARBONISATION:
CATALYSE
CLIMATE ACTION:
Reduce Orica’s GHG emissions
in the decade to 2030
Mobilise our people, collaborate
and help customers respond to
climate change, foster innovation
and technology, and advocate
responsibly on climate
Guiding Principles
A transition to a net zero
emissions economy is required
to limit global warming in
line with the goals of the
Paris Agreement2
The path to a net zero
emissions economy must
represent a ‘just transition’
and encourage sustainable
development3
Commodities, raw
materials and technology
are fundamental to the
low-carbon transition
Transparency
and disclosure drive
individual and collective
business performance
1 Covers our global Scope 1 and Scope 2 GHG emissions under our direct control, and material Scope 3 GHG emission sources. Material means the GHG emissions embodied in
purchased ammonia and ammonium nitrate included in the Scope 3 reporting category of purchased goods and services. These comprise around two-thirds of Orica’s Scope 3
emissions footprint.
2 Net zero emissions: net zero emissions are achieved when human-induced emissions to the atmosphere are balanced by natural removals over a specified period.
The Paris Agreement recognises the need to achieve net zero emissions by the second half of this century.
3 Ambitious emissions reductions are achieved in conjunction with economic development, adaptation, poverty and reducing social inequity.
52
| ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
EMBEDDING CLIMATE IN OUR
STRATEGIC DECISION-MAKING
Our approach to climate governance
continues to strengthen with the
integration of climate-related risks
and opportunities into our business,
strategic and financial planning.
Climate governance
This year, we further strengthened the
links between executive remuneration
and climate change.
Short-term incentive compensation of the
CEO and Executive Committee members
includes a climate change metric with
a 10 per cent weighting. Performance is
measured on progress towards achieving
our target to reduce Scope 1 and
Scope 2 operational emissions by at least
40 per cent by 2030 from 2019 levels.
The remuneration of our Executive
Committee members will also be
measured against additional sustainability
metrics as part of the strategic component
of their respective scorecards. More detail
is included in our Remuneration Report
on page 86.
Integrating climate risk and
opportunity
We test our business strategy against a
range of plausible future climate scenarios.
Our scenario analysis is designed to
challenge our strategic thinking and
help identify short and long-term
responses to mitigate climate risks and
capture new opportunities.
In FY2021, we made important changes
to our approach, including updating our
Paris-aligned Scenario 1 to a 1.5°C pathway.
We undertook a series of activities to
further integrate climate risk into our
strategic and financial planning, including:
– using the outcomes of our scenario
analysis to drive risk and opportunity
awareness and management across
the business;
– developing additional climate
change risk registers to better
understand, integrate and manage
our climate risks and opportunities
at a regional level; and
– strengthening our assessments
of the physical impacts of climate
change on our major global assets
and operating regions.
We have outlined our approach to
climate risk management, outcomes, and
responses to scenario planning in our
FY2021 Climate Action Report.
ACCELERATING
DECARBONISATION
We developed an evidence-based
decarbonisation roadmap last year to
underpin our 2030 target. Work continued
this year to understand longer-term
technological and economic pathways
towards decarbonisation in 2050 and to
complete a full Scope 3 emissions inventory.
Progress against targets
Our global operational Scope 1 and Scope
2 emissions for FY2021 were 1.9 MtCO2-e,
a 10 per cent decrease from FY2020.
Scope 1 emissions decreased by
12 per cent from FY2020, driven primarily
by updates to emissions accounting
methodology, contributing 53 per cent
of the overall decrease.
Lower production due to China trade
tensions and improvement in emissions
abatement performance also contributed
to the decrease.
Scope 2 emissions increased 3.5 per cent
from FY2020. While we continue to
implement a range of energy efficiency
initiatives, changes in grid electricity
intensity factors in Alberta, Canada have
contributed to the observed increase
since FY2019.
Last year, we set a target to reduce
operational Scope 1 and 2 GHG emissions
by at least 40 per cent by 2030, from 2019
levels. We remain on track to meet this
target having reduced operational emissions
13 per cent4 since the FY2019 base year.
Our global GHG emissions intensity
(Scope 1, Scope 2, Scope 3) was
1.64 tCO2-e per tonne of AN sold.
We are on track to remain below our
FY2022 target (1.7 tCO2-e per tonne of
AN sold). With a full Scope 3 emissions
inventory completed in FY2021, we will
review and consider future targets
encompassing Scope 3 emissions sources
during the year ahead.
Global Scope 1, 2 and 3 GHG emissions
were 8.9 MtCO2-e. This represents an
eight per cent increase from FY2020
primarily due to accounting for additional
Scope 3 emission sources and assessing
our full value chain emissions boundary
for the first time.
Global GHG emissions and emissions intensity per tonne of AN sold
1.86
332
1,799
1.81
260
2,244
1.75
242
1,941
1.67
267
1.64
276
1,849
1,625
FY2017
FY2018
FY2019
FY2020
FY2021
Total Scope 1 emisisons (kt CO2-e)
Total Scope 2 emisisons (kt CO2-e)
Emissions intensity (tCO2-e/tonne AN sold)
Note: FY2019 – FY2020 data has been restated to account for changes in emissions accounting methodology.
4 We report our GHG emissions transparently. For the FY2021 reporting year, global emissions accounting methodologies changed. Accordingly, our FY2019 target baseline year and
performance data has been restated. This allows for a direct comparison over time and a more precise evaluation of our ongoing performance. Further information is outlined in our
Climate Action Report.
ORICA Annual Report 2021 |
53
ORICA GREENHOUSE GAS EMISSIONS
ALONG THE VALUE CHAIN
Upstream Value Chain
Orica Limited
Downstream
Value Chain
11%
Purchased
Ammonia
Scope 3
43%
11%
21%
4%
10%
<1%
Purchased Ammonium Nitrate
Scope 3
Other
Manufacturing
Inputs &
Feedstocks
Scope 3
Operational
Emissions
Scope 1 and 2
Logistics
Scope 3
Product
processing,
use &
end-of-life
Scope 3
Other
sources1
constituting
less than 1%
of total
footprint
Scope 3
Scope 1 and 2 target: to reduce operational Scope 1 and 2 emissions by at least 40 per cent by FY2030 from FY2019 levels.
Emissions Intensity Target: to maintain emissions intensity at or below 1.7 tCO2-e/tAN sold by FY2022 from FY2019 levels.
Net Zero Ambition: to achieve net zero emissions by 2050.
Long term decarbonisation
Building on our 2030 target, this year
we set an ambition to achieve net zero
emissions by 2050. Our net zero emissions
ambition covers our global Scope 1 and
Scope 2 emissions under our direct control,
and material2 Scope 3 emission sources.
We will engage with our suppliers to
support progress towards technological
solutions for decarbonisation.
Initiatives outlined in Orica’s 2050 Net Zero
Emissions Roadmap:
– Engaging suppliers and setting
procurement standards
– Sourcing lower emissions intensive
ammonia and ammonium nitrate
products
– Switching to lower carbon feedstocks
and CCUS
– Reducing nitrous oxide process emissions
– Sourcing renewable energy and
increasing energy efficiency
OUR ROADMAP TO ACHIEVE
NET ZERO EMISSIONS BY 20503
Process
emissions
Scope
1, 2
H2
Renewable
energy
Energy
efficiency
Lower carbon
feedstocks
and CCUS
Low carbon
sourcing
Scope
3
2019
Supplier
engagement
Carbon offsets
2050
1 Other assessed up – and downstream FY2021 Scope 3 emissions, including waste generated in operations, business travel, employee commuting and investments
2 Material means the GHG emissions of our direct ammonia and ammonium nitrate suppliers included in the Scope 3 reporting category of purchased goods and services.
These comprise around two-thirds of Orica’s Scope 3 emissions footprint.
3 Covers our global Scope 1 and Scope 2 emissions under Orica’s direct control, and material Scope 3 emission sources. Material means the greenhouse gas (GHG) emissions embodied
in purchased ammonia and ammonium nitrate included in the Scope 3 reporting category of purchased goods and services. These comprise around two-thirds of Orica’s Scope 3
emissions footprint. Achieving this ambition will require effective government policy frameworks, supportive regulation and financial incentives, and access to new low-carbon
technologies operating at commercial scale.
54 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Reducing our operational emissions
A continued focus on nitrous oxide
The primary GHG emissions associated with
our operations are nitrous oxide, arising from
the production of nitric acid (a precursor
to AN), and carbon dioxide emissions from
ammonia manufacture. In FY2021, these
emission sources accounted for 71 per cent
of our global emissions with electricity use
contributing a further 12 per cent.
At our nine nitric acid plants, we are
focused on mitigating our nitrous oxide
process emissions by deploying the best
available catalytic technology. Tertiary
abatement catalyst can eliminate up to
95 per cent of nitrous oxide emissions
compared to unabated levels.
Global operational GHG emissions (Scope 1 and 2 by source)
Other (Scope 1 and 2) 2%
Electricity (Scope 2) 12%
Natural Gas Combusted (Scope 1) 15%
Nitrous Oxide Process
Emissions (Scope 1) 49%
In FY2021, tertiary abatement catalyst was
installed at our Carseland plant in Canada,
and we announced the Kooragang Island
Decarbonisation Project in partnership with
the New South Wales (NSW) Government
and Clean Energy Finance Corporation
in Australia.
We delivered a fourth consecutive year of
declining nitrous oxide intensity. Our nitrous
oxide emissions intensity has reduced by
36 per cent since FY2018.
Global nitric acid emissions
intensity (tCO2-e per tonne
of nitric acid produced)
1.3
1.08
0.99
0.83
Natural Gas Used as Feedstock (Scope 1) 22%
FY2018
FY2019
FY2020
FY2021
Note: Boundary covers Scope 1 nitrous oxide emissions only.
ORICA Annual Report 2021 |
55
KOORAGANG ISLAND DECARBONISATION PROJECT
This year, we announced plans to
install an Australian first tertiary
abatement technology, EnviNOx® at
our Kooragang Island manufacturing
plant. The NSW Government will
contribute $13.06 million towards
the project, together with the Clean
Energy Finance Corporation financing
Orica’s $24 million investment.
The technology will be installed
across three nitric acid processing
plants used in the production of
ammonium nitrate at Kooragang
Island from October 2022.
This important partnership is
estimated to abate at least 0.57
MtCO2-e of nitrous oxide emissions
annually. This represents a 48 per cent
decrease in the site’s greenhouse
gas emissions and is expected to
deliver a cumulative emissions
reduction of at least 4.7 MtCO2-e by
2030 based on forecast production1.
The project can make a significant
contribution to achieving the NSW
target to reduce GHG emissions
by 50 per cent by 2030 and is
estimated to abate 11 per cent
of all chemical industrial process
emissions in Australia2.
Together with environmental outcomes,
the project will deliver certainty for our
domestic manufacturing operations
and contribute to the local economy.
Almost half of the $37 million project
will be spent with local NSW suppliers.
This builds on Orica’s history of
supporting local socio-economic
development, with two-thirds of
suppliers3 to the site being located either
in the Hunter Valley (38 per cent) or
across NSW (28 per cent).
Orica has enjoyed the support of the
NSW Government for over 50 years,
and the project only strengthens our
confidence to keep investing and
supporting the regional economy
and Hunter area into the future.
Air and
ammonia
Tail gas with nitrous oxide
and residual nitrogen oxides
REACTOR
Nitrous oxide
and nitrogen
oxides
Water
Process gas with
nitrous oxide and
nitrogen oxides
N
M
U
L
O
C
N
O
I
T
P
R
O
S
B
A
Heat exchangers for
energy recovery
Ammonia and
natural gas
TERTIARY
ABATEMENT
SYSTEM
Cleaner tail gas
Nitric acid
product
Exhaust
stack
1 While emissions are set to be (physically) reduced from 2022, progress against our targets will not be immediately
apparent and likely to be non-linear. Further explanation is provided in our FY2021 Climate Action Report.
2 Grattan Institute, 2021, Towards net zero – practical policies to reduce industrial emissions, report number
10-2021 August 2021 Appendix 3, Non-energy industrial processes from the chemical industry represent
5.1 MtCO2-e/year in FY2019.
3 Orica, Kooragang Island economic effects analysis, 2020.
56 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Coupling CCUS with steam methane
reforming could address a large share
of CO2 emissions, however, there are
currently no oil or gas producing areas
near Kooragang Island, Newcastle, suitable
for permanent carbon dioxide storage
and geo-sequestration. As a result,
pursuing carbon capture and storage (CCS)
from Newcastle would incur significant
infrastructure and transport cost to other
suitable areas.
We are supporting a carbon capture and
utilisation (CCU) mobile demonstration
plant which is being designed and
commissioned by MCi at our Kooragang
Island facility (see case study on page 58).
During the year, we led a market
process and now better understand
the risks and opportunities presented
by new electrolysis technology and
renewable ammonia market opportunities.
An internal manufacturing study for
early-stage adoption of hydrogen
produced via renewable electrolysis
was also completed to understand
the safety case, barriers and changes
required to manufacturing equipment
to facilitate adoption.
Hard-to-abate GHG emissions
Industrial process CO2 emissions are
our second largest source of operational
emissions accounting for 22 per cent of our
Scope 1 and 2 inventory. Industrial CO2 is
produced because of the natural gas-based
production of hydrogen as an ammonia
feedstock (Kooragang Island, NSW) and
in our cyanide plant (Gladstone, QLD).
While our medium-term decarbonisation
strategy focuses primarily on nitrous oxide
and electricity emissions, we continue to
explore options to reduce industrial CO2
emissions including alternative methods
to obtain hydrogen and carbon capture
utilisation and storage (CCUS) technologies.
We are a founding participant in the
Australian Industry Energy Transitions
Initiative (ETI) to work together with
other industry leaders in hard-to-abate
sectors on shared challenges to accelerate
decarbonisation. Switching from the
dominant steam methane reforming
process to renewable electrolysis for
hydrogen production is a promising
opportunity to eliminate these emissions
over the long term, and is a goal shared by
many of our peers, suppliers, and customers.
Progress depends on the cost-effective
supply of large quantities of renewable
electricity, and the extent and speed of
cost reductions for electrolysers. The ETI
finds that renewable electrolysis is expected
to be the lowest-cost form of hydrogen
production by 20404.
4 Butler, C, Maxwell, R, Graham, P & Hayward, J 2021, Australian Industry Energy Transitions Initiative Phase 1
Technical Report, ClimateWorks Australia https://energytransitionsinitiative.org/.
ORICA Annual Report 2021 |
57
MINERAL CARBONATION INTERNATIONAL ATTRACTING
PUBLIC AND PRIVATE CAPITAL
In FY2021, MCi, a start-up backed by
Orica, secured a $14.6 million Australian
Government grant. The cleantech
company has developed a scalable
carbon platform technology that
converts industrial CO2 emissions into
valuable materials for construction,
industrial and consumer markets.
The innovative technology aligns with
our goals of catalysing climate action
and optimising resource use through
circularity. The MCi collaboration also
provides us with an avenue to explore
CCUS as a means to address our own
industrial CO2 waste stream, which
represents 22 per cent of our Scope 1
and 2 inventory.
The grant – one of the largest to be
issued from the Australian Government’s
CCUS Fund – will help fund construction
of a mineral carbonation mobile
demonstration plant at our Kooragang
Island site. The plant will have access
to around 250 thousand tonnes of CO2
emissions from our manufacturing
operations and will contribute to the
decarbonisation of our operations.
“This CCUS grant will fast-
track MCi’s plans to help
the hard-to-abate industries
towards the transition to
net zero. The steel, cement,
aluminium, mining, and
chemical industries need
technologies that help with
the transition. This is a key
focus not only in Australia,
but also in the worldwide
race to zero emissions.”
– CEO Marcus Dawe
In addition to the Australian Government
grant, MCi also attracted its first private
investor, ITOCHU, the Japanese
corporate giant. ITOCHU will help MCi
achieve early commercialisation by
looking to leverage its networks in Japan
to facilitate further demonstration plants
and through collaboration on carbon
utilisation technology.
While we share a commitment to
reduce emissions with our strategic
suppliers, we have key levers at our disposal
to further reduce indirect emissions:
– Engage with our suppliers to
collect more accurate emissions
data and influence the most material
suppliers to set their own emissions
reduction targets;
– Embed GHG emissions considerations
into the supplier selection process over
the long-term, as supply chains align
on targets and commitments; and
– Evolution in future product and service
design and procurement policies.
The contribution of these longer-term
drivers will depend on technology maturity,
deployment, and commercialisation.
Effective global climate policy and financial
incentives will also be required.
Scope 3 emissions
Global Scope 3 GHG emissions was
7.0 MtCO2-e, an increase of 15 per cent
compared to FY2020. This was primarily
due to improvements in methodology
associated with completing our full
Scope 3 emissions inventory.
Scope 3 emissions associated with the
sourcing of ammonia and ammonium
nitrate from third parties (as reported
for FY2020), increased by 12 per cent
on FY2020. This was primarily due
to increased volumes following the
acquisition of Exsa in April 2020.
Our net zero emissions ambition covers
Scope 3 emissions from purchased
ammonia and ammonium nitrate.
Around two-thirds of our ammonia
and almost half of our ammonium
nitrate is sourced from global suppliers
with emissions reduction targets or
operations in countries with net zero
emissions targets.
58 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
CATALYSING CLIMATE ACTION
Innovating sustainable solutions
To further catalyse climate action
and amplify our impact, we are
designing sustainable solutions for
our customers and supporting research
and development of low-carbon
technologies.
Our suite of products and services are
increasingly focused on digitisation,
automation, and increased use of data
to optimise blasting and minimise
downstream processing. By increasing
the precision of the blasting process,
we can help our customers achieve
better recovery rates and reduced
energy per tonne (see Design for
Outcome case study on page 64).
We are investigating alternate options
for hydrogen production through the
Australian Industry Energy Transitions
Initiative (ETI), alongside other industry
leaders in hard-to-abate sectors.
Our Research and Innovation team has
developed a Clean Technology Roadmap.
This includes several commercial-in-
confidence initiatives being pursued to
progress early technological development
of decarbonised explosives.
Looking ahead, we will build on the
growing employee appetite to support
our climate change agenda by creating
opportunities for local teams to catalyse
employee action into the future.
Responsible advocacy
Our stakeholders expect strong governance
and transparency as they pertain to
the climate lobbying positions of the
membership organisations we belong to.
We believe industry plays an important
role in helping formulate effective policy
frameworks, standards, and practices
to facilitate a low-carbon economy.
We are members of a range of business
and industry associations around the world.
This year, we continued to review our key
industry associations to identify any material
differences between the climate change
and energy positions we hold, and those
held by our relevant industry associations.
We discontinued our membership with
the International Fertilizer Association
given Orica’s small contribution across the
global fertiliser value chain. This decision
was driven by cost reduction initiatives
rather than any misalignment on climate
change positions.
Where misalignments have been
identified, we are engaging with
associations to understand, clarify, or
confirm their position. In doing so, we
consider the significance of the issue,
and the scope Orica has, to influence
from within. An important consideration
is that divergence on some issues like
climate change may be outweighed by
the overall benefits of membership.
If misalignment cannot be addressed
through constructive engagement,
Orica would further assess whether
the membership should continue.
Further details are outlined in our
FY2021 Climate Action Report.
FY2022 PRIORITIES
– Maintaining emissions reduction
momentum by implementing the
Kooragang Island Decarbonisation
Project.
– Implement year three of our
TCFD Roadmap.
ORICA Annual Report 2021 |
59
STEWARDING NATURAL
RESOURCES
Strengthening our approach to
managing environmental risks
Managing environmental risks, and
preventing loss of product events,
continue to be the primary objectives
of our environmental strategy.
We took a number of actions to improve
our approach to managing environmental
risks. We are adopting the MHM
framework to manage our material
environmental risks. This includes defining
key controls and ensuring verification
protocols are in place to systematically
mitigate adverse environmental impacts.
Our Global Environmental Steering
Committee was established this year
to oversee the identification and
management of material environmental
risks and develop programs to
increase environmental awareness and
communications. The Committee will
augment the current regional approach
to environmental management with a
broader, company-wide lens.
Our continued focus on spill prevention and
response has seen a 50 per cent reduction
in environmental Severity 1+1 events, and a
40 per cent reduction in loss of containment
events from FY2020. We achieved our zero
Severity 3+2 environmental event target.
There were no significant events with
severity 23 or greater.
Optimising resource use
through circularity
We continually look for opportunities
to reduce our environmental footprint
through the optimal use of resources and
materials. This includes opportunities for
increased circularity in our supply chains
by maximising the use of recycled water
and researching new methods to reuse
and recycle key waste types.
We source water from potable, surface,
groundwater and recycled water sources.
This year our total water consumption
fell 3 per cent to 2.84 million Kilolitres (kL)
and we increased our use of recycled
water to 28 per cent from 26 per cent
last year.
While our potable water intensity fell
by 10 per cent to 0.69 kl per tonne of
AN sold, we did not meet our target of
0.67 kl per tonne of AN sold. This was
due to fluctuating supply of recycled
water at our Kooragang Island site.
Potable water consumption
and intensity
0.77
0.73
0.77
0.69
0.60
3.06
2.91
2.94
2.47
2.84
FY2017
FY2018
FY2019
FY2020
FY2021
Potable (million kl)
Potable intensity (kl/tonne AN)
Gross waste disposal
by destination (kT)
5.95
0.56
3.91
7.11
0.42
5.02
7.74
0.20
4.35
8.18
8.36
8.29
6.24
0.25
6.07
8.06
7.39
0.24
4.27
6.31
FY2017
FY2018
FY2019
FY2020
FY2021
Landfill (on or off site)
Reused
Treated/destroyed
Recycled
CYCLO™: RECYCLING USED
OIL FOR EXPLOSIVES
This year we launched Cyclo™, an
innovative service to create value
from waste. The process combines
our emulsifier technology with
used oil processing technology,
to transform mine site used oil for
application in explosives.
Cyclo™ is an example of our strategic
focus on optimised resource use
through circularity. While used oil/
diesel blends have been utilised in
process fuels for more than 15 years,
the technique requires tight quality
control and regular testing when
used to manufacture emulsions.
As a result, it has only been feasible
at sites with access to external
laboratory services. In order to service
a broader range of customers, we
partnered with CreatEnergy to
develop a stand-alone, onsite solution
which treats used oil to the quality
required for emulsion manufacture.
Cyclo™ can reduce total explosives
fuel costs by 30 per cent and diesel
consumption for the manufacture
of bulk explosives by 50 per cent.
The process reduces the volume of
diesel required to be delivered to our
customers’ operations and eliminates
a used oil waste stream that needs
to be removed. This reduces
truck movements through local
communities and the associated
logistical challenges and risks,
particularly for remote operations.
We progressed efforts to minimise waste
and maximise diversion from landfill.
Building on a review of waste data in
FY2020, we commenced a company-wide
assessment of waste types and sites to
target our actions where they will have
the most impact.
1 Severity 1 events are minor, reversible environmental effects. Short term impacts only in the immediate vicinity of the release. Minor clean-up required with the total cost of any
clean-up is less than $100,000.
2 Severity 3 environmental events result in relatively wide-spread serious environmental damage, with some impairment of ecosystem function that will recover after remediation.
3 Severity 2 environmental events have localised but measurable environmental effect that is reversible after clean-up.
60 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
This information will enable a focus
on avoidance and reduction at key
waste sites and guide our research
into alternative uses for waste.
This year our waste performance was
impacted by one-off events associated
with a remediation project in Huachipa,
Peru and site divesture and demolition
works in Minden, Australia.
Both projects generated waste types that
had to be disposed to landfill contributing
to an 8 per cent increase in total waste
disposed to 20.6 Kilotonnes (kT) and a
decrease in the proportion of waste
diverted from landfill to 61.3 per cent.
As a result, we did not meet our
FY2021 target of less than 19 kT
total wasted disposed.
FY2022 Priorities
– Pilot environmental major Key Control
Verifications focused on spill prevention,
clean up and impervious surfaces with
secondary containment.
– Deep dive on waste improvement
opportunities for top 10 waste
producing sites.
ENVIRONMENTAL REMEDIATION
We are applying technology to restore
natural systems and resources where we
have historically impacted soil and/or
groundwater.
From physical and chemical techniques
to plant-based methods, we seek
opportunities to innovate and collaborate
on our remediation goals by leveraging
knowledge and skills from around
the world.
While our major remediation projects are
associated with legacy issues at our former
chemical manufacturing sites, they can
also arise from ongoing manufacturing
activities. Our core team of remediation
experts are responsible for progressing our
complex, ongoing chemical remediation
projects and providing technical advice to
regional SHES teams where necessary.
Divestment of remediated land
Our aim is to remediate land to reduce risks
to human health and the environment and
to allow divestment and adaptive land
reuse. This year, we made two significant
divestments in Australia at Villawood and
Botany totalling $140 million.
ORICA Annual Report 2021 |
61
The divestments mark the completion
of multi-decade remediation programs
tailored to site-specific requirements.
Both sites have been restored to a standard
suitable for commercial or industrial
use with a warehouse facility and
carpark approved for the Botany site.
We have retained small parcels of land
at each location to ensure access for our
groundwater monitoring and remediation
obligations and commitments.
Yarraville remediation completed
An in-situ thermal remediation system that
was delayed in FY2020 due to COVID-19
has been completed and 12,600 m3 of soil
and groundwater treated. In an Australian
first, the technology was deployed to treat
contamination at the legacy chemical
manufacturing site through a system
of heating and gas/vapour extraction.
After operating for 174 days, the system
safely and efficiently removed 14,000 kg
of organic contaminants. Soil validation
samples presented to the Environmental
Protection Agency (EPA) and Environmental
Auditor confirmed all treatment targets
had been met and the EPA supported
shut down of the system at the end
of May 2021. Planning is advanced for
the deployment of the same technology
on an adjoining block of land in FY2022,
which would complete the remediation
works set out in the Clean Up Plan for
the Yarraville site.
Fifth export shipment of HCB waste
delayed due to COVID-19
Our program for the safe destruction of
the hexachlorobenzene (HCB) stockpile in
New South Wales, Australia continues to
progress. Last financial year 2,700 tonnes
of the waste were exported from Australia
for destruction in Europe.
Orica has received approval for up to
3,050 tonnes of HCB waste to be exported
for destruction offshore with a shipment
expected to depart in FY2022 as we
continue to work toward eliminating this
long-term legacy safely and responsibly.
62
| ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
ADDRESSING CONTAMINATION THROUGH PHYTOREMEDIATION
Using indigenous plant species
to fight historical contamination
in Gomia (India)
In Gomia, surface water contains
elevated concentrations of contaminants
such as nitrate, lead and perchlorate.
Our teams, with the support of the
University of Kalyana, Calcutta
University, and a local service
provider, have planted indigenous
plant species, mainly reeds and grasses,
in contaminated areas. These plants
consume and absorb contaminants as
they grow, with some contaminants,
such as nitrate, even promoting
growth. Once grown, these plants
can be harvested with lead and other
contaminants safely removed from
surface water.
More than 50,000 seedlings were
selected and planted in late July and
early August 2021 as part of this
large-scale phytoremediation project.
These plants will be harvested four
months after initial planting with
health and growth monitored closely.
Our current crop is thriving under
challenging conditions and growth
has been promising. Once collected,
the biomass will be tested to measure
contaminants present, and to
understand the effectiveness of
the mechanism.
We continue to seek innovative,
effective ways to address historical
contamination issues at our sites.
One method is phytoremediation, an
environmentally friendly, sustainable
technology harnessing the capability of
plants to ‘clean up’ a variety of soil and
water contaminants such as explosives,
hydrocarbons, and heavy metals by
degrading, storing, or immobilising
the contaminants as they grow.
Brownsburg (Canada)
phytoremediation progressing
Building on work in FY2020, our
partnership with University of
Montreal’s Institut de Recherche
en Biologie Végétale (IRBV) to pilot
an experimental program that uses
trees and bacteria to remediate
soil contamination, is progressing.
The site is mainly contaminated with
polychlorinated biphenyls (PCBs)
and trace metal elements and has
been planted with fast growing
species known to be effective for
phytoremediation. Through this process
PCBs are degraded into harmless
substances while trace elements are
accumulated and removed to specialist
waste centres when the plants are
harvested. This approach requires less
initial investment, minimal maintenance
once the process commences, and
offers a range of co-benefits including
increased biodiversity, greenhouse gas
capture, improved soil function and
improved aesthetics. Over the coming
growing seasons, the IRBV and Orica
team will monitor plant performance
and changes in soil contamination.
BOARD FOCUS
Our Safety and Sustainability
Committee assists the Board
in its oversight of strategy and
policy, compliance and risk, and
performance and reporting on all
safety and sustainability related
matters, including climate risk, and
the environment. During the year,
the Committee’s focus included:
– Climate and environmental
performance, including progress
against targets;
– Reviewing the adequacy of
environmental risk management,
assurance, and improvement
strategies;
– Endorsing our ambition for net
zero emissions by 2050, following
a detailed assessment of Orica’s
long-term decarbonisation
opportunities;
– Considering outcomes of climate
scenario planning and analysis,
incorporating a range of global
warming futures; and
– Approved climate-related and
sustainability disclosures in Orica’s
annual reporting suite.
FY2022 Priorities
Our focus in FY2022 is on progressing
our remediation programs, including:
– Export shipment of
Hexachlorobenzene Waste from
Botany (Australia);
– Completion of soil remediation
works at Deer Park (Australia);
– Implementation of the second
phase of in-situ thermal remediation
at Yarraville (Australia); and
– Phytoremediation of soils at
Brownburg (Canada) and sediments
and surface water at Gomia (India).
ORICA Annual Report 2021 |
63
Community
and relationships
Strong and collaborative relationships with our customers,
suppliers, host communities, industry and government partners
create shared and enduring value.
Through partnerships fostered across
our global and regional operations and
technology centres, we are developing
innovative solutions to safely meet the
needs of our customers and communities,
deliver commercial value and address critical
environmental and social sustainability
issues across our value chain.
CUSTOMERS
This year was characterised by ongoing
disruption. We continued to provide our
customers with critical support ensuring
security of supply while our remote and
automated technology solutions portfolio
expanded to enable the safe delivery
of services. We enhanced our value
proposition by investing in technology
to help accelerate our customers’
performance and sustainability ambitions.
Improved customer satisfaction
Our Voice of Customers (VoC) program
independently and consistently captures
customer feedback across our operations,
with over 800 customers providing insights
in FY2021. The main metric to measure
customer loyalty and satisfaction is our NPS,
which improved for the fourth consecutive
year. Customers recognised three key areas
where we delivered outstanding performance:
– Value through technology and
innovation: improved productivity
and safety outcomes of our technology
solutions and new technologies;
– Outstanding product quality:
continuous improvement in quality,
reliability, precision, and durability of
our products in response to customer
feedback; and
– Superior service quality: responsive,
timely service and support.
Our FY2021 NPS increased slightly, with
an overall improvement of 57.6 per cent in
customer satisfaction since the inception
of our VoC program in 2017.
DESIGN FOR OUTCOME
AT ROY HILL
At Roy Hill mine in Western
Australia’s Pilbara region, our
Design for Outcome (DfO) solution
was deployed to improve mining
productivity and increase mining
profit. DfO is an artificial intelligence
(AI) machine learning based
technology that learns from
operational data to associate rock
and ore properties to applied blasting
energy and resultant outcomes.
The technology’s predictive algorithm
domains the geology in each drill
hole and matches explosives energy
to each domain, producing tailored
hole-by-hole blast designs and
generating automated loading
rules for blast charging.
This technology is supported by our
smart explosives delivery systems
(MMU™). The MMU™ retrieves
automated loading rules from the
cloud to facilitate accurate explosives
charging in line with the loading rules
generated by the algorithm, with
minimal interaction by the operator.
This reduces the variability in blast
performance, removing overcharging
and redeploying explosives energy
to under-blasted areas.
An additional feature was also
implemented to measure reduction
in CO2-e emissions associated with
lower explosives consumption.
Now, with each DfO blast, Scope 1
and 3 emissions are aggregated,
enabling more precise reporting
of emissions reduction outcomes.
The system will be expanded to
further increase productivity, optimise
ore fragmentation, and increase
performance in the crushing and
processing circuits downstream in
the value chain.
64 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
DELIVERING OUR FULL PRODUCT AND SERVICE SUITE FOR GLENCORE ZINC AND COPPER
OPERATIONS IN AUSTRALIA
Every day, our customers rely on our
people, technology, and products to
deliver successful outcomes.
In November 2020, we signed a five-year
contract with Glencore for explosive
technology and services across their
Australian copper and zinc operations,
a total of six sites across three states.
This delivers our full suite of technology
and blasting services, including
WebGen™, our wireless initiating system,
BlastIQ™, our digital blast optimisation
suite of products and Bulkmaster™ 7,
our smart explosives delivery system.
The contract recognises the strength
of our people and delivery model to
manage the risk of transition, our
focus on providing outstanding levels
of customer service and our innovative
technology solutions. It also
demonstrates the depth of knowledge
of our customers and their operations.
Since Glencore first trialled our WebGen™
alpha system at Ernest Henry Mine (EHM)
in 2016, we have been working to
understand their needs and key business
drivers. After WebGen™ was adopted at
EHM in 2018, we ran a technical forum
giving Glencore an opportunity to
review our full technology suite. It also
allowed our technical experts to review
Glencore’s mining techniques and
propose changes to mining methods to
deliver improved safety and productivity
outcomes and make optimal use of our
cutting-edge technology.
Our relationship with Glencore, from
management and site teams to functional
experts, was critical to successfully
mobilising simultaneously across
Queensland, New South Wales, and
the Northern Territory. With downtime
at Glencore measured in minutes, we
managed the transition with no disruption
to operations and no downtime,
achieved by running our spare assets
in parallel to the incumbent plant.
Our ability to mobilise in a short
timeframe demonstrates the strength
and commitment of our people,
with cross-functional teams working
together to deliver excellent outcomes
for our customers. This included: talent
teams who managed recruitment and
onboarding of all new employees;
engineering teams who set up temporary
and permanent facilities and managed
transport of equipment to site; technical
engineers and product specialists who
provided technical support for new
technologies at site; and safety teams
who ensured best practice safety
standards were implemented and people
were protected. Our teams continue to
support Glencore in delivering on their
productivity and sustainability goals.
AT 20-YEARS YOUNG, GROUNDPROBE CONTINUES TO ADD INNOVATIVE TECHNOLOGIES
TO OUR PRODUCT PORTFOLIO
The military grade technology can
provide evolving details from the scene
every 0.25 seconds issuing customised
alarms tailored to specific site needs
including sirens, text message, lights
and/or pager alerts.
This hazard monitoring technology
helps our customers ensure the safety
of their teams by removing people from
harm and equipping them to understand
adverse events in real time and move
quickly to minimise impacts.
“At GroundProbe, our aim
is to keep people, assets and
communities safe through
better risk management.
The RGR-Velox is the
ultimate assistant in reactive
safety monitoring.”
– David Noon, CEO GroundProbe
In October 2021, our geohazard
monitoring business celebrated 20 years
of moving people from harm’s way.
GroundProbe boasts the industry’s
broadest range of geotechnical monitoring
technologies and services and continually
strives to design and develop new
solutions to best meet customer needs.
This year, RGR-Velox, a reactive
monitoring, and alarming system that
complements GroundProbe’s predictive
monitoring technologies, was added
to the product suite. RGR-Velox tracks
geohazards once they have commenced,
i.e., where an existing fleet of slope stability
radars and lasers detect imminent mine
or tailings dam collapses.
ORICA Annual Report 2021 |
65
COMMUNITY
Creating opportunities for women in STEM
FY2021 marked the transition of our
community program, with the completion
of some corporate partnerships and the
implementation of our revised Community
Impact and Investment Framework to build
safe, resilient and thriving communities.
Our community investment totalled
$2.4 million in FY2021. Our contributions this
year reflected a more even distribution across
regions, better aligned to our operational
footprint, with 30 per cent of our
contributions outside the Asia Pacific region
compared to only 12 per cent in FY2020.
Community investment by year ($m)
1.8
1.8
1.9
3.2
2.4
FY2017
FY2019
FY2019
FY2020
FY2021
Community investment by region (%)
70
APA
15
EMEA
12
LATAM
3
NA
The Orica Impact Fund
The Orica Impact Fund (OIF) was launched
this year, replacing our previous community
partnerships program, with $1 million in
grants made available annually to fund
selected community projects and programs.
The OIF is part of our revised Community
Investment and Impact Framework,
enhancing our existing regional community
investment activity, and targeting strategic
investments in our communities of
operation to drive long-term benefits and
positive social and environmental impact.
This year, we received 30 funding
applications requesting between $10,000
and $100,000 per year (up to a maximum
of 3 years). Each application was assessed
against a range of criteria, including impact,
need and capability of the delivery partner.
Of these, 24 initiatives seeking to drive positive
impact in education, equality, environment,
and wellbeing were approved for funding,
including initiatives in Australia, Canada, India,
Indonesia, the Philippines, Peru, South Africa,
Sweden, and the USA. Some of these OIF
funded initiatives are described below.
66 | ORICA Annual Report 2021
We are passionate about driving gender
equality in STEM and equipping the
next generation of women with the tools
and training required for success in a
technology-driven world. In Indonesia,
female students account for only two per
cent of the total number of students in
STEM-based vocational high schools.
The innovative digital learning program
is designed to increase digital literacy for
young female students. In partnership
with Yayasan Cinta Anak Bangsa (YCAB)
Foundation and funded by the OIF for
three years, the program will provide
100 high school science teachers and
7,000 students with training. Students will
have access to a gamified, interactive digital
learning platform, with core objectives of
igniting their passion for technology and
encouraging them to consider STEM-based
career pathways.
A stepping-stone to a bigger vision
In Sweden, our manufacturing facility
is located in the picturesque town of
Gyttorp. The town is small, with limited
job opportunities, activities, and amenities
available, and many locals opt to travel
outside the town for leisure time.
With our community partners, Kottabergets
vänner, the goal is to drive local economic
development in the town by creating
opportunities for tourism. Initially, the project
will transform deforested land into a mountain
bike trail, attracting cyclists from the local
community and from across Sweden and
developing an alternate industry in the region.
While it may take some years to fully
realise the benefits, the project embodies
our approach of creating long-term, shared
value community partnerships.
Education in focus
Creating long-term positive impact includes
investing in the next generation. In FY2020,
community investment in education initiatives
formed our second highest category
of contribution, outside of emergency
relief funding. Once again, many of our
initiatives, through the OIF and our site-led
social investment programs focus on
education. We proudly support community-
based organisations and non-profit
organisations around the world as they
build pathways for disadvantaged students,
encourage equality in STEM education,
and develop future change-makers.
SUPPORTING OUR
COMMUNITIES THROUGH
COVID-19
Many of our communities continue
to feel the effects of COVID-19,
particularly with the rapid spread of
the Delta variant. Among the hardest
hit areas were our sites in Gomia
(India), Bontang (Indonesia), and
Lurin (Peru) where health systems
and infrastructures have been
overwhelmed.
With our teams on the ground
consulting directly with community
leaders and organisations about
areas of critical need, we provided
emergency funding to procure
vital medical equipment and
services, including personal
protective equipment, transportation
services, provision of oxygen and
medicine supply.
Collaborating with business
community partners in Lurin,
Peru
In Lurin, Peru, the high demand for
oxygen to treat COVID-19 patients
coupled with low supply resulted
in a shortage of medical oxygen.
In early 2021, local council and
religious leaders began working
with locally based companies,
requesting assistance to fund and
source an oxygen plant for Lurin
and surrounding communities.
With the request prioritised for
approval internally, our onsite,
group sustainability and supply
chain teams immediately commenced
the search for an oxygen plant.
With high demand, these were
difficult to find, however, a call
to a local manufacturer yielded the
last oxygen plant available within
the region.
With four partners in Lurin’s
business community, we helped
fund the purchase of the oxygen
plant enabling medical oxygen to
be produced locally, providing vital
treatment to those suffering the
physical impacts of COVID-19 in Lurin
and the surrounding community.
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Expanding education opportunities for
remote and regional students in Australia
The Smith Family is Australia’s largest
education charity, supporting disadvantaged
children through learning support and
mentoring programs to equip them to
succeed in school. In 2018, we partnered
with the Smith Family to bring their
Learning for Life program to Gladstone,
Queensland, for the first time. The program
recognises the challenges students from
disadvantaged backgrounds face as they
move through the school system, and
provides support in the form of financial
assistance, connections to local learning
opportunities, and access to Smith Family
educational programs.
This year, we broadened our support by
working with the charity to facilitate the
Work Inspirations program. This connects
students with businesses, building their
career aspirations by showcasing opportunities
available post-education. Over three days,
13 Orica employees hosted 19 students
for a ‘day in the life at Orica’ highlighting
potential career pathways.
In FY2021, we signed a new Memorandum
of Understanding (MoU) with the Smith
Family to extend our support for the Learning
for Life program in Gladstone by a further
two years. Our volunteer team at Yarwun
will welcome more students in FY2022.
Empowering the next generation
of STEM champions
With the demand for STEM skill sets
growing, we continue to seek community
and education partners who are working to
spark the interest and passion of students
looking to pursue a career in STEM.
Through our partnership with the Academy
of Technology and Engineering (ATSE) in
Australia, we support the Science and
Technology Education Leveraging Relevance
(STELR) project. This program aims to address
low participation rates in STEM subjects at
a high school level by engaging students
through learning modules to investigate
and solve real-world science and
technology problems.
In FY2021, Orica supported the establishment
of a STELR education program aimed at
developing a new generation of Australian
sustainability leaders. The education
program included developing a new on-line
sustainable housing module, challenging
students to consider what it would take
to build a low energy home. Through this
exercise, students learn about the different
types of heat transfers and the thermal
properties of matter. This is particularly
relevant to the Australian context, where
sustainable building design is an important
tool used to withstand the country’s harsh
weather conditions, reduce building waste,
and lower the greenhouse gas emissions
associated with building and powering a home.
FY2022 Priorities
Our enhanced materiality process in
FY2021 has given us a better insight
to what is material to our stakeholders
and shapes our priorities for FY2022,
which include:
– Enhancing our approach to First
Nations engagement and cultural
heritage protection;
– Continued efforts to meaningfully
respond to the impacts of COVID-19
(and other emergencies and disasters)
on our local communities; and
– Maintaining community investment
spend towards achieving our target
(at least $15 million by FY2025).
SUPPLIERS
Our suppliers are a critical part of our value
chain and ensure we maintain a secure
service for our customers. We work with
our suppliers to mitigate sustainability
impacts and promote sustainable practices
across our value chain.
In FY2021, we procured products and
services from 8,500 suppliers in 53 countries
around the world, with a total procurement
spend of $2.9 billion. The reduction of
our supply base from FY2020 is a result of
active consolidation of spend through our
strategic sourcing programme targeted
at optimising cost, improving security of
supply of quality products and services, and
developing supplier relationships that are
strategically aligned with our objectives.
Minimising Supply Chain
Disruption Risks
COVID-19 continued to impact global
supply chains throughout FY2021, with
increasing freight costs, container shortages,
lack of space on vessels and low levels of
reliability of vessel schedules resulting in
transportation and shipping challenges.
Despite this, Orica’s unique global network
allowed us to achieve continuity of supply
and minimise freight impacts, while
maintaining vessel standards and product
quality. This was achieved through:
– Maintaining an agile internal chartering
desk responsible for adjusting shipping
modes as required to maintain security
of supply to customers.
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– Assessing each trade and associated
product deliveries to ensure alignment
and optimisation of manufacturing and
supply chain operations.
– Reducing the number of vessel sailings
by leveraging economies of scale.
Developing our first Responsible
Sourcing Statement
As part of our commitment to creating a more
sustainable, inclusive, and resilient value
chain, we developed our first Responsible
Sourcing Statement. The statement
enhances the principles outlined in our
Code of Business Conduct and details our
expectations of suppliers on ethical business
practices, human and labour rights, and
social and environmental impacts.
Modern slavery response
Last year, we performed a risk assessment
on our supply chain to identify goods
and services with a high potential risk
of modern slavery. We have now
commenced activities to mitigate those
risks. This includes tools developed for
use through the source-to-contract
process to better understand modern
slavery risks prior to engaging a supplier.
The tools were part of a pilot program
on Modern Slavery Risk Management.
The results of the pilot have been
incorporated into a comprehensive
modern slavery gap analysis of our
response to managing modern slavery
risks throughout our supply chain to
provide recommendations for improvement.
These recommendations have now been
incorporated into our Modern Slavery
roadmap and will be implemented over
the next three years.
For more information, refer to our
FY2021 Modern Slavery Statement.
Working towards a decarbonised
supply chain
To meet our ambition to achieve net zero
emissions by 20501, we are prioritising
and addressing the most material emission
sources in our upstream supply chain.
As new and emerging technologies scale
and become commercial, we will partner
with suppliers to source lower emissions
intensity AN and ammonia products.
The purchase of these products currently
accounts for approximately 70 per cent
of our total Scope 3 emissions.
We continue to directly engage our
strategic suppliers, to better understand
their activities in managing emissions,
identify pathways for future collaboration,
and work together towards technological
solutions for decarbonisation.
Responsible sourcing of palm oil
Our purchased bulk palm oil product is
sustainably certified, meeting the criteria
set out by the Roundtable on Sustainable
Palm Oil (RSPO). This not-for-profit
organisation draws membership from
across the palm oil industry, from
producers, processors and manufacturers
to retailers, and its certification criteria is the
most widely accepted standard for certified
sustainable palm oil. Our product meets
the ‘segregated’ certification criteria and is
sourced from a variety of certified sources.
We concluded a concept study into
the removal of palm oil from emulsions,
resulting in the complete removal of
palm oil from an emulsion utilised in
underground blasting. We continue to
investigate the removal of palm oil from
other products, ensuring that where
substitutions are made, the total
environmental impact is reduced.
1 Covers our global Scope 1 & Scope 2 emissions under our direct control, and material Scope 3 emission sources. Material means the GHG emissions embodied in
purchased ammonia and ammonium nitrate included in the Scope 3 reporting category of purchased goods and services. These comprise around two-thirds of
Orica’s Scope 3 emissions footprint.
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Our Performance
Governance and Risk
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Financial Statements
Other Information
BOARD FOCUS
During the year, the Board
added ‘societal expectations’ as a
new strategic risk, in response to
growing community expectations
on issues such as cultural heritage
protection and the socio-economic
development of host communities.
FY2022 Priorities
– Publish our Responsible Sourcing
Statement, supporting our efforts
to build a more sustainable and
transparent supply chain.
– Continue engagement with our
strategic suppliers to explore possible
pathways for future collaboration to
jointly de-carbonise our supply chain.
PARTNERSHIPS
We know collaboration makes us better.
That applies to how we work together as
a team, and with our customers, industry
bodies, Non-Government Organisations
(NGO), and research and educational
institutions. Our work with external
partners delivers a range of commercial,
environmental, and social benefits.
We continue to seek out partnerships with
innovative, values-aligned organisations,
recognising that together, we can achieve
better people and sustainability outcomes.
ORICA AND EPIROC DELIVER
WORLD’S FIRST FULLY
MECHANISED EXPLOSIVES
CHARGING PROTOTYPE
Our partnership with Epiroc has
developed a semi-automated
explosives delivery system to
keep people out of harm’s way.
The innovative Avatel™ system
combines Epiroc’s industry
leading underground equipment
design expertise with our fully
wireless breakthrough initiation
system WebGen™.
The solution provides an operator
in a ballistics-proofed cabin safe
access to load explosives into
pre-drilled holes using remotely
operated booms and charging
equipment. Avatel™ reduces the
reliance on costly, time-consuming,
and at times, ineffective controls
put in place to manage the risks
of personnel working in one
of the highest risk areas of an
underground mine.
“With the mining industry
moving rapidly toward a
digitally integrated and
automated future, Avatel
will fulfil our shared vision
of developing safer and
more productive blasting
solutions.”
– Angus Melbourne,
Orica Chief Technology Officer
Extensive trials of Avatel™ will take
place throughout FY2022 when the
first commercially available systems
are expected to enter service.
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Governance
and Risk
70
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Board of Directors
MALCOLM BROOMHEAD AO
BE, MBA
Malcolm Broomhead AO was appointed Chairman
of Orica Limited as of 1 January 2016 and has been
a Non-executive Director since December 2015. He is
Chairman of the Nominations Committee. He is a Director
of BHP Group Limited and Plc and a former Chairman of
Asciano Limited. He is also a Director of the Walter and
Eliza Hall Institute and Council Member of Opportunity
International Australia.
SANJEEV GANDHI
BEng, MBA
Sanjeev Gandhi was appointed Managing Director and
Chief Executive Officer in April 2021, after previously
holding the role of Group Executive and President,
Australia Pacific, and Asia. He is a former Executive Director
of publicly listed German Chemical company BASF SE.
During his 26-year career with BASF, he held several
senior marketing, commercial and business leadership
roles including Head of Asia Pacific and Head of Global
Chemicals Segment (Intermediates & Petrochemicals).
JOHN BEEVERS
BEng, MBus, MAICD
John Beevers was appointed Non-executive Director
in February 2020, after previously holding the role of
Managing Director and Chief Executive Officer of
GroundProbe, and various executive roles within the
Orica Group including Group General Manager of
Chemical Services and Chief Executive Officer of Orica
Mining Services. He is a member of the Safety and
Sustainability Committee, the Innovation and Technology
Committee and the Nominations Committee. He is also
a Non-executive Director of Syrah Resources Limited and
former Director of QUT Bluebox, the commercialisation
arm of the Queensland University of Technology.
BOON SWAN FOO
BA, MBA
Boon Swan Foo was appointed Non-executive Director
in May 2019 and is a member of the Innovation and
Technology Committee, Board Audit and Risk Committee
and the Nominations Committee. He is Chairman and
Non-executive Director of SGX-ST-listed Global Investments
Limited, Chairman of Allgrace Investment Management
Private Limited, and Chairman of Singapore Consortium
Investment Management Limited. He is an external Director
of China Baowu Steel Group Corporation Ltd, and Senior
Advisor to Temasek International Pte Ltd. Previously, he was
an external Director of China Huadian Corporation Ltd and
a Non-executive Director of Singbridge Holdings Pte Ltd,
Singbridge International Singapore Pte Ltd and Sino
Singapore Guangzhou Knowledge City Investment and
Development Company.
MAXINE BRENNER
BA LLB
Maxine Brenner was appointed Non-executive Director in
April 2013. She is Chairman of the Human Resources and
Compensation Committee, member of the Board Audit and
Risk Committee and the Nominations Committee. She is a
Director of Origin Energy Limited, Qantas Airways Limited,
and Woolworths Group Limited and former Director of
Growthpoint Properties Australia limited, Neverfail Australia
Ltd, Treasury Corporation of NSW and Federal Airports
Corporation. She is also the former Managing Director of
Investment Banking at Investec Bank (Australia) Ltd and a
former member of the Takeovers Panel.
DENISE GIBSON
BA, MBA
Denise Gibson was appointed Non-executive Director
in January 2018 and is Chairman of the Innovation
and Technology Committee and member of the
Human Resources and Compensation Committee
and the Nominations Committee. She is co-founder and
Chairman of Ice Mobility, Director of Aerial Technologies
Inc., NASDAQ-listed VOXX International Corporation,
a director of the Consumer Technology Association,
and Chairman Emiritus of the Consumer Technology
Association Foundation, both not-for-profit organisations.
She is the founder and former CEO of Brightstar US.
KAREN MOSES
BEc, DipEd, FAICD
Karen Moses was appointed Non-executive Director in
July 2016. She is Chairman of the Safety and Sustainability
Committee, and member of the Human Resources
and Compensation Committee and the Nominations
Committee. She is a Director of Boral Limited, Charter Hall
Group, Snowy Hydro Limited, Sydney Symphony Limited,
and Music In The Regions Limited and a Fellow of the
Senate of Sydney University. She is also a former Director
of Sydney Dance Company, SAS Trustee Corporation,
Australia Pacific LNG Pty Limited, Origin Energy Limited,
Contact Energy Limited, Energia Andina S.A., Australian
Energy Market Operator Ltd, VENCorp and Energy and
Water Ombudsman (Victoria) Limited.
GENE TILBROOK
BSc, MBA, FAICD
Gene Tilbrook has been a Non-executive Director since
August 2013. He is Chair of the Board Audit and Risk
Committee and member of the Safety and Sustainability
Committee and the Nominations Committee. He is also
a Non-executive Director of Woodside Petroleum, and
former Director of Aurizon Holdings, Fletcher Building
and GPT Group, and former Executive Director of
Wesfarmers Limited.
Company
Secretaries
KIRSTEN ANDERSON LLEWELLYN
LLB, BA, LLM, FGIA
ERIN O’CONNOR
LLB (Hons), BCom, FGIA
ORICA Annual Report 2021 |
71
Governance
Sound corporate governance
has never been more important.
Responsible business behaviours and processes, and transparency,
are critical to maintain the trust of our stakeholders, particularly as we
navigate the challenges presented by our external operating environment.
Our Board is committed to conducting
business ethically and to the highest
standards of corporate governance.
This is a pre-requisite to maintaining
stakeholder confidence. Good corporate
governance creates value by ensuring
the interests of management are aligned
with our stakeholders, cultivating a
company culture of integrity, and
facilitating better decision-making
through clearly defined roles and
responsibilities, and robust processes.
To align our approach with best
practice, we periodically review and
update our corporate governance
documents and practices. Our FY2021
governance arrangements comply
with the ASX Corporate Governance
Council’s Corporate Governance
Principles and Recommendations
(4th Edition) (ASX Principles and
Recommendations).
For further details on Orica’s corporate
governance framework see our FY2021
Corporate Governance Statement.
ROLE OF OUR BOARD
The Board oversees the
business and affairs of the
Group. They set our strategic
direction, oversee performance
and risk management, and
provide leadership and direction
on workforce culture and
values. There are five Board
Committees: The Board Audit
and Risk Committee, the
Nominations Committee,
the Human Resources and
Compensation Committee, the
Innovation and Technology
Committee, and the Safety
and Sustainability Committee
(formerly the Safety, Health,
Environment, Community
and Security Committee).
Each Committee has its own
Terms of Reference which sets
out its roles and responsibilities
They are available in the Board,
Executive & Committees section
of our website.
Day-to-day responsibility
for managing the Group is
delegated to our Managing
Director and CEO, who operates
within delegated authority
limits determined by our Board.
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CORPORATE GOVERNANCE FRAMEWORK
Shareholders
Accountable to Shareholders
Access to
independent
assurance
and advice
Board of Directors
Non-executive Directors and CEO
Delegated authority
Accountable to Board
CEO
Group
Delegation of
Authority
EXECUTIVE COMMITTEE
Company
Secretary
Operating
culture
Group
Delegation of
Authority
OUR PEOPLE
Strategy, Performance, Risk Management, Culture
Delegated authority
(Terms of Reference)
Accountable
to Board
Board Committees
Board Audit
and Risk
Nominations
Human Resources
and Compensation
Safety and
Sustainability
Innovation and
Technology
GROUP POLICIES, STANDARDS AND PROCEDURES
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73
Board composition
and succession planning
Delegated responsibility for Board
composition and succession planning
rests with our Nominations Committee.
In considering potential candidates
for appointment to the Board, the
Committee complete a thorough
review of the skills, experience, and
competencies of candidates in relation
to the Board’s current and future
skill and experience requirements,
as well as diversity considerations.
In November 2021, the Committee
approved Safety and Sustainability
as an additional skill category.
This reflects the importance of
integrating material sustainability
and climate change risks and
opportunities into strategic decision-
making to create sustainable value.
Average tenure of
Non-executive Directors
Under 3 years
3-6 years
6-9 years
Over 9 years
2
3
2
0
FY2021 CEO SUCCESSION
The Board, through the Nominations
Committee, has in place a CEO
succession planning framework
with time-based checkpoints to
monitor progress. The framework
also utilises a dual-track process
of ‘shadow tracking’ external
candidates, facilitated by an external
consultant, whilst continuing to
monitor the development of internal
candidates. This process culminated
in the appointment of Sanjeev
Gandhi as Managing Director and
CEO on 1 April 2021 and enabled
a smooth transition from
Alberto Calderon.
Diversity profile
Women
37.5
per cent
International
experience
25.0
per cent
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A summary of the collective
skills held by our Board
LEADERSHIP
Board, CEO or Senior Executive experience in major organisations,
enterprises, or listed companies in Australia or overseas.
MINING
Experience, knowledge, and expertise in the Australian or the international
resources sector and/or related operations.
GLOBAL PERSPECTIVE
Experience in international markets with exposure to a range of political,
cultural, regulatory, and business environments.
TECHNOLOGY TRENDS AND INNOVATION
Experience, knowledge, and expertise in the development and commercial
application of new and emerging technology and cyber security.
FINANCIAL ACUMEN
Financial knowledge or related financial management or accounting
qualifications and experience, including understanding the financial statements.
MERGERS AND ACQUISITIONS
Experience in merger and acquisition transactions involving complex issues.
GOVERNANCE AND LEGAL
Experience and knowledge in governance issues (including the legal,
compliance, environmental and regulatory environment applicable
to the Australian or international resources sector).
SAFETY AND SUSTAINABILITY*
* To be incorporated in FY2022.
Professional development
Orica has in place a Non-executive Director Business Understanding Program which delivers
ongoing learning for Directors to deepen their understanding of our business and operations,
and to ensure they are able to make fully informed decisions on Orica’s strategic direction.
The Program is delivered through a combination of site visits, business briefings, deep-dive
education sessions at the Board and Committee level, and one-on-one discussions with
management, as appropriate. While the COVID-19 pandemic necessitated that some of the
planned initiatives were deferred to FY2022, the Board participated in multiple sessions over
the year.
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Risk
Managing risk through
uncertain times
Risk management is fundamental to informing
and executing our strategic direction in support
of value creation for our stakeholders. We take a
proactive approach to identify and capitalise on
opportunities, whilst managing risks appropriately,
which goes hand in hand with operating a safe
and responsible business.
Our risk management approach
is designed to focus on the key
existing and emerging risks that
could significantly impact the
delivery of our strategy and vision,
as described on page 12, or
meeting the expectations of our
stakeholders (refer page 24).
We continuously evolve our risk
management system by monitoring
performance and strengthening our
processes, data and systems that
support the effective management
of risks across the organisation.
OUR RISK APPROACH AND
GOVERNANCE STRUCTURE
We focus on the ongoing
identification, management,
and communication of risks by
consistently applying the principles
of the International Organization
for Standardization’s Risk Management
Guideline, ISO 31000:2018 across
our business.
Board
The Board has overall responsibility
for making sure we manage risks in
line with our approved risk appetite
settings and are maintaining our
internal control systems. It regularly
reviews, either directly or through
its committees, how our risk
management processes are
performing across the business.
The Board Audit and Risk Committee
has oversight of the effectiveness
of the Group’s risk management
framework and processes.
Executive Committee
The Executive Committee owns
our material risks and is responsible
for interrogating the effectiveness
of risk mitigation strategies and for
monitoring our performance against
the approved risk appetite settings.
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Financial Statements
Other Information
Orica Board
Audit and
Risk Committee
Safety and
Sustainability
Committee
Innovation and
Technology
Committee
Human Resources
and Compensation
Committee
Risk Appetite
Executive Committee
Risk Mitigation
1st Line
Risk and Control Owners
2nd Line
Monitoring and Oversite Functions
3rd Line
Internal Audit
Enabled by:
Training and
Communication
Reporting
Risk Champions
and Facilitators
Risk Culture
Technology
1
Risk and control owners are
responsible for identifying,
monitoring, and managing risks
across Orica. They are typically
senior employees who own risks
aligned to their operational
accountabilities across our
regions, manufacturing locations
and group functions.
2
Our group functions provide
expertise, support, monitoring and
challenge on risk-related matters
to our first line. For example, our
SHES team provides assurance and
support to improve our operational
control environment.
We follow the principals of the ‘three lines’ model.
Our internal audit function provides
independent assurance to management,
and the Board, that our risk management
processes are operating effectively. We use
a combination of in-house and external
specialist resources.
3
ORICA Annual Report 2021 | 77
Risk appetite
framework
We enhanced our risk management system in
FY2021 by defining risk appetite statements for
the material risk categories of our business.
RISK APPETITE
STATEMENTS
AND SETTINGS
KEY RISK
INDICATORS
AND RISK LIMITS
a qualitative view on how willing
the Board is to assume risk for
each material risk category after
considering our control environment,
strategy, business environment and
the risk/reward trade-off.
a defined set of quantitative indicators
and risk limits (guardrails) to execute
decisions and manage business
performance. Exceeding risk limits
will act as a trigger for management
and/or Board action.
Risk appetite statements, settings and risk
limits are important to set the boundaries
for the decisions we make, ensuring
we understand how to remain within
the risk appetite set by the Board, while
establishing clear triggers for action in
the event of change.
Consistent performance against our
risk appetite settings and risk limits is
paramount. We achieve this by maintaining
the right culture, control environment and
processes to operationalise them within the
business, integrate them into key decision-
making, and monitor performance against.
Each risk appetite statement is allocated
one of five settings ranging from zero,
where there is very low appetite for an
event outside of the defined risk limits, to
active where we are willing to take more
risk in the pursuit of our strategic objectives.
WE HAVE DEFINED RISK APPETITE STATEMENTS, SETTINGS,
AND LIMITS ACROSS THE MATERIAL RISK CATEGORIES OF OUR BUSINESS
STRATEGIC STRATEGIC GROWTH | STRATEGIC MARKETING & TECHNOLOGY | CLIMATE CHANGE*
OPERATIONAL SAFETY & HEALTH | ENVIRONMENT | SECURITY | PEOPLE
INFORMATION TECHNOLOGY CYBER SECURITY | INFORMATION SECURITY | IT GOVERNANCE
FINANCE FINANCIAL PERFORMANCE | TAX
COMPLIANCE ETHICS & COMPLIANCE
* In draft for approval in FY2022.
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Other Information
ORICA Annual Report 2021 |
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Material risks and opportunities
Link
to our
material
themes
Risk
Risk category
How we are responding
Key opportunities
Strategic
Strategic
Strategic
Strategic
Information
and technology
Information
and technology
Macro-economic
factors: commodity
demand
Uncertain economic
growth outlook and
material fluctuations
in commodity
demand
Political and
Regulatory
Uncertain geopolitical
dynamics and
regulatory change
Climate change
Consequences
and opportunities
presented by
low-carbon
economic transition
and physical impacts
of a changing climate.
Increasing society
and investor
expectations
(emerging risk)
Failure to respond to
shifts in societal and
investor expectations
leads to threats to
our ability to achieve
our objectives and
meet stakeholder
expectations.
Customer and
technology
disruption
Rising adoption of
new technology and
fast paced competitor
development.
Cyber security
A compromise to
the confidentiality,
availability and/or
integrity of our critical
technology services
and data.
We maintain a globally diverse customer base across
numerous markets and employ leading macro-economic
indicators to inform our strategic planning.
We use strategic risk indicators (our ‘signposts’) to
monitor the macro-economic environment as it relates
to our business and have conducted deep dives into
future-facing commodities growth opportunities.
We actively monitor the political situation around
our operations.
We consider our key suppliers through maintaining a
globally diverse customer base and supply chain with
a focus on critical materials.
We engage regularly with key stakeholders including
governments and suppliers to remain fully informed, which
enables us to respond quickly to comply with the latest
regulations, economic sanctions, and trade rulings.
In line with our ambition to achieve net zero emissions
by 2050, we are embedding climate risk into strategic
and financial planning, accelerating decarbonisation,
and catalysing action across the value chain.
This is illustrated with our Kooragang Island
Decarbonisation Project announcement and installation of
low-emissions technology at Carseland, Canada in FY2021.
We have progressed physical climate risk assessments
at our key operating locations to better understand our
exposure to the impacts of high, moderate, and low
climate change scenarios.
We continue to listen and engage. We actively
communicate our strategy with our stakeholders to
demonstrate the steps we are taking to reduce our
environmental impact, strengthen our governance
and consider our social strategy.
Our materiality process has been strengthened to
reflect these considerations and we have reviewed
our First Nations and cultural heritage processes in
response to increased regulatory, customer and societal
expectations following the Juukan Gorge incident in
the Pilbara, Australia.
We continue to develop and invest in our core products,
as well as new applications to enhance our performance
and safety outcomes.
Our research and innovation teams continued to
develop our strategy with regards to new technology
and monitoring disruptive technology and business
model trends.
We continuously review and strengthen our Information
Technology (IT) security controls as part of our cyber
security strategy.
We have upgraded the separation between our IT and
Operational Technology (OT) networks to better protect
our key systems and information and enhanced our security
operations centre functionality to improve capture and
analysis of malicious attacks.
We train our teams to raise awareness of security threats
and invest in systems and technologies to protect our data
and network access.
Positioning our
portfolio towards higher
growth commodities,
including future-facing
commodities.
Rapid and efficient
responses to change
enabled by our scale and
geographic diversity.
There is an opportunity
to participate in carbon
markets.
We can enhance
competitiveness by
offering customers lower
carbon AN products.
Our aim is also to be a first
mover to gain advantage
and secure public financial
support and incentives.
Continuing to lift our
ESG ambition and action
to create competitive
differentiation.
Technological
advancement brings
opportunities to further
support our customers
in their growth and
productivity goals.
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Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Link
to our
material
themes
Risk
Risk category
How we are responding
Key opportunities
Ethics and
compliance
Operational
Ethical business
practices and good
governance
Our global presence
means there are
numerous laws and
regulations that we
must comply with
including competition,
modern slavery,
anti-bribery, and
corruption
requirements.
Safety, health,
environment,
and security
Material SHES risks
that impact our
people, communities,
and the environment.
Operational
Operational
COVID-19 pandemic
Failure to prepare and
respond to significant
disruptive factors
caused by the
COVID-19 pandemic
because of
inadequate
development or
execution of our
response plans
impacting our ability
to maintain our
supply chain, support
our people and meet
our financial targets,
as well as reputational
and regulatory
obligations.
Supply chain
disruption
Interruption to the
integrity and/or
continuity of our
supply chain.
Operational
Product Quality
A poor-quality
product or service
impacting
performance against
required outcomes.
We have extensive compliance controls in place including
country entry procedures and customer and vendor
sanction screening.
We train our people to do the right thing and provide an
independent ‘Speak-Up’ service.
This year we carried out reviews of our high-risk business
partners and joint venture partners to ensure compliance
with Orica Ethics and Compliance requirements. Learnings
helped us strengthen our screening processes and due
diligence systems.
The prevention of harm is our number one priority.
Our key controls include compliance protocols, audit
and inspection programs, plant and equipment design
standards, and asset maintenance programs. Our MHM
Program defines key safety controls and establishes rigorous
verification protocols. If harm were to occur, we have
stringent first response and emergency response
management plans in place across all our operations.
Our teams have recently focused on utilising our Enablon risk
management system to standardise our change management
system, improved our asset maintenance strategies to
reduce our risk of loss of toxic materials and trialled systems
to monitor key risk indicators for vehicle incidents.
The COVID-19 pandemic impacts multiple areas of our
business, therefore our response to this risk involves a
comprehensive plan, to support the safety of our people
and customers, and to ensure continuity of our operations.
The plan is continually monitored and adjusted, with
core priorities established in support of protecting our
people, maintaining reliable operations and supply
chains, supporting our most impacted communities,
and monitoring the impact on our cash flow and debt
facilities from any disruption.
By utilising our global supply chain of manufacturing
plants, supply alliances, and joint ventures we are
committed to ensuring a safe and secure supply for our
customers. Each of our supply partners undergo risk
assessments, and our assets have management and
preventative maintenance programs in place.
We have detailed planning and forecasting to predict
ongoing demand and build redundancy into our supply
chains to reduce reliance on key suppliers where we can.
Our quality improvement framework is focused on
ensuring our products meet our customers’ needs in a
reliable manner. We have in place new product testing
and trials as well as global procurement standards to
maintain high product quality and assurance processes.
We monitor the performance of all our sites against clear
performance metrics, and if required enact improvement
programs where required.
We take the opportunity
to lead from the front by
improving industry safety
standards in developing
nations and regions.
Technology and
connectivity are driving
mobility and collaboration
in workplaces, creating
further opportunities
for knowledge sharing,
cross-business
deployments, and
process efficiencies.
Improved supply chain
efficiency by making
the most optimum use
of our resources and
relationships.
ORICA Annual Report 2021 |
81
Directors’
Report
82 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Directors’ Report
The Directors of Orica Limited (‘the Company’ or ‘Orica’) present the Annual Report of the Company and its controlled entities (collectively ‘the Group’)
for the year ended 30 September 2021 and the Auditor’s Report thereon.
DIRECTORS
The Directors of the Company during the financial year and up to the date of this report are:
M W Broomhead, Chairman
A Calderon, Managing Director and Chief Executive Officer (‘CEO’) (resigned 1 April 2021)
S Gandhi, Managing Director and Chief Executive Officer (‘CEO’) (appointed 1 April 2021)
M N Brenner
Boon S F
D W Gibson
K A Moses
G T Tilbrook
J R Beevers
E O’Connor and K Anderson Llewellyn are each Company Secretary of Orica Limited.
Particulars of Directors’ and Company Secretary qualifications, experience and special responsibilities are detailed in the Annual Report.
DIRECTORS’ MEETINGS
The number of Directors’ meetings (including meetings of committees of Directors) and number of meetings attended by each of the directors of the
Company during the financial year are listed below:
Scheduled
Board
Meetings(1)
Ad-hoc
Board
Meetings(1)(2)
Audit
and Risk
Committee(1)
Human
Resources &
Compensation
Committee(1)
Nominations
Committee(1)
Safety &
Sustainability
Committee(1)
Innovation
& Technology
Committee(1)
Held
Attended
Held
Attended
Held
Attended
Held
Attended
Held
Attended
Held
Attended
Held
Attended
Director
M W Broomhead(3)
J R Beevers
M N Brenner
S Gandhi(4)(5)
D W Gibson
K A Moses
Boon SF
G T Tilbrook
Former
11
11
11
4
11
11
11
11
11
11
11
4
10
11
11
11
A Calderon(4)(6)
7
7
2
2
2
1
2
2
2
2
1
2
1
1
1
1
1
2
2
1
–
–
7
–
–
–
7
7
–
–
–
7
–
–
–
7
7
–
–
–
7
–
7
7
–
–
–
–
–
7
–
7
7
–
–
–
5
5
5
–
5
5
5
5
–
5
5
5
–
5
5
5
5
–
–
5
–
–
–
5
–
5
–
–
5
–
–
–
5
–
5
–
–
3
–
–
3
–
3
–
–
–
3
–
–
3
–
3
–
–
(1) Shows the number of meetings held and attended by each Director during the period the Director was a member of the Board or Committee.
(2) Ad-hoc board meetings were held on 26 March 2021 and 29 September 2021.
(3) The Chairman of the Orica Board attends all Board Committee meetings as an ‘ex officio’ member of that Committee.
(4) The Managing Director and CEO attends Committee meetings on an ‘as needs’ basis.
(5) Mr S Gandhi was appointed to the Orica Board on 1 April 2021.
(6) Mr A Calderon retired from the Orica Board effective 1 April 2021.
In addition, 8 ‘Board Briefings’ were held during the year and do not appear on the attendance register.
DIRECTORS’ INTERESTS IN SHARE CAPITAL
The relevant interest of each Director in the share capital of the Company is disclosed in the Remuneration Report.
PRINCIPAL ACTIVITIES
The principal activities of the Group in the course of the financial year were the manufacture and distribution of commercial blasting systems including
technical services and solutions, mining and tunnelling support systems to the mining and infrastructure markets, and various chemical products and services.
ORICA Annual Report 2021 |
83
Directors’ Report (continued)
LIKELY DEVELOPMENTS
Likely developments in the operations of the Group and the expected results of those operations are covered generally in the review of operations and
financial performance of the Group in the Annual Report.
REVIEW AND RESULTS OF OPERATIONS
A review of the operations of the Group during the financial year and of the results of those operations is contained in the Annual Report.
CHANGES IN THE STATE OF AFFAIRS
There were no significant changes in the state of affairs of the Group during the year ended 30 September 2021.
DIVIDENDS
Dividends paid or declared since the end of the previous financial year were:
Final dividend declared at the rate of 16.5 cents per share on ordinary shares, unfranked, paid 15 January 2021
Interim dividend declared at the rate of 7.5 cents per share on ordinary shares, unfranked, paid 9 July 2021
Total dividends paid
$m
66.9
30.6
97.5
Since the end of the financial year, the Directors have declared a final dividend to be paid at the rate of 16.5 cents per share on ordinary shares.
This dividend will be unfranked.
EVENTS SUBSEQUENT TO BALANCE DATE
Acquisition of business
On 29 October 2021, the Group entered a contract to acquire 100% of the shares of RIG Technologies International Pty Ltd and Resources Innovation
Group Pty Ltd, based in Western Australia, who design and build downhole measurement technology. The purchase price comprises $12 million upfront
and potential earn out payments based on the achievement of revenue targets over the next five years. The financial effect of this transaction is not
included in the financial statements for the year ended 30 September 2021 and will be recognised in the FY2022 financial statements.
Dividends
On 10 November 2021, the Directors declared a final dividend of 16.5 cents per ordinary share payable on 22 December 2021. The financial effect of this
dividend is not included in the Annual Report for the year ended 30 September 2021 and will be recognised in the FY2022 Annual Report.
The Directors have not become aware of any other significant matter or circumstance that has arisen since 30 September 2021, that has affected or may
affect the operations of the Group, the results of those operations, or the state of affairs of the Group in subsequent years, which has not been covered
in this report.
ENVIRONMENTAL REGULATIONS
Orica seeks to be compliant with applicable environmental laws and regulatory permissions relevant to its operations. Where instances of non-compliance
occur, Orica’s procedures require that relevant governmental authorities are notified in accordance with statutory requirements and internal investigations
are conducted to determine the cause of the non-compliance to ensure the risk of recurrence is minimised.
The Company has committed major investments, both in terms of capital and resources, to improve its environmental performance at key sites in addition
to its general maintenance program. The Company is working closely and co-operatively with regulators and government agencies in relation to these
initiatives, as well as enhancing community engagement and consultation.
More specific details about Orica’s sustainability initiatives and performance, including safety, health and environment, can be found on the Orica website
www.orica.com/sustainability.
84 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Directors’ Report (continued)
INDEMNIFICATION OF OFFICERS
The Company’s Constitution requires the Company to indemnify any person who is, or has been, an officer of the Company, including the Directors,
the Secretaries and other Executive officers, against liabilities incurred whilst acting in good faith as such officers to the extent permitted by law.
In accordance with the Company’s Constitution, the Company has entered into a Deed of Access, Indemnity and Insurance with each of the Company’s
Directors and, in certain instances, specific indemnities have been provided. No Director or officer of the Company has received benefits under an
indemnity from the Company during or since the end of the year.
The Company has paid a premium in respect of a contract insuring officers of the Company and of its controlled entities, against a liability for costs
and expenses incurred by them in defending civil or criminal proceedings involving them as such officers, with some exceptions. The insurance contract
prohibits disclosure of the nature of the liability insured against and the amount of the premium paid.
NON-AUDIT SERVICES
During the year, KPMG, the Company’s auditor, performed certain other services in addition to its audit responsibilities.
The Board is satisfied that the provision of non-audit services during the year by the auditor is compatible with, and did not compromise, the auditor’s
independence requirements of the Corporations Act 2001 for the following reasons:
– all non-audit services were subject to the corporate governance procedures adopted by the Company and have been reviewed by the Board Audit
and Risk Committee to ensure they do not impact the integrity and objectivity of the auditor; and
– the non-audit services provided do not undermine the general principles relating to auditor’s independence as set out in APES 110 Code of Ethics
for Professional Accountants (Including Independence Standards), as they did not involve reviewing or auditing the auditor’s own work, acting in a
management or decision-making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards.
A copy of the lead auditor’s independence declaration as required under Section 307C of the Corporations Act 2001 is contained on page 106 of the
Annual Report and forms part of this Directors’ Report.
Details of the amounts paid to the auditor of the Company, KPMG, and its related practices for audit and non-audit services provided during the year
are disclosed in note 21 to the Annual Report.
ORICA Annual Report 2021 |
85
Remuneration Report
– No remuneration increases were received
by Executives who remained in the same
role during FY2021. For those individuals
whose role changed as part of the reshaping
of our Executive Committee, their fixed
annual remuneration was set lower than
the prior incumbent.
– Board fees did not change in FY2021 and
will remain at the same level for FY2022.
In addition, Malcolm Broomhead elected
to forfeit his Board Chair fees from 1 June
to 30 September 2021 in support of our
cost reduction focus in the second half
of FY2021.
OUTCOMES UNDER ORICA
INCENTIVE PLANS
The average Executive STI scorecard outcome
was 56.7% driven by positive safety and
environmental performance, and progress
during FY2021 against key strategic objectives.
As in prior years, we consider the non-financial
components of the Executive STI scorecards
to be of the utmost importance to running a
safe and sustainable business. However, given
financial performance over FY2021, the Board
exercised its discretion not to award any
payments under the Executive STI plan to the
CEO or other Executives so as to better align
with the shareholder experience.
The FY2018 LTI award (1 October 2017 to
30 September 2020) did not vest following
testing in November 2020, with average
Return on Net Assets (RONA) performance
below the required threshold.
EXECUTIVE REMUNERATION
IN FY2022
As foreshadowed last year, during FY2021
the Board undertook a formal review of our
Executive Remuneration Framework, engaging
with shareholders and other stakeholders as
part of this process to better understand their
view of our current framework and practices.
In addition to the revised CEO remuneration
structure on Sanjeev Gandhi’s appointment,
two key changes will be made to our incentive
plans from FY2022.
Relative Total Shareholder Return (rTSR)
introduced into the LTI
The LTI previously included an rTSR metric.
This, along with Return on Capital (ROC),
was replaced in 2018 with the current RONA
metric to better support the implementation
of our transformation program. Last year, we
committed to reviewing the LTI metrics as part
of the Executive Remuneration Framework
review, resulting in a decision to introduce rTSR
to complement RONA as a second equally
weighted metric. The Board believes that RONA
remains the most appropriate internal financial
metric given the need for improved operating
and capital efficiency, however, we recognise
our investors are seeking more direct
shareholder alignment through the current
recovery phase.
Focusing on sustainability
Recognising the importance of monitoring the
environmental impact of our operations, in
FY2021 we introduced Loss of Containment
(LOC) as an environmental metric within our STI
scorecard. For FY2022, the renamed ‘Safety and
Sustainability’ component of our STI scorecard
will include a greenhouse gas emissions-based
metric in addition to LOC. The new metric is
aligned with our stated objective to reduce
Scope 1 and 2 operational emissions by at least
40% by FY2030. To ensure sufficient weighting
on each STI metric we have focused our safety
performance on the Serious Injury Case Rate
(SICR) which will have a higher weighting for
FY2022 and the High Potential Incident (HPI)
Injury Ratio will be removed from our scorecard.
HPIs will continue to be closely monitored
internally as a leading indicator to focus on
sustained performance. We have also adjusted
the weighting of metrics within the financial
component of the STI scorecard. Detail on our
FY2022 CEO STI scorecard, including
weightings, is shown in Section 2.6.
We appreciate your ongoing support and I look
forward to engaging with you again in FY2022.
Yours faithfully,
Maxine Brenner
Chairman, Human Resources
and Compensation Committee
Cover Letter (unaudited) to the
Remuneration Report
Dear Shareholders,
On behalf of the Board, I am pleased to
present Orica’s FY2021 Remuneration Report,
for which we seek your support at our
Annual General Meeting.
PERFORMANCE ALIGNMENT
AND KEY DECISIONS DURING
FY2021
The 2021 financial year has been challenging
for Orica with the COVID-19 pandemic, trade
tensions and foreign exchange continuing
to impact volume and margins across our
business. With the impact of COVID-19 more
prolonged than previously anticipated, we have
remained focused on the safety and wellbeing
of our people and are also making good
progress towards becoming a more sustainable
organisation. We have seen significant change
at an executive leadership level and our
commitment to talent development and
succession planning in recent years resulted
in all new Executive Committee members
being drawn from internal candidates.
Given our financial performance, the following
key decisions were made during the year:
– On appointment of Sanjeev Gandhi as
Managing Director and Chief Executive
Officer (CEO), the Board took the
opportunity to reshape the CEO
remuneration package. In addition to
decreasing fixed annual remuneration (FAR)
compared to the previous incumbent,
a substantial portion of the CEO’s FAR is
now provided in equity which ensures
immediate and ongoing alignment with the
shareholder experience. We also addressed
feedback from our investors and decreased
the CEO’s maximum short-term incentive
(STI) opportunity from 200% to 150%,
and the long-term incentive (LTI) grant
opportunity from 215% to 200%.
86 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Remuneration Report (continued)
EXECUTIVE SUMMARY
FY2021 Remuneration Strategy and outcomes linked to business priorities and performance
At Orica, remuneration is linked to the drivers of our business strategy, helping create long-term success for shareholders. The at-risk components of
remuneration are tied to measures that reflect operating and capital efficiencies in both the short and long-term. Strategic drivers are reflected in STI
and LTI performance measures ensuring Executive incentives are linked to actual performance.
OBJECTIVE: COMPETITIVE REMUNERATION THAT ALIGNS EXECUTIVES
WITH THE LONG-TERM SUCCESS OF ORICA AND ITS SHAREHOLDERS
D
R
A
O
B
S
E
I
T
I
R
O
R
P
I
Strong alignment
with shareholder returns
Fit for purpose,
aligned to business
strategy and driving desired
business behaviours
Simple and transparent
Globally competitive,
enabling Orica to attract
and retain the best talent
COMPONENT
FIXED ANNUAL
REMUNERATION (FAR)
SHORT-TERM
INCENTIVE (STI)
LONG-TERM
INCENTIVE (LTI)
PURPOSE AND
LINK TO
STRATEGY
Provide competitive base pay to attract
and retain the skills needed to manage a
complex global business.
We target remuneration at the median
of an ASX listed comparator group comprising
companies of similar size, operations and
global business complexity.
The new CEO receives a portion of FAR
in equity to ensure immediate and ongoing
alignment with our shareholders.
Drive performance aligned to near term strategy
and underpinning long-term value creation.
Scorecard metrics support a focus on:
– reducing serious injuries;
– minimising the impact of our operations
on the environment;
– driving sustainable productivity
improvement and efficient capital
allocation across the Group and equally
within each Region; and
– key strategic priorities including operating
efficiency, innovation and technology, and
adjacency growth.
Deferred component provides long-term
shareholder alignment over an additional
three-year time horizon post-vesting.
Drive long-term value creation for
shareholders by encouraging an
owner’s mindset and decision-making
that supports sustainable performance.
The LTI design:
– reinforces a focus on sustainable
productivity improvement and
efficient capital allocation during the
three-year vesting period; and
– provides long-term shareholder
alignment over a five-year time horizon.
POLICY MIX
(AT TARGET)
Cash
Equity
Current CEO:
20.6%
4.4%
Other Executives:
35.7%
Former CEO:
24.1%
DELIVERY
KEY CHANGES
DURING FY2021
FY2021
REMUNERATION
OUTCOMES
Base salary,
superannuation
(or pension
equivalent)
and allowances
(per local
market practice).
For the new CEO, 17.6%
of FAR is delivered as
fixed securities that vest
monthly, but are subject to
restrictions until the CEO’s
minimum shareholding
guideline is met.
Introduction of fixed equity for the new
CEO along with increasing the minimum
shareholding guideline from 100% to 150%
of FAR and reducing the timeframe to meet
the guideline from six to five years.
Our benchmarking comparator group has
been revised to better reflect our market
capitalisation and operations including the
removal of size outliers.
No increases for Executives who remained
in the same role following the organisational
structure changes.
New CEO and Executive pay set lower
than the prior incumbent in all instances
reflecting our market capitalisation, financial
performance and investor feedback on CEO
remuneration quantum.
Current CEO:
12.5% 12.5%
Other Executives:
14.3%
7.1%
Former CEO:
12.0% 12.0%
Portion as cash
payment (50% for
CEO; 66.7% for
other Executives).
Current CEO:
50.0%
Other Executives:
42.9%
Former CEO:
51.9%
Portion deferred
into shares for one
year with a further
three year holding
lock (50% for CEO;
33.3% for other
Executives).
Performance rights (vesting after three
years subject to performance hurdles)
with a further two-year holding lock.
The LTI is granted at face value, based on
the volume weighted average price (VWAP)
of Orica shares during the five trading days
following the full year results announcement.
New CEO’s maximum STI opportunity
reduced from 200% to 150% of FAR.
FY2021 scorecard changes:
– key control verifications (KCV) and
close-out of critical actions replaced
by HPI Injury Ratio;
– new LOC environmental metric; and
– new Cash Generation Efficiency (CGE)
financial metric.
New CEO’s LTI grant reduced from 215%
to 200% of FAR (for FY2021 the new CEO
received only the Executive LTI grant of
120% of FAR).
Given our financial performance over FY2021,
no payments were made under the Executive
STI plan.
The FY2018 LTI (tested in November 2020)
did not vest with three-year average RONA
below the required threshold.
Deferred shares allocated under the FY2018,
FY2019 and FY2020 awards remain in a holding
lock and have therefore seen fluctuations in
value aligned with our share price.
ORICA Annual Report 2021 |
87
Remuneration Report (continued)
Contents
Section 1. Key Management Personnel
1.1 Executive Key Management Personnel
1.2 Non‑Executive Directors Key
Management Personnel
Section 2. Key stakeholder questions
2.1 How is Executive remuneration structured?
2.2 What is the new CEO’s fixed equity component?
2.3 When is remuneration earned and received?
2.4 How much were Executive KMP paid in FY2021?
2.5 What were the termination arrangements
for the former CEO?
2.6 What were the outcomes of the
Executive Remuneration Framework review?
Section 3. Executive remuneration
3.1 Executive Remuneration Framework
3.2 Short‑term incentive outcomes –
link to performance
3.3 Long‑term incentive outcome
3.4 Equity granted in FY2021
3.5 Overview of business performance –
five‑year comparison
3.6 Service agreements
Section 4. Non-Executive Director arrangements
4.1 Overview
4.2 Fees and other benefits
Section 5. Remuneration governance
5.1 Responsibility for setting remuneration
5.2 Use of remuneration advisors during the year
5.3 Securities dealing policy and Malus
5.4 Executive and Director share ownership
Section 6. KMP statutory disclosures
6.1 Executive KMP remuneration
6.2 Summary of awards held under
Orica’s Executive equity arrangements
6.3 Non‑Executive Director remuneration
89
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90
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91
92
92
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88 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Remuneration Report (continued)
SECTION 1. KEY MANAGEMENT PERSONNEL
1.1 Executive Key Management Personnel
The table below lists the Executives of the Company who, together with the Non-Executive Directors, were defined as Key Management Personnel (KMP)
under Australian Accounting Standards for FY2021. For the purpose of this Remuneration Report, references to Executives are to the Executive KMP and
other Executive Committee members with the same remuneration arrangements as the Executive KMP.
In addition to appointing a new Managing Director and CEO, several changes were made to our Executive KMP during FY2021, including the transition
of individuals into new roles and the creation of a new Chief Technology Officer position with accountability for our customer-facing technology and
innovation agenda. As a result of changes to the manufacturing structure, the Chief Manufacturing Officer position has also ceased to exist, and a new
Senior Vice President Discrete Manufacturing and Supply role was created that is not considered to be KMP.
Role in FY2021
Commencement date in role
Country of residence
Name
Executive Director
Sanjeev Gandhi
Executive KMP
Christopher Davis
James Bonnor(1)
Brian Gillespie(2)
Angus Melbourne
Former Executive KMP
Alberto Calderon(3)
Darryl Cuzzubbo(4)
Thomas Schutte(5)
Managing Director and CEO
President – Australia Pacific & Asia
1 April 2021
20 July 2020
Chief Financial Officer
1 October 2018
President – Europe, Middle East and Africa
1 July 2021
President – North America
President – Latin America
Chief Technology Officer
Chief Commercial Officer
1 October 2015
3 May 2021
1 April 2021
1 October 2016
1 April 2021
President – Latin America & Supply
1 September 2018
Managing Director and CEO
Chief Manufacturing Officer
19 May 2015
7 October 2019
Australia
Australia
Australia
United Kingdom
United States
Australia
Australia
Australia
Australia
Chile
Australia
Australia
Germán Morales(2)
President – Australia Pacific & Asia
President – Europe, Middle East and Africa
1 October 2017
United Kingdom
(1)
James Bonnor continued to act in the President – North America role until James Crough’s appointment as President – North America on 1 October 2021.
(2) Germán Morales continued in the President – Latin America role until his relocation to Australia in May 2021. During April 2021, he acted in both this role and as
President – Australia Pacific & Asia before Brian Gillespie assumed the role of President – Latin America on 3 May 2021. Brian Gillespie will relocate to Chile pending
COVID-19 related travel restrictions easing.
(3) Alberto Calderon ceased to be KMP on 31 March 2021. His entitlements on termination are included at section 2.5.
(4) Darryl Cuzzubbo ceased to be KMP on 31 March 2021 as part of a mutually agreed separation from Orica. He retained a pro-rata entitlement to the FY2021 STI and
a pro-rata portion of the FY2021, FY2020 and FY2019 LTI awards (all pro-rated based on time served over the relevant performance period), noting that no FY2021 STI
payment will be received. Mr Cuzzubbo’s FY2020, FY2019 and FY2018 STI deferred shares remain on foot and subject to the original disposal restrictions, aside from
a portion of shares released to cover a tax liability on cessation. As part of the separation agreement, Mr Cuzzubbo also received a severance payment of 26 weeks’
fixed annual remuneration in accordance with his contractual entitlements.
(5) Thomas Schutte ceased to be KMP on 30 June 2021 but remained in employment with Orica until his retirement on 30 September 2021 to support the transition of the
President – Europe, Middle East and Africa role during a period of significant change. He retained a pro-rata entitlement to the FY2021 STI and a pro-rata portion of the
FY2021, FY2020 and FY2019 LTI awards (all pro-rated based on time served over the relevant performance period), noting that no FY2021 STI payment will be received.
Mr Schutte’s FY2020, FY2019 and FY2018 STI deferred shares remain on foot and subject to the original disposal restrictions.
Executive Committee member qualifications, experience and responsibilities are detailed on pages 28-29 of this Report.
ORICA Annual Report 2021 |
89
Remuneration Report (continued)
1.2 Non-Executive Directors Key Management Personnel
The Non-Executive Directors who held office during FY2021 are set out below. These Directors have oversight of the strategic direction of the Company
but have no direct involvement in the day-to-day management of our business.
Name
Current Directors
Malcolm Broomhead
John Beevers
Maxine Brenner
Boon Swan Foo
Denise Gibson
Karen Moses
Gene Tilbrook
Role in FY2021
Commencement date in role
Country of residence
Non-Executive Director, Chairman
1 December 2015
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
1 February 2020
8 April 2013
6 May 2019
1 January 2018
1 July 2016
14 August 2013
Australia
Australia
Australia
Singapore
United States
Australia
Australia
SECTION 2. KEY STAKEHOLDER QUESTIONS
2.1 How is Executive remuneration structured?
Our Executive Remuneration Framework is weighted towards variable (at-risk) remuneration to align with the interests of our shareholders and drive
performance against short-term and long-term business objectives.
Assuming target STI and the face value of LTI granted to Executives, the current policy remuneration mix is:
– CEO: 75.0% variable based on performance, 62.5% of which is delivered as deferred shares or performance rights; and
– Other Executives: 64.3% variable based on performance, 50.0% of which is delivered as deferred shares or performance rights.
Previous Mix
Current Mix
LTI Rights
51.9%
CEO
36% Cash
64% Equity
Fixed Cash
24.1%
STI Cash
12.0%
STI Equity
12.0%
LTI Rights
50.0%
CEO
33% Cash
67% Equity
Fixed Cash
20.6%
Fixed Equity
4.4%
LTI Rights
42.9%
STI Cash
12.5%
STI Equity
12.5%
STI Equity
7.1%
Other
Executives
50% Cash
50% Equity
Fixed Cash
35.7%
STI Cash
14.3%
2.2 What is the new CEO’s fixed equity component?
As Sanjeev Gandhi was appointed as CEO within 12 months of joining Orica, the Board considered it important to deliver a portion of his FAR in the form
of Orica equity to ensure immediate and ongoing alignment with shareholders. The fixed equity component is equal to 17.6% of total FAR and is granted
in the form of restricted rights which vest monthly in alignment with the payment of fixed cash. For FY2021, a pro-rata grant was made post-half-year
results as outlined below.
Apr 2021
May 2021
Jun 2021
Jul 2021
Aug 2021
Sept 2021
Grant of restricted rights
Vesting date
Fixed Cash
Fixed Equity – monthly vesting in equal tranches
Holding lock until CEO holds 150% x FAR in vested equity
For FY2021, the actual number of restricted rights granted was determined based on the VWAP of Orica shares over the five days up to and including
the effective date of appointment. For the FY2022 grant, the VWAP period will be the five days following full-year financial results, consistent with
the approach for the allocation of equity under the deferred STI and LTI plans. Vested Rights are exercisable for a five-year period from grant, with the
underlying shares subject to a holding lock until the CEO exceeds his minimum shareholding requirement, except where the sale of shares is required
to meet tax obligations.
In setting the new CEO remuneration package and in recognition of the new fixed equity component, the minimum shareholding requirement was
increased from 100% to 150% of FAR and the time period allowed to reach this holding was reduced from six to five years from appointment. Further
information on the CEO’s fixed equity is detailed in Section 3.1.
90 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Remuneration Report (continued)
2.3 When is remuneration earned and received?
Remuneration is structured to reward Executives progressively across different timeframes with an emphasis on alignment with shareholders through
extended holding locks and a five-year effective holding period. The diagram below illustrates the period over which FY2021 remuneration is earned
and delivered, and when holding locks are lifted.
FY2021
FY2022
FY2023
FY2024
FY2025
Fixed Cash
Fixed Equity*
Holding lock until minimum shareholding guideline is met
* Fixed Equity applicable for new CEO from 1 April 2021
Cash STI
STI Deferred Shares
One year deferral
Three year holding lock post vesting
D
E
X
I
F
E
L
B
A
R
A
V
I
LTI Performance Rights
Two year holding lock post vesting
Five-year plan
periods for
STI and LTI
End of performance period
Vesting date
2.4 How much were Executive KMP paid in FY2021?
The table below presents the remuneration paid to, or vested for, Executive KMP in FY2021.
Executive KMP
Sanjeev Gandhi
Christopher Davis
James Bonnor
Brian Gillespie
Angus Melbourne
Germán Morales
Former Executive KMP
Alberto Calderon
Darryl Cuzzubbo
Thomas Schutte
Total
Fixed
pay(1)
$000
1,200.0
875.0
871.8
241.7
919.8
784.0
900.0
437.5
822.4
7,052.2
STI to
be paid
in cash(2)
$000
–
–
–
–
–
–
–
–
–
–
Equity
awards
vested during
year(3)
$000
Total
remuneration
received
$000
Other(4)
$000
141.7
130.4
100.0
–
148.2
133.2
685.1
113.4
181.4
25.9
2.6
548.5
6.6
4.9
415.2
7.1
439.4
5.0
1,367.6
1,008.0
1,520.3
248.3
1,072.9
1,332.4
1,592.2
990.3
1,008.8
Total cash
payment
$000
1,200.0
875.0
871.8
241.7
919.8
784.0
900.0
437.5
822.4
7,052.2
1,633.4
1,455.1
10,140.7
(1) Fixed Pay includes actual base pay received and superannuation (or equivalent pension) contributions for each individual’s applicable KMP period. Refer footnote 7
in section 6.1 for detail on payments received by Alberto Calderon and Thomas Schutte from the dates they ceased to be KMP and when they formally ceased
employment with Orica.
(2) No payments were made under the FY2021 Executive STI plan. Brian Gillespie will receive a payment of $21,866 relating to the period 1 October 2020 to 2 May 2021
when he held the non-Executive role of CEO GroundProbe and participated in the Orica Incentive Plan. From Mr Gillespie’s appointment as President – Latin America
on 3 May 2021, his Orica Incentive Plan participation was replaced by a pro-rata opportunity under the Executive STI plan and he therefore did not receive any payments
relating to the Executive KMP role.
(3) Relates to the face value of equity awards (using the share price at the vesting date) that vested during FY2021, including deferred shares from FY2019 that vested in
December 2020, but remain subject to holding locks until December 2023. For select overseas executives or Australian-based executives who ceased employment during
FY2021 and where a tax liability arose at vesting or cessation, a portion of the deferred shares were released from restriction to settle the taxes due. No shares were
acquired under the LTI as the FY2018 LTI did not vest. For Sanjeev Gandhi, the amount also includes vested fixed equity and the first tranche of a sign-on award that was
granted on commencement of employment and vested on 31 March 2021.
(4)
Includes the cash value of relocation assistance, the cost of meeting tax filing obligations associated with international assignments, and other benefits and allowances
provided (where applicable). Movements in annual leave and long-service leave balances have not been shown. For Darryl Cuzzubbo, this figure includes a contractual
severance payment. Refer footnote 4 in section 1.1 for details.
For more information, refer to section 6.1 – FY2021 Executive KMP remuneration table prepared in accordance with the accounting standards.
ORICA Annual Report 2021 |
91
Remuneration Report (continued)
2.5 What were the termination arrangements for the former CEO?
Alberto Calderon ceased as CEO on 31 March 2021 however he remained in employment with Orica from 1 April to 31 May 2021 to support the
transition of the CEO role to Sanjeev Gandhi. While contractually entitled to receive a separation payment equivalent to six months’ salary, it was mutually
agreed this payment would not be made. On termination, he forfeited any entitlement to the FY2021 STI and all unvested equity awards (including the
FY2020 STI deferred shares and FY2021, FY2020 and FY2019 LTI awards) lapsed. The FY2019 and FY2018 STI deferred shares, which vested prior to
termination in December 2019 and December 2020 respectively, remain on foot and subject to the original disposal restrictions aside from a portion
of shares that were released to cover a tax liability on termination.
2.6 What were the outcomes of the Executive Remuneration Framework review?
As flagged in our FY2020 Remuneration Report, the Board undertook a formal review of our Executive Remuneration Framework during FY2021, with
a focus on ensuring the framework supports our business strategy, aligns with shareholders’ interests, enables us to attract, engage and retain talent,
and motivates our people to deliver their best performance.
Following the 2020 AGM and throughout the review process, we engaged with investors and proxy advisors to understand their views. The new CEO
remuneration framework took into account the feedback received on quantum, structure and shareholder alignment. We also recognise that direct
alignment of executive remuneration with share price is critical over the near term and for this reason, rTSR will be introduced as a second measure
(in addition to RONA), linking 50% of the CEO and other Executives’ LTI outcomes to our share price performance.
In relation to the STI, we have shown our commitment to reducing the impact of our business on the environment through the introduction of the
Loss of Containment metric in FY2021. In further support of this and aligned with our stated 2030 emissions reduction objective, the revised Safety and
Sustainability component of FY2022 STI scorecards will include a new greenhouse gas (GHG) emissions metric. With Serious Injury Case Rate the primary
safety metric, the weighting on this metric has also been increased. For other Executives, the Strategic component of their FY2022 STI scorecard will
include an additional sustainability-based metric aligned to their specific role within the organisation. The financial metrics remain as per the prior year,
however, the weighting on EBIT and RONA will increase in recognition of the importance of improving earnings performance in FY2022.
FY2022 CEO Scorecard
Measure
Metric
Weighting (at target)
Safety and Sustainability
Serious Injury Case Rate
Financial
Loss of Containment
Global Scope 1 and 2 GHG emissions(1)
EBIT
RONA
Cash Generation Efficiency
10.0%
5.0%
10.0%
30.0%
30.0%
15.0%
(1) Scope 1 and 2 refers to emissions under Orica’s operational control, measured in accordance with the GHG Protocol and National Greenhouse and Energy Reporting
(NGER) Measurement Determination.
SECTION 3. EXECUTIVE REMUNERATION
3.1 Executive Remuneration Framework
The following table outlines the FY2021 Executive Remuneration Framework.
Remuneration Positioning
Market position
Median for FAR and between Median and 75th percentile for total remuneration where outstanding performance
is delivered.
Comparators
Primary comparator group – 13 ASX listed companies similar in size, operations and complexity to Orica,
with reference to market capitalisation, revenue, industry and the extent of international operations.
The primary comparator group was last reviewed as at 30 June 2021 and comprised the following companies:
Amcor Limited, Ansell Limited, BlueScope Steel Limited, Brambles Limited, Incitec Pivot Limited, James Hardie
Industries Plc, Newcrest Mining Limited, Oil Search Limited, Orora Limited, Sims Limited, South 32 Limited,
Woodside Petroleum Limited and Worley Parsons Limited.
Secondary comparator group (reference) – ASX listed companies with market capitalisation between 50%
and 200% of Orica’s 12-month average market capitalisation, as at 30 June of the relevant financial year.
Where appropriate, particularly for roles located outside of Australia, additional sector or local industry specific
data is taken into consideration in benchmarking Executive remuneration.
FAR (Cash)
Payment vehicle
Cash salary, superannuation (or pension equivalent) and allowances (per local market practice).
92
| ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Remuneration Report (continued)
FAR (Equity)
Payment vehicle
Restricted rights (each vested right providing a 1:1 entitlement to Orica shares).
Opportunity (face value)
CEO: 17.6% of Total FAR, equivalent to $300,000 per annum for FY2021 (pro-rata FY2021 face value from
1 April 2021 appointment of $150,000).
The actual number of restricted rights issued was determined by dividing FAR (Equity) opportunity by the five-day
VWAP of Orica shares, up to and including 1 April 2021 ($14.15).
Vesting period
1 April 2021 to 30 September 2021.
Vesting schedule
Vests in equal monthly tranches subject to continued employment until the end of the relevant month.
Exercise period
Holding locks
Between vesting and five-years from grant.
Shares allocated following exercise of vested rights will be subject to a holding lock until the CEO’s minimum
shareholding requirement (150% x FAR) has been met.
Cessation of employment
Unvested rights lapse on cessation, subject to Board discretion to determine otherwise. Vested rights are retained
with no holding locks attached to the underlying shares.
Change of control
Board discretion to determine an appropriate treatment.
Access to dividends
Entitlement to dividend equivalent payments in relation to vested rights.
STI
Changes in FY2021
Changes to FY2021 STI metrics: Key Control Verifications and Close out of Critical Actions replaced with
High Potential Incident Injury Ratio; new Loss of Containment metric; new Cash Generation Efficiency metric
which reduced the weighting on EBIT and RONA.
Reduction in maximum STI opportunity for the CEO from 200% to 150% of FAR.
Payment vehicle
Cash and deferred shares.
Opportunity
Current CEO: 0 to 150% of FAR; 100% at target.
Former CEO: 0 to 200% of FAR; 100% at target.
Other Executives: 0 to 120% of FAR; 60% at target.
Performance Measures
CEO: Safety, Health & Environment (25%); Financials (75%) comprising EBIT, RONA and CGE(1).
For Executives based outside of Australia, opportunities are typically referenced to base salary only.
Other Executives: Safety, Health & Environment (18%); Financials (60%); Strategic priorities (22%).
For each measure, levels for threshold, target and maximum are set. Below threshold, no incentive is paid.
Above threshold, straight-line vesting applies between threshold and target, and between target and maximum.
For Regional Presidents, safety measures are solely based on Regional performance and financial metrics are evenly
weighted between Group and Regional outcomes.
While not specifically included as an STI metric for the CEO, the Board continues to measure progress against Orica’s
corporate plan, organisational health baselines, key people metrics and in strengthening business conduct and
compliance frameworks.
The determination of final performance outcomes for all Executives includes input from Board Committee Chairs
and senior functional leaders (e.g., finance and safety).
Deferred STI
CEO: 50% of STI into deferred shares which vest after one-year and are subject to risk of forfeiture.
Other Executives: one-third of STI into deferred shares which vest after one-year and are subject to risk of forfeiture.
The number of deferred shares granted is calculated using the five-day VWAP immediately after the announcement
of our annual results.
Holding lock
Cessation of
employment
Following the one-year vesting period, vested deferred shares are subject to a further
three-year holding lock during which time Executives are restricted from trading in
shares. Disposal restrictions may be lifted where an Executive is required to fund personal
tax obligations arising on vesting (typically applies to non-Australian based Executives) or
cessation (applicable for Australian-based Executives).
Unvested deferred shares lapse on resignation or termination for cause. In other
circumstances, being good leaver events, unvested shares may be retained subject
to the original vesting period and holding lock.
Vested deferred shares: retained on cessation, subject to the original holding lock.
The Board retains discretion to determine a different treatment on cessation if
considered appropriate in the circumstances.
Change of control
Board discretion to determine an appropriate treatment.
Access to dividends
During both the deferral and holding lock periods, Executives are entitled to
accumulate dividends.
ORICA Annual Report 2021 |
93
Remuneration Report (continued)
LTI
Changes in FY2021
Reduction in LTI opportunity for the CEO from 215% to 200% of FAR (applicable from FY2022 LTI).
Payment vehicle
Performance rights (each vested right providing a 1:1 entitlement to Orica shares).
Opportunity (face value)
Former CEO: 215% of FAR grant at face value.
Other Executives (including current CEO): 120% of FAR grant at face value.
For Executives based outside of Australia, opportunities are typically referenced to base salary only.
The actual number of performance rights issued to each Executive was determined by dividing their respective grant
values by the five-day VWAP of Orica shares following the announcement of our FY2020 annual results ($16.99).
Performance period
Performance is measured over three financial years (FY2021, FY2022 and FY2023).
Performance measure
RONA(2) – calculated as annual EBIT/rolling 12-month Net Operating Assets (calculated on an average basis over three
financial years).
Targets and vesting
schedule
The FY2021 vesting schedule for the RONA performance measure is as follows:
Average RONA over 3 years
% of Rights vesting
Below 11.0%
At 11.0%
No vesting
30% of rights vest
Between 11.0% and 11.7%
Straight line vesting between 30% and 60% of rights vest
At 11.7%
60% of rights vest
Between 11.7% and 12.6%
Straight line vesting between 60% and 100% of rights vest
At or above 12.6%
100% of rights vest
The FY2021 LTI RONA targets reflected the Board’s expectations in late 2020 for returns through the current
industry/market cycle, our corporate plan and transformation program, and long-term growth expectations. As with
prior LTI grants, to achieve target or above-target vesting, EBIT growth must be significantly above the Board’s view
of underlying explosives market growth.
Following the three-year performance period, vested performance rights are converted into shares and are subject to
a further two-year holding lock during which time Executives are restricted from dealing in those shares. The holding
lock is designed to support an owner’s mindset and provide alignment with shareholders. Disposal restrictions may
be lifted where an Executive is required to fund personal tax obligations arising from the vesting of performance
share rights (typically applies to non-Australian based Executives).
Holding locks
Cessation of employment
Unvested rights lapse on resignation or termination for cause. In other circumstances, being good leaver events, a
pro-rata portion of rights (based on service period) is retained subject to the original vesting period and holding lock.
Vested rights are retained on cessation, subject to the original holding lock.
The Board retains discretion to determine a different treatment on cessation if considered appropriate in the
circumstances.
Change of control
Board discretion to determine an appropriate treatment.
Access to dividends
Executives are not entitled to receive dividends on unvested performance rights during the three-year performance
period. Once vested, Executives are entitled to receive dividends during the two-year holding lock.
(1) For STI purposes, EBIT is defined as earnings from Continuing Operations before interest, tax and individually significant items; RONA is defined as EBIT/Net operating
assets. Net operating assets is defined as rolling 12-month average assets including net property, plant and equipment; intangibles at NBV; current and non-current
investments in associates at current carrying value; trade working capital; non-trade working capital excluding environmental provisions; CGE is defined as Net cash from
operating activities (incorporating movement in 12-month average trade working capital) excluding cash outlays related to growth capital or other investments, non-trade
working capital, and payments to and from shareholders and debt, but including sustaining capital/Earnings Before Interest, Taxes, Depreciation and Amortisation.
(2) For LTI purposes, RONA is defined as EBIT/Net operating assets. Net operating assets is defined as rolling 12-month average assets including net property, plant and
equipment; intangibles at NBV; current and non-current investments in associates at current carrying value; trade working capital; non-trade working capital excluding
environmental provisions; EBIT is defined as earnings from Continuing Operations before interest, tax and individually significant items.
The Board has an overriding discretion to adjust final outcomes under the terms of both the STI and LTI plans to ensure executive reward outcomes are
reflective of our overall performance and aligned to shareholder expectations.
94 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Remuneration Report (continued)
3.2 Short-term incentive outcomes – link to performance
Consistent with the prior year, progress made during FY2021 against each safety, health and environment, financial and strategic metric has been assessed
as part of each Executive’s performance review.
Based on this performance assessment, the CEO FY2021 STI scorecard outcome was 38.8% of Target. FY2021 outcomes against the STI metrics within
the FY2021 CEO scorecard are summarised below.
Other Executive KMP FY2021 STI scorecard outcomes would have delivered payments between 51.7% and 62.6% of target. The scorecard outcomes were
predominantly driven by safety and environmental performance, and delivery of strategic priorities. These priorities were determined and approved by the
Board at the commencement of FY2021 based on their role and included enhancing Orica’s development and use of technology, and operating efficiency.
Notwithstanding the importance of ensuring an ongoing focus on safety, sustainability and long-term strategic activities, considering the degree to which
our FY2021 annual financial results were below expectations, the Board has exercised discretion not to make any payments under the FY2021 Executive
STI plan to the CEO or other Executives. The Board’s decision also took into account the shareholder experience over the financial year.
Measure
Target
Weighting
(at target)
Threshold
Target
50%
100%
Max
150%
Weighted
Outcome
(%)
Performance commentary
Safety, Health
& Environment
Rewards a continuous focus on safe and reliable operations measured through a combination of lagging
and leading indicators
2021 performance
SICR(1)
0.139
8.33%
High Potential
Incident Injury
Ratio(2)
Loss of
Containment(3)
25.4
8.33%
65
8.33%
0.0%
9.0%
12.5%
New HPI Injury Ratio led to a
significant increase in reported
HPIs compared to FY2020 and
has driven the desired behavioural
change across the business.
A similar focus on LOC events
also led to a positive outcome
in the first year of the metric.
SICR was slightly higher than
FY2020 but remained below the
FY2019 outcome and our strong
focus on preventing serious
injuries remains.
Financials
Rewards improvements to earnings, enhanced returns from invested capital, developing enabling technology
and adjacency growth, optimising capital allocation and reallocation
EBIT(4)
$641.1
25.0%
0.0%
EBIT outcome was below
threshold predominantly due to
a poor first half of FY2021 that
was adversely impacted by FX,
China trade tensions and the
COVID impact in Latin America,
EMEA and Asia.
RONA(4)
11.4%
25.0%
0.0%
RONA outcome was similarly
below threshold due to EBIT
performance.
CGE(4)
55.1%
25.0%
17.3%
CGE outcomes were impacted
by lower earnings but the strong
focus on trade working capital
and capital expenditure discipline
resulted in continued balance
sheet resilience despite weaker
earnings.
Board
discretion
Overall STI
outcome
The Board exercised discretion to reduce the CEO scorecard outcome of 38.8% to nil in recognition of FY2021 financial
performance and the shareholder experience.
% of Target 0.0%
% of Maximum 0.0%
(1) SICR measures the total number of Severity 3 and Severity 4 injuries and illnesses per 200,000 hours worked by an employee/contractor. Excludes non-work-related
injury/illness and occupational disease or illness that are attributable to chronic exposure to harmful agents over an extended period.
(2) HPI Injury Ratio measures the total number of incidents or near misses that could result in a Severity 4 injury or illness (high potential incidents), divided by the number
of high potential incidents that result in a Severity 1 or greater.
(3) LOC measures the total number of uncontrolled releases of material from a primary containment that results in a Severity 1 or greater environmental impact on water or soil.
(4) Refer section 3.1 for the definitions of EBIT, RONA and CGE for FY2021 STI purposes.
ORICA Annual Report 2021 |
95
Remuneration Report (continued)
3.3 Long-term incentive outcome
The table below summarises the LTI Plan awards tested in the current financial year together with awards that remain unvested.
Plan
LTIP
LTIP
LTIP
LTIP
FY2018 grant
Grant
FY2018
FY2019
FY2020
FY2021
Performance period
FY2018 – FY2020
FY2019 – FY2021
FY2020 – FY2022
FY2021 – FY2023
Performance measures
applicable to award
RONA (100%)
RONA (100%)
RONA (100%)
RONA (100%)
Outcome
No vesting
Not yet tested
Not yet tested
Not yet tested
The FY2018 grant was tested in November 2020 but did not vest as three-year average RONA was below the required threshold.
In determining the average RONA outcome, the Board applied discretion to adjust EBIT and Net Operating Assets (the inputs used to calculate RONA)
to remove the acquisition year impact of the GroundProbe (FY2018) and Exsa (FY2020) transactions, and to remove the impact of the IFRS-16 leasing
standards changes. Net Operating Assets was also adjusted to ensure management were not advantaged from impairments to Minova, IT and other
assets and the write down of defective assets at Burrup (which were all added back). Overall, management were neither advantaged nor disadvantaged
by the adjustments made and they did not change the vesting outcome.
RONA (3-year average)
12.1%
Below threshold of 13.7% 0%
Final outcome
Vesting position
% Rights vesting
FY2019 grant
The FY2019-21 LTIP will be tested in November 2021. It is not anticipated that the minimum RONA performance threshold will be met.
3.4 Equity granted in FY2021
The table below presents the equity granted at face value to Executive KMP during FY2021.
Executives (KMP)
Sanjeev Gandhi
Christopher Davis
James Bonnor
Angus Melbourne
Germán Morales
Former Executive KMP
Alberto Calderon(4)
Darryl Cuzzubbo(5)
Thomas Schutte(5)
Total
FY2021
LTI(1)
$000
1,200.0
1,050.0
1,022.9
1,103.8
820.7
–
175.0
317.1
5,689.5
FY2020
Deferred
shares(2)
$000
–
116.8
100.3
102.4
89.7
–
144.5
82.6
636.3
Other(3)
$000
150.0
–
–
–
–
–
–
–
Total
$000
1,350.0
1,166.8
1,123.2
1,206.2
910.4
–
319.5
399.7
150.0
6,475.7
(1) Due to vest in November 2023 subject to satisfaction of performance conditions and then subject to a two-year holding lock.
(2) Not subject to any further vesting conditions except continued employment for duration of deferral period and then subject to a three-year holding lock.
(3) Relates to Sanjeev Gandhi’s FY2021 fixed equity grant which vests in equal monthly tranches (refer Section 3.1 for details).
(4) Alberto Calderon forfeited the full FY2021 LTI award and all FY2020 deferred shares on termination.
(5) Darryl Cuzzubbo and Thomas Schutte each forfeited a pro-rata portion of their FY2021 LTI award on termination.
96 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Remuneration Report (continued)
3.5 Overview of business performance – five-year comparison
The table below summarises key indicators of the performance of the Company, relevant shareholder returns over the past five financial years, and the
impact on STI vesting outcomes. This demonstrates how our incentive awards align with our performance.
Financial year ended 30 September
Profit/(loss) from operations ($m)
Individually significant items ($m)(2)
EBIT ($m)(3)
Dividends per ordinary share (cents)
Closing share price ($ as at 30 September)(4)
Three-month average share price (1 July to 30 September) each
year
EPS growth (%)(3)
NPAT ($m)(3)
External Sales ($m)
Cumulative TSR (%)(5)
Average STI received as % of maximum opportunity for Executives(6)
2017
635.1
–
635.1
51.5
19.77
20.12
(1.7)
386.2
2018
242.8
375.3
618.1
51.5
17.03
17.31
(16.6)
324.2
2019
468.8
195.9
664.7
55.0
22.54
21.36
14.2
371.9
2020(1)
320.6
293.1
613.7
33.0
15.43
17.05
(22.8)
299.1
2021
(27.3)
453.9
426.6
24.0
13.79
12.83
(32.3)
208.4
5,039.2
5,373.8
5,878.0
5,611.3
5,682.2
46.52
60.0
29.44
23.0
64.28
53.3
34.15
29.2
2.57
0.0
(1) FY2020 Profit/(loss) from operations, Individually significant items, EBIT, EPS growth, NPAT and External sales have been restated to align with the figures presented in the
financial statements.
(2) This figure is before interest, tax and non-controlling interest.
(3) Before individually significant items.
(4) The closing share price for financial year 2016 (as at 30 September 2016) was $15.20.
(5) Cumulative TSR has been calculated using the same start date for each period measured (1 October 2016). In calculating the cumulative TSR, three-month average
share prices (1 July to 30 September for each year) have been used.
(6) Refers to awards received under the Executive STI plan.
3.6 Service agreements
Remuneration and other terms of employment for Executives are formalised in service agreements. The terms and conditions of employment of each
Executive reflect market conditions at the time of their contract negotiation on appointment or subsequently. The material terms of the employment
contracts for the current Executive KMP are summarised in the table below and subject to applicable law.
Contractual Term
Application
Conditions
Duration of contract
All Executive KMP
Permanent full-time employment contract until notice given by either party.
Notice period to be
provided by Executive
Notice period to be
provided by Orica
All Executive KMP
Six months.
MD & CEO
Six months. Orica may elect to make payment in lieu of notice. In the event of
Orica terminating the service agreement, the MD & CEO will be entitled to receive
a termination payment of six months’ salary (less any payment in lieu of notice).
Should the MD & CEO’s service agreement be terminated by mutual agreement,
six months’ salary is payable (in which case no notice is required to be given).
Other Executive KMP
Executives have either a 13 week or 26-week notice period.
Post-employment
restraints
All Executive KMP
Executives are entitled to be paid an amount equal to 26 weeks’ FAR on
termination (52 weeks in the case of James Bonnor).
Each Executive has also agreed to restraints and non-solicitation undertakings
as part of their service agreements, which will apply upon cessation of their
employment to protect the legitimate business interests of Orica.
ORICA Annual Report 2021 |
97
Remuneration Report (continued)
SECTION 4. NON-EXECUTIVE DIRECTOR ARRANGEMENTS
4.1 Overview
Fees for Non-Executive Directors (Directors) are set by reference to:
– the individual’s responsibilities and time commitment attaching to the role of Director and Committee membership;
– the Company’s existing remuneration policies and survey data sourced from external specialists; and
– fees paid by comparable companies and the level of remuneration required to attract and retain Directors of the appropriate calibre.
To preserve their independence, Directors do not receive any form of performance-based pay.
The current aggregate fee pool for Directors of $2,750,000 was approved by shareholders at our 2019 Annual General Meeting. The Company
pays both superannuation and Committee fees to the Directors from this pool. Committee fees are not paid to the Chairman of the Board.
4.2 Fees and other benefits
The table below sets out the elements of Directors’ fees and other benefits applicable for the full FY2021, noting that between 1 June 2021 and
30 September 2021, no fees were paid to the Chairman of the Board.
Fees/benefits
Board fees
Description
Main Board
Chairman – Malcolm Broomhead
Members – all Non-Executive Directors
Committee fees
Board Audit and Risk Committee
Chairman – Gene Tilbrook
Members – Maxine Brenner, Boon Swan Foo
Human Resources and Compensation Committee
Chairman – Maxine Brenner
Members – Denise Gibson, Karen Moses
Innovation and Technology Committee
Chairman – Denise Gibson
Members – John Beevers, Boon Swan Foo
Safety & Sustainability Committee
Chairman – Karen Moses
Members – John Beevers, Gene Tilbrook
Superannuation
Other fees/benefits
Superannuation contributions are made on behalf of the Directors at a rate of 10.0%
from 1 July 2021 (9.5% prior to 1 July 2021) being the current superannuation
guarantee contribution rate subject to a cap at the Maximum Contributions Base.
Directors receive a travel allowance based on the hours travelled to a Board meeting.
The allowance paid is $3,000 per meeting for travel between three and 10 hours,
or $6,000 if travel time exceeds 10 hours. Directors are also entitled to be paid
additional fees for extra services or special exertions. No travel allowances were
received for FY2021.
2021
$
Included in
shareholder
approved cap
510,000
177,000
45,000
22,500
45,000
22,500
45,000
22,500
45,000
22,500
Yes
Yes
Yes
No
98 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Remuneration Report (continued)
SECTION 5. REMUNERATION GOVERNANCE
5.1 Responsibility for setting remuneration
The HR&C (the Committee) is delegated responsibility by the Board for reviewing and making recommendations on our remuneration policies, including
policies governing the remuneration of Executives.
Activities of the Committee are governed by its Terms of Reference, which are available on our website at www.orica.com. Among other responsibilities,
the Committee assists the Board in its oversight of:
(a)
remuneration policy for Executives;
(b)
level and structure of remuneration for Senior Executives, including STI and LTI plans;
(c)
the Company’s compliance with applicable legal and regulatory requirements in respect of remuneration matters; and
(d) approval of the allocation of shares and awards under Orica’s equity programs.
5.2 Use of remuneration advisors during the year
No remuneration recommendations were received from remuneration advisors as defined under the Corporations Act 2001.
5.3 Securities dealing policy and Malus
Securities dealing
All Executives are required to comply with our Securities Dealing Policy at all times and in respect of all Orica shares held, including any defined employee
share plans. Trading is subject to pre-clearance and is not permitted during designated blackout periods unless there are exceptional circumstances.
Executives are prohibited from using any Orica shares as collateral in any margin loan or derivative arrangement.
Malus
Orica’s Malus Standard allows the Board to require any Executive to forfeit in full or in part, any unvested LTI or deferred STI award as a result of:
– a material misstatement in financial results;
– behaviour that brings Orica into disrepute or has the potential to do so;
– serious misconduct; and
– any other circumstance, which the Board has determined in good faith.
In considering whether any adjustment is necessary in respect of any or all participants, the Board may take into account the individual’s level of
responsibility, accountability or influence over the action or inaction, the quantum of the actual loss or damage, any impact on our financial soundness
or reputational standing, the extent to which any internal policies, external regulations and/or risk management requirements were breached, and any
other relevant matters.
5.4 Executive and Director share ownership
The Board considers that an important foundation of our Executive Remuneration Framework is that each Executive and Director accumulate and hold
a significant number of Orica shares to align their interests as long-term investors.
Executives
The Executive Minimum Shareholding Guideline requires each Executive to accumulate a minimum vested equity holding in Orica over a fixed time period
from their appointment. During FY2021, the CEO requirement was increased to 150% of FAR (from 100%) with the time period decreased to five years
from appointment (from six years). The requirement for other Executives was unchanged from FY2020 at 50% of FAR over six years from appointment
(by 31 December 2022 for Executives employed prior to 1 January 2015, the effective date of the guideline). Under the current Executive Remuneration
Framework, at target performance and vesting, Executives would exceed these guidelines.
Non-Executive Directors
To create alignment between Directors and shareholders, Directors are required to hold (or have a benefit in) shares in the Company equivalent in value
to at least one year’s base fees. Such holdings must be acquired over a reasonable time using personal funds.
ORICA Annual Report 2021 |
99
Remuneration Report (continued)
The table below sets out the number of shares held directly and indirectly by Directors and Executive KMP employed as at 30 September 2021:
Balance at
1 October
2020
Acquired(1)
Disposed
Balance at
30 September
2021
Minimum
Shareholding
Required(2)
Date Minimum
Shareholding
Required to be
met(3)
Executive KMP
Sanjeev Gandhi(4)
Christopher Davis
James Bonnor
Brian Gillespie(5)
Angus Melbourne
Germán Morales
Former Executive KMP
Alberto Calderon(6)
Darryl Cuzzubbo(6)
Thomas Schutte(6)
Directors
Malcolm Broomhead
John Beevers
Maxine Brenner
Boon Swan Foo
Denise Gibson
Karen Moses
Gene Tilbrook
–
23,255
31,190
–
46,707
15,000
228,329
63,015
60,659
37,984
7,727
9,539
–
3,000
11,000
14,070
40,735
21,251
3,426
–
9,189
8,170
50,127
6,956
5,883
–
7,073
–
–
10,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
40,735
44,506
34,616
–
55,896
23,170
278,456
69,971
66,542
37,984
14,800
9,539
–
13,000
11,000
14,070
184,917
31 March 2026
31,726
31,678
21,030
33,350
32,632
30 September 2024
31 December 2022
30 April 2027
31 December 2022
31 August 2024
–
–
–
–
–
–
36,983
12,835
12,835
12,835
12,835
12,835
12,835
(1) Shares acquired include FY2019 STI deferred shares that have vested but remain subject to holding locks and shares acquired through the Dividend Reinvestment Plan (DRP).
(2) Calculated using the Orica closing share price on 30 September 2021.
(3) Directors are required to acquire a shareholding of at least one year’s base fees over a reasonable time.
(4)
Includes 10,600 vested rights granted under the CEO’s fixed equity arrangement as these are no longer subject to forfeiture and can be converted into ordinary shares
with nil consideration.
(5) Opening balance on commencement as KMP.
(6) Closing balance on cessation of employment.
SECTION 6. KMP STATUTORY DISCLOSURES
6.1 Executive KMP remuneration
Details of the nature and amount of each element of remuneration of Executive KMP are set out in the table below. Remuneration outcomes presented in
these tables are calculated with reference to the Corporations Act 2001 and relevant Australian Accounting Standards for FY2021 rather than the basis of
take-home pay.
Short‑term employee benefits
Cash STI
Payment(1)
$000
Other
Benefits(2)
$000
Other
Long‑Term
Benefits(3)
$000
Post‑
employment
benefits
Super‑
annuation
Benefits
$000
Termin‑
ation
Benefits
$000
Total excl.
SBP*
Expense
$000
SBP
Expense
(4)(5)
$000
–
–
–
233.6
–
200.6
96.6
206.7
48.2
(38.0)
636.6
305.2
–
–
14.0
21.5
11.3
22.4
–
–
22.2
21.2
22.2
21.2
–
–
–
–
–
–
1,296.6
411.8
937.2
1,073.4
1,519.7
1,468.7
701.5
154.4
58.4
(52.4)
50.2
(77.3)
Total
$000
1,998.1
566.2
995.6
1,021.0
1,569.9
1,391.4
Base
(Fixed)
Pay
$000
1,200.0
205.1
852.8
835.1
849.6
919.3
Current Executive KMP
Sanjeev Gandhi
2021
2020
Christopher Davis
2021
2020
James Bonnor(6)
2021
2020
100 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Remuneration Report (continued)
Short‑term employee benefits
Cash STI
Payment(1)
$000
Other
Benefits(2)
$000
Other
Long‑Term
Benefits(3)
$000
Post‑
employment
benefits
Super‑
annuation
Benefits
$000
–
–
204.9
–
179.3
–
818.4
–
406.7
–
289.1
–
–
165.3
26.3
46.2
100.3
435.1
56.6
1,289.0
630.8
75.2
(86.6)
28.0
(2.1)
–
11.1
24.8
–
–
–
–
–
25.3
43.9
14.8
29.6
–
–
–
–
–
9.5
22.2
21.2
27.2
40.1
103.3
103.7
10.8
21.2
10.8
21.2
–
24.0
33.0
Termin‑
ation
Benefits
$000
Total excl.
SBP*
Expense
$000
SBP
Expense
(4)(5)
$000
Total
$000
–
–
–
–
–
–
–
–
–
437.5
–
–
–
–
268.0
–
268.0
966.0
1,243.5
1,219.1
944.0
6,206.6
5,141.4
990.0
2,149.7
903.0
1,162.0
51.2
(66.2)
1,017.2
1,177.3
44.8
102.3
906.1
60.8
1,263.9
1,046.3
7,112.7
5,202.2
–
990.0
(111.3)
2,038.4
72.3
(51.5)
975.3
1,110.5
17.3
(228.7)
(211.4)
833.5
1,301.8
41.3
(78.4)
874.8
1,223.4
Base
(Fixed)
Pay
$000
232.2
897.6
917.1
756.8
668.0
Brian Gillespie
2021
Angus Melbourne(6)
2021
2020
Germán Morales(6)
2021
2020
Total Current Executive KMP
4,789.0
3,544.6
889.2
1,778.8
426.7
853.8
17.3
798.4
1,078.7
2021
2020
Former Executive KMP
Alberto Calderon(7)
2021
2020
Darryl Cuzzubbo
2021
2020
Carlos Duarte
2020
Thomas Schutte(6)(7)
2021
2020
Total
2021
2020
* Share-based payment (SBP).
6,903.3
7,273.2
–
1,679.5
1,403.3
566.9
40.1
73.5
148.9
179.1
437.5
–
8,933.1
9,772.2
1,019.7
(409.1)
9,952.8
9,363.1
(1) Cash STI Payment includes payments relating to FY2021 performance accrued but not paid until FY2022. No payments were made under the FY2021 Executive STI plan.
Brian Gillespie will receive a payment of $21,866 relating to the period 1 October 2020 to 2 May 2021 when he held the non-Executive role of CEO GroundProbe and
participated in the Orica Incentive Plan. From Mr Gillespie’s appointment as President – Latin America on 3 May 2021, his Orica Incentive Plan participation was replaced
by a pro-rata opportunity under the Executive STI plan and he therefore did not receive any payments relating to the Executive KMP role.
(2) These benefits include car parking, medical and insurance costs and movements in annual leave accrual (inclusive of any applicable fringe benefits tax). For overseas based
Executives other benefits also include relocation costs, assignment-related expenses and allowances including reimbursement of accommodation, health insurance and
taxation services, and mandatory payments in the overseas location. A negative balance may appear where the leave accrual has decreased from the prior year.
(3) This benefit includes the movement in long service leave accrual.
(4) This includes the value calculated under AASB 2 Share-based Payment to Executives which vests over three years. Value only accrues to the Executive when performance
conditions have been met. The share-based payment expense represents the amount required under Accounting Standards to be expensed during the year in respect of current
and past long-term incentive allocations to Executives. These amounts are therefore not amounts received by Executives during the year nor may they be payable to the Executive
at any other time if performance hurdles are not met. The mechanism which determines whether long-term incentives vest in the future is described in Section 3.1. Where a
negative SBP Expense is shown, this represents a write-back of a previous share-based payment accrual based on a revised estimate of performance conditions being met.
(5) Under AASB 2 Share-based Payment, STI paid to Executives as deferred equity is accounted for as a share-based payment and expensed over two years. Accordingly,
50% of the value of the FY2020 deferred equity has been included in the Executives share-based payment expense in FY2020 with the remainder included in FY2021.
No deferred equity has or will be awarded in respect of FY2021 performance.
(6) For overseas based Executives, salary reported is based on the salary figure in overseas currency converted at the average foreign exchange rate for the year.
(7) Alberto Calderon, former Managing Director and CEO, ceased to be a KMP on 31 March 2021. During a transition period from 1 April 2021 to 31 May 2021 when he
remained employed with Orica to support the transition to Sanjeev Gandhi, he received contractual base salary and superannuation of $300,000 in addition to the
amounts shown in the above table. While contractually entitled to receive a separation payment, it was mutually agreed that no payment would be made (refer section
2.5 for further details of the termination arrangements). Thomas Schutte, former President – Europe, Middle East and Africa, ceased to be a KMP on 30 June 2021 and
following the transition of his role to James Bonnor, retired from Orica on 30 September 2021. In addition to the amounts shown in the above table, during the period from
1 July 2021 to 30 September 2021, Mr Schutte continued to receive his contractual base salary (equivalent to $266,120), pension contributions and employment benefits.
ORICA Annual Report 2021 |
101
Remuneration Report (continued)
6.2 Summary of awards held under Orica’s Executive equity arrangements
Details of LTIP performance rights, CEO restricted rights, sign-on rights and deferred shares awarded under the STI plan are set out in the table below:
For the year ended
30 September 2021
Current Executive KMP
Sanjeev Gandhi
Grant date
Granted
during FY2021
Vested
Lapsed
FY2021 Fixed Equity rights(1)
24 May 21
FY2021 LTIP Performance rights
3 Feb 21
10,600
70,629
10,600
–
Sign-on rights(2)
Christopher Davis
20 July 20
–
30,135
FY2021 LTIP Performance rights
3 Feb 21
61,801
FY2020 LTIP Performance rights
10 Jan 20
FY2019 LTIP Performance rights
11 Jan 19
FY2020 STI Deferred shares
FY2019 STI Deferred shares(3)
8 Dec 20
3 Dec 19
James Bonnor
–
–
6,874
–
FY2021 LTIP Performance rights
3 Feb 21
60,206
FY2020 LTIP Performance rights
10 Jan 20
FY2019 LTIP Performance rights
11 Jan 19
FY2018 LTIP Performance rights
FY2020 STI Deferred shares
FY2019 STI Deferred shares(3)
Angus Melbourne
5 Jan 18
8 Dec 20
3 Dec 19
–
–
–
5,903
–
FY2021 LTIP Performance rights
3 Feb 21
64,965
FY2020 LTIP Performance rights
10 Jan 20
FY2019 LTIP Performance rights
11 Jan 19
FY2018 LTIP Performance rights
FY2020 STI Deferred shares
FY2019 STI Deferred shares(3)
5 Jan 18
8 Dec 20
3 Dec 19
Germán Morales
–
–
–
6,029
–
FY2021 LTIP Performance rights
3 Feb 21
48,306
FY2020 LTIP Performance rights
10 Jan 20
FY2019 LTIP Performance rights
11 Jan 19
FY2020 STI Deferred shares
FY2019 STI Deferred shares(3)
8 Dec 20
3 Dec 19
–
–
5,276
–
–
–
–
–
7,998
–
–
–
–
–
6,133
–
–
–
–
–
9,091
–
–
–
–
8,170
–
–
–
–
–
–
–
–
–
–
–
51,529
–
–
–
–
–
57,742
–
–
–
–
–
–
–
Fair value of
instruments at
grant date
$
Balance at
year end
Value of equity
instruments
included in
compensation
for the year
$
–
70,629
15,045
61,801
44,112
52,892
6,874
–
60,206
46,160
52,863
–
5,903
–
64,965
46,370
59,237
–
6,029
–
48,306
32,759
43,110
5,276
–
150,000
949,960
749,988
831,223
851,803
778,041
116,796
190,400
809,771
891,350
777,615
811,582
100,301
146,005
873,779
895,405
871,376
909,437
102,435
216,414
649,716
632,576
634,148
89,655
194,491
150,000
–
551,473
–
–
–
58,398
–
–
–
–
–
50,151
–
–
–
–
–
51,218
–
–
–
–
44,828
–
102 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Remuneration Report (continued)
For the year ended
30 September 2021
Former Executive KMP
Alberto Calderon
Grant date
Granted
during FY2021
Vested
Lapsed
Fair value of
instruments at
grant date
$
Balance at
year end
Value of equity
instruments
included in
compensation
for the year
$
FY2021 LTIP Performance rights
3 Feb 21
227,781
FY2020 LTIP Performance rights
10 Jan 20
FY2019 LTIP Performance rights
11 Jan 19
FY2018 LTIP Performance rights
FY2020 STI Deferred shares
FY2019 STI Deferred shares(3)
5 Jan 18
8 Dec 20
3 Dec 19
Darryl Cuzzubbo
–
–
–
23,938
–
–
–
–
–
–
42,033
FY2021 LTIP Performance rights
3 Feb 21
61,801
FY2020 LTIP Performance rights
10 Jan 20
FY2019 LTIP Performance rights
11 Jan 19
FY2018 LTIP Performance rights
FY2020 STI Deferred shares
FY2019 STI Deferred shares(3)
5 Jan 18
8 Dec 20
3 Dec 19
Thomas Schutte
–
–
–
8,507
–
FY2021 LTIP Performance rights
3 Feb 21
74,652
FY2020 LTIP Performance rights
10 Jan 20
FY2019 LTIP Performance rights
11 Jan 19
FY2018 LTIP Performance rights
FY2020 STI Deferred shares
FY2019 STI Deferred shares(3)
5 Jan 18
8 Dec 20
3 Dec 19
–
–
–
4,864
–
–
–
–
–
3,999
6,956
–
–
–
–
–
11,131
227,781
162,584
213,223
207,841
23,938
–
51,500
22,056
9,009
52,691
–
–
55,989
22,758
5,469
63,967
–
–
–
–
–
–
–
–
10,301
22,056
45,047
–
4,508
–
18,663
31,860
60,155
3,063,654
3,139,497
3,136,510
3,273,496
406,710
1,000,518
831,223
851,803
795,164
829,883
144,535
165,591
1,004,069
1,054,674
965,329
–
1,007,480
4,864
–
82,640
264,960
–
–
–
–
–
–
–
–
–
–
72,268
–
–
–
–
–
41,320
–
(1) A grant of restricted rights was made to Sanjeev Gandhi in relation to his FY2021 fixed equity component of remuneration. Five of the six tranches vested during FY2021
(in relation to service from 1 April to 31 August 2021) with the remaining tranche vesting on 1 October 2021 (in relation to service from 1 September to 30 September 2021).
(2) A grant of sign-on rights was made to Sanjeev Gandhi following his commencement of employment with Orica. Tranche 1 (66.67% of the rights) vested on 31 March
2021 with Tranche 2 (33.33% of the rights) to vest on 31 December 2021 subject to Mr Gandhi remaining employed with Orica on the vesting date.
(3) The FY2019 deferred shares vested on 2 December 2020. Per the terms and conditions of grant, the vested shares remain subject to disposal restrictions via a holding
lock for a further three years following vesting which prevents Executives from selling the vested shares during this period. In certain overseas locations where a tax
charge to participants arose at vesting, Executives were permitted to sell sufficient shares to cover the tax liability with the remaining shares subject to the holding lock.
Certain Executives who ceased employment during FY2021 were also permitted to sell sufficient shares to cover the tax liability arising as a result of cessation.
ORICA Annual Report 2021 |
103
Remuneration Report (continued)
The total number of rights and the fair value of rights issued under the LTI are:
Grant date
Vesting date
30 Jul 21(1)
3 Feb 21
3 Feb 21(2)
10 Jan 20
10 Jan 20(2)
08 Aug 19(1)
11 Jan 19
11 Jan 19(2)
20 July 18(1)
5 Jan 18(2)
30 Nov 23
30 Nov 23
30 Nov 23
30 Nov 22
30 Nov 22
30 Nov 21
30 Nov 21
30 Nov 21
30 Nov 20
30 Nov 20
Number
of rights
issued
36,834
36,834
1,226,741
1,065,573
776,085
939,811
507,595
71,078
1,139,030
782,122
117,150
1,751,427
440,815
754,443
267,429
50,991
853,515
414,436
–
–
Number of
rights held at
30 September
2021
Number of
rights held at
30 September
2020
Number of
participants
at
30 September
2021
Number of
participants
at
30 September
2020
–
–
–
886,806
474,827
54,830
1,001,594
681,806
86,906
1,331,560
4
306
9
292
7
15
278
10
–
–
–
–
–
317
8
15
300
11
17
268
Fair value
of rights at
grant date
$
535,566
17,836,814
10,438,343
19,623,254
9,801,689
1,256,097
18,110,577
11,440,237
1,995,065
28,911,209
The assumptions underlying the rights valuations are:
Price of
Orica Shares
at grant date
$
Expected
volatility in
share price
%
Dividends
expected on
shares
%
Risk free
interest
rate
%
Fair value
per right
RONA(4)
$
12.39
15.79
15.79
22.71
22.71
22.51
17.30
17.30
17.93
18.53
18.53
22.5
22.5
22.5
20.0
20.0
25.0
25.0
25.0
25.0
25.0
25.0
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
0.11
0.11
0.11
0.79
0.79
1.81
1.81
1.81
2.07
2.07
2.07
14.54
14.54
13.45
20.88
19.31
15.90
15.90
14.71
17.03
17.03
15.75
Grant date
30 Jul 21(1)
3 Feb 21
3 Feb 21(2)
10 Jan 20
10 Jan 20(2)
08 Aug 19(1)
11 Jan 19
11 Jan 19(2)
20 July 18(1)
5 Jan 18
5 Jan 18(2)
(1) A supplementary LTI offer was made in July 2018, August 2019 and July 2021 to selected senior management other than Executives who joined Orica after the grant date
of the main offer in January 2018, January 2019 and February 2021. No supplementary offer was made in 2020. The terms and conditions of the supplementary offer are
the same as the main offer.
(2) Under the Executive LTI plan, performance rights granted are subject to a single performance condition, RONA with a two-year holding lock applying to shares acquired
following vesting. A discount to the fair value has been made to reflect lack of marketability during this period.
104 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Remuneration Report (continued)
6.3 Non-Executive Director remuneration
Details of Non-Executive Directors’ remuneration are set out in the following table:
Current Directors
Malcolm Broomhead, Chairman(2)
2021
2020
John Beevers(3)
2021
2020
Maxine Brenner
2021
2020
Denise Gibson(4)
2021
2020
Boon Swan Foo
2021
2020
Karen Moses(4)
2021
2020
Gene Tilbrook
2021
2020
Former Directors
Lim Chee Onn(5)
2020
Total Directors
2021
2020
Short-term employee benefits
Directors
fees
$000
Committee
fees
$000
Other
benefits(1)
$000
Post-
employment
benefits
Superan-
nuation
$000
340.0
510.0
177.0
118.0
177.0
175.3
177.0
175.3
177.0
175.3
193.3
191.0
177.0
175.3
14.2
1,418.3
1,534.4
–
–
45.0
30.0
67.5
67.5
67.5
67.5
45.0
45.0
67.5
67.5
67.5
67.5
3.8
360.0
348.8
0.6
6.3
–
6.0
–
6.0
–
15.0
–
6.0
–
6.0
–
15.0
–
0.6
60.3
16.3
21.2
21.8
14.2
22.2
21.2
22.2
21.2
21.8
21.2
5.9
5.2
22.2
21.2
1.7
132.4
127.1
Total
$000
356.9
537.5
243.8
168.2
266.7
270.0
266.7
279.0
243.8
247.5
266.7
269.7
266.7
279.0
19.7
1,911.3
2,070.6
(1) These benefits include travel allowances and car parking benefits.
(2) Malcolm Broomhead forfeited his FY2021 Board Chairman fees from 1 June 2021 to 30 September 2021.
(3)
John Beevers was appointed as a Non-Executive Director on 1 February 2020.
(4) Karen Moses elected not to receive superannuation contributions from Orica from 1 January 2020 to 30 June 2021. Superannuation contributions were received
in accordance with statutory requirements from 1 July 2021 to 30 September 2021. Other benefits in 2020 for Karen Moses and Denise Gibson were reversed in the
prior year Remuneration Report and have been corrected in the above table.
(5) Lim Chee Onn ceased to be a Director on 31 October 2019. Remuneration data has been included for comparative purposes only.
Rounding
The amounts shown in this report and in the financial statements have been rounded off, except where otherwise stated, to the nearest tenth of a million dollars,
the Company being in a class specified in the ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 dated 24 March 2016.
The Directors’ Report is signed on behalf of the Board in accordance with a resolution of the Directors of Orica Limited.
M W Broomhead
Chairman
Dated at Melbourne 10 November 2021
S Gandhi
Managing Director and Chief Executive Officer
ORICA Annual Report 2021 |
105
Lead Auditor’s Independence
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of Orica Limited
I declare that, to the best of my knowledge and belief, in relation to the audit of Orica Limited for the financial
year ended 30 September 2021 there have been:
i.
ii.
no contraventions of the auditor independence requirements as set out in the Corporations Act 2001
in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Penny Stragalinos
Partner
Melbourne
10 November 2021
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated
with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo
are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a
scheme approved under Professional Standards Legislation.
106 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Financial
Statements
ORICA Annual Report 2021 |
107
Income Statement
For the year ended 30 September
Continuing operations
Sales revenue
Other income
Raw materials and inventories
Employee benefits expense
Depreciation and amortisation expense(1)
Purchased services and other expenses(1)
Outgoing freight
Repairs and maintenance
Impairment expense
Operating model restructuring
Significant environmental provision expense
Gain on sale of Botany site
Gain on sale of Villawood site
Software as a service (SaaS) expense(1)
Initiating systems network optimisation
Share of net profit of equity accounted investees
Total
(Loss)/profit from operations
Net financing costs
Financial income
Financial expenses(1)
Net financing costs
(Loss)/profit before income tax expense from continuing operations
Income tax expense(1)
(Loss)/profit after tax from continuing operations
Discontinued operations
Profit after tax from discontinued operations
Net (loss)/profit for the year
Net (loss)/profit for the year attributable to:
Shareholders of Orica Limited(1)
Non-controlling interests
Net (loss)/profit for the year
Earnings per share attributable to ordinary shareholders of Orica Limited:
From continuing operations:
Basic earnings per share
Diluted earnings per share
Total attributable to ordinary shareholders of Orica Limited
Basic earnings per share
Diluted earnings per share
Consolidated
2021
$m
Restated(1)(2)
2020
$m
Notes
(1b)
(1d)
(1b)
(1e)
(1e)
(1e)
(1e)
(1e)
(1e)
(1e)
(13)
(3b)
(3b)
(3b)
(11)
(15)
(2)
(2)
(2)
(2)
5,207.9
45.7
(2,449.8)
(1,111.2)
(358.1)
(510.3)
(304.6)
(149.4)
(480.0)
(45.6)
(39.3)
71.6
40.8
–
–
34.4
(5,301.5)
(47.9)
1.0
(106.3)
(105.3)
(153.2)
(25.3)
(178.5)
14.6
(163.9)
(173.8)
9.9
(163.9)
5,143.0
15.5
(2,221.8)
(1,130.3)
(320.7)
(479.4)
(277.8)
(171.3)
(63.4)
(23.0)
–
–
–
(122.7)
(80.1)
35.7
(4,854.8)
303.7
2.0
(161.0)
(159.0)
144.7
(65.0)
79.7
11.8
91.5
82.3
9.2
91.5
cents
cents
(46.3)
(46.3)
(42.7)
(42.7)
18.8
18.7
20.8
20.7
(1) Restated for the retrospective application of a change in Orica’s accounting policy on AASB 138 Intangible Assets and AASB 116 Property, Plant and Equipment,
following an International Financial Reporting Interpretations Committee (‘IFRIC’) agenda decision this year. Refer to note 24 for further details.
(2) Restated to disclose Minova as a discontinued operation. Refer to note 15.
The Income Statement is to be read in conjunction with the accompanying notes to the financial statements.
108 | ORICA Annual Report 2021
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Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Statement of Comprehensive Income
For the year ended 30 September
Net (loss)/profit for the year(1)
Other comprehensive income
Items that may be reclassified subsequently to income statement:
Exchange differences on translation of foreign operations
Exchange gain/(loss) on translation of foreign operations, net of tax
Net gain on hedge of net investments in foreign subsidiaries, net of tax
Net exchange differences on translation of foreign operations
Sundry items:
Net gain/(loss) on cash flow hedges, net of tax
Items that will not be reclassified subsequently to income statement:
Net actuarial gain/(loss) on defined benefit obligations, net of tax
Other comprehensive income/(loss) for the year
Total comprehensive loss for the year
Attributable to:
Shareholders of Orica Limited
Non-controlling interests
Total comprehensive loss for the year
Notes
(11c)
(11c)
(11c)
(11c)
Consolidated
2021
$m
(163.9)
Restated(1)
2020
$m
91.5
3.7
2.5
6.2
5.4
54.9
66.5
(97.4)
(105.1)
7.7
(97.4)
(357.8)
43.8
(314.0)
(6.0)
(8.2)
(328.2)
(236.7)
(234.3)
(2.4)
(236.7)
(1) Restated for the retrospective application of a change in Orica’s accounting policy on AASB 138 Intangible Assets and AASB 116 Property, Plant and Equipment,
following an International Financial Reporting Interpretations Committee (‘IFRIC’) agenda decision this year. Refer to note 24 for further details.
The Statement of Comprehensive Income is to be read in conjunction with the accompanying notes to the financial statements.
ORICA Annual Report 2021 |
109
Balance Sheet
As at
Current assets
Cash and cash equivalents
Trade receivables
Other receivables
Inventories
Assets held for sale
Other assets
Total current assets
Non-current assets
Other receivables
Equity accounted investees
Property, plant and equipment(1)(2)
Intangible assets(1)(2)
Deferred tax assets(2)
Other assets
Total non-current assets
Total assets
Current liabilities
Trade payables
Other payables
Interest bearing liabilities
Provisions
Liabilities held for sale
Other liabilities
Total current liabilities
Non-current liabilities
Other payables
Interest bearing liabilities
Provisions
Deferred tax liabilities(1)(2)
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Ordinary shares
Reserves
Retained earnings(2)
Total equity attributable to ordinary shareholders of Orica Limited
Non-controlling interests(1)
Total equity
30 September
2021
$m
Notes
Consolidated
Restated(1)(2)
30 September
2020
$m
Restated(2)
1 October
2019
$m
(5)
(5)
(15)
(13)
(7)
(8)
(11d)
(5)
(3a)
(6)
(15)
(3a)
(6)
(11d)
(4a)
551.0
678.2
112.1
635.8
298.2
116.3
2,391.6
33.8
290.4
3,040.2
1,150.4
400.2
59.1
4,974.1
7,365.7
876.5
287.5
61.4
223.1
137.8
82.5
920.5
837.7
139.1
610.0
–
156.7
2,664.0
46.3
301.6
3,267.0
1,440.3
409.4
74.9
5,539.5
8,203.5
739.7
426.3
682.4
225.2
–
95.8
1,668.8
2,169.4
8.8
2,261.8
533.7
39.6
60.6
2,904.5
4,573.3
2,792.4
2,686.1
(647.2)
687.4
2,726.3
66.1
2,792.4
11.6
2,357.3
639.4
42.0
43.4
3,093.7
5,263.1
2,940.4
2,659.1
(670.3)
903.8
2,892.6
47.8
2,940.4
412.6
681.6
84.2
587.5
–
69.9
1,835.8
63.0
301.3
3,135.3
1,483.0
385.6
187.5
5,555.7
7,391.5
863.2
412.6
60.9
193.1
–
115.0
1,644.8
7.1
2,226.0
586.2
73.4
–
2,892.7
4,537.5
2,854.0
2,138.0
(363.5)
1,022.3
2,796.8
57.2
2,854.0
(1) Restated for purchase price allocation adjustments for the Exsa S.A. business acquisition. Refer to note 14 for further details.
(2) Restated for the retrospective application of a change in Orica’s accounting policy on AASB 138 Intangible Assets and AASB 116 Property, Plant and Equipment,
following an International Financial Reporting Interpretations Committee (‘IFRIC’) agenda decision this year. Refer to note 24 for further details.
The Balance Sheet is to be read in conjunction with the accompanying notes to the financial statements.
110 | ORICA Annual Report 2021
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Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Statement of Changes in Equity
For the year ended 30 September
Ordinary
shares
$m
Retained
earnings(1)
$m
Foreign
currency
translation
reserve
$m
Cash flow
hedge
reserve
$m
Other
reserves
$m
Non-
controlling
interests(2)
$m
Total
$m
Total equity
$m
2020
Balance at 1 October 2019
2,138.0
1,193.7
(225.3)
(16.0)
(122.2)
2,968.2
57.2
3,025.4
IFRIC Agenda Decision on
Configuration or Customisation
Costs in a Cloud Computing
Arrangement(1)
AASB 16 transitional adjustment
IFRIC 23 transitional adjustment
Adjusted balance at
1 October 2019
Net profit for the year(1)
Other comprehensive
(loss)/income
Total comprehensive
income/(loss) for the year
Transactions with owners,
recorded directly in equity
Total changes in contributed
equity (note 4)
Share-based payments expense
Acquisition of subsidiaries with
non-controlling interests(2)
Dividends/distributions (note 4c)
Dividends declared/paid to
non-controlling interests
–
–
–
(158.6)
(2.6)
(10.2)
57.2
9.2
2,854.0
91.5
(316.6)
(11.6)
(328.2)
(234.3)
(2.4)
(236.7)
–
–
–
(158.6)
(2.6)
(10.2)
–
–
–
–
–
–
–
–
–
(158.6)
(2.6)
(10.2)
2,138.0
1,022.3
(225.3)
(16.0)
(122.2)
2,796.8
–
–
–
521.1
–
–
–
–
82.3
–
(8.2)
(302.4)
74.1
(302.4)
–
–
–
(192.6)
–
–
–
–
–
–
–
(6.0)
(6.0)
–
–
–
–
–
–
–
–
–
1.6
–
–
–
Balance at the end of the year
2,659.1
903.8
(527.7)
(22.0)
(120.6)
2,892.6
(527.7)
(22.0)
(120.6)
2,892.6
2021
Balance at 1 October 2020
2,659.1
Net (loss)/profit for the year
Other comprehensive
income/(loss)
Total comprehensive income/
(loss) for the year
Transactions with owners,
recorded directly in equity
Total changes in contributed
equity (note 4)
Share-based payments expense
Share-based payments settlement
Acquisition of subsidiaries with
non-controlling interests
Dividends/distributions (note 4c)
Dividends declared/paid to
non-controlling interests
–
–
–
27.0
–
–
–
–
–
903.8
(173.8)
54.9
(118.9)
–
–
–
–
(97.5)
–
–
8.4
8.4
–
–
–
–
–
–
–
5.4
5.4
–
–
–
–
–
–
–
–
–
–
9.9
(0.6)
–
–
–
82.3
521.1
1.6
–
(192.6)
–
(173.8)
27.0
9.9
(0.6)
–
(97.5)
–
68.7
(2.2)
66.5
(105.1)
7.7
(97.4)
–
–
3.9
–
521.1
1.6
3.9
(192.6)
(10.9)
47.8
(10.9)
2,940.4
47.8
9.9
2,940.4
(163.9)
20.6
–
–
(2.8)
–
(7.2)
66.1
47.6
9.9
(0.6)
(2.8)
(97.5)
(7.2)
2,792.4
Balance at the end of the year
2,686.1
687.4
(519.3)
(16.6)
(111.3)
2,726.3
(1) Restated for the retrospective application of a change in Orica’s accounting policy on AASB 138 Intangible Assets and AASB 116 Property, Plant and Equipment,
following an International Financial Reporting Interpretations Committee (‘IFRIC’) agenda decision this year. Refer to note 24 for further details.
(2) Restated for purchase price allocation adjustments for the Exsa S.A. business acquisition. Refer to note 14 for further details.
The Statement of Changes in Equity is to be read in conjunction with the accompanying notes to the financial statements.
ORICA Annual Report 2021 |
111
Statement of Cash Flows
For the year ended 30 September
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees(1)
Interest received
Borrowing costs
Dividends received
Other operating income received
Net income taxes paid
Net cash flows from operating activities
Cash flows from investing activities
Payments for property, plant and equipment(1)
Payments for intangibles(1)
Proceeds from sale of property, plant and equipment
Payments for purchase of businesses/controlled entities
Proceeds from sale of investments
Net cash flows used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Dividends paid – Orica ordinary shares
Dividends paid – non-controlling interests
Principal portion of lease payments
Proceeds from issue of ordinary shares, net of costs
Net cash flows (used in)/from financing activities
Net (decrease)/increase in cash held
Cash at the beginning of the period
Effects of exchange rate changes on cash
Cash at the end of the period
Consolidated
2021
$m
Inflows/
(Outflows)
Restated(1)
2020
$m
Inflows/
(Outflows)
Notes
(3c)
(14)
(4c)
6,427.0
(5,596.2)
1.1
(114.2)
17.5
32.2
(148.5)
618.9
(305.4)
(17.8)
152.4
(25.1)
–
(195.9)
2,330.8
(2,939.7)
(72.4)
(7.2)
(60.8)
0.7
(748.6)
(325.6)
920.5
(1.2)
593.7
6,057.9
(5,733.3)
2.4
(109.1)
23.0
18.2
(114.4)
144.7
(311.3)
(80.1)
8.4
(153.9)
9.2
(527.7)
2,948.3
(2,266.1)
(179.4)
(11.3)
(61.0)
505.4
935.9
552.9
412.6
(45.0)
920.5
(1) Restated for the retrospective application of a change in Orica’s accounting policy on AASB 138 Intangible Assets and AASB 116 Property, Plant and Equipment,
following an International Financial Reporting Interpretations Committee (‘IFRIC’) agenda decision this year. Refer to note 24 for further details.
The Statement of Cash Flows is to be read in conjunction with the accompanying notes to the financial statements. The statement above includes
discontinued operations, refer to note 15 for further details.
112 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Notes to the Financial Statements
Section A. Financial performance
Segment report
1.
2. Earnings per share (EPS)
Section B. Capital management
3. Net debt and net financing costs
4. Contributed equity and reserves
Section C. Operating assets and liabilities
5. Working capital
6. Provisions
7.
8.
9.
Property, plant and equipment
Intangible assets
Impairment testing of assets
Section D. Managing financial risks
10. Financial risk management
Section E. Taxation
11. Taxation
Section F. Group structure
Investments in controlled entities
12.
13. Equity accounted investees and joint operations
14. Businesses and non‑controlling interests acquired
15. Businesses disposed and discontinued operations
16. Parent Company disclosure – Orica Limited
17. Deed of Cross Guarantee
Section G. Reward and recognition
18. Employee share plans and remuneration
19. Defined benefit obligations
Section H. Other
20. Contingent liabilities
21. Auditor’s remuneration
22. Events subsequent to balance date
23. List of controlled entities
24. New accounting policies and accounting standards
115
115
121
123
123
126
128
128
129
132
133
134
137
137
143
143
147
147
147
149
150
153
153
155
155
155
160
160
161
161
162
164
ORICA Annual Report 2021 |
113
Notes to the Financial Statements (continued)
For the year ended 30 September
ABOUT THIS REPORT
Basis of preparation
This is a general purpose Financial Report which has been prepared by a for-profit entity in accordance with the requirements of applicable Australian
Accounting Standards and the Corporations Act 2001 and complies with International Financial Reporting Standards (IFRS) adopted by the International
Accounting Standards Board.
It has been prepared on a historical cost basis, except for derivative financial instruments, superannuation commitments and investments in financial assets
which have been measured at fair value.
The financial statements are presented in Australian dollars with all amounts rounded off, except where otherwise stated, to the nearest tenth of a million
dollars, in accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 dated 24 March 2016.
Orica’s Directors have included information in this report that they deem to be material and relevant to the understanding of the consolidated financial
statements. Where appropriate, comparative information has been reclassified to conform to changes in presentation and to enhance comparability.
Disclosure may be considered material and relevant if the dollar amount is significant due to size or nature, or the information is important to understand the:
– Group’s current year results;
– impact of significant changes in Orica’s business; or
– aspects of the Group’s operations that are important to future performance.
Except as described in note 24, the financial statements have been prepared using consistent accounting policies in line with those of the previous financial
year and corresponding interim reporting period.
Significant accounting policies that apply to the overall financial statements
Foreign currencies
Functional and Presentation Currency
The Company’s functional and presentation currency is Australian dollars. Each entity in the Group determines its own functional currency and items
included in the financial statements of each entity are measured using that functional currency.
Transactions and Balances
Transactions in currencies other than the functional currency of the Company or entity concerned are recorded using the exchange rate on the date of
the transaction. Monetary assets and liabilities that are denominated in foreign currencies at the balance date are retranslated at closing exchange rates.
Non-monetary assets are not retranslated unless they are carried at fair value. Gains and losses arising on the retranslation of monetary assets and
liabilities are included in the income statement, except where the application of hedge accounting requires inclusion in other comprehensive income
(refer to note 10).
Consolidation of Group Entities
On consolidation, assets and liabilities of foreign operations are translated into Australian dollars at the closing rate at balance date. The results of foreign
operations are translated into Australian dollars at average exchange rates for the period where these do not materially differ from rates applicable on the
date of the transaction. Foreign exchange differences arising on the retranslation of foreign operations are recognised directly in a separate component
of equity.
Critical accounting judgements and estimates
Application of the Group accounting policies requires management to make judgements, and to apply estimates and assumptions to future
events. The areas involving a higher degree of judgement or complexity, and which are material to the report, are highlighted in the
following notes:
Note 3 Net debt
Note 5 Working capital
Note 6 Provisions
Note 7 Property, plant and equipment
Note 8
Intangible assets
Note 9
Impairment testing of assets
Note 11 Taxation
Note 14 Businesses and non-controlling interests acquired
Note 19 Defined benefit obligations
Note 20 Contingent liabilities
114 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Notes to the Financial Statements –
Section A. Financial performance
For the year ended 30 September
SECTION A. FINANCIAL PERFORMANCE
A key element of the Group’s strategy is to create sustainable shareholder value. This section highlights the results and performance of the Group for
the year ended 30 September 2021.
1. SEGMENT REPORT
(a) Identification and description of segments
Orica’s reportable segments are based on the internal management structure as reported to the Group’s Chief Operating Decision Maker (the Group’s
Managing Director and CEO).
During the financial year the Group committed to a plan to sell the Minova business. On 30 September 2021, the assets and liabilities of the business have
been classified as held for sale and it is considered a discontinued operation.
Orica Group
Provider of chemical
and mechanical
earth control products,
adhesives and ground
support solutions
Manufacture and
supply of commerical
explosives and
blasting systems
Manufacture and
supply of advanced
hardware and software
solutions to the
mining industry
Corporate and
support costs
Minova
Australia
Pacific & Asia
North
America
Latin
America
Europe,
Middle East
& Africa
Orica Monitor
Global Support
ORICA Annual Report 2021 |
115
Notes to the Financial Statements –
Section A. Financial performance (continued)
For the year ended 30 September
1. SEGMENT REPORT (continued)
(b) Reportable segments
Australia
Pacific &
Asia
North
America
Latin
America
Europe,
Middle
East &
Africa
Orica
Monitor
Global
Support
Elimin-
ations
Total
Cont-
inuing
Oper-
ations
Discon-
tinued
Oper-
ations
Elimin-
ations
Consol-
idated
2021
$m
Revenue
External sales
Inter-segment sales
Total sales revenue
Other income (refer to note 1d)(1)
21.6
8.9
13.3
3.8
1.0
Total revenue and other income
2,259.0 1,342.5 1,001.6
831.0
117.3
2,105.9 1,229.6
956.5
801.4
114.5
131.5
104.0
31.8
25.8
1.8
2,237.4 1,333.6
988.3
827.2
116.3
–
–
–
(2.9)
(2.9)
– 5,207.9
474.3
– 5,682.2
(294.9)
–
0.1
(0.1)
–
(294.9) 5,207.9
474.4
(0.1) 5,682.2
–
45.7
0.7
–
46.4
(294.9) 5,253.6
475.1
(0.1) 5,728.6
Results before individually
significant items
Profit/(loss) before financing costs
and income tax
Financial income
Financial expenses
Profit before income tax expense
Income tax expense
Profit after income tax expense
Less: Profit attributable to
non-controlling interests
Profit after income tax expense
before individually significant
items attributable to
shareholders of Orica Limited
Individually significant items
(refer to note 1e)
279.7
107.9
28.9
25.0
30.7
(67.6)
–
404.6
22.0
–
426.6
1.1
(106.7)
321.0
(102.7)
218.3
(9.9)
208.4
Gross individually significant items
Tax on individually significant items
(330.9)
44.8
(9.4)
2.6
(4.3)
(165.6)
1.2
0.7
–
–
57.7
22.0
–
–
(452.5)
71.3
(1.4)
0.4
–
–
(453.9)
71.7
Net individually significant items
attributable to non-controlling
interests
Individually significant items
attributable to shareholders
of Orica Limited
Profit for the year attributable
to shareholders of Orica Limited
Segment assets
Segment liabilities
Equity accounted investees
Acquisitions of PPE and intangibles
(excluding right of use assets)
Impairment of PPE
Impairment of intangibles
Depreciation and amortisation
Share of net profit/(loss) of equity
accounted investees
3,291.8 1,216.4 1,015.8
1,000.7
83.9
318.1
202.4
362.5
–
786.2
231.9
2.7
277.5
479.8
60.4 2,461.9
–
1.4
130.8
159.6
158.1
174.2
70.9
32.5
31.9
8.4
36.3
–
–
–
–
61.0
44.4
–
162.3
31.1
–
–
–
–
12.9
34.5
6.4
24.6
2.2
1.2
–
–
(1)
Includes foreign currency gains/(losses) in various reportable segments.
116 | ORICA Annual Report 2021
–
(382.2)
(173.8)
– 7,365.7
– 4,573.3
–
–
–
–
–
–
290.4
323.3
159.6
320.4
369.8
34.4
298.2
137.8
–
12.5
–
–
11.7
– 7,067.5
– 4,435.5
290.4
310.8
159.6
320.4
358.1
–
–
–
–
–
–
34.4
–
2020
$m
Revenue
External sales
Inter-segment sales
Total sales revenue
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Notes to the Financial Statements –
Section A. Financial performance (continued)
For the year ended 30 September
1. SEGMENT REPORT (continued)
Australia
Pacific &
Asia
North
America
Latin
America
Europe,
Middle
East &
Africa
Orica
Monitor
Global
Support
Elimin-
ations
Total
Cont-
inuing
Oper-
ations
Discon-
tinued
Oper-
ations
Elimin-
ations
Consol-
idated
Other income (refer to note 1d)(1)
5.1
7.1
3.3
(2.0)
2,050.6 1,260.0
855.6
882.8
143.3
216.4
40.0
29.6
2,193.9 1,476.4
895.6
912.4
94.0
4.4
98.4
1.9
–
– 5,143.0
468.3
– 5,611.3
635.8 (1,069.5)
–
2.4
(2.4)
–
635.8 (1,069.5) 5,143.0
470.7
(2.4) 5,611.3
0.1
–
15.5
1.3
–
16.8
Total revenue and other income
2,199.0 1,483.5
898.9
910.4
100.3
635.9 (1,069.5) 5,158.5
472.0
(2.4) 5,628.1
Results before individually
significant items
Profit/(loss) before financing costs
and income tax(2)
Financial income
Financial expenses(2)
Profit before income tax expense
Income tax expense
Profit after income tax expense
Less: Profit attributable to
non-controlling interests
Profit after income tax expense
before individually significant
items attributable to
shareholders of Orica Limited
Individually significant items
(refer to note 1e)
373.4
165.3
38.4
64.2
20.3
(68.7)
–
592.9
20.8
–
613.7
2.4
(161.4)
454.7
(146.4)
308.3
(9.2)
299.1
Gross individually significant items(2)
Tax on individually significant items(2)
(9.1)
2.6
(25.6)
(29.8)
(35.3)
(0.6)
(188.8)
6.7
8.4
1.3
0.1
56.1
–
–
(289.2)
75.2
(3.9)
1.1
–
–
(293.1)
76.3
Net individually significant items
attributable to non-controlling
interests
Individually significant items
attributable to shareholders
of Orica Limited
Profit for the year attributable
to shareholders of Orica Limited
Segment assets(2)
Segment liabilities(2)
Equity accounted investees
Acquisitions of PPE and intangibles
Impairment of PPE
Impairment of intangibles
3,436.5 1,250.8
857.9
76.9
199.1
1.0
–
380.4
193.8
52.5
10.6
–
852.3
443.4
13.6
16.9
4.7
–
Depreciation and amortisation(2)
148.6
70.4
34.0
780.1
281.0
2.4
32.7
16.8
2.1
32.1
–
(216.8)
82.3
– 8,203.5
– 5,263.1
–
–
–
–
–
–
301.6
378.4
33.1
63.4
332.1
35.7
257.5 1,484.0
– 8,061.2
142.3
62.0 3,154.9
– 5,179.6
83.5
–
14.3
–
–
12.8
14.9
50.9
–
61.3
22.8
–
–
–
–
–
–
301.6
366.4
33.1
63.4
–
12.0
–
–
320.7
11.4
35.7
–
Share of net profit/(loss) of equity
accounted investees
3.6
29.3
2.9
1.1
–
(1.2)
(1)
Includes foreign currency gains/(losses) in various reportable segments.
(2) Restated for the retrospective application of a change in Orica’s accounting policy on AASB 138 Intangible Assets and AASB 116 Property, Plant and Equipment, following
an International Financial Reporting Interpretations Committee (‘IFRIC’) agenda decision this year. Refer to note 24 for further details.
ORICA Annual Report 2021 |
117
Notes to the Financial Statements –
Section A. Financial performance (continued)
For the year ended 30 September
1. SEGMENT REPORT (continued)
(c) Disaggregation of revenue (by commodity/industry)
Consolidated
2021
$m
2020
$m
1,107.0
1,099.8
991.3
864.0
816.5
433.2
352.0
114.5
529.4
474.3
893.8
900.0
731.0
410.1
350.0
94.0
664.3
468.3
5,682.2
5,611.3
Consolidated
2021
2020
Continuing
$m
Discontinued
$m
Consolidated
$m
Continuing
$m
Discontinued
$m
Consolidated
$m
34.0
2.4
9.3
–
45.7
0.1
(0.8)
1.4
–
0.7
34.1
1.6
10.7
–
46.4
18.2
(6.7)
(0.2)
4.2
15.5
–
0.2
1.1
–
1.3
18.2
(6.5)
0.9
4.2
16.8
Gold
Copper
Thermal Coal
Quarry and Construction
Iron Ore
Coking Coal
Orica Monitor
Other
Minova (Discontinued operations)
Total disaggregated revenue
(d) Other income
Other income
Net foreign currency gains/(losses)
Net gain/(loss) on sale of property,
plant and equipment
Profit from sale of investments
Total other income
118 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Notes to the Financial Statements –
Section A. Financial performance (continued)
For the year ended 30 September
1. SEGMENT REPORT (continued)
Gross
$m
2021
Tax
$m
Consolidated
Restated 2020
Net
$m
Gross
$m
Tax
$m
Net
$m
(e) Individually significant items
Profit after income tax includes the
following individually significant
items of expense:
Significant items from
continuing operations
Impairment expense(1)
Operating model
restructuring expense(2)
Significant enviromental
provision expense(3)
Gain on sale of Botany site(4)
Gain on sale of Villawood site(5)
Software as a service (SaaS) expense(6)
Initiating systems network optimisation
Individually significant items from
continuing operations
Significant items from
discontinued operations
Operating model restructuring
expense(2)
Individually significant items from
discontinued operations
Individually significant items
attributable to shareholders of
Orica
(480.0)
(45.6)
(39.3)
71.6
40.8
–
–
(452.5)
(1.4)
(1.4)
41.0
12.8
11.8
–
5.7
–
–
71.3
0.4
0.4
(439.0)
(32.8)
(27.5)
71.6
46.5
–
–
(63.4)
(23.0)
–
–
–
(122.7)
(80.1)
(381.2)
(289.2)
(1.0)
(1.0)
(3.9)
(3.9)
18.7
6.6
–
–
–
36.9
13.0
75.2
1.1
1.1
(44.7)
(16.4)
–
–
–
(85.8)
(67.1)
(214.0)
(2.8)
(2.8)
(453.9)
71.7
(382.2)
(293.1)
76.3
(216.8)
(1) Refer to note 9.
(2) As part of the global restructuring project, redundancy costs were recognised across the Group.
(3) Refer to note 6.
(4) Orica sold Lot 9 at Botany in New South Wales.
(5) Orica sold a legacy site in Villawood.
(6) Refer to note 24.
ORICA Annual Report 2021 |
119
Notes to the Financial Statements –
Section A. Financial performance (continued)
For the year ended 30 September
1. SEGMENT REPORT (continued)
(f) Geographical segments
The presentation of geographical revenue is based on the geographical location of customers. Segment assets are based on the geographical location of
the assets.
Australia
United States of America
Other(3)
Consolidated
Consolidated
Revenue
2021
$m
1,656.6
695.3
3,330.3
5,682.2
2020
$m
1,608.3
888.6
3,114.4
5,611.3
Consolidated
Non-current assets(1)
2021
$m
2,604.1
377.6
1,627.7
4,609.4
Restated(2)
2020
$m
3,037.7
390.7
1,972.7
5,401.1
(1) Excluding: financial derivatives (included within other assets) and deferred tax assets.
(2) Restated for purchase price allocation adjustments for the Exsa S.A. business acquisition. Refer to note 14 for further details.
(3) Other than Australia and the United States of America, sales to other countries are individually less than 10% of the Group’s total revenues.
Recognition and measurement
Revenue is recognised when, or as the Group transfers control of goods or services to a customer at the amount to which the Group expects to be
entitled. If the consideration includes a variable amount (net of trade discounts and volume rebates), the Group estimates the amount of consideration
to which it will be entitled. The majority of the Group’s operations are conducted under Master Service Agreements which require customers to place
orders for goods or services on a periodic basis. The performance obligations are identified at the point that the customer places the order.
Supply of products and provision of services
Revenue is derived from contractual agreements for either:
– the supply of products; or
– the supply of products and the provision of services.
Contracts for the supply of products are one performance obligation; and contracts for the supply of products and services include one or two separate
performance obligations depending on whether the customer can benefit from the products independently of the services.
Product revenue is recognised when the goods are delivered to the contracted point of delivery as this is the point at which the customer gains control
of the product and the performance obligation is satisfied by the Group.
Service revenue is recognised over time as the customer simultaneously receives and consumes the benefits of the Group’s performance. Where products
and services are combined into one single performance obligation, revenue is recognised over time as the customer simultaneously receives and consumes
the benefits provided by the Group’s performance.
Contracts to provide a designated output
The provision of goods and services in contracts that provide a designated quantity of output results in the identification of a single performance
obligation to deliver an integrated service to the customer. Revenue from this performance obligation is recognised over time as the customer
simultaneously receives and consumes the benefits of the Group’s performance.
120 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Notes to the Financial Statements –
Section A. Financial performance (continued)
For the year ended 30 September
2. EARNINGS PER SHARE (EPS)
(i) As reported in the income statement
Earnings used in the calculation of basic EPS attributable to ordinary shareholders of Orica Limited
(Loss)/Profit after tax from continuing operations
Profit after tax for from discontinued operations
Less: Net profit for the year attributable to non-controlling interests
Total
Weighted average number of shares used in the calculation:
Number for basic earnings per share
Effect of dilutive share options and rights
Number for diluted earnings per share
The weighted average number of options and rights that have not been included in the calculation
of diluted earnings per share
From continuing operations
Basic earnings per share
Diluted earnings per share
Total attributable to ordinary shareholders of Orica Limited
Basic earnings per share
Diluted earnings per share
Consolidated
2021
$m
(178.5)
14.6
9.9
(173.8)
Restated
2020
$m
79.7
11.8
9.2
82.3
Number of shares
406,755,512
395,620,418
–
1,489,532
406,755,512
397,109,950
4,199,023
3,044,873
Cents
per share
Cents
per share
(46.3)
(46.3)
(42.7)
(42.7)
18.8
18.7
20.8
20.7
ORICA Annual Report 2021 |
121
Notes to the Financial Statements –
Section A. Financial performance (continued)
For the year ended 30 September
2. EARNINGS PER SHARE (EPS) (continued)
(ii) Adjusted for individually significant items
Earnings used in the calculation of basic EPS adjusted for individually significant items
attributable to ordinary shareholders of Orica Limited
(Loss)/profit after tax from continuing operations
Profit after tax for from discontinued operations
Less: Net profit for the year attributable to non-controlling interests
Adjusted for individually significant items from continuing operations (refer to note 1e)
Adjusted for individually significant items from discontinued operations (refer to note 1e)
Total adjusted
From continuing operations before individually significant items
Basic earnings per share(1)
Diluted earnings per share(1)(2)
Total attributable to ordinary shareholders of Orica Limited before individually significant items
Basic earnings per share(1)
Diluted earnings per share(1)(2)
Consolidated
2021
$m
Restated
2020
$m
(178.5)
14.6
9.9
381.2
1.0
208.4
79.7
11.8
9.2
214.0
2.8
299.1
Cents
per share
Cents
per share
47.4
47.3
51.2
51.1
71.9
71.6
75.6
75.3
(1) Earnings per share before individually significant items is a non-IFRS measure. Management excludes individually significant items from the calculation in order to enhance
the comparability from year-to-year and provide investors with further clarity in order to assess the underlying performance of operations.
(2) Diluted earnings per share before individually significant items has been calculated using dilutive share options and rights of 693,451. These share options and rights are
dilutive to earnings per share before individually significant items but not dilutive to statutory loss per share.
122 | ORICA Annual Report 2021
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Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Notes to the Financial Statements –
Section B. Capital management
For the year ended 30 September
SECTION B. CAPITAL MANAGEMENT
Orica’s objectives when managing capital (net debt and total equity) are to safeguard the Group’s ability to continue as a going concern and to ensure
that the capital structure enhances, protects and balances financial flexibility against minimising the cost of capital. This section outlines the principal
capital management initiatives that have been undertaken, current year drivers of the Group’s cash flows, as well as the key operating assets used and
liabilities incurred to support financial performance.
3. NET DEBT AND NET FINANCING COSTS
In order to maintain an appropriate capital structure, the Group may adjust the amount of dividends paid to shareholders, utilise a dividend
reinvestment plan, return capital to shareholders such as a share buy-back or issue new equity, in addition to incurring an appropriate level of
borrowings. Currently, Orica maintains a dividend payout ratio policy and expects the total payout ratio to be in the range of 40%–70% of
underlying earnings. It is also expected that the total dividend paid each year will be weighted towards the final dividend.
Orica monitors debt capacity against a number of key credit metrics aligned to debt covenants, principally the gearing ratio (net debt excluding lease
liabilities divided by net debt excluding lease liabilities plus equity) and the interest cover ratio (EBIT excluding individually significant items, divided by
net financing costs excluding lease interest). These ratios, together with performance measure criteria determined by Standard & Poor’s, are targeted
in support of the maintenance of an investment grade credit rating, which enables access to borrowings from a range of sources. Standard & Poor’s
key measures include Funds from Operations (FFO)/Debt and Debt/EBITDA. Of note, Standard & Poor’s rating methodology adjusts Orica’s net debt
to incorporate post-retirement benefit obligations, asset retirement obligations (i.e. environmental and decommissioning provisions) and leases.
Orica’s debt covenants are exclusive of these items.
The Group’s current target for gearing is 30%-40% and interest cover is 5 times or greater. Ratios may move outside of these target ranges for relatively
short periods of time after major acquisitions or other significant transactions.
In addition, the gearing and interest cover ratios are monitored to ensure an adequate buffer against covenant levels applicable to the various
financing facilities.
The gearing ratio is calculated as follows:
Interest bearing liabilities excluding lease liabilities – continuing operations (refer to note 3a)
Interest bearing liabilities excluding lease liabilities – held-for-sale (refer to note 3a)
less cash and cash equivalents – continuing operations
less cash and cash equivalents – held-for-sale
Total net debt
Total equity
Total net debt and equity
Gearing ratio (%)
The interest ratio is calculated as follows:
EBIT (excluding individually significant items – refer to note 1b)
Net financing costs excluding lease interest (note 3b)
Interest cover ratio (times)
Consolidated
2021
$m
2,072.4
0.3
(551.0)
(42.7)
1,479.0
2,792.4
4,271.4
34.6%
426.6
93.3
4.6
Restated
2020
$m
2,741.0
–
(920.5)
–
1,820.5
2,940.4
4,760.9
38.2%
613.7
146.4
4.2
ORICA Annual Report 2021 |
123
Notes to the Financial Statements –
Section B. Capital management (continued)
For the year ended 30 September
3. NET DEBT AND NET FINANCING COSTS (continued)
(a) Interest bearing liabilities
Opening
Balance
$m
Held-for-sale
$m
Non-cash
movements
$m
Net cash
movements
$m
Closing
Balance
$m
Current
Unsecured
Private Placement debt(1)
Bank loans(1)
Bank overdraft
Other loans
Lease liabilities
Total
Non-current
Unsecured
Private Placement debt(1)
Bank loans(1)
Other loans
Lease liabilities
Total
Total
469.5
145.5
2.4
–
65.0
682.4
2,118.5
4.6
0.5
233.7
2,357.3
3,039.7
–
–
–
–
(3.1)
(3.1)
–
–
(0.3)
(6.5)
(6.8)
(9.9)
(0.3)
(10.1)
–
0.5
69.2
59.3
(49.7)
(0.8)
0.9
(34.4)
(84.0)
(24.7)
(1) Orica Limited provides guarantees on certain facilities, refer to note 16 for further details.
During the current and prior year, there were no defaults or breaches of covenants on any loans.
(b) Net financing costs
Finance income
Interest income
Total finance income (note 15)
Finance costs
Interest expense
Lease interest expense from continuing operations
Lease interest expense from discontinued operations
(Gain)/loss on discounting of provisions(1)
Total finance costs (note 15)
Net financing costs
Net financing costs excluding lease interest
(469.2)
(135.1)
(0.3)
0.5
(73.1)
(677.2)
–
(3.8)
(0.9)
–
(4.7)
–
0.3
2.1
1.0
58.0
61.4
2,068.8
–
0.2
192.8
2,261.8
(681.9)
2,323.2
Consolidated
2021
$m
Restated(2)(3)
2020
$m
1.1
1.1
99.1
12.0
0.3
(4.7)
106.7
(105.6)
(93.3)
2.4
2.4
100.6
12.3
0.3
48.2
161.4
(159.0)
(146.4)
(1) Primarily due to the change in the discount rate applied to measure the Botany groundwater provision.
(2) Restated for a change in Orica’s accounting for cross currency swap interest income and interest expense netted in interest expense, previously reported on a gross basis.
(3) Restated for the retrospective application of a change in Orica’s accounting policy on AASB 138 Intangible Assets and AASB 116 Property, Plant and Equipment,
following an International Financial Reporting Interpretations Committee (‘IFRIC’) agenda decision this year. Refer to note 24 for further details.
124 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Notes to the Financial Statements –
Section B. Capital management (continued)
For the year ended 30 September
3. NET DEBT AND NET FINANCING COSTS (continued)
(c) Notes to the statement of cash flows
Reconciliation of profit/(loss) after income tax to net cash flows from
operating activities
(Loss)/profit after income tax expense
Adjusted for the following items:
Depreciation and amortisation
Net gain on sale of property, plant and equipment
Impairment of intangibles
Impairment of property, plant and equipment
Impairment of inventories
Net profit on sale of investments
Share based payments expense
Share of equity accounted investees net profit after adding back dividends received
Discounting of provisions
Other
Changes in working capital and provisions excluding the effects of acquisitions and disposals
of businesses/controlled entities
decrease/(increase) in trade and other receivables
(increase)/decrease in inventories
(increase)/decrease in net deferred taxes
(decrease) in payables and provisions
(decrease)/increase in income taxes payable
Net cash flows from operating activities
Notes
(1b)
(1d)(1e)
(8)
(7)
Consolidated
2021
$m
Restated(1)
2020
$m
(163.9)
91.5
369.8
(123.1)
320.4
159.6
(1.3)
–
9.9
(16.9)
(4.7)
(2.8)
112.5
(83.1)
(18.0)
126.9
(66.4)
618.9
332.1
(0.9)
63.4
33.1
(3.3)
(4.2)
5.3
(12.7)
48.2
4.2
(147.4)
33.1
89.2
(390.1)
3.2
144.7
(1) Restated for the retrospective application of a change in Orica’s accounting policy on AASB 138 Intangible Assets and AASB 116 Property, Plant and Equipment,
following an International Financial Reporting Interpretations Committee (‘IFRIC’) agenda decision this year. Refer to note 24 for further details.
Recognition and Measurement
Cash and cash equivalents
Cash includes cash at bank, cash on hand and deposits at call.
Interest bearing liabilities, excluding lease liabilities
Interest bearing liabilities are initially recognised net of transaction costs. Subsequent to initial recognition, interest bearing liabilities are stated at amortised
cost with any difference between cost and redemption value being recognised in the income statement over the period of the liabilities on an effective
interest basis, unless they are liabilities designated in a fair value relationship in which case they continue to be measured at fair value (refer to note 10).
Financing costs
Borrowing costs are expensed as incurred unless they relate to qualifying assets where interest on funds are capitalised. Interest income and interest
expense relating to interest rate swaps and cross currency interest rate swaps are presented on a net basis.
Lease liabilities
The Group recognises all lease liabilities and corresponding right of use assets, with the exception of short-term (12 months or less) and low-value leases,
on the balance sheet. Lease liabilities are recorded at the present value of fixed payments, variable lease payments that depend on an index or rate,
amounts payable under residual value guarantees and extension options expected to be exercised. Where a lease contains an extension option which the
Group can exercise without negotiation, lease payments for the extension period are included in the liability if the Group is reasonably certain that it will
exercise the option. Variable lease payments not dependent on an index or rate are excluded from the liability. Lease payments are discounted at the
incremental borrowing rate of the lessee unless the rate implicit in the lease can be readily determined.
Lease liabilities are remeasured when there is a change in future lease payments resulting from a change in an index or rate, or a change in the assessed
lease term. A corresponding adjustment is made to the carrying amount of the right of use asset, or is recorded in profit or loss if the carrying amount has
been reduced to zero.
ORICA Annual Report 2021 |
125
Notes to the Financial Statements –
Section B. Capital management (continued)
For the year ended 30 September
3. NET DEBT AND NET FINANCING COSTS (continued)
The Group applied judgement to determine the incremental borrowing rates as well as the lease term for some lease contracts that include extension or
termination options. The assessment of whether the Group is reasonably certain to exercise such options impacts the lease term, which significantly affects
the amount of lease liabilities and right of use assets recognised.
The Group recognises depreciation of the right of use assets and interest on the lease liabilities in the income statement over the lease term. Repayments
of lease liabilities are separated into a principal portion (presented within financing activities) and interest portion (presented within operating activities) in
the cash flow statement.
Expenses relating to short-term and low-value leases of $38.2 million (2020 $31.7 million) and variable lease payments not included in lease liabilities of
$52.7 million (2020 $115.9 million) have been recognised in the income statement. Total cash outflow for leases was $164.0 million (2020 $221.2 million).
Critical accounting judgements and estimates
– Determination of the discount rate to use
– Determination of whether it is reasonably certain that an extension or termination option will be exercised
4. CONTRIBUTED EQUITY AND RESERVES
(a) Contributed equity
Movements in issued and fully paid shares of Orica since 1 October 2019 were as follows:
Details
Ordinary shares
Opening balance of shares issued
Shares issued under the Orica dividend reinvestment plan
Shares issued under the Institutional Share Placement, net of costs
Shares issued under Share Purchase Plan
Shares issued under the Orica dividend reinvestment plan
Deferred shares issued to settle Short-Term Incentive
Shares issued under the Orica GEESP plan(1)
Balance at the end of the year
Shares issued under the Orica dividend reinvestment plan
Shares issued under the Orica dividend reinvestment plan
Deferred shares issued to settle Short-Term Incentive
Shares issued under the Orica GEESP plan(1)
Balance at the end of the year
(1) General Employee Exempt Share Plan (GEESP)
(b) Reserves
Recognition and Measurement
Foreign currency translation reserve
Date
Number
of shares
Issue price
$
1-Oct-19
380,576,621
13-Dec-19
25-Feb-20
24-Mar-20
8-Jul-20
376,806
23,596,036
1,085,837
243,515
30-Sep-20
405,878,815
15-Jan-21
9-Jul-21
1,044,048
590,200
30-Sep-21
407,513,063
23.62
21.19
15.93
17.51
15.99
14.19
$m
2,138.0
8.9
487.4
17.3
4.3
2.5
0.7
2,659.1
16.7
8.4
1.2
0.7
2,686.1
Records the foreign currency differences arising from the translation of foreign operations. The relevant portion of the reserve is recognised in the income
statement when the foreign operation is disposed of.
Cash flow hedge reserve
Represents the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred.
Other reserves
Other reserves represents share based payments reserves and equity reserves arising from the purchase of non-controlling interests.
126 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Notes to the Financial Statements –
Section B. Capital management (continued)
For the year ended 30 September
4. CONTRIBUTED EQUITY AND RESERVES (continued)
(c) Dividends
Dividends paid or declared in respect of the year ended 30 September were:
Ordinary shares
interim dividend of 16.5 cents per share, unfranked, paid 8 July 2020
interim dividend of 7.5 cents per share, unfranked, paid 9 July 2021
final dividend of 33.0 cents per share, 15.2% franked at 30%, paid 13 December 2019
final dividend of 16.5 cents per share, unfranked, paid 15 January 2021
Dividends paid in cash or satisfied by the issue of shares under the dividend reinvestment plan (DRP)
during the year were as follows:
paid in cash
DRP – satisfied by issue of shares
Since the end of the financial year, the Directors declared the following dividend:
Final dividend on ordinary shares of 16.5 cents per share, unfranked, payable 22 December 2021.
Consolidated
2021
$m
2020
$m
30.6
66.9
72.4
25.1
67.0
125.6
179.4
13.2
The financial effect of the final dividend on ordinary shares has not been brought to account in the financial statements for the year ended
30 September 2021 – however will be recognised in the 2022 financial statements.
Franking credits
Franking credits available at the 30% corporate tax rate after allowing for tax payable in respect of the current year’s profit or loss and the payment
of the final dividend for 2021 are nil (2020 nil).
ORICA Annual Report 2021 |
127
Notes to the Financial Statements –
Section C. Operating assets and liabilities
For the year ended 30 September
SECTION C. OPERATING ASSETS AND LIABILITIES
This section highlights current year drivers of the Group’s operating and investing cash flows, as well as the key operating assets used and liabilities
incurred to support delivering financial performance.
5. WORKING CAPITAL
(a) Trade working capital
Trade working capital includes inventories, receivables and payables that arise from normal trading conditions. The Group continuously looks to improve
working capital efficiency in order to maximise operating cash flow.
Inventories (i)
Trade receivables (ii)
Trade payables (iii)
Trade working capital
(i) Inventories
The classification of inventories is detailed below:
Raw materials
Work in progress
Finished goods
Recognition and Measurement
Consolidated
2021
$m
635.8
678.2
(876.5)
437.5
Consolidated
2021
$m
223.2
0.1
412.5
635.8
2020
$m
610.0
837.7
(739.7)
708.0
2020
$m
219.8
2.3
387.9
610.0
Inventories are measured at the lower of cost and net realisable value. Cost is based on a first-in first-out or weighted average basis. For manufactured
goods, cost includes direct material and fixed overheads based on normal operating capacity. Inventories have been shown net of provision for impairment
of $38.3 million (2020 $45.7 million).
(ii) Trade receivables
The ageing of trade receivables and allowance for impairment is detailed below:
Not past due
Past due 0 – 30 days
Past due 31 – 120 days
Past 120 days
Consolidated
Consolidated
2021
Gross
$m
611.9
65.6
20.6
48.7
746.8
2021
Allowance
$m
–
–
(19.9)
(48.7)
(68.6)
2020
Gross
$m
750.7
78.5
37.3
47.1
913.6
2020
Allowance
$m
–
–
(28.8)
(47.1)
(75.9)
Recognition and Measurement
The collectability of trade and other receivables is assessed continuously, specific allowances are made for any doubtful trade and other receivables
based on a review of all outstanding amounts at year end. The expected impairment loss calculation for trade receivables considers both quantitative
information from historic credit losses as well as qualitative information on different customer/debtor profiles and segments. The net carrying amount
of trade and other receivables approximates their fair values. A risk assessment process is used for all accounts, with a stop credit process in place for
most long overdue accounts.
128 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Notes to the Financial Statements –
Section C. Operating assets and liabilities (continued)
For the year ended 30 September
5. WORKING CAPITAL (continued)
(iii) Trade payables
Recognition and Measurement
Trade and other payables are recognised when the Group is required to make future payments as a result of the purchase of goods or as services provided
prior to the end of the reporting period. The carrying amount of trade payables approximates their fair values due to their short-term nature.
(b) Non-trade working capital
Non-trade working capital includes all other receivables and payables not related to the purchase of goods and is recognised net of provisions for
impairment of $28.0 million (2020 $20.9 million).
Critical accounting judgements and estimates
In the course of normal trading activities, management uses its judgement in establishing the carrying value of various elements of working
capital – principally inventory and accounts receivable. Provisions are established for obsolete or slow moving inventories. Actual expenses
in future periods may be different from the provisions established and any such differences would impact future earnings of the Group.
COVID‑19
Whilst the impact of COVID-19 has been considered, it did not have a material impact on the expected impairment loss on the closing receivables
balance for the Group.
6. PROVISIONS
Current
Employee entitlements
Environmental and decommissioning (1)(2)
Restructuring
Other
Non-current
Employee entitlements
Retirement benefit obligations (see note 19b)
Environmental and decommissioning (1)(2)
Restructuring
Other
(1) Payments of $43.4m (2020 $48.2m) were made during the year in relation to environmental and decommissioning provisions.
(2) Provisions of $34.5m (2020 $43.5m) have been capitalised as part of the carrying value of land.
Consolidated
2021
$m
2020
$m
105.6
84.3
13.7
19.5
223.1
16.5
209.1
299.3
0.3
8.5
533.7
103.3
92.8
13.6
15.5
225.2
19.4
313.6
296.1
0.2
10.1
639.4
ORICA Annual Report 2021 |
129
Notes to the Financial Statements –
Section C. Operating assets and liabilities (continued)
For the year ended 30 September
6. PROVISIONS (continued)
The total environmental and decommissioning provision comprises:
Botany Groundwater remediation
Botany (HCB) waste
Burrup decommissioning
Initiating systems network optimisation
Deer Park remediation
Yarraville remediation
Other provisions
Total
Recognition and Measurement
Employee Entitlements
Consolidated
2021
$m
211.9
29.4
44.2
27.0
12.2
15.7
43.2
2020
$m
201.3
31.3
56.5
27.9
17.0
19.3
35.6
383.6
388.9
A liability for employee entitlements is recognised for the amount expected to be paid where the Group has a present legal or constructive obligation
to pay this amount as a result of past service provided by the employee and that obligation can be reliably measured.
Decommissioning
In certain circumstances, the Group has an obligation to dismantle and remove an asset and to restore the site on which it is located. The present value
of the estimated costs of dismantling and removing the asset and restoring the site on which it is located are recognised as a depreciable asset with
a corresponding provision being raised where a legal or constructive obligation exists.
At each reporting date, the liability is remeasured in line with changes in discount rates, timing and estimated cash flows. Any changes in the liability
are added to or deducted from the related asset, other than the unwinding of the discount which is recognised as a finance cost.
Environmental
Estimated costs for the remediation of soil, groundwater and untreated waste are recognised when there is a legal or constructive obligation to remediate
and the associated costs can be reliably estimated.
Where the cost relates to land held for resale then, to the extent that the expected realisation exceeds both the book value of the land and the estimated
cost of remediation, the cost is capitalised as part of the carrying value of that land, otherwise it is expensed.
The amount of provision reflects the best estimate of the expenditure required to settle the obligation having regard to a range of potential scenarios,
input from subject matter experts on appropriate remediation techniques and relevant technological advances.
130 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Notes to the Financial Statements –
Section C. Operating assets and liabilities (continued)
For the year ended 30 September
6. PROVISIONS (continued)
Critical accounting judgements and estimates
Botany groundwater remediation
Orica’s historical operations at the Botany Industrial Park resulted in contamination of the soil and groundwater. Due to the complex nature of the
chemicals involved and its distribution e.g. Dense Non-Aqueous Phase Liquid (DNAPL), the lack of known practical remediation approaches and
the unknown scale of the contamination, a practical solution to completely remediate the contamination has not been found. Orica continues
to work in close cooperation with the New South Wales (NSW) Environmental Protection Authority (EPA) to address the contamination.
Orica has a current obligation to contain and mitigate the effects of the contamination on the groundwater at the site. Orica and the NSW EPA
entered into a Voluntary Management Proposal to contain groundwater contamination while an effective remediation approach to the DNAPL
source contamination is identified.
The findings from the 2018 review of costs and operational duration of the Groundwater Treatment Plant (GTP) indicated that the cessation
of groundwater extraction using the GTP is possible within an 18-year timeframe. The review considered existing remediation technologies
which would augment the existing ‘pump and treat’ methodology, with the expectation that the operating costs of the GTP would reduce.
This assumption had been included as a future cost saving within the provision calculation.
One of these remediation technologies has been piloted, however the performance of the trials to date has been limited by lower biological
activity than expected. It is considered unlikely that results will improve, therefore the assumption of the future cost saving has been removed
from the provision calculation. This has resulted in an increase to the environmental provision which has been reflected in the Financial Statements
with the expense included as a significant item.
Provisions for other sites
For other sites where Orica has recognised a provision for environmental remediation, judgement is required in determining the future
expenditure required to settle the obligation due to uncertainties in the assumptions regarding the nature or extent of the contamination,
the application of relevant laws or regulations and the information available at certain locations where Orica no longer controls the site.
Changes in these assumptions may impact future reported results. Subject to those factors, but taking into consideration experience gained
to date regarding environmental matters of a similar nature, Orica believes the provision balances are appropriate based on currently available
information. However, considering the uncertainties noted above the costs incurred in future periods may be greater than or less than the
amounts provided.
Contingent environmental liabilities
Botany – remediation of source contamination
Specifically related to the remediation of DNAPL source contamination a reliable estimate of the costs to complete remediation is not possible
given the lack of proven remediation techniques that can be effectively deployed at the site and uncertainty of the scale of the DNAPL
contamination. This position was confirmed during the year when management held a strategy workshop with both remediation experts
and the NSW EPA to review developments in applicable technology, the level of assessed contamination and whether alternate remediation
approaches could be implemented.
Other sites
In respect of historical and current operations, certain sites owned or used by the Group may require future remediation actions.
Sites with significant uncertainties relating to the following are disclosed as contingent liabilities:
– Sites where contamination is known or likely to exist, however the impact cannot be reliably measured due to uncertainties related to the
extent of Orica’s remediation obligations or the remediation techniques that may be utilised; or
– Sites where known contamination exists but does not pose a current threat to human health or the environment, therefore no regulatory
or formal remediation action is probable.
Any costs associated with these matters are expensed as incurred.
ORICA Annual Report 2021 |
131
Notes to the Financial Statements –
Section C. Operating assets and liabilities (continued)
For the year ended 30 September
7. PROPERTY, PLANT AND EQUIPMENT
Owned assets
Leased assets
Land,
buildings and
improvements
$m
Machinery,
plant and
equipment
$m
Land,
buildings and
improvements
$m
Machinery,
plant and
equipment
$m
761.1
–
(333.7)
427.4
5,283.2
(192.3)
(2,542.0)
2,548.9
Carrying amount at the beginning of the year(1)
472.7
2,412.5
Consolidated
2020
Cost(1)
Accumulated impairment losses
Accumulated depreciation
Total carrying value
Movement
Transition adjustment to AASB 16
Additions(1)
Additions through acquisitions of entities(2) (see note 14)
Disposals
Transfers between property, plant & equipment assets
Depreciation expense(1)
Impairment expense (see note 9)
Foreign currency exchange differences
Carrying amount at the end of the year
2021
Cost
Accumulated impairment losses
Accumulated depreciation
Total carrying value
Movement
Carrying amount at the beginning of the year
Additions
Additions through acquisitions of entities (see note 14)
Disposals
Transfers between property, plant & equipment assets(3)
Depreciation expense
Impairment expense (see note 9)
Transfer to assets held for sale
Foreign currency exchange differences
Carrying amount at the end of the year
–
16.1
38.9
–
(64.4)
(28.7)
–
(7.2)
427.4
962.4
(57.7)
(386.7)
518.0
427.4
33.0
–
(7.3)
169.1
(29.1)
(57.7)
(16.4)
(1.0)
518.0
193.8
–
(25.9)
167.9
–
140.1
25.4
32.4
–
–
(25.9)
–
(4.1)
167.9
208.8
–
(77.2)
131.6
–
310.2
129.6
(6.0)
64.4
(210.9)
(33.1)
(117.8)
2,548.9
5,083.9
(296.7)
(2,498.7)
2,288.5
2,548.9
167.9
292.5
2.0
(13.6)
(169.1)
(231.9)
(101.9)
(39.6)
1.2
2,288.5
4.0
–
(6.8)
–
(29.2)
–
(4.0)
(0.3)
131.6
Total
$m
6,405.6
(192.3)
(2,946.3)
3,267.0
2,885.2
250.1
409.1
203.2
(6.0)
–
(310.2)
(33.1)
(131.3)
3,267.0
6,429.4
(354.4)
(3,034.8)
3,040.2
3,267.0
360.3
2.0
(27.9)
–
(332.5)
(159.6)
(66.9)
(2.2)
3,040.2
167.5
–
(44.7)
122.8
–
110.0
57.4
2.3
–
–
(44.7)
–
(2.2)
122.8
174.3
–
(72.2)
102.1
122.8
30.8
–
(0.2)
–
(42.3)
–
(6.9)
(2.1)
102.1
(1) Restated for the retrospective application of a change in Orica’s accounting policy on AASB 116 Property, Plant and Equipment, following an International Financial
Reporting Interpretations Committee (‘IFRIC’) agenda decision this year. Refer to note 24 for further details.
(2) Restated for purchase price allocation adjustments for the Exsa S.A. business acquisition. Refer to note 14 for further details.
(3) Reclassification on commissioning of the Burrup ammonia nitrate (‘TAN’) plant.
Individually significant items
An impairment of the Yara Pilbara Nitrates (Burrup) plant was recognised in the current year resulting in an impairment to property, plant and equipment
of $159.6 million. Refer to note 9 for further details.
Capital expenditure commitments
Capital expenditure on property, plant and equipment and business acquisitions contracted but not provided for and payable no later than one year was
$60.9 million (2020 $77.1 million) and later than one but less than five years was $14.6 million (2020 $3.1 million).
132 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Notes to the Financial Statements –
Section C. Operating assets and liabilities (continued)
For the year ended 30 September
7. PROPERTY, PLANT AND EQUIPMENT (continued)
Recognition and Measurement
Property, plant and equipment is stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the
acquisition of the item and includes capitalised interest (refer to note 3). Subsequent costs are capitalised only when it is probable that future economic
benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.
The right of use asset at initial recognition reflects the lease liability adjusted for any lease payments made before the commencement date plus any make
good obligations and initial direct costs incurred (refer to note 3). The leases recognised by the Group under AASB 16 predominantly relate to property
leases including offices and storage as well as plant & equipment leases including vehicles and rail cars.
Critical accounting judgements and estimates
Management reviews the appropriateness of useful lives of assets at least annually, any changes to useful lives may affect prospective depreciation
rates and asset carrying values. Depreciation is recorded on a straight line basis using the following useful lives:
Owned assets
Right of use assets – leased
Land
Buildings and improvements
Machinery, plant and equipment
Indefinite
25 to 40 years
3 to 40 years
1 to 70 years
1 to 20 years
1 to 15 years
8. INTANGIBLE ASSETS
Consolidated
2020 (restated)
Cost(1)
Accumulated impairment losses
Accumulated amortisation(1)
Net carrying amount
Movement
Goodwill
$m
2,662.4
(1,475.9)
–
1,186.5
Carrying amount at the beginning of the year(1)
1,194.2
Additions(1)
Additions through acquisitions of entities(2) (see note 14)
Amortisation expense(1)
Impairment expense
Foreign currency exchange differences
Carrying amount at the end of the year
2021
Cost
Accumulated impairment losses
Accumulated amortisation
Net carrying amount
Movement
Carrying amount at the beginning of the year
Additions
Additions through acquisitions of entities (see note 14)
Amortisation expense
Impairment expense
Transfer to assets held for sale
Foreign currency exchange differences
Carrying amount at the end of the year
–
38.4
–
–
(46.1)
1,186.5
1,230.6
(333.9)
–
896.7
1,186.5
–
–
–
(320.4)
–
30.6
896.7
Patents,
trademarks
and rights
$m
Software
$m
210.7
–
(127.4)
83.3
63.9
–
28.6
(6.0)
–
(3.2)
83.3
158.7
–
(94.4)
64.3
83.3
11.4
20.3
(16.6)
–
(17.0)
(17.1)
64.3
268.7
(97.7)
(77.4)
93.6
160.0
24.5
–
(2.3)
(63.4)
(25.2)
93.6
278.6
(114.4)
(64.9)
99.3
93.6
18.3
–
(19.8)
–
(0.6)
7.8
99.3
Other
$m
182.0
–
(105.1)
76.9
64.9
18.2
13.9
(13.6)
–
(6.5)
76.9
157.3
–
(67.2)
90.1
76.9
0.9
–
(0.9)
–
–
13.2
90.1
Total
$m
3,323.8
(1,573.6)
(309.9)
1,440.3
1,483.0
42.7
80.9
(21.9)
(63.4)
(81.0)
1,440.3
1,825.2
(448.3)
(226.5)
1,150.4
1,440.3
30.6
20.3
(37.3)
(320.4)
(17.6)
34.5
1,150.4
(1) Restated for the retrospective application of a change in Orica’s accounting policy on AASB 138 Intangible assets, following an International Financial Reporting
Interpretations Committee (‘IFRIC’) agenda decision this year. Refer to note 24 for further details.
(2) Restated for purchase price allocation adjustments for the Exsa S.A. business acquisition. Refer to note 14 for further details.
ORICA Annual Report 2021 |
133
Notes to the Financial Statements –
Section C. Operating assets and liabilities (continued)
For the year ended 30 September
8. INTANGIBLE ASSETS (continued)
Individually significant items
The $122.7 million spend on the SAP project in 2020 that was retrospectively expensed following the IFRIC agenda decision on implementation costs
relating to Software as a Service platforms has been separately disclosed as a significant item.
An impairment expense was recognised against goodwill in the segments EMEA ($162.4 million) and Pilbara ($158.0 million) in 2021. Refer to note 9 for
further detail.
Recognition and Measurement
Unidentifiable intangibles – Goodwill
Where the fair value of the consideration paid for a business acquisition exceeds the fair value of the identifiable assets, liabilities and contingent liabilities
acquired, the difference is treated as goodwill. Goodwill is not amortised but the recoverable amount is tested for impairment at least annually.
Identifiable intangibles
Development expenditure is capitalised only if the expenditure can be measured reliably, the product or process is technically and commercially feasible,
future economic benefits are probable and the Group intends to and has sufficient resources to complete development and to use or sell the asset.
Otherwise, it is recognised in profit or loss as incurred. Subsequent to initial recognition, development expenditure is measured at cost less accumulated
amortisation and any accumulated impairment losses. Identifiable intangible assets with a finite life are amortised on a straight line basis over their
expected useful life to the Group, being up to thirty years. Expenditure on capitalised intangible assets is capitalised only when it increases the future
economic benefits of the specific asset to which it relates and which the Group controls (therefore excluding Software as a Service). All other expenditure
is expensed as incurred.
Critical accounting judgements and estimates
Management reviews the appropriateness of useful lives of assets at least annually, any changes to useful lives may affect prospective
amortisation rates and asset carry values.
9. IMPAIRMENT TESTING OF ASSETS
Recognition and Measurement
Methodology
Formal impairment tests are carried out annually for goodwill. In addition, formal impairment tests for all assets are performed when there is an indication
of impairment. The Group conducts an internal review of asset values at each reporting period, which is used as a source of information to assess for any
indications of impairment. External factors, such as changes in expected future prices, costs and other market factors, are also monitored to assess for
indications of impairment. If any such indication exists, an estimate of the asset’s recoverable amount is calculated.
If the carrying amount of the asset exceeds its recoverable amount, the asset is impaired and an impairment loss is charged to the income statement to
reduce the carrying amount in the balance sheet to its recoverable amount. The recoverable amount is determined using the higher of value in use or fair
value less costs to dispose. Value in use is the present value of the estimated future cash flows. Value in use is determined by applying assumptions specific
to the Group’s continued use and does not consider future development. The value in use calculations use cash flow projections based on actual operating
results, the operating budgets and cash flow forecasts approved by the Board of Directors and a terminal value calculated with reference to long term
growth rates. Fair value less costs to dispose is the value that would be received in exchange for an asset in an orderly transaction.
In testing for indications of impairment and performing impairment calculations, assets are considered as collective groups and referred to as cash-
generating units (CGU). CGUs are the smallest identifiable group of assets, liabilities and associated goodwill that generate cash inflows that are largely
independent of the cash inflows from other assets or groups of assets with each CGU being no larger than a segment. CGUs to which goodwill has been
allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal
reporting purposes. The test of goodwill and its impairment is undertaken at the segment level, except for the Pilbara CGU, a subcomponent of the
Australia Pacific & Asia segment, which contains goodwill related to the establishment of the joint operation with Yara International ASA Group.
The estimated capital outflows required to meet the Group’s commitment to reduce scope 1 and 2 emissions by at least 40% by 2030 have been included
in the testing. As part of the Group’s Task Force on Climate-related Financial Disclosures (TCFD) reporting, scenario analysis was performed over climate
change risk, which we consider within our impairment modelling. As the Group’s TCFD reporting plans develop and quantitative analysis is performed,
financial implications will continue to be considered and built into future cash flow assumptions used within impairment modelling.
134 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Notes to the Financial Statements –
Section C. Operating assets and liabilities (continued)
For the year ended 30 September
9. IMPAIRMENT TESTING OF ASSETS (continued)
Key assumptions
Australia Pacific & Asia
Pilbara
North America
Latin America
Europe, Middle East & Africa
Orica Monitor
Total
Australia Pacific & Asia
North America
Latin America
Europe, Middle East & Africa
Orica Monitor
Total
Post-tax
discount rates
2021
%
8.4 – 11.8
8.1
7.8
7.8 – 13.3
8.3 – 21.5
8.4
Weighted
average post-
tax discount
rates 2021
%
9.2
8.1
7.8
8.9
14.1
8.4
Terminal
growth rates
2021
%
2.3 – 6.5
1.2
1.6
1.4 – 5.0
1.1 – 6.5
2.5
Post-tax
discount rates
2020
%
Weighted
average post-
tax discount
rates 2020
%
Terminal
growth rates
2020
%
7.1 – 13.4
7.5
8.1 – 13.8
6.8 – 18.0
7.4 – 9.0
10.3
7.5
8.9
9.6
8.9
0.5 – 7.3
1.6
2.3 – 5.5
1.2 – 11.5
2.0 – 2.6
Weighted
average
terminal
growth rate
2021
%
3.0
1.2
1.6
3.1
3.8
2.5
Weighted
average
terminal
growth rate
2020
%
3.9
1.6
3.6
3.6
2.6
Goodwill
2021
$m
408.6
–
162.9
161.5
48.6
115.1
896.7
Goodwill
2020
$m
552.9
155.8
158.9
203.8
115.1
1,186.5
Critical accounting judgements and estimates
2021
Pilbara
The Group owns a 50% interest of Yara Pilbara Nitrates Pty Ltd (YPN), with the remaining shares being held by subsidiaries in the Yara International
ASA group. YPN owns and operates a 330,000 tonnes per annum industrial grade technical ammonium nitrate plant on the Burrup Peninsula
(Western Australia). For accounting purposes YPN is a joint operation and Orica recognises its share of any jointly held or incurred assets, liabilities,
revenues, and expenses in the consolidated financial statements along with goodwill related to the establishment of the joint operation and
capitalised interest.
The Group’s asset base in the Pilbara consists of the TAN plant, the equity accounted investee Orica Mining Services Pilbara Pty Ltd and the
Pippingarra emulsion plant. Following a review of product movement and cashflows post the commissioning of the TAN plant on 1 October 2020,
management have concluded that the Pilbara is a separate CGU. The recoverable amount for the plant and other assets in the region are below
their carrying value and therefore an impairment has been recognised against goodwill of $158.0 million and property, plant and equipment of
$159.6 million.
Any variation in the key assumptions of the cash flows would result in a change in the assessed value in use. If the impact of the change had
a negative impact, it could, in the absence of other factors, require a further impairment to property, plant & equipment. The key assumptions
underlying the value in use calculations are as follows:
– EBIT growth of $24 million within five years primarily due to volume and price growth.
– A terminal growth of 1.2%.
– A post-tax discount rate of 8.1%.
ORICA Annual Report 2021 |
135
Notes to the Financial Statements –
Section C. Operating assets and liabilities (continued)
For the year ended 30 September
9. IMPAIRMENT TESTING OF ASSETS (continued)
Critical accounting judgements and estimates (continued)
2021 (continued)
EMEA
EMEA has been severely impacted by COVID-19, with numerous sites suspending operations and customer project delays in the Nordics and
Middle East. The latest forecasts project that recovery in the region will be slower than previously anticipated, particularly in Europe. As a result,
the goodwill in the segment has been impaired by $162.4 million.
Any variation in the key assumptions of the cash flows would result in a change in the assessed value in use. If the impact of the change had
a negative impact, it could, in the absence of other factors require a further impairment to goodwill. The key assumptions underlying the value
in use calculations are as follows:
– Growth in EBIT to $79 million within five years primarily due to easing of COVID-19 impacts, new technology and growth in Africa and the CIS.
– A weighted average terminal growth in line with local country economic forecasts of 3.8%.
– A weighted average post-tax discount rate of 14.1%
LATAM
Based on the latest projected cash flows of the Group, the carrying value of the Latin America segment is approximately equal to its value in use.
The value in use calculations are sensitive to earnings forecasts, changes in discount rates and terminal growth rates.
Any variation in the key assumptions of the cash flows would result in a change in the assessed value in use. If the impact of the change had
a negative impact, it could, in the absence of other factors require an impairment to goodwill. The key assumptions underlying the value in use
calculations are as follows:
Growth in EBIT to $87 million within five years. This is reliant on achieving future growth in earnings primarily due to easing of COVID-19 impacts,
securing new or expanded contracts and delivery of value added services.
– A weighted average terminal growth in line with local country economic forecasts of 3.1%.
– A weighted average post-tax discount rate of 8.9%.
COVID‑19
The Group continues to actively monitor the impact of the COVID-19 pandemic, including the impact on economic activity and financial
reporting. Significant judgement is required in determining the following key assumptions used to calculate the value in use, which has been
updated to reflect uncertainty and the current risk environment:
– Revenue growth
– Foreign exchange rates
– Discount rates
– Future cash flows
The potential impact of COVID-19 has been considered in formulating these assumptions.
Ultimately due to the ongoing uncertainty as to the extent and duration of COVID-19 restrictions and the overall impact on economic activity,
actual results may materially differ from the Group’s internal assumptions. This may result in reassessment of indicators of impairment for the
Group’s assets in future reporting periods.
2020
Intangible Assets
As part of the impairment review and the transition to the new SAP operating system, Orica identified $63.4 million of historic IT assets that
would no longer be utilised by the business.
Property, plant and equipment
The Group is undertaking a global project to rationalise its product portfolio, simplify and reduce its different technologies, and enable the
optimisation of the initiating system (IS) plant network. This project is expected to result in a substantial increase in the IS plant network’s
utilisation by 2024.
As part of these plans, the Minden, Hallowell and Tappen plants will cease production, with further rationalisation of other manufacturing
facilities planned.
This has resulted in an impairment charge of $33.1 million. In calculating the impairment charge management has used a value in use model
to forecast the remaining cashflows to be generated by these plants before they cease production.
136 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Notes to the Financial Statements –
Section D. Managing financial risks
For the year ended 30 September
SECTION D. MANAGING FINANCIAL RISKS
Orica’s Review of Operations and Financial Performance highlights funding and other treasury matters as material business risks that could adversely
affect the achievement of future business performance.
This section discusses the principal market and other financial risks that the Group is exposed to and the risk management program, which seeks to
mitigate these risks and reduce the volatility of Orica’s financial performance.
10. FINANCIAL RISK MANAGEMENT
Financial risk factors
Financial risk management is carried out centrally by the Group’s treasury function under policies approved by the Board.
The Group’s principal financial risks are associated with:
– interest rate risk (note 10a);
– foreign exchange risk (note 10b);
– commodity price risk (note 10c);
– credit risk (note 10d); and
– liquidity risk (note 10e).
(a) Interest rate risk
Interest rate risk refers to the risk that the value of a financial instrument or cash flows associated with the instrument will fluctuate due to changes
in market interest rates.
The Group is primarily exposed to interest rate risk on outstanding interest bearing liabilities. Non-derivative interest bearing assets are predominantly
short-term liquid assets. Interest bearing liabilities issued at fixed rates expose the Group to a fair value interest rate risk while borrowings issued at a
variable rate give rise to a cash flow interest rate risk.
Interest rate risk on long-term interest bearing liabilities is managed by adjusting the ratio of fixed interest debt to variable interest debt. This is managed
within policies determined by the Board via the use of interest rate swaps and cross currency interest rate swaps. As at September 2021, fixed rate
borrowings after the impact of interest rate swaps and cross currency swaps were $1,268.5 million (2020 $1,462.7 million), representing a fixed/floating
split of 61% and 39% respectively (2020 53% and 47%).
Interest rate sensitivity
A 10% movement in interest rates without management intervention would have a $4.1 million (2020 $5.0 million) impact on profit before tax and
a $2.9 million (2020 $3.5 million) impact on shareholders’ equity.
(b) Foreign exchange risk
i) Foreign exchange risk – transactional
Foreign exchange risk refers to the risk that the value of a financial commitment, recognised asset, liability or cash flow will fluctuate due to changes
in foreign currency rates.
The Group is exposed to foreign exchange risk due to foreign currency borrowings and sales and/or purchases denominated, either directly or indirectly,
in currencies other than the functional currencies of the Group’s subsidiaries.
Foreign exchange risk on foreign currency borrowings is managed using cross currency swaps and forward foreign exchange contracts. As at September 2021,
the notional balance of derivative contracts hedging foreign currency debt was $1,003.4 million (2020 $1,477.1 million).
In regard to foreign currency risk relating to sales and purchases, the Group may hedge up to 100% of committed exposures utilising a declining
percentage over time methodology. Only exposures that can be forecast to a high probability are hedged. Transactions can be hedged for up to
five years. The derivative instruments used for hedging purchase and sale exposures are bought vanilla option contracts and forward exchange contracts.
Forward exchange contracts may be used only under Board policy for committed exposures and anticipated exposures expected to occur within 12
months. Bought vanilla option contracts may be used for all exposures. These contracts are designated as cash flow hedges and are recognised at their
fair value. At reporting date, Orica held foreign exchange contracts with a net asset value of $4.9 million (2020 net asset of $6.8 million).
ORICA Annual Report 2021 |
137
Notes to the Financial Statements –
Section D. Managing financial risks (continued)
For the year ended 30 September
10. FINANCIAL RISK MANAGEMENT (continued)
Foreign exchange sensitivity
The table below shows the Group’s main exposure to foreign currency transactional risk (Australian dollar equivalent) and the effect on profit or loss and
equity had exchange rates been 10% higher or lower than the year end rate with all other variables held constant.
The analysis takes into account all underlying exposures and related hedges but not the impact of any management actions that might take place if these
events occurred.
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Interest bearing liabilities
Net derivatives
Net exposure
Effect on profit/(loss) before tax
If exchange rates were 10% lower
If exchange rates were 10% higher
Increase/(decrease) in equity
If exchange rates were 10% lower
If exchange rates were 10% higher
2021
2020
USD
$m
182.4
232.0
(302.1)
(1,342.1)
1,390.6
160.8
5.5
(4.5)
12.5
(10.2)
EUR
$m
13.4
17.7
(16.5)
(61.5)
66.8
19.9
1.0
(0.8)
1.5
(1.3)
USD
$m
123.4
186.2
(173.0)
(1,765.5)
1,858.3
229.4
8.8
(7.2)
17.8
(14.6)
EUR
$m
18.5
18.2
(11.3)
(62.2)
51.7
14.9
1.3
(1.0)
1.2
(0.9)
ii) Foreign currency risk – translational
Foreign currency earnings translation risk arises primarily as a result of earnings generated by foreign operations with functional currencies of CAD,
USD, MXN, PEN, RUB and KZT being translated into AUD. Derivative contracts to hedge earnings exposures do not qualify for hedge accounting under
Australian Accounting Standards. Board approved policy allows hedging of this exposure in order to reduce the volatility of full year earnings resulting
from changes in exchange rates. At reporting date, Orica held no derivative contracts to hedge earnings exposures (2020 nil).
Net investment in foreign operations
Hedging of foreign investment exposures is undertaken primarily through originating debt in the functional currency of the foreign operation, or by raising
debt in a different currency and swapping the debt to the currency of the foreign operation using derivative financial instruments. The remaining translation
exposure is managed, where considered appropriate, using forward foreign exchange contracts, or cross currency interest rate swaps. As at reporting date,
37.0% of the Group’s net investment in foreign operations was hedged (Restated 2020 36.2%).
(c) Commodity price risk
Commodity price risk refers to the risk that Orica’s profit or loss or equity will fluctuate due to changes in commodity prices.
Natural gas or ammonia are the primary feedstocks in Orica’s production process. Orica manages its contract portfolio so that on a mass balance basis it
seeks to maintain a low risk position across the contract cycle such that material input cost variations are passed through to customers in price variations
through rise and fall adjustments contained in all significant contracts.
The Group may enter into derivative contracts to hedge commodity price risk that is not eliminated via contractual or other commercial arrangements.
At reporting date, Orica held no commodity derivative contracts (2020 nil).
(d) Credit risk
Credit risk represents the loss that would be recognised if counterparties failed to meet their obligations under a contract or arrangement. The Group
is exposed to credit risk from trade and other receivables and financial instrument contracts.
The creditworthiness of customers is reviewed prior to granting credit, using trade references and credit reference agencies. Credit limits are established
and monitored for each customer, and these limits represent the highest level of exposure that a customer can reach. Trade credit insurance is purchased
when required.
The Group manages bank counterparty risk by ensuring that actual and potential exposure is monitored daily against counterparty credit limits,
which have been assigned based on counterparty credit ratings. The Group does not hold any credit derivatives to offset its credit exposures.
138 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Notes to the Financial Statements –
Section D. Managing financial risks (continued)
For the year ended 30 September
10. FINANCIAL RISK MANAGEMENT (continued)
Orica’s maximum exposure to credit risk as at 30 September is the carrying amount, net of impairment, of the financial assets as detailed in the table below:
Financial assets
Cash and cash equivalents
Derivative assets
Trade and other receivables
Total
(e) Liquidity risk
2021
$m
593.7
56.9
894.1
1,544.7
2020
$m
920.5
152.2
1,023.1
2,095.8
Liquidity risk arises from the possibility that there will be insufficient funds available to make payment as and when required.
The Group manages this risk via:
– maintaining an adequate level of undrawn committed facilities in various currencies that can be drawn upon at short notice;
– using instruments that are readily tradeable in the financial markets;
– monitoring duration of long-term debt;
– spreading, to the extent practicable, the maturity dates of long-term debt facilities; and
– comprehensively analysing all forecast inflows and outflows that relate to financial assets and liabilities.
Facilities available and the amounts drawn and undrawn are as follows:
Unsecured bank overdraft facilities
Unsecured bank overdraft facilities available
Amount of facilities undrawn
Committed standby and loan facilities
Committed standby and loan facilities available
Amount of facilities unused
2021
$m
58.4
56.3
2020
$m
67.7
65.3
3,561.1
1,486.3
4,256.0
1,510.0
The bank overdrafts are payable on demand and are subject to an annual review. The repayment dates of the committed standby and loan facilities range
from 25 October 2022 to 25 October 2030 (2020 25 October 2020 to 25 October 2030).
The contractual maturity of the Group’s financial liabilities including estimated interest payments as at 30 September are shown in the table below.
The amounts shown represent the future undiscounted principal and interest cash flows and therefore differ from the carrying amount on the
balance sheet:
2021
Non derivative financial liabilities
Interest bearing liabilities,
excluding lease liabilities
Lease liabilities
Trade and other payables
Derivative financial liabilities
Inflows
Outflows
Total
1 year
or less
$m
90.3
67.6
1,254.2
(157.6)
162.7
1,417.2
1 to
2 years
$m
2 to
5 years
$m
Over
5 years
$m
Contractual
cash flows
$m
Carrying
amount
$m
692.8
56.3
8.8
(18.6)
21.4
760.7
383.9
87.4
–
(55.1)
75.4
491.6
1,396.5
120.4
–
(622.3)
676.0
1,570.6
2,563.5
331.7
1,263.0
(853.6)
935.5
4,240.1
2,072.7
260.4
1,263.0
–
65.7
3,661.8
ORICA Annual Report 2021 |
139
Notes to the Financial Statements –
Section D. Managing financial risks (continued)
For the year ended 30 September
10. FINANCIAL RISK MANAGEMENT (continued)
2020
Non derivative financial liabilities
Interest bearing liabilities, excluding
lease liabilities
Lease liabilities
Trade and other payables
Derivative financial liabilities
Inflows
Outflows
Total
Fair value measurement
1 year or less
$m
1 to 2 years
$m
2 to 5 years
$m
Over 5 years
$m
Contractual
cash flows
$m
Carrying
amount
$m
718.7
71.1
1,166.0
(335.0)
340.0
1,960.8
93.7
59.4
11.6
(19.0)
20.9
166.6
900.8
109.0
–
(55.4)
64.3
1,018.7
1,574.9
138.2
–
(643.7)
688.0
1,757.4
3,288.1
377.7
1,177.6
(1,053.1)
1,113.2
4,903.5
2,741.0
298.7
1,177.6
–
47.1
4,264.4
The balance sheet includes financial assets and financial liabilities that are measured at fair value. These fair values are categorised into hierarchy levels that
are representative of the inputs used in measuring the fair value.
Level 1 – uses quoted prices for identical instruments in active markets.
Valuation method
Level 2 – uses inputs for the asset or liability other than quoted prices that are observable either directly or indirectly.
Level 3 – uses valuation techniques where one or more significant inputs are based on unobservable market data.
At reporting date, other assets and other liabilities on the balance sheet included derivatives carried at fair value and categorised as Level 2 as the inputs
are observable. There has been no movement between levels since prior year.
Valuation techniques include, where applicable, reference to prices quoted in active markets, discounted cash flow analysis, fair value of recent arm’s
length transactions involving the same instruments or other instruments that are substantially the same, and option pricing models. Changes in default
probabilities are included in the valuation of derivatives using credit and debit valuation adjustments.
The fair values of forward exchange contracts are calculated by reference to forward exchange market rates for contracts with similar maturity profiles
at the time of valuation.
The fair values of cross currency interest rate swaps and interest rate swaps and other financial liabilities measured at fair value are determined using
valuation techniques which utilise data from observable markets. Assumptions are based on market conditions existing at each balance date. The fair value
is calculated as the present value of the estimated future cash flows using an appropriate market-based yield curve, which is independently derived and
representative of Orica’s cost of borrowings.
Derivative financial instruments
Derivative assets
Designated as a hedge of interest bearing liabilities
Other
Total
Derivative liabilities
Designated as a hedge of interest bearing liabilities
Other
Total
2021
2020
Current
$m
Non-Current
$m
Current
$m
Non-Current
$m
–
8.0
8.0
–
(5.1)
(5.1)
48.9
–
48.9
(60.6)
–
(60.6)
67.0
14.8
81.8
–
(3.7)
(3.7)
70.4
–
70.4
(43.4)
–
(43.4)
Financial assets and liabilities carried at amortised cost
The fair value of cash and cash equivalents, trade and other receivables (note 5), and trade and other payables (note 5) approximates their carrying amount
due to their short maturity.
Interest bearing liabilities excluding lease liabilities have a carrying amount of $2,072.7 million including discontinued operations (note 15) (2020 $2,741.0
million). The carrying amount of bank and other loans which are primarily short-term in nature approximates fair value. Private Placement debt which is
primarily long-term in nature has a carrying amount of $2,068.8 million (2020 $2,587.9 million) and a fair value of $2,122.2 million (2020 $2,696.3 million).
Fair value of Private Placement debt is determined as the present value of future contracted cash flows discounted using standard valuation techniques at
applicable market yields having regard to timing of cash flows.
140 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Notes to the Financial Statements –
Section D. Managing financial risks (continued)
For the year ended 30 September
10. FINANCIAL RISK MANAGEMENT (continued)
Offsetting financial assets and liabilities
Financial assets and liabilities are offset and the net amount reported in the balance sheet where Orica currently has a legally enforceable right to offset
the recognised amounts, and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. No financial assets or
liabilities are currently held under netting arrangements.
Orica has entered into derivative transactions under International Swaps and Derivatives Association (‘ISDA’) master agreements that do not meet the
criteria for offsetting but allow for the related amounts to be set-off in certain circumstances, such as the event of default. As Orica does not presently
have a legally enforceable right of set-off, derivatives are presented on a gross basis on the balance sheet.
Derivatives and hedge accounting
The Group uses derivatives and other financial instruments to hedge its exposure to currency, interest rate and commodity price risk exposures arising from
operational, financing and investing activities. Where applicable, these instruments are formally designated in hedge relationships as defined by AASB 9.
To qualify for hedge accounting the Group formally designates and documents details of the hedge, risk management objective and strategy for entering
into the arrangement and methodology used for measuring effectiveness.
Hedge accounting relationships are categorised according to the nature of the risks being hedged:
Hedge type
Description
Fair value hedge
Hedges the change in fair value of recognised assets and liabilities.
Cash flow hedge
Hedges the exposure to variability in cash flows attributable to a particular risk associated with an asset, liability or highly
probable forecast transaction.
Net investment hedge
Hedges the foreign currency translation exposure of the net assets of foreign operations.
Critical terms of hedging instruments and hedged items are transacted to match on a 1:1 ratio by notional values. Matching critical terms enables
economic offset thereafter to be determined qualitatively.
Hedge ineffectiveness arises primarily from the counterparties’ and the Group’s own credit risk which is included in the fair value of the derivative hedge
instrument but not the hedge item. During the current and prior financial years, there was no material impact on profit or loss resulting from hedge
ineffectiveness.
AASB 9 also allows certain costs of hedging to be deferred in equity. Gains or losses associated with ‘currency basis’ cost of hedging are deferred in the
cash flow hedge reserve as they are not material for separate disclosure. The amounts are systematically released to the income statement to align with
the hedged exposure.
The London Interbank Offered Rate (LIBOR) is expected to be replaced by alternative risk-free rates (ARR) as part of inter-bank offer rate (IBOR) reform.
IBOR reform impacts Orica’s interest rate swaps, which reference 3-month US LIBOR. At 30 September 2021, the notional value of hedging instruments
that reference 3-month US LIBOR is US$170m and Orica has not transitioned any of its existing interest rate swaps to ARR’s. It is anticipated that 3-month
LIBOR will continue to be published until June 2023 and Orica’s interest rate swaps will only transition to ARR once US LIBOR publication ceases. Orica is in
the process of developing action plans to ensure a smooth transition to ARR.
Effects of hedge accounting on financial position and performance
Fair value and cash flow hedges
The table below shows the carrying amounts of the Group’s Private Placement debt and the derivatives which are designated in fair value and/or cash flow
hedge relationships to hedge them:
– The carrying amount of the Private Placement debt includes foreign exchange remeasurements to year end rates and fair value adjustments when
included in a fair value hedge;
– The breakdown of the hedging derivatives includes remeasurement of foreign currency notional values at year end rates, fair value movements due
to interest rate risk, foreign currency cash flows designated into cash flow hedges, costs of hedging recognised in other comprehensive income and
ineffectiveness recognised in the income statement; and
– Hedged value represents the carrying amount of the Private Placement debt adjusted for the carrying amount of the designated derivatives.
ORICA Annual Report 2021 |
141
Notes to the Financial Statements –
Section D. Managing financial risks (continued)
For the year ended 30 September
10. FINANCIAL RISK MANAGEMENT (continued)
Fair value of derivatives (1)
Carrying
amount
$m
Foreign
exchange
notional @ spot
$m
Fair value
interest
rate risk
$m
Balance in cash
flow hedge
reserve (3)
$m
Recognised
in income
statement (2)
$m
Total carrying
amount
liability/(asset)
$m
Hedged value
$m
2,068.8
(2.3)
(9.1)
23.4
(0.3)
11.7
2,080.5
2,587.9
(75.2)
(51.2)
31.7
0.7
(94.0)
2,493.9
2021
Private Placement
debt
2020
Private Placement
debt
(1)
Individual derivative transactions may be included in more than one hedge type designation.
(2) Amounts recognised in the income statement are presented within financing costs.
(3)
Includes cost of hedging as defined by AASB 9 of $5.8 million (2020 $8.1 million).
Net investment hedges
As at 30 September, hedging instruments designated in a net investment hedge consisted primarily of foreign currency debt and had a carrying amount
of $909.7 million (2020 $906.5 million). During the period movements in the hedging instruments of $3.5 million loss (2020 $62.6 million gain) were
recognised in the foreign currency translation reserve, with no ineffectiveness (2020 nil) recognised in the income statement.
Derivatives and hedge accounting – significant accounting policies
Valuation: Derivatives are measured at fair value at inception, and subsequently remeasured to fair value at each reporting date.
Fair value hedges
Cash flow hedges
Net investment hedges
Gains or losses
on fair value
movements of
the financial
instrument
Discontinuation of
hedge accounting
Recognised in the income statement,
together with gains or losses in relation
to the hedged item attributable to the
risk being hedged.
The effective portion is recognised
in other comprehensive income.
The ineffective portion is recognised
immediately in the income statement.
The cumulative gain or loss that has
been recorded to the carrying amount
of the hedged item is amortised to the
income statement using the effective
interest method.
When a hedging instrument expires or
is sold, terminated or exercised, or the
entity revokes designation of the
hedge relationship but the hedged
forecast transaction is still expected
to occur, the cumulative gain or loss
at that point remains in equity. If the
forecast transaction is no longer
forecast to occur, the cumulative gain
or loss is transferred immediately to the
income statement.
The effective portion is recognised
in the foreign currency translation
reserve in equity. The ineffective
portion is recognised immediately
in the income statement.
Amounts remain deferred in the
foreign currency translation reserve
and are subsequently recognised in
the income statement in the event
of disposal of the foreign operation.
Derivatives not in a designated hedge arrangement
Financial instruments that do not qualify for hedge accounting but remain economically effective, are accounted for as trading instruments. These instruments
are classified as current and are stated at fair value, with any resultant gain or loss recognised in the income statement. The Group policy is to not hold or issue
financial instruments for speculative purposes.
142 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Notes to the Financial Statements –
Section E. Taxation
For the year ended 30 September
SECTION E. TAXATION
This section outlines the taxes paid by Orica and the impact tax has on the financial statements.
Orica has operations in more than 50 countries, with customers in more than 100 countries. In 2021, Orica paid $219.7 million (2020 $175.6 million)
globally in corporate taxes and payroll taxes. Orica collected and remitted $127.1 million (2020 $122.1 million) globally in GST / VAT.
As Orica operates in a number of countries around the world, it is subject to local tax rules in each of those countries. Orica’s tax rate is sensitive
to the geographic mix of profits earned in different countries with different tax rates, as tax will be due in the country where the profits are earned.
Many of the jurisdictions Orica has operations in have headline tax rates lower than 30%.
11. TAXATION
(a) Income tax expense recognised in the income statement
Current tax expense
Current year
Deferred tax
Under provided in prior years
Total income tax expense in income
statement
(b) Reconciliation of income tax expense
to prima facie tax payable
Income tax expense attributable to profit
before individually significant items
Profit from operations before individually
significant items
Prima facie income tax expense calculated
at 30% on profit
Tax effect of items which (decrease)/increase
tax expense:
variation in tax rates of foreign
controlled entities
tax under provided in prior years
recognition of previously unbooked
temporary differences
non creditable withholding taxes
non allowable interest deductions
non allowable share based payments
recognition of tax losses
sundry items
Income tax expense attributable to profit
before individually significant items
Consolidated
2021
2020
Continuing
$m
Discontinued
$m
Consolidated
$m
Continuing
$m
Discontinued
$m
Consolidated
$m
68.9
(46.5)
2.9
25.3
299.3
89.8
(2.0)
2.9
(19.4)
7.1
13.2
2.2
(2.0)
4.8
96.6
5.5
–
0.2
5.7
21.7
6.5
(1.4)
0.2
–
–
2.1
0.2
0.1
(1.6)
6.1
74.4
(46.5)
3.1
31.0
321.0
96.3
(3.4)
3.1
(19.4)
7.1
15.3
2.4
(1.9)
3.2
107.4
(43.9)
1.5
65.0
433.9
130.2
(11.3)
1.5
(16.6)
12.3
20.6
1.4
(3.5)
5.6
102.7
140.2
5.1
–
–
5.1
20.8
6.2
(1.3)
–
–
–
1.3
0.2
–
(0.2)
6.2
112.5
(43.9)
1.5
70.1
454.7
136.4
(12.6)
1.5
(16.6)
12.3
21.9
1.6
(3.5)
5.4
146.4
ORICA Annual Report 2021 |
143
Notes to the Financial Statements –
Section E. Taxation (continued)
For the year ended 30 September
11. TAXATION (continued)
Consolidated
2021
2020
Continuing
$m
Discontinued
$m
Consolidated
$m
Continuing
$m
Discontinued
$m
Consolidated
$m
(452.5)
(135.8)
(39.5)
103.0
–
–
1.0
(71.3)
25.3
(1.4)
(0.4)
(453.9)
(289.2)
(136.2)
(86.8)
–
–
–
–
–
(39.5)
103.0
–
–
1.0
–
–
2.5
8.1
1.0
(0.4)
5.7
(71.7)
(75.2)
31.0
65.0
(3.9)
(1.2)
–
–
0.1
–
–
(1.1)
5.1
(293.1)
(88.0)
–
–
2.6
8.1
1.0
(76.3)
70.1
Income tax (benefit)/expense attributable
to individually significant items
Loss from individually significant items
Prima facie income tax expense calculated
at 30% on individually significant items
Tax effect of items which (decrease)/increase
tax expense:
utilisation of capital losses for gain on
sale of land
impairment
variation in tax rates of foreign
controlled entities
non allowable initiating systems network
optimisation expense
non allowable operating model
restructuring expense
Income tax benefit attributable to loss
on individually significant items
Income tax expense reported
in the income statement
(c) Income tax recognised in Equity
Consolidated
2021
2020
$m
$m
$m
$m
$m
$m
Before tax
Tax (expense)/
benefit
Net of tax
Before tax
Tax (expense)/
benefit
Net of tax
3.6
6.6
1.1
9.3
75.4
96.0
–
96.0
(1.1)
(2.0)
(0.3)
(5.6)
(20.5)
(29.5)
–
(29.5)
2.5
4.6
0.8
3.7
54.9
66.5
–
66.5
62.6
(18.8)
43.8
(16.5)
7.9
(397.8)
(12.1)
(355.9)
(6.0)
(361.9)
4.9
(2.3)
40.0
3.9
27.7
1.8
29.5
(11.6)
5.6
(357.8)
(8.2)
(328.2)
(4.2)
(332.4)
Net gain/(loss) on hedge of net
investments in foreign subsidiaries
Cash flow hedges
– Effective portion of changes
in fair value
– Transferred to income statement
Exchange gain/(loss) on translation
of foreign operations
Net actuarial gain/(loss) on defined
benefit obligations
Recognised in comprehensive
income
Deductible share issue costs
Total recognised in equity
144 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Notes to the Financial Statements –
Section E. Taxation (continued)
For the year ended 30 September
11. TAXATION (continued)
(d) Recognised deferred tax assets and liabilities
Deferred tax assets
Trade and other receivables
Inventories
Property, plant and equipment(1)(2)
Intangible assets(2)
Trade and other payables
Interest bearing liabilities
Provision for employee entitlements
Provision for retirement benefit obligations
Provisions for environmental and decommissioning
Provisions for other
Tax losses
Other items
Deferred tax assets
Less set-off against deferred tax liabilities
Net deferred tax assets
Deferred tax liabilities
Inventories
Property, plant and equipment(1)(2)
Intangible assets(2)
Other items
Deferred tax liabilities
Less set-off against deferred tax assets
Net deferred tax liabilities
Deferred tax expense
Consolidated
Balance Sheet
Income Statement
2021
$m
Restated(1)(2)
2020
$m
28.1
19.5
17.2
64.4
41.0
11.3
28.1
40.3
98.5
3.3
134.9
5.3
491.9
(91.7)
400.2
–
99.0
24.5
7.8
131.3
(91.7)
39.6
16.2
25.2
55.2
101.8
50.7
39.8
30.8
64.9
87.6
19.3
118.8
6.7
617.0
(207.6)
409.4
10.8
193.1
27.2
18.5
249.6
(207.6)
42.0
2021
$m
(12.5)
(6.1)
(14.6)
29.8
8.8
22.6
1.7
0.4
(11.1)
15.7
(17.5)
0.7
–
(57.1)
2.0
(9.3)
2020
$m
(6.8)
(3.6)
6.3
(36.9)
(9.4)
20.3
(2.2)
2.7
3.8
13.2
(17.7)
0.8
4.5
(19.7)
(8.6)
9.4
(46.5)
(43.9)
(1) Restated for purchase price allocation adjustments for the Exsa S.A. business acquisition. Refer to note 14 for further details.
(2) Restated for the retrospective application of a change in Orica’s accounting policy on AASB 138 Intangible Assets and AASB 116 Property, Plant and Equipment,
following an International Financial Reporting Interpretations Committee (‘IFRIC’) agenda decision this year. Refer to note 24 for further details.
Tax losses not booked
Capital losses not booked
Temporary differences not booked
Tax losses not booked expire between 2021 and 2031.
Consolidated
2021
$m
74.5
44.3
97.8
2020
$m
66.6
79.5
122.9
ORICA Annual Report 2021 |
145
Notes to the Financial Statements –
Section E. Taxation (continued)
For the year ended 30 September
11. TAXATION (continued)
Recognition and Measurement
Income tax on the profit or loss for the year comprises current and deferred tax and is recognised in the income statement.
Current tax is the expected tax payable on the taxable income for the year using tax rates applicable at the reporting date, and any adjustments to tax
payable in respect of previous years.
Deferred tax balances are determined by calculating temporary differences based on the carrying amounts of assets and liabilities for financial reporting
purposes and their amounts for taxation purposes. Where amounts are recognised directly in equity the corresponding tax impact is also recognised
directly in equity.
The amount of deferred tax provided will be based on the expected manner of realisation of the asset or settlement of the liability, using tax rates enacted
or substantively enacted at reporting date.
A deferred tax asset will be recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be
utilised. Deferred tax assets will be reduced to the extent it is no longer probable that the related tax benefit will be realised.
Tax consolidation
Orica Limited is the parent entity in the tax consolidated group comprising all wholly-owned Australian entities.
Due to the existence of a tax sharing agreement between the entities in the tax consolidated group, the parent entity recognises the tax effects of its
own transactions and the current tax liabilities and the deferred tax assets arising from unused tax losses and unused tax credits assumed from the
subsidiary entities.
Critical accounting judgements and estimates
The Group is subject to income taxes in Australia and jurisdictions where it has foreign operations and is subject to periodic challenges by local tax
authorities on a range of tax matters during the normal course of business. These include transfer pricing, indirect taxes and transaction-related
issues. Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations
undertaken during the ordinary course of business for which the ultimate tax determination is uncertain.
The Group recognises liabilities for tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these
matters is different from the amounts that were initially recorded, such differences will impact the current and deferred tax provision in the period
in which such determination is made.
In addition, deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable
profits are available to utilise those temporary differences and losses, and the tax losses continue to be available having regard to the nature and
timing of their origination and compliance with the relevant tax legislation associated with their recoupment.
Assumptions are also made about the application of income tax legislation. These assumptions are subject to risk and uncertainty and there is
a possibility that changes in circumstances or differences in opinions will alter outcomes which may impact the amount of deferred tax assets
and deferred tax liabilities recorded on the balance sheet and the amount of tax losses and timing differences not yet recognised. In these
circumstances, the carrying amount of deferred tax assets and liabilities may change, resulting in an impact on the earnings of the Group.
Contingent tax liabilities
In the normal course of business, contingent liabilities may arise from tax investigations or legal proceedings. Where management are of the view
that potential liabilities have a low probability of crystallising or it is not possible to quantify them reliably, they are not provided for and are
disclosed as contingent liabilities.
Consistent with other companies of the size and diversity of Orica, the Group is the subject of ongoing information requests, investigations
and audit activities by tax and regulatory authorities in jurisdictions in which Orica operates. Orica co-operates fully with the tax and regulatory
authorities. It is possible that Orica may incur fines and/or other penalties as a consequence of these investigations and audits.
(i) Brazilian Tax Action
The Brazilian Taxation Authority (BTA) is claiming unpaid taxes, interest and penalties of approximately $25 million for the 1997 financial year
relating to an alleged understatement of income based on an audit of production records. Orica believes BTA has misinterpreted those production
records and recently received a favourable decision from the Brazilian Civil Court in relation to an excise dispute based on the same factual matter.
This decision should support the income tax dispute.
ICI plc, the vendor of the business to Orica, has been notified to preserve Orica’s rights under the tax indemnity obtained upon acquisition of the
business which provides indemnity for amounts exceeding certain limits. The BTA has been granted a bank guarantee of up to approximately
$25 million.
146 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Notes to the Financial Statements –
Section F. Group structure
For the year ended 30 September
SECTION F. GROUP STRUCTURE
Orica has a diverse spread of global operations, which includes controlled entities incorporated in over 50 countries, as well as entering strategic
partnering arrangements with certain third parties. This section highlights the Group structure including Orica’s controlled entities, as well as those
where Orica holds less than 100% interest.
12. INVESTMENTS IN CONTROLLED ENTITIES
Recognition and Measurement
The consolidated financial statements are prepared by combining the financial statements of all the entities that comprise the Group, being the Company
(the parent entity) and its subsidiaries as defined in AASB 10 Consolidated Financial Statements.
On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the
cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill.
When the Group relinquishes control over a subsidiary, it derecognises its share of net assets. Any resulting gain or loss is recognised in profit or loss.
Any interest retained in the former subsidiary is measured at fair value when control is lost.
The consolidated financial statements include the information and results of each subsidiary from the date on which the Company obtains control until
such time as the Company ceases to control such entity. In preparing the consolidated financial statements, all intercompany balances, transactions and
unrealised profits arising within the Group are eliminated in full.
Refer to note 23 for the list of investments in controlled entities.
13. EQUITY ACCOUNTED INVESTEES AND JOINT OPERATIONS
(a) Investments accounted for using the equity method
The table below shows material investments (based on carrying values). All other investments are included in “Individually immaterial”.
Ownership
Profit/(loss)
for the year
Consolidated
Carrying value
Balance
date
2021
%
2020
%
2021
$m
2020
$m
Name
Nelson Brothers, LLC(1)
Principal activity
Manufacture and
sale of explosives
Nelson Brothers Mining Services LLC(1)
Sale of explosives
Poly Orica Management Co., Ltd(2)
Manufacture and
sale of explosives
30-Sep
30-Sep
31-Dec
Southwest Energy LLC(1)
Individually immaterial
Sale of explosives
30-Sep
Various
50.0
50.0
49.0
50.0
50.0
50.0
49.0
50.0
8.3
7.0
4.2
9.3
5.6
34.4
6.0
8.6
3.7
14.8
2.6
35.7
2021
$m
40.7
34.3
74.5
126.8
14.1
290.4
2020
$m
38.7
32.8
70.2
121.6
38.3
301.6
(1) Entities are incorporated in USA
(2) Entity is incorporated in China
All equity accounted investees disclosed in the table above are classified as joint ventures.
ORICA Annual Report 2021 |
147
Notes to the Financial Statements –
Section F. Group structure (continued)
For the year ended 30 September
13. EQUITY ACCOUNTED INVESTEES AND JOINT OPERATIONS (continued)
The following table summarises the financial information of significant equity accounted investees as included in their own financial statements.
Equity Accounted Investees
2021
Name
Balance Sheet
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets (100%)
Group’s share of net assets
Income Statement
Revenue
Net profit
Total profit and comprehensive income (100%)
Group’s share of total comprehensive income
Translation and other adjustments
Included in the Group’s income statement
Dividends received by the Group
2020
Name
Balance Sheet
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets (100%)
Group’s share of net assets
Income Statement
Revenue
Net profit
Total profit and comprehensive income (100%)
Group’s share of total comprehensive income
Translation and other adjustments
Included in the Group’s income statement
Dividends received by the Group
(b) Joint operations
Nelson
Brothers, LLC
$m
Nelson Brothers
Mining Services
LLC
$m
Poly Orica
Management
Co., Ltd
$m
Southwest
Energy LLC
$m
69.4
70.7
(64.1)
(19.7)
56.3
28.2
273.3
16.5
16.5
8.3
–
8.3
7.8
24.8
14.7
(25.8)
(1.2)
12.5
6.3
139.3
14.3
14.3
7.2
(0.2)
7.0
5.9
96.3
81.9
(18.4)
(3.1)
156.7
76.8
101.7
9.8
9.8
4.8
(0.6)
4.2
–
77.6
99.0
(26.9)
(10.9)
138.8
69.4
275.4
18.9
18.9
9.5
(0.2)
9.3
2.4
Nelson
Brothers, LLC
$m
Nelson Brothers
Mining Services
LLC
$m
Poly Orica
Management
Co., Ltd
$m
Southwest
Energy LLC
$m
59.1
72.6
(50.2)
(29.0)
52.5
26.3
246.9
10.5
10.5
5.3
0.7
6.0
6.3
29.5
17.3
(32.2)
(1.7)
12.9
6.5
156.5
15.9
15.9
8.0
0.6
8.6
8.9
82.7
79.0
(16.7)
(2.0)
143.0
70.1
82.6
76.1
(21.2)
(6.9)
130.6
65.3
103.3
261.5
8.8
8.8
4.3
(0.6)
3.7
–
25.5
25.5
12.8
2.0
14.8
7.8
The Group owns 50% interest of Yara Pilbara Nitrates Pty Ltd, with the remaining shares held by subsidiaries in the Yara International ASA Group.
148 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Notes to the Financial Statements –
Section F. Group structure (continued)
For the year ended 30 September
13. EQUITY ACCOUNTED INVESTEES AND JOINT OPERATIONS (continued)
(c) Transactions with equity accounted investees
Transactions during the year with equity accounted investees were:
Sales of goods to equity accounted investees
Purchase of goods from equity accounted investees
Dividend income received from equity accounted investees
(d) Transactions with related parties
2021
$m
316.3
107.2
17.5
2020
$m
447.8
105.9
23.0
All transactions with other related parties are made on normal commercial terms and conditions and in the ordinary course of business.
Recognition and Measurement
Investments accounted for using the equity method
The Group’s interests in investments accounted for using the equity method comprise interests in associates and joint ventures.
An associate exists where Orica holds an interest in the equity of an entity, generally of between 20% and 50%, and is able to significantly influence
the decisions of the entity. A joint venture is an arrangement in which the Group has joint control.
Joint operations
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets and obligations for the
liabilities relating to the arrangement. Orica recognises its share of any jointly held or incurred assets, liabilities, revenue and expenses in the consolidated
financial statements under applicable headings.
14. BUSINESSES AND NON-CONTROLLING INTERESTS ACQUIRED
Consolidated – 2021
Acquisitions of business and controlled entities
Business combinations are accounted for under the acquisition method when control is transferred to the Group, in accordance with AASB 3 Business
Combinations. On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition.
Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. The transaction costs are
expensed in the income statement.
As part of Orica’s technology development strategy, the Group acquired the shares of Hopper Industrial Group and assets from OreControl Blasting
Consultants LLC and OrePro Holdings LLC for total consideration of $22.3 million. No Goodwill was recognised on these transactions.
Since 1 October 2020, the Group has acquired an additional 1.9% of Exsa, for the consideration of $2.8 million. The ownership at 30 September 2021
is 98.7%.
Consolidated – 2020 (restated)
Accounting standards permit a measurement period of up to one year during which acquisition accounting can be finalised following the acquisition date.
The Group have finalised the accounting of the Exsa S.A. (“Exsa”) acquisition which occurred on 30 April 2020, resulting in an adjustment to the fair
values below and a corresponding increase in goodwill.
Goodwill as at 30 September 2020
Adjustments to fair value of net assets
property, plant and equipment
provision for deferred tax
non-controlling interest
Goodwill as at 30 September 2020 (restated)
Exsa S.A.
$m
6.3
36.2
(3.3)
(1.0)
38.2
ORICA Annual Report 2021 |
149
Notes to the Financial Statements –
Section F. Group structure (continued)
For the year ended 30 September
15. BUSINESSES DISPOSED AND DISCONTINUED OPERATIONS
Businesses disposed – 2021
In September 2021 the Group disposed of Arboleda S.A. and its investment in the equity accounted investee Ulaex S.A.
Consideration
Disposal costs
Net consideration
Carrying value of net assets of businesses/controlled entities disposed
Equity accounted investee
Trade and other receivables
Profit on sale of business/controlled entities
Businesses disposed – 2020
The Group has not disposed of any businesses or entities in the year to 30 September 2020.
Discontinued operations
Arboleda S.A.
$m
18.1
(0.5)
17.6
15.9
1.7
17.6
–
During the financial year the Group committed to a plan to sell the Minova business. On 30 September 2021, the assets of the business have been
classified as held for sale and it is considered a discontinued operation.
The results of the business and the detail of the operating assets and liabilities held for sale are presented below:
Assets held for sale
Property, plant and equipment
Intangibles
Cash and cash equivalents
Inventories
Trade receivables
Other receivables
Deferred tax asset
Other assets
Assets held for sale
Liabilities held for sale
Trade payables
Other payables
Interest-bearing liabilities
Provisions
Other liabilities
Deferred tax liability
Liabilities held for sale
Cash flows from/(used in) discontinued operations
Net cash from operating activities
Net cash used in investing activities
Net cash used in financing activities
Net cash flows for the year
150 | ORICA Annual Report 2021
Minova
2021
$m
66.9
17.6
42.7
58.6
67.2
2.8
30.2
12.2
298.2
70.2
20.0
9.9
32.2
–
5.5
137.8
2020
$m
17.3
(10.7)
(2.8)
3.8
Minova
2021
$m
16.9
(9.6)
(2.7)
4.6
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Notes to the Financial Statements –
Section F. Group structure (continued)
For the year ended 30 September
15. BUSINESSES DISPOSED AND DISCONTINUED OPERATIONS (continued)
Continuing
2021
$m
Discontinued
2021
$m
Consolidated
2021
$m
Continuing
2020
$m
Discontinued
2020
$m
Consolidated
2020
$m
Sales revenue
Other income(1)
Raw materials and inventories
Employee benefits expense
Depreciation and
amortisation expense(2)
Purchased services and
other expenses(2)
Outgoing freight
Repairs and maintenance
Impairment expense
Operating model restructuring
Significant environmental
provision expense
Gain on sale of Botony site
Gain on sale of Villawood site
Software as a service (SaaS) expense(2)
Initiating systems
network optimisation
Share of net profit
of equity accounted investees
Total
(Loss)/profit from operations
Net financing costs
Financial income
Financial expenses(1)
Net financing costs
(Loss)/profit before income tax
expense
Income tax (expense)/benefit(2)
(Loss)/profit after tax
Net (loss)/profit for the year
attributable to:
Shareholders of Orica Limited
Non-controlling interests
Net (loss)/profit for the year
5,207.9
45.7
(2,449.8)
(1,111.2)
(358.1)
(510.3)
(304.6)
(149.4)
(480.0)
(45.6)
(39.3)
71.6
40.8
–
–
34.4
(5,301.5)
(47.9)
1.0
(106.3)
(105.3)
(153.2)
(25.3)
(178.5)
(188.6)
10.1
(178.5)
474.3
0.7
(294.0)
(95.7)
(11.7)
(31.4)
(12.9)
(7.3)
–
(1.4)
–
–
–
–
–
–
(454.4)
20.6
0.1
(0.4)
(0.3)
20.3
(5.7)
14.6
14.8
(0.2)
14.6
5,682.2
46.4
(2,743.8)
(1,206.9)
(369.8)
(541.7)
(317.5)
(156.7)
(480.0)
(47.0)
(39.3)
71.6
40.8
–
–
5,143.0
15.5
(2,221.8)
(1,130.3)
(320.7)
(479.4)
(277.8)
(171.3)
(63.4)
(23.0)
–
–
–
(122.7)
(80.1)
34.4
(5,755.9)
(27.3)
35.7
(4,854.8)
303.7
1.1
(106.7)
(105.6)
(132.9)
(31.0)
(163.9)
(173.8)
9.9
(163.9)
2.0
(161.0)
(159.0)
144.7
(65.0)
79.7
74.3
5.4
79.7
468.3
1.3
(291.1)
(111.5)
(11.4)
(14.8)
(12.8)
(7.2)
–
(3.9)
–
–
–
–
–
–
(452.7)
16.9
0.4
(0.4)
–
16.9
(5.1)
11.8
8.0
3.8
11.8
5,611.3
16.8
(2,512.9)
(1,241.8)
(332.1)
(494.2)
(290.6)
(178.5)
(63.4)
(26.9)
–
–
–
(122.7)
(80.1)
35.7
(5,307.5)
320.6
2.4
(161.4)
(159.0)
161.6
(70.1)
91.5
82.3
9.2
91.5
(1) Discontinued operations other income includes foreign exchange gain of $0.8 million (2020 $0.1 million loss)
(2) Restated for the retrospective application of a change in Orica’s accounting policy on AASB 138 Intangible Assets and AASB 116 Property, Plant and Equipment, following
an International Financial Reporting Interpretations Committee (‘IFRIC’) agenda decision this year. Refer to note 24 for further details.
Continuing
2021
cents
Discontinued
2021
cents
Consolidated
2021
cents
Continuing
2020
cents
Discontinued
2020
cents
Consolidated
2020
cents
Earnings per share attributable
to ordinary shareholders of
Orica Limited:
Basic earnings per share
Diluted earnings per share
(46.3)
(46.3)
3.6
3.6
(42.7)
(42.7)
18.8
18.7
2.0
2.0
20.8
20.7
ORICA Annual Report 2021 |
151
Notes to the Financial Statements –
Section F. Group structure (continued)
For the year ended 30 September
15. BUSINESSES DISPOSED AND DISCONTINUED OPERATIONS (continued)
Reconciliation of net profit for the year
Continuing
2021
$m
Discontinued
2021
$m
Consolidated
2021
$m
Continuing
2020
$m
Discontinued
2020
$m
Consolidated
2020
$m
404.6
(105.3)
299.3
(96.6)
202.7
(10.1)
192.6
(452.5)
71.3
(381.2)
–
(381.2)
(153.2)
(25.3)
(178.5)
(10.1)
(188.6)
(188.6)
10.1
(178.5)
22.0
(0.3)
21.7
(6.1)
15.6
0.2
15.8
(1.4)
0.4
(1.0)
–
(1.0)
20.3
(5.7)
14.6
0.2
14.8
14.8
(0.2)
14.6
426.6
(105.6)
321.0
(102.7)
218.3
(9.9)
208.4
(453.9)
71.7
(382.2)
–
592.9
(159.0)
433.9
(140.2)
293.7
(5.4)
288.3
(289.2)
75.2
(214.0)
–
(382.2)
(214.0)
(132.9)
(31.0)
(163.9)
(9.9)
(173.8)
(173.8)
9.9
(163.9)
144.7
(65.0)
79.7
(5.4)
74.3
74.3
5.4
79.7
20.8
–
20.8
(6.2)
14.6
(3.8)
10.8
(3.9)
1.1
(2.8)
–
(2.8)
16.9
(5.1)
11.8
(3.8)
8.0
8.0
3.8
11.8
613.7
(159.0)
454.7
(146.4)
308.3
(9.2)
299.1
(293.1)
76.3
(216.8)
–
(216.8)
161.6
(70.1)
91.5
(9.2)
82.3
82.3
9.2
91.5
Before individually
significant items
Profit from operations
Net financing costs
Profit before income tax expense
Income tax (expense)/benefit
Profit after tax before
non-controlling interests
Non-controlling interests
Profit after tax before
individually significant items
Individually significant items
Loss before income tax expense
Income tax benefit
Loss after tax before
non-controlling interests
Non-controlling interests
Loss after tax from individually
significant items
Net (loss)/profit after tax
Net (loss)/profit before income tax
expense
Income tax (expense)/benefit
(Loss)/profit after tax before
non-controlling interests
Non-controlling interests
Net (loss)/profit after tax
Net (loss)/profit for the year
attributable to:
Shareholders of Orica Limited
Non-controlling interests
Net (loss)/profit for the year
Recognition and Measurement
A discontinued operation is a component of the Group where the operations and cash flows can be clearly distinguished from the rest of the Group.
It represents a separate major line of operations and is part of a single co-ordinated plan to dispose of a separate major line of operation or business.
Classification as a discontinued operation occurs at the earlier of disposal date or when the operation meets the criteria to be classified as held for sale.
When an operation is classified as a discontinued operation, the comparative income statement and statement of comprehensive income is re-presented
as if the operation had been discontinued from the start of the comparative year.
Disposal groups comprising assets and liabilities are classified as held for sale if it is highly probable that they will be recovered primarily through sale rather
than through continuing use.
Such disposal groups are measured at the lower of their carrying amount and fair value less costs to sell. Once classified as held for sale, intangible assets
and property, plant and equipment are no longer amortised or depreciated.
152 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Notes to the Financial Statements –
Section F. Group structure (continued)
For the year ended 30 September
16. PARENT COMPANY DISCLOSURE – ORICA LIMITED
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Ordinary shares
Retained earnings
Total equity attributable to ordinary shareholders of Orica Limited
Net profit and total comprehensive income for the year
Company
2021
$m
1,805.6
3,367.8
174.7
176.1
2,686.1
505.6
3,191.7
387.9
2020
$m
1,479.6
3,045.8
170.1
171.6
2,659.1
215.1
2,874.2
414.7
The Company did not have any contractual commitments for the acquisition of property, plant or equipment in the current or previous years.
Contingent liabilities and contingent assets
Under the terms of a Deed of Cross Guarantee entered into under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785, each wholly
owned subsidiary which is a party to the Deed has covenanted with the Trustee of the Deed to guarantee the payment of any debts of the other
companies which are party to the Deed which might arise on the winding up of those companies. A consolidated balance sheet and income statement
for this closed group is shown in note 17.
Orica Limited guaranteed senior notes issued in the US Private Placement market in 2010, 2013, 2017 and 2020. The notes have maturities between
calendar years 2022 and 2030 (2020: 2020 and 2030). Orica Limited has also provided guarantees for committed bank facilities.
17. DEED OF CROSS GUARANTEE
The parent entity, Orica Limited, and certain subsidiaries are subject to a Deed of Cross Guarantee (Deed) under which each company guarantees
the debts of the others.
The parties to the Deed are:
– Initiating Explosives Systems Pty Ltd
– Orica Explosives Holdings No 2 Pty Ltd
– Orica Australia Pty Ltd
– Orica Explosives Technology Pty Ltd
– Orica Investments Pty Ltd
– Orica IC Assets Pty Ltd
– Orica Explosives Holdings Pty Ltd
By entering into the Deed, the wholly owned subsidiaries have been relieved from the requirement to prepare a financial report and Directors’ report
under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785.
ORICA Annual Report 2021 |
153
Notes to the Financial Statements –
Section F. Group structure (continued)
For the year ended 30 September
17. DEED OF CROSS GUARANTEE (continued)
A consolidated income statement and consolidated balance sheet are shown below:
Summarised Balance Sheet
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets(1)
Total current assets
Non-current assets
Trade and other receivables
Equity accounted investees
Other financial assets
Property, plant and equipment(3)
Intangible assets(3)
Deferred tax assets(3)
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Interest bearing liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Trade and other payables
Interest bearing liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Ordinary shares
Reserves
Retained earnings(3)
Total equity
Summarised Income Statement and retained profits
(Loss)/profit before income tax expense(2)(3)
Income tax benefit/(expense)(3)
Profit from operations
Retained profits at the beginning of the year(3)
Actuarial losses recognised directly in equity
Ordinary dividends – interim
Ordinary dividends – final
Retained profits at the end of the year
2021
$m
9.9
298.3
151.8
17.4
477.4
2.0
11.1
7,015.6
1,272.7
168.5
188.9
8,658.8
9,136.2
280.0
16.6
28.9
128.4
453.9
1.8
4,540.9
322.4
4,865.1
5,319.0
3,817.2
2,686.1
681.6
449.5
3,817.2
(156.8)
12.4
(144.4)
672.3
19.1
(30.6)
(66.9)
449.5
2020
$m
0.6
363.2
141.5
20.4
525.7
2.3
21.8
7,099.0
1,321.2
161.6
184.4
8,790.3
9,316.0
290.7
15.5
62.3
138.2
506.7
1.7
4,458.4
339.8
4,799.9
5,306.6
4,009.4
2,659.1
678.0
672.3
4,009.4
918.1
(96.2)
821.9
53.9
(10.9)
(67.0)
(125.6)
672.3
(1) Other assets include net tax receivables with Group entities outside the Deed of Cross Guarantee.
(2) Loss before income tax primarily due to the impairment of the investment in Yara Pilbara Nitrates Pty Ltd.
(3) Restated for the retrospective application of a change in Orica’s accounting policy on AASB 138 Intangible Assets and AASB 116 Property, Plant and Equipment,
following an International Financial Reporting Interpretations Committee (‘IFRIC’) agenda decision this year. Refer to note 24 for further details.
154 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Notes to the Financial Statements –
Section G. Reward and recognition
For the year ended 30 September
SECTION G. REWARD AND RECOGNITION
Orica operates in more than 50 countries and has more than 13,000 employees. This section provides insights into the reward and recognition
of employees, in addition to the employee benefits expense and employee provisions disclosed in the income statement and note 6 respectively.
This section should be read in conjunction with the Remuneration Report, contained within the Directors’ Report, which provides specific details
on the setting of remuneration for Key Management Personnel.
18. EMPLOYEE SHARE PLANS AND REMUNERATION
The following plans have options or rights (“instruments”) over Orica shares outstanding at 30 September 2020 and 30 September 2021:
The Long-Term Incentive Plan (LTIP)
Refer to Remuneration Report.
Sign-on Rights
For a select group of senior managers who join Orica post allocation of an LTIP grant (and who generally have forgone at-risk remuneration from their
previous employer) rights may be allocated at the discretion of the Orica Board.
Recognition and Measurement
The issued instruments are measured at fair value based on valuations prepared by PwC. The fair value is recognised in the income statement over
the period that employees become entitled to the instruments.
Key Management Personnel compensation summary
As deemed under AASB 124 Related Parties Disclosures, Key Management Personnel (KMP) include each of the Directors, both Executive and
Non-Executive, and those members of the Executive Committee who have authority and responsibility for planning, directing and controlling
the activities of Orica.
A summary of the KMP compensation is set out in the following table:
Short-term employee benefits
Other long-term benefits
Post employment benefits
Share based payments
Termination benefits
Consolidated
2021
$000
2020
$000
10,085.5
11,463.1
40.1
281.3
1,019.7
437.5
11,864.1
73.5
306.2
(409.1)
–
11,433.7
Information regarding individual Directors and Executives compensation and some equity instrument disclosures as permitted by Corporation Regulations
2M.3.03 are provided in the Remuneration Report.
19. DEFINED BENEFIT OBLIGATIONS
Recognition and Measurement
Contributions to defined contribution superannuation funds are recognised in the income statement in the year in which the expense is incurred.
For each defined benefit scheme, the cost of providing retirement benefits is expensed in the income statement so as to recognise current and past service
costs, interest cost on net liabilities, and the effect of any curtailments or settlements. Actuarial gains and losses are recognised in other comprehensive
income. The Group’s net liabilities in respect of defined benefit pension plans is the present value of the future benefit employees have earned, less the
fair value of any plan assets.
(a) Defined benefit pension plans
The Group participates in several Australian and overseas defined benefit post-employment plans that provide benefits to employees upon retirement.
Plan funding is carried out in accordance with the requirements of trust deeds and the advice of actuaries. Information within these financial statements
has been prepared by the local plan external actuaries. Orica were assisted by Willis Towers Watson to consolidate those results globally. During the year,
the Group made employer contributions of $30.7 million (2020 $27.3 million) to defined benefit plans. The Group’s external actuaries have forecast total
employer contributions and benefit payments to defined benefit plans of $26.8 million for 2022.
ORICA Annual Report 2021 |
155
Notes to the Financial Statements –
Section G. Reward and recognition (continued)
For the year ended 30 September
19. DEFINED BENEFIT OBLIGATIONS (continued)
(b)(i) Balance Sheet amounts
The amounts recognised in the balance sheet are determined as follows:
Present value of the funded defined benefit obligations
Present value of unfunded defined benefit obligations
Fair value of defined benefit plan assets
Deficit
Restrictions on assets recognised
Net liability in the balance sheet
Amounts in the balance sheet:
Liabilities
Assets
Net liability recognised in balance sheet at end of the year
Comprised of:
Net liabilities of continuing operations
Net liabilities held for sale
Net liability recognised in balance sheet at end of the year
(b)(ii) Amounts recognised in the Income Statement
The amounts recognised in the income statement are as follows:
Current service cost
Interest cost on net defined benefit liabilities
Losses from immediate recognition
Past service cost
Total included in employee benefits expense
Comprised of:
Continuing operations
Discontinued operations
Total included in employee benefits expense
156 | ORICA Annual Report 2021
2021
$m
735.4
128.1
(631.4)
232.1
1.9
234.0
238.0
(4.0)
234.0
209.1
24.9
234.0
2021
$m
16.5
6.3
(0.5)
1.0
23.3
22.6
0.7
23.3
2020
$m
750.8
131.9
(569.2)
313.5
0.1
313.6
314.0
(0.4)
313.6
313.6
–
313.6
2020
$m
17.2
6.3
0.4
0.2
24.1
23.3
0.8
24.1
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Notes to the Financial Statements –
Section G. Reward and recognition (continued)
For the year ended 30 September
19. DEFINED BENEFIT OBLIGATIONS (continued)
(b)(iii) Amounts included in the Statement of Other Comprehensive Income
Actuarial gains/(losses) on defined benefit obligations:
Due to changes in demographic assumptions
Due to changes in financial assumptions
Due to experience adjustments
Total
Return on plan assets greater than discount rate
Change in irrecoverable surplus other than interest
Total gains/(losses) recognised via the Statement of Other Comprehensive Income
Tax (expense)/benefit on total losses recognised via the Statement of Other Comprehensive Income
Total gains/(losses) after tax recognised via the Statement of Other Comprehensive Income
Comprised of:
Continuing operations
Discontinued operations
Total gains/(losses) after tax recognised via the Statement of Other Comprehensive Income
(b)(iv) Reconciliations
Reconciliation of present value of the defined benefit obligations:
Balance at the beginning of the year
Current service cost
Interest cost
Actuarial losses
Contributions by plan participants
Benefits paid
Settlements/curtailments
Exchange differences on foreign funds
Balance at the end of the year
Comprised of:
Continuing operations
Held for sale
Balance at the end of the year
2021
$m
(10.6)
45.8
(7.8)
27.4
49.8
(1.8)
75.4
(20.5)
54.9
53.0
1.9
54.9
2021
$m
882.7
16.5
20.3
(27.9)
0.9
(43.5)
1.0
13.5
863.5
810.6
52.9
863.5
2020
$m
(12.9)
(8.2)
11.5
(9.6)
(2.5)
–
(12.1)
3.9
(8.2)
(7.9)
(0.3)
(8.2)
2020
$m
894.6
17.2
21.9
9.6
1.0
(42.8)
0.1
(18.9)
882.7
882.7
–
882.7
ORICA Annual Report 2021 |
157
Notes to the Financial Statements –
Section G. Reward and recognition (continued)
For the year ended 30 September
19. DEFINED BENEFIT OBLIGATIONS (continued)
Reconciliation of the fair value of the plan assets:
Balance at the beginning of the year
Interest income on plan asset
Return on plan assets greater than discount rate
Contributions by plan participants
Contributions by employer
Benefits paid
Exchange differences on foreign funds
Balance at the end of the year
Comprised of:
Continuing operations
Held for sale
Balance at the end of the year
2021
$m
569.2
14.0
49.8
0.9
30.7
(43.5)
10.3
631.4
603.4
28.0
631.4
2020
$m
587.2
15.6
(2.5)
1.0
27.3
(42.8)
(16.6)
569.2
569.2
–
569.2
The fair value of plan assets does not include any amounts relating to the Group’s own financial instruments, property occupied by, or other assets used
by, the Group.
Comprising:
Quoted in active markets:
Equities
Debt securities
Property
Other quoted securities
Other:
Property
Insurance contracts
Cash and cash equivalents
2021
$m
2020
$m
227.5
242.2
9.4
92.3
30.1
4.9
25.0
631.4
197.9
214.9
11.1
87.9
25.5
4.6
27.3
569.2
The principal assumptions applied in determining the present value of defined benefit obligations and their bases were as follows:
– Rates of increase in pensionable remuneration, pensions in payment and healthcare costs: historical experience and management’s long-term
future expectations;
– Discount rates: prevailing long-term high quality bond yields, chosen to match the currency and duration of the relevant obligation; and
– Mortality rates: the local actuaries’ designated mortality rates for the individual plans concerned.
158 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Notes to the Financial Statements –
Section G. Reward and recognition (continued)
For the year ended 30 September
19. DEFINED BENEFIT OBLIGATIONS (continued)
The weighted averages for those assumptions and related sensitivity information are presented below. Sensitivity information indicates by how much
the defined benefit obligations would increase or decrease if a given assumption were to increase or decrease with no change in other assumptions.
Rate of increase in pensionable remuneration
Rate of increase in pension payments
Discount rate for pension plans
Weighted average of
assumptions used p.a.
Change in assumptions
2021
2.99%
2.36%
2.74%
2020
2.75%
2.22%
2.37%
+1% p.a.
$m
24.5
27.4
(104.4)
–1% p.a.
$m
(20.7)
(22.7)
129.6
The expected age at death for persons aged 65 is 87.1 years for men and 89.6 years for women at 30 September 2021. A change of one year in the
expected age of death would result in an $22.1 million movement in the defined benefit obligation at 30 September 2021.
Critical accounting judgements and estimates
The defined benefit obligation costs are assessed in accordance with the advice of independent qualified actuaries but require the exercise of
judgement in relation to assumptions for future salary and superannuation increases, long-term price inflation and bond rates. While management
believes the assumptions used are appropriate, a change in the assumptions used may impact the earnings and equity of the Group.
ORICA Annual Report 2021 |
159
Notes to the Financial Statements –
Section H. Other
For the year ended 30 September
SECTION H. OTHER
This section includes additional financial information that is required by Australian Accounting Standards and which management considers to be
relevant information for shareholders.
20. CONTINGENT LIABILITIES
Contingent liabilities relating to environmental uncertainties are disclosed in note 6 and those relating to taxation in note 11. All others are disclosed below.
(a) Guarantees, indemnities and warranties
– The Group has entered into various long-term supply contracts. For some contracts, minimum charges are payable regardless of the level of operations,
but the levels of operations are expected to remain above those that would trigger minimum payments.
– There are guarantees relating to certain leases of property, plant and equipment and other agreements arising in the ordinary course of business.
– Contracts of sale covering companies and assets which were divested during the current and prior years include commercial warranties and indemnities
to the purchasers.
(b) Legal, claims and other
There are a number of legal claims and exposures which arise from the ordinary course of business. There is significant uncertainty as to whether a future
liability will arise in respect of these items. The amount of liability, if any, which may arise cannot be reliably measured at this time.
Critical accounting judgements and estimates
Where management are of the view that potential liabilities that arise in the normal course of business have a low probability of crystallising or it is
not possible to quantify them reliably, they are not provided for and are disclosed as contingent liabilities.
Legal proceedings
The outcome of currently pending and future legal, judicial, regulatory, administrative and other proceedings of a litigious nature (“Proceedings”)
cannot be predicted with certainty. Proceedings can raise complex legal issues and are subject to many uncertainties including, but not limited to, the
facts and circumstances of each particular case, issues regarding the jurisdiction in which each Proceeding is brought and differences in applicable
law. Thus, an adverse decision in Proceedings could result in additional costs that are not covered, either wholly or partially, under insurance policies
and that could significantly impact the business and results of operations of the Group. Therefore, it is possible that the financial position, results of
operations or cash flows of the Group could be materially affected by an unfavourable outcome of those Proceedings. Proceedings are evaluated on
a case-by-case basis considering the available information, including that from legal counsel, to assess potential outcomes.
Warranties and Indemnities
In the course of acquisitions and disposals of businesses and assets, Orica routinely negotiates warranties and indemnities across a range of
commercial issues and risks, including environmental risks associated with real property. Management uses the information available and exercises
judgement in the overall context of these transactions, in determining the scope and extent of these warranties and indemnities. In assessing Orica’s
financial position, management relies on warranties and indemnities received, and considers potential exposures on warranties and indemnities
provided. It is possible that the financial position, results of operations and cash flows of the Group could be materially affected if circumstances
arise where warranties and indemnities received are not honoured, or for those provided, circumstances change adversely.
160 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Notes to the Financial Statements –
Section H. Other (continued)
For the year ended 30 September
21. AUDITOR’S REMUNERATION
Total remuneration received, or due and receivable, by the auditors for:
Audit services
Auditor of the Company – KPMG Australia
– Audit and review of financial reports
Auditor of the Company – overseas KPMG firms
– Audit and review of financial reports(1)
Other services
Auditor of the Company – KPMG Australia
– advisory services in relation to integrated reporting and sustainability
– advisory services in relation to compliance reporting
– other services
Consolidated
2021
$000
2020
$000
3,967
4,781
1,915
5,882
1,839
6,620
351
306
118
775
31
–
27
58
6,657
6,678
(1) Fees paid or payable for overseas subsidiaries’ local statutory requirements.
From time to time, KPMG, the auditor of Orica, provides other services to the Group, which are subject to strict corporate governance procedures adopted
by the Company which encompass the selection of service providers and the setting of their remuneration.
22. EVENTS SUBSEQUENT TO BALANCE DATE
Acquisition of business
On 29 October 2021, the Group entered a contract to acquire 100% of the shares of RIG Technologies International Pty Ltd and Resources Innovation
Group Pty Ltd, based in Western Australia, who design and build downhole measurement technology. The purchase price comprises $12 million upfront
and potential earn out payments based on the achievement of revenue targets over the next five years. The financial effect of this transaction is not
included in the financial statements for the year ended 30 September 2021 and will be recognised in the FY2022 financial statements.
Dividends
On 10 November 2021, the Directors declared a final dividend of 16.5 cents per ordinary share payable on 22 December 2021. The financial effect of this
dividend is not included in the financial statements for the year ended 30 September 2021 and will be recognised in the FY2022 financial statements.
The Directors have not become aware of any other significant matter or circumstance that has arisen since 30 September 2021, that has affected or may
affect the operations of the Group, the results of those operations, or the state of affairs of the Group in subsequent years, which has not been covered
in these financial statements.
ORICA Annual Report 2021 |
161
Notes to the Financial Statements –
Section H. Other (continued)
For the year ended 30 September
23. LIST OF CONTROLLED ENTITIES
The consolidated financial statements incorporate the assets, liabilities and results of the following controlled entities held during 2020 and 2021
(non-controlling interests shareholding disclosed if not 100% owned):
Name of Entity
Company
Orica Limited
Controlled Entities
Place of incorporation
if other than Australia
Name of Entity
Place of incorporation
if other than Australia
Indian Explosives Private Limited
India
Initiating Explosives Systems Pty Ltd
International Blasting Services Inc – 1.3%
Panama
Alaska Pacific Powder Company(a)
USA
Altona Properties Pty Ltd(b) – 37.4%
Aminova International Limited
Hong Kong
JSC “Orica CIS”
Minova Africa (Pty) Ltd – 26%
Minova Africa Holdings (Pty) Limited
Ammonium Nitrate Development
and Production Limited – 9.3%
Anbao Insurance Pte Ltd
Arboleda S.A(c)
ASA Organizacion Industrial S.A. de C.V.
Barbara Limited
Beijing Ruichy Minova Synthetic Material
Company Limited
BST Manufacturing, Inc.
CJSC (ZAO) Carbo-Zakk – 6.25%
Controladora DNS de RL de CV
Dansel Business Corporation
Dyno Nobel VH Company LLC – 49%
Thailand
Singapore
Panama
Mexico
UK
China
USA
Russia
Mexico
Panama
USA
Minova Arnall Sp. z o.o.
Minova Australia Pty Ltd(b)
Minova Bohemia s.r.o.
Minova CarboTech GmbH
Minova Codiv S.L.
Minova Ekochem S.A.
Minova Holding GmbH
Minova Holding Inc
Minova International Limited
Minova Kazakhstan Limited Liability
Partnership
Minova Ksante Sp. z o.o.
Minova MAI GmbH
Emirates Explosives LLC – 35%
United Arab Emirates
Minova Mexico S.A. de C.V.
Explosivos de Mexico S.A. de C.V.
Explosivos Mexicanos S.A. de C.V.
Exsa Chile SpA – 1.3%
Exsa Colombia S.A.S. – 1.3%
Exsa S.A. – 1.3%
Mexico
Mexico
Chile
Colombia
Peru
Fortune Properties (Alrode) (Pty) Limited
South Africa
GeoNitro Limited – 69.4%
Georgia
GP FinCo Pty Limited(b)
GP HoldCo Pty Limited
GroundProbe Australasia Pty Ltd(b)
GroundProbe Colombia S.A.S.
GroundProbe do Brasil
GroundProbe International Pty Ltd(b)
GroundProbe North America LLC
GroundProbe Peru S.A.C.
GroundProbe Pty Ltd(b)
Colombia
Brazil
USA
Peru
GroundProbe South Africa (Proprietary) Ltd
South Africa
GroundProbe South America SA
Chile
GroundProbe Technologies Pty Ltd(b)
GroundProbe (Nanjing) Mining Technology
Co. Ltd
Hallowell Manufacturing LLC
Holding EXSA S.A.C. – 1.3%
Hopper Industrial Group Pty Ltd(b)
China
USA
Peru
162 | ORICA Annual Report 2021
Minova MineTek Private Limited
Minova Mining Services SA
Minova Nordic AB
Minova Runaya Private Limited – 49%
Minova USA Inc
Minova Weldgrip Limited
Mintun 1 Limited
Mintun 2 Limited
Mintun 3 Limited
Mintun 4 Limited
Nitro Asia Company Inc. – 41.6%
Philippines
Nitro Consult AB
Nitro Consult AS
Nitroamonia de Mexico S.A de C.V.
NMR Services Australia Pty Ltd(b)(f)
Nobel Industrier AS
Nutnim 1 Limited
Nutnim 2 Limited
OOO Minova
Sweden
Norway
Mexico
Norway
UK
UK
Russia
Orica-CCM Energy Systems Sdn Bhd – 45% Malaysia
Orica-GM Holdings Limited – 49%
Orica Africa Holdings Limited
Orica Africa (Proprietary) Ltd
Orica Argentina S.A.I.C.
UK
UK
South Africa
Argentina
Russia
South Africa
South Africa
Poland
Czech Republic
Germany
Spain
Poland
Germany
USA
UK
Kazakhstan
Poland
Austria
Mexico
India
Chile
Sweden
India
USA
UK
UK
UK
UK
UK
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Notes to the Financial Statements –
Section H. Other (continued)
For the year ended 30 September
23. LIST OF CONTROLLED ENTITIES (continued)
Name of Entity
Orica Australia Pty Ltd
Orica Belgium S.A.
Place of incorporation
if other than Australia
Belgium
Name of Entity
Orica Logistics Canada Inc.(d)
Orica Logistics LLC
Place of incorporation
if other than Australia
Canada
Russia
Orica Blast & Quarry Surveys Limited – 25% UK
Orica Long Term Equity Incentive Plan Trust(b)
Bolivia
Brazil
Burkina Faso
New Caledonia
Canada
Canada
Panama
Costa Rica
Chile
Chile
Colombia
Ivory Coast
Denmark
Dominican Republic
Democratic Republic
of Congo
Estonia
Germany
Germany
Orica Bolivia S.A.
Orica Brasil Ltda
Orica Burkina Faso SARL
Orica Caledonie SAS
Orica Canada Inc
Orica Canada Investments ULC(d)
Orica Caribe, S.A.
Orica Centroamerica S.A.
Orica Chile Distribution S.A.
Orica Chile S.A.
Orica Colombia S.A.S.
Orica Cote D’Ivoire
Orica Denmark A/S
Orica Dominicana S.A.
Orica DRC SARL
Orica Eesti OU – 35%
Orica Europe FT Pty Ltd(b)
Orica Europe GmbH & Co KG
Orica Europe Verwaltungs GmbH
Orica Explosives Holdings Pty Ltd
Orica Explosives Holdings No 2 Pty Ltd
Orica Explosives Holdings No 3 Pty Ltd(b)
Orica Explosives Research Pty Ltd(b)
Orica Explosives Technology Pty Ltd
Orica Explosivos Industriales, S.A.
Spain
Orica Finance Limited
Orica Finance Trust(b)
Orica Finland OY
Orica Ghana Limited
Orica Grace US Holdings Inc.
Orica Holdings Pty Ltd(b)
Orica Ibéria, S.A.
Orica IC Assets Holdings Limited
Partnership(b)
Orica IC Assets Pty Ltd
Orica International IP Holdings Inc.
Orica International Pte Ltd
Finland
Ghana
USA
Portugal
USA
Singapore
Orica Investments (Indonesia) Pty Limited(b)
Orica Investments (NZ) Limited
NZ
Orica Investments (Thailand) Pty Limited(b)
Orica Investments Pty Ltd
Orica Japan Co. Ltd(e)
Japan
Orica Kazakhstan Joint Stock Company
Kazakhstan
Orica Malaysia Sdn Bhd
Orica Mali SARL
Orica Mauritania SARL
Orica Med Bulgaria AD – 40%
Orica Mining Services (Namibia) (Proprietary)
Limited
Malaysia
Republic of Mali
Mauritania
Bulgaria
Namibia
Orica Mining Services (Hong Kong) Ltd
Hong Kong
Orica Mining Services DRC SASU
Orica Mining Services Peru S.A.
Orica Mining Services Portugal S.A.
Orica Mining Services (Thailand) Limited
Orica Mongolia LLC – 51%
Orica Mountain West Inc.
Orica Mozambique Limitada
Orica New Zealand Limited
Orica New Zealand Superfunds Securities
Limited
Democratic Republic of
Congo
Peru
Portugal
Thailand
Mongolia
USA
Mozambique
NZ
NZ
Orica Nitrates Philippines Inc – 4%
Philippines
Orica Nitro Patlayici Maddeler Sanayi ve
Ticaret Anonim Sirketi – 49%
Orica Nitrogen LLC
Orica Nominees Pty Ltd(b)
Orica Norway AS
Orica Panama S.A.
Orica Philippines Inc – 5.5%
Orica Portugal, S.G.P.S., S.A.
Orica Securities (UK) Limited
Orica Senegal SARL
Orica Share Plan Pty Limited(b)
Orica Singapore Pte Ltd
Turkey
USA
Norway
Panama
Philippines
Portugal
UK
Senegal
Singapore
Orica Soluciones de Voladuras S.A.C.
Peru
Orica South Africa (Pty) Ltd – 26.5%
South Africa
Orica St. Petersburg LLC
Orica Sweden AB
Orica Sweden Holdings AB
Orica Tanzania Limited
Orica UK Limited
Orica US Finance LLC
Orica US Holdings General Partnership
Orica USA Inc.
Orica U.S. Services Inc.
Orica Venezuela C.A. – 49%
Orica Zambia Limited
OriCare Canada Inc.
Oricorp Comercial S.A. de C.V.
Russia
Sweden
Sweden
Tanzania
UK
USA
USA
USA
USA
Venezuela
Zambia
Canada
Mexico
ORICA Annual Report 2021 |
163
Notes to the Financial Statements –
Section H. Other (continued)
For the year ended 30 September
23. LIST OF CONTROLLED ENTITIES (continued)
Name of Entity
Oricorp Mexico S.A. de C.V.
Penlon Proprietary Limited(b)
Project Grace
Project Grace Holdings
Project Grace Incorporated
Promec International Pty Ltd(b)(f)
PT GroundProbe Indonesia
PT Kalimantan Mining Services
PT Kaltim Nitrate Indonesia – 10%
PT Orica Mining Services
Rui Jade International Limited
Surtech Systems Pty Ltd(b)(f)
Place of incorporation
if other than Australia
Mexico
UK
UK
USA
Indonesia
Indonesia
Indonesia
Indonesia
Hong Kong
White Lightning Holdings, Inc
Philippines
(a) Merged in 2021.
(b) No separate statutory accounts are required to be prepared in Australia.
(c) Divested in 2021.
(d) Amalgamated in 2021.
(e) Liquidated in 2021.
(f) Acquired in 2021 as part of the Hopper Industrial Group acquisition; refer to Note 14.
24. NEW ACCOUNTING POLICIES AND ACCOUNTING STANDARDS
Changes in accounting policies
The Group assessed and applied a number of new and revised accounting standards issued by the Australian Accounting Standards Board (AASB) which
were required to be applied from 1 October 2020. Except as described below, the accounting policies applied by the Group in its financial statements are
the same as those applied by the Group in its financial statements for the year ended 30 September 2020.
(i) New and amended accounting standards and interpretations adopted
Effective from 1 October 2020 the Group adopted the following new accounting standards.
AASB 2019-3 Amendments to Australia Accounting Standards – Interest Rate Benchmark Reform (Phase 1)
The interest rate benchmark reform results in the replacement of Interbank Offered Rates (IBORs) with Alternative Reference Rates (ARRs), which is
expected to occur from 1 January 2022.
The amendments in AASB 2019-3, which are effective from 1 October 2020, modify specific hedge accounting requirements to allow hedge accounting
to continue for affected hedges during the period of uncertainty caused by the interest rate benchmark reform.
The amendments are relevant to the Group given that it applies hedge accounting to its interest rate exposures, however the Group’s hedge profile and
approach to the transition minimises any material uncertainty caused by the reform.
IFRIC Agenda Decision on Configuration or Customisation Costs in a Cloud Computing Arrangement (SaaS)
In April 2021, the International Financial Reporting Standards Interpretations Committee (IFRIC) issued a final agenda decision relating to the application
of IAS 38 Intangible Assets to Configuration or customisation costs in a cloud computing arrangement. Based on the IFRIC decision, Orica considers
costs incurred in relation to the configuration and customisation of Software as a Service (SaaS) platforms do not meet the criteria for recognition as an
intangible asset, as the supplier of the software and not Orica, controls the software. As a result, these costs should be expensed as incurred.
Under Orica’s previous accounting policy, costs relating to cloud computing arrangements (including the 4S Project costs) were capitalised as intangible
assets and amortised on a straight-line basis over the length of time the benefits were expected to be received. Orica has updated its accounting policy
to comply with the IFRIC agenda decision, and applied AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors to reflect this change
in its financial statements.
164 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Notes to the Financial Statements –
Section H. Other (continued)
For the year ended 30 September
24. NEW ACCOUNTING POLICIES AND ACCOUNTING STANDARDS (continued)
The impact of this change on the financial statements for the year ended 30 September 2020 is presented in the following tables.
Balance Sheet
Extract
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Net deferred tax assets
Total non-current assets
Total assets
Net assets
Equity
Equity attributable to ordinary shareholders of Orica Limited
Retained earnings
Total equity attributable to ordinary shareholders of Orica Limited
Total equity
Income Statement
Extract
Expenses
Depreciation and amortisation expense
Purchased services and other expenses
Software as a Service (SaaS) expense
Total expenses
Profit from operations
Financing costs
Financial expenses
Net financing costs
Profit before income tax expense
Income tax expense
Net profit for the year
Net profit for the year attributable to:
Shareholders of Orica Limited
Non-controlling interests
Net profit for the year
Earnings per share attributable to ordinary shareholders of Orica Limited (in cents):
Basic earnings per share
Diluted earnings per share
Consolidated
Pre-adjustment
$m
Increase/
(decrease)
$m
Post-
adjustment
$m
3,280.1
1,776.3
263.1
5,784.3
8,448.3
3,185.2
1,148.6
3,137.4
3,185.2
(13.1)
(336.0)
104.3
(244.8)
(244.8)
(244.8)
(244.8)
(244.8)
(244.8)
3,267.0
1,440.3
367.4
5,539.5
8,203.5
2,940.4
903.8
2,892.6
2,940.4
Consolidated
Pre-adjustment
$m
Increase/
(decrease)
$m
Post-
adjustment
$m
(339.9)
(469.4)
–
(4,741.3)
417.2
(151.6)
(149.6)
267.6
(101.9)
165.7
160.3
5.4
165.7
40.5
40.4
19.2
(10.0)
(122.7)
(113.5)
(113.5)
(9.4)
(9.4)
(122.9)
36.9
(86.0)
(86.0)
–
(86.0)
(21.7)
(21.7)
(320.7)
(479.4)
(122.7)
(4,854.8)
303.7
(161.0)
(159.0)
144.7
(65.0)
79.7
74.3
5.4
79.7
18.8
18.7
ORICA Annual Report 2021 |
165
Notes to the Financial Statements –
Section H. Other (continued)
For the year ended 30 September
24. NEW ACCOUNTING POLICIES AND ACCOUNTING STANDARDS (continued)
Statement of Comprehensive Income
Extract
Net profit for the year
Total comprehensive loss for the year
Statement of Changes in Equity
Extract
Retained earnings
Adjusted balance as at 1 October 2019
Net profit for the year
Total comprehensive income/(loss) for the year
Balance at the end of the year
Total equity
Adjusted balance as at 1 October 2019
Net profit for the year
Total comprehensive loss for the year
Balance at the end of the year
Consolidated
Pre-adjustment
$m
Increase/
(decrease)
$m
Post-
adjustment
$m
177.5
(150.7)
(86.0)
(86.0)
91.5
(236.7)
Consolidated
Pre-adjustment
$m
Increase/
(decrease)
$m
Post-
adjustment
$m
1,180.9
168.3
160.1
1,148.4
3,012.6
177.5
(150.7)
3,185.0
(158.6)
(86.0)
(86.0)
(244.6)
(158.6)
(86.0)
(86.0)
(244.6)
1,022.3
82.3
74.1
903.8
2,854.0
91.5
(236.7)
2,940.4
166 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Notes to the Financial Statements –
Section H. Other (continued)
For the year ended 30 September
24. NEW ACCOUNTING POLICIES AND ACCOUNTING STANDARDS (continued)
Statement of Cash Flows
Extract
Cash flows from operating activities
Payments to suppliers and employees
Net cash flows from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangibles
Net cash flows from investing activities
Opening Balance Sheet
Extract
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Net deferred tax assets
Total non-current assets
Total assets
Net assets
Equity
Equity attributable to ordinary shareholders of Orica Limited
Retained earnings
Total equity attributable to ordinary shareholders of Orica Limited
Total equity
Consolidated
Pre-adjustment
$m
Increase/
(decrease)
$m
Post-
adjustment
$m
(5,600.6)
277.4
(321.3)
(202.8)
(660.4)
(132.7)
(132.7)
10.0
122.7
132.7
(5,733.3)
144.7
(311.3)
(80.1)
(527.7)
Consolidated
Pre-adjustment
$m
Increase/
(decrease)
$m
Post-
adjustment
$m
3,149.7
1,694.6
244.8
5,714.3
7,550.1
3,012.6
1,180.9
2,955.4
3,012.6
(14.4)
(211.6)
67.4
(158.6)
(158.6)
(158.6)
(158.6)
(158.6)
(158.6)
3,135.3
1,483.0
312.2
5,555.7
7,391.5
2,854.0
1,022.3
2,796.8
2,854.0
A number of other new standards are effective from 1 October 2020, but they do not have a material impact on the Group’s Annual Report.
(ii) New and amended accounting standards and interpretations issued but not yet effective
There are no new standards or interpretations that are not yet effective and that would be expected to have a material impact on the Group in the current
or future reporting periods and on foreseeable future transactions.
ORICA Annual Report 2021 |
167
Directors’ Declaration
We, Malcolm William Broomhead and Sanjeev Gandhi, being Directors of Orica Limited, do hereby state in accordance with a resolution of the
Directors that in the opinion of the Directors,
(a)
the consolidated financial statements and notes, set out on pages 107 to 167, and the Remuneration Report in the Directors’ Report, set out on
pages 87 to 105, are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the financial position of the Group as at 30 September 2021 and of its performance for the financial year ended
on that date; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b)
there are reasonable grounds to believe the Company will be able to pay its debts as and when they become due and payable.
There are reasonable grounds to believe that the Company and the controlled entities identified in note 17 will be able to meet any obligations or liabilities
to which they are or may become subject to by virtue of the Deed of Cross Guarantee between the Company and those controlled entities pursuant to
ASIC Corporations (Wholly-owned Companies) Instrument 2016/785.
The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Managing Director and Chief Financial
Officer for the financial year ended 30 September 2021.
The Directors draw attention to “About this report” on page 114 to the financial statements, which includes a statement of compliance with
International Financial Reporting Standards.
M W Broomhead
Chairman
Dated at Melbourne 10 November 2021
S Gandhi
Managing Director and Chief Executive Officer
168 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Independent Auditor’s Report
.
Independent Auditor’s Report
To the shareholders of Orica Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of
Orica Limited (the Company).
In our opinion, the accompanying Financial
Report of the Company is in accordance
with the Corporations Act 2001, including:
• giving a true and fair view of the
Group's financial position as at 30
September 2021 and of its financial
performance for the year ended on that
date; and
The Financial Report comprises:
• Consolidated balance sheet as at 30 September 2021
• Consolidated income statement, Consolidated statement
of comprehensive income, Consolidated statement of
changes in equity, and Consolidated statement of cash
flows for the year then ended
• Notes including a summary of significant accounting
policies
• Directors' Declaration.
• complying with Australian Accounting
the Corporations
Standards
and
Regulations 2001.
The Group consists of Orica Limited (the Company) and the
entities it controlled at the year-end or from time to time
during the financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the
audit of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
for Professional Accountants (including Independence Standards) (the Code) that are relevant to our
audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in
accordance with the Code.
Key Audit Matters
The Key Audit Matters we identified are:
•
Impairment of property, plant and equipment
and intangible assets
• Environmental and decommissioning
provisions and contingent liability disclosures
Key Audit Matters are those matters that, in our
professional judgement, were of most significance in
our audit of the Financial Report of the current period.
These matters were addressed in the context of our
audit of the Financial Report as a whole, and in
forming our opinion thereon, and we do not provide a
separate opinion on these matters.
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated
with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo
are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a
scheme approved under Professional Standards Legislation.
ORICA Annual Report 2021 |
169
Independent Auditor’s Report (continued)
Impairment of property, plant and equipment ($159.6 million) and intangible assets ($320.4
million)
Refer to Note 9 to the Financial Report
The key audit matter
How the matter was addressed in our audit
Our procedures included:
• We considered the appropriateness of the value in use
method applied by the Group to perform the annual
impairment test against the requirements of the
accounting standards.
• We assessed the integrity of the value in use model used,
including the accuracy of the underlying calculation
formulas.
• We tested key controls in the Group’s valuation process,
such as Board approval of budgets and review and
approval of the impairment assessment, including cash
flow forecasts, by examining the review and approval of
information by the Board.
• We assessed the appropriateness of the change in the
identification of CGUs during the year, and the allocation
of goodwill and other net assets, with reference to the
Group’s current operating structure and
internal
monitoring process.
• We compared the forecast cash flows contained in the
value in use model to the future business plans approved
by the Board, reflecting the expected rate of recovery for
the Group from the impacts of COVID-19.
• We compared the Group’s cumulative value in use
calculation to the Group’s market capitalisation to inform
our evaluation of the current forecasts incorporated in the
models.
• We assessed the accuracy of previous Group cash flow
forecasts for the respective CGUs to
inform our
evaluation of current forecasts incorporated in the
models.
• We assessed the scope, competence and objectivity of
the Group’s external expert engaged to assist with the
determination of the discount rate for the respective
CGUs.
• Working with our valuation specialists, we independently
developed a discount rate range for each CGU, using
publicly available market data for comparable entities,
adjusted for risk factors specific to the Group and the
industry it operates in. We compared the discount rates
applied by the Group for each CGU to our acceptable
range.
• Working with our valuation specialists, we assessed the
reasonableness of forecast cash flows by comparing the
implicit earnings and asset multiples from the models to
corresponding multiples of comparable entities.
A key audit matter was the Group’s
annual testing of the recoverability of
property, plant and equipment and
intangible assets given the size of the
balances and
the higher estimation
uncertainty associated with the business
disruption impact of the COVID-19 global
pandemic.
Certain conditions impacting the Group,
particularly with respect to the Pilbara and
EMEA CGUs, increased the judgement
applied by us when evaluating the
evidence available.
We focused on the significant forward
looking assumptions the Group applied in
the value in use models, including:
•
•
increase
Forecast operating cash flows: the
Group has experienced continued
business disruption in the current
year as a result of COVID-19. These
conditions, and the uncertainty of
their continuation,
the
possibility of assets being impaired
and the risk of inaccurate forecasts or
a significantly wider range of possible
outcomes for us to consider. We
focused on the expected rate of
recovery for the Group and the
Group’s future business plans when
assessing
the
the
Group’s forecast cashflows.
feasibility of
Terminal growth rates: in addition to
the uncertainties described above,
the Group’s models are highly
sensitive to changes
in terminal
growth rates. This drives additional
audit effort specific to their feasibility
and consistency of application to the
Group’s strategy.
• Discount
rates:
are
these
complicated
in nature and vary
according to the conditions and
environment
the specific Cash
Generating Units (CGUs) are subject
to from time to time, and the
approach to incorporating risks into
the cash flows or discount rates.
170 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Independent Auditor’s Report (continued)
Impairment of property, plant and equipment ($159.6 million) and intangible assets ($320.4
million) (continued)
Refer to Note 9 to the Financial Report
The key audit matter (continued)
How the matter was addressed in our audit (continued)
• We considered the sensitivity of the models by varying
key assumptions such as forecast operating cash flows,
terminal growth rates and discount rates, within a
reasonably possible range, to identify those assumptions
at higher risk of bias or inconsistency in application and to
focus our further procedures.
• We challenged the Group’s significant forecast cash flow
and terminal growth rate assumptions in light of the
impacts of COVID-19 and the expected rate of recovery
in specific regions. We used our knowledge of the
Group’s operations, their past performance and our
industry experience to evaluate the feasibility of these
plans. We also compared forecast growth rates to
authoritative published studies of industry trends and
expectations, considering differences for the Group’s
operations.
• We recalculated the impairment charge relating to the
Pilbara and EMEA CGUs against the recorded amount
disclosed.
• We assessed the disclosures in the financial report using
our understanding of the matter obtained from our testing
and against
the accounting
standards.
requirements of
the
Pilbara CGU
the Group
As described in Note 9 to the financial
statements,
review of
following a
operations post commissioning of the
TAN plant on 1 October 2020, the Group
has concluded that the Pilbara region is a
separate CGU. Following the change in
CGU,
the
recoverable amount of the Pilbara CGU
using a value in use discounted cash flow
model. This model identified that the
carrying value exceeded the recoverable
amount resulting in an impairment charge
against goodwill and property, plant and
equipment of $317.6 million (pre tax).
This increased our audit effort in this area.
reassessed
EMEA CGU
As described in Note 9 to the financial
statements, the performance of the
EMEA business was impacted by COVID-
19 and the latest forecasts project that
recovery in the region will be slower than
previously anticipated. Accordingly, the
Group
recoverable
amount of the EMEA CGU using a value
in use discounted cash flow model. This
model identified that the carrying value
exceeded
amount
resulting in an impairment charge against
goodwill of $162.4 million (pre tax). This
increased our audit effort in this area.
recoverable
reassessed
the
the
involved valuation specialists to
We
supplement our senior audit
team
members in assessing this key audit
matter.
ORICA Annual Report 2021 |
171
Independent Auditor’s Report (continued)
Environmental and decommissioning provisions ($383.6m) and contingent liability disclosures
Refer to Note 6 to the Financial Report
The key audit matter
How the matter was addressed in our audit
Our procedures included:
• We tested key controls relating to the completeness,
size and location of the Group’s identification of areas
which contain contamination and the related recognition
and measurement of provisions, including the Group’s
review and authorisation of cost estimates.
• We tested the accuracy of historical remediation
provisions by comparing to actual expenditure. We used
this knowledge to challenge the Group’s current cost
estimates and to inform our further procedures.
• We made enquiries of various personnel regarding the
remediating certain source
for
Group’s strategy
contamination.
• We read correspondence with regulatory authorities to
understand their views about acceptable remediation
techniques and compared this with the assumptions
made in the Group’s provision models.
• We obtained the Group’s quotations for remediation
activities, as well as other
internal and external
underlying documentation for the Group’s determination
of required future activities, their timing and associated
cost estimates. We compared them to the nature and
quantum of cost contained in the provision balance.
• We assessed the scope, competence and objectivity of
the Group’s internal and external experts engaged to
assist in the determination of strategies to remediate
contamination and the costing of remediation activities.
• We checked consistency of the Group’s internal and
external experts’ assumptions to other underlying
internal documentation considered and tested by us.
• We challenged the Group where provisions were unable
to be made for source contamination, in particular for
treatment of Dense Non-Aqueous Phase Liquid source
areas at Botany, New South Wales, in relation to the
existence of information which would enable a reliable
estimate of the provision to be made. We compared this
to our understanding of the matter and the criteria in the
accounting standards for recording a provision.
• We tested the mathematical accuracy of the Group’s
provision models.
• We assessed the Group’s disclosures using our
knowledge of the business and the requirements of the
accounting standards. In particular, we focused on the
disclosure of uncertainties associated with the provision
or exposure.
of
estimation
environmental
The
remediation
decommissioning
provisions is considered a key audit matter
due to the:
and
•
•
particularly
Inherent complexity associated with
the Group’s estimation of remediation
costs,
potential
contamination of ground beneath
established structures and long term
legacy matters, and
in gathering
persuasive audit evidence thereon.
for
closure
Internal
activities
restructuring
undertaken by the Group, including the
scheduled
certain
manufacturing sites which give rise to
heightened focus on the nature, timing
and amount of decommissioning costs
that are expected to be incurred.
of
The complexity in estimating the Group’s
environmental
decommissioning
provisions is influenced by:
and
•
The inherent challenges experienced
by the Group in precisely determining
the size and
location of potential
contamination beneath established
structures.
• Current
and
potential
and
future
regulatory
environmental
requirements and
impact on
completeness of remediation activities
within the provision estimate, including
the activities which will be acceptable
to regulators.
the
•
expected
The
environmental
remediation strategy and availability of
any known techniques to remediate
source contamination, in particular for
treatment of Dense Non-Aqueous
Phase Liquid source areas at Botany,
New South Wales.
• Historical experience, and its use as a
reasonable predictor when evaluating
forecast costs.
•
The expected timing of the expenditure
given the long term nature of these
exposures.
172 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Independent Auditor’s Report (continued)
Other Information
Other Information is financial and non-financial information in Orica Limited’s annual reporting which is
provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the
Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not and
will not express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In
doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or
our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information,
and based on the work we have performed on the Other Information that we obtained prior to the date of
this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
• preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting
Standards and the Corporations Act 2001;
• implementing necessary internal control to enable the preparation of a Financial Report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error; and
• assessing the Group and Company's ability to continue as a going concern and whether the use of the
going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless they either intend to liquidate
the Group and Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
• to obtain reasonable assurance about whether the Financial Report as a whole is free from material
misstatement, whether due to fraud or error; and
• to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of the
Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and
Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf.
This description forms part of our Auditor’s Report.
ORICA Annual Report 2021 |
173
Independent Auditor’s Report (continued)
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration
Report of Orica Limited for the year
ended 30 September 2021 complies
with Section 300A of the Corporations
Act 2001.
The Directors of the Company are responsible for the
preparation and presentation of the Remuneration Report in
accordance with Section 300A of the Corporations Act 2001.
Our responsibilities
We have audited the Remuneration Report included in the
Directors’ report for the year ended 30 September 2021.
Our responsibility is to express an opinion on the Remuneration
Report, based on our audit conducted in accordance with
Australian Auditing Standards.
KPMG
Penny Stragalinos
Partner
Melbourne
10 November 2021
174 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Other
Information
Five Year Financial Statistics
For the year ended 30 September
Orica consolidated ($m)(1)
Profit & Loss
2021
Restated(2)
2020
Restated(2)(3)
2019
2018
2017
Sales
5,682.2
5,611.3
5,878.0
5,373.8
5,039.2
Earnings before depreciation, amortisation,
net borrowing costs and tax
Depreciation and amortisation (excluding goodwill)
Earnings before net borrowing costs and tax (EBIT)
before individually significant items
Net borrowing costs
Individually significant items before tax
Taxation expense
Non-controlling interests
(Loss)/profit after tax and individually significant items
Individually significant items after tax attributable
to members of Orica Limited
Profit after tax before individually significant items
net of tax
Dividends/distributions
Financial Position
Current assets
Property, plant and equipment
Equity accounted investees
Intangibles
Other non-current assets
Total assets
Current borrowings and payables
Current provisions and other liabilities
Non-current borrowings and payables
Non-current provisions and other liabilities
Total liabilities
Net assets
Equity attributable to ordinary shareholders
of Orica Limited
Equity attributable to non-controlling interests
Total shareholders’ equity
796.4
(369.8)
426.6
(105.6)
(453.9)
(31.0)
(9.9)
(173.8)
945.8
(332.1)
613.7
(159.0)
(293.1)
(70.1)
(9.2)
82.3
941.1
(276.4)
664.7
(109.7)
(195.9)
(108.6)
(5.4)
245.1
885.0
(266.9)
618.1
(121.3)
(375.3)
(156.0)
(13.6)
(48.1)
(382.2)
(216.8)
(126.8)
(372.3)
208.4
97.5
299.1
192.6
371.9
203.0
324.2
181.2
2,391.6
3,040.2
290.4
1,150.4
493.1
7,365.7
1,225.4
443.4
2,270.6
633.9
4,573.3
2,664.0
3,267.0
301.6
1,440.3
530.6
8,203.5
1,848.4
321.0
2,368.9
724.8
5,263.1
1,835.8
2,885.2
301.3
1,483.0
635.1
7,140.4
1,336.7
297.9
1,979.4
659.6
4,273.6
1,960.3
2,866.2
213.3
1,697.9
426.7
7,164.4
1,357.2
254.2
2,010.7
574.3
4,196.4
896.3
(261.2)
635.1
(71.7)
–
(164.0)
(13.2)
386.2
–
386.2
197.1
1,784.8
2,741.5
184.6
1,577.1
497.2
6,785.2
1,084.1
213.2
1,937.4
587.0
3,821.7
2,792.4
2,940.4
2,866.8
2,968.0
2,963.5
2,726.3
66.1
2,792.4
2,892.6
47.8
2,940.4
2,809.6
57.2
2,866.8
2,903.2
64.8
2,968.0
2,962.3
1.2
2,963.5
(1) Results include continuing and discontinued operations for the consolidated Group.
(2) Restated for the retrospective application of a change in Orica’s accounting policy on AASB 138 Intangible Assets and AASB 116 Property, Plant and Equipment, following
an International Financial Reporting Interpretations Committee (‘IFRIC’) agenda decision this year. Restated only 2019 financial year balance sheet. Refer to note 24 for
further details. Only the balance sheet has been restated for 2019.
(3) Balances are as at 30 September 2019. The Group adopted AASB 16 Leases and IFRIC Interpretation 23 Uncertainty over income tax Treatments on 1 October 2019.
176 | ORICA Annual Report 2021
Introduction and Overview
Our Business
Our Performance
Governance and Risk
Directors’ Report
Financial Statements
Other Information
Five Year Financial Statistics (continued)
Five Year Financial Statistics (continued)
For the year ended 30 September
Orica consolidated(1)
Number of ordinary shares on issue at year end (millions)
Weighted average number of ordinary shares on issue
(millions)
Basic earnings per ordinary share
– before individually significant items (cents)
– including individually significant items (cents)
Dividends per ordinary share (cents)
Dividend franking (percent)
Dividend yield – based on year end share price (percent)
Closing share price range – High
Low
Year end
Stockmarket capitalisation at year end ($m)
Net tangible assets per share ($)
Ratios
Profit margin – earnings before net borrowing costs and
tax/sales (percent)
Net debt (excluding lease liabilities) (millions)
Gearing (net debt/net debt plus equity excluding lease
liabilities) (percent)
Interest cover (EBIT/net borrowing costs excluding lease
interest) (times)
Net capital expenditure on plant and equipment (Cash
Flow) ($m)
Net cash flow from (acquisition)/sale of businesses/
controlled entities ($m)
Return on average shareholders’ funds
2021
407.5
406.8
51.2
(42.7)
24.0
–
1.7
$17.61
$11.17
$13.79
5,619.6
3.82
7.5
1,479.0
34.6
4.6
Restated(2)
2020
Restated(2)(3)
2019
405.9
395.6
75.6
20.8
33.0
–
2.1
$24.27
$13.25
$15.43
6,262.7
3.58
10.9
1,820.5
38.2
4.2
380.6
380.0
97.9
64.5
55.0
9.1
2.4
$22.97
$16.31
$22.54
8,578.2
3.49
11.3
1,620.6
36.1
6.1
2018
379.2
378.2
85.7
(12.7)
51.5
–
3.0
$21.37
$16.34
$17.03
6,548.0
3.18
11.5
1,648.3
35.7
5.1
2017
377.0
376.2
102.7
102.7
51.5
5.8
2.6
$21.03
$15.57
$19.77
7,454.1
3.67
12.6
1,440.9
32.7
8.9
(153.0)
(302.9)
(226.0)
(153.0)
(210.7)
(25.1)
(153.9)
(14.0)
(252.8)
9.5
13.4
13.4
– before individually significant items (percent)
– including individually significant items (percent)
7.4
(6.2)
10.5
2.9
13.0
8.6
11.1
(1.6)
(1) Results include continuing and discontinued operations for the consolidated Group.
(2) Restated for the retrospective application of a change in Orica’s accounting policy on AASB 138 Intangible Assets and AASB 116 Property, Plant and Equipment,
following an International Financial Reporting Interpretations Committee (‘IFRIC’) agenda decision this year. Refer to note 24 for further details. Only the balance sheet
has been restated for 2019.
(3) Balances are as at 30 September 2019. The Group adopted AASB 16 Leases and IFRIC Interpretation 23 Uncertainty over income tax Treatments on 1 October 2019.
ORICA Annual Report 2021 |
177
Shareholders’ Statistics
As at 14 October 2021
DISTRIBUTION OF ORDINARY SHAREHOLDERS AND SHAREHOLDINGS
Size of holding
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 and over
Total
Number of holders
Number of shares
24,030
11,986
1,292
590
41
63.34
31.59
3.41
1.56
0.11
9,603,971
25,503,733
8,967,801
11,291,582
352,146,012
37,939
100.00
407,513,099
2.36
6.26
2.20
2.77
86.41
100.00
Included in the above total are 743 shareholders holding less than a marketable parcel of 34 shares.
The holdings of the 20 largest holders of fully paid ordinary shares represent 85.02% of that class of shares.
TWENTY LARGEST ORDINARY FULLY PAID SHAREHOLDERS
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
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