Well, thank you very much for braving the weather today in Sydney. First of all, may I apologize. Today is Remembrance Day. We're starting at 10:00 A.M. This presentation may well go past 11:00 A.M., and I hope I have your forbearance that we won't break at 11:00 A.M. for one minute. We should be in the middle of Q&A by that stage. Apologies for that. We'll take questions from the room, then we'll go to the telephone afterwards. Thank you once again. I'll start off with sustainability, then I'll ask Craig to go through the financial performance. I'll come back on projects update and a general business update and explain some of the things we've been working on and some of the positive profile points that we've delivered. Starting off with safety performance. The navy blue bars are the lost time incident frequency rate numbers.
The lighter blue is the all-worker case rate. This is per 200,000 hours. Then the red line at the top is the severity rate. To give you a profile of how we've gone for the year, we worked fatality-free. There were no fatalities within the company. The severity rate came down dramatically and continues to come down. That is a record severity point. Basically, for the accidents that we have had for the year, they are less severe than the historical average. All of our numbers are well below the average for the industries in which we deal and our peer industries as well. Now, the reason there's a light blue bar on 2013, that shows the total extent of our frequency rates. That light blue represents ground support.
The ground support area is running with a frequency rate above the average for the company. The opportunity we'll be pursuing in the upcoming year is how do we get ground support to a position where it is in line with the rest of the company. Once we get it in line, then that darker blue bar represents where the frequency rate will be. We've started some initiatives at our steel plants to reorganize the layout of those plants so we can continue to improve the safety performance of ground support in line with how we're improving the safety performance of the whole company. On greenhouse gas, we've put in place some abatement projects that are actually delivering material savings against the carbon tax. The carbon tax to us is an immaterial point.
Most importantly, through those projects, we've taken the equivalent of over 250,000 cars off the road. We're actually contributing to where Australia is trying to go and the rest of the world, because this is not just at our Australian sites, it's in Indonesia, et cetera. We're contributing to where the world progress is on greenhouse abatement going forward. In general license to operate issues, I've made the point to several of you over the last 18 months that we'll be spending to catch up on the maintenance profile and the way that we run our major manufacturing sites. You can see from those bars given from the top right-hand side that we're now over the hump of that spend on sustenance and maintenance. It's coming down to sustainable, if I can use that word, level going forward.
We've just finished off a containment pond at Yarwun. That together with all the other improvements will put us in a very good position in regard to the regulators and our license conditions. We have spent a lot of money at Kooragang Island bringing it in line. You can see from that bottom graph that all of our inspections, et cetera, for all equipment at Kooragang Island is now in line with our schedules. We're over the hump of the spend to get us back into the right position, and those sites are in full compliance. Most importantly, we've also improved our community engagement. The groups that we deal with around Kooragang Island, especially Yarwun and Yarwun Council and around Botany, we have established a two-way system of regular updates. At Kooragang Island, we'll continue that going forward.
At Botany, we're in a position now where we have an engagement program. As we move forward with the EPA and other regulators in New South Wales, we will be discussing with those community persons how we go forward with the issue of historical mercury levels around the site. We think we're well-positioned. Most importantly, we've spent the money that needs to be spent on the sites to get ourselves back in compliance. With that, I'll hand over to Craig, who will be taking you through financial performance. Thank you, Craig Elkington.
Ian. Thanks, Ian. Excuse me. Thanks, Ian. Good morning, everyone. Welcome also to those joining us via the webcast. This morning, I'll be providing details of the company's financial performance for the year, with particular emphasis on the operating and cash flow elements underpinning these results. Our profit report and analyst compendium contain more detailed information, and these have been posted on our website and lodged with the Australian Securities Exchange earlier today. From a headline perspective, statutory profit after tax and individually material items for the period was AUD 602 million, up 49% on the 2012 result. On an underlying basis, profit after tax was down 7%.
EBITDA remained steady at AUD 1.3 billion, despite market conditions being more challenging than in recent years, with stronger contributions from explosives and mining chemicals products offsetting lower returns from chemicals and ground support products, both from a market perspective and due to integration and optimization costs for the ground support business to reset these operations in the broader mining services group this year. Ian will talk to that later. Higher depreciation and interest costs meant that EBIT was 4% lower than last year at AUD 985 million. A pleasing result was the strong increase in operating cash flow for the year, up AUD 515 million or 95% on last year's result. From a shareholder returns point of view, both earnings per share and return on shareholders' funds moved generally in line with the profit result.
Earnings per share was up AUD 0.56 to AUD 1.65 per share, and return on average shareholders' funds increased from 11.7% to 17.3%. In line with the company's progressive dividend policy, directors have declared a final, fully franked ordinary dividend of AUD 0.55 per share, bringing full-year dividends to AUD 0.94. An important point to make is that this final dividend is fully franked on this occasion due to an increased Australian profit profile and timing of tax payments generally. As far as future franking is concerned, we expect that dividends in the near future are unlikely to be franked at more than 50%. Moving on to the group EBIT waterfall. As I mentioned earlier, EBIT was down 4% or AUD 38 million on the prior year.
While 2013 presented changing market dynamics across many of the sectors we operate within, the explosives and mining chemicals product lines showed pleasing signs of earnings resilience. Starting from the left of the chart, on a comparative basis, earnings this year were favorably impacted by the non-recurrence of the 2012 Kooragang Island shutdown. I'll provide more granularity on the next three market elements in the next few slides, but in summary, volumes were generally down across our product portfolio. Improved explosives margins contributed positively to the result, while on the other hand, pricing weakness for ground support and industrial chemicals largely offset the explosives margin upside. Moving on from market conditions, ground support optimization and integration costs were AUD 29 million.
Depreciation was AUD 33 million higher than in 2012, with a full year operation of the Bontang plant in Indonesia and full-year depreciation from the Kooragang Island ammonia plant uprate project in the past. Land sales in 2013 contributed AUD 10 million this year, but were comparatively speaking AUD 23 million lower than last year's property sales contribution. Finally, the weaker Australian dollar in the second half of the year lifted earnings by AUD 10 million, while inflationary factors and other general costs of AUD 35 million were incurred. A little more detail on explosives volumes. Overall, volumes were down 2% on the prior year, with demand in Australia, Africa, and the CIS being the stronger performing regions. Australia Pacific volumes were up 5% on the back of continued market share growth in the Pilbara and southeast regions of Australia, only partly offset by lower volumes in the northeast.
In North America, volumes were down 6%, largely due to weak demand from the coal markets. Sales to coal markets were off 14%, with eastern coal regions being the largest down at 21% and Powder River down to a lesser extent at 3%. As far as other markets go, volumes across metal markets in both Canada and Southwest U.S.A. were up 6%. A recovering U.S. infrastructure market, particularly in the second half, saw quarry and construction volumes up 2% for the full year. In Latin America, volumes were down 8% due to generally flat and weaker demand across the regional mix of countries. Some isolated product-only contract losses in Brazil and Peru, and the impact of extended industrial disputes across the Colombian mining market.
Finally, volumes in EMEA, that's Europe, Middle East, and Africa, were up 8%, driven by strong growth in volumes to the emerging markets of Africa and CIS. They were up 19% and 32% respectively. The Nordics region, Western Europe, and other Eastern Europe markets were generally flat for the year, as weak conditions in the first half were offset by a pleasing return of volumes later in the year. Volumes in Asia were down 3%, mainly due to flat market demand in Indonesia, coupled with specific operational issues at certain customer sites that affected our second half demand profile. A feature of this year's result was the margin resilience of the explosives product and services portfolio, with an AUD 36 million improvement in 2013.
From a pricing perspective, we saw modest price improvements in North America, relatively stable pricing conditions across Australia, Latin America and Indonesia, and increased pricing pressure in EMEA, India and China. In terms of product mix, we are beginning to see the benefits of our progress of the differentiation strategy, both in terms of increased service delivery and in moving to higher value products. On this latter point, we've seen an increase in shift in the proportion of emulsion products to total AN volumes across all regions. From a global perspective, in 2013, emulsion products comprised 56% of total explosives volumes. That compares with 52% last year. In the detonator portfolio, electronic detonator volumes continued to grow, this time another 11% during the year.
Outside of products, we continue to build momentum in terms of our advanced blasting service offering in Latin America and Australia, with emerging exciting prospects in all other regions. With the integration of all mining related products and services under the mining services segment, we've prepared this slide to provide a greater degree of visibility of earnings contribution from explosives, our largest product and service offering. On a contribution per ton basis, explosives returns have improved globally year-on-year, particularly in the second half. This profile has been replicated across North America, Latin America and Asia through a combination of mix, services contribution and, to a lesser extent, price. Asia has also benefited from a full year's operation of the Bontang AN plant. The exception was in EMEA, where weak first half conditions were generally reversed in the second half.
While in our largest market, Australia, the contribution per ton was only slightly down year-on-year, this primarily due to higher logistic costs to service our growing Pilbara position. In terms of other product groups, we saw a mixed set of results across the portfolio, this portfolio comprises mining chemicals, ground support and the non-mining chemical product offerings. Sodium cyanide volumes are up 2% for the year. Pricing was generally stronger and together with improved production outcomes at our Yarwun plant, solid margin improvement was delivered. Market conditions for ground support products continued to be challenging during the year, with weak demand across our regions. Global volumes for steel were down 6%, and volumes of resins and powders were down 25% across our markets. Pricing was stable in Australia and Latin America. However, pricing pressure continues in North America, Europe and China.
In the chemicals business, we saw stronger chlorine volumes, up 5%, due to a warmer, drier summer on the east coast of Australia, and caustic soda volumes were steady. On the pricing front, caustic soda prices, though, were down for the year. Traded chemical volumes were generally subdued given the soft domestic manufacturing landscape and increased competitive environment. During the year, we spent AUD 243 million on sustaining capital, including AUD 55 million on environmental improvement programs at Yarwun and Kooragang Island plants. This year, we've split out an important element within our capital profile, what we call customer-facing contract capital. This capital typically involves spending on MMU equipment, that's Mobile Manufacturing Units, or onsite storage or other assets there on site, that typically moves in line with our customer contracts and therefore will remain a critical part of our new capital profile going forward.
AUD 217 million was spent on growth capital. This included AUD 82 million of spend at Kooragang Island across the projects there, and AUD 25 million on the Hunan detonator project in China. AUD 200 million was spent on the Burrup AN plant in Western Australia, and this included the project entry payment of $110 million, and the remainder being our contribution to construction costs. A key takeaway from this slide is the targeted reduction in 2014 capital, and this aligns perfectly with our refreshed capital strategy. We'd also expect, all things being equal, that a lower 2015 spend would occur as we also run down on the Burrup capital commitments to around AUD 80 million in 2015. Moving to our balance sheet. Net debt of AUD 2.3 billion is a slight increase from last year. However, pleasingly, our gearing has decreased to 36.9% versus 41.5% last year.
Gearing is now at the lower end of our company's targeted range of 35%-45%. Net interest expense was higher, up AUD 22 million to AUD 150 million, and this was due to lower capitalized interest occurring in 2013 following the commissioning of the Bontang plant. Capitalized interest was down AUD 26 million to AUD 12 million in 2013. Interest cover remains healthy at 6.6 times, well above our banking covenant requirements of two times, and above our company's internal target of at least 5 times. Average funding costs for the period were 4.8%, inclusive of commitment and other fees, and this is slightly lower than the previous year of 4.9%. A feature of the 2013 result, as I said before, was our operating cash performance in almost doubling to above AUD 1 billion through a focus across all cash flow components.
While year-end trade working capital balance of AUD 699 million was lower than last year, the 12-month rolling trade working capital ratio was up to 13.9%, and that compares to 13.3% last year. We've still got some work to do there. A strong focus on receivable and cash payment cycles has delivered good results in recent months. The next phase involves a program around sustainably reducing inventory levels across the global network. That will be a key focus going ahead in 2014. The company had total debt facilities of AUD 4.6 billion in place at the end of the year. Significant facility headroom exists across these facilities with AUD 2.1 billion undrawn at year-end. We continue to assess the optimum level of undrawn commitments we require going forward. Drawn debt levels show a diversified maturity profile and improved tenor.
Average duration increased from 4.5 years in March to 6.6 years at the end of September. The $450 million U.S. private placement issue completed in September has enabled us to replace some of the shorter-term debt maturities with longer-term funding lines. In summary, the company is in a strong liquidity position with adequate facility headroom and remains committed to our BBB+ rating. To manage downside risk of adverse currency movements, we undertake hedging of foreign currency exposures, typically using options. The U.S. currency represents 65% of all FX exposures for the group. This time, 63% of that exposure for the 2014 financial year has already been hedged at an average strike rate of $0.95. Other currency pairs are actively managed in this way, the total cost of the 2014 hedging program to date is AUD 11 million across the broad basket of currencies.
Given this approach, the remaining sensitivity of our earnings to currency movements is somewhat asymmetrical. To give you an idea of that sensitivity, using the change in strength of Aussie to U.S. as representative of the entire basket of currencies, for every $0.01 move above $0.95, EBIT would be negatively impacted by $3 million, while a 1% move below $0.95 would see EBIT increase by $7 million. Turning to environmental issues, as with previous presentations, we've included the expected cash spend profile over the next few years to deal with environmental legacies of the past. At year-end, environmental provisions were at AUD 188 million, with AUD 113 million of that balance relating to remediation programs at our Botany site in New South Wales. These programs include Botany groundwater remediation, hexachlorobenzene, or better known as HCB, waste treatment, and mercury remediation programs.
The groundwater treatment plant at Botany continues to operate at the level required to contain the plume. Annual cash spend on this program is expected to be around AUD 13 million annually. In maintaining the provision balance at around the AUD 50 million-AUD 60 million, it means that a similar amount to the cash spend gets charged to earnings. In terms of our HCB stockpile at Botany, Orica continues to safely store the waste in fully licensed and secure storage facilities, that remains the basis of our provision. In parallel, we continue to assess other options for the safe and environmentally sound destruction of the waste.
With mercury, a remediation pathway has been agreed with the New South Wales EPA, activities have commenced for the stage 1 of this work, we continue to support the independent process to address community concerns, all provisions have been updated in line with those programs. The main items included in the other environmental provision of AUD 75 million include remediation work at various other sites, some of these sites for future divestment. These sites around the world, the larger ones typically include Yarraville, Villawood, and Deer Park in Australia. We've got Seneca in the U.S. Engerø in Norway, just to name a few. Good progress is being made in remediating these sites. That concludes my comments on the result.
Before I hand back to Ian, I'd just like to take this opportunity to give you a sense of my priorities in coming into the role. My almost 20 years with the company in financial and operating roles, domestic and internationally, has given me a deep appreciation of the importance that strong financial discipline and proactive operational partnering has in driving company performance. This will be a key focus for me and the teams that I lead going forward. Further to my earlier comments this morning on cash, it won't surprise you that sustained cash flow delivery will be a central focus. Driving improved returns from two shareholders require selective capital selection and focused post-investment delivery. As a company, we're committed to these objectives just as I am.
Finally, from an external perspective, Orica has built long-term, strong relationships over many years across debt and equity capital markets. My clear objective here is to ensure that these relationships continue to support the delivery of mutual benefits and provide a strong set of future funding options for our company going forward. Thank you. I'll now hand back to Ian.
Thank you, Craig. I'll go through some of our projects and give you some granularity about what those projects mean and where it positions us in the respective markets. First of all, mineral carbonation. We've gone into an arrangement with funding jointly sponsored by the federal state governments and ourselves, so we'll be covering one-third of that funding for the next four years, as we ascertain whether there's an alternate way to combine CO2 with silicates. The great thing about this is it talks to our major customer base of coal-fired power stations and the feed thereof. Also, the technology at the stage it's at at the moment suggests that there's a way to retrofit power stations around the world, as opposed to carbon sequestration, where the geology restricts the application points, and there are inherent issues with the retrofitting of power stations.
Over the next four years, we should be able to update you on a regular basis as to how we go to a pilot plant position, which will be taking CO2 from Kooragang Island and testing whether this is a commercial construct for the world. We're very excited about this. Our scientists are involved with the University of Newcastle and others to see how we progress on this. One of the important things is, together with the abatement we've already put in place, we are vanilla when it comes to which political party pushes which approach to carbon abatement in the future. The opposition would like to sponsor such things as mineral carbonation, and some other political forces would like to introduce or continue with punitive taxes and other constructs.
Where we've positioned ourselves as a company means that we can really talk and play in any of those political arenas when it comes to carbon and the impact on the business. Bontang ammonium nitrate plant in Indonesia. It's now up to its prescribed and desired rate. We think into the future, we can push it above those rates. Over the next couple of years, you'll see the return on that asset appreciably improve from where they are at the moment. One of the flexibility points that we've introduced there is that in calendar year 2013, we had a license to export 78,000 tons. In fact, during the financial year, we exported 58,000 tons into Western Australia. When you look at import figures for ammonium nitrate into Australia, a fair bit of that comes from ourselves. That will continue to give us flexibility going forward.
In the upcoming years, as Mozambique, East Africa, and Africa in general expand for us, Bontang, together with Burrup, can be supply points into those markets. We're building the flexibility into how we go about using our manufacturing points around the world to service various markets. In Hunan, in China, we've just finished and have started commissioning a detonator plant which will supply 40 million detonators into the Chinese market. Just the non-electric part of the Chinese market constitutes 1.2 billion dets. The total market in China is in excess of 2 billion detonators. This will be supplying in at the premium end. Not the premium end as opposed to our electronics, but the premium end of electrics into the Chinese market at 40 million detonators per year. Burrup ammonium nitrate is on schedule for construction, the on-site construction piece is 30% complete.
Module fabrication, 28% complete. Overall, we're just over 50% project completion. Burrup should be fully commissioned and at its nameplate capacity by the end of 2016. It'll be supplying into the Western Australian market, which is a major growth point for us in Australia. In fact, the Pilbara is the last growth point for us, apart from the natural growth within the inherent markets that we already sell into. Our projections are that in 2017, that Western Australian market will be oversupplied by the amount of 150,000-200,000 tons of ammonium nitrate. That's on a very conservative basis for strip ratios, tonnage, and to get that number, we've taken the position that CSBP does not sell any of its expanded tons into fertilizer. That's on the assumption that the CSBP expansion all goes into explosives.
The projections for strip ratios, et cetera, in Western Australia, especially in the Pilbara, and their increases in 2017 and post-2017 suggest that oversupply in the Western Australian market will disappear very quickly. We're building this on the basis of a 40-50-year presence in the Pilbara as a supply point, an alternative supply point, which is 1,600 kilometers closer to that home market than the current supply points. Plus, we have the flexibility of backup out of Burrup. Basically, what we're doing in the fastest-growing part of demand in Australia is we're providing the miners in that area with two secure alternative supply points. Plus, we can back it up with supply out of Yarwun. When we strike our contracts with miners in that area, it's on the basis that we can guarantee secure supply independent of any other constructs.
We're already two-thirds placed into the market, and with all of the miners coming out with supporting points about how they're expanding their production, we feel confident we'll be able to place all of those tons by the end of 2016. We have, as I said before about Bontang, the opportunity to support Africa out of Burrup and Bontang going forward. This is building in flexibility, and it's building in security for the miners in the area. Kooragang Island. The southeast of Australia is already in excess of our capacity to produce out of KI. Sometime during 2015, that undersupply point will reach our trucking limit out of Yarwun down into the southeast. We've come up with a low-capital way to expand Kooragang Island from 430,000 to 500,000 tons with the use of nitric acid.
We've been talking to supply points around the world to give us secure supply of nitric acid going forward, which is very competitive against ammonia supply and through the ammonia plant that we have. Again, it gives us flexibility and security of backup to supply points. For AUD 40 million, we're going to build a tank at KI. That'll allow the inherent capacity of the back end of the plant to be lifted to 500,000, which will give us coverage in the southeast market and obviate the need or push out the need for an expansion to 750,000 tons for several years. We probably won't have to go to that final expansion until sometime around 2020.
Again, this is an application of our low-capital thinking of how we can best supply our markets in the most flexible way without overindulging or getting in front of the market with the spend in capital. On the back of KI, we've also announced this morning that we've struck a deal with SOBHP for supply of 14 petajoules of gas per annum to Kooragang Island for the period 2017 to the end of 2019, with a pathway to extend that into the future if we so wish and if SOBHP so wish. That gas will come from Gippsland through the Longford plant. Basically, we're the base contractual point which will allow more gas into the New South Wales market, which I think New South Wales would be looking forward to going forward with some of the constructs out of what's going to happen around Gladstone.
This is commercial-in-confidence about the pricing, I can tell you, if you project the current contract that we have over that period and compare it to the pricing that we have in this current arrangement, the differential is AUD 12 million or thereabouts. Because that is a gas feed into the ammonia plant, two-thirds of that ends up at KI at 500,000 tons and one-third to Yarwun because we export ammonia from KI to Yarwun. Basically, at 500,000 tons, it's AUD 8 million per annum extra into the costs in 2017 through to 2019 at KI, which is about AUD 16 a ton. That's a worst-case scenario. We've also done a deal with Strike.
We gave Strike Energy a small loan, and we struck a deal whereby if they're successful, and they've just started their first hole around the Moonbir area, they should be in a position to give us some feedback on positive outcomes of that hole by the end of November. If that is successful, we can take supply from Strike Energy as well. We don't have to use that gas at KI. We may well be in the fortunate position where we have an excess of gas. We can decide whether we take that into Yarwun, or whether we sell into the domestic market and use that as an offset. On a conservative basis, if Strike is successful, the price that we pay for gas now compared to the price we'll be paying at that time, we will have a positive outcome.
Quite unusual in this market. Worst case scenario if Strike is unsuccessful, AUD 12 million, AUD 8 million into KI. If Strike is successful, we may well be in a position where we actually reduce our costs of feed from where it is at the moment. We've taken the position to actually do something about getting gas and allowing gas to move a little bit more freely around Australia, rather than relying on governments to come up with some artificial constraint on the market. I think it's a pretty good outcome. It also reduces cost volatility for our customers, so we can give assurance and profile points about how we go forward with our contracts into the future. General business update.
I've been outlining for the past 12 months or so, now that I've finished my first 18 months with the company, that we would be embarking on a slightly different strategy. I think what you're seeing in these results is that we are actually delivering to that new strategy. The removal of functional duplication is at a point where the last of the structural points have been put in place. We are seeing that as we go around the world, the way that we've put in place those functional support points is starting to reduce duplication in the way that we were going forward before, when we had business primacy. You'll continue to see cost control and efficiencies coming through over the upcoming year. We have a full internal program of cost control with a roadmap of who's accountable, when it'll be delivered, et cetera.
Over the year, we will continue to promote our cost reductions at the same time that we lift our volumes. Supply chain excellence. We're not only going through an optimization of how we go about shipping and shipping costs, looking at various different sizes for ships. Actually at the same time, we want to lift the amount of flexibility we have out of our plants to various markets and backups. When we go to a customer, we can say to people, "If you buy from us, we can offer you something no one else can, multiple channels of supply," which equates to security. A lot of people value that in a material sense around the world. Our manufacturing excellence. Most of our big plants are now producing at record rates, and we can see pathways forward to lift those rates even further.
The capital-light approach is evident out of what we're doing at KI, and that capital profile going forward. The project management with that is in place, so we actually have a very, very controlled profile of how we go about spending money. The minimizing of working capital. You've already had a flag from Craig that this year we will be moving into a very clear project profile around how we control and how we reduce the amount of inventory we need to carry around the world. That should be coming through in our overall approach to working capital. Our advanced blasting techniques. I think at the moment we've got 19 trials around the world going on of various applications of trademarked uses of explosives in ways that other people can't really apply.
The more success we have in this area, the more communication that people are affording us in how they spread the word with others in the market. The integrated service solutions. Over the last 12 months or so, we've gone from a position where two-thirds of our contract renewals involve just products, to a situation where two-thirds of our contract renewals have services. We're getting onto more sites. That gives us a basis to build long-term relationships, and it gives us a basis to move people along that chain to the advanced blasting techniques over time. It's a building strategy of self-multiplication. The differentiated and innovative products.
As Craig outlined, our percentage moving to emulsion really puts us in a position where we can apply explosives in quite different ways and dial up strengths of blasts to a greater range than most other people in this market. The integration of ground support. We flagged at the half year, and then we flagged again when we gave the update on our profits, that we would be accelerating the integration and optimization of ground support. That cost us AUD 29 million in one-offs for the year, 24 of which came in the second half of the year. We have reduced numbers in that area by over 400 people. A lot of those AUD 29 million were in redundancies, plant closures, stock write-offs, as we went back to some customers and said we will henceforth not be producing certain things because the margins weren't acceptable.
We've taken all of those costs during the year. I'd like to reconfirm that the opportunities for enhancement of our results are in line with what we flagged at the half year of AUD 23 million-AUD 25 million you'll see this year coming through. Towards the end of the year, we did see some market kick-ups, a little bit in the U.S., a little bit in Europe. The feedback points to us are that the North American market especially has seen the bottom. A lot of the differential hit into the Central Appalachian has been taken. A lot of the stock write-downs or the stock reductions that were built up in 2012 have worked their way through the system.
You should see a stabilization of coal, thermal coal into the energy curve in the U.S., getting back around the 40% mark and stabilizing there, which will give us a good platform for growth going forward in ground support. Also, the full integration into mining services has meant that we've already started to introduce into a far wider market range with underground metalliferous, et cetera. We are starting to see upside points already from the integration points. Contracts for explosives. This is a really important point. In the year just completed, we had a contract renewal profile, which was average to above average in its amount of money involved. It wasn't a low year for us in contract renewals. During that year, we retained over 90% of the potential revenue that came up for renewal.
I'll use the word potential because only about 20% of our contracts are traditional take-or-pay. We strike the vast majority of our contracts at a set point, and as the volume goes up or down on that, the price can either go up or down with it. There's a fairly wide range around the set point for most of our contracts. We retained over 90% of that revenue, and for every dollar we'd lost at re-tender, we picked up well in excess of AUD 2 from greenfields contracts or contracts that we had won that were previously held from competitors. We basically grew the revenue basket over the year, as we did the year before. Really important point.
An even more important point is if you look at the total earnings potential at the end of 2012 financial year to the end of 2013, the earnings potential per dollar of revenue has gone up as well. We've grown the revenue basket and we've grown the earnings potential of that revenue basket on the back of an enhancement of our services and on the back of the enhancement of our differentiation of products and moving people to emulsions, et cetera. I would suggest that the volumes that you saw in 2013 going down by 2%, the market, in fact, went down by more than 2% on average around the world. The reason we only experienced a 2% volumes down point is because of the enhancement and enlargement of our contractual base. 2013 was quite an unusual year.
It is very unusual for the world to see a reduction in volumes for explosives as an average across the world. I will get back to that point when we get onto outlook. Our pricing in most markets was flat. In North America, we were able to lift prices both on ammonium nitrate services and our electronics. Our market share is growing. In a market that was not getting bigger, we were able to pick up more contracts off others, and we know of all the major contracts that are going on around the world. This has been a quite unusual threatening year, but it's also been an opportunity for us where we've increased our market share. Our penetration into Africa, the CIS, and the Pilbara has gone on apace. We've kept our homeland position, plus we've expanded for potential earnings into new markets.
I would suggest the volumes and earnings in a normal average year for us have both been lifted in potential. All we've got to do is have an average year. That focus on product differentiation and services is assisting our margins. You can see it in those returns that we're getting per ton of explosive. We're well-positioned around the world To our outlook. Our group net profit after tax before individually material items in FY 2014 is expected to exceed 2013. However, volatile market conditions add a greater degree of uncertainty. Going back to the previous slide, the point is that 2013 was quite an unusual below-average year. If I was going to give a personal predictive point on top of this outlook, I would suggest that the first half of the year is going to be a little harder for us than the second half.
Overall, I think on balance, people are thinking that market should be at least moving back to normalization. Now having said that, I think we all know that if thermal prices or prices for thermal coal were to drop by another 10% and the Aussie dollar was to go back over parity, then that would introduce another set of conditions to us, where we'd find it hard to maintain our volumes. The U.S. market is past its worst peak because it is principally a domestic market. Those internal stockpiles that have been worked through put it in a position where coal is returning to around that 36%, 40% contribution to the energy curve. Over time, there's about a 24% buffer of energy into the energy curve in North America that can be picked up by either gas or coal.
Even a worst-case scenario for gas pricing, coal will be around the 40% mark going forward. I think North America for us may well come back. Indonesia and Australia for thermal coal are probably the big exposure points for a very positive outcome for us going forward, and that should play out in the first six months of the year. If you see surety of pricing and then a slow uplift in thermal prices, that will be a preset for conditions which will give us a positive outlook. I think in summary, we've done everything that we need to do to position ourselves for the world to get back onto what is average to above-average growth points. The indications are that Tri-America is starting to move into that positive direction, and we're even seeing some green shoots in Europe.
We're seeing it through our quarries and construction. Quite an unusual year behind us. We've taken the opportunity to fully integrate ground support, and we've taken the opportunity to expand our base and get set for those average to better conditions that we should expect over the next few years. With that, I'll open up for questions from the floor, and then we'll go to questions from telephone.
Hi Ian, it's Mark Wilson from Deutsche.
How are you?
You went through the surplus, your anticipated surplus in the WA market. Just wondering if you could give an outline for what you are currently seeing in the Queensland or Northeast market, what type of a surplus, and how quickly that's being worked through, given the very strong volumes over the last three to six months? Also Indonesia, is there a surplus up there? How big, and what is happening in that spot market?
Good question. As I said, the Southeast is continuing to grow for us, and we're still trucking down tonnages from Yarwun to supply into the Southeast market. The Northeast, especially in the first half, we went through a bit of an adjustment point as our competitors brought on plant, et cetera. We've repositioned ourselves with flexibility out of Yarwun and supply into some of those competitors. The Northeast overall is slightly over-supplied, but the flexibility we've built in counters that, and we've put ourselves in a position at the end of the year far better than we were at the start of the year. I would suggest that the Northeast, Southeast is really going to be driven by what I was talking about with thermal prices and the Aussie.
If we see the Aussie going down below 94, which it is this morning, and it gets down below the 90 mark and the thermal demand picks up in the way that people are suggesting, then I don't think there will be oversupply. If the two combinations go in the opposite direction, you may well see some mine closures and then of course there will be oversupply. It talks to our point about flexibility and moving Yarwun tons around. We've actually run some experimental shipments into South America for Yarwun, which we could do if needed. That's one of the crucial strategic points that we're trying to build in. Indonesia for us was a very troubling year, where there was a dispute at one mine which had a material impact on the tonnage demand, and that dispute continues on.
There was another point where one of our customers closed for three months while it fixed up some internal issues around ground support, et cetera, and that's back online. In this type of market with the low BTU coal that comes out of Indonesia, we're not seeing much growth in that area. One of our major contracts is up for renewal now, even though the contract itself does not run out till the end of September next year. We're working that through with our customers as we speak. With the 60,000 into W.A., we see a profile of 280, 290 out of Bontang. Into Indonesia, that 220 mark, 230 mark. All the indications are that we'll be able to supply to that point.
Again, it's that thermal pricing and the differential of demand out of India on the back of India as the main source for low BTU coal now. It's really how those markets play out.
Ian, it's Michael Ward from CBA. Just two questions from me. The slide you put up around the shift between AN and into emulsion, I think it was 56%.
Yeah.
What's sort of the end game there? How far can that actually go?
Well, I'll give you some examples. The weather out of the northeast of Australia every year from this time on, you get interruptions to the flow of coal. Emulsion can overcome a fair bit of that interruption profile, so that area can grow. In the Pilbara, as a lot of the older pits continue to get closer and closer to that water table, the use of Emulsion will grow. The variability in how we can dial up Emulsion for various more sophisticated blasts is another growth point. I'm not saying we'll ever move to a position where it's 100% Emulsion, but I think there's still a fair bit of growth left in the move from prill to Emulsion, because it gives you greater flexibility in the way that you run operationally day to day.
Our thrust into Emulsion and getting customers into that Emulsion thinking will continue over the next few years.
Maybe asking a question in a slightly different way. Over the next few years, would you expect it to continue to grow at 4% a year, or would it be less than that?
I think out of the Pilbara and a few other places around the world, around the 4% mark should be a target that we aim for. I can't talk on behalf of the miners and where they're going and which pits they're going to be running and whatever. Around 4% should be a growth point for us.
Okay. Just in ground support or ground control, whatever it's called. I think it's ground support. You made a comment there around steel versus chemical volumes and some potential changes to the competitive landscape on the chemical side. Is that a structural change in the market, or was that just a particular instance this year which you'd expect to reverse into next year?
Yeah, actually, the percentages were that steel was down by 6% and the resins and powders were down by 25%.
Yeah.
What we saw happening in the market is that people were going for the less sophisticated ground support bolt systems where you'd use less resin and just use a steel wedge in the end of the bolt. As market conditions improve, then we will see people hopefully going back to catch up some of their long-term bolting and that, which requires resins. They've been trying to cut their costs by going to the low-tech end of how they apply ground support. That resin powder percentage should come back as the markets come back as well.
Thank you.
Hi, Ian. It's Ramon Lazar from UBS. A question on EMEA. Pretty good sort of turnaround in the second half. Could you just talk around maybe what to expect, looking into 2014 from that market, particularly on a cost per ton basis?
Well, we have pushed into CIS. We've picked up some pretty big contracts in the CIS, one of which goes over 10 years. That's a fundamental growth point for us. We're looking at opportunities to move into Eastern Russia as well, which should continue that growth path for us. In Africa, we're pushing into the West African belt as well as the belt that sits just above South Africa. Good growth potential going forward. In Africa, a lot of it is built around emulsion. Some of the technological advantages we have in Africa and the way we can drop plants on the ground give us a technological advantage, and it also gives us a margin advantage. In Europe itself, the traditional Europe, Eastern Europe coal volumes have dropped off.
As the U.S. stabilizes, hopefully we'll see some exports out of the U.S. into market drop, which will help Eastern European tonnage. We're starting to see Q&C come back. On top of that, we have a restructure program that's in its first year this year in how we amalgamate all our operations in Europe itself, which will reduce costs at the background of how we run that European part of EMEA. You've also seen a fair few costs come through in how we're setting our foundation point for Africa. The total cost structure in EMEA this year will be better than it was last year, and we should continue to pick up more tons.
Thanks. Just one more on North America. Just any update with regards to that CF supply renewal?
Very good question. Hopefully within three months, I'll be able to give you the positive outcomes of what we've been doing there. I know some people are taking the position that we're facing some pretty big cost impulse from all the discussions we've had so far. That will not be the case, but I can't confirm that until we actually finish off a negotiation point. It's looking very positive.
Ian, Andrew Scott, CIMB. Just a couple if I can. First of all, you just spoke about growing into Africa and, I guess, emerging Europe. Just expectations around CapEx there, as I imagine it's relatively CapEx light, but the numbers you're talking about or the growth you're talking about, is that funded in the CapEx numbers you've given us today?
Yeah, that's part of it. The reason we're stripping out the capital that sits at the back of our contractual growth is just making the point that we want that number to continue to grow because of the test of the fact that we're moving into more and more services. In Africa, we've got these NOISE plants which arrive in containers. You drop them on a site, you can bolt them together, and you're up and running with an emulsion plant. Now, they're carried over the life of the contract and written off, but you've still got to provide the capital for that. Very low levels of capital, but there will be more and more capital as we move into more and more services because we'll be running more and more trucks, more and more containerization, helping people do their blasts, et cetera.
The margins are good, but you've got to invest the capital up front to get those returns.
Just secondly, either for yourself or for Craig, good cash flow performance. The CapEx profile over the next few years is declining and hard to see that we're throwing in a big AN plant anywhere. You're at the low end of your target range for gearing. When do we start talking about capital management as a potential?
Yeah, it's a fantastic problem to have, isn't it? Look, we think that by the end of 2014, we'll be in a position where we start to discuss with people about opportunities for hopefully a position where we have to undertake some cash management. We should be in a position to reward shareholders even more than we're rewarding at the moment. As far as growth is concerned in explosives, it's something we've kicked around a fair bit. We think our positioning point is such that most of our growth going forward will come out of organics in the core of explosives. We can't think of anyone around the world that gives us a potentially more advantageous position in any of our major markets that we would be allowed to move on.
Outside of that core, maybe in cyanide and whatever, there may be opportunities, but this capital-light approach will put us in a position where it should be generating a fair bit of cash over the upcoming years.
Okay. It's Paul Jennings from PAC Partners. Ian, just a question for you and then one for Craig. Just on the situation where you've taken some market share, are you able to comment as to whether that came from taking materials that were done in-house, or were there regional players or more global players you took that market share off?
We've pushed into the Pilbara pretty quickly. We've got a fair percentage of the Pilbara already. We've obviously taken market share there. We've taken some market share on the East Coast as well, in the northeast areas. In Africa, we've taken a greater market share. CIS is another area we've been pushing in. Canada, we've been expanding our market share, and we've consolidated in the U.S., expanded in a bit of the Southwest in market share. In Latin America, we've stabilized. We haven't been growing market share there, but we've repositioned ourselves. It's right around the world.
Is it coming from the customers that were doing it in-house and you're now doing it, or is it coming from regional players that you're displacing? I'm just working out where that extra services EBIT's coming from.
Mostly regional players that we're supplying. It's not as simple a question as you may think because we're supplying people who are supplying services to others, and we're picking up market share in that regard as well. It's into the base supply points, plus into the more sophisticated supply points. It's right across the range because some people have decided to back off some of their own services they were supplying themselves, and we're now supplying those right through to some products that they were supplying themselves and we're supplying. It's coming from a whole range of points.
This is a question for Craig. Are you miked up there?
Yeah. How's that?
Just with your CFO priorities there.
Yes.
One problem we've had in the past is when Orica pushes the financial envelope a bit, the customers lose out. I was interested in your priorities. The customers weren't in there. I'm just wondering how you tie that up coming from a, I suppose, a customer-focused background into that role.
Thanks, Paul. That's critical, and I think that's an advantage of having been out there, particularly the last few years, day to day, meeting with customers. It's a critical element. It's included in the first point, Paul, around really operational partnering. We're going to have financial disciplines and metrics and KPIs. That's clear. The whole organization needs to interact. This is the advantage of a very clear strategy and a structure to support that. All the component parts need to work together. I actually see the finance function as being something that goes from left to right and sees the whole breadth. Everything we do, everything we need to do has to have that customer element front and center. I see that very clearly in the objectives I'll be setting, not only for my team, but obviously for the organization as well.
I think you're seeing in the results a pretty clear indication that we're not just relying on lifting ammonium nitrate prices to build our margins and build our profits going forward. How do you come up with a sustainable value proposition that the customer wants? That's the direction we're trying to go in. How do we provide more services? How do we actually improve productivity for people?
Just Sorry, if I could just add one more thing there, a bit of addressing your first point as well. Part of our capital-light strategy around being more embedded in the customers through on-site storage and MMUs, et cetera, is exactly that, is to be part of the customer fabric so that we're more involved in the services. Of course, a lot of those services were previously done by customers. We need to prove ourselves in that interchange. The strategy is to make sure that we continually embed ourselves further and further in terms of those mining services and mining practices and so forth. When we talk about differentiation, there's clearly the campaign stuff, the big Strata Blast and the big advanced blasting services that we're trialing around the world, as Ian said. There's so much more differentiation day to day.
The more people we have there working, engaging with our customers on blast design and blast execution, the more opportunities to bring higher value, more advanced products, more advanced services into the customer's value chain itself. Embedding ourselves even further with the customers will be forefront to all of that. Our capital program is a key part of driving that intimacy.
Okay. If there are no more questions from the floor, Sorry, there's one more question from the floor.
Yeah. Would you mind just commenting a bit more on sodium cyanide, how that performed this year and the outlook?
Yeah. The plant produced record amounts. Effectively, the cost per ton of production went down for us. The pricing actually lifted this year compared to last year. Our margins lifted for sodium cyanide. You would've noticed that we did 2% more sodium cyanide this year than last year. I think when I was in Hong Kong, I gave an update that at that stage we were 4%. The last year of 2012 was a very strong year for us. The comparator between the two last points, last months of the year, brought the overall percentage down. We did some maintenance at the end of the year, which brought down the supply. Going forward, we don't see much opportunity for further upside in pricing.
The contractual basis and the spreading out of that contractual basis gives us a firm point of security of earnings from sodium cyanide. Even though you're seeing a bit of volatility in the gold market, we've positioned ourselves with the biggest customers in such a way that we're pretty confident about the earnings profile out of that area.
Total profit would be pretty high, I believe that bit.
A bit. Sorry, I can't give you that number. We've lifted the margins on the back of what we've done internally. We've pushed the cost of production per ton down a fair bit. Yep. Is that telephone?
Your first question from the phone comes from the line of Stuart Jackson from JP Morgan. Please go ahead.
Hi, guys. Can you talk about what you're seeing in terms of strip ratios and the impact that's had on the volumes globally, and what you expect the outlook for that to in terms of demand going forward? Secondly, just on the ground support or ground services side of the business, you gave the guidance earlier in the year that that'd be basically break even after all the restructuring charges. How did that perform relative to that expectation?
Okay, I'll go to strip ratios first. We saw at the start of the third quarter, our financial year third quarter in the northeast of Australia, people starting to back off their strip ratios a bit. Of late, they've certainly caught those up. We're not seeing any downturn driven by strip ratios up and down the east coast of Australia. Some of our Indonesian customers are still running at strip ratios that an average person would suggest they cannot continue with for too much longer. That's another pressure point in the Indonesian market when they do go back to what is their average strip ratio profile, what the pricing is to sustain that. North America, I don't think it's been a major point for us over the whole year.
From time to time, we've had various customers trying to push down on their strip ratios while they run through stockpiles, et cetera. That's mine by mine issue. Indonesia's probably the one area that we're seeing that strip ratios are still being run at rates that they can't continue with for very much longer. They are starting to pick up again, the strip ratios, I don't think it's a big material point. In Australia, we're not seeing overall strip ratios being played too much for their cost constraints. In ground support, we did guide to basically a wash your face EBIT position with ground support. It did come in with a very slight positive EBIT, I don't think it's something that is material in the total context of the company.
In fact, in the last month or so in North America and in Europe, out of Quarrying and Construction, we did see a slight pickup in the ground support volumes, which gave us a slight positive contribution in EBIT.
Great. Thanks.
Okay. One more.
Your next question comes from the line of Matthew McNee from Goldman Sachs. Please go ahead.
Ian, just one quick question. Just on the ammonia lag. You normally identify the benefit from that or the cost of that, and I suspect it was a benefit in the year. Can you quantify that for us?
No, it was neither an impact of a negative or positive nature over the course of the year. That lag of pricing three months didn't have any material effect on our earnings at all during the year.
Those improvements.
We saw a dip in ammonia prices, and then it came back again towards the end of the year.
Okay. The improvements in contribution per tonne wasn't impacted by any of that. Just on Asia, can you explain to us a little bit more about what's happening there? You were saying that Bontang's obviously ramping up. Is that what we're seeing, just the fixed cost leverage working for you there? Or what's driven that change in contribution per tonne?
We've been picking up tonnage in India. We've been picking up tonnage in the Philippines. Fairly flat to slightly down in Indonesia. It's really across the board how we're going about contributions. There's pricing pressure in Indonesia, but some of the other product ranges that we're moving with into the Philippines, et cetera, are making up for that.
Okay. Thank you.
Another one on the front end.
Your next question comes to the line of Ben Chan from Merrill Lynch. Please go ahead. Mr. Chan, your line is open to ask a question.
Sorry, can you hear me now? Yep. Can you hear me now?
Yeah.
Okay. Just hoping you could just speak quickly about some of the economics of shipping product from Australia to Africa. Just seems like, obviously, quite a long way. Just trying to understand a bit more of the opportunity there or if it's more just to really keep plants loaded.
I said before that we've actually run some trial shipments out of Yarwun into Africa, and we've run them into South America. The landed costs into South America and into Africa are such that, compared to other points of shipment around the world, we make a slight profit taking them out of Yarwun. Yes, it's always part of how do you keep your plants full, because if you rely on regional demand with weather conditions and normal mining cycles, you will never be able to run your plant at the exact point of full capacity unless you have multiple points that you can take your production into. That's one point.
Two, we want to get to a situation where not only our own plants, but other points of supply around the world give us flexibility in a way that we don't diminish our contribution margins by making sure that our plants run fully utilized all the time. You got to remember that these plants are basically fixed-cost plants. The only variable for us is the ammonia consumption linked to the tonnage, but most of the other overheads you carry all the time. The higher utilization of those plants, the lower the average cost of production. When you take those points into account from economics, then it is far better for us to run those plants. In the long term, it is better from a maintenance profile to run continuous plants on a continuous basis as well. The economics are there.
We've been through the exercise, and it does stack up.
From other supply points into those regions, I presume Australia, then what you're saying is compares quite well to North America, to Africa or wherever product is going could alternatively come from.
Sorry, could you just repeat that just a little louder, please?
Sorry. I was just asking that just the actual landed cost into Africa, say from Australia, would be equivalent then to something coming down from North America or from Europe or another supply point?
Yes. That's certainly true of South America as well. Are there any? Okay. Thank you once again for braving this weather and participating in person, and thank you very much to those persons who participated on the phone. I hope you recognize this result as a transition year for us. We've reset our positions in light and in regard to the strategy that we enunciated just over 12 months ago. We are in a position for an average market to give us quite healthy returns. In answer to a question earlier, in 12 months' time, we hope to have a very positive conundrum of what we do with some of the cash. Thank you very much for your forbearance and your time.