Business Overview 2007

Our growth story

page 

Growing a global Orica Managing Director’s message

This year marks the completion of Orica’s first 10 years as an independent company. We’ve come a long way over the past decade, experiencing some significant challenges and disappointments as well as being rewarded with great successes. We have learnt from each of these and they have shaped the Orica of today – a truly global company with strong market positions, operating in more than 50 countries, poised for further growth. From this position of strength we have adopted a very successful approach to geographic, acquisitive and organic growth. We actively seek ways to maximise opportunities that arise through circumstances such as the resources boom, while remaining faithful to our proven growth strategy. We invest only in businesses that meet the financial criterion of 18% return on net assets (RONA) and thereby earn the right to grow. We grow ‘close to the core’, which means that the growth opportunities pursued are in closely related businesses to reduce risk and maximise synergy benefits. Growth activities include our proposal to build an ammonium nitrate plant in Bontang (East Kalimantan, Indonesia), a number of small acquisitions in both the Watercare business and in Mining Services North America, and the expansion of both the ammonium nitrate and sodium cyanide plants at Yarwun (Queensland, Australia). We believe there is much to be gained from the opportunities that present themselves as a result of urbanisation and industrialisation in the emerging Asian and Russian economies. Africa and Latin America are other regions in which we identify excellent potential for growth. Chemnet has established a presence in Latin America that is already delivering strong results, while the construction of a sparge (product transfer) facility in Ghana by our Chemical Services business complements our existing trading activities on the African continent. Orica’s presence in Eastern Europe has been strengthened by the acquisition of Minova which was completed at the end of last year. As the global leader in specialist chemical products for underground mining and civil

engineering activities, Minova’s product and service offering is highly complementary to that of our Mining Services business and is proving to be a valuable addition to the organisation. The recently announced acquisition of Excel Mining Systems, the leading manufacturer of specialty bolts for use in underground mining in the USA, will further complement Minova’s product and service offering. Orica has a proud tradition of innovation. Several of our businesses operate dedicated research facilities to maintain our creative and technological edge. Our Mining Services business offers a range of progressive blasting solutions that includes electronic detonating technology as well as advanced explosives. Commercialisation of MIEX® is progressing well as the benefits of this water purification system become more widely recognised. Product development at our Consumer Products business continues to focus on ways to contribute to a sustainable future with products such as Aquanamel and EnvirO2™ that are both 100% greenhouse neutral, Aquadeck water-based decking oil, the Yates Nature’s Way product range that is based on natural or organic ingredients offers eco-friendly gardening solutions, and the introduction of Paintback™, a recycling program for paint and paint packaging that recently received the Eco-Innovation Banksia Award. A significant contributor to our success is the calibre of our people at all levels of the organisation. The Orica family circles the world, and its members speak many different languages and come from diverse backgrounds. Our focus on effective recruitment and professional development guarantees the talent of our management and employees across the globe. Our highperformance based culture empowers all our people to help make Orica a better, stronger and more competitive company. All our employees are familiar with our culture and the strict code of ethics that supports it, thanks to the renewal of our culture program that has run over the past year. Using our four key principles as a guide for everyday decisionmaking is fundamental to Orica taking the next step as a global market leader. We continue to focus on productivity improvement and this is evident in the seamless integration of the acquired Dyno Nobel businesses. While there is still work to be done, the projected synergy benefits of $90 million per annum are on track, of which $70 million have been delivered to date.

We remain totally committed to an injury-free workplace, and we strive to meet the needs of our customers and the community in an environmentally sustainable way. We will not put production ahead of our safety, health and environmental obligations. When incidents do occur, such as recent tragic events in Mexico and Chile, we undertake thorough investigations to identify how we can prevent any recurrence. We actively pursue best practice, often learning from the businesses we acquire. Our focus on sustainability is stronger than ever and a new policy is currently being implemented to reduce the future impact of our operations. One of the ways we’re doing this is through the appointment of a dedicated global carbon trading manager who is charged with being the focal point for Orica’s carbon trading activities worldwide. We have successfully remediated a number of sites where contamination resulted from past operations conducted under less stringent environmental standards. Whilst progress has been made this year on identifying the most economical and practical method for disposing of our hexachlorobenzene (HCB) stored waste, a final outcome has yet to be reached. We remain committed to finding the best possible solution to this legacy issue. Since 2005, the Botany Groundwater Treatment Plant has been processing sufficient volumes of contaminated groundwater to contain the plume, most of which is then recycled and made available for use in industrial manufacturing, thus reducing the consumption of potable water. We have indeed come a long way and achieved much in the past 10 years, and we have a bright future before us. We will continue to pursue opportunities to commercialise new technologies, to seek out merger and acquisition opportunities in higher growth markets, to take advantage of opportunities for category and geographic expansion, and to capture value in adjacent market segments. It’s a strategy that has served our business and our shareholders well, and one that will continue to drive us forward.

Graeme Liebelt Managing Director November 2007

page 

Orica – who we are Orica turns science into solutions to satisfy basic human needs

We’ve only been known as Orica for a decade yet we can lay claim to more than a century of expertise, superior service and innovative product development in our chosen fields. Our commitment to leadership, innovation, quality and safety has seen us grow into a global Australian-based company with more than 14,000 people operating in around 50 countries and servicing customers in more than twice that number.

Orica is a multibillion dollar organisation, currently ranked in the top 40 companies listed on the Australian Stock Exchange based on market capitalisation. We take pride in our ability to turn science into the solutions that satisfy basic human needs, and in our delivery of products, brands and services that can be trusted for their reliability, range and quality. Whilst end consumers are often unaware of it, Orica’s role is critical in

producing many of the things that people take for granted in their everyday lives. At Orica, we aim to conduct our business in a sustainable manner. Meeting our environmental, social and community obligations is important – not only to us, but also to our customers and the community.

ORICA > TURNING SCIENCE INTO SOLUTIONS Orica Mining Services offers commercial explosives, initiating systems and Blast Based Services to the mining, quarrying and construction industries. The business has true global reach with a presence in Australia, Asia, Europe, the former Soviet Union, Africa, the Middle East, North America and Latin America. Minova specialises in delivering chemical-based consumables, associated equipment and services for ground consolidation, ventilation and water control to the underground mining, tunnelling and civil engineering markets. Minova operates sites in Australia, the Czech Republic, United Kingdom, Germany, India, South Africa, Poland, Russia, the USA, China, Kazakhstan, Sweden, Switzerland and Spain. The recently-announced acquisition of Excel Mining Systems is highly complementary and will expand the breadth of the business’ customer offerings. Excel is the leading supplier of specialised bolts and accessories used for strata reinforcement in underground mining in the USA. Orica’s Consumer Products business is Australia and New Zealand’s leader in decorative, preparation, and lawn and garden care products. The iconic brands manufactured and marketed by the business include Dulux, Berger, British Paints, Levene, Walpamur, Cabot’s, Feast Watson, Intergrain, Acratex, Selleys, Rota Cota, Poly, Turtle Wax, Yates, Thrive, Zero and Dynamic Lifter in Australia and New Zealand. An extensive range of powder coatings is manufactured and marketed in Australia, New Zealand and the Asia-Pacific region. Chemical Services is a major supplier of chemicals, services and technologies to the water treatment, mining chemical and industrial chemical markets. The business is based in Australia and has operations in the USA, United Kingdom, Ghana and Peru. Chemical Services operates three separate business units: Watercare, Mining Chemicals and Specialty Chemicals. Chemnet is Australasia’s largest chemical distributor, supplying a broad range of chemicals to almost every industry group. The business is based in Australia and operates in New Zealand, China, Hong Kong, Fiji, Indonesia, Thailand, Malaysia, Singapore, Peru and Chile.

Since 1998, Orica’s business portfolio has been refined in line with our strategic objectives. Today, each of our businesses enjoys a world class reputation. Orica Mining Services and Minova are global market leaders, and our Consumer Products, Chemnet and Chemical Services businesses are Australian market leaders.

page 

MINOVA > TURNING SCIENCE INTO SOLUTIONS

Minova’s cavity-filling solution in Spanish tunnel Work to expand the Spanish high speed rail network between Cordoba and Malaga included construction of approximately 20kms of tunnels of which the 7km Abdalajis twin bore tunnel proved the most problematic. Abundant fault zones, water inflow and unexpected methane influx were just some of the difficulties faced. After several delays caused by methane build up and rock falls, a solution was sought that would enable the tunnelling work to continue safely and securely through the faulted area. That solution came in the form of Geofoam and Geoflex, two silicate resins developed by Minova CarboTech in Germany. “Geofoam, a rapid-reacting, high-expansion foam, was pumped into the cavities,” said Peter Simon, Product Application Engineer.

“The foamed resin consolidated the existing poor and broken ground, preventing gas and water accumulations.” Geoflex was injected through hollow glass reinforced plastic (GRP) dowels in order to consolidate the ground ahead of the tunnel face. This enabled the tunnel boring machine to pass quickly and safely through the faulted area. GRP bolts were used to prevent any damage to the tunnel boring machine when cutting. The bolts can be cut, have an excellent tensile strength, are corrosion-resistant and have a low weight.

“It was very satisfying to be part of the solution to the problems faced by this tunnelling project.” Peter Simon Minova

After application of the resins, construction of the tunnel was able to continue through the poor ground and the methane levels controlled to well below the levels required by the Spanish authorities.

MINOVA > COUNTRIES OF OPERATION

Minova’s industry knowledge is drawn from rock-solid experience and an understanding of the challenges faced by our customers.

page 

Growing Orica Our global expansion

Orica has a proud history that began in the 19th century Australian goldfields. Formerly a subsidiary of the UK company ICI Plc, our major transformation occurred in 1997 when ICI divested its majority shareholding, allowing its Australian and New Zealand subsidiary to become an independent corporation that then became known as Orica.

Improving productivity has also been key to our success. We focus on both capital productivity, which aims at reducing the amount of fixed and working capital required to produce each dollar of sales, and cost productivity, which aims at reducing the total cost incurred for each dollar gross margin of sales.

Since then, we have evolved into a multibillion dollar, global company with businesses that all enjoy strong market positions.

The relatively recent introduction of the disciplined, data-driven Six Sigma methodology into the organisation has impacted positively on our productivity drive and also contributes to a culture of continuous improvement.

Our transformation has been driven by a simple approach that focuses on three fundamental elements for success – growth, productivity and culture. This approach has served us well and it continues to underpin everything we do. Over the past decade, we have invested in excess of $3 billion in merger and acquisition opportunities that have facilitated geographic and category expansion. Growth activities have also included significant investment in brownfield expansion as well as organic growth. What differentiates our approach is that we grow from a position of strength, requiring all our businesses to meet strict financial criteria in order to earn the right to grow. Growth opportunities are pursued only in closely related businesses or markets to leverage expertise and maximise synergy benefits.

Orica’s people all operate with the same attitudes, behaviours and ethics thanks to our performance-based culture known as ‘Deliver the Promise’. By sharing a common approach to business, all our people help drive the continued growth and success of our organisation. Our employees are not alone in driving Orica forward. Our other key stakeholders – customers, shareholders and the communities in which we operate – also play a part as value drivers of our organisation. The principle of ‘working together’ applies not only within Orica, but also to the way in which we approach our relationships with customers, peers and the community.

We know that working in partnership, with a firm understanding of each other’s needs and objectives, delivers significant results. We continue to invest in research and development to enhance our products and to identify new processes and technologies that improve the way we do business, both commercially and as part of our commitment to becoming a truly sustainable organisation. Orica’s continued growth and our ongoing relationships with our key stakeholders will be dependent upon our commitment to sustainability – a long-term approach to excellence in environmental and social achievement that includes an uncompromising commitment to safety. Through constantly re-evaluating and refining our business portfolio, Orica has progressively moved away from volatile, cyclical businesses and reached a position of strength in all our existing business platforms. The journey has not always been easy, but by remaining true to our strategy and being prepared to make some tough decisions, we now look forward to going from strength-to-strength.

page 

Orica – 10 years Our growth story

ORICA > TURNING SCIENCE INTO SOLUTIONS Then and now: On becoming an independent company, we had around 9,500 employees operating in seven countries. Orica now employs around 14,000 people. We have operations in around 50 countries, and we supply products and services to more than twice that number.

2003: Orica expands its offering of consumer products with the acquisition of the Yates Consumer Lawn and Garden Business, the market leader in the garden care sector in Australia and New Zealand.

1998: The start of the Orica era. The Company’s change of name and identity becomes effective at the start of February. Orica is an abstract word that research at the time indicates can be associated with attributes such as knowledge, expertise and technology.

1997: We separate from former parent company, ICI Plc, to become an independent company. Our subsequent acquisition of the Explosives interests of ICI Plc in the Americas and Europe alters the company’s focus from regional to global.

1999: Orica announces the construction of a state-of-the-art Chlor-Alkali plant at Laverton North, Victoria, Australia. The plant, which uses sophisticated membrane production technology, offers significant benefits in terms of efficiency and reliability as well as delivering world class safety, health and environmental performance.

2001: Orica enters a turbulent period that necessitates a major transformation project with a key focus on productivity, culture and financial discipline. The organisation’s subsequent turnaround is attributed to the introduction of these principles.

2003-2005: A series of acquisitions contributes to the expansion of Orica’s Chemnet business. Between September 2003 and January 2005, the Chemnet portfolio expanded to include Fernz Specialty Chemicals, Bronson and Jacobs, Woods and Woods, and Keith Harris Flavours and Fragrances.

2004: Orica commences a series of expansions to its Yarwun ammonium nitrate plant at Gladstone, Queensland, Australia. Production capacity is now 580ktpa, making Yarwun the largest industrial grade ammonium nitrate plant in the world.

2006: Orica completed the acquisition of Dyno Nobel’s commercial explosives business in Europe, the Middle East, Africa, Asia and Latin America. Orica Managing Director Graeme Liebelt comments: “The acquisition of the Dyno Nobel businesses in these regions complements our global footprint and extends our access into growing regions.”

2007: Orica acquires Minova, the global leader in providing specialist chemical products for underground mining and civil engineering activities. The acquisition brings an additional 1,200 employees into the company.

2007: Orica acquires Excel Mining Systems, the leading manufacturer and distributor of specialty bolts and accessories for strata support in underground mining in the USA, further strengthens Orica’s position in a growing underground mining segment.

page 

Sustainability Safety, Health and Environment

We view sustainability – long-term excellence in environmental and social achievement – as being complementary to our financial performance. It is a critical component of both our licence to operate in all regions of the world and our ability to attract and retain the best employees. These employees have the right to expect to work without injury, so sustainability encompasses the uncompromising commitment to safety that is captured in our vision, ‘No Injuries to Anyone Ever’. The breadth and nature of our businesses require the careful management of many different hazards, however we remain committed to the belief that all work-related injuries and illnesses are preventable. Our recordable incident frequency rate is among the best in the world. Despite this good injury performance, we have been unable to completely eliminate workplace accidents and, even more distressing, fatalities. Any such events are thoroughly investigated to identify the causes and to try to eliminate any recurrence. The Challenge program, originally launched in 1990, has contributed much to our achievements in relation to Safety, Health and the Environment (SH&E). The Challenge program sets tough five-year SH&E goals that take us progressively closer to eliminating all work related injuries and illnesses, environmental incidents and complaints from our neighbouring communities. Put simply, our goal is no harm to people or the environment. This requires a comprehensive process and a commitment to resources. We identify priority actions and work towards achievable goals, often in partnership with our suppliers and our customers.

Shareholder Communication At Orica, we continually seek to provide open, timely and relevant information to all our shareholders regardless of their location or the size of their shareholding. Details of the latest share price, announcements to the Australian Stock Exchange, investor and analyst presentations, webcasts and annual reports are available online at www.orica.com. In accordance with the Corporations Legislation Amendment (Simpler Regulatory System) Bill passed in 2007, the automatic mailing of Annual Reports has ceased.

We recognise our biggest challenges as being climate change and water scarcity and we have already taken significant steps towards addressing these issues. We aim to become a carbon-neutral organisation. To become carbon-neutral, we must be even more diligent about the way we use energy, investigate ways to make more use of renewable and lowercarbon forms of energy, find ways of using waste energy and, when no other option is economically viable, consider off-setting our remaining emissions. Orica is a member of the Australian Federal Government’s Greenhouse Challenge Program. Over the past decade, we have been reducing energy usage and carbon emissions per tonne of product and have recently introduced a shadow price for carbon and water sensitivity analysis into major expenditure proposals and contracts. However, our biggest contribution will come from developing ways to reduce emissions of the greenhouse gas, nitrous oxide, at our ammonium nitrate plants. Across the globe, our plants use significant volumes of water. We have decided to maximise the efficient use of water and we aspire to become a water-neutral organisation. We are constantly seeking ways to reduce our use of potable water and also to recycle water as a replacement for potable water. Sydney’s largest water recycling project was opened by Orica in late 2006 at the Botany Industrial Park site. Orica’s Groundwater Treatment Plant treats and cleans contaminated groundwater which is then re-used in industrial applications, thus reducing the need for potable water. We constantly strive for innovative solutions to achieve zero waste from our offices and operations plus the development of products and services that meet the expectations of our customers with less environmental impact.

Shareholders are invited to access an electronic copy of the Annual Report on our website, www.orica.com. In addition, we can provide electronic dividend statements, notices of meeting and proxy forms.

Orica’s ongoing commitment to sustainability has not gone unnoticed by the wider community. We have been recognised with a number of awards for environmental innovation during the year including the Eco-Innovation Banksia Award presented to Dulux and its partners for the Paintback™ recycling program, and two prestigious awards presented to Dulux New Zealand at the Regional Sustainable Business Awards. Our safety performance has also received recognition with several awards such as the Annual Safety Award presented to the Orica Mining Services team in Chile by SERNAGEOMIN (National Service of Geology and Mining). Orica’s sustainability team was itself a finalist for the Australian Plastics and Chemicals Industry Association (PACIA) Sustainability Award this year for its workshop that has trained Orica employees around the world in sustainability principles and how they can be incorporated into operations at their respective workplaces. Orica is a signatory to the Responsible Care® Community Right to Know Code of Practice. Major sites are expected to communicate their safety, health and environmental performance to their neighbours on a regular basis. There is no doubt that sustainability presents a significant challenge for large, global and energy intensive organisations like Orica, but we understand the challenge and the innovative and creative opportunities that it offers. Orica’s progress towards sustainability will engage and test the ingenuity and resolve of every employee. We invite you to view our complete Sustainability Report online at our website, www.orica.com, and to monitor our progress towards our goals.

Shareholders wishing to receive all communications electronically can register their preference, as well as update their personal details, via the Orica website, www.orica.com/registry. Shareholders still have the option of receiving the Annual We believe everyone benefits from electronic Report by mail and should select the shareholder communication. Shareholders appropriate communication delivery method receive prompt information and have the convenience and security of electronic delivery. via the Orica website if they wish to exercise Furthermore, there are significant cost savings that option. for the company, and our communications are more environmentally friendly.

page 

Financial overview – 2007 Executive Director Finance’s message

Considerable effort and investment has been undertaken over the last few years aimed at improving a number of our underlying business fundamentals. It is pleasing to see the results beginning to be realised in capital management, cash generation, and continued financial discipline. Net profit after tax and individually material items was down 10% to $488M compared with the previous corresponding period (pcp) of $539M, which included a net profit on individually material items of $159M. Net profit after tax before individually material items for the year ended 30 September 2007 of $498M(1) was up 31%. This is another good result for Orica, in a year where all businesses reported improved underlying earnings. Mining Services, Consumer Products and Mining Chemical Services delivered record results. Earnings per share(1) increased by 21% over the prior year and return on shareholder funds(1) remained at just over 19%. The Board declared a 53 cents per share final dividend, bringing the total dividend for 2007 to 89 cents per share, an increase of 20% over the 2006 dividend. Cash flows from operating activities grew strongly to $524M, up 27% over 2006, as benefits from improved earnings and trade working capital flowed through. Net debt and gearing increased during the year, following the acquisition of Minova for $870M on 1 January 2007. As of 30 September 2007, net debt was $1,306M and gearing, after adjusting for the Step-up Preference Shares (SPS Securities) on issue, was 39.6%(2). Interest cover was 6.6 times, significantly above our internal target of at least 5 times. Growth and productivity continue to be cornerstones of our overall strategy and significant improvement in these areas has been made throughout the year. In 2007, we have seen gross margin increase by 16% and productivity (measured as total fixed costs as a percentage of gross margin) improve from 72.8% to 69.8%. Our cash conversion ratio, which measures how effectively we convert profit into cash, increased from 52.5% to 63.8%.

Widespread adoption of Six Sigma methodologies across a broad range of activities in the company is a key component of those efforts. We have had many successes including process efficiency improvements at our Initiating Systems plants at Lorena, Brazil and Brownsburg, Canada. As well as continuing to deliver on our promises, we are also focused on how we do business. At Orica we work hard at achieving and maintaining the highest levels of integrity throughout the organisation. That same integrity is part of Orica’s culture which empowers people to admit any mistakes as comfortably as they share news of their successes. In this way, issues are identified early. Moving forward, we will endeavour to continue to deliver our promises.

Noel Meehan Executive Director Finance November 2007 FINANCIAL HIGHLIGHTS • Sales revenue up 3% to $5,527M. Underlying sales growth was 12% (excluding acquisitions and divestments). • Earnings before interest and tax (EBIT) up 24% to $813M(1). • NPAT after minority interests up 31% to $498M(1). • Earnings per share(1) up 21% to 152.6 cents. • Return on shareholders’ funds(1) at 19.2% is in line with the pcp. • Gearing(2) at 33.2%, up from 10.2% in the pcp. Adjusted gearing(3) at 39.6%, up from 18.4% in the pcp. • Final dividend is 53 cents per share (cps) up 20% on the pcp – franked at 17 cps.

BUSINESS HIGHLIGHTS • Record result in Mining Services with EBIT up 40% to $575M, reflecting firm conditions in most regions and the ongoing successful integration of the former Dyno Nobel businesses. • Record performance in Consumer Products on the back of improving market conditions and increased market share, flowing from continuing investment in our brands. • Chemical Services’ result was ahead of last year, with the benefit of ongoing market growth in Mining Chemicals and continued progress in the commercialisation of the MIEX® technology. • Chemnet’s result was slightly ahead of last year, as the cost benefits of the 2006 restructure are being realised. • A positive start by Minova which continues to trade strongly in firm resources markets. MERGERS & ACQUISITIONS, DEVELOPMENT • The purchase of Minova for was completed on 1 January 2007. • The sale of the Adhesives and Resins businesses was completed in January 2007 for an after-tax profit of $24M. • The purchase of Excel Mining Systems for approximately $775M was completed on 26 October 2007. • Further progress has been made on the development of an ammonium nitrate manufacturing facility in Bontang, Indonesia. • Mining Services continues to develop its business through organic growth, a number of small bolt-on acquisitions and increasing Orica’s ownership in joint ventures. • Chemical Services’ Watercare division continues to work on the commercial development of new technologies, with MIEX® steadily gaining market acceptance and extending its product offering in the watercare market by way of small bolt-on acquisitions. • The uprate of the Yarwun sodium cyanide facility of the Chemical Services’ Mining Chemicals business was completed on time and within the revised budget of $50M. (1) Before individually material items and not adjusted for the impact of discontinued businesses. (2) Calculation as per Note (3) with SPS Securities notionally treated as 50% debt and 50% equity. (3) Net debt/net debt + book equity.

page  FINANCIAL PERFORMANCE 2007 Shareholder Scorecard Earnings per Share* ($) and Year End Share price ($)

Return on Shareholders’ Funds* (%)

Dividends per Share ($)

2004 23.9

2004 0.68

30

20

10

0

2004 1.19 EPS

2005 1.24

2006 1.26

2007 1.52

2005 25.5

2006 19.3

2007 19.2

2005 0.71

2006 0.74

2007 0.89

Year End Share Price *Before individually material items

*Before individually material items

financial summary Sales ($M) and EBIT ($M)

Net Profit After Tax Before Individually Material Items ($M)

Cash Flow from Operating Activities ($M)

2004 326

2004 588

800 600 400 200 0

2004 4,611 Sales

2005 5,127

2006 5,359

2007 5,527

2005 340

2006 380

2007 498

2005 376

2006 414

2007 524

EBIT

financial leverage Net Debt ($M)

Adjusted Gearing (%)

Interest Cover (Times) 60 8 40

6 4

20 2 0

2004 977

2005 1,112

2006 302

2007 1,306

2004 38.8

2005 42.3

Gearing

2006 18.4*

2007 39.6*

Target Range

0

2004 7.7

2005 5.9

2006 7.1

Interest Cover

2007 6.6

Target >5x

*Adjusted gearing, which treats the SPS Securities as 50% equity and 50% debt.

efficiency Gross Margin Growth ($M)

Productivity (%)

2004 1,894

2004 74.0

2005 1,975

2006 2,125

2007 2,474

Corporate governance The Board and management of Orica are committed to conducting the Company’s business ethically and in accordance with high standards of corporate governance. We believe that good corporate governance practices protect and enhance long-term shareholder value.

2005 73.2

2006 72.8

Cash Conversion (%)

2007 69.8

2004 75.2

2005 70.2

2006 52.5

2007 63.8

Productivity is measured as total fixed costs (incl. depreciation and amortisation) as a percentage of gross margin.

Cash conversion is calculated as earnings before interest, tax, depreciation and amortisation (EBITDA) add/less movement in working capital less sustenance capital spend.

Orica’s corporate governance policies and practices, which are continually refined and improved, comply with the Australian Stock Exchange Corporate Governance Council Principles of Good Corporate Governance.

Additional information about the Company’s corporate governance practices can be found in our Corporate Governance Statement in the 2007 Annual Report which is available online at www.orica.com.

page 10

Clear vision

LD

CO

M

Our business activities are structured around what we regard as the enablers to success, namely Growth, Productivity and Culture.

M

SHA

ITY

RE

O

ERS

UN

H

The way we do business

GROWTH PRODUCTIVITY

S ER

PL

O YE

M

EM

CULTURE

ES

CU

ST

O

Orica’s strategic direction over the past decade has been governed by a desire to move away from highly volatile, cyclical businesses. This resulted in a frank assessment of the businesses we were in and those we should remain in. Over time, we have exited businesses that did not meet our strategic objectives and have strengthened our position in businesses we chose to retain and the markets we decided offered long term growth. We view our stakeholders – employees, customers, shareholders and the communities in which we operate – as the organisation’s value drivers, which increases the importance of maintaining positive relationships with them all.

• Growth – Our growth strategy is guided by three criteria: – Market leadership – our aim is to be market leader in each business either globally or locally and do we have the competitive advantage to sustain that position? – Grow ‘close to the core’ – we pursue opportunities in related businesses where we can leverage expertise and achieve synergies. – Invest in the ‘winners’ – we only grow our best performing businesses that meet financial performance targets and have earned the right to grow. We grow through organic means and through acquisition, extending into new geographies, expanding into new categories and improving our ability to meet customers’ needs. • Productivity – Improving productivity, which Orica measures by the ratio of total fixed costs to gross margin, is a key element of how we do business. Our aim is to improve productivity year-on-year by way of efficiency, effectiveness or leveraging our fixed cost base. All our business units are focused on improving efficiency, paying particular attention to manufacturing and supply chain improvements. The adoption of Six Sigma plays an important role in our productivity improvement program.

This ongoing drive for productivity is intrinsic to our integration of acquisitions, where we continually look for synergies as part of the integration process. For example, we identified $90 million of synergy benefits per annum associated with our integration of Dyno in Europe, Latin America and Asia. Delivery of these benefits is on track, with $70 million delivered to date. • Culture – Much of our growth has come from geographic expansion spanning cultural, language and workplace relations diversity. Having a strong culture within the organisation is critical to ensuring that we all share a common approach to the way we do business. The four ‘Deliver the Promise’ principles that support our performance based culture and against which our performance is measured, revolve around Safety, Health and Environment, Commercial Ownership, Creative Customer Solutions and Working Together. Our culture empowers and motivates Orica’s people to achieve long-term, sustainable results.

page 11

“Developing fit-for-purpose water treatment solutions is a key component of how Watercare meets customers’ needs.” Bob Arnold Chemical Services

CHEMICAL SERVICES > TURNING SCIENCE INTO SOLUTIONS

Rainwater to drinking water – a tailored solution The recent acquisition of key technologies by Orica Watercare, part of the Chemical Services business, has increased the business’ ability to offer total solution water treatment packages. With a solid base of chemical water treatment options, Watercare now also offers a range of alternative treatments including ultraviolet (UV) disinfection through the acquisition of UV Technologies, membrane filtration technology as a result of the acquisition of Wendouree Water Treatment, and the patented MIEX® water purification technology. The key to engineering a fitfor-purpose solution is fully understanding the customer’s needs which may include the environment in which the water is being treated and the end use for the treated water. The appropriate technology modules can then be combined to deliver the ideal solution. An example is Watercare’s involvement in a project to recycle rainwater at schools throughout the droughtstricken Australian state of

New South Wales. Rainwater recovered from the school roofs is converted into safe drinking water by passing through a series of filters each designed to remove specific contaminants, before undergoing UV disinfection. In this instance, the choice of UV rather than chemical disinfection was determined by the need to eliminate the presence of chemicals at school sites. In addition, because the water is being consumed at the point of collection, it doesn’t need the residual protection delivered by chlorine. UV disinfection, in conjunction with water filtration, delivers potable water that meets the required standards. The volume of water to be treated is another influential factor in determining the most appropriate treatment. In addition, in the case of water recycling, the end use for the water can also impact whether a chemical solution or other technology is best. For example, in a waste water plant where the treated water is being discharged into a sensitive eco-system, UV might

be the most appropriate disinfection option. “Our ability to offer the optimum solution to our customers depends on having access to a wide range of different technologies,” said Bob Arnold, one of the new technology managers who has played a key part in the New South Wales schools initiative. “And if we need to source a particular element of a customer’s water treatment package externally, we use our alliances and commercial strength to ensure our customers get the desired outcome.”

Our dedicated research facilities work hard to maintain our competitive and technological edge.

CHEMICAL SERVICES > COUNTRIES OF OPERATION

page 12

Strong delivery Growth – organic and mergers & acquisitions

Orica’s growth strategy is clear – staying close to our core businesses we pursue opportunities for organic growth, category expansion, mergers and acquisitions. Over the past decade, we have grown significantly in terms of geographic reach, product and service offerings, employee numbers and production capacity. Organic growth • Total production capacity of our ammonium nitrate complex at Yarwun (Queensland, Australia) has increased to 580ktpa. The increase was effected in stages, the last of which was commissioned in August 2006. • During 2007, the capacity at our Yarwun sodium cyanide plant increased by 20ktpa to 80ktpa. • In 2006, a 110ktpa expansion at our Kooragang Island ammonium nitrate plant in New South Wales, Australia, brought the plant’s annual production to 415ktpa. • Continued focus on the commercialisation of patented MIEX® technology has led to 12 MIEX® water purification systems being operational in Australia, the USA and Europe at the time of publication with a further 14 approved for installation.

• A new UNI Tronic™ and i-kon™ electronic detonator manufacturing facility is being established in Brownsburg, Canada. Category expansion • The acquisition of Yates Lawn and Garden care expanded our consumer products offering. • UV Technologies and Wendouree Water Treatment have become part of our Watercare portfolio, extending the range of our water treatment technologies. • Our chemical trading business, Chemnet, has completed 10 acquisitions in recent years including Fernz, Bronson & Jacobs, Marplex, Woods and Woods, and Keith Harris Flavours and Foods. • Woodcare’s acquisition of Australian Specialty Waterborne Coatings (Enviropro) expanded the business’ product offering. • The leading positions of Minova with its chemical-based strata products and Excel Mining System’s metal based specialty products were combined with the acquisition of Excel in October 2007.

Mergers, Acquisitions and Joint Ventures • Orica’s journey from a regional to global organisation began with the acquisition of ICI Plc’s worldwide explosives interests in 1997. Since then, our Mining Services portfolio has been strengthened by the addition of a number of other interests including Indian Explosives Limited and Initiating Explosives Systems India in 2004, and the Dyno Nobel acquisition in 2006 which created the world’s largest explosives manufacturing and distribution enterprise. • Orica Powder Coatings established a joint venture with Camel Paints in China that gave our Consumer Products business a foothold in Asia. • Our Watercare business has completed several smaller, bolt-on acquisitions in recent years. These include Aluminates Chemical Industries and CSBP’s Chlor-Alkali business in Western Australia. The latter positions Orica as the leading supplier of chlorine and sodium hypochlorite to the West Australian water treatment market. • The acquisition of a 51% interest in Andean Chemicals Group in Latin America in 2005 established Chemnet’s first direct presence in Latin America. In 2007, we increased our shareholding to 100%.

page 13

MINING SERVICES > TURNING SCIENCE INTO SOLUTIONS

Local problem, global solution In the demanding conditions of Estonian underground ‘mine-and-pillar’ operations, equipment specifications are rigorous. Height and weight limitations are imposed on Orica’s mobile charging units (MCUs) which are expected to deliver optimum performance without compromising safety, health and the environment. A reduction in carbon dioxide emissions is a key requirement, traditionally met by installing an electrical power pack on the MCU. However, laying electrical cabling to every mine face is time-consuming and leads to a significant reduction in MCU productivity, so the Orica Estonia Underground Bulk team, together with customer representatives, sought an alternative. “We came up with the idea of installing hydraulic accumulators on the MCUs, and we forwarded our design requirements to the Orica MCU engineering team

at Kurri Kurri, Australia, for further development,” said Sergey Shubin, Underground Bulk Manager, Estonia. While the first newdesign MCU was built by Australian contractors, new mobile charging units for use in Estonia were then constructed in Germany to reduce transport costs. Use of hydraulic accumulator technology halves the number of MCUs and personnel required in the mine whilst doubling productivity per MCU. The number of loaded bore holes is three times higher than the global average. Use of this technology also significantly lowers diesel consumption in the mine, delivering a cost benefit as well as reducing diesel fumes and carbon dioxide emissions.

“I’m proud to have been part of this solution to reduce costs and carbon dioxide emissions.” Sergey Shubin Mining Services

MINING SERVICES > COUNTRIES OF OPERATION

Orica’s global network ensures help is only ever a phone call away, with operations in over 50 countries worldwide.

page 14

Orica Mining Services

Mining

World’s largest supplier of commercial explosives, initiating systems and blast based services to the mining, quarrying and construction industries.

Overview • Global business with a presence in Australia, Asia, Europe, the former Soviet Union, Africa, the Middle East, North America and Latin America. • Extensive product and service offering that is complemented by the Minova and Excel businesses. • Recent acquisitions have increased our geographic strength in emerging markets. The year in review • Record result reflecting strong conditions in all regions. • Completed strategic bolt-on acquisitions in North America and Northern Ireland. • Official opening of the uprated Yarwun ammonium nitrate plant in April. The 277ktpa expansion of the plant was completed in August 2006, making it the largest industrial grade ammonium nitrate plant in the world. • Continued recognition through national and industry awards of our commitment to employee safety and our strong safety performance, including a national award presented to the Kalimantan site in Indonesia in recognition of completing 1.5 million working hours injury-free, and a national award presented to Indian Explosives Ltd by the Indian Government’s Ministry of Labour and Employment for the lowest accident frequency rate. • Three of our sites in Chile have completed in excess of 10 years accident-free, while our Helsinki site in Papua New Guinea has operated for 20 years without injury. • Despite continual improvement in all worker recordable case rate, the second half of the year was marred by two fatal incidents in Chile and Mexico. • Our commitment to sustainability has been recognised through awards such as the Plastics and Chemicals Industries Association (PACIA) Environment Award

Tunnels

Roads

Services

Electricity Generation

2007 and New South Wales Green Globe Awards 2006, both presented to our Kooragang Island site. • Divestment of High Energy Materials (a Norwegian-based business acquired as part of the purchase of Dyno Nobel) is consistent with Orica’s policy not to sell raw materials used in the manufacture of munitions. • The successful integration of Dyno continues with synergies being delivered ahead of time. To date $70M of synergies have been delivered.

Northern Ireland and supplier of ammonium nitrate fuel oil and shotfiring services to the quarrying industry. • Progress continues to be made towards construction of an ammonium nitrate plant in Bontang, East Kalimantan, Indonesia. • Recognising the increasing penetration of EBS in the market, a substantial EBS capacity uprate program commenced in Brownsburg, Canada. • The introduction of our leading technology Blast Based Services continues to gain market acceptance.

Business fundamentals • Orica Mining Services is the largest commercial explosives company in the world. • The business operates superior assets including the world’s three largest ammonium nitrate plants. • World’s leading provider of commercial blasting solutions that are safety-focused, cost-effective, accurate and flexible, including exclusive Electronic Blasting System (EBS) technology and mine modelling systems. • Orica is widely recognised for its development and application of safety systems. • Complete product offering including initiating systems, ammonium nitrate, bulk explosives and packaged explosives and technical services. • Only truly global supplier.

Cost productivity and capital productivity • Orica Mining Services Australia has introduced a new commercial structure to provide greater focus, cohesion and responsiveness in dealing with customers. • A number of opportunities for improvement at the Initiating Systems plants in Lorena and Itatiaiuçu, Brazil, were identified as part of a business turnaround program this year. These are being addressed to deliver significant improvements including process efficiency, production capacity and labour productivity. • Through the implementation of Six Sigma methodologies, capacity at our Brownsburg plant in Canada increased by 20% to meet customer demand without significant cost investment.

Growth • We have increased from 27.7% to 50% our holding in Nelson Brothers’ western joint venture which services the open pit mining industry in the Powder River Basin in the USA. • Orica acquired a 75% controlling stake in Blast & Quarry Surveys (BQS). BQS is the leading drilling and blasting company in

Strategy and future direction • We have the geographic presence to take advantage of the ‘stronger for longer’ cycle associated with the emerging BRICs (Brazil, Russia, India and China) economies. • Continued geographic expansion. • Lateral expansion through opportunities such as Minova and Excel Mining Services. • Increased mining services offering aimed at improving blast performance and improving productivity in customers’ operations.

EBIT ($M) and EBIT Margin (%)

Financial Performance A$M

FINANCIAL PERFORMANCE 2007 Record result with profitability up 40% to $575M, including a contribution of $121M from the acquired Dyno businesses (including synergies).

Year ended September 2007 20 15 10

Key EBIT Margin EBIT H2 EBIT H1

5 0

2004 270.1

2005 340.0

2006 412.0

2007 575.1

2006 Change F/(U)*

Sales Revenue 3,111.2 2,620.9 EBIT 575.1 412.0 Operating Net Assets 2,307.1 2,184.1 Return on Net Assets 26% 25% EBIT Australia/Asia North America Latin America EMEA

314.0 83.5 84.7 92.9

* F – Favourable, (U) – Unfavourable

227.3 83.2 51.9 49.6

19% 40% 6%

38% 0% 63% 87%

page 15

Minova Global leader in the supply of chemical-based consumables, associated equipment and services for strata support, ventilation and water control in underground mining and tunnelling.

Overview • Minova has a presence in almost every key underground mining region worldwide. • The business is based in the United Kingdom and operates sites in Australia, the Czech Republic, Germany, India, South Africa, Poland, Russia, the USA, China, Kazakhstan, Sweden, Switzerland and Spain. • Products include resin capsules, powders and injection chemicals. The year in review • The recent acquisition of Excel Mining Systems is highly complementary to Minova’s existing product and service offering, and offers significant synergy benefits. • Minova is implementing Orica’s Safety, Health and Environment policy. • Minova formed a joint venture company, Minova Kazakhstan, located in Karaganda at the centre of the Kazakh coal mining region. • Minova Australia introduced direct supply to customers of its entire product range rather than utilising the services of reseller companies for certain products. • MMTT Ltd, a UK-based company specialising in the application of injection resins and cavity filling foams to the UK mining industry, was acquired during the year.

Minova earnings for it’s first nine months were in line with Orica’s expectations.

• In March, Minova acquired the remaining 49% of Czech company Geobolt s.r.o. and is now the sole owner of the Company which produces Boltex friction bolts used for strata control. • A new safety drive led by the Chinese Government has seen an increase in demand for the products produced by Ruichy Minova, China. Business fundamentals • Minova is the global market leader with 30 years’ experience of industry specialisation. • The business provides both proprietary and custom-engineered applications. • Minova operates in a niche market segment with excellent potential for growth. • Its product and service offering is complementary to Orica’s Mining Services business. • The business has a strong financial position with very strong cash flows and earnings. Growth • The recent acquisition of Excel Mining Systems expands the breadth of offering to customers and provides Minova with the capability of being a ‘one stop shop’ supplier of stabilisation systems in underground mining. • The Geobolt acquisition enables Minova to develop production and sales of the Boltex friction bolt. Production capacity in the Czech Republic will be expanded which opens new opportunities for an efficient supply to customers in Eastern Europe, Russia and Asia, in addition to the western and southern European markets. • The acquisition of Exochem Mining in 2005 is beginning to have a positive impact on the business. The acquisition has enabled Minova to expand its technology and customer offering and has reinforced the business’ position as a solution provider to mining and tunnelling customers worldwide.

Cost productivity and capital productivity • A procurement project is underway to evaluate ways to leverage the spend of the combined Orica and Minova companies to achieve synergy savings. Strategy and future direction • Minova is well positioned to benefit from a long-term gradual global shift towards underground mining as access to commercially viable open cut mines diminishes. • Increased market penetration is resulting from a stronger focus on safety in underground mining. • Minova will continue to explore lateral expansion opportunities and increase its product and services offering. • We anticipate an increased adoption of modern mining methods in developing regions such as China, India and Russia which are key markets for Minova.

Financial Performance A$M

Period ended September Sales Revenue EBIT Operating Net Assets Return on Net Assets^ ^

E BIT excluding $7m acquisition adjustment and extrapolated to 12 months

2007 332.1 61.6 905.6 10.1%

page 16

Driving value Productivity – efficiency and effectiveness

Minimising cost, maximising productivity and improving efficiency continues to be a focus at Orica. An ever-increasing number of Orica employees around the globe are using the Six Sigma methodology to continuously improve performance in many areas including manufacturing and supply chain, trade working capital and customer service. Like other best practice manufacturing companies, Orica has incorporated Lean Manufacturing principles, tools and techniques into our Six Sigma program. The program is becoming known within the company as Lean Six Sigma. Among the more significant improvements achieved this year were: Orica Mining Services, Latin America: A 90-day business turnaround strategy was developed for the Brazilian business that included the identification and implementation of manufacturing improvements at our initiating systems plants at Lorena and Itatiaiuçu. Through the application of Six Sigma, a number of improvement opportunities were identified and actioned. The project has already delivered improvements in labour productivity, production capacity and process efficiency, and financial benefits are anticipated to be delivered in the next financial year.

Orica Mining Services, North America: A forecast early in 2007 highlighted the need to increase production by 20% at our Brownsburg initiating systems plant in Canada to meet anticipated customer demand. Through intensive employee involvement, the application of Six Sigma identified more than 20% capacity improvements that did not involve significant cost investment and also reduced fixed costs by 5%. Additional improvement opportunities in terms of productivity and safety identified by employees are being incorporated into new projects. Orica Consumer Products, Australia and New Zealand: A Sales Force Effectiveness program is being implemented, aimed at reducing the amount of time spent by sales representatives and managers on non valueadding activities and improve the effectiveness of activities that add value. One of the initial successes of this program has been a significant reduction in the time and cost associated with recruiting to fill vacant sales positions. Chemnet Australia: A Six Sigma project was completed at Bronson and Jacobs reacting to customer concerns around responsiveness and delivery performance. The project addressed all process areas that impact on product lead time, order placement, supplier delivery, warehouse management and customer service, and achieved a 10% improvement in our service delivering to customers.

Orica Consumer Products, Australia and New Zealand: New product development is a key business process for Orica Consumer Products. This project was undertaken to reduce the time taken to bring new products to market. The project improved forecast accuracy and the minimisation of slow-moving and obsolete stock as a result of new product releases. The project has created a more rigorous and transparent process and improved data for decision-making leading to efficient and more timely product launches. Trade Working Capital: A Trade Working Capital (TWC) project team has been working in conjunction with the businesses to deliver sustainable reduction in TWC through the utilisation of Six Sigma methodology. The team has evaluated key processes in the areas of inventory, receivables and supplier management. Since May 2006, this combined focus has delivered lower TWC in the order of $130 million with further benefit expected throughout the next financial year as full year benefits are realised.

page 17

CHEMNET > TURNING SCIENCE INTO SOLUTIONS

Chemnet’s experience delivers ‘Ship-to-Shore’ safety A customer’s urgent need for a large volume of sulphuric acid led Orica Chemnet to begin working with colleagues in Orica’s Engineering Shared Services division to devise an efficient new delivery method. The outcome was a safe method of transferring sulphuric acid from a sea tanker directly into road tankers. This unique ‘Shipto-Shore’ capability allows deliveries to locations where shore-based tanks are not available. Using pumps on the ship to transfer the product via pipes into 20 tonne road tankers, the customer was able to take possession of the required volume in a matter of days. The process was also completed without incident or injury to the personnel involved. “The ship-to-shore service allows for fast, safe delivery of large volumes of sulphuric

acid when inadequate port-side infrastructure is in place,” said Marketing Manager John Bresnahan. “Without this capability, the customer would have to wait for weeks while the product was transported by road from a port with the requisite infrastructure.” Initially trialled at the port of Darwin in northern Australia, the success of this Orica initiative has led to another customer requesting the same service in New Caledonia early next year. This exciting step change in the sulphuric acid business, which has resulted from combining Chemnet’s extensive distribution experience with the expertise available in Orica’s Engineering Shared Services team, not only delivers innovative solutions to customers, but also provides a springboard for further business growth.

“Without the full commitment and support from the team, Chemnet would have not realised this opportunity.” John Bresnahan Chemnet

CHEMNET > COUNTRIES OF OPERATION

Chemnet sources products from around the globe to meet the needs of our customers.

page 18

Dedicated people Culture – having common attitudes, behaviours and ethics

SH&E

No injuries to anyone, ever. Value people and the environment.

Commercial Ownership

Run the business as if it’s your own.

Creative Customer Solutions

Think differently, deliver swiftly and capture the value.

Working Together

Success as a team and success as an individual.

At Orica, we have established a highperformance culture that empowers and motivates our people to achieve long-term, sustainable results. Orica’s culture has at its core four key principles that were defined by our employees. These principles embody the attitudes, behaviours and ethics that are common to all our people right across the organisation. Since being introduced in 2002, the principles have been a key component of Orica’s transformation and have helped the company position itself for growth. A recent culture renewal program has reaffirmed its value in guiding the way we do business and helping Orica’s people to ‘Deliver the Promise’ to all our key stakeholders. Employee Comments General I can really see the power of this culture program. I am very pleased to hear that all employees in Poland have a vision for the future and everyone wants to improve in the part they play. Poland, April 2007

What SH&E means to me Take care of each other, the Company and the environment, always. Develop the business based on respect for life and the environment and for the communities, thinking not only in today but in the future. Zero tolerance on unsafe acts. Colombia, February 2007 What Commercial Ownership means to me I won’t say running the business as if it’s my own, but I will say run the business/Orica well because it is my own business, my own Orica. Zambia, February 2007 What Creative Customer Solutions means to me Think about customer delight, not just satisfaction by anticipating and exceeding their needs. Gomia, India, March 2007 What Working Together means to me Work in harmony. Teach other people to help each other. All the individual activities take us to a common objective. More communication, more people think better than one. Mexcobre, Mexico, March 2007

page 19

“Being able to contribute to a sustainable future is very rewarding.” Vesna Martic Orica Consumer Products

CONSUMER PRODUCTS > TURNING SCIENCE INTO SOLUTIONS

Working towards a sustainable future A collaboration between Orica’s Dulux Powder Coatings business in Melbourne, Australia, and Australia’s leading scientific and research body, CSIRO, is creating an environmentally friendly alternative to solvent-based products currently used in the automotive industry. Funded through the Victorian Government Sustainability Fund, and managed by Sustainability Victoria, Orica’s development of solvent-free powder coatings is being combined with CSIRO’s surface treatment technologies to reduce waste and volatile organic compound (VOC) emissions generated in the production of automotive plastics. Powder coatings are recyclable and the majority of powder coatings applied to plastic components ends up on the plastic surface, making this technology

ideally suited to replacing current solvent-based wet paint finishes that generate more solid and solvent waste. Powder coatings’ zero solvent content also eliminates the VOC emissions associated with wet-paint coating operations. “The challenge has been to develop a low-bake powder coating, enabling low temperature-tolerant plastics to be treated,” said Vesna Martic, Development Chemist. Leading edge CSIRO electroconductive surface treatment technology allows the powder coating to adhere to the plastic surface, which will facilitate the use of powder coatings in the production of a variety of internal plastic components such as dashboards, consoles around gear shifts and components found under the bonnet or in the car boot.

The new powder coating process makes plastic parts appear like metals which will allow some metal automotive parts to be replaced with plastic powder-coated ones, reducing weight and part cost. The adoption of these technologies will assist the automotive industry to meet anticipated emission restrictions and contribute to a sustainable future.

Orica is committed to researching sustainable and environmentally-friendly products for our customers.

CONSUMER PRODUCTS > COUNTRIES OF OPERATION

page 20

Orica Consumer Products

Paint

Australia and New Zealand’s leading supplier of interior and exterior architectural and decorative paint, paint preparation and garden care products.

Overview • The business operates in Australia, New Zealand, Papua New Guinea, Hong Kong, Singapore, Malaysia and China. • Products include paints and stains, texture coatings, powder coatings, paint preparation products, car care products and garden care products. • Icon brands including Dulux, Berger, British Paints, Levene, Walpamur, Cabot’s, Feast Watson, Intergrain, Acratex, Selleys, Rota Cota, Poly, Turtle Wax, Yates, Thrive, Zero and Dynamic Lifter. the year in review • Banksia Award recognition for the Paintback™ paint and paint packaging recycling program. • Numerous Supplier of the Year awards across Australia and New Zealand presented to Orica Consumer Products businesses, many of them repeat wins. • Examples of product innovation included the launch of Aquadeck water-based decking oil, Dulux EasyRoll, an innovative paint pack with built-in roller tray, and Selleys’ non-methylene chloride paint strippers. • Orica Powder Coatings in New Zealand recognised for its environmental performance through gold certification in the Enviro-Mark® New Zealand program. • Dulux New Zealand’s commitment to key sustainability goals recognised at Sustainable Business Awards. • Orica’s Gracefield facility in New Zealand implemented a comprehensive approach to sustainability called ‘Project Green’ to increase employee awareness of sustainability related issues, reduce waste generation, energy consumption (and emissions) and water consumption.

Handyman Products

Paint Tools

Business fundamentals • Consumer Products is the largest paint and paint preparation business in Australia and New Zealand. • Consumer Products enjoys market leadership positions, and customer awareness of our leading brands is more than twice that of our competitors. • The business has strong and varied distribution capabilities, and a level of service excellence that has resulted in frequent, widespread recognition. • Consumer Products has manufacturing plants that are efficient by market standards. • The business continues to invest in research and development of new products. • Consumer Products is well positioned to take advantage of positive market conditions in Australia and New Zealand. Growth • The launch of a new business, Orica Coatings China, located in Shenzhen, has continued to build a solid base for Orica in China’s rapidly expanding consumer products sector. • Successful development of Heat Sensitive Substrates Powder Coatings in China. Several customers have established production lines for the powder coating of Medium Density Fibreboard products. Cost productivity and capital productivity • Construction of the new Dulux corporate head office in Clayton, Victoria, that has been designed and constructed as a ‘green’ building. It is anticipated that the sustainable design and building technologies will save over 440 MWh of electricity and 420 tonnes of carbon dioxide per year (equivalent to the energy used annually by 20 houses).

Garden Products

Powder Coatings

Woodcare

• Formation of the General Merchandise Group, comprising Selleys and Yates businesses, to establish a platform for further growth in the general merchandise category. • Establishment of the OCP Recruitment Centre that implements process improvements identified through the application of Six Sigma methodology. • Construction has commenced for a purpose-built facility at Dandenong South, Victoria, to replace the existing three locations of Dulux Powder Coatings business. • Restructure of the Yates business, (primarily focusing on supply chain improvement and a rationalisation of product ranges) that has been impacted by prolonged drought conditions in Australia. Strategy and future direction • Continue to leverage our strong market position in Australia and New Zealand. • Merger and Acquisition opportunities into higher growth markets. • Category expansion. • Continuing investment in research, development and brand marketing. • Product and market knowledge gives us excellent leverage to pursue organic and acquisitive growth opportunities in the emerging and rapidly growing markets of Asia, particularly China.

FINANCIAL PERFORMANCE 2007 Strong performance with underlying earnings up 14%. Total reported earnings up by 4% after the establishment of a $10M provision for restructuring of the Yates business and a $4M environmental provision.

EBIT ($M) and EBIT Margin (%)

Key EBIT Margin (excluding Yates restructure) Reported EBIT Margin EBIT H2 EBIT H1

Year ended September 2007

15

Sales Revenue EBIT Underlying EBIT(i) Operating Net Assets Return on Net Assets

10

(i) Excluding the impact of the Yates restructuring provision (ii) Selleys, Yates, Powders & Eliminations

5

0

2004 99.8

2005 100.5

2006 97.3

2007 101.6

Financial Performance A$M

20

2006 Change F/(U)*

826.3 101.6 111.1 242.7 44%

785.0 97.3 97.3 222.5 44%

5% 4% 14% 9%

Business Sales Paints and Woodcare 574.7 Other(ii) 251.6

535.3 249.7

7% 1%

(i) (ii) see footnotes to the left * F – Favourable, (U) – Unfavourable

page 21

Chemical Services

Water Treatment

Major supplier of chemicals, services and technologies to the water treatment, mining chemical and industrial chemical markets.

Overview • The business is based in Australia with operations in the USA and the United Kingdom. • It comprises three business units: Watercare, Mining Chemicals and Industrial Chemicals. • Watercare supplies municipal customers with products to produce safe drinking water and treat sewerage, and industrial customers with products used in water and process applications. Industrial markets include pulp and paper, food and beverage, dairy, steel, power generation and petrochemical. • Based in Australia, Mining Chemicals supplies the local Australian gold industry and also exports products to gold producers in Asia, Africa and the Americas. • Industrial Chemicals is one of the world’s largest producers of explosive emulsifiers and is also a niche manufacturer of specialty surfactants, personal care additives, paint additives, pulp and paper dyes and agricultural chemicals. the year in review • The acquisition of Wendouree Water Treatment and UV Technologies has broadened our water treatment technical capability. • A new sparge facility is being commissioned by Orica Mining Chemicals in Peru. This facility is the second of its kind outside Australia, following the construction of a similar facility in Ghana last year. • Chemical Services’ acquisition of the CSBP Chlor-Alkali business in Western Australia was completed at the end of last year, positioning Orica as the premier manufacturer and distributor of chlorinebased products in Western Australia.

Chemical Services increased EBIT by 2% to $69M. The Adhesives and Resins businesses were divested in January 2007.

Gold Extraction

• There are 12 MIEX® water purification systems now operating in Australia, the United States and Europe. • The capacity at our Yarwun sodium cyanide plant in Queensland, Australia, has been increased by 20ktpa to 80ktpa and the plant has been successfully commissioned. • Divestment of the Australia and New Zealand Adhesives and Resins business was completed in January 2007, exiting a highly cyclical business. • International cyanide management code (ICMC) accreditation was achieved for specific parts of the Mining Chemicals business. ICMC is an audited voluntary gold mining industry program to promote responsible management of sodium cyanide used in gold mining, to enhance the protection of human health, and to reduce the potential for environmental impacts. Business fundamentals • Watercare business with strong, privileged asset positions, many of which employ state-of-the-art technology. • A diverse watercare business product range and wide customer base that reduces our vulnerability to market fluctuations. • A strong focus on exploiting technology to expand our product range to meet the needs of our customer base. • A range of initiatives implemented over the past few years that have improved our cost and capital efficiency. • Orica Mining Chemicals is the world’s second-largest producer of sodium cyanide. Growth • The business sees growth opportunities in extending its existing water treatment activities into a wider range of industrial and municipal projects, and in the commercialisation of new technologies.

EBIT ($M) and EBIT Margin (%) 25 20 15 10

Key EBIT Margin EBIT H2 EBIT H1

5 0

2004 50.9

2005 60.8

2006 67.1

Industrial

2007 68.7

• Chemical Services is actively seeking applications for MIEX® in the broader industrial sector. In addition to the 12 MIEX® systems currently operating, a further 14 MIEX® water treatment systems have been approved for installation across the United States, Europe, the United Kingdom, Australia and New Zealand. • As well as organic growth opportunities, the business has been pursuing acquisitive growth through a number of small bolt-on investments in complementary businesses such as UV Technologies, Wendouree Water Treatment and the CSBP Chlor-Alkali business. • A number of regulatory and structural market changes, along with our own strategic investment in additional capacity have put us in a strong position in terms of the growth outlook for our sodium cyanide business. The outlook for the gold industry continues to be positive. Cost productivity and capital productivity • A profit improvement plan was initiated during the year to deliver improvements in a number of areas including transport and the recovery of fixed and variable costs. Strategy and future direction • Capture value in adjacent market segments for watercare. • Broaden and continue commercialisation of advanced water technologies including MIEX®. • Continue to build on our strong sodium cyanide position and extend into related chemicals and services.

Financial Performance A$M Year ended September 2007

2006 Change F/(U)*

Sales Revenue EBIT Operating Net Assets Return on Net Assets Return on Net Assets^

425.1 68.7 397.1 17% 19%

477.0 67.1 391.2 18% 20%

(11%) 2% 2%

Business Sales Watercare Mining Chemicals Industrial Chemicals

198.0 148.8 78.3

185.8 136.5 154.7

7% 9% (49%)

* F – Favourable, (U) – Unfavourable ^ Excluding MIEX®

page 22

Chemnet

MDF

Polymers

Orica’s trading and distribution solutions business, servicing more than 40 key industries. Milk Processing

Overview • Chemnet acts primarily as a value-adding distributor or agent for many of the world’s major chemical manufacturers through its comprehensive supply chain. • The business services a wide range of markets including food, beverage, dairy, pharmaceutical, personal care, flavours, mining, agriculture, pulp and paper, printing, plastics, refrigeration, metal, engineering, surface coating, building and construction, automotive, dry-cleaning, footwear, cosmetic, wire and cable, appliance and container.

• Orica Chemicals Chile gained certification to the Responsible Care® program and was presented with a major Responsible Care® award.

the year in review • Recognising the strong outlook in the Latin American region, Orica increased its ownership in Orica Chemicals Latin America to 100% (previously 51%). • The New Zealand Customer Service team won a national award for its outstanding customer service in a field of approximately 95 customer contact centres. • Marplex, a Chemnet company in Australia, and Orica Chemnet in New Zealand, entered into an exclusive distribution agreement for Plantic’s biodegradable injection moulding materials in Australia and New Zealand. • The Australian PVC Compounding business, a division of Marplex, was divested during the year. The sale included the Welvic products produced at Deer Park and Campbellfield in Victoria. • In respect to Marplex, the ongoing disappointing trading performance has resulted in restructuring and goodwill impairment costs of $16M which has been recognised as an individually material item in the 2007 Financial Report.

Growth • Chemnet’s business in the Latin American region has experienced growth in excess of 30% in the two years since acquisition. In addition to servicing Chile and Peru, permanent personnel are now located in Brazil and Argentina. • Chemnet has invested in a bulk sulphuric acid tank in Darwin in Australia’s Northern Territory to supply the mining industry under long term agreements.

Business fundamentals • Chemnet is the largest chemical trading business in Australasia. • Strong asset positions with niche manufacturing plants and supply chain infrastructure. • The business has widespread market coverage with customers of all sizes across many industries.

Food and Flavours

• At Chemnet’s Port Kembla site in New South Wales, wastewater from the Spent Acid Regeneration Plant is being treated and reused, saving around 80% of the site’s current use of potable water. The solids removed from the wastewater provide a carbon-rich by-product that can be used by other industries across the Illawarra region. • The Chemnet restructure program is complete with achievements that include a sustainable reduction of $20M in the fixed cost base, and the business is firmly focused on delivering profitable growth. Strategy and future direction • With a presence in Asia and Latin America, the business is well positioned for further growth opportunities in these regions. • The business has been working on consolidating the acquisitions completed in recent years and on implementing a performance improvement plan. • Chemnet is particularly focused on strategic sourcing and achieving supply chain improvements.

Cost productivity and capital productivity • Metal halide lamps have been installed throughout Chemnet’s Marplex site in Laverton, Victoria, Australia, that produce 35% more light for the same power. The reduction in power consumption is complemented by the energy efficiency savings delivered by lumitrols that switch lights off depending on the ambient light level.

FINANCIAL PERFORMANCE 2007 Chemnet profitability up 2% to $59M due to the benefits of the restructure program being offset by ongoing difficult trading conditions in some market segments. RONA improved but remains below target.

EBIT ($M) and EBIT Margin (%)

9

Year ended September 2007

6

3

Key EBIT Margin EBIT H2 EBIT H1

Financial Performance A$M

0

2004 62.6

2005 78.5

2006 57.7

2007 58.7

Sales Revenue EBIT Operating Net Assets Return on Net Assets^ Return on Net Assets

927.7 58.7 335.2 16.9% 17.3%

2006 Change F/(U)* 987.4 57.7 342.2 15.4% 15.4%

^ Excluding Marplex goodwill impairment * F – Favourable, (U) – Unfavourable

(6%) 2% (2%)

page 23

Where we make our products Orica worldwide

Mining Services sites Major Ammonium Nitrate Sites Bacong (Philippines) 40ktpa Carseland (Canada) 500ktpa Geneva (USA) – 50% joint venture, Orica share = 50ktpa Kooragang Island (Australia) 415ktpa Monclova (Mexico) 65ktpa Rayong – TNC (Thailand) – 50% joint venture, Orica share = 45ktpa Yarwun (Australia) 580ktpa Major Initiating Systems Sites Antofagasta – EHM & La Portada (Chile) Brownsburg (Canada) Deer Park (Australia) Gomia (India) Gyttorp (Sweden) Helidon (Australia) Itatiaiuçu (Brazil) Limay (Philippines) Lorena (Brazil) Tappen (Canada) Trosidorf (Germany)(1) Weihai (China) Regional Manufacturing Plants Ahafo (Ghana) Arequipa (Peru) – Joint Venture Candasnos (Spain) Cape Town (South Africa) Chambishi (Zambia) Charlestown (USA) Chumotov (Czech Republic) Cuatro Cienegas (Mexico) Engene (Norway) Fexar (Colombia) Gaellivare (Sweden) Glensanda (UK) Goiania (Brazil) Gullaug (Norway)(2) Huachipa (Peru) – Joint Venture Hummene (Slovakia)

Kalgoorlie (Australia) Karelia (Russia) Kielce (Poland) Kumtor (Kyrgystan) Kustamotcha (Russia) La Campana, Manicaragua (Cuba) La Chimba (Chile) La Jagua (Colombia) Lalahan (Turkey) Lampa (Chile) Liddell (Australia) Lisheen (Ireland) Luanshya (Zambia) Marneuli (Georgia) Morón, Carabobo (Venezuela) Panagyurishte (Bulgaria) Roburite (UK) Sierras Bayas (Argentina) Sirgala, Ida-Virumaa (Estonia) Soma (Turkey) Tehuantepequillo, Guadalajara (Mexico) Ust-Kamenogorsk (Kazakhstan) Valderas (Spain) Würgendorf (Germany) Research Facilities Brownsburg (Canada) Capricorn Park (South Africa) Gomia (India) Gyttorp (Sweden) Kurri Kurri (Australia) Watkins (USA) Troisdorf (Germany)(1) Chemicals Plants ChlorAlkali Botany (New South Wales, Australia) Laverton (Victoria, Australia) Yarwun (Queensland, Australia) Sodium Cyanide Yarwun (Queensland, Australia) Aluminates Heybridge (Tasmania, Australia)

Morwell (Victoria, Australia) Wyong (New South Wales, Australia) Water Treatment Toowoomba (Queensland, Australia) Torrens Park (South Australia) Specialty Chemicals Deer Park (Victoria, Australia) Marplex Manufacturing Laverton (Victoria, Australia) Noble Park (Victoria, Australia) Blending & Repacking Plants Villawood (New South Wales, Australia) Morrinsville (New Zealand) Mt Maunganui (New Zealand) Timaru (New Zealand) Anofagasta (Chile) Santiago (Chile) Other Plants Geelong (Victoria, Australia) Kinleith (New Zealand) Port Kembla (New South Wales, Australia) Orica Consumer Products Manufacturing Facilities Paints and Stains Dandenong (Victoria, Australia) Gracefield (New Zealand) Lae (Papua New Guinea) Rocklea (Queensland, Australia) Coatings Auckland – Powder Coatings (New Zealand) Beverley – Texture Coatings (South Australia) Clayton – Powder Coatings (Victoria, Australia) Dong Guang – Powder Coatings (China) Kuala Lumpur – Texture Coatings (Malaysia)

Selleys Padstow (New South Wales, Australia) Yates/Garden and Lawn care Auckland (New Zealand) Mt Druitt (New South Wales, Australia) Wyee (New South Wales, Australia) Research facilities Clayton (Victoria, Australia) Minova Manufacturing Sites Alfreton (United Kingdom) Beijing (China) Blue Field (West Virginia, USA) Carspach (France) Essen (Germany) Georgetown (Kentucky, USA) Grand Junction (Colorado, USA) Hyderabad (India) Johannesburg (South Africa) Karaganda (Kazakhstan) Katowice (Poland) Kemerovo (Russia) Lenisk Kuznetsk (Russia) Mackay (Queensland, Australia) Nowra (New South Wales, Australia) Petrvald (Czech Republic) Polkowice (Poland) Research Facilities Essen (Germany) Georgetown (USA) Johannesburg (South Africa) Katowice (Poland) Nowra (Australia) Excel Mining Systems Manufacturing Sites Bowerston (Ohio, USA) Cadiz (Ohio, USA) Clearfield (Utah, USA) Grundy (Virginia, USA) Marion (Illinois, USA) Proctorville (Ohio, USA)

(1) due to close as announced to ASX on 6 July 2006 (2) due to close as part of the original Dyno Nobel business integration

Sponsorships Orica operates a corporate donations program that is funded to the equivalent of dividends payable on a shareholding of 0.15% of the company’s issued capital for donation in accordance with published criteria at the direction of the Corporate Governance and Nominations Committee. Funds are allocated to the Orica Community Foundation and to support the employee workplace giving program, called ‘Dare to Share’, by matching donations up to a certain value, across all of the eleven charities selected by our employees to receive donations under the program. In 2007, the Orica Community Foundation supported three major organisations:

• Habitat for Humanity whose vision is to build decent, affordable houses in partnership with those in need of adequate shelter; • Landcare Australia whose projects address issues such as salinity, soil erosion, weed control, and improving water quality and efficiency; and • The OzGREEN program, dedicated to addressing critical water issues by enabling informed and active community participation in the care of the world’s waters and the building of a life-sustaining society. All the projects supported are related to Orica’s commitment to sustainability and fit in the Orica Community Foundation’s philosophy of building long-term relationships with a small number of selected organisations in order to help more enduring projects to be established. Orica does not make political donations.

Telephone: +613 9665 7111 Facsimile: +613 9665 7937

We are committed to keeping all our shareholders well-informed and regularly update our website at orica.com with: • Orica Share Price – updated every 15 minutes • ASX Releases • Investor presentations • Financial performance • Half-yearly and annual  results webcasts • Annual Reports

Email: [email protected] Website: orica.com

The paper used for this Business Overview Report 2007 has a 55% recycled fibre content.

Registered address and head‑office: Level 10, 35 Spring Street Melbourne Victoria 3000 Australia Postal address: GPO Box 4311 Melbourne Victoria 3001

protect,protect, preserve, beautify preserve, beautify

meORICA 8544-01

Orica Limited ABN 24 004 145 868