Business SummaryOrica Limited (ORI) is involved in the manufacture and distribution ofcommercial blasting systems including technical services and solutions,mining and tunnelling support systems to the mining and infrastructuremarkets, and various chemical products and services. Orica has a portfolio ofmanufacturing and distribution assets strategically located acrossAustralia,New Zealand, Asia, Latin America and Africa.

Minova: Minova is a provider of chemical and mechanical earth controlproducts, adhesives and ground support solutions for the undergroundmining, construction, tunnelling and civil engineering industries.

Orica Monitor: This segment consist of Manufacture and supply of advancedhardware and software solutions to the mining industry and specialistconsultation for blasting and rock engineering, vibration control and surveys.

Global Support: This segment consists of Corporate and support costswhich cannot otherwise be allocated to other segments on a reasonablebasis, operation of legacy environmental sites and non-operating assets.

Australia Pacific & Asia, North America, Latin America, Europe, MiddleEast & Africa: These geographical segments consists of Manufacture andsupply of commercial explosives and blasting systems including technicalservices and solutions to the mining and infrastructure markets, and supply ofmining chemicals including sodium cyanide for gold extraction.

Latest ResearchAsset impairments; FY21 underlying earnings to benefit from lower D&A,improved market conditions

ORI today announced recognition of neg. ~$350m significant items (largelynon-cash) in 2H FY21 accounts. We expect the market will look thoughthese adjustments to focus on underling earnings momentum fromimproved pricing and recovering AN

volumes. We reiterate our Buy rating and believe that continuedimprovement in business performance should be evident over the nextthree years with NPAT improving from $229m in FY21 to $357m in FY23.

For more information see research 1 Oct 2021.

GICS - Materials

Orica Limited

ASX Code: ORI Price: $14.10 12 Mth Target Price: $14.00 Rating: Buy

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Snapshot

DateMarket Cap.Shares on issue12 Month High12 Month Low

4 October 2021$5,746m407.5m$17.61$11.17

RatingRating12 Mth Target Price

Capital GainGross Yield

Implied Total Return

Buy$14.001.5%3.5%5.0%

Investment FundamentalsFYE 30 Sep 2020A 2021F 2022F 2023F

Profit $m 299.0 229.0 323.0 357.0Profit (norm)* $m 299.0 229.0 323.0 357.0

EPS* ¢ 75.0 56.0 79.0 88.0EPS Growth % -22.7 -25.3 41.1 11.4P/E* x 18.4 24.6 17.5 15.7P/E Relative % 0.0 0.0 0.0 0.0

DPS ¢ 33.0 25.0 45.0 50.0Yield % 2.4 1.8 3.3 3.6Franking % 100.0 20.0 20.0 20.0* Adjusted for goodwill and unusual itemsSource: Based on Citi estimates

Share Price Chart

Total Return on $10,000 Investment

Profit & Loss ($M)2016A 2017A 2018A 2019A 2020A

Sales Revenue 5,092 5,039 5,374 5,878 5,611Total Revenue ex. Int. 5,156 5,091 5,411 5,951 5,628EBITDA 908 896 770 908 917Depreciation & Amort. -266 -261 -267 -276 -351Goodwill Amortisation -- -- -- -- --EBIT 642 635 503 631 566Net Interest -84 -72 -121 -110 -150Profit Before Tax 558 564 382 522 416Income Tax -157 -164 -124 -168 -133Outside Equity Int. -12 -13 -14 -5 -9Profit after Tax 389 386 245 348 274Significant Items after Tax -46 -0 -293 -103 -105Reported Profit after Tax 343 386 -48 245 168Preferred Dividends -- -- -- -- --

Cash Flow ($M)2016A 2017A 2018A 2019A 2020A

Receipts from Customers 5,797 5,513 5,914 6,435 6,058Funds from Operations 976 689 746 921 457Net Operating Cashflow 778 466 615 746 277Capex -263 -306 -322 -424 -524Acquisitions & Investments -4 -0 -264 -6 -154Sale of Invest. & Subsid. 34 18 -3 -13 9Net Investing Cashflow -176 -255 -552 -368 -660Proceeds from Issues 1 1 1 1 505Dividends Paid -226 -165 -157 -195 -191Net Financing Cashflow -501 -2 -81 -497 936Net Increase Cash 101 209 -18 -119 553Cash at Beginning 261 316 517 511 413Exchange Rate Adjust. -46 -9 13 12 -45Cash at End 316 517 511 404 920

Ratios and Substantial Shareholders2016A 2017A 2018A 2019A 2020A

Profitability RatiosEBITDA Margin % 17.83 17.79 14.33 15.44 16.34EBIT Margin % 12.61 12.61 9.37 10.74 10.08Net Profit Margin % 7.64 7.67 4.56 5.93 4.87Return on Equity % 13.98 13.04 8.44 11.74 8.72Return on Assets % 7.11 6.73 5.20 6.36 4.92

Debt/Safety RatiosNet Debt/Equity % 55.67 48.62 55.54 53.57 66.52Interest Cover x 7.62 8.86 4.15 5.75 3.78

Top 5 Substantial ShareholdersAustraliansuper Pty Ltd 13.1%Harris Associates L P 9.5%Harris Associates Investment Trust 8.4%BlackRock Group 6.2%Cooper Investors Pty Limited 6.1%

Balance Sheet ($M)2016A 2017A 2018A 2019A 2020A

Cash & Equivalent 328 517 515 413 920Receivables 688 666 748 766 977Inventories 518 538 626 588 610Other Current Assets 44 64 71 70 157Current Assets 1,578 1,785 1,960 1,836 2,664Prop. Plant & Equipment 2,725 2,742 2,866 2,900 3,316Intangibles 1,559 1,577 1,698 1,690 1,744Other Non-Current Assets 73 161 154 133 203Non-Current Assets 5,018 5,000 5,204 5,458 5,792Total Assets 6,596 6,785 7,164 7,294 8,456Interest Bearing Debt 1,877 1,958 2,163 2,033 3,040Other Liabilities 1,935 1,864 2,033 2,235 2,231Total Liabilities 3,813 3,822 4,196 4,269 5,270Net Assets 2,783 2,964 2,968 3,025 3,186Share Capital 2,025 2,068 2,110 2,138 2,659Reserves -490 -566 -439 -364 -670Retained Earnings 1,247 1,460 1,232 1,194 1,148Outside Equity Int. 1 1 65 57 49Total Shareholders Equity 2,783 2,964 2,968 3,025 3,186

Current Analyst Recommendations *

* Source: Morningstar. This chart shows the spread of recommendations from thosebroker analyst's in Australia with research coverage of this stock.

Principals & DirectorsPrincipals

Company Secretary Ms Erin O'ConnorMs Kirsten Anderson Llewellyn

Directors

Mr Gene Thomas Tilbrook(Non-Executive Director)Mr Malcolm William Broomhead(Non-ExecutiveDirector,Non-Executive Chairman)Ms Karen Anne Moses(Non-Executive Director)Ms Denise Waund Gibson(Non-Executive Director)Ms Maxine Nicole Brenner(Non-Executive Director)Mr Swan Foo Boon(Non-Executive Director)Mr John Richard Beevers(Non-Executive Director)Mr Sanjeev Gandhi(Chief Executive Officer,Managing Director)

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