Todd Scott - VP, Investor Relations Galdino Claro - Group CEO Fred Knechtel - Group CFO Steve Shinn - President, North American Metals Waste Region Alistair Field - Managing Director, Australian & New Zealand Metals Bill Schmiedel - President, Global Trade Division

Scott Hudson - CLSA Emily Smith - Deutsche Bank Jon Clarke - Maple-Brown Abbott Peter Stein - Macquarie Ramoun Lazar - UBS John Hyde - Merrill Lynch James Rutledge - Morgan Stanley Mason Thomas - Australian Ethical Investment\ Simon Thackray - Citi Michael Slifirski - Credit Suisse Hugh Stackpool - JP Morgan

Thank you, good morning everyone here in Sydney. If you're listening on Webcast welcome to the first half fiscal 2016 results and presentation for Sims Metal Management.

Just a few housekeeping issues before we get started. I'd like to remind you that today's presentation may contain forward-looking statements, including statements including financial condition, results of operations, earnings outlook and prospects for Sims Metal Management Limited.

Also just as a reminder, Sims is domiciled in Australia, all references to currency are in Australian dollars unless otherwise noted. The agenda for today's presentation will start with an overview of the first half results presented by Group CEO Galdino Claro and Group CFO Fred Knechtel.

Following which Galdino will present an overview of the business resetting actions the company is currently undertaking, assisting in this portion of the presentation there are several members of the Executive Leadership Team. With us today are Steve Shinn, President of the North American Metals Waste Region, Alistair Field, Managing Director for the Australian & New Zealand Metals Business and Bill Schmiedel, President of the Global Trade Division.

We will also hold several external industry advisory positions including on the Steel Committee of the London Metal Exchange and as President of the First Division at the Bureau of International Recycling. Lastly, Galdino will close with the a few comments on current conditions and outlook for the business including with our question-and-answer-session.

I will now like to pass the presentation over to Mr Galdino Claro.

Thank you Todd and good morning. The recycling industry is under significant pressure.

It's facing extreme challenges unseen since the early 1980s. However, we have seen these conditions before and as orders are failing we are taking this opportunity to strengthen the basis of our leadership position in the industry.

Our balance sheet is strong. We have a clear strategy in place to improve performance and a highly motivated team working hard to continuously lower our breakeven point via improving margins and reducing controllable costs.

In leveraging our best in class assets with your objective of generating an above cost of capital return for our shareholders based on clearly identified initiatives under our control. We are more confident than ever in our strategy and we are here together today to restate our commitment to take Sims to an above cost of capital return by the end of fiscal year 2018 even at current market conditions.

It's hard to predict when the English Recycle will recover. But history proves it will.

When it does we are the best placed company to take advantage of the enormous earning potential this industry can deliver. Today's presentation will cover four key areas.

The market conditions we faced in the first half and we will move to how these conditions impacted our financial performance and how we react to them. Third point will be how we are resetting the business to deliver attractive return in year terms, while creating a strong foundation for future growth.

And lastly, we will talk about what we expect in our market outlook. So please now turn to the next slide.

Current head winds have put many of our peers in survival mode. Since the beginning of fiscal year 2016 over 50 metals recycling facilities have either closed or gone bankrupt only in North America alone, in the US alone.

Facing the toughest conditions indicates in the first quarter of fiscal year 2016 we also took a big punch. But before the referee start counting, we got up and went back into the fight.

In quarter two was already profitable. At the same time we improved the business and start returning capital to the shareholders.

We rapidly put in place actions to reset the business to a lower cross base. During half year 2016 we moved A$57 million in controllable costs from the business, while reducing head count and exiting underperforming operations.

Our net cash balance sheet grew to a record of A$373 million driven by operating cash flow and sensible capital expenditure, while this will successfully extend our debt facilities until late 2019. In an industry, where many of our peers are facing bankruptcy, our strong balance sheet is a meaningful competitive advantage.

With our growing cash balance we are able to return capital to shareholders taking advantage of the current share price, we initiate an up to 10% share buy back in December. So far we purchased 3 million shares with an up to a further 17 million shares that can be purchased.

So let me now pass the presentation to Fred for the details on our financial performance, Fred please.

Thank you Galdino. Good morning.

I begin with the discussion on external operating conditions then review our first half operating performance and finish with an update on our capital management strategy. Global economic growth concerns, steel overproduction, record Chinese exports and the strong US dollar caused metal prices to fall sharply across both ferrous and non-ferrous commodities.

Export ferrous scrap prices declined 37% with the majority of the decline occurring in the first quarter. Nonferrous commodity prices declined significantly, copper declined 22%, aluminum 12% and nickel 27%.

The Australian dollar also weakened. It is down 19% to the US dollar, 5% to the Euro and 14% to the British Pound compared to the first half of last year.

These economic factors have contributed to weaker scrap demand and lower prices have dramatically hampered ferrous intake volume. Sales volume was 1.2 million tons lower than last year with most of the decline occurring in the first quarter.

This sharp decline in volume has put tremendous pressure on our fixed cost base. We believe that current market conditions will persist for the foreseeable future and that resetting actions are required to match our fixed cost base to these lower activity levels.

As shown on slide five we incur charges of A$245 million, A$119 million related to our investment in SA Recycling, A$43 million for Global E-Recycling goodwill and A$83 million for business resetting actions. Following a write down A$110 million of goodwill and A$66 million of other intangible assets remain on the balance sheet.

In the evaluation of these intangible assets, it was determined that no further impairments would be required. However if market conditions deteriorate then further impairments may be identified.

Underlying EBIT loss, excluding significant items, was A$4.8 million. Underlying EBITDA with A$61 million.

Working capital declined by A$108 million driven by lower ferrous and nonferrous prices and lower sales volume. Capital spending was A$44 million up slightly from the prior year with prioritized spending on PMO optimizing initiatives, and as always safety, environmental and maintenance.

Our gross cash balance improved to A$381 million driven by working capital improvement, sale of idled and loss making assets offset by dividend payments and share repurchases. Looking at the business performance on slide six.

Lower metals prices and resulting lower volume, negatively impacted every business, resulting in a A$4.8 million underlying EBIT loss. Several loss making assets were identified to be divested.

These assets generated a loss of A$20 million. Excluding these operations to be discontinued underlying EBIT was A$15 million.

We are in the advanced stages of rationalizing these assets and expect that these assets will be divested by the end of the second semester. We did make progress resetting the business in the first half.

We are currently evaluating additional actions to be executed in the second half and these actions may require additional restructuring charges. North America Metals underlying EBIT loss of A$23 million was driven by a lower volume.

While the East and West regions of North America remain profitable, the losses were concentrated in the Central region, bulk stainless and SA Recycling joint venture. Australia and New Zealand's profit decline 14 million due to lower volume.

Europe Metals EBIT declined to A$2 million due to lower domestic sales volume in the first quarter, however performance recovered in the second quarter as sales shifted to export markets. Global E-Recycling's EBIT declined significantly, impacted by lower commodity prices and fixed price supplier contracts.

On slide seven the primary driver of lower first half earnings was a significant drop in ferrous sales volumes. Lower nonferrous metal margin and commodity price impacts on E-Recycling.

Ferrous volume was down 23%, while nonferrous volume declined a lesser 8%, partially benefiting from our efforts to grow the nonferrous business. The decline in non-ferrous metals pricing negatively impacted metal margins across both Metals Recycling and E-Recycling.

However, considering the sharp drop in ferrous prices, maintaining steady ferrous margins was a significant accomplishment. Controllable costs was reduced by A$57 million.

A result of our rapid business resetting actions and without these actions, first half losses would have been much greater. Lower earnings in other primarily relates to our SA Recycling joint venture.

In the evaluation of quarterly performance, on slide eight, lower volumes continue to impact earnings in the second quarter. Offset by improved metal margins and resetting initiatives resulting in positive EBIT.

E-Recycling and SA Recycling continued to pressure profitability. Before I turn over the discussion to Galdino, I would like to review our capital management strategy on the next slide.

Our first priority, at this point in the cycle, is to maintain a strong balance sheet to finance future working capital from volume or price recovery and new business opportunities. Second, invest back into the business to support the existing asset base and support PMO optimizing initiatives.

And third, finance expansion opportunities. After these priorities are satisfied, we will return capital to shareholders to share buyback and dividends.

Galdino.

Thanks Fred. We reacted to the deteriorating conditions of the first quarter with confidence and with sense of urgency.

We have stabilized the business and returned profitability. But to achieve our return on capital target by fiscal year 2018, under the current market conditions, there is more work to do.

Over the remaining two and a half years of the strategic plan, we will continue to reduce our cost base, while keeping the vast majority of the volume capacity to benefit from a future market recovery. The next slide will give you a more graphical representation of our past achievements and future projections.

The left blue column represents the 12.8 million tons sold in fiscal year 2013, the base year of our strategy. And the black dot, in the upper part of the column, indicates the volume breakeven point of 11.9 million tons in that specific year.

In other words, the A$67 million in EBIT generated in fiscal year 2013 was supported by less than 1 million ton of sales above the breakeven point, which is an unquestionably fragile position for profitability. Moving now to the right column and black dot.

They demonstrate, under the same concept, our original strategic target for fiscal year 2018. The objective was to improve metals margins and reduce controllable costs and consequentially lower the breakeven point of the company by 8%, while realizing a 10% increase in sales volume through organic in market growth.

These improvements combined would generate a goal upgraded at 10% return on capital which in fiscal year 13 equated to roughly A$320 million in EBIT. These objectives would be achieved without any improvement over fiscal year 2013 market conditions.

However, in the time since the original strategic target was created, the market significantly deteriorated as shown in the next slide. In the first two years of the plan, sales volumes declined considerably.

By fiscal year 2015 sales volumes fell 25% below the original projected levels of fiscal year 2018. Sims metal volume decline was aligned with a global market contraction.

With overall market share maintained during this period. But despite declining volumes, through the significantly higher than anticipated so far internal initiatives, Sims was able to drop its breakeven point faster than the volume contraction and consequentially grow profitability.

From A$67 million in fiscal year 2013 to A$142 million in fiscal year 2015 and we did it by simply increasing narrow margins and reducing controllable cost at the same time. So by fiscal year 2015 and only two years into our five year plan, we had already lowered our breakeven point below our fiscal year 2018 target.

In fact, if market volumes had not declined the company would have already reached by the second year its five year return on capital and EBIT targets. But also if we had not lowered our breakeven points so dramatically, we would be having a very different conversation here today or at least you would.

So let’s now take a look at what happened in the first half of fiscal year ’16 in the next slide. So volumes took another big step downward, nearly as much in the first half than the previous two years combined.

And the pressure from lower commodity prices and lower export demand, sales volume are now 40% below our original strategic plan projections. Despite the gains from our accelerated strategic initiatives and the removal of additional A$57 million in controllable costs in this first half, the volume contraction was, for the first time since the beginning of our strategy, faster than our ability to improve efficiencies on time.

So yes it was a volume contraction and it catch up on our improved break-even point. And driven by our unconditional commitment to generate attractive returns for shareholders, even in the most diverse market conditions, myself and my executive leadership team, many of whom are with us here today, developed and implemented a significant resetting plan to stabilize the business and further streamline underperforming operations while accelerating our optimization initiatives.

The next slide will show what the resetting plan will deliver. So November of 2015 we started the resetting that will core progressively over the second half of fiscal year 2016.

In total, these initiatives will improve group earnings to an underline EBIT run rate similar to what was achieved in fiscal year ’15 by the end of fiscal year ’16. These will result in further lowering the breakeven point of the business by reducing controllable costs, divesting our foreclosing under performing in non-core operations and the acceleration of identified optimization actions.

Driven by the success of our strategy so far, in the execution discipline demonstrate by this team, we can state with confidence that these actions, along with the continuation of our current optimization projects, are more than sufficient to return the business to a greater than 10% return on capital by fiscal year ’18 and beyond. It is also important to note on the completion of these streamlining actions the vast majority of our volume capacity will be retained.

We expect a relatively minor 6% reduction in total processing capacity relative to fiscal year 2013 market conditions. So now moving to the next slide.

So on slide 15 you can see how these improvement initiatives are anticipated to be achieved over the next two years. Despite the pressure faced across our industry, we continue to see a very clear path to reaching our strategic earnings target of 10% return on capital or more by the end of fiscal year ’18.

Looking more closely at the streamline initiatives on slide 16, please. A significant amount of the actions have already been taken.

During the first half we closed 10 underperforming facilities, the majority in North American central but also in Australia and New Zealand and in Europe. Headcount across the group was reduced by over 500 since the end of fiscal year ’15, down by 9%.

While headcount reductions are difficult, these actions have made the remaining part of the company much stronger. By the end of the second half of fiscal year ’16, we will complete our streamline initiatives of the resetting plan.

These actions will include the sales or closure of a further 25 facilities. As we have indicated in the past, the majority of these will be located in the central region of North America Metals with some also in the U.S.

E-Recycling. As you may recall from previous conversations, we have over 400 initiatives under implementation with the objective of both to increase metal margins and reduce controllable costs in parallel.

To ensure the execution discipline of those initiatives, a project management office was created and members of my executive leadership team nominated as the sponsors for several things of employees assigned to those projects. The members of my executive leadership team here today will now give you some examples of these initiatives, beginning with Steve Shinn, President of the West Region in North American Metals on slide 17.

Steve, please.

Thank you, Galdino. As mentioned, I run the west region of North American Metals business.

However, I also serve as a executive sponsor for the logistics optimization initiatives globally. As many of you know, under Galdino's leadership, our PMO journey began about two years ago, but let me start by demystifying what we mean by metal margin.

It's derived from sales price minus purchase price minus freight costs. We know that every time we touch or move our scrap metal we incur costs.

We also recognize how the current market challenges not only ourselves but also our suppliers. Because I regularly speak with the owners of several of these small businesses, I learn that they feel squeezed between lower sales prices and the cost of their operations.

We value our suppliers greatly therefore our margin optimization relies on supply chain and logistics improvement to reduce freight costs so we can offer a competitive pricing to our suppliers. In fact, we strive to redefine the supply base from the logistics point of view, thereby improving the supply chain throughout the industry.

The pyramid graph, shown on the slide, represents an overall transportation management strategy. As illustrated, our plan for achieving these improvements has started with tactical, foundational improvements in our freight and billing of audit payments.

Since fiscal 2014 we identified logistics initiatives that we estimated will result in A$17 million of global EBIT improvement. Throughout this journey we plan and execute solutions in real time.

Let me provide a few examples that already contribute to logistics improvements in North America. Beginning second half fiscal 2015 and through first half fiscal 2016 we selected and implemented a new payment and audit system in North America, which improves transparency on freight costs and third party vendor services.

While relatively new, this system has already helped management identify and recover millions of dollars in my region alone. My organization now has better information so that we can make better decisions around carriers, costs and services.

Building upon this foundation, we just completed a competitive sourcing exercise in North America which will reduce select outbound truck transportation costs 12%, for both the metals and E-Recycling businesses. Moving further up the pyramid, we analyzed our North American Metals business to determine what benefits we might realize from some transportation network changes.

We identified lanes within the east region where we can barge scrap more cost effectively than over the road transport. We've completed analysis, signed agreements and expect these improvements to deliver second half fiscal 2016.

In the central region, we've exited certain locations where our local businesses compete directly with local steel mills. However, we will leverage our scrap generations from Houston and Chicago areas, using low cost waterborne transportation to efficiently service the domestic market when markets allow.

Historically, our industry lacked a sophisticated understanding of logistics and the building blocks necessary to move from a tactical and reactive view of the supply chain to a strategic and proactive view. We will successfully build our transportation management strategy by identifying and driving initiatives that will provide better decision making and cost visibility.

At current depressed commodity prices, volumes and margins have never been more important. The more efficient we become at logistics the more competitive pricing we can offer our suppliers, which should lead to improved volumes and greater market share and ultimately we preserve and achieve better total margins.

Incentive to improve is meaningful. Minimizing transport expenses is critical to maximize margins while keeping prices attractive for our suppliers.

Thank you. And now I hand the presentation over to Alistair Field, Managing Director for Australia and New Zealand Metals, to discuss initiatives and operational excellence.

Please turn to slide 19.

Thanks, Steve. As mentioned in the introductions, I'm responsible for the Sims ANZ business and that's based here in Sydney and have oversight of this region.

I've had numerous years of experience, both in the logistics shipping field as well as operations and continuous improvement. Operational excellence is obviously a broad category, but we are focusing on ensuring that everything that we do from the time we receive our raw materials to the final end product is done in the most efficient and cost effective manner possible.

These costs in turn are all materials into finished saleable commodities, totaled over 1.1 billion in fiscal 2015. This is equal to roughly A$110 per ton of costs for every tonne that we sold.

This represents a large opportunity for our organization and our optimization initiatives which in ANZ Metals we are approaching in several ways. Firstly, we are maximizing the non-ferrous, we are extracting from the metal shredding process.

This includes improving the downstream systems used to recover non-ferrous metals from shredding and sophisticated plants consisting of a series of eddy currents, magnets and sensors have been installed to create a mixed non-ferrous aluminium-rich product which we call zorba. This is one of the reasons for the construction of an offline non-ferrous plant at our new facility in Kwinana, Western Australia.

Secondly, another simple example of how we are reducing our controllable cost is to reducing our waste disposal cost. The cost of landfill waste in Australia can be up to A$100 per tonne.

However, a portion of the weight of the material you're paying to dispose of is the moisture within that shredded residue. Through the relatively simple solution of covering the shredder conveyors and waste bays, we have reduced the moisture content and weight of the material, creating a lower disposable cost.

So turning now to Slide 19. One additional example of operational excellence, In ANZ we have recently begun to look at ways we can use strategic decentralization of our processing activities to reduce costs associated with transporting that material from these regional areas to urban centers for processing.

So through adding shearers and balers into these regional centers, this allows clean light-gauge material to be shipped directly to our customers. This hence creates the ability to export directly from these regional ports such as Albany and Darwin without incurring the large transport costs to ship that material to an alternative larger urban centre.

So at this point I'd like to hand over the presentation to our President of Global Trade, Bill Schmiedel, to discuss the initiatives in product quality.

Thank you, Alistair. About two years ago Galdino challenged his leadership team to look at our industry in general and our Company in particular with a different set of field glasses.

Now, apparently for Sims in a past life I was volunteered for product quality of ferrous scrap. Seriously, myself and my team first decided to concentrate on productivity.

We started to deep dive into our data to see who was shipping us what. We spent time with our major consumers worldwide to see what was important to them.

We had in-depth meetings with two internationally renowned commodity inspection companies to better understand their protocols. We also matched these conversations with discussions at our own processing facilities to see what material they were buying and what supply inspection processes they had in place and how we could improve these.

We held seminars on inspection and following detailed re-education of our inspectors we have increased our yield from our shredders by over 7% on ferrous and over 1% on non-ferrous. This obviously benefited the Company in three ways: an increase in the amount of material available for sale, lowered our production costs as well our disposal costs.

In other words, we have created margin where it did not exist before. We no longer had to improve our margin on the backs of our suppliers, and in the time when prices are low this avenue for improvement is obviously critical for the health of our suppliers as well as for Sims.

Another ferrous group project was to increase our density for what we call HMS. Now, in the export business we need to be able to ship cargoes that will carry the most weight given the type of vessel employed.

To do this in the past we had to use between 35% to 40% shredded combined with the HMS. However, some of our largest ferrous scrap consumers do not value shredded in ways that other regions do.

Therefore, by densifying the HMS and lowering the amount of shredded for some of these cargoes, this allows us to ship many more 100% shredded cargoes to those markets that value it higher than those others. Now, in October of this past year I was tasked with the directorship of the non-ferrous PMO group.

After the first few days what struck me was the number 1,9,6,8. Those numbers, in that order, because that was the year I started to spend all my non-school hours in this industry.

That was the year that the third traitor in the United States was inaugurated in North Haven, Connecticut, at my father's company. Now as a side note that shredder is now operating under the Sims flag and I will argue that it is the most efficient shredder in the United States.

With that deference to my father aside, the process of shredding metal scrap has really not changed since that time. The process of recovering zorba has changed, as Alistair has enumerated, but the marketing is essentially the same as I worked with so many decades ago.

Now zorba is shipped to countries with low labor costs, so for me back then that meant Japan. Then it was Taiwan, and now it is China where it is sent for further separation of the mixed metal elements contained in zorba.

Now once zorba is segregated into each of the metal groups these individual metals are smelter-ready. Therefore, unlike almost all the other products we produce, zorba, our largest non-ferrous product, is not a finished product as it requires further processing.

Now because we had the critical mass and the in-house knowledge on the required technology we intend to support the logical progression into this field. We've recognized that we need to diversify as we see no reason to separate Sims from their direct relationships with the end consumers.

There are many other interesting initiatives in progress across the ferrous and non-ferrous product quality classifications. However, our data shows that just these mentioned products will translate to a minimum of A$25 million PBIT improvement for North America, let alone the UK and Australia.

Now, if I can hold your attention for a moment longer, Galdino has asked me to update you on what we are currently experiencing in the global ferrous markets. So let me put on my trader's hat and ask you to please turn to slide 22.

As in most market dynamics, there is good and bad news. So as what is usually in my way I will start with the bad news.

Beginning in 2014, there were clear macro signs that our industry was about to be challenged in a way that we had not experienced for 30 years. After more than a decade of unparalleled economic growth with global producers of commodities working very hard to meet this burgeoning global demand, our biggest competition would soon not be the other companies in our industry but rather the producers of those products that our recycling materials were sold to.

So in the ferrous end of our business, that means that our biggest competitors would be Chinese and to some degree, Russian steel mills, who are exporting their excess production in the form of semi-finished steel into those world markets. Since mid-2014 the excess steel production, which has been built up in China, has increasingly been turning to the export market for liquidity as domestic demand for steel within China has contracted.

By the end of 2015 total steel exports from China exceeded 110 million tonnes for the year, with the majority of this material flooding into regions that house our traditional end markets and thereby, shrinking the demand for ferrous scrap. So, if you look at this graph you can see easily that while ferrous scrap prices can maintain historically bullish levels even with Chinese exports of 80 million tonnes, which is not a small number as it also represents the total steel capacity or production, at least of the United States.

Nevertheless, at over this level, world EAF steelmakers will and have started to shut down their hot ends and started rolling imported semi-finished steel. Simply, the higher the tonnage export the lower the demand for ferrous scrap.

That certainly is the bad news. And of course, this event has been very painful for Sims and others.

However, this excess production has also come at a major price to the Chinese steel industry. The reports I have read and the Chinese steel industry losing between $9 billion and $12 billion or about $40,000 per steel worker, even at a time when the key ingredient of iron ore is at historically low levels.

Significantly, approximately 70% of this loss came in the last five months of 2015. It is not a coincidence that this corresponds to our first quarter challenges.

Now the good news, things that don’t make sense don’t last. More recently it’s become clearer that the central government is losing its patience.

Senior leaders have admitted that about 150 million tonnes of capacity is needed to be removed. Proof of this commitment is the formation of a RMB30 billion fund to assist in the transition process for the coal and steel industries.

As additional evidence, steel exports from China in January 2016 have been reduced by 8.6% when compared to December of 2015. Further proof as to the importance of diminishing steel exports from China is this last chart, and probably my favorite chart.

From this you can see that while the 1.6 billion tonnes of steel produced today, 70% is through the BOF method and about 28% through the EAF process. If we remove those major steel regions that use predominantly the BOF method and do not import scrap, you can see that this table is reversed.

This is the universe that Sims operates in and can flourish if not adversely affected by irrational business practices. I will now turn this presentation back to Galdino.

Thank you very much.

Thank you, Bill. We know external conditions are at their harshest point in 30 years.

We also know that at some point they will recover. What we don’t know is exactly when.

However, we are in this business for the long-term. Should the market expand, we are the best placed in the industry to take advantage of this through our strong balance sheet, low breakeven point, and best in class assets and people to pursue potential consolidations.

Near-term, we will continue our current strategy to ensure returns above cost of capital by fiscal ’18 through our numbers of optimization initiatives currently in place. Let’s now turn to slide 25 for my closing remarks.

In summary, the management team remains as confident as ever about our current and future outlook for the business. This confidence is driven by the strong net cash balance sheet supporting our market buyback which has already purchased three million shares, with up to a further 17 million shares to be purchased before the end of the calendar year.

My management team has shown its ability to react quickly to the tough environment. The business resetting actions as started in the first half are already gaining traction, with EBIT profitability restored in the second quarter and substantial further benefits expected in the second half.

The resetting of the business would allow it to perform more efficiently in current depressive conditions, which significant leverage to a future market recovery through the lower breakeven point while keeping the majority of our volume capacity. We currently anticipate underlying EBIT to reach a run rate similar to fiscal year ’15 by the end of the second half of fiscal year ’16.

To reach this run rate we need streamline actions to be completed, optimize initiatives to gain traction, and volumes to be at similar levels of the first half. The operations and efficiency of the company continue to improve, reinforcing our belief and commitment to an above 10% return on capital by fiscal year ’18.

Thank you all very much for your time and I’ll now open the meeting for your questions.

Thanks, we’ll start off by taking some questions in the room.

Hi Galdino, Scott Hudson from CLSA. I just had a question on the 25 divisions or sites that you’re highlighting for closure or sale.

Are the majority of those located in the central region of the U.S., and given what’s happened with the credit markets and I guess industry profitability, what gives you confidence that those assets can be sold?

Hello. The negotiations are very advanced with some potential buyers of those assets that certainly have a stronger business case to operate in that region than we have.

But Fred is leading the project to analyze those potential digressions so I’ll let Fred elaborate on that. We're in, as Galdino said, advanced conversations with some folks, and we have pretty good confidence that they'll come to closure before the end of the half.

We're still evaluating some of the other assets that we're operating in the central. Most of the assets are in the central region of the U.S.

There are a few that will still operate in the U.S. but as part of our SRS business.

The majority will be in the metals business operating in that central region.

Have all those assets been written down in terms of the impairments already taken?

Certainly the intangible assets associated with that, and we wrote everything down to a liquidation value. If it does change and there's some differences and we end up selling there could be some adjustments to the writeoff.

Great thanks.

Emily Smith from Deutsche Bank. Just a couple of questions.

Firstly, in terms of the capital base that you referred to, delivering a 10% return on capital on, am I correct in saying that's the number that we see on slide 39 which is 1523 million? So I'm just trying to understand what that base is, because I think even though the capital base declined previously you guys reiterated I think it was a 321 million EBIT target.

Secondly, in terms of the E-Recycling business, are you anticipating that it was obviously a tough half for you guys. Are you already seeing a bit of an improvement there?

What sort of initiatives are in place to turn that business around specifically? Thank you.

Thank you, Emily. I will elaborate a little bit on the SRS business, and then I'll ask Fred to go over the capital base.

Yes, the SRS is improving a little bit. However, it is the portion of our business that is more vulnerable to oscillations on nonferrous commodity prices, because the lead time is large.

From the time we buy the electronics to when we process it and make it available for sales it is exposure. Now with the stabilization of the commodity prices where they are we believe that those impacts will be minimized or at least reduced.

Having said that, it is a challenging business and we are continuously looking at opportunities to improve its efficiencies. So as Fred pointed out, SRS is going to have a lot of attention in the second half of the year for us.

Really evaluate mechanisms that we need to implement to reinforce the profitability of that business. So, Fred you want to talk to [Indiscernible].

Yes. Our capital base was reduced when we took some of the impairments of the goodwill in particular and investments in our SA joint venture.

How we view the progression of our return on capital is that certainly achieving cost to capital return would be a milestone for us, but our view is we will continue to operate at the level that's going to generate more profit that's going to cover that smaller capital basis. So one way to look at it is really the capital base that we had before the write offs is we're still trying to achieve that cost to capital return in 2018, so on that lower capital base we'd expect the return on capital to be higher.

Is that that 321 that you talked to? 321 million in EBIT?

No, the 321 million actually was just the from the beginning as we have at least tried to articulate as clear as possible. The objective of our strategy from the beginning was to generate returns above cost of capital by fiscal year 2018.

Of course, the dynamics of the market change commodity prices deteriorate, our working capital contracted and our assets become unprofitable and therefore had to be written off. That changes the dynamics but the commitment is still the same.

Now, what is exactly the EBIT that's going to generate that level of return? I think it's going to oscillate depending upon the dynamics of the industry.

If the Chinese thought the process that Bill mentioned, eventually commodity prices go up as a consequence of that, then the number could come to be higher than what it is today because the asset base is going to be higher. So I really want you to fix on the commitment of this strategy which is coming to a return on capital of both costs of capital by the end of fiscal year 2018.

The number is going to be whatever the number needs to be to generate that return.

And just one final question from me around the cash flow: obviously the cash flow generation was very positive in the half. Do you have a strong degree of confidence that discipline will remain in the second half and you'll similarly be able to generate really good cash?

I'll pass that to Fred.

If we look at the working capital generation, the majority of it was really driven by the lower ferrous and nonferrous more so on the nonferrous, a steep decline. So we did generate a lot of cash from working capital.

In a constant pricing environment, which we expect going through in the second half, we wouldn't expect the working capital to continue to generate as much cash as they did. So in the second half it's really going to be based on our improvement initiatives, getting our profitability back to the levels of 2015, that's going to generate the cash for us.

We'll utilize that cash, as we discussed, for investing back in the business for CapEx. We'll continue to explore the share buyback.

We're paying a dividend that we announced, a A$0.10 dividend in the second half. So we would expect that our cash flow given that including a portion of the share buyback to be consistent with what we saw at the end of the first half.

Jon Clarke, Maple-Brown Abbott. Just wondering where you're sitting on inventory volumes as such are you sitting above or below where you'd see normalized volumes, and is that going to be a headwind?

I'm sorry, can you please repeat the question?

Yes, just wondering where you're sitting on inventory volumes, and if it's going to be a headwind do you need to rebuild volumes or run down volumes?

No, I think the level of inventory we have today in tonnage is what we expect to maintain going forward. In terms of the monetary value of the inventory of course it's going to be a function of the commodity price but we don't foresee the inventories to improve substantially from now to the end of the year.

Peter Stein of Macquarie. Perhaps, just a quick question or perspective from you around U.S.

tariffs and what implications those have for the market, are you seeing any improvement in balance of demand and how do you see that playing out going forward?

I'll ask Bill to address that for us. Bill?

I'm not quite sure I understand your question, but let me try.

Anti-dumping.

Yes, okay. Certainly there are numerous cases in the U.S.

of anti-dumping, but I think even more significant is what we're seeing worldwide. The Vietnamese are very close to eliminating imports of Chinese semi-finished steel.

There was talk of that being implemented two months ago. It still has not happened yet but I would anticipate it will.

The Indians have put in their PMI program, where there is a minimum price that must be maintained for imports of steel. Thailand has got some rather robust barriers to entry, as do Mexico.

Certainly the Europeans are looking at the same type of venues as they did back let's say 18 months ago with hot rolled stainless where that was a major impact, a major benefit to their austenitic business. So more and more as we go we're seeing more and more barriers to entry.

I think that answers your question or not?

Perhaps specifically in the U.S., are you seeing anything particular around the arresting of some of the export volumes that have come from China into the U.S. market?

There have been small cases that have been won but there are many more that are still being adjudicated.

But outside of the cases, I suppose I'm more curious whether on the ground you're seeing an alteration in patterns in the market?

No, not yet.

Operator, we'll now take a few questions from the phone.

I just had a couple of questions. Just your earlier comments, Galdino, around the closure of 50 facilities to date in North America.

Just wondering what you're seeing in terms of the impact on capacity as a result in the various regions, and also just interested to get your perspective on where you think capacity utilization for shredders in North America sits at present?

Absolutely the operations we are addressing either by divestiture or shut down are really having what I would call a minimal impact on our capacity or installed capacity. As I mentioned in my speech, we don't see our capacity contracting any further than 6%.

So we still have enough capacity installed to react to a potential improvement in material flow. It's just positioned in a better place more towards our export as well as Steve mentioned when he was talking about logistics coming out of our operation in Chicago and Houston to supply the North American steel demand.

Alistair is also resetting his capacity in Australia as well our guys in the UK and SRS is not an exception for that. But in terms of preparing ourselves for an eventual improvement in material flow, I don't see those divestitures or shut downs being of any risk in terms of limiting our capacity to support the market.

What about the industry I guess capacity? I mean what sort of net declines in capacity have you seen to date?

We've seen some of our competitors across the globe to exit some operations, and as I mentioned in the U.S. alone we've seen 50 bankruptcies more recently.

So the capacity is contracting. But as you know, in our type of business differently than steel making for example, quantifying capacity is a very challenging proposition because we don't know if you're talking about shredding capacity or capping capacity or processing capacity in general.

I think the industry is contracting and adapting its capacity to the reality of volumes flowing today, but in our case specifically that contraction is not compromising the future.

Okay. Just another one just around what you're seeing in terms of prime scrap flows and pricing compared to the area that you target in around obsolete scrap flows.

Just if you can give us a perspective on what you're seeing there?

I'm sorry, I'm not sure I understood the question. Are you talking about prices of steel or prices of scrap?

Can you elaborate a little more?

Just I think at the beginning of this year or late last year the price of prime scrap in the U.S. had declined to a level where the shredders -- sorry the steel mills were using a lot more of the prime scrap versus the shredded scrap or obsolete scrap.

Just wondering what you're seeing in terms of volumes generally across the industry in terms of the flows of scrap?

The amount of industrial scrap produced in the U.S. and certainly in Mexico have increased over the last many months, which has created a different dynamic between the values of the two different grades.

One example I could use would be Nucor shutdown our DRI plant in the end of November and December, because the industrial scrap prices were lower than they could produce the DRI for. That lasted for about 60 days and then the overhanging amount of industrial scrap was deleted and the DRI plants are now running again.

So at the moment I would say the amount of industrial scrap is in balance with the demand for it, certainly in the U.S. and that's a moving target but it seems to be in parity at this time.

But we can't forget that that's a very small part of the amount of ferrous scrap that is treated internationally in any event.

Okay and just one final one, just Fred's slide on Q2 and the bridge chart there, there was an improvement in the margin in Q2, just wondering is that price driven or is that cost driven, i.e. freight or any other costs?

So the improvement on Q2 in relation to Q1, as you could see, is really more on the metal margin. Metal margin, again, is, as Steve Shinn defined, is our sales price, which includes all the initiatives in terms of product quality that you mentioned, minus our buy price and transportations costs, which also includes the improvements in logistics.

So that's what you see. Despite the volume contraction from Q1 versus Q2 of A$18 million, metal margins improved by A$15 million then, almost offset that entire volume contraction.

On top of that, there was A$17 million of controllable costs that improved as a consequence of the operations re-exit and some other initiative that we accelerate to improve our cost conditions. So those actually two elements almost balance, right, the A$15 million in metal margins and A$17 million of cost improvements that drove improvements from Q1 to Q2 in terms of profitability.

I just want to reinforce that those numbers include the losses of the operations to be discontinued, as Fred said, so if you exclude those losses, which are A$20 million, I mean the EBIT of the half one would be already positive of A$15 million as established end of the year in slide that compares half on half.

Okay, great, thanks very much.

Good morning gents. Just really following on from Ramoun's question, looking back on Slide 6, if you back out the losses that the discontinued businesses are achieving and apply broadly the same metrics to what's coming out this time I end up with an off rating margin of about 1.6% to 2%.

I mean is that possibly where the East and the West businesses are operating in the current environment?

I’m not sure I understood the question again, I’m sorry, if you can break it in two pieces, perhaps that would be easier for us to follow you.

So I’m trying to back out the losses from, the discontinued businesses made this half. Obviously you’re not going to see them next half and applying the broad metrics, I’m ending up with an operating margin of about 2% for the east and west businesses.

Is that about where they operate?

So the A$20 million for losses from operations to be discontinued, as Fred pointed out, are concentrated on the North America central mostly and the booked stainless business, which is a North American business, also lost money and losses coming from our joint venture with SA Recycling in the West Coast. It’s tough to break exactly how much is actually coming from each portion of the business, but as we pointed out, the North American central business is the major contributor for that loss.

I hope that helps you.

Yes, but I mean in this environment and the work that you’ve done, I imagine that you would have a fair idea about operating margins for the east and west businesses. Are you able to give us any more clarity around where they are operating at and is that number, that 2%, is that ballpark, I guess?

The metal margins that we are looking at today are pretty much in line with what we had last year with some improvement on top of it. So the contraction in profitability is really driven by volumes coming out too close again or in line with the breakeven point, as I mentioned.

So there is literally no deterioration on metal margins from last year to this year across the, minimal deterioration, a couple of million dollars perhaps on metal margins. Now on non-ferrous, as Fred pointed out, that is more substantial, close to A$20 million.

Okay, thanks. With the SRS or your recycling business, so there was obviously a pretty big deterioration in margins and you attributed that to timing.

I mean how much does the contract base work account for revenue with your larger customers? How much is contract work account for the total revenue stream from that business?

Because that’s meant to be a more sustainable earnings stream, I’m just surprised at the level of decay this half.

Right. Well the SRS has a large number of customers and a large number of contracts, so it’s hard for me to say really which, if I take the five top contracts for how long those terms are, typically they are, as they have been from the beginning with the SRS, they are long-term contracts that will go across a year.

Okay. Thank you very much.

You’re welcome.

Thank you, good morning. Just trying to understand the guidance from the second half a little more.

I think you indicate that the volumes or the market conditions required need to be consistent with what was seen in the first half of fiscal ’16 to achieve that exit run rate in the second half of fiscal ’16. So can I, guess you talk through how volumes have tracked through the first six months of the year and if that requires an improvement in the market from here or if it’s just steady state conditions from here?

No, if the conditions stay where they are today and there is no further market and volume contraction, we are pretty confident that by the end of the second semester, our run rate will be similar to where we ended up in the previous year, from the return point of view.

Okay that’s clear, thanks. Then just around the optimizing streamline benefits that you need to see come through in the second half, how confident are you that you will realize them and what are the risks to realizing them through the next few months?

I think we, as Fred pointed out, I mean we are pretty advanced on those negotiations and the initiatives are gaining traction, so we have a high degree of confidence today that those will materialize.

Okay, thank you. That’s very clear.

Morning guys, Mason Thomas, Australian Ethical Investment. Just a couple, how much further can you reduce your breakeven without significantly altering your, that’s sort of the latent capacity, volume capacity within the business?

That’s a question that we keep asking ourselves. When we put the strategic plan together, we thought we would be reducing our breakeven by a certain level and we were positively surprised by how those initiatives took place and drove us to a much lower breakeven point than we thought we would ever be.

But I think the breakeven point today stays around, what seven million tons, that's achieved we have and if volumes go much further down from that, we will technically going to have go and accelerate even further the initiatives we have to compensate that. I think at current level its pretty much we're at the breakeven point is going to stay, around seven million tons.

Just looking at what's happening over in the Middle East, obviously Turkey's one of the biggest buyer of scrap, they're now being drawn deeper into the turmoil are you getting a sense for what that might do to volumes over the next 12 months?

I'll let Bill address that as he's closer to it.

We certainly understand the turmoil that's going on in that area. I mean that's in the news every day.

All I can say is that so far it has not affected anything. The amount of material that they have purchased, whether it be scrap or semi finished steel hasn't decreased at all, really for the last six months but as they continue.

Overall I think it's important to realize that the overall steel market, world steel market, while not healthy in the sense of return, is quite healthy in the sense of demand. Steel being produced is being sold and being used.

So if Turkey is in a position where they are not able to purchase as much I think that slack will be brought up in other areas.

Just lastly, are your suppliers getting a lot more efficient at extracting the valuable nonferrous material from car holts and consumer goods and other things? Are you sort of finding that there's a lot less nonferrous material in the stuff that you're getting from them?

If I understand your question, you're asking if they remove the nonferrous before they sell it?

Yes, all the copper wiring that's in a car body but they might not have taken out when scrap was a lot higher.

Yeah, no actually the quality focus that Bill mentioned we have today is helping us to identify suppliers that will give us raw material for processing with higher content of nonferrous. This helps a lot because with the technologies that we described that we have today and are evolving in that direction, helping us extract more nonferrous if you have more on the end fit, that has a double impact.

You're buying higher quantities of nonferrous and you're extracting even more. So no, we didn't have any deterioration that way.

Okay. Actually just one more, what are some of the key leading indicators or potential catalysts that you're looking for that might suggest that the worst is behind us?

I think what Bill mentioned in relation to what is really behind it, which is the exports of semi fabricated products from China and in recent movements we have seen impacting that trend, the major indicators for us are that we are close to the bottom on this. So if those exports of bullets and the slabs are reduced, semi fabricated products, we'll certainly see a substantial improvement in scrap price and consequently an accelerated volume flow, hopefully.

We're not planning for that, though.

Thanks, we'll now return to the phone lines for additional questions.

Thanks very much. Good morning gentlemen, I've got three questions.

First one I'm going to start with, Galdino, is I think we spoke previously about when prices fall quite dramatically on the scrap market you can end up with a seller's strike on the intake side. What's been the impact in terms of volumes?

Because your volumes have looked reasonably matched on intake to sales, has there been any impact on the supply chain cost of having to travel further afield to gain your scrap supply?

We certainly see there is, in areas where the scrap comes from further distances, you will see people holding on their inventories and sometimes waiting for better prices or accumulations of material that will justify cheaper transportation. In areas of high demographic density, that accumulation is literally possible because area is limitation, so the material continues to flow.

But nothing different than we have experienced before; the first semester, I mean the beginning of this year was really terrible, as you could see of course by the results and all the details in the presentation. But it's all price driven, in my opinion.

Okay, so nothing material in the supply chain costs and no dramatic change in behaviour?

No, in our behaviour yes, we are trying to barge much more than we rail and railing much more than we truck to reduce transportation costs, but not in the market.

Okay, that's helpful, Galdino, thank you. Secondly, the surprise and you've articulated this and apologies if I'm catching up a little bit here, but I think you mentioned or Fred mentioned the impact of inventory in the non-ferrous side in the recycling, that's a bit of a surprise again.

I mean that's the second inventory impact we've had half-on-half. Last half was in the central region because of the short order times of the mills that was causing the damage and now we've got a longer lead time in e-recycling.

Could you just sort of step us through the damage that was done and how that inventory is managed in that business? Because that seems quite different to the way the rest of the business has been managed to buy and sell and matching buyer and seller.

No, I don't think there is any difference from the way it was managed before. What happens is the declining on non-ferrous price in a very short period of time impacted the value of the inventory while it was being captured and managed.

So I think the difference is the speed of the price in declining not the amount of materials in inventory. We have to keep in mind that sometimes non-ferrous prices are much higher.

An 8% decline in commodity prices in copper in terms of dollars impact is substantially more impact than a 30% to 40% decline in non-ferrous because the base value is substantially higher. So from the dollar impact point of view, non-ferrous is much more substantial than ferrous.

I understand that, but I guess what I'm asking there, do you need to or you do think you feel like you need to revisit the inventory management within that business, given we're still in a period of volatility on commodity prices?

We are doing exactly that. We are revisiting the whole inventory management and protection mechanisms we have in place to make sure that we have systems in place that are more robust to avoid that.

Okay and then the final question that I have is really around the first half; the 57 million in controllable costs in the first half there was the losses on the businesses that have been sold, 10 of the 35 units in that half. What, if I can ask this question, what was the run rate profit or loss for the residual 25 businesses that you have on the block that you look to jettison by the end of the second half?

In other words, was there a drag being created also from those 25 residual businesses and what is the quantum of that drag in the first half?

Right, so if you look at Slide 7, actually we broke it in two pieces just to address exactly the point you're mentioning. The losses of the operations to be discontinued in the first semester was A$20 million.

Yes, I see that.

It is not included in the 57. The 57 is really improvement in costs, so that is one pocket of improvements that we have driven through the business.

While that was implemented, those operations were losing A$20 million in the first semester. So that is the totality of the operations to be discontinued.

So this is why Fred is saying in this chart that excluding the operations to be discontinued, you should be looking at the EBIT of half one 2016 in reality as A$50 million, then you can analyze at A$30 million.

No, I understand that. I'm actually asking about the residual 25 businesses to be sold, because that 20 million is from the 10 isn't it, the 10 that have been…

No, no, the 20 million is for all the operations that will be discontinued.

Of all 35?

Yeah.

All 35, okay.

So the ones that have been discontinued and the ones that will be discontinued, that's A$20 million on the semester, or A$40 million in a year.

Right okay, terrific. Thank you for that clarification.

No problem, thank you.

I've got an extension really of Simon's question with respect to the E-Recycling business in two parts. First of all, I'd imagine that across the spectrum of customers there must be a reasonably steady state volume of metals that's to some extent predictable.

Have you looked at the opportunity to hedge that? We're used to resource companies doing just that, knowing what their metal price exposure is over a quotational period typically of three months and hedging that to lock in the margin.

Is that something you've looked at? And the second part of the question is given that copper seems more stable, gold's gone up, metal prices certainly half today look a lot less volatile than what they were in the half you've gone through, from that can we read that the e-recycling business should be pretty much restored to what it was previous corresponding period?

That's correct Michael and thanks for both questions because I think it will help us to clarify that. So on your first question, the predictability of non-ferrous content on the material we price and the recycling, a little bit different in what you said, it's really not that predictable, Michael.

Depending upon the mix we receive from our suppliers, you can have substantial variations in terms of the metal content, in the type of commodity as well. So, with the changes in the industry, the challenges we are facing, sometimes we just receive quantities and quantities of material that do not have a high amount of metal content and then all of a sudden next week maybe see the completely different [indiscernible] So that's why the hedging process is complicated because you don't know exactly what you're going to be hedging until you do some degree of processing and identify what type of commodities and what quantities are related to that material.

When you have that information there, you can put the hedge in place. So, this is what we are analyzing today, what's the most efficient way really to protect ourselves vis-a-vis what I have just explained to you in terms of unpredictability of the metal content.

It's a difficult thing, but can be done. So, on the second part of your question, I'll ask Fred to help me.

Thanks. Michael, would you mind repeating the second part of your question?

Oh it was just about the stability of metal prices, that this half has started a lot more stable, gold up, copper looking at bit more stable, so is the earnings potential of that e-recycling business effectively what it was the previous corresponding period before metal prices collapsed and stole your margin?

Yes, I think when you look at the prices if they stabilize, we still with our fixed contracts -- there'll still be pressure in that business. When commodity prices come back to the same level they were in the corresponding period, then we would expect to see similar levels of possibility in that business.

Okay, thank you. In terms of volumes, I think the comment was that your capacity reduction is 6% only compared to what your capacity was in the '13 year, but I don't know that we know the capacity in the '13 year; we know how many tonnes were sold, but not the actual capacity.

I don't recall any capacity reduction between '12 and '13, so is it fair to take perhaps at least the FY12 volumes as indicative of what the capacity was and still is?

Yes, the capacity is more than that, Michael and you're right, I mean we don't -- capacity in that type of industry as we all know is such a complicated parameter because as I said, we don't ever talk about shedding capacity or cutting capacity or shearing capacity or flow capacity. So, just to make it more transparent, what we said is that whatever capacity we had in fiscal '13, when we produced the 12.9 million tonnes or something like that, is reduced from that point only in 6%.

Okay, well typically what would capacity utilisation be? What sort of capacity overhang would you have over and above what you process?

Well, we today could practically go to that same level of volume without having to increase our break-even point too much. So, we need to put a few shifts here or there, additional, the break-even point that you see today at close to 7 million tonnes, it's practically stable if we could produce what we produced back in fiscal year '13 which we would boost profitability substantially.

So that's what we call being prepared here for an eventual recovery of this market, very low break-even point would be fantastic.

Okay, thank you. Finally, how do you allocate between what you consider ferrous trading and ferrous brokerage?

I note that the comparison with the previous corresponding period first half '15 has been restated where you seem to have allocated more to ferrous trading than what was there previously and considerably less to ferrous brokerage. So what happens to change that categorization?

Let me pass it to Fred. I'm just looking at here to see the data.

You have it there, Fred?

Yes. I'm trying to understand where you see the difference Michael.

Can you just walk me through?

Yes, the comparative that you provide to the current half in -- on page 35, when you last stated the first half '15, those numbers were quite different. In aggregate they were the same.

The ferrous trading has increased from 3.9 billion tonnes to 4.4 billion tonnes. The ferrous brokerage has dropped from nearly 1.3 million tonnes to 800,000 tonnes.

I have to get back to you on that Michael and give you a bridge. If you can give me an opportunity to analyze it I’ll certainly get back.

Okay thank you, because it’s quite interesting from a volume decline perspective, the change from 3.9 to 3.4 is certainly less dramatic than the new change of 4.4 to 3.4.

Okay. Yes I understand and will follow-up.

Okay. Thank you.

Hi guys, first question is on volumes. We know the scrap price has declined and the impact that has on scrap collectors to get that marginal scrap and that’s the key factor behind the lower volumes.

But how much of the drop in volumes do you think is due to price volatility? So, collectors may be holding back in anticipation of steadier higher prices and on that theme if we saw prices stabilize at lower levels would you expect that price stability to lead to an improvement in volumes?

I’m sorry, you’re a bit, you’re going to have to repeat the question. I somehow your line broke up a little bit.

Okay yes no worries guys. So because the volume decline is lower scrap price and that incentivizes collectors to collect less of that marginal time, but I’m just wondering how much volatility has an impact.

So whether scrap, the collectors are holding back in anticipation of steadier or higher prices and on that theme, if we saw the prices stabilize at these lower levels would you actually expect an improvement in volumes from where they are now?

Thanks for clarifying that, yes we do. I think if prices stay stable, even any improvement in the ones that are holding on inventory come to a realization that there is relatively low probability of improvements then the flow catches up and it stabilize again.

It’s different again from region to region. In Australia it is more difficult than it is in the New York City area for obvious reasons in terms of inventory holding possibilities there.

History shows that even at lower prices when the industry stabilize, material should flow.

Okay. Thanks for that.

And I guess on your ROC target if market conditions you indicated further impairments may be required. Is your current target, of greater than 10%, factoring in a flat net assets number?

And I guess from the way you were speaking before, would you consider lower EBIT levels with an impairment generating a greater than 10% return on capital? Would that be a successful outcome or would you consider lifting the target if you had to go through further impairments?

Well listen success for any management team of course is driven by satisfying your objectives in terms of return. One thing to keep in mind, those assets we are shutting down or divesting, we are doing that because keeping them in the portfolio would hurt more than moving away from them.

They are assets that are losing money substantially short-term as you could see A$20 million in this semester alone and assets for which we have no business case to turn around or the capacity or competencies that we have. So holding on those assets long term would be much more damaging for the enterprise than addressing the fact that they have to be removed from the portfolio today.

So it’s not a pleasant thing to do. There are 500 people that are losing their jobs while we are doing this.

Relationships, as Bill pointed out, between customers and suppliers that were there for 40 years and we have to address it. So, achieving success is a relative factor, but the point is we need to do what we need to do to make sure that the enterprise is protected and the returns that we generate are attractive for you.

So, just, we’re not doing that with pleasure. We are doing that because it needs to be done.

And yes, if we due to the challenge of the market manage to take this company to an above cost of capital by fiscal ’18 as we are confident we will get there. Would we feel good?

I think you will too.

Thanks.

Now thank you very much, thank you all for the opportunity of discussing our results, past times, but also a very attractive proposition going forward. We are very confident that we can take this company to where we said it’s going to be in the near future.

I think we have, we’re close to the bottom, probably too close to the bottom but our breakeven point is improving substantially. And even our current market conditions we have initiatives to take this company to where we want to be by fiscal year '18.

If there is a market trend to recover with the breakeven point we have today I think we have a tremendous opportunity to generate attractive returns even beyond cost of capital as Fred pointed out. So, thank you again for the opportunity to be here with us.