Good morning, everyone. Welcome to Capral's first-half results presentation.

I'm joined this morning by our CFO, Tertius Campbell, who many of you will have met in the past, and also by Luke Hawkins, the General Manager of our Industrial business and also our supply chain. Luke also heads up our anti-dumping and government advocacy.

Luke will be helping us with the presentation today. All right.

Firstly, turning to the agenda, I will run through the business overview and the first-half highlights. Luke will talk a bit about the Industrial business in particular.

Tertius will run through the financials, and then I'll come back and talk about strategy and outlook, and then guidance to finish up. Turning to slide 3, the Capral business at a glance.

Capral is Australia's leading supplier of aluminium extrusion and rolled products. We've got six manufacturing plants around the country, 65,000-tonne of annual extrusion capacity, 24 distribution centres, 19 regional distribution centres, 15 trade centres.

The key markets we play in are residential and commercial buildings, and also a wide range of industrial markets, the largest being transport, marine, and infrastructure. Overall, the revenue for the last 12 months is around $730 million.

Our market share sits at approximately 27% of the aluminium market in Australia, downstream aluminium market, and we have in excess of 1,000 employees. Moving to the first-half highlights on page 4, a really solid first half despite challenging market and supply chain conditions.

Certainly, the Middle East conflict played havoc on aluminium supply chains internationally in the first half of the year, and also on Capral, and Luke will talk a little bit about that in more detail later on through the presentation. That led to materially higher global metal prices which drove higher sales revenue on slightly higher volume.

The residential market remains subdued, and we expect the recovery to be gradual. Strong operating cash generation and a net cash position.

Our margins held up well through disciplined cost and pricing management, and we have a strong balance sheet supporting continued capital investment. Moving to the detailed highlights on page 5, I won't go through all of these.

I'll just pick out the major ones we want to talk about. Overall, a nice improvement in earnings in a challenging market, and the standout was our strong cash generation and strong cash balance at the end of 30th of June.

Our volume up 4% to 32,500 tonnes, revenue up 14% driven by the higher metal pricing, particularly LME, which I spoke about earlier. Our underlying EBIT up 4% to $16.7 million, and our underlying EBITDA up 5% to $29 million.

Net profit after tax just under $16 million, up 4%. Last year's number did include a $2.5 million tax benefit, and this year's included a positive LME revaluation.

Overall, earnings per share up 9% to 99.4 cents per share, net tangible assets up 6% to just over $13.40. As I mentioned earlier, a very strong net cash position, $62 million, on the back of our best ever debtors collection in the month of June.

Really pleased about that result, leading to strong operating cash flow. Our capital management, our share buyback continued through the first half of 2026.

We managed to buy back on market 23 equivalent of 23 cents per share, which was slightly down on the 27 cents per share in the first half of last year. Similar to last year, no interim dividend, but clearly it's our intention to top up the share buyback with a final dividend, and I'll let Tertius talk a bit more about that later in the presentation.

Really pleased with our safety performance, best on record, 3.1 total reportable injury frequency rate, down from 5.9 last year. Now turning to page 6 where we discuss our volume and our channels to market and sales mix.

We have diversified our channels quite extensively over the last five or six years, and that supports our overall resilience, particularly in the downturn in the housing cycle. As I mentioned earlier, first-half volume up 4% with the growth primarily coming from our distribution channel, which is a channel where we've made a number of strategic investments over the past five years.

Our industrial business now represents 50% of our total volume, that's up from 41% in 2017. That's broadening our demand on our business beyond just the building cycle, and it does reduce our earning cyclicality.

Our residential exposure, as we've spoken about previously, is weighted to detached and low-rise dwellings. The high-rise multi-residential dwellings, the high-rise apartment market has become the domain of fully fabricated imported windows and doors.

As we're just talking about imports, imports of both extrusion and fully fabricated windows continue to impact upon the Australian aluminium market. In particular, the big change over the last couple of years has been the growth in imported fully fabricated windows.

As a result of that, the Australian Windows Association, together with the largest window fabricators in Australia, have jointly taken an anti-dumping case which is currently in progress, and Luke will speak a little bit about that later in the presentation. Where we sit at the moment, our channels to market are around 50% of our volume goes directly from our mills to our large customers.

Then out through our distribution business, 32% of that is extrusion through our distribution business, and 16% in rolled products, and rolled being sheet and plate aluminium. The chart on the bottom right-hand side of the page represents our six-monthly sales going back to 2017.

As you can see, the second-half sales are typically, or volumes are typically higher than the first half as we hit into the summer months where there's more building activity, and we get more feet on the ground and out there in the marketplace. We are looking forward to once again a lift in volume in the second half of the year.

Okay. Turning to page 7, specifically here residential.

While our exposure to the residential market has fallen a bit in recent years, it is still by far our single largest segment that drives our volume. Just to note that our demand typically lags commencement by around two quarters.

If we look at this graph, we can see in 2023-24 the cycle low, and 2025 the market stabilising, and then this year, 2026, starting to see a lift in housing commencements, albeit we are yet to see that volume start to flow through, but we do expect it to start flowing through in the second half of 2026. Beyond this year, the forecast as you can see on the slide of good, solid growth in the housing market, reasonable proportion of that is in the green parts of the graph in which our sales are primarily plan, which is the low-rise and housing market, but also strong growth in high-rise on apartments as well.

I think the thing to note here is that the impact of the recently announced tax changes by the federal government, I think that the budget was in May, have created a fair bit of uncertainty in the last couple of months about what that means I guess for all investments, but for us particularly relevant for Capral is investment in residential housing. While there is, as I said, a fair bit of uncertainty about that at the moment and the knock-on impact leading to lower house prices immediately, we do think that given the underbuild of housing in Australia over the last decade that with the tax changes favouring new build that, once the market settles, that we should see continued strong growth in the new housing market as a result.

Okay. Now moving to a few examples of projects recently completed.

Page 8, just want to highlight here some projects completed by our fabricators. The first two are upmarket homes completed by Busselton Aluminium in WA using Capral's AGS framing systems, and also an upmarket home there on the Sunshine Coast fabricated by Elite Aluminium using our upmarket residential system and also our framing systems as well.

Then turning to commercial building examples on next page, just to give you some idea of where our products end up. We have a shopping centre or outlet centre in New South Wales produced by Elite.

We have a train station in WA, Nicholson Road Station. You can see a lot of aluminium used in these new infrastructure projects.

Then we have on the far right-hand side a medical clinic in Charlestown in New South Wales with the fabricator there being PCW from up in the Central Coast. Okay.

Now turning to the Industrial sector, I'm just going to let Luke, who heads up this part of our business, talk to this slide.

Thanks, Tony. What we can see here is, looking at the key market segments, the transport sector has been pretty steady.

You can see it's stabilised from the 2025 downturn, and it's been pretty stable into '26, and we expect that to sort of continue through. The marine segment has been particularly strong for us, particularly the heavy commercial ferry class.

We've seen strong growth with Incat, RDM, and to a lesser extent, Austal and in the defence space, and Echo Marine. The solar segment, which is a bit of a longer-term play, we are working with potential beneficiaries of the government's Solar SunShot panel startup programs, and we are starting to see some initial volumes with one existing panel manufacturer.

In the industrial construction segment, we've seen strong uptake with regard to cladding replacement. That continues to evolve and continues to gain momentum, and we'd expect that to continue for several years yet.

Equally, we're starting to see benefit in the data centre space. In that space, we're able to provide into the server racking and arrays space.

Both the ceilings and flooring systems in some of these also have a significant aluminium content, as does the facade, exterior, I guess, provide opportunity. It is an emerging area, and obviously we expect to get more benefits across the coming years in that space, particularly leveraging our ESG certified products in comparison to imports.

The manufacturing space has continued, manufacturing in general fabrication segment has remained relatively steady, and we've held our share gains against imports over the last couple of years. Of particularly interest is in the reseller space.

We have seen BlueScope announce a significant reduction in their aluminium distribution capacity, with an exit from Western Australia, a significant reduction in South Australia, Victoria, and New South Wales. That's presenting opportunity for us, particularly in the transport sector and marine segment, and we're looking to shore that up, and we've managed to secure a purchase agreement for a significant portion of their inventory to help us enter into that market more holistically.

You can see, I guess, our volume down the bottom indexed from 2012 has shown that we've maintained reasonable growth across the last couple of years. Moving to the next slide, we've got a few examples of what we've been discussing there.

What you can see on the left is an RDM, Richardson Devine Marine, who's constructed a fleet of Sydney Ferries. That one there is recently completed.

Equally in the transport segment, to give you a feel for where our metal goes, there's some aluminium tippers there produced by Bulk Transport Equipment in Victoria. Then on the right-hand side, you can see Aussie Play.

We've got a number of customers in that segment producing park furniture, producing playground equipment, etc. for right across the country.

I think we're about now to show one of our Crafted with Capral videos featuring Aussie Play. Something a little bit different just to show the diversity of where our products end up.

We supply all sorts of resources and equipment to early learning sectors and primary schools and councils and everywhere else. Being able to design the product one day and see a prototype the next is the real strength of Australian manufacturing.

When we say Australian made, we literally do every single aspect. We don't buy in pieces and just bolt it together.

We cut it all, we bend it all, fold it, weld it, assemble it. We are true manufacturers.

There was no aluminium in playground equipment, we brought that new material to the range, and it sort of set the benchmark that that's what it needs to be as a minimum. The entire time, really, I've been buying my aluminium through Capral, it's been a long relationship.

The beauty of Capral is that because it's made in Australia, we can always talk to Maryanne and say, 'We've got some urgent stuff going on,' and sure enough, a couple of days later we've got those products here in stock ready to go. One of the beautiful things about playground equipment is we can design a playground, and then when you watch the children on it, they do not do anything along the lines of what you think, they do something totally different.

That's what brings the real pleasure in designing something is seeing how the children engage with it and what it makes them think, and what makes it fun and challenging for them. I love that.

I think that's really, really important.

Okay. We now turn to our financials, I will hand over to Tertius to take

Thanks, Tony. Let me take you through the first-half financials.

Three things framed this half: the metal cost rose materially and remained volatile. It is the dominant influence on the results: on our revenue, on our cost of sales, and on our working capital.

Earnings were resilient in the face of the higher costs across the business, and we finished the half with a stronger balance sheet and materially better cash generation than the prior corresponding half. I'll take each of these in turn, but just before I do that, I'll ask Luke to just talk about the metal cost component.

Certainly the Middle East crisis has provided significant volatility in metal costs. What you can see here, I guess that's driven by the fact that 9% of the world's aluminium is produced in the Gulf, and obviously significant interruptions both to alumina supply in, the Strait of Hormuz being closed, has conspired to drive aluminium prices to a all-time high.

What you can see here is that the average LME price compared to the same period last year was 17% higher, and in addition to that, we've seen regional premiums, in our case MJP, being 22% above the corresponding period last year. That conflict is likely to continue to provide volatility over the coming months, and it's one of the biggest drivers to our working capital going forward.

Okay.

Just to the next slide, please. Revenue increased 14% to just over $372 million on a 4% higher volume, higher average metal costs, and improved mix.

The volume growth came mainly through the distribution channel, as Tony mentioned earlier. Underlying EBITDA increased to $29 million, and underlying EBIT increased 4% to $16.7 million.

The bridge is best read as a cost recovery. Our inflation, which is wages, freight, occupancy, reduced our EBIT by around $6.2 million.

That is what the price and productivity are set to recover. Price and mix contributed $5.6 million, and further savings and productivity throughout the business produced $1.3 million.

So $6.9 million against the 2.1- $6.2 million in inflation. Our inflationary costs was basically covered in full.

Compliance and other costs, you can see there on the bridge of $2.1 million, of which some of it is one-off items and won't be repeated, and the volume and growth added $2 million, taking our underlying EBIT to $16.7 million. Significant items were a net gain of $1.3 million, mainly LME revaluation, giving us a statutory EBIT of $18 million.

Finance costs were $2.1 million, of which $2 million was due to AASB 16, the lease charges. Net profit before tax was $15.9 million, up $3.1 million.

In the prior corresponding half, we carried a $2.5 million deferred tax benefit. We did not increase the DTA this half.

Net profit after tax $15.9 million. Our earnings per share increased 9.5% to 99.4 cents per share, ahead of the 4% growth in profit, reflecting also the reduction in the shares on issue through the buyback.

Turning to the next page. The balance sheet is stronger than what it was in December.

Our net assets increased $7.7 million to $252 million. The net tangible asset per share increased 6% to $13.43, supported by retained earnings and the continued buybacks.

Inventory reduced by $3.6 million. The metal cost rose 25% across the half, thus the lower inventory tonnes, which is mainly a reduction of delayed shipments, provided that assistance.

Receivables increased $27.9 million on a higher revenue and metal-linked pricing, and our collections were well controlled and achieving a record low DSO in June. Payables increased $25.6 million, tracking the higher metal costs, and some timing of the payments improved our cash position at the reporting date.

Our working capital was broadly flat at $125 million, while we saw sales grew. The working capital to sales improved to 17% on a 12-months basis.

We ended the half with $62.1 million in cash, and the syndicated facility in place with additional headroom, and we remain comfortably within our banking covenants. Our lease liabilities under AASB 16 totalled $71.3 million.

The accounting treatment reduced our net assets by around $17 million, or $1.09 per share, which is non-cash in nature. To the next slide.

Operating cash flow was $28.2 million against the $7.8 million in the prior corresponding half. Most of that improvement is working capital: $1 million released this half against the $16.1 million build in the previous first half, a swing of $17.1 million.

EBITDA growth contributed the balance. I would not read this half's conversion as a run rate.

Payments for higher cost inventory falls due in the second half, and we expect working capital to increase. Capital expenditure was $8.7 million across sustained and growth programs directed at reliability, automation, and productivity.

Our free cash flow was $10.3 million after lease principal payments against an outflow of $4.6 million in the prior corresponding half. We returned $8.4 million to shareholders through the final dividend and the buybacks, and cash increased $1.9 million before foreign exchange effects.

Trade instruments, letters of credit, were $36.8 million, consistent with imported product flows and the higher metal pricing. The key points on this was cash generation was strong this half.

The improvement was real, but timing does have an impact on this. Next slide.

Capital management: our capital allocation framework remains unchanged. We target a cash distribution to shareholders of 40% to 60% of underlying earnings over time, maintaining flexibility between our buybacks and unfranked dividends.

In the half, we bought back just over 300,000 shares at an average price of $11.77, below the NTA per share of $13.43, which is accretive to our earnings per share and to shareholder value. That equates to 23 cents per share against the 27 cents in the prior corresponding half.

Around 2.2 million shares have now been purchased since we started this program. As Tony mentioned, we're not declaring any interim dividend at this time.

Our intention for 2026 is to focus on returns via the buybacks, but then top that up with unfranked dividends as required at full year. The 2027 2026 program is for up to 10% of our issued shares.

Buying resumes tomorrow, 25 August, as soon as our results blackout lifts. Over the five years to June 2026, Capral has delivered a total shareholder return of approximately 97%, or around 14.5% per annum compounded growth.

Capital returns are supported by the $62 million in cash and our significant availability under our syndicated facility, preserving flexibility for growth and for through-cycle volatility. In summary: resilient earnings, a stronger balance sheet, disciplined capital management.

That positions Capral well to manage volatility and the benefit of residential demand recovery throughout the second half. With that, I'll hand back to Tony.

Thank you, Tertius. I'll now turn to our strategy and outlook.

We remain focused on increasing returns on invested capital, strengthening our competitive position, and growing our distribution footprint in what can be quite challenging market conditions in this industry. We have a clearly defined strategy which has been consistent over the past decade or more, which consists of building on our strengths, which is we have the widest range of aluminium products, we have a national footprint, we have a strong development of our own aluminium systems and our supply chain, and last but not least, committed and experienced people.

Second leg of our strategy is optimising what we do. We continue to focus on our key customer service metrics, drive lean manufacturing in our plants, invest in new technology, optimise our supply chain to maximise our efficiencies, and protect our margins through very careful price management and continue to improve our productivity.

The third leg is growing for the future, leveraging these capabilities into new opportunities, developing new products and channels, which we continually do, enhancing our presence in the architectural market has been a big focus in the past five years and continues to gain us market share and profitability, and expanding our footprint through acquisition and into adjacent markets. You may be aware that we've completed I think five or six small acquisitions over the past few years, and we will continue to do that as the opportunities arise.

Talking next slide, just in terms of the key things that are going on around our business. Firstly, manufacturing: continuing to drive productivity and metal recovery improvements across our extrusion network, ensure that we can continue to spend money on our plants to maintain their reliability.

We've got some major capital projects coming up this year at our Canning Vale site in WA and our Bremer Park site in Queensland. At Canning Vale, we're rebuilding the press, and at Bremer Park, we're putting in the first electric furnace in the Southern Hemisphere will be installed at our plant up in Southeast Queensland, we're very proud of that and looking forward to those two projects being successfully completed over the Christmas break.

We're progressively upgrading our shop floor control systems, and we're continuing to develop and deliver automation and digital initiatives in our manufacturing operations. In terms of our distribution business or distribution channel, we continue to focus on developing our own window and door systems and range, and we had a big product release two years ago with introducing our new residential systems, and the focus currently is on upgrading our commercial systems.

We want to grow our direct distribution channel organically and through acquisition. As I mentioned earlier, we've completed five since 2022, and just a couple of months ago, at the end of June, we opened a new trade centre, greenfield trade centre in Geelong, the first new aluminium centre for Capral in how many years, Luke?

More than 20.

More than 20 years. Very proud of that, and it's a great great site, and we look forward to that site in Geelong, which is already a strong industrial area, going to contribute over next forthcoming years.

The Commsupply acquisition was completed late last year. That business has grown our presence in the window and door hardware market significantly.

It's performing to expectations, slightly above expectations, and we're looking at expansion opportunities on the East Coast of Australia in the years ahead, building on that. Big focus on margin discipline, particularly as our metal costs are moving around and ensuring we stay ahead of the game in terms of recovering our inflationary and metal cost increases, and focusing on our working capital efficiency.

Luke alluded to or spoke about the opportunity or the exit of BlueScope from the aluminium distribution on the I think all sites apart from Queensland, where they have quite a large presence, but certainly Western Australia, South Australia, Victoria, and New South Wales, and we've concluded an arrangement to acquire the inventory from BlueScope in Western Australia, and we're currently negotiating to do the same in the other states to and take advantage of the opportunity that's presenting. Most of this is in sheet and plate, there is only a modest amount of extrusion, but by acquiring the inventory, puts us into the best position to secure increased market share for Capral from these industrial markets.

Anything else to add there, Luke?

I think that covers it. I think it's an opportunity where we haven't had to acquire the business and we're looking to capitalise on it.

We've secured the inventory, we've got the I guess the opportunity in front of us,

so. Okay.

Then in sales and marketing, we continually invest in technology in this area, around EDI, digital marketing, we're very active on that front, and branding of the business, particularly in the industrial and in the architectural segments. This year, we will be implementing a new CRM system, so that's very exciting for our team so that we're bringing all of our customer information together on one platform.

We're expanding our lower-carbon LocAl, which is our local Capral branded offer, LocAl offer, for our low-carbon aluminium, and we now have approved EPDs in place for those LocAl products. Our Crafted with Capral program continues and delivered positive outcomes for our customers, and we have been played a leading part in the Australian Made resurrection of the Australian Made campaign this year.

Our Smithfield site was selected as the campaign opening site in late January. We also conducted an event at the MCG featuring none other than one of our fabricators makes the goalposts for all of the AFL and football games, so that was an exciting event as well.

All right. Next slide, we now move on to anti-dumping, and I'm going to hand this over to Luke.

Luke headed up our anti-dumping and government advocacy over the last close to a decade now, Luke, I would think. Very close to what's going on in this area, I'll let him speak to that.

I think first of all, I think the slide points out that the impact of the US tariffs there's no direct impact on Capral. We don't export directly to that market, and we are dealing with some indirect consequences around trade flows, but broadly speaking, that's the biggest risk associated with it.

One of the challenges around the current system is that it hasn't had a great deal of reform over the last decade, and it is an area where I guess a contemporary system is important to ensure that people don't work around it. In the aluminium extrusion context, we currently have measures in place against China that were renewed and extended for a further five years late last year, which puts them in place till 2030.

They are relatively modest, and a floor price is in place. Similarly in Malaysia and Vietnam, and there's sort of three different cases that cover those category of products, but we have measures in place for a further five years through to 2031 with a similar floor price and modest duties in place.

The challenge around all of those cases is that the measures aren't contemporary to the rising LME that's currently underway, and we're reviewing options with regards to that at the moment. The other case that Tony already alluded to, which is most important for ourselves, is the window and doors case.

Ventora, one of our customers, in conjunction with AGWA, the Australian Glass and Window Association, initiated a case on fully fabricated windows and doors end of last year, and that case is progressively coming closer to finalisation. It obviously has a significant impact on our customer base, particularly in that windows and doors space, by competing against fully fabricated imported windows and doors.

That case is due for a statement of essential facts, preliminary numbers and preliminary position to be released on or around the 23rd of September this year, with a finalisation date, as it currently stands, due on Christmas Eve. We continue to advocate for a strong, fair system across all of these product types, and we're heavily involved with the government with regard to consultation around further reform to strengthen the system and make it more relevant.

That's what's going on in that space.

Thank you, Luke. Now turning to our to ESG.

Safety, as I mentioned earlier, one of the highlights for us in the first half was the improvement in our safety performance, and very proud of what we've been able to achieve there. We continue to work very hard to ensure we provide a safe place for our people to work.

EPDs, we have now EPDs for our LocAl products, and we're we are the only ASI-certified extruder in Australia, allowing us to provide a chain of custody guarantee for our customers, and now with the EPDs in place puts us into a strong position locally, versus our competition, to sell lower-carbon product into both the built environment and the industrial environment as well. As far as emissions are concerned, we are on track to achieve our 2030 target of a 20% reduction in Scope 1 and Scope 2.

We're well down the path of analysing our Scope 3 emissions, which, as you've probably be aware, will primarily come from the aluminium raw material we buy from our smelters and also from the aluminium sheet and plate that we import. Sustainability reporting, well we've been through our first climate report.

We're one of the first cabs off the rank, being a December financial year, our 2025 climate report was issued earlier this year, and not with it not without its challenges, being being one of the first to release, but and a huge amount of work to get that up and running, and not to be underestimated the complexity and the challenges this provides for all businesses in Australia, not just ASX-listed companies. Okay.

Let's now move to what we need Outlook and guidance. We're on the home home straight.

Market conditions, as I said earlier, demand is forecast to lift in the second half of 2026 as the commencements start to flow through. Industrial demand has softened from recent highs, but we expect it to remain broadly stable this year in the second half of the year.

LME and premiums are expected to remain volatile while the conflict in the Middle East Middle East continues. We will continue as an organisation to focus on productivity, recovery, and cost control, and have a disciplined approach to capital expenditure.

As a result of that, our full-year earnings are expected to be broadly in line with prior year, depending on some recovery of the residential housing market to start to flow through into the to the second half, which we expect. Metal cost volatility, freight costs, and residential commencements remain the key sensitivities.

That's the outlook and guidance, and I think that's is a wrap for our presentation, and we can now move to see if there's any questions that may come through.

good morning, gentlemen. Another great result amid what looks like a pretty tough environment.

A couple of quick questions if I can roll through them. The capex outlook for FY '27, what sort of number should we be thinking about for '27?

It's

a little bit lower than current year, around about $10 million is where we anticipate next year to be. Okay.

Tony, the proprietary building systems that have been I think an important part of the margin improvement over the last few years, how's that tracking?

It's tracking very well. We have, as you said, Andrew, put a big investment into the last probably 5, 6 years now into we started on this program to grow our building systems business.

It has borne fruit, and continues to do so. We are growing our market share in this area.

We have the installation of the paint line here in Sydney has helped to deliver a far better service to our building system customers, not only in New South Wales, but also Victoria and Queensland, able to utilise this line to provide faster turnaround for our customers and high-quality powder-coated product. We have developed, as I said during the presentation, a new range of residential suites, not only the entry level, but also the higher-end residential suites, which we've now been in the market for nearly 2 years, and the focus in the last 12 months has been on redeveloping our commercial range, which we are consistently doing.

We are and together with our security offer with our Amplimesh brand heading up our security offer, and our hardware business with Commsupply coming on board, we are developing a much stronger and more resilient Building Systems division, but also a much more resilient, stronger Capral overall.

Okay. If I'm right, when you made the acquisition of of Commsupply, you talked about leveraging that model into the East Coast.

Correct me if I'm wrong on that, but I thought there was something around that.

Yes, no, that's correct. That's correct, Andrew.

We're not quite there yet. We are looking at both greenfield, but also acquisitions in this area as well, which we haven't quite concluded at this point in time, but certainly it is top of mind, and it's all part of our strategy.

Excellent. Just finally, the BlueScope exit, you're acquiring the inventory.

Have the closure of their sites left any meaningful geographic gaps that need to be filled?

That's a very good question. We already play in the major markets.

Probably the only one that is a gap which we haven't quite got our heads around yet is the Albury-Wodonga

We don't have a presence in regional New South Wales.

regional New South Wales where

that we don't have

So in that region, yes, It's early days, but yes, certainly, it's something we will be looking at.

Okay.

Our competitors do have a presence in those regions already.

They do, yeah.

Yeah. Okay.

The question, obviously, you've asked is does it justify opening a new site there when you've already got competitors in that space?

Yeah. Right.

Yep.

Okay. All right.

No, I appreciate that. Thanks again.

Done. I know the working capital will reverse a bit, but I think that was a massive surprise.

Are you giving any guidance around what the cash might look like at the end of the year, or if normal working capital levels were maintained and not on a dollar basis, but on a volume basis, what would the cash have looked like in the first half?

Second half? Look, yeah, look, we have done some work on it, but we haven't got the numbers yet, but it will be lower than the first half, there's no doubt about that because the inventory acquisition on the BlueScope side is to the tune of $8 million to $9 million, it's not insignificant as well.

That will take

obviously some time to work through. It will be quite lower,

I

won't say significantly lower to what it is at half-year as a result of the lag and the higher metal costs, suppliers being paid, and the BlueScope inventory.

Tertius,

you've got anything

Right. No, that's true.

Obviously, Andrew, it depends on what happens with the LME for the remainder of the year.

Sure.

If LME goes up again, then it will have a bigger drag on the working capital.

Okay. All right, great.

Thanks very much. I've taken more than my share of time.

Thank you.

That's okay. All right.

Any other questions?

We do have a number of questions on the web. If there's none on the call, Alison?

Yeah, please proceed. I think let me ask them.

If there's a call one, we can carry on with that then. First question here is from Mr Alan Menzies from Pango Family Trust.

It says, 'Australia's manufacturing cost base continues to increase relative to imported products. As you look over the next 5 to 10 years, how do you think about the competitiveness of Capral's Australian manufacturing footprint?

Under what circumstances would you consider further rationalisation, consolidation, or investment in your plants? Do you believe maintaining a broad domestic manufacturing footprint remains a long-term competitive advantage?'

That is an excellent question and one that we don't ask ourselves every day, but certainly when we comes around to a strategic planning and investment in our facilities. Yes, we do.

Look, this year marks 90 years of manufacturing in Australia for Capral, and I'm not sure whether we're going to be doing it in 90 years' time, but certainly in the next 5 years we will continue to be in the foreseeable future, a strong advocate for Australian manufacturing. Yes, it is getting hard, but we can compete.

There's a reasonable freight cost to import aluminium from overseas. The supply chains are typically two-month 2 to 3 months, and particularly around certain times of the year where ports and shipping gets really busy.

There is a strong case to maintain local manufacturing and being close to our customers. However, quite right to ask the question because clearly labour costs in Australia are only going up.

We are able to offset that to a degree through automation, but handling of aluminium and processing of aluminium does require labour. Energy is the other area where despite being promised lower energy costs, we are paying more for energy than our offshore competitors, albeit it represents less than 10% of our total conversion costs.

It is challenging, but the benefits of local manufacturing outweigh importing. Our customers value it, and what is one of the reasons why we have invested in our distribution business to ensure that we can continue to be a major part of the aluminium market both in terms of extruding and distribution.

It is a challenge. A key part of that is to ensure that we have a robust anti-dumping environment here in Australia.

We can reasonably compete against imported product, as long as it's not dumped. That's been the challenge of a number of countries around the world because dumped aluminium subsidised by very large governments, both in terms of smelting and downstream extrusion, have caused us challenges over the last decade or more.

With the work we do on that front and with government being acutely aware of the challenges and prevent dumping into the country, we believe we've got a good future to continue manufacturing. May not be for another 90 years, but certainly for the foreseeable future.

I've got another question from Mr Menzies is, 'Could you talk through your expectations for maintenance and growth capital expenditure over the next 3 to 5 years? Specifically, how should shareholders think about the balance between sustaining the existing manufacturing network versus investing in capacity expansion, automation, and productivity initiatives?

Given the strength of the balance sheet, should we expect capex to remain around historical levels, or do you see a period of increased investment ahead?'

Look, our maintenance capex in our plants runs to between $4 million and $5 million a year. We've invested significantly in that maintenance capex over the last 4 or 5 years, Tertius, with rebuilds at Penrith, Canning Vale, and Smithfield, and Bremer Park now.

That runs to the tune of $4 million to $5 million every year. The other capex we're looking at in terms of growth capex is around paint lines, and automation of our plants.

That investment would also sit probably in a similar number, probably $3 million to $4 million, $5 million, depending on the project and the timing. One of the things we're also considering, albeit yet to be put in front of the board, is automation of our warehousing environments.

There are quite sophisticated high-bay automated warehousing facilities for aluminium extrusion that operate in Europe and in the US in particular. We are looking at those, but that's more of a one-off type project, but they are quite expensive.

We're talking about a significant capital investment, not so much in manufacturing, but in distribution, which would be to the tune of maybe around $20 million, which will be some sort of a one-off, but potentially transformative in terms of our aluminium distribution in Australia.

Next question again from Mr Menzies is just, 'What is your annual cash rent payment amount?' It's just north of $20 million is the answer there.

Then we've got a one question from Taz Davis from NAMSET, says, 'Firstly, congratulations to management on another solid and consistent result. I also want to acknowledge the disciplined approach to capital management and the quality of Capral's communication with shareholders.

The reporting is clear, transparent, and very useful. First question: You're forecasting residential commencements to begin flowing through to Capral's volumes in the second half.

What are you actually seeing in current orders and customers' activities that gives you confidence that this recovery is now occurring rather than being pushed out again?'

Yes, well it's not as strong as what we originally planned. We have started to see in June and July, markets were relatively in the residential side relatively soft, probably getting over the shock of the federal budget tax changes, but in the month of August, we have started to see a lift in volume coming from those window fabricators.

Albeit, as Luke mentioned, the local fabricators are being impacted by fully imported windows, so that is having a bit of a negative impact on the availability of our fabricators to market. Yes, we're starting to see the early signs of recovery in August, but certainly be fair to say that June and July were quite quiet.

Just a follow-up question as well is, 'Revenue increased 14% in the half, but underlying EBIT increased only 4%. With aluminium prices and premiums expected to remain elevated, how confident are you that pricing can fully recover those higher costs in the second half, and should investors expect EBIT margin to return towards historical levels?'

Yes, another good question, a little bit difficult to answer. We typically, particularly in our our mill, high-volume business, we sell on a spread above the metal cost, fixed spread, which preserves our margin in a dollar-per-tonne basis.

When we have rising prices, the percentage gross margin and percentage net margin falls as a result of the fixed kg pricing regime. We have in place which sort of is insurance with back-to-back metal pricing with our customers, so as the metal pricing rises, our percentage margin does fall mathematically, but our spreads, if you like, or our gross margin per tonne, remains consistent.

We don't see that as a negative. In fact, it gives us a natural hedge against the ups and downs of the aluminium market.

Clearly, the reason why our sales revenue grew 14% and our volume only grew 4% is because it was a factor of higher metal prices flowing through to our selling prices. Hope that answers that question adequately.

Thanks, Tony. We don't have any more questions online.

Alison, back to you.

Oh, thank you. Just one extra question.

Luke, around your comments about the anti-dumping measures wanting to see those be more contemporary, or the need for them to be more contemporary, can you just elaborate on that a little?

Sure, Andrew. The way the investigation works is it effectively measures the import prices through a investigation period, which obviously our cases have different timelines, but they're not in recent times, they're 2 or 3 years old.

Obviously, we've seen a significant escalation in metal price in the last 12 months, which means the measures in place are against a old average import price. The challenge around how do you make those measures become contemporary, and there is a investigation type, a variable measures investigation, that we could initiate, and are considering that at the moment on all our cases that we have completed.

It sounds like they need a complete restructure of how they think about the whole measurement of it. Anyway, okay, thanks.

I appreciate that. We're trying.

That's one of the reforms that we're strongly advocating for is that there is a much faster turnaround and quicker turnaround of these contemporary measures what we call variable measures reviews. They typically can take up to how long, Luke, to

run? 12 to 18 months.

12 to 18 months.

They can take 12 to 18 months, and by that time, the horse is sort of bolted. It is one of the

Absolutely.

There's probably the top thing on our agenda in terms of the anti-dumping reform packages.

That's right, and there's obviously a range of reforms that we've participating consultation that do address those issues longer term. We understand they're in cabinet and confidence at the moment, and we expect to hear further consultation sort of opportunities in the new year.

Under this government, it does seem to be the best opportunity for meaningful reform in this area that we've seen.

Fingers crossed. Great, well that's it for me.

Thank you.

All right, I think we may be

Thank you, everyone, for your time this morning. That completes the presentation.

It's been a solid first half for Capral in quite challenging conditions, particularly around aluminium supply and pricing. We're looking forward to a lift in the second half and delivering another solid result for the full year.

Thank you for your attendance.