Australia | 10:44 AM
Dyno Nobel's Investor Day showcased management's ambition to transition into a growth company, including new earnings targets and additional growth through military munitions explosives.
- Dyno Nobel has communicated an ambitious FY31 EBIT growth target
- Defence energetics emerges as a new growth platform as the world shifts it focus to defence
- Premium products, new contract wins and additional ammonium nitrate capacity underpin the next phase of earnings growth ambitions
By Danielle Ecuyer
FY31 growth targets
The strategic repositioning of Dyno Nobel ((DNL)) is the key takeaway from last week's Investor Day, titled “Beyond FY28 $600m EBIT Ambition”.
Management signalled its longer-term growth ambitions for the explosives company, laying out not only an upgraded FY28 EBIT target, but also an FY31 EBIT goal of $800m, compared to FY26 EBIT of between $480m-$490m.
The market was happy to cheer the update, sending the share price up almost 8%, which is impressive given the rally off the late March low of some $2.88 to currently around $4.10.
On balance, the detailed investor presentations, which outlined multiple growth levers for the company, were equally well received by analysts, barring UBS, which could only muster a “mixed” assessment of the market update.
While acknowledging the Explosives FY26 EBIT/NPAT guidance came in -2% and 5% below and above consensus expectations at the midpoint, respectively, the bottom-line upgrade was generated by lower interest and effective tax rate guidance. Capex remains in line.
RBC Capital retains an upbeat view on the stock and was happy to look through the NPAT guidance beat, which it notes as 4% ahead of the market, albeit boosted by lower tax and interest costs.
The real focus for RBC is management’s “clear line of sight” to FY28 EBIT of $600m, which compares to the prior market expectation of $579m.
The new FY31 target of $800m compares to market consensus of $607m and is inclusive of a $30m-$40m EBIT contribution from two North American defence energetics contracts.
As noted by UBS, the FY31 “material” beat on prior market expectations is factoring in high single-digit revenue growth from FY26-FY31, compared to consensus previously expecting around 3%.
Projected revenue growth assumes a target of 3%-4% volume growth, 1%-2% price/mix growth and 3%-4% from new markets.
As observed by Macquarie, the FY31 target represents around a 9% EBIT compound average growth rate off FY28.
FY26 guidance
Before diving into the strategic shift, perusing the FY26 update, North American performance was better than expected, with growth evident across all end-user segments and distribution channels, RBC points out.
Macquarie views the ongoing ammonium nitrate supply challenges as “not so good”, with around 15% of North American sales third-party sourced.
Ongoing debottlenecking initiatives at Cheyenne and LOMO (Louisiana, Missouri) in North America are expected to add some 70kt of ammonium nitrate capacity, with upgrades at Moranbah, Queensland, anticipated by Ord Minnett to add 15kt-20kt over the next year.
Macquarie identifies FY27 as more of a turnaround year than previously, including Cheyenne and Moranbah. Queensland Nitrates at Moura, rather than Moranbah, is the 50%-owned joint venture with Wesfarmers ((WES)).
The result is higher forecast capex, a rise of around $60m from FY26. Macquarie suggests the FY25 turnaround impacts of circa -$50m, which also incorporated large maintenance programs at Moranbah and Louisiana, Missouri, are unlikely to be of the same order of magnitude in FY27.
Ord Minnett points to new contract wins, including projects with Vale in Brazil, two AngloGold Ashanti sites in Ghana and Mesabi Metallics in the US, as well as several mining developments in Canada.
In Australia, Dyno Nobel has announced ten new hard rock mining sites over the last year.
Macquarie’s take was the new customer contracts in Africa and Latam, while positive, have also moved further out, with ramp-ups now in early FY27, while Ord Minnett also points out EMEA and Latam growth has been slower than originally expected due to competition and softer construction and quarry markets in Europe.
Management expects conditions in Brazil to improve. The start-up of a new emulsion plant in Peru is flagged for 2026.
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