Orica 2021 Full Year Results Announcement

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Orica Limited

Results for the year ended 30 September 2021

11 NOVEMBER 2021

Second half recovery and refreshed strategy set platform for future growth

Melbourne: Orica (ASX: ORI) today announced a Statutory Net Loss After Tax (NLAT) attributable to the shareholders of Orica for the year ended 30 September 2021 of $174 million; and underlying EBIT of $427 million, down 30 per cent on the prior corresponding period (pcp) (1).

KEY FINANCIALS

• Statutory NLAT of $174 million, including $382 million significant items after tax
• Underlying EBIT(1),(2) of $427 million, down 30 per cent on the pcp, before individually significant items
• Ammonium nitrate (AN) volumes up 4 per cent on the pcp at 4.1 million tonnes
• Underlying earnings per share(1),(3) down 32 per cent on the pcp to 51.2 cents per share
• Net operating cash flows(1),(4) of $619 million, up over 100 per cent on the pcp with cash conversion of 127.0 per cent, up 52.6 percentage points on the pcp
• Capital expenditure of $323 million(1),(5), down 5 per cent on the pcp from lower spend on Burrup and strict capital management
• Net debt(6) of $1.5 billion and gearing(7) at 34.6 per cent
• Unfranked final dividend of 16.5 cents per ordinary share, within target payout ratio range at 50 per cent

Orica's 2021 full year results reflect a challenging year, with earnings from global operations impacted by adverse market factors including unfavourable foreign exchange movements, disrupted thermal coal trade flows due to trade tensions with China, increased sea freight costs, and rising input costs.

Orica Managing Director and CEO Sanjeev Gandhi said: "I am proud of the resilience and commitment of our people to support our customers and deliver a significantly improved second half result.

"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 returns through our refreshed strategy."

Dividend and Capital Management

The Board has declared an unfranked final ordinary dividend of 16.5 cents per share, representing a payout ratio of 50 per cent. This brings the full year dividend to 24.0 cents per share and full year payout ratio of 47 per cent. The dividend is payable to shareholders on 22 December 2021 and shareholders registered as at the close of business on 22 November 2021 will be eligible for the final dividend.

Orica's gearing of 34.6 per cent remains within the target range of 30 to 40 per cent.

Mr Gandhi said: "We maintained a disciplined approach to our balance sheet and capital management, strengthened by cash generation and the sale of non-core surplus landholdings."

Orica's ambition to achieve net zero emissions by 2050

Building on Orica's previously announced medium-term target to reduce scope 1 and 2 operational emissions by at least 40% by 2030, in October, Mr Gandhi announced Orica's ambition to achieve net zero emissions by 2050, covering scope 1 and 2 greenhouse gas (GHG) emissions and its most material scope 3 GHG emission sources(8).

Authorised for release to the ASX by the Company Secretary of Orica Limited

Orica Limited, 1 Nicholson Street East Melbourne VIC 3002 Australia. ABN 24 004 145 868

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ORICA RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2021

"We continued to deliver on our sustainability commitments, reducing scope 1 and 2 greenhouse gas emissions by 13 per cent on the 2019 baseline, and we remain on track to achieve our target of reducing scope 1 and 2 greenhouse gas emissions by at least 40 per cent by 2030.

"We've taken our 2030 medium-term target and extended our planning over the long term, developing a clear roadmap to support our ambition to achieve net zero emissions(8) by 2050. It shows our commitment to playing a part in achieving the goals of the Paris Agreement(9) and is a strong signal that the decarbonisation of Orica will, and must, continue beyond 2030. This will require a collaborative approach across all of our stakeholders."

Refreshed strategy

Orica's refreshed strategy has been rolled out, to deliver solutions and technology that drive productivity for its mining and infrastructure customers across the globe. The strategy is centred on optimising operations, delivering smarter solutions, and partnering for progress across the core business, and focusing on four key business verticals - mining, quarry and construction, digital and mining chemicals.

Mr Gandhi said: "The fundamentals of the business are strong. We have refreshed our strategy to refocus on driving profitable growth and creating enduring value for our shareholders and other stakeholders. As our strategy is embedded in our business, we will be well placed to seize opportunities as the market stabilises.

"Our four key business verticals will allow us to leverage our strengths and create opportunities for growth beyond blasting.

"Our customers share our appetite to leverage new technology in order to improve safety, productivity and sustainability outcomes which will play a pivotal role as we look to build on our expanded offering in high- growth and future-facing commodities(10).

"Importantly, our refreshed strategy does not rely on significant additional organic capital investment. As we execute on our key priorities, we expect to see our return on net assets improve."

Outlook

Subject to market conditions, the strong momentum from the second half of the current financial year is expected to continue into the 2022 financial year.

Commenting on the 2022 outlook, Mr Gandhi said: "We expect steady commodity growth in 2022 which will drive stabilised demand for explosives-related products and services, particularly in copper, gold and quarry and construction markets.

"Earnings in 2022 are expected to improve from increased adoption of our advanced technology offerings, volume growth, supply chain initiatives and sustainable overhead cost reductions. Meanwhile, our focus on pricing discipline will continue to play a key role in supporting the strategy rollout and mitigating the impacts of rising input costs."

Capital expenditure in the 2022 financial year is expected to be between $340 million and $360 million. The depreciation and amortisation expense is expected to be up to 5 per cent higher than the pcp.

A focus on balance sheet and cash flow optimisation will be maintained, with gearing expected to remain within the target range of 30 to 40 per cent.

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ABOUT ORICA

Orica (ASX: ORI) is the world's largest provider of commercial explosives and innovative blasting systems to the mining, quarrying, oil and gas and construction markets, a leading supplier of sodium cyanide for gold extraction, and a specialist provider of ground support services in mining and tunnelling.

For more information about Orica, visit: www.orica.com

ORICA LIMITED | 1 NICHOLSON STREET EAST MELBOURNE VIC 3002 AUSTRALIA | ABN 24 004 145 868

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ORICA RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2021

REVIEW OF OPERATIONS

Safety

Safety remains the top priority at Orica.

The 2021 financial year was a fatality free year, while the serious injury case rate (SICR) increased by 0.03 on the pcp to 0.19 serious injuries per 200,000 hours worked. This was above the target of 0.14, however the average days lost per injury reduced by 25 per cent on the pcp. Focus has been directed towards injury prevention going forward.

The major hazards management (MHM) program empowers team members to immediately stop work if they observe a potentially hazardous situation. This has driven a three-fold increase in the number of MHM stops in the 2021 financial year.

Reporting, investigating and sharing information about high potential incidents (HPI) provides an opportunity to reduce the risk of fatalities and serious injuries. There was a 25 per cent increase in HPIs reported which has allowed proactive action to be taken to prevent incidents.

With ongoing uncertainty from the global pandemic, supporting team members' mental health and wellbeing has been a particular focus during the year.

Sustainability and Environment

Orica's commitment to embedding sustainability in critical business priorities and ways of working has been reinforced by both the commitment to reduce operational scope 1 and 2 greenhouse gas (GHG) emissions by at least 40 per cent on 2019 levels by 2030, and the recently announced ambition to achieve net zero scope 1, 2 and material scope 3 GHG emissions by 2050(8).

In 2021, scope 1 and 2 GHG emissions reduced 13 per cent on the 2019 baseline, in line with plan.

In October 2021, installation of tertiary abatement technology was completed at the Carseland plant in Canada to reduce nitrous oxide emissions. During the year, Orica also announced the Kooragang Island Decarbonisation Project in partnership with the New South Wales (NSW) Government and Clean Energy Finance Corporation in Australia, which seeks to reduce GHG emissions by implementing new low-emissions technology. In April 2021, Orica secured approval to generate Australian Carbon Credit Units (ACCUs) and was awarded an optional Carbon Abatement Contract for the purchase of 3.4 million ACCUs by the Australian Government. This approach helps to de-risk the project.

Excluding the Minova business, which is held for sale and therefore presented as a discontinued operation, thermal coal exposure has decreased from 20 per cent in the 2018 financial year to 17 per cent in the 2021 financial year, following the acquisition of Exsa and diversification across metals sectors such as gold and iron ore.

In 2021, a focus on spill prevention and response has led to a reduction in loss of containment instances, which has lowered the likelihood of Orica operations having harmful impacts on the environment.

Customer

Fulfilling customers' needs during the challenging year remained a top priority. This was enabled by the reliability of Orica's global supply, together with a shared appetite for innovative solutions to maximise customer value and improve safety and sustainability outcomes. The quality of products and services provided to customers was uncompromised during the uncertain times. Product and service quality, and value through technology and innovation were notable areas of Orica's outstanding performance as measured by the Net Promoter Score, which has continued to improve each year since 2017.

ORICA LIMITED | 1 NICHOLSON STREET EAST MELBOURNE VIC 3002 AUSTRALIA | ABN 24 004 145 868

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ORICA RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2021

People

Diversity and inclusion are a part of Orica's culture, with a global workforce spanning across 49 countries, representing over 90 nationalities and bringing together a wide range of backgrounds, experiences and skill sets. The diverse team is the backbone of Orica's global operations, a key competitive advantage in often fragmented markets.

Gender diversity is also important to the Orica team. At 30 September 2021, women represented 28 per cent of senior management, with a targeted increase to 35 per cent by 2024.

Strategy

Over the last six months, Orica's strategy has been refreshed, aimed at achieving its goal to sustainably deliver enduring value to shareholders and other stakeholders, delivering solutions and technology that drive productivity for customers across the globe. The strategy is underpinned by three value drivers:

1. Smarter solutions;
2. Optimised operations; and
3. Partnering for progress.

Smarter solutions

Orica's scope and capabilities are being expanded across the value chain. Recent digital acquisitions provide both upstream and downstream solutions, with orebody intelligence from tools such as RHINO™ to ore processing from tools such as Integrated Extraction Simulator (IES). Orica can provide best-in-class products and offer a seamless workflow solution across the value chain. Rapid commercialisation of products and solutions is key to the technology strategy.

Optimised operations

Value will be realised through continuing overhead cost reduction, reduced manufacturing costs and supply chain efficiencies, as well as monetising non-core land assets. The intent to sell Minova has been announced and exits from jurisdictions which are not strategically aligned or could be better serviced through alternative channels have commenced.

Partnering for progress

The strategy is shaped to equip employees with the changing skills and competencies needed to deliver strong performance. Focus will be placed on deeper talent management and supporting the development of capabilities that drive Orica's competitive advantage. Collaboration is key, and work will continue with stakeholders to drive growth and to solve shared challenges. Public-private partnerships will play a significant role in creating value. This year, a significant decarbonisation milestone was achieved through government partnerships in Australia.

This focus on working smarter, more efficiently and collaboratively with partners will allow for profitable organic growth without the need to increase capital expenditure from historical levels. The level of return on Orica's asset base is expected to improve as a result.

The approach will focus on four business verticals:

1. Mining;
2. Quarry and construction;
3. Digital solutions; and
4. Mining chemicals.

These verticals will leverage Orica's strengths and create opportunities for growth beyond blasting.

Mining

The largest business vertical, mining, will be centred on growth from future-facing commodities(10) as the world continues to transition to a low carbon economy, and accelerating the adoption of Orica's premium blasting solutions. WebGenTM wireless detonators are an example of this, with increased sales volumes in the 2021 financial year on the pcp, led by increased demand in Canada and following the introduction to the market in Brazil and Peru. Joining forces with innovative partners and collaborating with foundation customers has allowed trials of new flagship technologies, such as the second-generation wireless detonator WebGenTM 200 and semi-automated explosives delivery system AvatelTM to commence.

ORICA LIMITED | 1 NICHOLSON STREET EAST MELBOURNE VIC 3002 AUSTRALIA | ABN 24 004 145 868

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ORICA RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2021

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Quarry and construction

The quarry and construction business will focus on maximising outcomes from both mature markets such as North America and Northern Europe, and from high-growth developing markets where Orica currently has low presence. Orica will continue to work closely with customers to provide differentiated value propositions and business models in order to effectively serve these different customer segments.

Digital solutions

As the adoption and expansion of Orica's digital solutions increase, the digital business vertical will grow both upstream and downstream, by providing best-in-class products and integrated digital workflow solutions to unlock greater value for customers across all segments, supported by collaborative partnerships. The uptake of digital solutions has been consistently building momentum, including penetration in Asian markets and rollout to Exsa customers, while BlastIQTM adoption almost doubled on the pcp in North America in the 2021 financial year.

Mining chemicals

The mining chemicals business offering will allow Orica to expand an already leading global presence, building on a global supply chain and customer relationships, and unlocking further capacity to broaden and capture growing demand. Long term growth in the mining chemicals vertical is expected to be underpinned by effective partnerships.

Pathway towards profitable growth

Key strategic priorities in the next three years include to:

• Pursue organic growth from the core
• Accelerate adoption of innovative blasting technologies and digital solutions, both upstream and downstream
• Optimise manufacturing and supply chains
• Grow presence in future-facing commodities(10)
• Diversify portfolio by increasing presence in quarry and construction markets and seek opportunities in high growth economies
• Expand in high-growth mining chemicals segments, building on existing global supply chain and customer relationships to unlock further capacity to broaden and capture growing demand

The strategy will be supported by an ongoing commitment to safety and sustainability, pricing discipline and enhanced capabilities from the SAP system.

The success of these strategic priorities is expected to drive the following outcomes:

Safety targets

• Zero fatalities
• Serious Injury Case Rate: < 0.14

3- year targets

• Average 3-year Return on Net Assets: 10 to 12 per cent
• Gearing: 30 to 40 per cent
• Dividend Payout Ratio: 40 to 70 per cent
• Annual Capital Expenditure: $340 million to $360 million annually

Long term greenhouse gas emissions objectives

• Commitment to reduce scope 1 & 2 greenhouse gas emissions by ≥40 per cent by 2030
• Ambition to achieve net zero scope 1, 2 and material scope 3 emissions(8) by 2050

ORICA LIMITED | 1 NICHOLSON STREET EAST MELBOURNE VIC 3002 AUSTRALIA | ABN 24 004 145 868

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