Good day, and thank you for standing by. Welcome to Orica FY 2022 financial results presentation. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. Now I'd like to hand the conference over to Ms. Delphine Cassidy, Chief Communications Officer of Orica. Thank you. Please go ahead.
Good morning, everyone, and thank you for joining us today. Welcome to Orica's 2022 full year results presentation. In the room with me in Melbourne today is Sanjeev Gandhi, our CEO, and our newly appointed CFO, Kim Kerr. Both will be presenting shortly. As per normal, we'll have plenty of time for questions after the presentation, so feel free to queue up and we'll get to those questions in a timely way. Before we get into the presentation detail, can I please ask you to take a moment and have a look at the disclaimer on slide two. Thank you. Sanjeev, over to you.
Thank you, Delphine. Welcome all. As always, I will start with safety. Tragically, we are reporting two fatalities, one relating to an incident at a customer site in Far East Russia this year, and another event which happened in 2021 at a site in Kazakhstan. Our thoughts and sympathies go out to our employees' families, friends, and colleagues. Any workplace fatality has a devastating and profound impact on all of us. We have undertaken an investigation on both incidents to understand the full details of how and why they occurred. This has been important work to ensure we can learn from the events and apply the many lessons which reinforce the critical safety measures that are in place to keep our people, customers, and communities safe every day.
Positively, we have achieved year-over-year improvements in key safety and environmental metrics, including serious injury case rate, loss of containment, and potable water intensity. We do know there's always more to do to ensure the safety of our people and our communities. A critical review of our key controls of the Major Hazard Management program is underway and will remain our top priority for the year ahead to improve our safety performance. Turning now to our progress on sustainability on slide six. We play a critical role in supporting the global climate change agenda and transition to net zero, and this is a unique opportunity and a competitive advantage as we move towards a low carbon future together. I'm pleased with our progress on sustainability and climate change performance.
Our greenhouse gas emissions are now 14% below 2019 baseline levels and are well on track towards reducing scope one and two emissions by at least 40% by 2030. The Tertiary Catalyst Abatement technology that we've installed at our Carseland manufacturing plant in Canada has reduced nitrous oxide emissions by 95% from unabated levels. We have now commenced the installation of this technology at Kooragang Island here in Australia. In August, we signed a 10-year renewable power purchase agreement to help mitigate rising energy prices and progress towards achieving our target to source 100% renewable energy and electricity by 2040. We are continuing to invest in digital and automated technologies, offering safer solutions to our customers that increase productivity while managing social and environmental impacts. A great example of this is Cyclo.
It's our first automated used oil recycling system that recycles our customers' used oil and processes it to remove any contaminants so that it can be used to manufacture quality emulsions. Another is Fortis Protect, a premium product that reduces nitrate leaching risk in surface Blasting. We are also continuing to diversify our commodity exposure and rebalance our portfolio towards higher growth commodities, including future-facing commodities and resources. From a financial perspective, last week, we announced the conversion of $1.3 billion of existing bank debt facilities to sustainability linked loans. This integrates Orica's sustainability performance into our financial framework and deepens our relationship with the banks who provide important sources of capital. The announcement of our renewable electricity target and the sustainability linked loan increase our accountability to our sustainability ambitions. Moving now to slide seven, our people.
Retaining talented people and attracting new talent in a very tight labor market and high wage inflation environment is an emerging issue for all companies globally. In FY 2022, we implemented our global culture and engagement survey, Our Say, to understand how we are tracking and opportunities to enhance the employee experience. With a participation rate of 65%, we achieved an overall engagement score of 88% outperforming global industry benchmarks. While this is a good result, there is still work to do. The results of the Our Say survey identified opportunities for greater support in learning and development, increased recognition of performance, and flexibility and clarity of roles. We have rolled out several learning and development initiatives this year, such as the Enterprise Mentoring Program and Frontline Leadership Program, which has been received very well by our team.
We are now reviewing and aligning our approach to compensation to retain our very talented people and attract new talent. Orica is privileged to work in many communities across Australia, and towards the end of this calendar year, we will be releasing our first reconciliation action plan. This plan presents a path for Orica and our employees to recognize the importance of reconciliation and First Nations peoples. This is the first step, and our actions are intended to grow and deepen as we develop further opportunities towards reconciliation with Aboriginal and Torres Strait Islander peoples and communities. Turning now to slide eight, which summarizes the strategic milestones we achieved in this financial year. Our full year results reflect the strength and resilience of our team and a commitment to our refreshed strategy, resulting in improved financial performance and growth across all regions.
This year has presented both challenges and opportunities for our business, including geopolitical tensions, trade sanctions, strong global commodity prices, and supply risks. Tight global supply of ammonia has led to a significant increase in AN costs, and inflation continued to rise sharply. Commercial discipline across the business, combined with the strength of our global manufacturing and supply network, positioned us well to capitalize on the current market conditions and more importantly, set us up to delivering quality earnings. We are focused on accelerating customer adoption of Blasting Technologies and Digital Solutions throughout the year, increasing our digital solutions adoption rate across all regions by 63% on the previous year, well above target. I will go through this in more detail shortly. In August, we announced the acquisition of Axis Mining Technology to further strengthen our ore body intelligence capabilities and increase our customer offerings from mine to mill.
I will also talk about this on the next slide. Additionally, we introduced a suite of new products and services to the market, including our second generation WebGen 200, 4D bulk explosives technology, Cyclo and Avatel in partnership with Epiroc. I'm pleased to report that our S/4HANA SAP ERP system is now stabilized, providing vital data in real time to us. Turning to slide five. Axis is a strategic acquisition as it further strengthens our existing Digital Solutions vertical and expands our unique ore body intelligence portfolio upstream. Axis's differentiated geospatial tools and instruments provide a better understanding of the ore body at the start of the mining value chain. This, combined with our existing suite of Digital Solutions, provides compelling ore body intelligence to customers and supports the delivery of the industry's first end-to-end solutions platform from mine to mill. The transaction was completed in October.
We have an integration team in place which is fully embedded with the Axis business. The team has held sessions with all existing Axis customers, and the feedback has been very positive. There already has been keen interest from some of Orica's customers to expand existing agreements to cover the broader ore body intelligence portfolio of geophysical measurements. I'm very pleased with the progress to date. Turning now to the financial results for this year. Our financial results are strong in a year of both challenges and opportunities. This is a testament to our people who have worked collaboratively towards delivering on our refreshed strategy, resulting in improved financial performance across all regions and businesses. Underlying earnings before interest and tax increased by 36% to AUD 579 million. Underlying net profit after tax was up 52% to AUD 317 million.
Our positive performance this year was a result of improved commercial discipline embedded across the business, volume growth in ammonium nitrate, electronic Blasting systems, and cyanide from new business, and increased mining activity driven by strong commodity prices as well as the new business. Orica's ability to provide security of supply to customers in a tight market and a shift to premium products contributed to our positive performance this year. Return on net operating assets increased from 8.1% in FY 2021 to 11.4% in the current financial year, driven by our improved earnings performance. The board has declared an unfranked final ordinary dividend of AUD 0.22 per share, representing a payout ratio of 53%. This brings the full year dividend to AUD 0.35 per share and full year payout ratio of 48%.
Kim will talk more about trade working capital and the balance sheet later. Looking at the regional performance on slide 10. Starting with Australia, Pacific Asia. Across the region, there was growth in the metal sector, primarily driven by increased activity in gold and copper markets in Australia and copper markets in Indonesia. Demand in the thermal coal sector in Indonesia and Southeast Asia increased. However, has reduced in Australia due to wet weather on the East Coast and lower domestic consumption. Elevated commodity prices and strong mining activity, mostly in Asia, drove high demand for ammonium nitrate, EBS, cyanide, and Blasting services. This increased demand, coupled with our commercial discipline on new and renewed contracts, a shift to premium products, increased adoption of technology, and improved fixed cost recovery from higher utilization of our manufacturing assets, contributed to the region's 31% year-on-year increase in earnings.
Record production was achieved at Yarwun and Bontang continuous plants. The Yarwun turnaround was completed in November 2021, and the Kooragang Island turnaround for installation of Tertiary Abatement Technology commenced in September 2022. Operating conditions in North America were strong across the region during the year. Mining activity improved due to high commodity prices, with labor shortages in a high inflationary environment and global supply chain challenges being the major constraints. High domestic energy prices in the United States led to increased demand for thermal coal. The 23% EBIT increase on the prior year was largely driven by new contract wins in Canada, improved contract terms negotiated, technology penetration, growth in Mexico, higher service contribution, and favorable foreign exchange.
The discrete network optimization, supply chain initiatives, and pass-through mechanisms were effective in reducing the impacts of supply chain challenges from raw material shortages, inflationary pressure, and increased gas and freight costs. Major planned maintenance turnarounds were completed at the Carseland ammonium nitrate manufacturing plant. Tertiary Catalyst Abatement installed to reduce unabated carbon emissions is performing above expectations. Turning now to Latin America. Security of supply for customers was paramount as ammonium nitrate trade flows into Latin America from Russia were constrained due to the Russia-Ukraine conflict. The global supply chain team acted very quickly to secure alternate sourcing options to continue servicing our customers. The significant increase in EBIT on the prior year was largely driven by commercial discipline on both customer and supply contracts, improved product mix, and technology penetration. Demand for premium products and electronic Blasting systems increased.
Technology adoption in the region is growing at pace, with Orica leading the mining digital transformation in Latin America. Supply initiatives included negotiating improved supplier terms and changes to shipment loadings and movements also contributed to the region's improved performance. The EMEA region was the most impacted by the Russia-Ukraine conflict. European gas prices increased significantly during the year, leading to the closure of several ammonia plants in the region and driving a tightening of supply. This led to significant disruptions to ammonia, ammonium nitrate, and energy trade flows. Our global supply chain team secured ammonium nitrate from alternate sources following the initial quotas put in place by the Russian authorities in December 2021. Following the sanctions placed on Russia, Orica completed the exit of its operations in Russia in September 2022, and related assets have been fully impaired.
Despite these challenges, EMEA delivered a significant increase in EBIT on the previous year, driven by positive product mix benefits in initiating systems, contractual improvements, and contribution from new growth projects in Africa and the UAE. Looking now at Orica Monitor. GroundProbe, that sits within Orica Monitor and Digital Solutions vertical, delivered strong EBIT growth year-on-year, driven by growth in radar sales and recurring service plans, and the geotechnical remote monitoring support services, particularly in Brazil, where we opened a new regional geotechnical support services office. Similar to the regions, the team at Orica Monitor implemented effective supply chain improvements to mitigate shipping delays and increased freight costs. Demand for radars is expected to continue to grow, driven by sustainability objectives of customers globally.
A second assembly line is underway in North America to double production capacity, reduce landed cost, and improve speed to global markets across North and Latin America. Growth is also expected from the broadening and integration of GroundProbe sensors and software suite with Orica Digital Solutions end-to-end digital workflows and will be reported as part of the Digital Solutions segment from FY 2023 onwards. Growth for the overall segment was suppressed by the loss of contribution from Nitro Consult AB, which we sold during the year as it was identified as a non-core asset. Now turning to slide 12 and technology adoption. Customer adoption of our latest technologies continues to accelerate across our premium products and services, as well as our game-changing Blasting Technologies and Digital Solutions.
This is largely driven by customers' desires to be safer, more efficient, and more sustainable in their operations, as well as the shifting societal expectations on our industry. In FY 2022, we introduced 17 new products and services to the market. This included, in our core Blasting technology, where we launched our patented second-generation WebGen 200 wireless detonator, 4D bulk explosives technology, and Avatel in partnership with Epiroc. We are also responding to a growing interest in renewables, recycled, lower carbon, and circular solutions by launching Cyclo and Fortis Protect bulk solutions. Beyond Blasting, across our Digital Solutions portfolio, we introduced new Orebody intelligent solutions, as well as FRAGTrack post-blast fragmentation analysis solutions and post-blast monitoring solutions with GroundProbe, BlastVision, and MonitorIQ. Looking at the map on the screen, you can see just how our technology has been adopted globally.
With strong adoption across all regions, we now have a total of 417 new technology adoptions spanning 36 countries worldwide. These cover every major mining market, including future-facing commodities. In FY 2022, we increased our Digital Solutions adoption rate globally by 63% on the previous year, well above our target of 37%, demonstrating our strength and capability in providing connected digital workflows across the mining value chain. In FY 2023, we will continue to innovate and expand the adoption of new Blasting Technologies and Digital Solutions and enhance our collaboration programs with key customers to focus on sustainability and automation, outcomes aligned with their needs. With the acquisition of Axis, we will look to integrate and increase the delivery of digital solutions to optimize workflows from mine to mill and further expand GroundProbe capacity and technology offerings to cover all geotechnical solutions.
The strength and flexibility of Orica's global manufacturing and supply chain remains one of our key competitive advantages. The current environment represents a significant opportunity for Orica to leverage our unmatched global network to ensure we maintain security of supply for our customers. In continuous manufacturing, reliability and flexibility of our continuous assets globally is key to delivering on our strategy. In FY 2022, we have achieved high plant operation and utilization, with our Bontang and Yarwun continuous manufacturing plants both achieving record production this year. Orica's investment and focus on improving maintenance and turnaround execution has reduced unplanned downtime across our ammonium nitrate manufacturing network. We have dedicated teams invested in improving our capability to optimize our turnaround cycles and improve execution efficiency on industry benchmarks.
The current situation has created an opportunity to implement no-regret opportunities to debottleneck our ammonium nitrate and ammonia export-import network to ensure supply security for our customers globally. An important example of this flexibility is the opportunity we are pursuing to invest in a new 30,000-ton ammonia tank at Kooragang Island to optimize our ammonia network on the east coast of Australia to deliver improved reliability and supply security. This is also a key enabler of a potential green ammonia value chain at KI in the future. We are also taking action on sustainability across our AN facilities to decarbonize our continuous plants and achieve our climate change targets while future-proofing our assets. Turning to discrete manufacturing, a critical enabler to our optimization strategy is the creation of the Lurín and Gomia as our low-cost global manufacturing hubs for discrete manufacturing in Peru and in India.
At our Lurín manufacturing center in Peru, which was part of the Exsa acquisition, we are producing Orica's complete range of bulk and package emulsion portfolio. We are providing local electronic Blasting solution supply to a critical growth market. We are improving operational efficiency and utilization across all product categories, and we are significantly enhancing product quality. These initiatives are establishing Lurín to be a global manufacturing hub while enabling privileged supply to the Latin American market. Our manufacturing center in Gomia in India now offers the standardized Orica timing range for detonators, cementing it as a truly global manufacturing hub. We are also very well advanced in implementing our discrete network optimization strategy in Orica.
Key milestones achieved this year include increasing our global EBS capacity by 35%, implemented primarily in Latin America, with plans to increase this further in FY 2023 and FY 2024 to meet the significant demand for growth in this critical product category. Completion of our SKU rationalization program as an enabler of improved utilization of our discrete manufacturing network. We have reduced our SKUs by 40% in the past two years by transitioning customers to premium product offerings and optimizing our product families. How do we measure our success across manufacturing and supply? First and foremost, we must operate safely, securely, and responsibly. Second, high plant availability and supply reliability is our competitive advantage, and we must maintain both throughout FY 2023. Finally, we must continue to optimize and grow our manufacturing network globally to reliably supply our customers and drive profitable growth for Orica.
I now hand over to Kim Kerr to give you an update on the year's financial results.
Thanks, Sanjeev. For clarity, the numbers on the slides presented today include Minova, which has been treated as a discontinued operation in the financial report. With that in mind, I will move to the key financial metrics shown on slide 15. Our strong momentum in the first half of 2022 has continued into the second half of the year despite the volatile external environment. Looking at the full year results for 2022, sales revenue of AUD 7.3 billion was up 29% from the prior period, driven by improved commercial discipline in customer contracts, solid volume growth from strong commodity market conditions, increased input prices and their recovery via contracted pass-through mechanisms, and increased customer preference for premium products. At AUD 964 million, underlying EBITDA has increased by 21% over the prior period.
Underlying EBIT of AUD 579 million has increased 36%, which I will outline in more detail in the following slides. Underlying NPAT of AUD 317 million is 52% above the prior period, driven primarily by the improved earnings. Statutory net profit after tax of AUD 60 million includes significant items of AUD 257 million after tax, which I'll outline in more detail on the next slide. At AUD 0.764, our earnings per share before individually significant items is up AUD 0.252 on the prior period. The final dividend for 2022 is AUD 0.22 per share and will be unfranked. This brings total dividends declared for 2022 to AUD 0.35 per share, representing a total payout ratio of 48% for the year. Turning to slide 16, titled Individually Significant Items.
All items on this page were disclosed as Individually Significant Items in our half year accounts. Unchanged from the half year is the gain relating to the sale of the Minova and Nitro Consult businesses and the associated release from the foreign currency translation reserve. Also disclosed in the half year results was an impairment of our EMEA assets following our decision to exit our operations in Russia due to the Russia-Ukraine conflict. This amount has increased from the half year by AUD 12 million before tax, reflecting impairment of earnings made in the second half of the year up until completion of the divestment on 9 September 2022. As that sale has now completed, and as required by the accounting standards, we have released the associated foreign currency translation reserve loss of AUD 41 million before tax from equity to the income statement.
The AUD 18 million attributable to non-controlling interests relates to our decision to exit Turkey. The related impairment of AUD 33 million is included in the impairment of EMEA assets, and both remain unchanged from the half year. The foreign currency translation reserve will be released once our exit is finalized. Given the materiality of these items, they have been disclosed as significant items. Turning to the EBIT bridge on slide 17. The impact of the movement in the Australian dollar on the translation of our foreign currency earnings has had a positive impact of AUD 12 million in 2022, with the largest impact being in the North America segment. Improved volumes had a positive impact of AUD 52 million, driven by new customer contracts in Australia, Brazil, and Africa, and improved demand from existing customers in Canada, Indonesia, and Africa.
Sales volumes of our premium electronic Blasting systems increased 10% on the prior period, partly due to the conversion of customers from traditional initiating systems to electronic Blasting systems. The year-on-year EBIT benefit in manufacturing was AUD 13 million. Increased volumes compared to the prior year, in particular in Australia and Asia, has resulted in increased utilization of our manufacturing plants at Kooragang Island, Yarwun, and Bontang, positively impacting fixed cost recoveries. This was partially offset by higher third-party ammonia and nitrate sourcing costs at the beginning of the year during the Carseland turnaround. Furthermore, the costs incurred in 2021 associated with the incident at the La Portada plant in Chile have not recurred in 2022. Mix and margin contributed AUD 55 million to the increased EBIT in FY 2022.
This included benefits from improved commercial discipline and emphasis on quality of earnings across the regions, and improved product mix as customers adopted more technology and shifted to premium products, especially in Latin America and Australia. Rise and fall mechanisms worked effectively to pass through the volatile ammonia and gas prices. Mining chemicals benefited from an 11% increase in cyanide volumes on the prior period, most notably in Australia and Asia, as a result of increased demand from the existing customer base as well as new customers. This has resulted in an additional contribution of AUD 20 million compared to the prior period. Orica Monitor has delivered an incremental AUD 4 million, which is a 13% improvement in EBIT in that segment compared to the prior period.
This growth was despite the loss of contribution from Nitro Consult AB, which was sold in the first half, and the cessation of sales to Russia. Net global support costs have decreased AUD 3 million compared to the prior period. Finally, the AUD 7 million variance from discontinued operations reflects five months of earnings in the 2022 financial year relating to Minova, versus a full 12 months of earnings from Minova in the 2021 financial year. The net result is that EBIT for the year was AUD 579 million, an increase of 36% on the prior period. Turning to capital expenditure on slide 18 now. We continue to apply a disciplined approach to capital expenditure, which has resulted in total capital expenditure for the year of AUD 349 million.
This is within our guidance of AUD 340 million-AUD 360 million that we communicated to the market at the start of this financial year. We invested AUD 124 million in growth capital expenditure to support new customer contracts, to support commercialization of our WebGen and 4D offerings, to optimize our discrete manufacturing network, and to further develop our digital technologies. Sustaining capital expenditure of AUD 189 million during the year reflects spend on major planned turnarounds and ongoing expenditure on customer-facing assets. We remain committed to decarbonization and supporting sustainability initiatives.
In FY 2022, we invested a further AUD 36 million on sustainability projects, including the Tertiary Catalyst Abatement technology installation at our Carseland plant and preparation for installation of the same technology at our Kooragang Island plant, as well as a Prill Tower scrubber at Kooragang Island to reduce particulate emissions. Moving on to slide 19, titled Cash Flow. The generation of strong operating cash flows remains a key focus for the business. We had a net operating cash outflow of AUD 157 million in the first half of the year due to an increase in trade working capital, most notably higher inventory holdings.
However, I am pleased to report our stronger operational performance in the second half has delivered a positive net operating cash flow of AUD 519 million, bringing us to a net total of AUD 362 million positive net operating cash flow for the year. Cash conversion came in at 72% for the full year, which is an improvement from 66% we reported at the half year. This includes the impact of funding the increase in trade working capital over the prior period, driven by higher inventory levels, which I will now talk to as I turn to the next slide. Turning to trade working capital on slide 20 now.
The volatile external environment we operated in across FY 2022, driven by factors such as high energy prices and the Russia-Ukraine conflict, provided both opportunities as well as challenge for Orica, which had a significant impact on our trade working capital levels during the year. As you can see on this slide, key ammonia indices increased significantly during the year. While prices have since come off intra-year highs, they remain elevated at 46% and 77% respectively from the start of the year. The other key driver of our increased trade working capital at year-end was the proactive decision we made to increase our inventory holdings during the year in order to ensure security of supply, so we could meet very strong demand from our customers during this extended period of supply chain disruption.
Looking at slide 22, where you can see that our trade working capital has increased by AUD 246 million on the prior period. This is predominantly driven by the AUD 237 million dollar increase in inventory, as I outlined on the previous slide. The increase in trade receivables and offsetting increase in trade payables was driven by the higher sales revenue and the associated increased purchasing activity. Looking at our key efficiency metrics on the right-hand side of the slide, we have improved days inventory held and days sales outstanding, respectively. What this means is we're holding inventory for less time and debtors are paying faster. While our days payables outstanding measure has fallen by eight days, this reflects the tight supply conditions and the need for shorter credit terms in order to secure ammonium nitrate supply, in particular.
We remain focused on actively managing our trade working capital regardless of external conditions through initiatives such as our discrete network optimization program, proactive management of customer trade terms and debtor collections, effective rise and fall mechanisms, optimizing our logistics arrangements, and maintaining commercial discipline with our supplier negotiations. Turning to balance sheet and liquidity on slide 22. On the third of August 2022, we announced the acquisition of Axis Mining Technology for AUD 260 million upfront cash consideration and a deferred earn-out payment of up to AUD 90 million. This was funded through an equity raise consisting of a fully underwritten institutional share placement and a non-underwritten share purchase plan that raised gross proceeds of AUD 691 million before cost.
The proceeds are also being used to fund the incremental trade working capital requirements that I discussed earlier and to provide balance sheet capacity. The balance sheet has also since benefited from the stronger operating result evident in the second half of the year. As such, we have sufficient levels of liquidity available with AUD 1.4 billion of undrawn committed bank debt facilities available at year-end, with a further AUD 1.3 billion of liquidity held in cash. Our year-end net debt was AUD 912 million, and our gearing ratio was 19.7%.
Gearing is below our stated range of 30%-40%, and we consider this prudent in the current operating environment. Please note that the acquisition payment for Axis of AUD 258 million, which included a minor working capital adjustment, was made on the 3rd of October, 2022, and is not reflected in our year-end balance sheet and ratios. Looking at our debt structure now. We recently converted AUD 1.3 billion of existing committed bank debt facilities into sustainability-linked loans. Our average drawn debt tenor is currently 4.3 years, and we are well-placed to manage our debt maturities. On the 5th of August, 2022, following the completion of the equity raise, S&P Global Ratings revised its outlook on our credit rating by removing the negative outlook and confirming our rating at BBB with a stable outlook.
Wrapping up now. Our financial position is prudent in the current volatile external environment. We remain focused on improving our operating cash generation and actively managing our trade working capital. We will continue to apply our capital management framework to guide our investment decisions. With that, I'll now hand back to Sanjeev. Thank you.
Thank you, Kim. In November 2021, we refreshed our strategy centered on optimizing our operations, delivering smarter solutions, and partnering for progress across our four business verticals of Mining, Quarrying and Construction, Digital Solutions, and Mining Chemicals. At the core, we continue to pursue organic growth from Blasting and by expanding Orica's presence across future-facing commodities and emerging markets. Beyond Blasting, we are accelerating customer adoption of our new technologies and demonstrating our strengths and capabilities in providing integrated digital workflows from mine to mill. Mining chemicals also continues to present growth opportunities for our business. I will go through some of the progress on the verticals on the next slide. I will spend some time on Mining Chemicals and Quarrying and Construction, as I have covered the progress we have made in the mining vertical in the regional updates.
In Mining Chemicals, our Cyanide business services over 80 customers globally and is underpinned by our integrated manufacturing facility at Yarwun and a network of transfer stations in key gold mining regions such as Malaysia, Ghana, and Peru. Our strategic priority is to increase cyanide production volumes at Yarwun through low capital debottlenecking and convert cyanide customers to Sparge products offering safer chemical transport by leveraging our network of transfer stations, decreasing the risk of loss of containment. Good progress has been made this year. We expanded our global cyanide distribution network with the opening of a new transfer station in Port Klang, Malaysia, growing our ability to provide industry-leading Sparge technology. We have also expanded our customer base in the cyanide market, driven by strong global demand for gold, resulting in an increase in cyanide volumes from prior.
Our premium Emulsifiers business with a manufacturing base in Deer Park, Australia, and a joint venture in the United States provides a critical component to explosives and has a presence across approximately 50 countries. We are also introducing new technology-led services to support customers in optimizing their leaching practices and maximizing gold recovery. Looking at Quarrying and Construction. The Q&C market is large and is expected to grow faster than most other mined commodities through 2026, which is underpinned by long-term committed government spending. Examples of this include the US infrastructure bill of $1 trillion, the $1.4 trillion infrastructure spend in South Korea by 2040, and the $1.4 trillion spend in India. Global population is expected to grow by 2 billion people by 2050 or 80 million per year.
This will require significant infrastructure which translates into strong demand for quarrying, construction, and tunneling solutions for better quality of life. Digital and technology offerings are key to driving growth and differentiation in this sector. Our industry-leading bulk emulsions, electronic Blasting systems, and service solutions are widely used in the United States, Europe, and Australia. Our Advanced Vibration Management system is a sophisticated measurement and statistical modeling tool to predict and control the impact of Blasting on civil structures. As 68% of the world's population is expected to live in an urban environment by 2050, managing and delivering targeted vibration control outcomes will be a critical safety and license to operate requirement. That is where Orica has strengths. Turning now to Digital Solutions on slide number 26. Presented here is Orica's end-to-end mine-to-mill solution.
Upstream from Blasting, we are actively taking steps to help our customers better understand the ore body. Recent digital acquisitions, including RIG, HIG, and the most recently Axis, gives us a unique market position in ore body intelligence. In Blast Design and outcome, we are collaborating with customers and industry to develop technologies and integrate vast amounts of complex geotechnical data into the Blast Design process. Our SHOTPlus Blast Design and OREPro 3D modeling software helps to ensure the right explosives are delivered into the right holes and initiated at the right time to achieve desired customer outcomes. The Blasting segment of the mining value chain remains at the core of our business.
The convergence of new technologies and solutions such as WebGen and 4D is enabling us to adjust and optimize customers' mine plans, allowing them to operate more efficiently, precisely, and responsibly. A great example of this is WebGen at Newmont Boddington, where we have successfully turned a loaded blast into a haul road, allowing them to optimize their mine plan completely. Moving to Measure and Monitor. We have made significant investments in post-blast monitoring, including GroundProbe technologies and measurement technologies that deliver insights around blast outcomes. FRAGTrack, for example, captures 2D and 3D blast fragmentation imagery and data with auto-analysis capability. Finally, further downstream, we are delivering Mining Chemicals and technologies to aid with processing and are building capability and technologies in ore processing with digital tools like IES and Design for Outcome. This is helping our customers to optimize their entire mining value chain.
As you can see, Orica now offers a truly connected end-to-end, mine-to-mill solution for our customers. From the first half of financial year 2023, we will show you the contribution from the Digital Solutions vertical separately and the progress on a year-on-year basis. To sum it all up, we are making good progress on our strategic targets as seen on slide 27. This is a snapshot as at 30th September, and we will continue to execute on our refresh strategy throughout FY 2023 and beyond. Along with achieving our financial targets, we are also making significant progress towards a simpler, more efficient and more sustainable organization, and this puts us in a good position to continue our momentum and drive our strategy for profitable growth. Turning now to the outlook on slide 29.
While we made strong progress this year, we are deeply committed to continually improving performance across all areas of our business. We expect the demand for critical minerals to remain strong in the year ahead, and we are well positioned to navigate ongoing external challenges and opportunities with the strength of our global network and our culture. For the 2023 financial year, EBIT from continuing operations is expected to increase on the PCP. This is attributable to anticipated growth in global commodities demand, continued commercial discipline, increased adoption of advanced technology offerings, including contributions from the newly acquired Axis Mining Technology business. Inflationary pressures and higher energy costs as well as supply chain dislocations will remain an ongoing challenge also in 2023, and we will continue to implement measures to reduce the impact on our business.
Capital expenditure is expected to be within the AUD 400 million-AUD 420 million range, higher than the PCP due to growth, sustainability and sustenance projects. Depreciation and amortization to be in line with the PCP. We will continue to focus on balance sheet and cash flow optimization, with gearing expected to remain below the stated range of 30%-40%. Based on our improving underlying results in FY 2022, we have updated our strategic FY 2023 to FY 2025 three-year target average RONA to 10.5%-13% from 10%-12%. Turning now to the final slide. We are making significant progress towards a simpler, more efficient and more sustainable organization in line with our refresh strategy.
Our customers' appetite for new technology and our refresh strategy sets us up on a clear pathway to drive organic growth from Blasting technologies and accelerate the adoption of our new technologies and Digital Solutions from mine to mill, growing beyond Blasting. Our financial position is prudent in the current volatile external environment. We will continue our disciplined approach to balance sheet and capital management, and we are focused on improving our operating cash generation. We remain fully committed to accelerating our sustainability agenda and helping our customers achieve their targets while remaining competitive in a lower carbon future and delivering value for our shareholders and other stakeholders. Thank you all. With that, we will open up for questions.
Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone. Please stand by while we compile the question and answer roster. Once again, that's star one one for questions. Our first question comes from the line of Niraj Shah from Goldman Sachs. Please ask your question, Niraj.
Hi, guys. Hope you can hear me. First, just Sanjeev, where are you seeing East Coast Australian IPP at the moment? Perhaps more importantly, as you've had contracts roll, say, over the last three to six months, what sort of delta in sort of bulk and pricing are you seeing compared to the legacy contracts?
Yeah. Thanks, Niraj. I mean, the IPP in Australia today is a theoretical number because there is very limited trade flow coming into Australia. If I look at international market prices and add the increased freight and logistics, this should be somewhere north of AUD 1,200 landed in the country, and then there's local distribution costs. That's the current benchmark, but this changes every day given the volatility that we have. In terms of the efforts we are putting in, I mean, you know that around roughly 25%-30% of our contract book rolls off every year. Obviously with every new contract we are, you know, resetting prices to reflect the current market situation. We are also going for tenure.
Whenever there's an opportunity also to look for contract extensions, we are also trying to do that. Now, that's an activity we have started in 2021 already, so we are now in the second year of doing that, and then we'll continue to do that also in FY 2023 and 2024. It's an ongoing process, and hopefully you see that the quality of earnings are starting to flow through into our bottom line there.
More EMEA and Latin America, but clearly the capital intensity of the business has increased via working capital. Now, some of this is probably captured through the rise and falls, but do you think you're sort of capturing an adequate sort of return on that increased capital intensity in the business in the current environment?
Yes, we are. That's why we kept referring to commercial discipline because this is across the board. This is not just on pricing, but it's also on trying to manage our suppliers and their expectations, also trying to get our payments in on time from our customers. It's very, very important, obviously, in EMEA and Latin America, because we are dealing with the traded ton there. Now, there have also been a couple of other initiatives, Niraj, as you know. We have also shortened the rise and fall durations, which were normally quarterly down to monthly. In certain cases, we are also doing now weekly, biweekly pricing because that's how our suppliers are dealing with us. You know, there's every effort to pass on those increased cost inflation and challenges down to our customer base.
That's why we have not really called out too much in terms of lags in the pricing this time, because we've been quite successful with the commercial discipline that we have been operating in for the last couple of years now.
Got it. Thank you.
Thank you for your question. Next question comes from the line of Andrew Scott from Morgan Stanley. Please ask your question, Andrew.
I lost the name there, but I'm gonna presume that was me. Can you hear me okay, Sanjeev?
Very well, Andrew. Go ahead.
Yeah. Thank you. I'm gonna follow on from Niraj's question. Prices, thank you for those import parity prices. Just interested when you are setting a three-year contract, what are we seeing relative to import parity? Obviously, I imagine you're there saying, "Look, we need a premium for certainty of supply." Customers are saying, "This is a three-year contract. I don't wanna be locking in what looks to be, you know, peak ammonia prices." How does it play out from there? Are we getting a premium to import parity, or is it setting a starting point and there's a discount to that?
It all depends on what the tenure of the contract was, what was the starting point for the contract. Obviously, we do respect all our commercial agreements with customers, but it's an ongoing discussion with customers. A lot of customers are proactively coming to us and asking us for tenure, and we are then taking the opportunity to reset prices. In certain cases, we are volunteering to go back to customers to say, "If you're willing to open the contract, we'll think about tenure and supply reliability." It's an ongoing discussion. As I mentioned earlier to Niraj's question, we have around roughly 25%-30% of our contract book globally rolling off, and we're taking every opportunity to reset that.
Not just reset pricing to reflect the current market environment, but also to get tenure, because it's critical that we guarantee supply reliability, and then we also lock in volumes and, you know, we get the visibility for the future. It's a lot of effort you can imagine, Andrew, but if you see the numbers coming through and you compare half year on half year, I think we are seeing the right trends flowing through now into the quality of earnings.
Fantastic. Thank you. Secondly, a really solid improvement in the RONA, so well done there. Against that backdrop, I guess I'd put it to you, the three-year targets don't look, well, they look soft at the low end, and given that they're actually below what we've just delivered this year and arguably not necessarily that challenging on a three-year average at the high end. Can you talk about the assumptions you've got in there and what's gone into building those up? I guess how literally do you think we should be taking those?
Andrew, three-year targets are a guidance, obviously, right? It does not limit us from over-delivering, which I'm sure that the entire Orica team is ready to do that. I look at it from a three-year horizon from last year and this year, and obviously the world has changed significantly. Last year we started with the 10%-12%. This year we are at 10.5%-13%. In my view, we have gone up with the guidance, but we are still trying to be sensible and pragmatic here because, you know, visibility into the future and, you know, upcoming external challenges are difficult to foresee and predict. Now, once again, to repeat what I said earlier, that does not restrict us from under-delivering.
We do have every intention of trying to, you know, get those numbers and go beyond if possible. That's the only reason. There's nothing underlying there. In my view, that's an improvement, and that's a bit of an ambition coming into the targets for the next three-year cycle. Maybe next year same time we have a different discussion. We have even different numbers there. You know, it's difficult to predict the future. I think we are feeling a bit more confident now, and the guidance also says that I expect momentum from the second half of 2022 to go into FY 2023, the weather gods permitting and everything else falling in place. It looks okay so far, Andrew. No concerns.
That's very helpful. Thank you.
Thank you. Our next question comes from the line of Grant Saligari from Credit Suisse. Please ask your question, Grant.
Good morning. Thanks. Sanjeev, again, I'll just back on Australia, if I could just get some qualification. The EBITDA per ton out of the Australia Pacific went up about AUD 50 a ton year-on-year. Can you give some broad quantification of the drivers there? Because emulsion volume was back. I assume that was a headwind. You've called out pricing, and then there was the technology penetration. I mean, in terms of order of magnitude or quantification, what were the different sort of contributions to that change, please?
Yeah, Grant. I mean, it's a bit complex to unravel that because that's Australia, Pacific, and Asia, so it's a mix of three very distinct regions with their own opportunities and challenges. That's why that AN margin per ton could be a bit misleading. We have not had too much volume growth in Australia because of the stated reasons. There was a terrible weather. We had a lot of wet weather. We also had some impacts, continued impacts of COVID. The volume growth came mainly out of Asia, and this was driven by the very strong demand in Indonesia and the rest of Asia in the coal and the Q&C market. A lot of technology penetration started obviously in Australia because that's our home market.
That's where the technology and the R&D activities are most focused on. Asia has been lagging there a little bit because they have had other challenges, and they have had to focus on running the business. It's a mix of a lot of different things. You're right. I mean, with wet weather, we sell more emulsions. We sell less AN tons. Margins go up, but the volumes come down significantly. In Asia, we have sold a lot more of the AN ton, but not that much of emulsion. Again, it's a mix effect. For me, what's important is to see the trend. Fortunately, our new ERP system is giving us those kind of visibilities based on SKU level by product, by country, by customer.
Wherever we see that the profitability of the product or the service is not good enough, we are going after that right away. We are working on this in real time, and then again, the commercial discussion, the commercial discipline discussion comes into play. We hope to show you continued improvement on that trajectory going upwards.
You've mentioned tenure of contract several times. How much has the actual average contract tenure gone up? Or what is the average contract tenure at the moment, please?
Yeah. The normal contract tenure in the mining space is between three to five years. If you go into the Quarrying and Construction space, it could be anywhere between six months to 12 months. It's quite different, based on the industry we're catering to. When I talk of contract tenure, what I meant is if I have a contract coming up in the next six months or 12 months, customers are asking us whether we should already do an extension today. Maybe this time they do not want to extend for three years but for five years because they want to lock in supply. Those are the kind of discussions we are having with our customers across the contract book. This is a global phenomenon, so we are doing this all over the world.
If I looked at Australia, are we seeing sort of more of a skew towards five-year contracts rather than three in the resets? Is that correct way to interpret it?
In the end, the customers decide that, but I prefer to see tenure because you know I have to lock up my gas demand, so I need to understand what kind of production volumes I have three, four, and five years down the line. The longer the tenure, the better it is for me to plan my gas purchases and my manufacturing assets, turnarounds and capital investment and all of that. Yeah, we are trying to get visibility in a very challenging environment, and our customers really appreciate that kind of discussion because they are also struggling with visibility as to what's going to happen in future.
Okay. All right. Thank you very much.
All right, thank you very much. Our next question comes from the line of Brook Campbell-Crawford from Barrenjoey. Please ask your question, Brook.
Yeah. Thanks for taking my question. First one just on North America. A key driver of earnings uplift was new contracts in Canada. Can you talk through the timing of those contract wins and perhaps the earnings contribution? I'm trying to sort of help understand or figure out what the roll-through benefit will be into FY 2023. Thanks.
Brooke, I'm a bit reluctant to talk about specific contracts and specific customers, as you can imagine. I can tell you that we are leading in the Canadian market. We have a fantastically placed asset in ammonium nitrate there in Carseland. We also have Brownsburg, which is our global hub for electronic Blasting system and wireless initiation development. We are very strongly placed in North America and in Canada. Obviously, we are using that footprint to leverage both new brownfield and greenfield projects, as well as to get a bit of share wherever it made sense for us. It's been across the board. Canada has been a clear highlight. I think I've underplayed a little bit Mexico.
We've had a very successful, very strong performance in Mexico. Mexico has had a very strong bounce coming back after several years of challenges with geopolitics and COVID and everything else. Overall, North America has been a fantastic contributor to the business, and I'm very pleased at the way they've managed the commercial discipline, the supply challenges, the gas price fluctuations and everything else. We have been quite successful in maintaining and improving our margins in that region.
Okay, thanks. Just one on the balance sheet. On my estimates, the gearing would have still been below the bottom end of the 30%-40% gearing range, even if you hadn't have done the overraise earlier on in the year. Just wondering if that's correct and if anything's changed dramatically on your cash flow performance that I guess in hindsight didn't actually need to sort of execute that overraise?
Yeah. Thanks. Thanks for that question. I think the important thing is to go back to the time when we were doing the equity raising to support that Axis acquisition. If you turn to the slide on the presentation that talks to the indices that were in existence at that time, slide 20, you can see that we were operating quite an elevated environment in relation to ammonia prices, and that was having a significant impact on our trade working capital in general and our inventory levels in particular. We weren't in a position at that time to forecast where those indices were going to go, and that was the environment that we were operating in.
We have since seen those indices come off, but you can see we still have an elevated price environment for the purchase of that ammonia coming into the year-end, which is still causing our inventory levels to be higher than what we had at the start of the year. We have seen them coming off over the last few months. Couple that with the operating performance that we did see in the last, particularly the last quarter of the year across our operations has been strong. That's where we've ended up with a stronger working capital position now than we had when we did that equity raising.
Okay. Thank you.
Thank you. Our next question comes from the line of Daniel Kang from CLSA. Please ask your question, Daniel.
I'm just wondering in terms of your alternative sourcing of-
Can hear you.
as you divert it away from Russia.
Daniel, could you repeat that? It's very difficult to hear you.
Oh, sorry, Sanjeev. Is that better?
Oh, much better, Daniel. Thank you.
Can you elaborate on your alternative sourcing of AN as you divert it away from Russia? How do you view your own security or supply reliability there with these new contracts? Can you just talk about the duration of these contracts as well? Thanks, Sanjeev.
Yeah. Thanks, Daniel. I mean, look, what we are doing is we are not forward selling product we don't have. We need to be very, very cautious here. If you make a commitment to a customer, we need to line up supply and feel secure about this. Now, given the fact that we have this global reach, we are active in 100 countries, we can reach out to every potential source of nitrogen in the world, which we have been doing already now for the last more than 12 months, and we've successfully lined up supply. The other thing we have been obviously continuing to work on is to free up more latent capacity within our own network.
In the past, we were very roughly at 50/50 in terms of own manufactured product and purchased product, and we're slowly but surely creeping up the ratio to more of our own manufactured product, which is obviously much more reliable and also contributes more to the bottom line. It's an ongoing activity. We are continuing to invest capital for debottlenecking, improving supply chain efficiency and all of that, so that we free up latent capacity in our system. We have also lined up contracts. There are two factors when we line up contracts and tenure. One is obviously aligned to our procurement needs for the nitrogen molecule. The second is aligned to our gas contracts. We obviously keep both of that in mind when we make commitments to our customers.
Yeah. Thanks for that, Sanjeev, and your comment about debottlenecking projects. I mean, the 50/50 ratio currently, where do you see longer term? Where would a comfortable level be? Is it 60/40, 70/30, in terms of your own and third party sourcing?
Yeah. The more own manufactured product we have and can make, that's always better for us in terms of quality. We need to keep in mind our products are difficult to transport and expensive to transport and highly regulated. Now, you know that we do not have manufacturing of ammonium nitrate and ammonia in every region. There is Latin America and the Indian region where we don't have our own assets. There will always be a certain significant share of purchased product. Wherever we have spare capacity, wherever we have inventory, you know, for example, last year when we had wet weather and we were not moving a lot of ammonium nitrate in New South Wales, we put it on a charter and we sent it to Latin America.
We'll continue to use those opportunities, so that we do not have latent capacity laying on the table because that's a clear opportunity for us. In the end, there is no perfect answer for that. If I can produce more, I will produce more and utilize my plants to the fullest as we've been doing now for the last several months. On the other hand, our sourcing activity, our partnership with our customers, with our suppliers will continue. In the end, if we are starting to creep up that 50/50 to maybe 60/40, 65/35, I feel already quite comfortable.
Great, Sanjeev. If I can just sneak in one last one. In terms of Axis Mining, you've just had the keys for just over a month now. How are you seeing the asset? Can you talk about the potential contribution Axis could make in 2023?
Yeah, it's very, very exciting, right? We have the integration. We are now able to open up the books and accounts, look at their order book, look at the pipeline of contracts, and everything that we see is positive, in line with our expectations and even pleasantly surprising in terms of upside. All good. We now have an Orica team basically job shadowing our colleagues at Axis. We have been supporting them with the infrastructure, for example. A very nice recent example is in GroundProbe. We are building a new factory in Arizona.
We have already invited Axis and given them some space there so that they can start stocking their products there, because they have very long lead times and channel times. You know, the first synergies are already coming through. Also, you know, in terms of customers, Axis customers are now coming to Orica asking us for products and services and vice versa. That's also very interesting in terms of cross-selling. It is still early days. It's been just a month and, you know, we'll continue to leverage that. The expectation is that the Axis contribution will continue to grow year-on-year as we have forecasted for last year. Keep in mind that we do have integration costs this year. This includes IT costs.
This includes the additional headcount we have for job shadowing and all of that will come into the Axis P&L this year. That is something to keep in mind when we build the numbers for 2023.
Thanks very much, Sanjeev.
Our next question comes from Richard Johnson from Jefferies. Please ask your question, Richard.
Thanks very much. Sanjeev, you quite understandably have, you know, for some time now been flagging the whole issue of the cost pressures that you face. At the end of the day in fiscal 2022, margins actually went up, which is obviously good to see. When I think about fiscal 2023 though, given that you're sold out, you know, presumably it's fair to say that it's price and mix that is gonna be the key driver of growth rather than operating leverage. When I think of price and mix, we're trying to have a better understanding of what technology adoption or how much of that price and mix is gonna be technology adoption rather than just straight AN pricing.
Yeah, the technology adoption is going to be a key driver. Upselling, Richard, because customers who are flush with cash at the moment, given the high commodity prices and demand, are willing to try our premium products, especially products that help them with ESG, help them to manage inflation, so reduce cost and maximize output. Because a lot of our customers, because of well-known reasons, are running behind mine plans, and they're asking us for help in terms of mobilizing more resources, more MMUs, more product, all of that. That's a fantastic opportunity to bring in the new technologies and also to upsell to premium products. I mean, as one good example, our EBS sales went up significantly.
We have seen significant ramp-up of WebGen, our wireless detonation capacity. We've already done successful trials on 4G. You see all of that coming through. Then on the digital part, Richard, if you wait another six months, in May we'll be giving you the P&L for the digital vertical, and hopefully that will be a very positive surprise for all of you.
Great. Thanks. Just on Cyanide, I noticed that you had a reasonable benefit from volume increases. You know, is that something you can repeat? Or presumably you're very, very tight there, or is there more debottlenecking you can do in 2023?
We will investigate further debottlenecking because the last one we did was obviously sold out in 2022. That's why we had record production at Yarwun. We are now looking at further possibilities to access capacity both within our system but also externally in the market. That is something we've always done, and we do not want volume limitations to limit our growth in Mining Chemicals. We'll continue to investigate this. Once again, they will all be low cost, low capital light investments into assets which free up capacity in terms of supply chain bottlenecks, building a tank here, building a warehouse there, you know, adding a pipe, even maybe expanding a reactor. All of those activities will happen.
The other challenge we do have is in 2023, we have a major turnaround coming up in Yarwun, so that will also limit available capacity, and we need to compensate that. I'm hoping that we'll find smart solutions as we always do, and the team is working on it.
Perfect. Thanks very much. That's very helpful.
Thank you. Our next question comes from the line of Paul McTaggart from Citi. Please ask your question, Paul.
Hi. Was that me, Paul McTaggart? I didn't quite catch that name. It dropped out. Look, I just wanted to ask. I mean, I understand that mining companies are busy now sort of catching up on mine plans. You know, looking in the macro environment, sort of rolling forward 12 months forward, it seems like things might get, particularly in the Western world, like under pressure. I just wanted to understand. You know, you had quite a positive tone about the sort of demand for commodities in the year ahead. I mean, I'd probably be somewhat cautious. I just wanted to get a sense of, you know, what was driving your apparent confidence.
Yeah, Paul. Look, the macros are uncertain. We all understand that. There's a lot of volatility, geopolitics and everything else happening. The fundamentals are quite strong in my view because the energy transition of the world is not gonna stop. I think it's even going to accelerate given the challenges Europe is facing. You know, there's going to be more demand for renewable energy. There's going to be more demand for wind and solar, and you just cannot transmit electricity without copper. Now, if you look at our portfolio, we have already grown our copper exposure. We are the largest solutions provider to copper mines in the world. We expect that to continue. Now, the copper price was $10,000. It's $8,000 today. Yes, it has come off. Is it profitable? It is extremely profitable.
Is there enough supply? No. The outlook is pretty healthy for copper. The same with gold. It is anti-cyclical. Gold demand has been strong. There's, you know, not enough ore available. Production in gold will continue. Our expectation is it'll run strong. Surprising and not a surprise, thermal coal continues to be very strong given the gas shortages in this country, all over the world, the European challenges, the lack of Russian energy supply. Coal demand will remain strong. That's something that we've seen across the board. The same with infrastructure spend. The Quarrying and Construction market is going really, really strong. With all the capital coming into the major markets here, that is a business that's going to drive strong demand.
Now, one big uncertainty clearly is for the steel industry and the impact of China. We all have to understand, and it's quite difficult where China is headed. I mean, I'm hearing now noises about China planning to open up next year. I think it's overdue. Obviously once they do, they will also do something with the economy now that they have the Congress out of the way and the elections and everything else is done. China is a little bit difficult to predict, but otherwise across the board, future facing commodities, and in Quarrying and Construction, I see the outlook to be quite healthy.
Thank you.
Great. Thank you. Our next question comes from the line of Nathan Reilly from UBS. Please ask your question, Nathan.
Oh, hello, Sanjeev Gandhi. Quick question just on the earnings bridge. The mix and margin benefits that you've reported in the second half. From memory, I think in the first half you know you had to absorb, I guess, the lagged negative headwinds from the impact from the higher ammonia prices. Just curious, were you able to recover those in the second half?
Yes, we have to a certain extent. What helped, based on the earlier comments that Kim made, is that we did see a flattening out of the ammonia cost curve, but it's not corrected downwards. You know, that helps with catching up with lags. What happens next year? What happens in winter in the Western Hemisphere? What happens to energy prices is something we have to wait and see. At the moment, we see a flattening of the ammonia cost curves, but we do not see a downward correction. We don't see an unwinding happening so far. We still see ammonia stabilize, but at a very, very high level. We are nearly double of the average ammonia price from last year.
Now, the flattening has helped us to catch up with the lags, and that's why we've not really talked about it in this result. This might change next year if we see a sharp spike in input costs. Obviously, we've also tried to mitigate that by shortening the rise and falls, especially at the traded tons where we purchase in the market, we are trying to pass it on immediately to our customer base. All of that is helping us.
Understood. Just on your recontracting profile, you indicated on a global basis, you'd be rolling 25%-30% of your contracts each year. Can you just talk me through how that looks from an Australian perspective? You know, maybe FY 2022, you know, did you do a lower level in that 25%-30%? Looking into 2023, would you be expecting to do maybe a higher level or a lower level? Just get a sense of how that might sort of skew around the regions with a particular focus on Australia, please.
I think in FY 2022 in Australia, we've pulled forward some of those renewal discussions into 2022, and we've closed them all successfully. 2023 might be a bit lighter than the average 30%, but we still have a couple of interesting commercial discussions ahead of us with our customers. Roughly, the rule of thumb is that 20%-30% holds good for most of our contract book globally, including Australia. You know, I talked about the tenure discussion that we've been having with customers quite successfully. As a result, we have pulled forward a few of those negotiations from 2023 into 2022, and we have successfully closed them.
Okay. An extension to that, just around tenure and your desire to wanna sort of cover off on your gas supply arrangements. Can you please just give us an update on where you're at in terms of your contract supply book, in terms of how you might be thinking about the impact of higher gas prices as those projects or those contracts roll off? Just how that sort of factors into your thinking around duration of customer contracts and I guess also mitigating the impact of those higher costs, just given your current focus on commercial discipline.
Sure. We have multiple contracts and multiple suppliers for Gas. As you can imagine, our demand is big, so we can't depend on one. The book is locked up until 2024, 2025, 2026, because we try to stagger contract renewals so that they all don't come up in the same year. We have a couple of years now. We obviously have already started discussions with our suppliers and given what's read in the press, and I made earlier this morning a couple of statements, also to the press here in Australia to say that we need to find a solution. Spot prices of AUD 20-AUD 30 is unfeasible, and we need better supply. We need more supply for the Australian market and industry, and we need some kind of pricing mechanism. The government is now obviously pretty closely.
The federal government is pretty closely involved and hands-on on this, so I have hope that we'll find some kind of agreement with gas suppliers. I'm not depending on this because you know that this has been a long discussion. This is nothing new here. We are trying to plan a lot of self-help measures. Obviously, planning our gas book, diversifying our supply base is something that's ongoing. You know that we've announced the intention to build an ammonia tank at KI, and that ammonia tank for me is a hedge. If gas prices in this country and suppliers are not playing with us, then we have the option of leveraging arbitrage between gas and ammonia. At the moment, we can't do that because we don't have infrastructure.
That's one tactic that we are adopting. The next one is obviously bringing in the electrolyzer and the green hydrogen discussion. We are quite advanced here at KI, so we might come with something there which will be positive for us. Obviously, you know, flexibilizing our manufacturing assets. We today have the possibility to make universal prill in Yarwun, which we did not have a year back. You know, all of that helps us to, you know, play the arbitrages and make the best positive impact for us in terms of, you know, playing the gas and the ammonia arbitrage. I am hopeful that we'll find some kind of solutions here. If we don't, then we have a plan B and a plan C in place.
I'm hopeful now, given the momentum we see with the government and the regulators getting involved.
Okay. Thanks for the update.
Great. Thank you. Next question comes from Scott Ryall from Rimor Equity Research. Please ask your question, Scott.
Hi there. Thank you very much. I've firstly a follow-up on the equity raising and the additional funds relative to your gearing targets. I mean, you've answered my first question, which was you would still do it with the benefit of hindsight. I wonder, is there an ongoing advantage in terms of operating the business to holding that extra capital at the moment? Yes, sure. You've given some color around the ammonia price and the potential to head up again. Is it mainly the flexibility around working capital that means that you need that additional flexibility on your balance sheet, or is there something else please?
Thanks, Scott, for the question. We're still operating in very volatile times. We're still seeing the ammonia indices moving around. It's very hard to predict where they're going. We've still got major conflicts happening around the world that's interrupting our supply chain, as well. We consider the environment that we have in the moment, having that stronger balance sheet, having that gearing below our target is prudent for the times that we have. We also did, in that raise, pre-fund for the earn-out for the Axis contribution as well. That does contribute about a 2% benefit into our gearing as well. As I mentioned earlier, that Axis payment did come through. The AUD 258 million came through in October.
Once you add a few of those back in, we're sort of sitting around that mid-25% gearing range, which is what we're considering quite prudent with the volatile environment that we have at the moment. The answer is yes, it's simply a stronger balance sheet in our operating times and our challenging operating times at the moment.
If I was to say to you that maybe the ammonia price stays where it is now, but doesn't, you know, fluctuate hugely, how do you move back to a point of optimal gearing?
We also need to look into the future that we're moving into. Obviously we're looking at growth across our business, growth in our Blasting business, our digital business, our chemicals business. What comes with growth is also increase in inventory and trade working capital as well. I don't know where the ammonia piece will go in the future, but we do need to make sure we keep right-sizing our inventory levels for our growing business. We will be looking to invest in that space still, maintaining high cash conversion and maintaining discipline with our debtors and our payables. We do need to make sure we have the right inventory levels for a growing business as well.
I think our balance sheet, going forward, is in a really good position to both the challenging external environment that we're in, but it's also well-positioned to fund us and support us as we're heading into further growth that Sanjeev has been talking about.
Okay, great. Very clear. My other question, Sanjeev, you mentioned very briefly some of the progress you've made on green hydrogen and ammonia project in New South Wales and Queensland. I wonder if you could just give us a little bit more around some of the milestones on Newcastle that you expect us to see over the next six, 12, 24 months, please.
Yeah. We made significant progress, Scott. I cannot give you every detail because you know we are operating with partners there. We should come out and provide an update to the markets in the near future. We've made significant progress since we talked last year on a technical concept on what the possibilities are, on who the partners would be, on what kind of government support we should be getting to be a first mover in that field. There's a lot at play here, but I'm not yet ready to talk about this publicly. We should very soon come up with something, and then we'll keep all of you in the loop.
It looks quite promising, both at Yarwun and at KI. Clearly, given the opportunities we see, we are also looking at similar possibilities at other manufacturing sites of Orica. You know, once you have a concept in place, you can easily scale up and replicate. The opportunities are global, given the energy transition and the need for green ammonia. Orica will play a major role in that transition and obviously benefit out of that.
Okay, great. Thank you. That's all I had.
All right. Thank you. Our next question comes from John Purtell from Macquarie. Please ask your question, John.
G'day, Sanjeev and Kim. How are you?
Great, John. Thanks.
Good, thank you.
Just had a couple of questions. Maybe first one for Kim, just in relation to the Russian EBIT in the 2022 result. Can you just clarify or quantify what the EBIT from Russia is? I think it was about AUD 8 million of EBIT in the first half.
Thanks, John. Yes, you're correct. The first half had about AUD 8 million. The second half, up until the time we divested on the 9th of September, we earned another AUD 12 million in our Russian operations, so about just under AUD 21 million for the full year. Under our accounting standards, we needed to record that second half earnings into our EBIT results. You'll also see our significant items also moved by about AUD 12 million in the second half, and that's backing out the AUD 12 million. Across the full year it was about AUD 21 million.
Got it. Thank you. Look, just a second question, in terms of Orica's end market exposures, and I know, Sanjeev, you've sort of touched on some of this, with your answers to the questions, but obviously there continues to be a lot of focus, on the long-term future of coal. How is sort of Orica preparing for that? You know, your future facing commodities, you shift into those is obviously a key part of that. You know, is there anything to kind of add in terms of what's been happening, over the last six months to prepare for that reality?
Yeah, absolutely, John. Look, our view on peak coal has not changed even though the market tells us that peak coal is not gonna come earlier, it's gonna come later, because coal has an important role to play in the transition, especially for the European Union. Somebody has to fill the hole of lack of gas from Russia. We have seen a ramp up of activity, not in Australia, and I mentioned that because of the weather and the COVID and all of that Australian coal output did not go up. We did see significant ramp up in coal activity in the United States, and obviously the Indonesian market was going very, very strong.
Now, our exposure in the United States in coal is not that large in the portfolio, but obviously if we have some spare capacity that the rest of the portfolio doesn't need, we are happy to offer that to coal customers. In our view and in our minds in terms of strategy, we still expect peak coal in 2024. After that we expect a stagnation and then a decline in consumption of coal. We are already preparing that transition. If you look at the portfolio chart we have today, it's copper and gold, our top two. We'll continue to grow the others. Iron ore will grow, future facing will grow, and then by default, exposure to thermal coal will continue to reduce.
We've successfully done that, John, for the last 10 years, and we'll continue to focus on this. Interesting enough, Q&C starts to show up as a significant contributor both to sales and earnings there. That's another area which is in fact growing faster than most other commodities. That's an area where we will also continue to grow.
Got it. Thank you.
Thank you. I am showing no further questions at this time. I would like to hand the conference back to Delphine for closing remarks.
Thank you all for joining us today. If there's any further questions, you know where to find us. Happy to do a call or just answer via email. Thank you all, and we'll see you soon.