Sims Ltd Sp/Adr

Thank you and welcome everyone to our call. Today we're here to present the Harkier results for FY25. Presenting with me is Warwick Ransom, our CFO. Also on the call are Rob Thompson, our North American Metal President, and John Blythe, our ANZ Metal Managing Director. First up, I will run through our strategy and strategic priorities, market dynamics, an overview of the results, and operational highlights. I'm also going to spend some time detailing the internal and external factors providing positive momentum for our business regions and divisions. Warwick will then take us through our recently formalized capital management framework, and then a decent review of the financial results. At the end, I will return to talk about the outlook, after which we will have Q&A. I will turn straight to slide five, which looks at our strategy and strategic priorities. At our FY24 results announcement, I presented a similar version of the graphic on the left-hand side of the slide. This is effectively our plan on a page. Our purpose has endured for several years now, and our core strategy is to repurpose and recycle. We deliver this to the five elements of our strategy as detailed in the graphic. However, you can't deliver everything at once. We've had to focus on the strategic priorities that give us the biggest bang for our buck. We've simplified SIMS by, amongst other things, reducing layers and increasing spans of control to speed up decision making. There's been an enormous focus on increasing margins and not being preoccupied, particularly in NAM, with marginal profit volumes. We've continued to focus on shortening the cash cycle to improve our cash generation. The UK sale has been the most significant contributor to optimising our portfolio. It has liberated management to focus on the US and ANZ, where in many areas we have a good market position, and in those where we don't, we have a pathway to a good market position. There could be some further acquisition and disposal opportunities within regions to further optimize the portfolio. Maintaining or improving our market position will allow us to grow from a position of strength. On the buy side, we have been improving our supplier network to allow us to buy more unprocessed scrap at source. On the sales side, there has been a concerted effort to enhance our customer relationships, particularly domestic customers, and this has provided us with genuine domestic and export optionality to manage and capitalize on dynamic market conditions. Part of this relationship building has also been about ensuring we have consistent and high-quality differentiated products to suit different market segments. The benefits of focusing on these strategic priorities are starting to show in our financials. But before we get to those, I would like to cover off-market prices and safety, beginning on slide six. In a nutshell, Ferris prices were on average lower this half compared to the FY24 half, and non-Ferris prices were higher. This continues a trend we have seen over the last 18 or so months. Interestingly, we have seen a bit of recovery in Ferris scrap prices as we enter the second half of FY25, particularly in US trade prices. Our belief is that this is being driven by the pending steel tariffs and also some restocking at the mills. It is unclear whether this upward trend will continue for the second half. Moving on to safety on slide seven. I noted at the FY24 results that we had moved to managing safety through proactive leading indicators as opposed to lagging. because lagging indicators are simply an outcome. We've successfully improved our safety program by focusing on enhancing and standardizing control measures that have created a safer organization. You can see that our leading indicators shown on the left are consistently strong, which is the key driver behind the improvement trend over the last few years in the lagging indicators and the significant reduction of more serious injuries. Onto slide eight, which is a high-level summary of the financial results. The two highlighted numbers on the page are EBITDA and EBIT, both up substantially. I also want to highlight the 22% increase in trading margin despite flat sales volumes. This is a proof point that focusing on margins, not volumes, is driving better financial outcomes. While the return measures on productive assets and investor capital are still unacceptably low, there is a definite improvement in line with profit performance. Turning to slide nine, while it is titled operational highlights, it is in fact both financial and operational highlights. Looking at first at Sims Metal, excluding global trading operations, an 8.6 percentage point increase in unprocessed scrap helped drive an uplift in our shredder capacity utilization And together, these are good contributors to the 3.5 percentage point increase trading margin percentage. The trading margin percentage increase was particularly strong in NAM, which Warwick will highlight later in the financial discussion. It is also worth noting here that we have changed the structure of SIMS Metal back to a more regional model. While the functional model served its purpose at the time, the current market and SIMS position in it requires Rob Thompson to be responsible for all of NAM and John Blythe for all of ANZ. I am exceptionally pleased with SLS's performance. Strong repurposed units growth contributed to a nearly 21% increase in revenue and a 2.2 percentage point increase in the EBIT margin. Moving to slide 10 now, which drills a little deeper on NAM's operational highlights and what we have been doing to achieve the turnaround in results. Let's start with the top left-hand chart. This shows that we are responding to price signals between domestic and export markets. In July 2024, export prices were $20 per tonne higher than domestic prices, and therefore we exported more. In the current month of February, domestic prices exceeded export prices by $56 per tonne, and we significantly lifted domestic sales to 65% of total sales. We've been working hard to develop our domestic channels in the US to enable us to have genuine optionality. Moving to the top right chart, clearly our focus on buying unprocessed material is showing results. We've increased the unprocessed ferrous scrap as a percentage of total ferrous scrap from the mid-50s in the first half of FY24 to approaching 70% in this half. This increase has driven better utilization of our shredders, but also our MRPs, which capture the non-fairest fraction driving an increase in Zorba volumes. This is shown on the bottom right-hand chart, where Zorba sales volumes are up 31%. Finally, the bottom left-hand chart, a proof point showing our increased focus on margin. Despite market conditions that have at best remained flat and depressed over the last 18 months, we have lifted our buy-sell spread significantly over consecutive halves. This increased spread has flowed through to EBIT, as shown on the quarterly NAM EBIT results in the chart to the right. The next few slides show the fundamentals driving NAM, ANZ, and SLS. Let's start with NAM on slide 11. The two charts show the increase in demand coming from EAF production. In particular, the chart on the left highlights the demand for scrap outpacing the supply through to around 2030 if the new EAFs come online. Within the detail, the issue is even more pronounced as it relates to shredded material because it compromises approximately 45% of infeed with only 30% being cut grades. It is also worth noting that this analysis was undertaken before the announcements of the steel and aluminium tariffs. The impact of the tariffs may well add to a consumption line, which will add even further demand for scrap. As the demand for scrap increases, the price will also increase. So the question then becomes, are CIMS and SA Recycling well positioned to benefit from this dynamic? The answer is yes, as can be seen on slide 12. The map on this slide shows the location of existing EAFs and the EAFs under construction or proposed, where NAM and SAR have the capability to supply those EAFs. As you can see, we are well positioned to benefit from the increased demand for obsolete scrap in the US, and as I said a moment ago, tariffs will only turbocharge this growth. I want to move to ANZ now on slide 13. In many ways, we see ANZ following the path of the USA. There are currently five EAFs being proposed, one in Western Australia, three in Queensland, and one in New Zealand. It is uncertain whether all will be constructed, but it is easy to imagine that two will be built in addition to Blue Scope's Glenbrook site. We are very well positioned to meet this increased demand, as the map on this slide shows. Clearly, this will change the dynamics in ANZ, and it's quite feasible that at times in the future, ANZ will materially consume all its domestically produced ferrous scrap, and there may even be a requirement to import. Our yet to be developed Pinker Bar site with its existing deep sea dock will play a vital role in the ferrous scrap and steel markets in the coming years. The non-ferrous business in ANZ is strong, producing over $400 million in revenue and growing. In line with our metal out of waste strategy, we are investing in a fines plant in Australia to extract more non-ferrous from our waste stream, further adding to revenue and margin. The Australian market is a complex and challenging one to navigate. Our view is that, as is happening in the US, there will be a consolidation of the market. And as in the US, we are one of the logical consolidators. Moving from our metal businesses to SLS on slide 14. The magnitude of the numbers associated with data centres were quite extraordinary, even before the advent of AI. Throw AI into the mix and the growing desire to keep data within country and therefore onshore data centres, it is obvious that the USA is going to continue to be the growth engine. The rationale for repurposing data centres is an economic one. The parts are lower cost, available within country, enable frequent upgrades, and have proven to be highly reliable. On top of all these economic benefits, the carbon footprint of a repurposed unit is a tiny compared to that of a new one. SLS has benefited from all this growth. as you can see on slide 15, and it is well positioned to capture further growth. Following the sale of SLS's European compliance business in 2019, the EBIT from the remaining business was 2.9 million in FY20. We are currently expecting around 30 million EBIT for FY25, a 60% compound growth rate since FY20, even higher than the compounding 40% growth in repurposed units over the same period. SLS's proven growth strategy is set out in the right-hand box. It's set to deliver further growth in the coming years. I'll turn over to Warwick now to take us through the financials in some detail.

Many thanks, Stephen, and good morning, everyone. Before I review some of the detail behind the results, I actually want to take the opportunity to talk about our revised capital management framework and how it feeds into the basis of our capital allocation going forward. It's an area we indicated at our full year briefing that we were working on and an important strategic element in how we continue to strengthen the business, advance appropriate growth opportunities and ensure we reward shareholders along the way. We clearly operate in a market that carries an inherent level of volatility and can swing rapidly in either direction from a range of influences outside of our control. As a business that operates on a very light margin, We need to remain dynamically responsive to those inevitable cycles. We're not in an industry that has the benefit of absorbing downward market changes into its existing earnings base for the medium to longer term and wait for recovery. Having a strong balance sheet and remaining conservative in our debt profile are critical elements to how we operate and think about our capital. But we also need to remain agile and responsive to value opportunities as they arise And so structuring our facilities around varying levels of working capital, maintaining an appropriate liquidity buffer, and recycling existing capital where we aren't generating the returns we need are all part of our considerations within this framework. Of course, our overarching business strategy is connected to our purpose and drives the assets in which we choose to invest. Trading margin, EBITDA performance, and returns against direct capital employed are our key measures of performance, but these also require a commitment to appropriate levels of maintenance capital as an initial capital allocation priority. We also need to maintain a strong balance sheet at the same time. We've reviewed and established two key target measures based on both our overall risk profile acceptance, which we set at less than 15% for gearing. and an operating leverage rate of 0.5 times underlying EBITDA, which excludes finance lease commitments and supports the management of our day-to-day working capital levels. Of course, these are target ratios, and we will no doubt step outside one or both of them from time to time, particularly to capitalise on growth opportunities. But those opportunities also need to be able to bring us back in line with those levels over an appropriate timeframe. Those considerations and allocations result in an available pre-growth free cash flow outcome. Our framework subsequently prioritises an ordinary dividend allocation to shareholders before considering growth or other capital returns. And of course, growth opportunities need to link back to strategy so that all elements of the framework work together to create value. On to slide 18, and as part of our review of the framework, we've looked to provide additional clarity over our dividend policy going forward. Of course, like most companies, we have a diversified shareholder base, with each shareholder no doubt having their own preference as to the basis of how it might receive returns. We clearly can't address individual needs, but we do want shareholders to receive returns along the way, and we believe an initial allocation from pre-growth free cash flow reflective of the performance of the business and in the context of the market, and provided we have maintained balance sheet strength, is an appropriate priority that enables investors to then execute against their own objectives. As the business continues to perform in the US, our level of available franking credits will inevitably be constrained against total earnings. However, the sale of LMS last year has provided a significant top-up in our franking balance for the current time. So going forward, the board aims to provide shareholders with a partial return through an ordinary dividend of between 25 to 35% of the company's pre-growth free cash flow, and has subsequently determined to pay an ordinary interim dividend of 10 cents per share for the current financial year in accordance with the revised policy. In line with the framework, strengthening our balance sheet through an improved operating performance and recycling capital back into the business through our sale of both UK metal and our residual interest in the closed-loop investment has helped bring our performance back in line with those success measures I've just talked about. However, we recognise that we still have some way to go in this area and there are a number of other initiatives that we're currently working through to further support our position. One of those areas is our land base. While our NTA per share has improved period on period, along with our capital returns, we still have some assets that won't get us there and provide us with the opportunity to further optimise our investment base. In the course of reviewing our portfolio, we've been able to assess an indicative as-is valuation of our land over the recorded book value of some $1.5 billion. Clearly, we're not looking to physically bank that, as we believe the underlying fundamentals of the business and the market opportunities in front of us are immense, but it does indicate the fundamental foundations that exist in support of the business. Okay, back to our performance now for the half year and slide 20. Something that we experienced in the latter part of last financial year through an improved operating performance, particularly in North America, continued through the first half of this financial year. Underlying EBIT for the total metal business increased $34 million over the comparative period and the total group performance increased by $47 million with further growth in volumes at SLS and reduced costs across the functions. Our focus on regaining margin in North America and market conditions more broadly saw a marginal reduction in overall volumes period on period, although we added around 180,000 tonnes to our total sales volume from the Baltimore acquisition, which occurred towards the end of calendar year 2023. A decline in statutory earnings reflected the inclusion of the LMS sale in the comparative period results. Specifically on the total metal business, as noted, our overall volumes remained relatively flat but reflected the concerted effort to improve margins in NAM through a greater intake of unprocessed material and to more broadly remain agile and responsive across the business to the markets in which we operate, switching between domestic and export opportunities in line with market dynamics as appropriate. This was achieved against the headwinds of some very challenging market conditions and a significant fall off in steel prices globally. We've been able to offset some of those challenges with an improved non-ferrous result, given higher pricing in that market, and a significant level of cost-out reductions across the business. Normalizing for Baltimore, which added $28 million to our cost base in NAM, and removing the impact of an $18 million cost credit we previously recorded from charging customers for reimbursing environmental processing levies, so our overall cost base remained relatively flat despite increases in labour costs across the board and higher waste disposal levies in Australia, which are now accounting for about 12% of our spend here. I'll come back and talk further about our cost reduction efforts shortly. On slide 22, SLS continued to perform extremely well, and with significant growth in the number of repurposed units we are now managing, has been able to reflect the scalability of its operating model and the returns it is able to independently generate from its revenue uplift. Stephen has already touched on the key drivers of the market in which it operates, and I'm sure we're all experiencing that impact ourselves. So I won't dwell on the result. Other than tonight, this business today sits at around 20% of our underlying result, perhaps supporting greater attributable value recognition within the company's total portfolio. Slide 23, touching briefly on corporate and central costs. Again, some great work here across the business on cost out efforts. A couple of things to note here. Firstly, we're in the process of developing new yard management software with support from our existing system coming to an end, and this will contribute to some fluctuation in future costs as we progress its development. And then secondly, corporate costs include our provisioning for full year incentive payments for the total business, against its earnings performance, which has obviously improved period on period. We had marginally higher costs for CIMS resource renewal relating to IP commercialisation activities. However, these costs won't continue beyond the current financial year. Onto our Cost Out program more specifically, and we continue to look for opportunities to simplify and delay the organisation, reducing our operational and central costs and further rationalising the existing operating portfolio by potentially exiting some of our smaller non-performing areas. We delivered $64 million in annualised savings last year, for which we are experiencing the benefits in our current cost base and are targeting another circa $35 million in the current financial year. Capturing the full benefit remains dependent on the timing of certain changes and restructuring activities. but we're comfortable in our ability to fully capture those reductions over the next 12 months. I would note that whilst we have identified additional opportunities going forward and will continue to focus as a leadership team in this area, we are beginning to level out somewhat. As an example, we've just seen an 80% increase in electricity costs in our New Zealand operations. We're also a relatively labour-intensive business with labour costs forming some 40% of our overall operating cost exposure. We have some work to go on optimising our portfolio composition, and we'll need to see what we can deliver on that. But our next major opportunity remains around volume growth at margin to further spread the fixed cost base. That's becoming our focus area. Moving on to the cost waterfall slide, and you can see the impact of annual increases in people costs even with our recent rounds of restructuring. Pleasingly, other cost areas have remained relatively flat despite ongoing inflationary factors, and we picked up the benefit of some timing variations in the half. Moving on to slide 26, and I thought it worthwhile touching briefly on the sale of the UK metal business and how that flows through to the net profit result and balance sheet. As previously indicated, Our approach with this business has been to maximize cash conversion throughout the sale process. This has included a significant element of working capital conversion, whereby rather than place that expectation on the purchaser, we were able to work with them and ensure the residual working capital of the business at completion met their requests as a smaller operator. We've subsequently converted agreed inventory and receivable amounts to cash, broadly in line with the stated asset values, and received the first installment of the capital component of the sale as scheduled. From an accounting perspective, however, we've also had to account for the foreign currency translation reserve to which we previously booked the cumulative effect of exchange rate changes on consolidation. Obviously, when we acquired the full business there in 1998, the exchange rate was in a much different position at around 38 pence. Together with transaction costs, That's resulted in us booking a small capital loss on asset sale despite a significant gain on cash. And then finally for me, our overall cash movements for the half. I've talked about most of these already. Just to note, net operating cash excluding UK working capital conversion does also include our residual payment of tax in relation to the gain on sale for LMS. So somewhat understating a strong and much improved operating cash flow performance. As for prior years, we would expect sustained capital to be marginally higher in the second half and broadly in line with the prior year. Back to you, Stephen.

Thank you, Oreck. Before I go to the outlook slide, I want to run through the key themes for this half year on slide 29. We've turned NAM around from its loss-making position a year ago by focusing on the basics of buying more unprocessed volumes at source and having the optionality to sell those volumes domestically or internationally. ANZ has shown resilience in the face of headwinds, and it is well positioned for the medium-term upside we see coming. SLS is delivering really well, and it operates in a strong growth market. We've achieved good cost reductions over the last 18 months, and this positions us well to spread fixed costs over larger volumes as the industry consolidates. particularly those policies that favour US steel production, have the potential to provide an overall positive financial outcome for CIMS. Our capital management framework has evolved, and it provides the right balance between flexibility and discipline, which will deliver value to shareholders. On slide 30, I want to discuss the outlook as well as the macro trends we believe will impact us. We have seen significantly different markets depending on where you are in the world, over the last 12 months. For example, the announcement of the steel and aluminium tariffs in the US has already changed that market by lifting steel and scrap prices. Regional differences, probably both positive and negative, will continue. It is hard to see China cutting steel production in the short term and thereby lowering exports. This will continue to dampen global fair scrap prices and steel prices. Non-ferrous volumes and prices have been robust, and we expect this to continue. On balance, we see supply and demand in the second half being similar to the first half, despite the slow January and February in the U.S., most due to seasonality and extremely cold and wet conditions that we haven't experienced for years. The hyperscaler data center market is set to continue its strong growth in the short and long term. Broader inflationary pressures have eased. We still have pockets of high inflation, such as our landfill fees in Australia. The cost initiatives we have put in place should enable us to mitigate increasing costs to hold them flat with the first half. Our assessment is that overall, the tariffs will benefit the US and challenge ANZ, and therefore in aggregate, the impact should be positive, given our larger US business with North American Metal and SA Recycling. What is less certain is the timing of any positive impact, particularly whether we will see it feed into our F25 results. Looking at the macro trends, as you would expect, they haven't changed, with one exception. We have added in our expectation that the world will become more nationalised, or at least regionalised. This will ultimately create opportunities for our metal business, with our optionality to sell domestically or internationally in both the USA and ANZ. SLS is also well positioned to benefit from USA's desire to keep data in country. Finally, thanks to the whole SIMS team. Your efforts have repositioned the business over the last 12 months to be much more resilient to changing market dynamics. I know I've said it before, but to go through this change while maintaining our safety culture and delivering strong outcomes is impressive. Back to you, operator.

Thank you. If you would like to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you would like to cancel your request, please press star 2. If you are on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Daniel Kang from CLSA. Please go ahead.

Good morning, everyone. Great to see that North America managed to swing toward the higher-priced domestic market from exports. Just wondering if underlying EBIT and margins have matched that redirection towards domestic sales in the 3Q period thus far. This is a follow-up on the broader group. Can you comment on the 3Q metals profit trend from 1Q and 2Q?

Sure. Hi, Daniel. Let me go first. I won't be able to give you specific forecasts for this quarter. But what I can say, and Rob, feel free to add, Rob's on the line with us, what I can say is exactly the same focus that drove the improvements in the first two quarters as we're going into the third quarter. So I would expect to see no deterioration in our trading margin percentage. We're still very focused on that. Same with EBIT. We're keeping a strong focus on costs. So I wouldn't expect to see a deterioration in that. The only thing I would say in absolute terms is, as I said, January and February, I know it didn't get reported much over here because we've been focused on other things in the US, but it's just been extraordinarily cold, wet, right throughout the country. That's just timing, though. I mean, the scrap's still there, but it has been a slower start as a result of that weather. Rob, anything you'd like to add?

Actually, no, Stephen, I think you've hit it on the head. It's January, February months have been difficult, as Stephen said, with weather. It's just not collection of scrap. It's also operating. The southern United States, which is typically more moderated in mild weather, have been under ice and snow, which is very unusual. So just getting people to work to make steel aluminum. let alone collect scrap has been very difficult the first 60 days of the new calendar year. But generally speaking, as Stephen said, no, our focus is still very largely on and very obsessed with trading margin.

Got it. Thanks, Stephen and Rob. And just in terms of the property portfolio, can you just provide some color on the location of the properties? Are they surplus to your current needs? and the potential costs or remediation liabilities that will be required to realise the as-is market valuations?

Yeah, it's Warwick here, Dan. You know, the first thing I'd say is it's not surplus property. It's just the property. It's just the market value on an as-is basis of the properties that we have. It's really just to get a better understanding of, you know, what options we have there. So we've still got a fair piece of work to do in terms of opportunities, and we'll come back to the market with those as we work through them. But they're right through, obviously, all our properties in North America, which is probably the largest part of our portfolio now, and ANZ, so quite broad.

Thanks for that. I'll pass it on.

Thank you. Your next question comes from Lee Power from UBS. Please go ahead.

Hi, Stephen. Hi, Warwick and team. Stephen, maybe if I just follow on from Dan just around that run rate. So I think originally you were saying 1Q was going to be 55 million EBIT from metals. That implies a second quarter of 69. It looks like maybe NAM came in a little bit below what you were originally talking to in the first quarter. So do you want to just give us an idea of what you actually did in the first quarter, just so we can kind of get a better sense of at least what you did into the second quarter, and then any additional colour around, is that an appropriate kind of run rate where we sit now?

Yeah, sure. So one of the good things is we have actually disclosed, on slide 10, we've actually disclosed the quarter split in NAM. NAM ended up, I think we originally said $29 million off the top of my head, it ended up at $24.5 million, and then the second quarter was $22.2 million. So NAM was probably the biggest swing. ANZ came in pretty much as we thought, and SAR was probably a little bit less inflicted, more to that second quarter as well. So I think by the time we got to the half, overall it was exactly where we thought it would be, a little bit of split difference. But what I would say, you know, I guess NAM is probably the biggest swing at the moment. NAM's lifted its performance up to that mid-20s per quarter for the first half. I guess looking forward, one of the things, and look, it's a little bit, I mean, quarters with us is very, very hard because, for instance, right now we're seeing this weather thing. So, you know, our third quarter, by definition, won't be as good because we just haven't been able to collect as much scrap or the mills haven't been running as much. But that's timing. That'll pick up by the time we get into March, April, May and June. So I'm not worried about that. That's just kind of a swings around about of us. And I guess what we're saying in the outlook is we're currently seeing supply demand for the full six months, both periods, we're seeing it similar. So I guess we're kind of seeing all things being equal, we're seeing a similar second half to first half. With the caveat on that, and I think you've got to give us some leeway here, is it's just hard to know the final impact of the tariffs and when the timing of that is going to happen. When's it actually going to impact the market? And that's, I think, something we're all grappling with.

Yeah. Why do you think... I mean, that's great, Carla. Thank you for that. I mean, like if I... If I kind of back out Baltimore, scrap out of your NAM volumes, it looks like they were maybe down 10% year on year. I know end markets aren't amazing. You've obviously called out weather in the first bit. Why wouldn't we expect more volume growth on a half-on-half basis? I know, obviously, it's been a tough start to the year, but the step down when you back out NAM still seems quite sizable.

That's a fair question, and our answer is it's deliberate, and that is we have deliberately not taken volumes where we don't think there's margin. And we were doing, you know, in prior periods, we were doing some dealer volumes, which are quite large volumes, which we just weren't making sufficient margin on. And I think this is quite a good proof point. We've deliberately focused on getting trading margin back into the business. And if that means less volumes for now, that's fine. And the overall impact of that, getting the margin balanced with the volume, is we've delivered a higher margin a much higher result. So I don't plan on us changing that strategy into the second half, again, all things being equal and assuming that the weather sorts itself out and all of that happens. What I think it gets us ready for is the consolidation of of the industry, which I think is going to happen over the coming years. And we've got the margin in the business, we've got our costs down, and we're nicely positioned for it. But we will definitely not be chasing volumes if they're marginless volumes.

Okay. Yep, that makes sense. And then maybe a final one, whether you or Rob has any insight. I mean, you've obviously talked about tariffs, and we can read about steel and aluminium, but scrap seems to be excluded from the market. the kind of direct tariff piece. Obviously, there's kind of, you know, some influence from what's happening with steel and aluminium. Like, are you seeing any other players respond when you think about global scrap flows? Because if I look at the imports into the US, it looks like they've kind of jumped in the last quarter. And I just don't know if there's something else going on or whether the fact that scrap's excluded, if that kind of makes a difference to what's kind of driving that.

So, Rob, I'll let you answer that. You're live on the ground in the U.S. at the moment, and I'm looking forward to seeing you this weekend when I'm back up there, but maybe you can answer that question for Lee.

Yeah, I think, Lee, if you're asking, or I'm sorry, I think it's Dan, is it? No, Lee. Or Lee, I'm sorry, from UBS. If you're asking do we feel there'll be a tariff on scrap, there's no indication of that at this point in time. Typically, imports into the U.S. do happen this time of the year. It's sort of a buying strategy from the domestic consumers. Again, just weather-related, it's a bit of a softening in the market, if you will, for the poor weather that comes. They build up inventories for the scrap that isn't being generated. And it's usually very selective grades. It's either imported scrap substitutes, DRI pig iron, from Ukraine or Brazil, or it's a prompt industrial prime scrap from European Union. And there's a bit of a price market arbitrage opportunity right now for imports to come into the United States at this point.

Okay, thanks. I really appreciate the call. I'll leave it there. Thank you. Thanks, Nick.

Thank you. Your next question comes from Peter Stahn from Macquarie. Please go ahead.

Hi, Stephen and Warwick, thanks very much. Perhaps on a similar line, but just thinking about your depiction on page 12 of your locations and SARs, I can't help but think what it would have looked like if the central region's locations weren't shut by since a number of years ago. But beside the point, I was just curious how you are thinking about your positioning in this domestic context from a northeast location with your own operations, logistics complexities, how you coordinate with SAR customer-wise. And then I guess to some of the conversation we've been having around the improvements you've been bringing, The need for quality scrap, are you seeing a significant improvement in your value opportunity coming from unprocessed all the way through to a higher grade? What is your perspective of that over the next few years as scrap markets tighten up further with more EIF capacity in that broader region?

Okay, thanks, Peter. Good to talk. I will make an overall comment, and then Rob, I'll get you to maybe provide some more detail. So the first comment I'd make is that every facility that we've listed and shown on that, whether it be a green SAR facility or a blue SIMS facility, has the capability to deliver to those mills. So we just haven't scattered our facilities, every facility we've got, and said that that can do it. So I acknowledge, you know, Can't turn back time, but we did sell a few years ago. There's some there in the Midwest. But between barging on the river systems, the rail access that we've now created, and trucking, we have the ability to deliver, and even coastal barging. So feeling confident about that. My overall comment on the domestic quality of scrap, I think you can see in the X-Resorber that we've produced out of NAMM that it's pretty high-quality scrap that we're buying. not only extra, you know, margin in the Ferris, but it's producing margin in Zorba as well. Those are my overall comments. But again, Rob, I'll hand over to you for some more color if you want to add it.

Sure. Quickly, I'll mention the SAR coordination. It's very much in line. We meet regularly on a daily basis in terms of collection, but also sales coordination. and logistics opportunities. Logistics is an interesting one. And as Stephen said, yes, we put a lot of time and effort into that over the last, you know, 12 to 18 months in particular. Barging, we're very good at river systems and also, as Stephen said, the coastal region. So, bargains are very advantageous for the steel mills if you look at all the new the majority of the larger steel installations are on the Mississippi River system or at least have access to a coastal region, the Gulf or the Atlantic Ocean, in particular on the eastern seaboard. Rail cars is something else. We've done a very good job in terms of, you know, getting more capacity, but also having the steel mills who own their own rail cars coordinate with us. On the quality piece, very interesting question, and this is precisely very in line with our fascination with unprocessed scrap. If you look at the demand for EAS and the type of steel that these EAS are trying to make, it's become very apparent that there's not going to be a lot more prompt, industrial, low residual, high quality scrap being produced. In other words, there's not a lot more manufacturing that's been announced but there's been a very significant swing in the way steel will be produced, and that's with electric arc furnaces. Electric arc furnaces, along with blast furnaces, all can use shredded steel scrap. Various qualities of shredded steel scrap exist. We run very high-tech, high-powered, significantly innovated shredders with ferrous downstreams and also, as Stephen said, with non-ferrous capture downstreams as well, we call MRPs. So we are in a very good position, have been growing the unprocessed scraps, chasing the market demand that's coming into the domestic market here in the United States, but also around the world. And we're also at this point in time making certain new products for certain mills on a metallurgical basis as per their needs. Sure.

Thanks. That was some good color. Appreciate it, Steve. And just a very small detailed question. On ANZ, you spoke about timing effects on some shipments. Just wanted to get some detail there so that we can just understand the run rate a little better in ANZ.

I'm sorry, Peter, I can't remember off the top of my head, but I can. You can, right? Thanks, Mark.

Yeah, so, Peter, in the revenue, we picked up some additional revenue just in terms of the swing over from FY24, so the timing there, so there's probably around about, there's probably, I'm going to say, $3 or $4 million sitting in our EBIT line around that swing, but, you know, that's a that's a period on period swing. So, you know, it's not to say we wouldn't be repeating that.

Yeah, sure. Thanks Warwick. Appreciate it. I'll stop there. Thanks gents.

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

Morning guys. Just a couple of questions for me. Firstly on SAR, pretty opaque from our perspective in terms of being able to, I guess, get a read on what's happening within their business. I'm just wondering if you can provide us any further colour on what they're seeing in terms of current trading and whether they're sitting on any sort of major working capital positions at the end of the period.

Just on their current, on their trading position, how they're going, they're going perfectly fine. I'm just looking at the where we laid out the, where we put SAR on slide 21. I guess, like the rest of industry, EBIT's down a little bit as a result of, you know, it's been a tough 18 months, or a tough 12 months or so. But not seeing anything in SAR to cause us alarm. It's still nicely exposed to the domestic market. It has good export optionality out of its both the west and the East Coast, so I would summarise it as it's been pretty much business as usual. Working capital build-up, no. I mean, we sit on the board of SA Recycling and obviously receive full detail of their monthly results. No, there's nothing happening there of anything unusual. Oh, and that's probably the best way to describe it.

Okay. And just a second question for me, just looking at the North American aluminium markets. You know, this is a big, focus previously in terms of, you know, things like Alusource and so forth. Just want you to give us an update on the strategy there and how that's been progressing.

Yeah, I'll give you overall and then I'll get Rob again on the details. So, yeah, Alumisource continues to be an important business for us. It's been a tough time on that business, but I think we're starting to see the benefits of what we've been putting in place, and NEMT was much more of a focus on copper, so probably not meant to talk too much about that one. But Rob, maybe your thoughts on the aluminium business there, what we've been doing at Illumisource, and how it's all fitting into our portfolio?

Yeah, Illumisource, the last six months to eight months has been a refocus on cost outs, improvement of reliability, and reorganizing really under our new management structure here. Biggest start, I guess, side of our cost side there with Illumisource, just like the rest of our NAM businesses, the buy side. So, we've really been focusing in on what we buy into our facilities for our production equipment with the mindset of, you know, what do our customers need. So, aluminum market year over year from a production point of view is down slightly. We're optimistic on the go forward. We just had Aluminum Dynamics, which is a company owned by Steel Dynamics, start up. this past 30, 45 days ago. So that demand is welcomed. It's flat sheet aluminum for the beverage can industry. So seeing that pop up as a customer for us, Novellus and Castellium and the rest of the other new installations are still underway, still breaking ground and installing equipment. Quite bullish on the aluminum market in the short to medium term. Again, just kind of going through a bit of a slowdown at the end of 2024 calendar year.

And just in terms of, I guess, from a tariff perspective, are your assets largely domiciled in the U.S. domestic side of the Canadian border?

Yes, they're all in the U.S. Is that an upside for you? Yes, in the aluminum sector, we would think so. There is a bit of a study going on right now because the USMCA is so intertwined and the supply chains have been built over two decades, how quickly things will get unwound because of other companies that have assets on both sides of the border, if not all three, with Mexico included.

I'll leave it there. Thanks, guys. Thanks, Owen.

Thank you. Your next question comes from Paul Young from Goldman Sachs. Please go ahead.

Thanks. Morning, Stuart. Morning, Warwick, Rob and John. First question is on the North American margins. Another 21%, and they increased, I think, 3% or thereabouts, but They have been higher, I think they were 23% a couple of years ago. I know you've done a lot of things to improve that margin, Stephen, with accessing more unprocessed per se scrap, and you've gone to the regional model, et cetera. But what more can you do to improve margins, or is it now more about volumes and price?

I think there's still more that we can do to improve margin. This is a journey. Do you ever get to the end of the journey? I'm not sure. You're right, we were up at 23%. three or four years ago, ANZ sitting this year at close to 26, and you've got SAR at a bit above 29. So I think our challenge in North America is to complete the story. We've still got more unprocessed scrap that we can buy. We've still got more processing that we can do. There's still more Zorba to be produced from it. So I don't think it's finished, is I guess what I'm saying. I'll throw over to Rob as well. There's definitely more actions that we can do. We set out on this journey, I remember it was this time last year, and we said that we thought the domestic export optionality would take us nine months to 12 months to put in place, and we thought that the whole growing the margin unprocessed scrap was at least a two-year journey. So we're one year into it, and I think there's more for us to do. Rob, your thoughts on that?

Yeah, quickly, not to pile on, I think What Stephen said is accurate. We haven't had a market at all to support us. This has all been roll up your sleeves and try things a lot differently. And a lot of details in the middle of that, Paul. So, yeah, there's more to come. And this was all done without any market support. So we're pretty optimistic we can do better.

Yeah, great. And then just maybe second to that, just competition for scrap in general. I mean, it was a pretty tough first half last year, calendar year. Second half, things look like they improved. We're seeing obviously a seasonally weak period at the moment in January and February. But any commentary around just availability of scrap and competition for scrap?

Rob? Yeah, this quarter is going to be extremely difficult. Mill operating rates are going to suffer at the same time. So it's, you know, fighting over something that nobody wants is a silly game. So as the sun comes out, as the ground dries up, and as work starts getting done with construction and projects, we expect to see scrap seasonally adjust again upwards as it normally will. The other piece too, I think here, Paul, is that, you know, the tariffs are starting to create some speculation on the steel industry side as well as the aluminum side. So we're starting to see order books of our customers improve, and they're starting to think about how they're going to ramp up their demand. So improved pricing will also help improve the supply side.

The only last thing I'll add is that I'll make specifically I mean, we operate in competitive markets, Paul. Scrap is competitive, and I don't think we particularly see a easing of the competitive tensions or the competitive buying of scrap over the second half.

Thanks, Rob. Thanks, Stephen. Just a quick one, Warwick, on capital allocation and actually capital management. Really good to see the switch to a percentage of free cash flow for the dividend. I think that's the right thing for the business. Can I just ask, though, about the simplified SIMS model? And greatest of the UK sale, and that was a fantastic outcome for SIMS. I'm just curious around how you look at further investments, particularly, you know, in the US, if there's any opportunities there, but also working in common with SLS, really good trajectory on growth at SLS. But I'd maybe just ask you, does this belong in SIMS ultimately in the long run, I mean, it's growing its EBIT and it's sitting, you've got a high growth business now, which is sitting within a very much a cyclical business or company, I should say. So is there any sort of discussion internally around potentially monetizing SLS and just any comments you can make around, you know, potential of U.S. divestments as well? Thanks.

Yeah, I think on the first question about US divestments, I mean, that is the next step, actually, in our cost out program. We're really stress testing our portfolio and where we operate. I think there are a couple of areas where we, rather than continue to operate, we might be making a small return there, but it would actually be better to strengthen our position elsewhere. So that piece of work is something that we're currently just really starting to get into around the overall portfolio. So that is something that's on the list, Paul. In terms of SLS, we get asked that question all the time. I think SLS still has a lot of opportunity in front of it, and I think one of the things we want to make sure is that we're capturing that full value Ultimately, would it sit better in or outside of SIMS? I think that's still an open question for us.

Yeah, I agree with that, Warwick. What I would add is I 100% agree there's lots of opportunity in SLS and it's delivering on it now. If someone's willing to pay us the present value of those future opportunities, we're very, I guess we're quite an unemotional company like that. That would be fine. If we got that up front, absolutely. But there is a lot of opportunity and SLS is really well positioned. And unless someone was willing to pay us on a risk-adjusted basis for that opportunity, we'll continue to grow it. But I do acknowledge your comment that it's harder to value a high-growth business like that in amongst a more cyclical entity. But I guess in a sense, that's quite a good problem to have.

Yeah, okay. Thank you very much. Appreciate it.

Thank you. Your next question comes from Ramon Lazar from Jefferies. Please go ahead.

Hi, Stephen. Hi, Warwick. Just a couple of questions. Just on your outlook slide, just trying to get my head around that slide a bit more. I'm just looking at consensus expectations for the full year. There seems to be a reasonable skew to the second half, about a 60-40 skew to the second half. Taking your comments though around margins sort of holding in NAM into the third quarter, but volumes weaker. Should we expect the NAM results in the second half to be lower than the first half, just on those volume comments? And then also just your comments around Australia as well, if you can elaborate on your expectations there into the second half.

Yeah, so let me deal quickly with Nam, and then I might get John in the room with us. I might get John to have a chat about ANZ. No, we're not expecting a lower second half. I guess what we're expecting it is to be skewed to the fourth quarter. So the third quarter, yeah, the weather's got us the whole market, but that scrapbook's still come out, and we expect that to happen in the fourth quarter, and there's no reason why that shouldn't happen. I guess my overall comment on trying to forecast a year-end position for us, we still haven't bought or sold any scrap in April, May, or June. And so it's always tricky to forecast for us those specific numbers, which is why we never give that sort of range guidance. But Ramon, sorry to specifically ask you a question. Right now, we've got no reason to expect that NAM's second half would not be at least as good as its first half.

Gotcha. And just Australia as well. Just go on, ANZ, your comments about ongoing.

Yeah, thanks, Roman. Look, Australia is certainly still seeing the challenges that we talked about 12 months ago with respect to supply tightness. Age of vehicles, consumer spend, durable goods, all those things are still challenged. So the supply scrap still remains tight. January is normally a slow period with Christmas closures, New Year's closures. January hasn't been a great start in terms of intake volumes, but I've got to say in early February, our volumes have been better. As Stephen alluded to, our non-ferrous business has been particularly strong in the first half and still looks strong going into the future. Ferris has been challenged. Zorba prices have been strong. And quite frankly, our volumes of Zorba have been strong. And we still have lots of capacity in Australia. So all up, I don't see a lot of change in the overall picture.

Okay, great. And Stephen, just your comments around NAM margins and just following on from Paul's question on where they could potentially get to. I'm just trying to understand, can you hold those margins, you think, in an environment where you're trying to grow the overall volume base in North America? Or does there have to be some give and take to grow those volumes in NAM and increase that shredder utilization over time?

Yeah, two comments on that. Significant growth will come from acquisition. There's no way that we can grow the business organically to that level and not disrupt the market, and we want to be very careful about not disrupting the market. So any significant growth in volumes will come from opportunistic acquisitions where we don't change the market structure. I think that's important to note. The other comment I would make is we can, yes, we can continue to grow those margins, but it all falls down at extremes. If we went back to the 2022 type market where we see scrap prices way up at the $600, $700 mark, we would sacrifice margin percentage then because in absolute terms we'd be making a lot more money. Our margin per tonne would still be growing. But within the normal bounds, I don't see why with good effort we can't get NAM back up to that. to the 23% margin percentage it used to be. I'm not guaranteeing that, but we've got in place a plan and we're working it through.

Okay, all right, good one. Thanks, I'll leave it there.

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

Thanks, good morning. Stephen, if I could just start by looking at the corporate line. If I look back to sort of five years or so, FY20, we're analyzing about $50 million today's level flat on last year, but we're analyzing sort of close to one 30 and that's kind of, despite simplifying the portfolio over that period. So can I just ask you, how do you feel about corporate costs of that level for a business of the size that you are now? And just related to that, do you expect any incremental business benefits with the further simplification as you've come out of the UK?

Yeah, I'll go, again, I'll provide an overall comment and then I'll let Warwick dive in on the detail. One of the things I would say is that in amongst our corporate costs, there's a mixture of what I call genuine corporate costs and those costs that we have centralized. Then in amongst that, Over that period of time, we've had the change in accounting policy where you have to expense all your IT development, and we've been doing a lot of IT development over this period that we didn't used to do, and when we did do it, it was capitalized and amortized over a significant period of time. So there's a bit of that going on. Am I happy with it? No, and we're still working on it, but Warwick has been leading that charge, so maybe Warwick, some detail from you as well.

Yeah, I think a few... There's a few factors in terms of corporate costs, and we intentionally don't call them corporate costs anymore because they're central costs. And so when we move to our functional model set up, we capture costs out of the business around HS&E, legal, IT, et cetera, that get grouped in there together. Our actual corporate overheads, I suppose, are sort of around about $30 million for the half, and I think As Stephen said, there's still opportunity there. And, you know, but one of the things that we've said is that we also, you know, as a listed entity, it becomes quite hard to take too much out of those in terms of some of the, you know, a lot of the things that we are required to do in terms of our governance structures, et cetera. So really the key for me is about, you know, our growth profile going forward. I think the other thing is when you go back a little bit in history and you're trying to compare, you've got to remember that Sims Municipal Recycling, that residual interest that we sold in closed loop, sat in that bucket as well. So we had income offsets from SMR sitting in our corporate cost structure. So it's not apples with apples when you're looking at it, Andrew.

Okay, that's clear and probably all fair. Thank you. Secondly, can you just help me understand the removal of the environmental levy for North America? I might be wrong, but I can't imagine those costs have gone away. Is that just a reflection of the competitive environment, or is there something else I'm missing there?

We set up an on-charge to customers, which meant that we were basically giving them less in terms of their scrap purchases. And we were offsetting and picking that up as a credit in our cost base. And then we realized that actually we were sort of pricing ourselves out of the market effectively. So it's really just a switch between costs and trading margin.

My correct in saying, John or Rob, we don't have any environmental levy at all now. We have removed that entirely. Yeah, I'm getting nods. So yes, we have entirely removed the levy, so that has an impact on the cost line where those credits are no longer there.

We still have one in Australia.

Good point, John. We still have an environmental levy in Australia, but in the US, it didn't really catch on. Our competitors didn't follow.

Okay, understood. And Stephen, big picture, this time you've given us ROIC, so thank you for that. But if we look at it, it's obviously... a fair way shy of what we'd maybe consider an appropriate return. What's your confidence if we look at the business and the earnings history? What's your confidence that you can deliver an appropriate return with the businesses that sits now on a through the cycle basis?

Yeah, so we're taking that from two angles. There's obviously the numerator and the denominator, so everything that we're doing on trying and To date, having had some success in turning the business around, particularly NAM, will drive up our return on invested capital. Market conditions are still tough, and I don't think there were any of what we would call the mid-cycle, so we would expect that. And then I think the other thing that Warwick has really focused on is our invested capital and making sure, as Warwick said, are our assets returning the invested capital? And the answer right now is a lot of them no. But then the next question is, do we think they have the ability to return capital in a mid-cycle market? And those ones that are still no, then we'll be recycling those out of the business to get the invested capital down. But it's a big focus internally, Warwick's leading that charge. John and Rob will focus on delivering the profit side of that equation. and Warwick will focus on making sure that we've got the invested capital at optimum levels as well. So I'm confident that we're working hard on it and the results are starting to happen.

Okay, thank you.

Thank you. Your next question comes from Rohan Gallagher from Garden Group. Please go ahead.

Yes, thank you, Tim, for the ability to ask questions. Most questions have been addressed already. However, there were one or two comments around the Baltimore acquisition, but could you just help us out in terms of its total contribution and performance and how that compared versus your pre-acquisition forecast, please, David?

Yeah, so Baltimore, and Rob, I'll pass over you when I've made my general comments. Baltimore has, the business itself has kind of been and split up in amongst the other businesses now. but we can make, you know, so yes, it's there. It is, at an EBITDA level, it's actually performing reasonably close, but at an EBIT level, it's still not performing where we need it to be versus our pre-acquisition modelling. That is in large part due to, frankly, the market conditions right now in terms of its cost structure, its operating performance, It is where we want it to be, but we didn't have the market down where it is for so long. And as a result, it's not yet, let's be really blunt, it's not yet performing in our business case analysis.

Thank you. And I missed it. I know you touched on it earlier, Warwick. Could you just clarify the comments regarding where you see maintenance cap eggs for FY25 and beyond, please? I believe you made a reference to it in your pre-prepared remarks.

Yes, so similar, Rowan, to our full year 24. So we always have a softer first half and obviously capital always picks up in the last quarter as people try to complete work. So I'd say we're looking at being in line with FY24.

And on a go forward basis, do you sort of have a sort of a rule of thumb around depreciation levels, sales levels, et cetera?

Yeah, around depreciation. Yeah, but with a little bit of fluctuation, it just depends what we have to work on. So there'll be some pluses and minuses there, but yeah, average depreciation.

Yeah, and finally, from a portfolio approach, Stephen, obviously, understandably, you can't do everything at once. and you've done a fantastic turnaround to date. In respect to the surplus land and reducing the numerator, what sort of timing should we be expecting? Are we expecting surplus land sales in the next six months, 18 months, three years? How are we to approach it? Obviously, we're not going to sort of know you if you don't deliver in that time period, but it was more the case of, Are we going to see something happening sooner rather than later, or is it a long-term sort of identification?

Yeah, the outright sale of surplus lands you should expect to see in the next two years. We have identified already some surplus land, and we're actively marketing that. So that's quite public down in Houston, a particular place called Mayoshill, and that's a decent bit of land, but we have no use for it. That's been actively marketed at the moment. That's the size of a little land and it takes a bit to negotiate. Other lands, let's say in the next two years, you should see some good movement on us selling surplus land.

And just in context, how much of that would be part of that $1.5 billion above book value of your total land bank, please?

Are we still working through it, Brogan? I mean, yeah, I wouldn't want to give a number at this stage.

Yeah, maybe not right now, no, but good point, Warwick. Thank you, gentlemen. Thanks, Rowan.

Thank you. Your next question comes from Chen Jiang from Bank of America. Please go ahead.

Good morning, Stephen and Warwick. Thank you for taking my question. Just a few questions on your slide 9 and slide 10. So, as you mentioned earlier, your intake volume is down 1.2% by sales volume flat because SIN has been prioritizing the metals trading margin and cost saving versus the volume, which is your strategy you have been implementing the last 12 months. I'm just wondering what are the key drivers to restore your margin? Is that mainly driven by using more unprocessed scrap proportion to get a value from the non-ferrous like you did for the first half? There's a big increase in the Zumba volume. or to improve the shredder capacity, which you had a shredder capacity, there's a slide 59% in the first half. And then for that, how much is under your control or your strategy and how much is market driven because you mentioned supply demand fundamentals didn't change this half, and then if the fundamentals didn't change, it's very hard to say you can further improve the capacity utilization or process graph. Thank you, I have more after this.

Okay, so the answer to your first one about what's driven the increase in margin and the various components, they're interrelated, so I'd say Two things first, and then how they're interrelated. So absolutely, we've driven the margin increase at the core of buying more unprocessed scrap. Without a shadow of a doubt, that's driven it. Second one is we've been focusing on simply buying less dealer volumes where there's lower margins made on it. Go back to the first one. Why that's interrelated with shredders is by buying more unprocessed scrap, we're going to increase our shredder utilization, by definition. Any shreddable material that we're buying, we'll put through the shredder and we'll produce Zorba, and Zorba is higher margin as well. So the whole piece is interrelated, but it all starts with making sure, to the greatest extent possible, we're buying unprocessed scrap at source, and that allows us to upgrade it, it allows us to make higher margins. So interrelated. On the fundamentals, I guess we can't control, we don't control the market. What we can control is how we operate in the market, and what I would say is if you look at the market fundamentals first half 24 versus the market fundamentals first half 25, at best, as I said, at best, they're flat on those two. But I actually think the market has been less helpful in this half than it was in the last half. So the work we've been doing is under our control. We have not been relying on the market to drive that increased margin. I think that positions us well for when the inevitable market increase does happen. We've got the basics right and we're operating profitably now in a market where we traditionally didn't operate profitably.

Sure, sure. Thanks for that. And for the unprocessed scrap proportion, under your current strategy or your planned strategy in the next, let's call it 12 or 18 months, do you think you can further improve the unprocessed scrap or whatever you achieved, is that sustainable?

Second one first, yes, I believe it is sustainable because we've done it sensibly. On the first one, our ambition will always be to try and get more unprocessed scrap at sensible pricing. And that's about having good feeder yard locations, good supply services, all of those types of things. And there's more work that we can do on that. So, you know, clearly our ambition is to continue to grow our unprocessed scrap. We're not sort of saying that's it. We've done as much as we can. So clearly that's our ambition, but we need to do it sensibly as well.

Sure, thanks. And maybe a follow-up on the slide 10, the fairest buy-sell spread per ton, you put a chart, a line chart on there, which is very helpful. But I'm wondering how much of your buy-sell spread per ton is from your strategy or is from the market dynamics of, you know, the export versus domestic scrap spread, because the market dynamics can change if it either can be a premium or discount, right? How U.S. domestic market score versus export. So how, I guess, then your strategy can change. You can sell more on the export market or sell more on domestic market. Yes, we can.

And I think that's a good point, is that we can. I mean, as the market dynamics change, as I show on the pie chart above it, we have created ourselves more optionality. So this time... A year, 18 months ago, we didn't have that level of optionality, and we found it much more easy to export than we did to sell domestically. Rob and his team in North America have done a great job over the last year providing us the ability to sell domestically when it works, and that's through developing strong relationships with the mills. It's through having more barging opportunities. It's through having more rail car opportunities. It's through differentiating the type of products. Typically now, shred is going to be much more, I think it's becoming much more valuable domestically, and maybe more cut grades will go export. So down in the detail, and all of that's under our control. So I would argue a little bit that that's not about the market helping us, that's actually about us making sure that we have the flexibility to control what we can control within the market. And I think all of that has driven the improvement in the NAM turnaround.

Sure, thanks. Appreciate that. Maybe last question switch back to NZ. I think you mentioned a couple of times challenging conditions in NZ from intake because the ability of scrap. But would you please give some colour on the sales and the margin as well for domestic market versus export, which is, you know, your sale to Asia. Do you see the market more challenging in your domestic Australia market, or the challenge is coming from export market from ANZ? Thank you.

Okay, we've got John in the room, so I'll let John answer that question.

Thanks, Chen. Look, definitely challenges, and I think Stephen mentioned it in the in the presentation. The expectation around China and exports of finished and semi-finished products isn't expected to abate. So that is going to continue to suppress export markets into regions that we typically ship into, you know, Southeast Asia, East Asia, the subcontinent, Middle East. So export markets for ferrous scrap are definitely challenged. Non-ferrous commodities, again, as Stephen mentioned, pretty buoyant and still plenty of underlying demand there with the electrification of the world. So I don't expect that to change much, sorry. What I would say around domestic demand, again, Stephen spoke to, you know, the five EAFs that are proposed. So in the medium term, longer term, we expect more scrap to stay onshore. And to Steven's point, ultimately, depending on how many get built, you may see regional deficits of scrap that we are very well positioned to capitalise on. As Steven indicated, the Pinkenbar facility with the three mills that are proposed for Brisbane, or around Brisbane, the Ipswich to Woomba, is very well positioned to meet that need. So longer term, our ability to support that market is very, very strong.

Okay, thank you very much, Stephen, Warwick, and John. I'll pass it on. Thank you.

Thanks. Thank you. Your next question comes from Brooke Campbell Crawford from Barron Joey. Please go ahead.

Firstly, on M&A, you talked about opportunities to perhaps release some value or sell some assets that don't make sense in your current portfolio. Is there, just to clarify the plan, to do that first before looking at any acquisitions or investments, or are the two sort of going to be side by side and you'd be open to acquisitions?

Yeah, I think it's a bit opportunistic, so probably side by side. I mean, in some ways, not in many ways, we have more control over what we sell than the opportunities that come up to buy. No, we won't be specifically waiting for one or the other. So I think side by side or simultaneously is probably the best way to think of it.

Great. And really quick second question, just around the proceeds from the UK sale. There's a sort of a second trance of proceeds, I think, receivable at the balance date, just to confirm what's causing that lag. And when do you expect to get those proceeds from the buyer? You might have got it already, perhaps after balance date, but could you just confirm?

Yeah, so the agreement with the purchaser was a split payment. So the first installment by the end of calendar year 24, which they paid. And then the second one is due by June this year.

Okay, thanks.

Thank you. Your next question comes from Nicole Penny from Remo Equity Research. Please go ahead.

Good morning and thank you. Could you please provide an update on the rollout of low-copper shreds facilities and volumes in the U.S., specifically what proportion of your sites now offer this capability and what the customer feedback has been, please?

Sorry, Nicole, do you want me to answer that one first, or you've got another one?

Yes, please. Yes. Okay.

I'll let Rob answer it specifically, but my general comment is it's a function of demand and price, and it's expensive to produce. But, Rob, maybe an update from you as to where you see customers are on the low-copper shirt at the moment.

Sure. To answer your question, Nicole, we only have one site up and running at this point in time. We have ordered further equipment that – We did so several quarters ago. It's still being produced and will be installed, I'd say, later this calendar year. In terms of the growth, it is growing now, the demand, with the recent startups of the brand-new installations. We have four or five customers now that buy our material. on a regular basis from the one site from the eastern seaboard of the United States.

Thank you very much. And lastly, you mentioned earlier that the U.S. scrap supply remains tight. What factors do you believe are driving these trends and what changes could potentially shift these supply constraints please?

Yeah, I think it's the same that's been happening for a while. You've got less post-consumer scrap coming out. That was originally driven by a number of things. High inflation, people weren't buying as many products. We had the COVID lockdown, which has still not found its way through. So during COVID, people were buying things rather than doing things, and so there was an enormous amount of consumer white goods, et cetera, were purchased at that time, and that's That's meant that that still hasn't come out because people have made those purchases then. They haven't made them over the last few years, but they will come out eventually. You're seeing the average age of cars in the US is still continuing to grow. It's flattening off a little bit, which is a hopeful sign. Again, I don't know what tariffs is going to do to the demand for cars in the US. That's all something to be seen yet. So it's really that post-consumer scrap hasn't been coming out. It will come out eventually. We just haven't seen it yet. Rob, I think the new construction has been a little bit light as well. What other activities are we seeing in the U.S. which you, you know, you're comfortable with driving? I guess holding production of scrap back.

Yeah, you've covered most of them. I'll just add the interest rates and inflationary issues that the rest of the world has been going through, very hampering with new projects. If you think about a site clearing with a demolition that happens, that's the scrap metal that we didn't get right now because the project's delayed for the new condominium to go up. So those sorts of things. Stephen talked about the end-of-life vehicles kind of sitting in driveways a lot longer and people driving them a lot more. And then, of course, PMIs, manufacturing PMIs have been all in contraction for most of the world. North America is no different there, so. even the prompt industrial scrap and the maintenance scrap that's generated from those facilities, just not there. And I think the last thing, just to think about the supply chain of scrap metal, below us, very, very much below us towards the retail or the peddler level, if scraps really staying at a very stable level worldwide in the low 300s for many, many months, when you think down two or three levels to a smaller peddler and fuel prices and labor costs, there wasn't a lot left. There wasn't a lot of motivation for them to be in this industry. So all of those things I think contributed to the lower supply side. Now, as prices goes up, you know, we expect that supply elasticity to kick in. Exactly. Good point.

Thank you.

Thanks, Nicole.

Thank you. As there are no further questions at this time, I'll now hand back to Mr. Mickelson for any closing remarks.

Nothing in particular from me, so thanks everyone for joining the call and I guess we'll catch up with a number of you over the coming days. Thank you. Bye.