Good morning and welcome to Austin Engineering 's Investor Briefing addressing the results released today. Thank you for taking the time to join us. As you all know, I'm a few weeks into the CEO and Managing Director position, and I'm pleased to be presenting the results in this capacity. Today, I'm joined by our Chief Financial Officer, David Bonomini. Together, we'll run through the Investor Presentation launched on the ASX this morning and then provide an opportunity for any questions at the end. As always, before we begin, I would like to draw your attention to the disclaimer on slide two, which covers the usual important information around forward-looking statements. Turning to your agenda on slide three, I'll begin today with an overview of the key results, along with an update on our South American business. Before passing to David, we'll take you through the financials in detail.
I'll cover the regional financials and operational results as well, then update you on our guiding metrics for 2026. We'll move into the Q&A at the end. If you could please turn to slide six, financial year 2025 results highlights. Full year 2025 was marked by another strong year of sales and manufacturing growth for Austin , against some market challenges, and I'm pleased to report a solid underlying operational performance for the year. We have embedded our three operational pillars across the business: product leadership, customer focus, and manufacturing excellence, and I intend to continue to build on these pillars in the coming year. We recorded a lift in revenue across all business units, with group revenue up 22.2% to $376.7 million.
North America was a standout in the group, with a 54% increase in revenue for the year, thanks to a 48% lift in trade sales and increased market sales as well, which we could handle because we have expanded our capacity and added a lease facility. APAC made a solid contribution to profit and margins, driven by Indonesia's and Australia's manufacturing efficiency, along with the impact of our AustBuy bulk seal procurement arm and an improved bucket sales. This has led to the group's underlying net profit after tax, increasing 70% to $40.4 million, while statutory net profit after tax was $2 million higher to $26.3 million. You can see our underlying EBITDA improved by 30%, while statutory EBITDA fell by 4.2%. Our Chile business unit's profitability was impacted following the award of a large OEM contract, which unfortunately created significant inefficiencies.
We've made changes in Chile that I'll address shortly, but moving part of the production to Batam has alleviated some of those pressures and allowed us to meet contract requirements. Our operating cash flow has fallen to $2.6 million. We had a build-up of working capital inventory to meet future demands from customers in Chile and the APAC region, as well as an increase in trade receivables from the APAC and U.S. sectors. We maintain a solid order pipeline, but the order book is softer year-on-year. This is, in our view, all due to timing of order receipts, and we are still confident on the year ahead. The board has declared a fully franked final dividend for financial year 2025 of $0.009 per share. With the interim dividend of $0.006, we've taken the full year dividend to $0.015 per share. This is up 25% year-on-year.
Please turn to the next slide, and I want to speak about our South American business and explain how we are going to overcome some of the recent challenges we have faced in that division. We took on a large OEM contract and faced margin pressures and the fast ramp-up that was required to deliver the products, largely through labor and steel productivity issues. Capacity in Chile became strained, and we shifted some of the production to Batam to manage the overspill and deliver on the contract, and that is working well. Subsequently, we've identified an accounting error in that unit where some product revenue has been booked prematurely, and we restated our financial year 2024 accounts as a result. I want to reiterate that this situation is confined to the Chile division.
Once we work out where these problems were, we've put in a series of measures immediately to strengthen communications and processes in that region to ensure it is mirroring the practices of the other divisions. We have appointed Max Flores as Vice President for the entire America region, who will report directly to me. The new General Manager has come on board in Chile, who will report directly to Max. The North American business has a strong and effective leadership team, and we are going to use that team to implement the same operational and financial processes in Chile. More widely, financial managers in all regions will be reporting directly to our Group CFO. We want to ensure every region is operating with exactly the same processes in place.
We are spending a lot of time centralizing our systems globally, and making sure Chile is operating properly is another main focus of mine this year. I'll now hand over to David to go through the results in more detail.
Thanks, Sy. Hi everyone. I will start with the overall performance of the group and then take a closer look at how each region performed and then finish with the balance sheet and cash flow. Turning to the group's P&L on slide nine, the group's revenue is up 22%. The big driver here was the U.S., driven by a strong order book, a market-leading product, and increased production capacity. EBITDA was up 30%, with APAC really stepping up and improving margins. Depreciation and amortization were broadly flat, a bit higher in the U.S., offset by other regions. Tax was lower than last year, with the additional deferred tax benefit recognized in Australia. Bottom line, underlying net profit was up 70%. That reflects stronger performances in both APAC and the U.S. Now turning to slide 10, referring to the EBITDA percentage margins chart on the left.
As you can see here, margins have steadily improved as we have focused on operational efficiency. From just 6% in FY 2021, we've now lifted to almost 15% in FY 2025, our best result so far. That has been driven by production efficiency, stronger product performance, and tighter cost management. Turning to the return on equity chart on the right, the improved margins are flowing directly through the returns. If we look at the return on equity, we have gone from just over 10% in FY 2021 to more than 28% in FY 2025. That is nearly a threefold improvement in five years. It shows not just higher profitability, but also better use of capital that we have invested across the business. Now moving to revenue on slide 11, looking at revenue by region, North America was a standout, up 54% to $147 million, driven by the new facility and a larger order book.
APAC was up 4% to $173 million. South America grew 21% to $56 million, supported by the new OEM orders. Turning to slide 12, the group's underlying EBITDA was up 30% year-on-year, reaching almost $56 million. APAC led the way, building on last year's momentum by leveraging Indonesia's production efficiency, stronger bucket performance, and good results from AustBuy. North America also grew profit, driven by the expansion of their facility and the expanded contractor partnerships in Canada. In South America, profit performance was softer. That was mainly due to the acceleration of operational expansion to meet the OEM demands, which impacted labor and steel productivity. Overall, EBITDA is up strongly, with APAC leading the charge, North America improving, and South America expected to turn around in FY 2026 with the support of the U.S. team.
With the P&L results in mind, let's now turn to working capital for the year on slide 13. Working capital was up $29 million this year. Most of that came from high inventory and receivables. What's pleasing, though, is raw materials fell by $23 million since December. We've seen more of the flow into work in progress as production ramped up towards the end of the financial year. Receivables moved in line with revenue. Payables were a bit lower because of the timing of steel supply payments, and customer advance payments held steady. Overall, working capital lifted to support growth. There are opportunities to improve, especially in South America, where we expect continued reductions in raw materials to occur. Turning to cash flow on slide four, our closing cash balance came down by $20 million, finishing the year at $20 million compared to $40 million last year.
We generated $15 million in operating cash flow, which was impacted by the $29 million increase in working capital. As mentioned on the previous slide, we expect working capital to reduce further in FY 2026. There was $12 million in tax and interest payments, along with $9 million allocated to capital expenditure, primarily designated for the U.S. expansion. All up, that meant a negative free cash flow of $6 million. While EBITDA was strong, cash conversion was lower this year as we invested in growth and carried higher working capital to support that sales growth. Turning to the balance sheet on slide 15, the balance sheet remains in great shape. Assets of $300 million, net assets of $144 million, net debt moved to $12.8 million compared to our net cash position last year, which was used to fund working capital for APAC in Chile and fund the U.S. expansion.
The net debt to equity ratio sits just over 8%, so still a low-geared position for the group. Turning to the order book on slide 16, the order book chart highlights a 21% decline in the order book growth rate year-on-year, with APAC down 18%, North America down 31%, and South America up 2%. We believe the order book at the end of June is due to timing issues. The orders can be lumpy, with large customers historically placing orders during the first half of our financial year. Since the 30th of June, the group has secured an additional $28.6 million orders. We will continue to capitalize on the group's growth opportunities and focus on improving the group's profitability and cash conversion. Thanks for the opportunity to share the group's financial performance. I'll now hand you back to Sy.
Thanks, David. I want to now provide a brief update on our global regions and how they performed over the year. Turning to slide 19, APAC delivered revenue of $173.3 million, up $7 million from FY 2024 and represented 46% of group revenue. [CRAYS] accounted for 54% of sales, with growth of $10.5 million, or 12% in that product line. APAC had an impressive margin performance, up 9.7 percentage points year-on-year because we're seeing operational efficiency in that region, both in Australia and Indonesia. Investment in our sales teams and improved customer support resulted in more customer acquisitions and a rise in spare parts sales, with the other product category sales rising 21%. Going to slide 20, as I mentioned before, North America was again a standout with a 54% increase in revenue, reaching $146.8 million.
This is due to expanded capacity in this region through the lease of a new facility and expansion of our existing facilities, allowing the team to take on more orders and increase its output. This is a strong business unit, and [CRAYS] sales were up 48%. The cost of that expansion has impacted margins, but I expect it to improve now that the expanded capacity is in place, works are complete, and we are fully operational. We effectively shielded the business from any impact of U.S. tariffs on imports and counter tariffs by establishing a supply chain for truck trade subassemblies using Canadian contractors. This has proven the mobility and flexibility of the Austin business.
To the next slide, slide 21, and in South America, we recorded a 21% rise in revenue for the year on some large contracts, but margins were significantly pressured, as I've mentioned, on labor costs and production inefficiencies due to the fast ramp-up to deliver on that OEM contract. We are in recovery mode here, and I'm confident we'll return the business unit to target margins. Please turn to slide 23. As I've mentioned before, our overarching strategy focuses on three pillars: product leadership, customer focus, and manufacturing leadership. I intend to continue to concentrate on these areas, ingraining them into the business as a basis for growth. Under product leadership, we continue to design and engineer products that meet the changing needs of our customers for productivity, efficiency, and sustainability gains. Products like our HPT trays are meeting those needs.
Our products are delivering the best performance and return on investment to customers, and we have complementary products like our IQ, a technology platform that is providing wear monitoring and then replacement insights to our customers that will lower their cost of ownership. Under customer leadership, we continue to build our sales and marketing programs and make sure we are always improving on before, during, and after-sales service to customers through the life of our products. In manufacturing leadership, we are focusing now on making sure centralizing systems are in place for the whole company. There has been a strong focus on training the team in lean manufacturing processes, increasing productivity, value-adding for our customers, and to reduce waste within our operations. Please turn to slide 30, where I want to step you through my priorities in FY 2026.
You can see here we are continuing to strengthen our focus on safety across all regions by focusing on both leading and lagging indicators, concentrating on our people, building strong teams, and then getting the best out of those teams. On operations, continue with the rollout of the Austin Way. This is our global initiative to roll out common processes and systems, as well as implementing best practices across the globe. Further, Chile recovery is high on my list, as we have already discussed. Customer focus, we are focusing on increasing market share and bringing new customers into the business to generate new revenue leads, including geographical expansion. Finally, continue to focus on technology and how it can benefit the business and our customers. Please turn now to slide 31, where we are providing financial year 2026 guidance that continues the growth trajectory for the business.
I'm confident we have the team and operations in place to achieve this. For FY 2026, we see revenue of between $390 million - $410 million and an underlying EBIT of between $40 million - $46 million. Thank you for your time today. David and I are now happy to take any questions you might have.
Thank you. If you would like to ask a question via the phone, you need to press the star key followed by the number one on your telephone keypad. If you would like to cancel your request, please press star two . If you are on a speakerphone, please pick up the handset to ask your question. If you would like to ask a question via the webcast, please type it into the Ask Question box and click Submit. Your first question today comes from Philip Pepe from Shawn and Partners. Please go ahead.
Hi, David. Thanks for taking the question. Very, very positive outlook. Just bigger picture stuff now that you've been in the official chair for a few weeks now. In terms of the longer-term demand from, say, your top two, top five major customers, you know, some of them are exposed to iron ore, etc., gold, copper, coal. What's the outlook like since you've taken on the chair? Is it challenging because of volatility in commodity prices? Is it stronger for longer because of what's happening with production volumes? How do you see the five-year view for Austin rather than just the next 12 months?
Yeah, thanks, Phil. Thanks for the question. I guess if you, I think the great thing about Austin Engineering Limited is we are not exposed to commodities directly. We are more exposed to the production cycle. If you look at the long-term production cycle of all the main commodities, that has an uptick forecast, right? If you look into the future and our replacement cycles, we see more work coming our way rather than worrying about the commodity cycle itself. If you then pivot to North America, where the current administration is very pro-mining, that's why we've seen such a huge uptick in North America. As a consequence, we continue to see that moderating up, and there's a lot more development in North America. South America, where we operate, you know, we operate in Chile, but there's a huge market there, a huge copper market adjacent to Chile.
There's also different geographical expansions that we can grow into, like Brazil, etc. We see the forward outlook very positive for our business based on the fact that, you know, we are a wear item supplier. I mean, our bodies wear every three to five years. There's a replacement cycle that has to take place. Hopefully, that addresses your question.
Thank you very much.
Thank you. Once again, if you'd like to ask a question, please press star one on your telephone and wait for your name to be announced. As there are no further phone questions, we'll now pause briefly before addressing any questions from the webcast. We do have one more phone question before then. Your next phone question comes from Marcus Bernard from Bell Potter. Please go ahead.
Yeah, morning. Just how are you seeing competition in the truck train market? I know it's a very localized market, but I just wondered if you're seeing any increased competition, particularly thinking about the issues in South America. I wondered if some of your competitors are more active in that market given your issues in supply. Thanks.
Yeah, thanks, Marcus. Thanks for the question. No, I don't think there's any major change in the competition landscape. As you're well aware, we are the largest manufacturer and supplier of trays as well as buckets and ancillary products across the globe. Most of our, well, all of our competition are localized or operate in restricted jurisdiction. We're the only one with a global footprint like we have. We're not seeing any major changes. There are competitions across the globe where we operate. In South America, as you've mentioned, there are quite a few competitors that compete against Austin.
The great thing about Austin, we've got a brilliant brand name, and that's why the major OEM that we work for, and yes, it's been a challenge, but we will get that right, has knocked on our door, not on our competitors' door, because of the brand name and the quality of product we deliver.
Oh, that's great. Thank you.
Thank you. Your first question from the webcast today comes from Patrick Moore. Patrick asks, why the large increase in subcontractor expenses, and will they continue at this level into 2026? Yet, this has not materially reduced employment expenses.
Yeah, okay. Patrick, thanks for the question. The main reason why subcontractor expenses have been elevated in FY 2025 was twofold. The one is when we actually subcontract product into Canada. That's obviously a subcontractor expense. Our subcontractor expenses have increased as a consequence of our revenue increasing. Remember, our revenue went up 22%, and we pivoted into Canada to circumvent or to ensure we didn't get hit by tariffs. That's number one. Number two, why subcontractor expenses have gone up is because of Chile. When we actually had this big influx of orders and the orders went from one to ten trays a month, which we struggled to deliver on, we used a lot of subcontractors in that space. That has moderated backwards. To answer your question, is it going to go on into 2026?
Our subcontractor expense in FY 2026 should be significantly less than FY 2025, but we will still have subcontractors as we grow the business and use subcontractors in regions we want to grow into.
Thank you. Your next question from the webcast comes from Reece van der Meyden. Reece asks, why does the large loss make Chilean order finish? What have you learned from this contract? Also, by asking them to change the terms of the contract, do you think this will harm you getting extra business with them or other companies in the future?
Yeah, thanks, Reece. We've got an overarching agreement with this OEM spanning multiple years. I want to make it clear that there is a termination for convenience on both parties if we wanted to move on. The fact is that the contract has been challenging for us as it's a new product. We are a subcontractor to the OEM. It's their design, and that has created challenges for us in Chile. We have since then worked very hard on trying to get our operations right-sized for that product. We've also moved some product over to Batam, and both of those will make us get to a better financial outcome for this contract. Simultaneously, we are also engaging with the OEM, and they are very reasonable working with us and want to continue to work with us. They have given us no indication that they would like to stop the arrangement.
In fact, they would like us to do more work for them, and those discussions are ongoing right now.
Thank you. Your next webcast question comes from Michael Babb. Michael asks, can you provide an idea of sustainable working capital requirements? For example, in terms of metrics such as working capital to sales or any other appropriate measure?
Yeah, so we don't have a specific target range as such, and let me explain why that is. Our working capital will go through peaks and troughs at any given time. We buy steel in bulk, which we then consume over a period. That gives us leverage with the steel mills and also reduces our cost base. However, that will spike our working capital as we buy that steel. We also have, obviously, accounts receivable that will spike depending on the order intake. However, that said, if you look at our current working capital, it's definitely elevated, and we will moderate that back. We've learned a few lessons from buying bulk steel, and we got it slightly wrong for our Chile operations, and we've learned from that, and that gives me confidence that going forward, our working capital will moderate backwards.
Thank you. Your next question from the webcast comes from Michael Beasley. Michael asks, with revenues expected to increase in FY 2026 and margins in the U.S. expected to recover, why is the EBIT forecast to be flat year-on-year?
I think the only answer I can answer to that is we don't expect in FY 2026 to have a similar normalization expenses flowing through our accounts, and that's the reason why it's flat year-on-year.
Thank you. Your next question from the webcast comes from Evan Karambelas. Evan asks, what specifically went wrong in Chile, and how are you addressing it?
Yeah, I think there's multiple challenges there. Chile has been operating for a very long time. It does manufacture trays, but the bulk of its income in the past has been from doing rebar work, rebar work for the mines across Chile. When we pushed through the OEM contract, and the legacy there is that we started off with doing one or two bodies per month. Unfortunately, through demand from the OEM, that increased to 10 bodies a month. Our team in Chile at that stage felt that they could do the work and rearrange their process flows. That obviously wasn't the case. We brought in quite a few subcontractors that really didn't know how to operate within our environment, and that stretched our resources at a local level.
How we've addressed this, as per my communication, I'm leveraging the North American management team to actually help right-size the business, put in the right process flows, and the right engineering processes in Chile. They're in the same time zone, and they can actually, my whole, well, not my whole, most of the North American team have been in Chile in the last few weeks to try and actually, or not try, to help the Chilean team to get their processes in place. The key lesson learned there was that when we actually take on a new product, and remember, this is not our engineered product. This is an OEM engineered product that we are subcontracting to, is to obviously prosecute the requirements of the OEM and ensure we do not overpower a specific operational area with work and to do so in a controlled manner.
Thank you. Your next several questions on the webcast come from Michael Manel. Michael's first question asks, does Austin see more OEM orders going forward?
Michael, thanks for the question. Yes, we do. This OEM that we are manufacturing for is a large OEM, like I said, and we are effectively subcontracting based on their order design. We also supply to other OEMs that we supply Austin bodies for. Yes, OEMs form definitely a large part of our target market, and we're definitely seeing that relationship growing going forward.
Thank you. Michael's next question is, what is the average lifespan of a dumper tray in copper mines in Chile and iron ore mines in the Pilbara?
Yeah, probably anywhere between three to six years is if you're using a very lightweight body like we design and manufacture. You could put, you know, the body can last for much longer if you put steel in it and you're not a sophisticated miner and you don't value the carrying capacity of ore or waste over the body. What I'm saying there is you can put a lot of steel plate in the body, make the body heavier, but that limits how much ore or waste you can carry in that body. To answer your question, between three to six years for the product we supply.
Thank you. Michael's next question is, who are our main competitors? Is the industry still fragmented?
Michael, we've got competitors across the globe, and yes, there are a few big players. Probably the biggest player in Australia is Austin Engineering Limited. In South America, it's a company called Minitec. In North America, it's very fragmented and most of the OEMs that we're competing against in North America. There are multiple other smaller suppliers across the globe.
Thank you. Michael's last question asks, does Austin Engineering Limited intend to gain orders from mines in Africa?
Yes, and we do supply into Africa, have been for multiple years, and it's part of our business, and we attend conferences in Africa. We have mine sites in Africa that actually call on Austin to buy product.
Thank you. There are no further questions at this time. I'll now hand the conference back to Mr. Sy Van Dyk for any closing remarks.
Thank you. Just give me a sec. Okay, I'd just like to make a few comments about the business. You know, I'm new to the business in an executive role. I think it's a great business, and I'm really excited to be leading this business. I think we've got a great future with a lot of growth potential. We've got a diversified customer base. We are a globally situated business with global operations, and there's no other business set up like us. We've got a very high return repeat customer base, which showcases that Austin's brand is well recognized, its product is well accepted, and people value our quality. We've got a strong balance sheet, and that balance sheet will allow us to both go after organic growth and inorganic growth, and both of those are obviously on the cards. Whatever we do, we'll do with significant financial discipline.
I hope you all agree on this call that the business is fundamentally undervalued, and it's my job to actually make sure it's rightly valued. I hope you all agree, and I hope the market sees the fundamental value in the business. On that basis, I'd like to thank you for your time today, and if anybody here would like to talk to us, please reach out to us, and we're happy to have any conversations on a one-on-one basis with anyone. Thank you so much. Thanks for your time.
That does conclude our conference for today. Thank you for participating. You may now disconnect.