Dyno Nobel Limited

Good morning and welcome to Incitec Pivot Limited's 2024 Fully Results Briefing. This is Tom Dixon speaking and I'm joined this morning by our CEO and MD, Mauro Neves, and our CFO, Paul Victor. The materials we'll be covering today have been lodged with the Australian Securities Exchange and can be found on the ASX and Incitec Pivot Limited's websites. At the end of the presentation, we'll have time for questions and an audio recording of this presentation will be available on the company's website. I'd like to draw your attention to the disclaimers found on slide two and slide three of the presentation. And before we move into the main presentation, I'd like to start with an acknowledgement of country. I'd like to acknowledge the traditional custodians of the land we are coming to you from today, the Wurundjeri peoples of the Eastern Kulin Nation. I pay my respects to the elders past and present. Thank you, and now I'd like to hand over to Mauro.

Thanks, Dom. Good morning and welcome, everyone. Before we start, I would like to acknowledge that today is Remembrance Day, a day when we pay respects to armed force members who lost their lives in battle. Our call may run past 11 a.m., so I would like to acknowledge this important day now and encourage you to take the time to observe a minute's silence later today. At our investor showcase in September, we outlined our ambition to become the leading global explosives player. As we go through our results today, we're making great progress to realize that ambition. Our explosives business has performed particularly well. We operate in attractive markets that are expected to remain resilient and grow as mining responds to the energy transition. Our leading technology, unique supply chains, well-positioned manufacturing, high-quality customer base give us an advantage in the market, driving reliable earnings streams with exciting growth potential. We're working hard to drive productivity further so we can deliver on our ambition to double our explosives earning and achieve returns on invested capital above work. So let's take a look in how we're going. Firstly, safety remains our number one priority. This is an area where we set high standards. Unfortunately, our performance has been below our expectations, and I'll touch more on that later. Our underlying financial performance has been very pleasing. Record earnings achieved by both DNAP Explosives business and our third distribution business. As we outlined at our investor showcase, our advanced technology is helping us win in the marketplace and is driving real customer and market growth, particularly in the metals markets. Our headline earnings have been impacted by some IMIs, the vast majority of which are non-cash and relate to an impairment charge against our fertilizers business. The impairment is mainly driven by uncertainty over gas prices in Australia, the same issue that resulted in the closure of Gibson Island Manufacturing in January 2023. We're pleased to note our transformation project has exceeded our expectations with $64 million of EBIT improvement realized in fiscal year 24. This means that we already delivered more than 21% of the expected transformation earnings improvements. Later in the presentation, I will outline the significant progress we made on our plans to separate the third business and our commitment to a separation timetable of six to 12 months. I will now touch on a few key highlights of our strategic ambition. As I stated earlier, our ambition is to become the leading global explosives player. by doubling our earnings, delivering returns above our cost of capital, and achieving top quartile TSR. We will achieve this by leveraging our unique competitive position, customer-centric technology, deep customer partnerships, superior products, and privileged assets and distribution networks. We expect to capture both new and existing demand through our strong customer connections and advanced technology. Our transformation program is about expanding margins, allowing us to transform and increase profitability, eliminating waste and fostering innovation. Capital prudence is paramount in ensuring attractive returns with a focus on returning working capital, I should say reducing working capital and funding only high returning projects. As you see in a moment, this strategy is delivering great results. But firstly, I would like to spend some time on our number one priority, safety. Zero harm is an important part of all of our lives. And I can tell you, it's a deep passion of mine. Before I talk about our performance, it's important that I once again acknowledge that in February this year, we lost a much loved colleague in a public road fatal incident. This tragic incident reminds us that we must stay vigilant, and on that point, we are emphasizing our focus on our global fatality prevention program. Looking more broadly at our zero harm metrics, we are disappointed with our rate of recordable injuries, which is unacceptable for our people. Our trifle of 1.08, which includes the fatal road incident, is above our 0.8 fiscal year 24 ambition. Although yet to materialize in the main KPIs, there are some leading indicators that are showing improvement, and it gives us some confidence that our actions are effective and will drive improvements across the business. For instance, 80% of our sites were recordable injury-free, which proves that zero harm is an achievable ambition. Pleasingly, for the third year running, we have not had any significant environmental incidents, and our process safety statistics have been trending down, despite a slight increase in Tier 2 events in fiscal year 24. We did not record any Tier 1 events during this year, I would also like to give recognition for our team at Gibson Island, who were awarded Chemistry Australia's HSC Award for 2024 in recognition of the safe closure of the Gibson Island manufacturing facility with zero recordable injuries. Moving now to our fiscal year 24 results. Our statutory result after tax, including IMIs, was a loss of $311 million, primarily related to non-cash impairments across our fertilizers business. The main driver of this impairment was a run down of phosphate yield, which is a consequence of gas price uncertainty on the east coast of Australia. Our underlying performance was very strong. as we see the benefits from our transformation program coming through in the results. Of particular note was the record earnings achieved in DNAP and in the third distribution business. It was also good to see the second half performance from Fawcett Hill, with production running at an annualized rate of around 950,000 tons per annum. Our headline results reflects change in our asset portfolio. The EBIT of $518 million is an 18% improvement on fiscal year 23, after adjusting for the Wallace sale, Gibson Island closure, and the impacts from commodities and foreign exchange. We have also announced today a final dividend of 6.3 cents per share, unfranked, which represents a 50% payout ratio consistent with our capital allocation framework. This takes our total ordinary dividends in fiscal year 24 to 10.6 cents per share, or 20.8 cents per share when included dividend component of the $500 million capital return we completed in February. We have also made solid progress on our $1.4 billion capital return program, having returned $649 million so far, leaving a further $751 million to come. The balance sheet remains strong, with net debt to EBIT sitting at 0.8 times. Now to the transformation program. As I highlighted on the earlier slide, I'm very pleased to report a $64 million uplift in fiscal year 24 EBIT following the successful early execution of the program. This is ahead of our expectations, driven by strong recontracting DNAP business, further business benefits from repricing, technology uptake, organic growth, and improved manufacturing performance. We are on track to deliver the target fiscal year 25 initiatives that will support the achievement of a run rate equivalent to 40 to 50% of the earnings uplift as we exit the year. Financial year 2023 EBIT serves as the baseline for our earnings growth ambition. And on this slide, we have included a waterfall to help you reconcile the $300 million starting position. So where would the fiscal year 25 benefits come from? At our investor showcase in Salt Lake, we outline in some detail where we would be deriving these benefits from. We talked about three levers, operational, commercial, and growth. This slide shows roughly how much of the overall benefits we expect to come from each of these levers, and how much each bucket will contribute in the fiscal year 25 year. Now, let's talk about technology. Over the last four years, we had some really impressive growth in our premium motions and electronic detonators. A truly global customer base is recognizing the value of our technology. And as we continue working together to innovate, we'll continue winning new business. Since 2020, we have deployed 135 new Delta E trucks, which demonstrates the growth that this market-leading product has achieved. This year, we designed and built the first electric mobile processing unit with its own solar charging station. We are also working towards customer trials of explosives containing renewable diesel in 2025, with several customers interested in partnering with us. Now, I'll touch briefly on some of the great work that has been going on across the business to improve reliability in our operations. Stable and safe operations releases our management time to grow and improve the business. Improving manufacturing reliability is a focus of our capital investments as we look to optimize returns. We've seen a 7% improvement at our Moromba plant compared to the equivalent period in the last campaign. I mentioned the good second half at Fossett Hill with an annualized second half production rate of around 950,000 tons and a run of 136 days of continuous ammonia production, which was a record in our last 10 years. We also opened the state-of-the-art Helidon automated electronic detonator plant, increasing capacity and driving safety and efficiency improvements. Now, talking about our business unit performance. Dynamo Asia Pacific had a fantastic year, delivering record earnings of $257 million, up $69 million on the prior year, with an impressive EBIT margin of just over 17%. This material earnings uplift was mainly driven by positive reconstructing outcomes throughout the year. And I'm very pleased to say we've continued to see further recontracting wins secured for fiscal year 25. The NAP's investment technology also continues to contribute to earnings growth through electronics, cyber debt, and delta E. Titanobel continues its growth trajectory as the business ramps up in line with the business case. I would also like to share exciting news of the appointment of Tania Rybaczek as President, DinoNobel Asia Pacific. She'll be commencing with us in February. Tania is an excellent fit for IPL with extensive experience across a range of industry and I'm delighted to welcome her to the team. DinoNobel America's explosives delivered 132 million US dollars of EBIT, which is 13% up on the prior year. EBIT and margins were up year on year, with strong growth in metals demand for technology products in Canadian, US, and Chilean markets, offsetting coal volume declines. Coal volume decline was largely due to low natural gas prices. Some slowness in our quarrying construction was primarily seen in the eastern US, following slow industrial and non-residential building 2024. Let's talk now about our fertilizer's business. Distribution had a record year, driven by both volume and margin improvements. This is particularly impressive, given average commodity prices were the lowest they have been since 2021, which really highlights the resilience of this business. This record performance through a period of lower commodity price highlights that distribution is not subject to volatile earnings swings. Soil testing samples through Nutrient Advantage also achieved a record last year, which highlights how our customers are thinking about their soil nutrition and provides a solid platform to leverage our market-leading technology offering. As you know, IPF has an exclusive supply agreement for REIA from Perdaman's Kiratha facility, which remains on track to deliver from fiscal year 27. with construction now 35% complete. An experienced team has been stood up, including a full-time project manager, to ensure readiness and smooth transition on commencement of supply. I have already talked about phosphate yield performance in the second half, averaging 80,000 tons per month and bringing total fiscal year 24 production to 740,000 tons. We have made considerable progress on the separation of our fertilizers business. We have decided to move our primary distribution center from Gibson Island to a new third party facility. This decision will enable us to monetize the Gibson Island real estate and we expect to begin a sale process in the first quarter of calendar year 2025. For manufacturing, we have assessed our options for Geelong and have made the decision to cease our manufacturing operations there. Geelong will transition to an import facility with distribution staying operational. The strategic review of Phosphate Hill is progressing well. We expect to finalize this review by no later than September 2025. We continue to deliver on our strategy for distribution, which is demonstrated by the record EBIT achieved this year. We intend to begin a sale process early next calendar year for distribution. We have appointed advisors to help us with the strategic review of manufacturing and with the sale process for distribution. Whilst there is still plenty of work on separation, we stay focused on delivering a dino-nobles transformation strategy, as outlined at our investor showcase. I want to highlight now some of the key competitive strengths that underpin our distribution business, as well as the key sources of future growth. Our distribution business has unique capability across soil testing, marketing, exporting, and R&D. Our distribution network relies on well-established infrastructure across key agricultural markets on the East Coast. We have the largest market share on the East Coast and continue to drive value-creative market share gains. Our operations are supported by significant trading, supply chain and logistics capability that enable us to deliver exceptional service for our customers. Earlier this month, IPF won the established B2B category in the AFR Customer Champions Award. We are focused on optimizing the network where possible, as highlighted by our decision to close the PDC at Gibson Island and entering an agreement with a third party to operate a new distribution center in Brisbane. The construction of the per-demand facility is around one-third complete, and is on track to deliver a step-changing earnings for this business in fiscal year 28. Importantly, the business can be separated from manufacturing, and separation work is underway as we speak. We have previously discussed some of our achievements in decarbonization. Having successfully completed the Moromba project, we will deliver a similar project at our Lomo facility and have committed to complete this installation in 2025. These are long lead time projects which require planned shutdowns and significant investment to install. Having said that, the benefits are great. Together, these two projects are expected to reduce DinoNobo's global greenhouse gas by 41% against our 2020 baseline. As part of our commitment to transparency, IPL has again been included in SNMP Global CSA Index, which is widely recognized as a leading reference point in sustainable investment. Our efforts to ensure sustainable operations throughout our business were also recognized in July when IPF was recognized as sustainability leader by the AFR in the agricultural and environmental category. I'll now hand over to Paul to take you through our financial results.

Thank you, Mauro, and good morning to everyone on the call today. Starting on slide 21, I want to begin to putting our financial results into context. As you've just heard, our underlying financial performance is very strong. In most parts of our business, we've strengthened our commercial positions, grown margins, contained cost, improved asset performance, and managed our cash and working capital levels very efficiently. However, our statutory results have been impacted by the strategy-led changes we have in our portfolio and the execution of our DinoNobel transformation strategy. The non-cash impairments we have announced today are primarily related to the uncertain gas environment we continue to operate in, and this is a challenge we face for some time. This has not stopped our focus on maintaining our financial and capital prudence through improving our working capital levels and our ongoing focus on delivering competitive, sustainable returns to our shareholders. So as we begin financial year 25, we are expecting a strong year for our operating businesses, but note that this will be impacted by our heightened program of plant turnarounds during the year. I'll come back to the outlook later in my section. Turning to slide 22, which provides a detailed overview of our financial performance for the year on a statutory basis. The net loss after-tax of $311 million reflects the $712 million of after-tax IMIs we booked during the year. These mainly relate to non-cash impairments in the fertilizer business and includes the DinoNobel business transformation cash costs. This was partly offset by the gain on the sale of Wallah. Our capital expenditure of $379 million is 23% lower than the previous year and is still very much in line with our expectations. The prior year included capex at Wallah and turnarounds in the DNA business, which were not repeated in the current year. We remain laser focused on improving our ROIC. Our ROIC, including Goodwill for continuing operations, increased from 6.1% to 6.3% due to the strong result in the DinoNobel business. While our ROIC increase, we recognize it's not where we want it to be, and we do have plans in place to address this, which we'll speak to later on in this presentation. Ambition is to increase our ROIC, including Goodwill, to about the 8.5% WAC over the following three years. And as I've said before, everything we do is focused on maximizing returns to shareholders. Our delivery of strong underlying earnings growth has enabled us to announce a 6.3 cents per share final dividend, which represents a 50% payout ratio. This takes our total dividend per share for the year to 20.8 cents per share when you include the dividend component of the capital return we completed in February. I will talk more about our overall capital management program later in this presentation. Turning to slide 23, I'm really proud to say that the group delivered a solid 18% underlying earnings growth in all of our customer-facing businesses. This included a record EBIT in the Diana Nobel Asian Pacific business and a record EBIT in the fertilizer distribution business. Congratulations to those teams involved in this performance. It really was a fantastic job that really highlighted the strength of the businesses we have. In total, our global explosive business increased earnings by 30% to $460 million, benefiting from the strong customer growth, improved pricing, and continued technology uptake. DNAP had a record year with earnings growth driven by favorable recontracting. DNA also delivered a good growth with strong earnings growth in the metals market and a continued focus on cost management and price discipline. Our fertilizer distribution business had an excellent year and really got on top of the complex challenge of managing fertilizer supply chains in a complex and a very dynamic environment. The overall fertilizer result was impacted by manufacturing interruptions at Phosphate Hill in the first half, and as Mero mentioned, the team really delivered an excellent second half to close out this financial year. We have been diligently managing our overheads during the year, but our results also reflect the settlement of a legacy U.S. litigation matter. The underlying group costs did decrease year on year and will further benefit from improvements made as a result of the transformation program. Overall, at group level, we delivered an EBIT result of $580 million and an EBITDA of $925 million on a continuing operations basis. On slide 24, it really outlines in more detail the impairments we've booked in our Australian and US fertilizer businesses. Let me start by saying that there were no impairments in our distribution business and that this business continues to perform exceptionally well. At Phosphate Hill, the impairment has been triggered by the ongoing uncertainty about gas prices on the east coast of Australia. As mentioned earlier, we have made the strategic decision to close the Geelong operations and have booked the associated impairments to those assets. Meanwhile, at Gibson Island, the $50 million impairment mainly relates to the infrastructure which cannot be relocated and has been written off. Over in the U.S., we have undertaken a competitive sales process for the St. Helens asset, and this has indicated a fair value below the carrying value. As a result, we have booked a $100 million in payment of that asset. Let's now turn our focus to working capital and on slide 25, you can see the year-on-year movement in working capital. Over the past year, we have introduced several business improvement actions that delivered many benefits in optimizing our working capital investment. We have to accept that in the growth areas of our business, such as explosives or the exposure to strategic stock issues, we have made the decision to increase our working capital levels on a temporary basis. We acknowledge that we still have much more to do to address the relative levels of working capital in the business. In addition, our DinoNobel transformation project will be instrumental in delivering better working capital outcomes and improving returns for the business. An important call-out was our decreased usage of trade working capital facilities. Utilizing cash on the balance sheet is much more beneficial as we buy back shares over time. The decision to rather use cash saved us between $3 to $4 million in additional facility charges and made it worthwhile to rather use cash on the balance sheet as opposed to the facility. Turning to side 26. Our capital expenditure is continuously being reviewed to deliver the most optimal levels of spend to ensure long-term asset reliability and delivering the best ROIC for all of our assets. Our expected level of sustenance expenditure in financial year 25 of $180 million to $220 million is in line with the prior year. As we have highlighted earlier, we have a number of planned turnarounds this year and we expect turnaround capital to be in the range of $120 to $140 million. This includes the planned 56-day turnaround at Maramba. Our total sustainability CAPEX is expected to be approximately $10 million in financial year 2025, and this is supporting our pathway to deliver our 2030 emissions reductions. Sustainable capital is aligned to our asset maintenance plans, which aims to balance returns as well as ensure sustainable throughput at our manufacturing facilities. Turning to slide 27, this really provides us with a great snapshot of how we are prioritizing the delivery of sustainable returns to our shareholders under our capital allocation framework. As you would know, in February we delivered the $500 million prorata capital return, which was the equivalent of 26 cents per share. As I've mentioned earlier, we announced today the 6.3 cents per share unfranked dividend. This takes Financier24's total ordering dividend to 10.6 cents per share, which excludes the special dividend of almost 10.2 cents per share as part of the $500 million capital return paid to shareholders in February. We have made excellent progress on our on-market share buyback program, and we expect to continue that program following the release of these results. Let's now turn into our outlook. At a high level, we expect the earnings benefit of the Diana Nobel Transformation Program to be impacting the earnings for financial year 25 quite significantly, but it will also be negatively impacted as a result of the planned turnarounds in financial year 25. We expect Diana Nobel earnings will be skewed to approximately 40% in the first half and 60% in the second half of this year. Adana Nobel America's business is performing really well, and we are also expecting the business to have a more pronounced first half, second half skew of around 30% to 70%. In Adana Nobel, Asian Pacific business earnings will continue to be supported by the favorable recontracting and margin improvements from our technology offerings. A big feature of the year will be the turnaround at Marimba to deliver safe and sustainable earnings into the future. We'll also be reporting a new business unit called DNEL, which stands for Donna Nobel, EMEA and LATAM. This is what we believe to think it being our growth business unit as we expand into new markets with our customers. Across the Diana Nobel business, the benefits of our transformation program will continue and we expect to deliver a 40% to 50% exit run rate at the end of financial year 25. Financial year 25 will also see turnarounds at Marimba, Shahan and Lomo, which we forecast will have a $45 to $55 million earnings impact for this financial year. For our fertilizer distribution business, we expect the earnings to be in the usual $40 to $60 million range, subject to market conditions. In fertilizer, our production expectation at phosphate yield are 790 to 860,000 tons for the year. It is important to note that due to some scheduled maintenance work, the expected production skew this year is around 40 to 45% in the first half. We also expect a fertilizer earnings skew of around 20% in the first half and 80% in the second half, depending on the gas and DAP price outcomes. For phosphate yield gas costs, we are currently assessing gas cost scenarios with an expected incremental cost of shortfall gas in financial year 25 to be in the range of 30 million to 90 million, depending on the timing of the recommencement of supply under the contract. It is also important to note that we expect to see the earnings benefit of the transformation program really coming through in financial year 26, as we exit the year on a 70% to 80% EBIT run rate with significantly less impacts as a result of turnarounds. Finally, on slide 29, we have provided an overview of our planned turnaround activities. As we have discussed, the turnarounds in Finance Year 25 will be at Maramba and Shahan, and also at our Ammonium Nitrate Facility at Lomo. The turnarounds planned at St. Helens in Finance Year 25 and Phosphate Hill in Finance Year 26 are subject to the outcome of the strategic review of those assets. We look forward to updating you on the progress of these critical activities as we progress the year. So that's all from me. Thank you very much, ladies and gentlemen, for listening to me. And on that note, I will now hand back tomorrow.

Thanks, Paul. Before we move to Q&A, I would like to take a moment to thank you, Paul, who last month communicated his intention to leave IPL. Paul has played a pivotal role in our business since joining in July 22. And I would like to personally thank him for supporting in my transition and for his leadership, commitment, and passion for IPL. In closing, I'm very excited for the outlook for this business. Our very strong underlying results presented today demonstrate material progress on our strategic objectives. We will continue to leverage our competitive advantage to grow. Our transformation program is delivering on our ambition to double earnings in the next three to four years. Our customers remain our obsession, and we will continue to demonstrate discipline in execution, in operations, and in capital allocation. Finally, and importantly, we have renewed our commitment to delivering the fertilizer separations in the next six to 12 months with a refreshed strategy. We believe that by potentially separating manufacturing distribution, we will maximize value and increase divestment certainty. Thank you for listening. And with that, I'll hand over for questions. Operator, could you please remind our callers how to raise a question?

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. And if you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Brooke Campbell Crawford from Baron Joey. Please go ahead.

Morning, Mario and Paul. Thanks for taking my question. First one, just with respect to the transformation program, you've talked to exiting FY25 at a 40% to 50%. run rate for the total targeted benefits of $300 million. What was the equivalent exit run rate for, I guess, as at September 24, please?

Brooke, we haven't provided that run rate. We did comment in our financial results that the benefit of the transformation program on an absolute basis is $64 million, which again significantly indicated the increase in EBIT from financial year 23 to financial year 24. Safe to say that... It is a significant step change. We haven't communicated what that exit run rate is, as you can respect with all the moving parts that we are navigating in stepping up the earnings run rate into financial 25. So at this point in time, I think we're going to stick to the 64 million for the year. and an ultimate message that we expect to achieve that 40% to 55% by financial year 25, which is really our focus at this point in time. But I think a significant effort made by the team in actually getting us to this point of achieving 64 already. And we can report it in the numbers, as you can see.

Understood. Thank you. And just a second one from me. You provided guidance for the North American exposes business to grow earnings by mid-single digits. That's EBIT growth in mid-single digits, I think, is what is in the materials. What's the equivalent expected EBIT growth in DNAP? If you could provide that number or some color on how we should think about the growth in 2025, that would be great. Thanks.

Thanks, Brooke. Yeah, and once again, I think, you know, we always have provided the guidance, especially to our single digits for DNA. I think, you know, it's quite prudent to say that the growth of the earnings book over time, you know, kind of allows us to make such statements. I think if you look at DNAP a little bit different, you know, due to the junkiness, my words, not yours, in terms of how we recontract the book, And it usually comes in these two to three, you know, kind of step changes in profitability, and then we get into the next phase of recontracting. I think it's safe to say that there's still some yards to come in terms of the recontracting, meaning benefits that we want to realize in financial year 25. So there would be still, you know, not as much as in financial year 24, but still a fair amount of increases in the recontracting book. which should be quite a positive catalyst for the EBIT and EBIT earnings for DNIP. So more to come in that business. If you look at this current year's performance, there's definitely going to be a further increase to that. But I think we also have to be quite careful. There is a turnaround this year. There's many moving parts there. So although we see the underlying business really improving with increases in earnings as a result of recontracting, we also have to carefully manage the turnaround. And we will update you at half year to give you indication of how much of the earnings uplift is, you know, kind of realizing and how much is impacted by the turnaround. But I think we're quite comfortable. I think Greg... And Dion and the team has done an excellent job of recontracting, and we're quite comfortable with the trajectory of the EBIT.

Thank you very much. I'll hand it over. Thanks.

Thank you. Your next question comes from Owen Barrow from RBC. Please go ahead.

Yeah. Good morning guys. Um, I was just, uh, I guess my question around the Fertz business, um, you know, you've announced closure of Geelong, sale of St. Helens, sale of distribution. I'm just wondering what's outstanding with Fosshill. Like, uh, why is that one still under review?

Thanks Owen. Mauro here, good morning everyone. Look, it's just a more complex asset and we'll take our time to look at all the moving parts. As we disclosed in the IMI's, gas remains a big uncertainty and we're working through that process with our suppliers and all the stakeholders involved. But I hope that the other announcements that we were able to do shows you a level of the decisiveness that we have applied to that, to when we're ready to make a decision, we'll make a decision. As I said in the investor day, we'll leave no stone unturned. All options are on the table, and we'll work swiftly to come to the conclusion of the strategic review, no later than September 25.

Can I just ask on that? I mean, you've got a big turnaround plan there, and I know you sort of highlighted that you defer the turnaround pending the the review, but in terms of ordering equipment and things for that turnaround, are you leaving yourself in a bit of a bind in terms of timing?

No, we've done some very good technical work with the team and that was part of the work we've done since we last talked to the marketing investor today to really give us the opportunity to wait until September 25 to make that decision, including the ordering of any long lead time items. So we really bought some more time thanks to the great technical work that the four still have done to put us in our position to have that decision made by no later than September 25.

Okay. And just one final question for me for Paul. The book value of the first asset base is now down to just slightly over a billion dollars. Are you able to give us the splits between, I guess, the book value of the manufacturing assets distribution and what you've got for real estate assets?

Yeah, so basically we do provide that, but I think the only asset really of relevance here, you know, that you can split out on the manufacturing side because on Geelong we effectively written down. On GI we're actually also going to give you an indication of the $50 million that we've written down on equipment that we're not going to use there. The financial records, you can see that for phosphate yield, we have $119 million remaining for phosphate yield on the assets and in the records. And then basically the remainder would be the distribution business.

Okay, so 190 mil for manufacturing.

Maybe it's my accent that doesn't translate well. 119. Oh, 119.

Yes. All right. And then so basically the rest is quality distribution? Yes. $880 million or so. Okay, thank you.

Thank you. Your next question comes from John Perdell from Macquarie. Please go ahead.

Good morning, Mauro and Paul. Hope you're both well. Just had a couple of questions to start just on DNA, if I can. Just to clarify, just the outlook comment there for DNA-based explosives expecting mid-single-digit growth, is that before transformation benefits and before the impact of plant turnarounds?

So, John, basically we're commenting on the EBIT on an all-inclusive basis. So that would include basically the turnarounds and will also include the transformation benefits. I think what is quite important to note, and Marie, if you don't mind me speaking about it, is that We will have the DNEL business that we will be reporting on in March or the first half. So we also need to kind of make some, you know, restatements as well as showing what the competitive numbers are for this business. So around about March, some parts of the DNAP business and some of the DNA business will transfer to the DNEL business. So those numbers we need to provide. So So excluding those and just looking at absolute business on a like-for-like basis, it is all-inclusive, John.

Thanks, Paul. And just further to that, as far as the market outlook goes, you've obviously called out some hurricane impacts there for Q&C and metals expected to grow sort of strongly. You know, just be interested in what you're sort of assuming post-election here. You know, there has been obviously some well-documented evidence slowness in the acquiring market because of the election. So are you sort of factoring in some improvement here? It looks like it's more in the second half.

Look, John, Mauro here. Good morning. We expect the market to grow next year. So all we're hearing from our customers are they're inquiring construction and minerals is a 5% to 10% improvement year on year. This is obviously very, very depending on different markets and different geographies. But we are... I'm talking about growth on the economy, not necessarily our business. The numbers that we provided before in our business remain the same. But just to give you a bit of a sentiment, it's upbeat in a sentiment of having put the elections behind us. People are starting to talk about investment in growth. So if anything, the conclusion of the electoral process seems to be giving confidence in our customers, especially on those markets that are more directly related to the economic growth, like construction and quarry and construction in general.

Thank you. And just a final one, if I can, on Phosphate Hill, the incremental 30 to 90 mil of gas costs, the baseline referred to is versus contract price. How does that compare to fiscal 24?

So basically, we have provided a range of $30 to $90 million based on the outcome of the gas situation. I would say safe to say the bottom end of the range, meaning the 30, should put us in a better position year on year. And the higher end of the range, obviously, would be much higher on a year-by-year basis.

Thanks, Paul. Thank you.

Thank you. Your next question comes from Daniel Kang from CLSA. Please go ahead.

Good morning, everyone. Just wondering if you can provide some context in terms of the surplus land opportunity at Gibson Island. Are you able to talk about the potential magnitude that could be realised? Also, is there a similar opportunity with the Geelong site? Thank you.

Thanks for your question, Daniel. We haven't disclosed the land valuation. It is something material, so we will wait until the process takes its way to comment on that. But we think we will release some good value from that. In relation to Geelong, please... Please rest assured we are thinking about all those things. But as we announced today, we're seizing manufacturing at Geelong, as we've done some time ago in GI. But at this point, we're still using that site as a distribution center for our distribution business. So eventually in the future, there may be an opportunity to think about real estate opportunities, but that's not something that we're prepared to comment today. So for today, the real estate opportunity is really on Gibson Island. And we'll talk about Geelong when potentially a decision is made in the future. But for the time being, Geelong is still one of our important distribution centres for the Victoria market.

Thanks, Maroon. Just while we've got the floor, Can you provide us with your assessment of what the current landed pricing for explosives grade AN is currently into Australia? I'm just thinking about how we reconcile that with the new cycle of recontracting that's about to start in 2025.

Thanks, Daniel. It varies a lot, but let's say ballpark about $1,100 per ton. Okay. Thank you.

Thank you.

Your next question comes from Andrew Scott from Morgan Stanley. Please go ahead.

Thank you and good morning. Just maybe start with a quick one for you, Paul. I just want to confirm that the first of the WALA tax payments was made in the FY24 year and follow on to that, that there's still the US 250 to come in FY25?

Short answer is yes.

Okay, fantastic. Thank you. Mauro, coming out of the Morambar turnaround, would you expect to unlock any incremental capacity there?

Yeah, look, we will set up some critical componentries that will allow us to do some further de-bottlenecking in the years to come. We try to de-risk this turnaround to a great extent, so we're doing works that will prepare us to do that de-bottlenecking in years to come, and we'll announce that. But if anything, this turnaround set us up to do that. Everything that is in the critical path, so that we don't need to stop the plan today to do the de-bottlenecking process we're doing now, But we tried to risk this turnaround to the extent we could.

Thanks, Mauro. And while we're on the topic of turnarounds, could you just talk to the work that is being done at Foss Hill? It's just interesting to see a guide for what seems to be a pretty significant production impairment, given that we are going into a shut year in just one year's time.

Look, the impairments are related to the production performance. If anything, we saw a performance uplift which we reported in the second half of last year. The main uncertainty that drives the impairment decision is to do with the uncertainty around gas price in the East Coast. So we remain of the view that we will continue improving that business further. Up until a point, it remains under the ownership of IPF. As we said before, we remain committed to the best of our first portfolio, including the manufacturing assets. But I can promise you that up to the very last day, we'll be doing everything we can to run it safely and as productively as we possibly can.

Sorry, I probably misspoke. I shouldn't use the word impairment. But what I'm getting at is the guide for volume at Foss Hill is substantially lower. And I understand you're doing some reliability work, but I would have thought that could coincide with a turnaround. So I just want to understand the work that you're doing. That means you're only going to get the 770 to 860,000 tonnes, which is significantly below sort of a theoretical nameplate.

So 790 to 860, if I may. We are just as we speak, and we've been talking to the teams over the weekend. They had a very safe and successful turnaround in both Mount Isa and Fossil Teal. The ammonia plant is back operational. So we're coming out of the turnaround that we've done since the turn of the financial year. So that's just what is accounting for the lower volume. But we remain confident that once we're out of this turnaround, we will go for another good run of continuous operation.

And could I hazard, what would you guess, what would you put a nameplate or a reliable production number at? Do you have an estimate of that at this stage?

So the 950 run rate for the second half of last year is something that we worked very hard to do more often and do consistently. We reported 136 days without a trip in the ammonia plant. That's the best we've done in the last 10 years. So there's some green shoots. The team has done fantastic work. I have spent lots of time together with the team there, with Steph and her team. I have nothing but pride of the work they're doing there on the ground.

That's very helpful, thank you.

Thank you. Your next question comes from Scott Ryle from Rimmer Equity Research. Please go ahead.

Hi, thank you very much. Just maybe one of my questions was on phosphate hills, so maybe just to go on that. Can you just tell me what takes so long to complete a strategic review process on that one, please? And I guess if in the answer, can you also comment that if Obviously gas is a problem that predates both of you guys, but I'm wondering if you have to cease manufacturing in Phosphate Hill, does that mean the mine will lie idle? Is that a kind of, they're so inextricably linked that you can't operate the mine without the other manufacturing assets, please?

Thanks, Scott. Nice to talk to you again. Look, the fossil fuel asset is comprised, as you spoke about, a mine and a processing plant for DAP and MAP. And yes, those assets can be seen together or in separation. As I said, we are leaving no stone unturned. There has been in history export of fossil trucks, so it wouldn't be the first or the last time that someone thinks about doing that. So this is not a possibility that is lost on us and that makes the strategic review as complex as you suggest. It's about the geology, the geological resources of the operation to its current purpose but potentially as an export. It's about the reliability of the plant. It's about how can we improve further the operation. It's about the cost to do that and the capital associated to that. It's about the gas uncertainty that I talked about. As you know, our contracted supplier in PWC, Power Water Company from the Northern Territory, has not been able to supply us as contractual volumes in recent years, and all those processes and all those uncertainties are things that we want to firm up before we make a decision. So we are very heavily doing stakeholder engagement with all the stakeholders involved to make sure that we make an informed decision. And as we said, we're committed to come back to the shareholders and to the market no later than September. It is a long process because it's a complex decision.

Okay, great, thank you. And then the second question I had was on Gladstone Green ammonia, please. I'm just wondering if you can just give us a timeline on decision-making there. I know in the documents you're currently finalizing pre-feed works. So what's the process timetable from here? And were you to go ahead, what's the approximate size of IPL's potential contribution into that place?

Look, we have a range.

A range is fine, obviously.

We haven't disclosed the capital commitments of the project. What I can tell you is we are in conversations with the other off-takers. Our role in this process is to be an off-taker of ammonia and do a participation commensurate to our volume off-take. We have signed the MOU with Stanwell and the other off-takers international, all of them international. We are the sole domestic off-taker of ammonia should that project go ahead. What I can tell you, to do the next step and commit further time and investment in this, The next step is really to have the definition on the incentives that would be required to make the cost of energy feasible to get the process over the line. But in terms of the technical work and the relationship with Stanwell and the other key participants in the joint venture, we couldn't be happier with the way the conversations are going and we remain hopeful that there will be a good outcome in terms of the incentives necessary to make it viable.

All right, great. Thank you. That's all I had. Great to reconnect with you too, Mario. Thank you.

Thank you. Your next question comes from Reinhard van der Waal from Bank of America. Please go ahead.

Morning, Maura and Paul. Thanks for taking my question. First one may be just on the below the line transformation costs. Can you just give us a sense of the quantum and the pace of those below the line costs and how they're going to shape over the next couple of years?

Yeah, more or less. Yeah, so basically we have disclosed in our IMIs that there's around about $30 million of transformation costs. In part would be the redundancies and severances, and then the other part would be the enablement, which we kind of – have capacity in the support of a BCG that assists us in the program. So that would be for this year. I think that next year, we'd also see the next tranche of redundancies coming through. So there would definitely be a charge. It would not be as significant as this year, but there is still some kind of labor exits that needs to take place in financial year 25 because we did manage it on a low-risk basis. So there would be some of that cost coming through. And then, of course, BCG is also helping us to the full realization of the run rate, which I think makes it great for them and great for us to ultimately drive and deliver the program to that desired outcome of what we believe the ambition should be. So there should also be further BCG expenses that we would incur in the next year. So, yeah, I would say probably the more sizable chunk were costed this year, but expect, you know, at least 80% of what we realized this year to realize in financial year 25 and to give, you know, full effect. I think standing back, if you use that as guidance, the project, you know, if you have the ambition to double the earnings, you know, the cost relative to the EBIT uplift is still in a ratio of 10 to 1. I just want to caution that because it is really low cost, very low capital, and the ambition to double, which we believe we are on the right track for. So just see the cost also in that context.

Understood. Very helpful. Thank you. Can I also just check? There are going to be a few other costs that you'll probably need to incur. I mean, systems investment might potentially be one of those in order for you to get the deep analysis for cost control. Can I just check if those system investments occur, are they also going to be recorded below the line or will they form part of the underlying EBIT number that you've given us a sort of shape guidance for?

That's a very good question. I mean, we have actually been upgrading our systems. And now systems, you can talk main ERP, you can talk, you know, applications cloud-based. You know, these systems are actually a very wide concept. I think, you know, our transformation towards cloud-based has started years ago, and we have been, you know, quite mindfully evolving. investing in those upgrades, which is part of our sustenance portfolio on an ongoing basis. We've also heavily invested in the upgrade of our cybersecurity, which I think is quite essential, network fragmentations, all of those things, retirement of legacy systems, all of those things have taken place. So that's already costed in. I think the big thing for us is kind of the upgrade of our ERP system to SAP for HANA, which most companies, you know, ultimately go to, and that will kind of take us to, you know, full cloud-based ERP system. We're really kind of very cautious in the way that we approach this. You know, kind of we will go for the vanilla option, which ultimately, you know, is not kind of the significant investments and big banks approach. We absolutely don't have the appetite for it. I think that cost and capital will still need to filter through as part of sustenance capital on the balance sheet over time. I can assure you that we are taking a very cautious approach. There's a lot of work that we are doing to find the most optimal position on that. And that we will need to disclose in the market over the next two years or so. But, yes, there would be some form of investment required. I really think that we're going to be quite modest about it and take from the learnings from others in the way that they've done this. And I really believe that this should be, you know, kind of a quite prudent and not a significant number associated with this over time.

Understood. Thank you very much, Paul. And maybe more just to pick up on the point you made around Foss Hill, you know, the fact that fossil rock mining alone could actually be feasible. I'm conscious that you're running the strategic review at the moment, so I don't want to sort of preempt it too much. But can you just give a sense of whether you think that there is actually enough rail capacity for you at this stage to be able to run it as just a fossil rock mine? And, I mean, in that kind of scenario where you take the DAPP, the downstream process out, do you think FOSROC's marketing or sales would actually lead you with a less volatile earnings profile relative to DAP or roughly similar?

Thanks, Ryan. I think the nature of your questions help us explain why we need to do the work. There's so many questions that we need to answer, and your question shows exactly. It's like you're participating in our internal meetings. Some of those questions we have, some of those we don't, and that's why we're doing the work. Now, notwithstanding all those options, and as I said, the scenarios of no stone unturned, Phosphateal long-term, as every other element of the agricultural market, doesn't belong to our portfolio. So we are doing all the work, but we don't believe we are the natural owners of those assets, whether it's a phosphate rock mine, whether it's a DAPMAP manufacturing facility. So we're looking to maximize value for our shareholders, but not something that we seek to operate long-term as IPL or as dino-novel.

Got it. Thanks, Mauro, and all the best, Paul, with your next opportunity. Thank you.

Thank you. To ask a question, please press star one. Your next question comes from Neeraj Shah from Goldman Sachs. Please go ahead.

Good morning, guys. A couple of questions from me. Firstly, in the outlook slide for fiscal 26, you've called out obviously progress on transformation and lower turnaround impacts. Just for the sake of completeness, how should we be thinking about the Morumba sort of gas price step up in 26, 27? Is that an incremental headwind or will that be sort of offset by rise and falls?

Yeah, so we don't see that as an incremental headwind. Again, you know, you have to step back and, you know, currently we are developing the field or, you know, supporting the development of the field with QPM. And we do believe that ultimately as we get to financial year 26, we don't envisage a significant step up. We always message it and we'll manage it accordingly. So yes, there's not a significant step up that we expect. Again, also in terms of our contractual arrangements, there's a way that we deal with you know, a higher, you know, gas cost. And usually we do pass those on to our customers. Of course, our customers also require from us to manage, you know, the cost and the management of the field as prudently as we can, which we believe we are. So, yeah, I think, again, coming back to the emphasis of Maranbar, this is a highly cost-advantaged asset that has the benefit for us and the benefit for customers. It's sold out, will continue to be. And we're quite hopeful and a strong belief that there's enough gas there to actually supply this asset for the next foreseeable future. So we're quite positive about it.

Thanks, Paul. That's very helpful. Just a quick second question. Just on the transformation program, obviously the fiscal 24 benefits skewed massively towards DNAP. But if I look at the entire incremental 300 mills, I guess 60 mil comes from I guess the new segment, but how should we think about the DNA versus DNAP split for the rest of the entire program?

It comes back to my earlier comment that I made, I think to John Patel, that we will split the different earnings of the business, the historical earnings, and provide guidance on the future earnings of the three segments around half year. I think we want to do a great job in managing the change of that so that you can actually understand the numbers and where the numbers are coming from. I think that's quite important. So we are going to reserve our comments at this point in time only to talk about DNA and DNAP, because the strategy is the strategy, right? And we want to grow the business. So, I mean, ultimately, we do believe that, yes, you're 100% right, that for the past financial year, we had this significant kicker in the recontracting and DNAP, which also earlier on the call today said that will continue. But we also see a significant contribution over time from DNA as a business. There's lots of value that they can contribute. And even in the current footprint, there is so much more value that they can provide in terms of discipline, growing the customer book. just managing the business more effectively and efficiently through the supply chains, going to the growth areas such as LATAM and so forth. So DNA in its current existence will contribute quite significantly towards that 300 million ambition on doubling the earnings.

Understood. Thank you.

Thank you. There are no further questions at this time. I'll now hand back for closing remarks.

Thanks for the questions. I hope you all have a safe day. Looking forward to be meeting many of you on our roadshow. I just wanted to let you know that we're bringing reinforcements to the roadshow. So we have Greg Hain, former president of DNAP and currently president of DNA. coming to the domestic roadshow, so prepare some hefty questions for my good friend. And then on the international roadshow, we'll be joined by Rob Brownsley, the new president of the international business. I think that will give you some exposure to some of our colleagues that face the markets to get to some of the detail. So if I had to do some closing comments, we are committed to separate the FERTZ business in the next six to 12 months. That's our priority. The strong underlying results that we presented this year, especially the record numbers for DNAP and FERTZ, give us confidence that we are in the right trajectory, and the transformation has delivered above our plane, and we're really confident that we are on track to deliver to our ambition to double EBIT by in the next three to four years. So thanks for your interest. Thanks for joining us and see you all on the road.