Thank you for standing by, and welcome to the Capral Limited First Half 2023 Results Investor Webinar. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question via the phones, you will need to press the star key followed by the number 1 on your telephone keypad. If you wish to ask a question via webcast, please enter in the Ask a Question box and click Submit. I would now like to hand the conference over to Mr. Tony Dragicevich, Chief Executive Officer and Managing Director. Please go ahead, sir.
Good morning, everyone, and welcome to Capral's First Half 2023 Results presentation. I'm Tony Dragicevich, the CEO of Capral, and joining me this morning is Tertius Campbell, our CFO. After the devastating result last night in the soccer, hopefully this set of results maybe cheer you up this morning. Presenting a decent set of financials for the first half for Capral for 2023. Before we head into the full presentation, we'll just run you through the agenda on the next slide. First of all, I'm gonna do a business overview and got some interesting things to talk to you about this morning, some changes from previous presentations. I'll run through the first half highlights.
Tertius will run through the financials, and then back to me for the strategy, and then the outlook and guidance at the end, and any questions we'll be open for. Turning to the next page. Capral is Australia's leading supplier of aluminum extrusion and rolled products. Aluminum is a very important metal. It is strong and lightweight, making it the preferred construction material in many building and transport and industrial applications. As a result, aluminum will play an increasingly important role in global decarbonization. Aluminum is also very important to the Australian economy, with both alumina and aluminum smelting, representing one of the largest export earners for the country. Back to Capral. Within our operation within Australia that we operate, and we are Australia's largest extrusion manufacturer.
We are the largest supplier of industrial aluminum extrusions, and we're the number one supplier of rolled product, rolled aluminum, which is sheet and plate, which is all imported into Australia. We are the number two player, number two distributor of commercial window and door systems in Australia. Turning to the next slide, just looking at our business at a glance. Six manufacturing plants, eight extrusion presses, 65,000 ton of annual extrusion capacity, 20 distribution and trade centers. Our key markets are residential and commercial construction, and a wide variety of industrial applications. Our market share has risen over the last couple of years, representing around 27% of the total market. Annual turnover for the last 12 months, AUD 680 million. Total assets, AUD 430 million, and in excess of 1,000 employees.
A decent-sized business and one that's performing, performed very well over the last few years. Turning to the next slide, I want to talk about what we've done within the business over the last 6 years, 5 to 6 years. Our big focus has been on de-risking the business and increasing our capability for the future. I just want to share with you some of the milestones and events we've been through during that period. Starting in 2018, we undertook the automation of the Bremer Park packing line. Quite a large capital expenditure there, with a relatively short payback. We also invested AUD 3 million into a paint line, into our Western Australian facility in Canning Vale. We also, at that time, also consolidated our distribution sites onto our manufacturing site in Western Australia.
We started the upgrade of our building systems range, so we'll design and innovation of new, new window systems and window and door systems started in 2018. In 2019, which is probably the biggest year we had at Capral in terms of things that we had to do or things that we did, we undertook the restructure of our Bremer Park plant, our largest manufacturing facility. We spent AUD 6 million on restructuring that site, including making over 70 people, retrenching nearly 70 heads. That produced an excess of AUD 10 million a year permanent cost savings to the business, significantly de, de-risking Capral during that period or post that, post that successful restructure.
During that year, we also established for the first time, a stand-alone building systems division within Capral, to allow us to compete in that residential and commercial window and door market, on the same basis as our competitors do. That's been a key initiative for the business over the last five years, and it will continue to be so. 2020, how can we forget COVID impacting in the first half of the year, significantly on everyone's lives and operations? We did see post the lockdowns, that the market rebounded quite quickly in the second half of the year. We saw a significant growth in Australian made sentiment, and we, during that period, we were also able to get the dumping duties on China, Chinese extrusion, extended for a further five years.
Volume started to turn into 2021 into 2022. In 2021, we acquired the Smithfield plant in New South Wales from G.James to give us additional extrusion capacity in our one of our largest markets. We achieved industry-leading safety performance that year and continued to do so over the last couple of years. We relocated at the end of 2021, our New South Wales distribution business and our corporate office to Huntingwood, where we are talking to you from today. We began our sustainability journey to net zero. Last year, we encountered record high aluminum, never been this high, driven by increased global demand, but most particularly, more particularly, the Russian invasion of Ukraine, sent metal prices skyrocketing. Quite hard to deal with.
Biggest impact on us, biggest impact in Capral was a significant increase in our working capital levels as a result of those, all those very high metal prices. We started the upgrade of, to our Penrith plant at the end of 2022. That will continue through the next year or two. We installed late 2022 and commissioned early this year a new paint line at our Huntingwood facility. We've also added to our, our trade center network with North Brisbane and more recently into Wollongong. In 2022, late 2022, we introduced LocAl into the market, which is a low-carbon alternative offer for our customers to meet those increasing requirements for building materials that have a lower carbon footprint.
We finally released, last but not least, released our new building systems range and the software to support it. That's some of the key milestones over the last five years and setting ourselves up for future success. Turning to our strategic footprint on the next page. You can see that I won't go through this in detail, but that map of Australia highlights all of our facilities. We have a national footprint. We're the only one in Australia with a national manufacturing distribution footprint. We have a presence in every state, and our extrusion plants are near the five mainland capital cities. One of our key marketing initiatives this year is, has been to promote our capability, or Capral's capability, to differentiate ourselves from our local competitors and importers into the market.
We've produced a series of short videos, 5-10 minutes long, that showcase the capability of each of our key operating facilities. We call these the Capral Can-Do videos. I just want to share with you now a cut-down, 90-second video of our facility in Canning Vale in Perth, WA, which will just give you a good example of what we do within, within our business. If we could run that video, that would be great.
Welcome to Capral Canning Vale, our manufacturing and distribution site for Capral in Western Australia. This 18,000 square meter site is home to the only aluminum extrusion press in WA, along with a state-of-the-art vertical paint line, CNC plate routers, and a comprehensive warehouse and distribution facility. Let's take a look around.
Now we turn to the half year highlights, and we talk about the financial performance of the business at a high level. We can just move to the next slide, please. Okay. We produced a stronger-than-expected first half result, driven by continued high volumes, supported by residential pipeline work and the, and our diversified industry exposure. We're able to maintain our margins through careful cost management and recovery through price increases. Okay, performance highlights. Next slide. Volume, starting off with the volume. Our market demand held up stronger than we had anticipated, which helped deliver an earnings result above where we thought we would be at this point of the year. Our volumes were slightly down on the first half of last year, but it held up, you know, very well.
Our sales revenue was down 5%, and that was really driven by the lower metal prices that prevailed in the first half of the year, and which continued to fall. Our earnings were on par with that, with last year, which was a record performance for Capral, record half year for Capral. We're very pleased to be able to produce a result that was in line with our record first half last year, despite the weakening or weakening economic conditions. Underlying earnings per share at AUD 0.96 per share. We have declared a interim dividend, fully franked, AUD 0.20 per share, and announced early August, a share buyback program, which will, which over the next six, till the end of December this year, which is equivalent to around AUD 0.15 per share.
In terms of net cash, we saw a big turnaround in our net cash position. Sitting net cash at AUD 41.2 million as at the end of June, compared to AUD 24.5 million, AUD 24.9 million at the same time last year, and up from the AUD 25 million in December. That, that is after the payment of a AUD 9 million dividend during the first half. Net tangible assets per share improved to AUD 9.44, up 10%, and our safety performance continues to be excellent and well, and much better than the peer average, which is greater than 9. A really strong first half, and very pleasing to be able to produce and portray these results. Turning to the next slide, which are our sales channels.
Just to remind everyone, all the new callers on, on the call this morning, that Capral's business, first of all, we sell our products both through direct from our manufacturing plants to our large customers. That's our extruded aluminum, which is around, represents around 56% of our total volume. The balance of our extrusion volume, which is 30%, goes through our own distribution network to our small to medium-sized customers. We also, 14% of our volume is represented by rolled product, which is sheet and plate that we import from overseas. That's how our products get to market. In terms of our industry exposure, the largest single market that drives our volume is the residential housing market, 42% of our total volume.
Commercial buildings and industrial buildings make up around 12% of our volume, with a wide variety of industrial segments making up 46%. That includes transport, manufacturing, and marine, a number of other manufacturing sectors. Our volume for the first half, as you said, was 2% lower than last year. That was mainly driven by some of our, some resellers that we sell to returning to imports, returning some of their volume to imports, as those import supply chains normalized. Also we saw quite a soft marine market in the first half of the year. The other sectors held up very strongly.
You can see there on the right-hand side, a graph of our half yearly sales by year, and, with the 2023 half year volume on par with where it has been in the last three half years, but down from the record highs of the second half of 2021. A strong result in terms of volume. Turning to the key markets in which we operate, first one being detached housing. Detached housing commencements have slowed, and the backlog, backlog of work has reduced. However, we did see continuing strong demand from the segment in the first half of the year, and we're expecting that pipeline of work, while, while at lower levels, to continue through most of the second half of this year and possibly into 2024.
You can see that from the graph on the right-hand side there, that the housing market peaked in 2021, came off a bit in 2022, but still at strong levels. This year forecast to be down overall 16%, which is no surprise to anyone, I'm sure. With housing starts forecast to be 174,000 this year, as a result of the higher interest rates obviously impacting and the removal of government and the post-COVID government initiatives to stimulate the housing market. What does the future look like? Well, the forecasters are telling us that we're going to see some slight improvement in housing in dwelling commencements in 2024 and 2025.
However, with the announcement yesterday of the government-backed new housing program, and also with immigration hitting record levels, we expect that there will be upside into these forecasts, but possibly not early in 2024, but certainly late 24 and into 25. With the demand and requirement for housing, both standalone and multi, multi-res, that this market will come back after a bit of a lull, certainly by 2025, but not before. Now turning to some recent projects that Capral has completed or been involved in. Just to show you where our products end up. These, these 3 projects are residential homes, 1 in South Australia, 1, the middle 1 in New South Wales, and the 1 on the right-hand side in Victoria.
All of these products feature Capral's designed and owned proprietary window and door systems, together with an example of Schüco, which is we're the New Zealand, sorry, the Australian and New Zealand agent for the Schüco brand, and that enables us to sell their products on behalf of the world's leading window systems designers based out of Germany. That's right at the top end of the market. There's some examples of the residential projects. Turning to the next slide, we've got some really nice examples of where our commercial systems end up. All these projects use Capral's designed and owned proprietary window and door systems. In Tasmania, the UTAS. In Tasmania, in Hobart, ANZAC House in Western Australia, and a commercial building in Victoria.
Some good examples of where our aluminium is used. Now turning on the next slide to the industrial sector, which is very, very important sector for us. That sector has remained strong despite the slowdown in some segments. The key one for us in the last couple of years has been in transport, which is really, for us, truck building. Strong, consistent conditions have persisted, and in the middle of that graph there, you can see new truck and van builds for the last 10 years or so, and with 2022 and 2023 being consecutive record years. That is expected to continue through to 2024.
The demand for freight and is continuing to increase, and the truck building industry is very buoyant and projecting continued strength in that sector for some time. We have experienced slower conditions in the marine market. There has been a slowdown in commercial ferry builds. Most of these commercial ferry builds have been traditionally been for offshore ferries, particularly in Europe and in the Middle East, where the largest customers in this area being Austal Shipyards in Western Australia and Incat in Tasmania. Those conditions have slowed. However, things are picking up. Incat secured the contract to build 8 new RiverCat for the Parramatta River service, and they'll be starting on those projects in the next few months.
We are, we are the major supplier of aluminium into, into both those two organizations. Solar market is continuing to grow. This market is dominated by imported aluminium extrusion. There is a slowly but surely increasing demand for local supply, and it is becoming a more important segment for us as time goes on. Industrial construction investments are steady, but there is starting to be a sign of a bit of a pullback after a couple of very strong years. However, the cladding sector continues to grow as rectification activity comes online. Those will be aware that there have been issues with certain building materials on the facades of buildings in terms of their flammability, and those uncompliant or non-compliant facades are being replaced with compliant systems, most of which include an aluminium component.
A volume to other aluminium resellers or distributors in Australia has softened in over the last year or two as the import has re-resumed, but it has typically been at the lower end of our, our margin, our margin customers, because they're reselling into the market and imports have always made up a fair share of their requirements. In terms of manufacturing and general fabrication, those markets have remained solid, and we've held share, the share that we've gained against imports in this area over the last couple of years, despite the fact that the supply chains, import supply chains have normalized. Maybe turning to the next slide, just showcasing some key customers that we deal with and the various products that they build in the industrial segment.
Firstly, here we have here Volgren, Australia's largest bus body manufacturer, with operations in Victoria, New South Wales, Queensland, and WA. A very strong, large industrial customers, customer. Louvreclad specializes in commercial building facade solutions. They're actually located just up the road from our Bremer Park facility in Queensland. On the right-hand side, last but not least, is Sloanebuilt, one of Australia's largest truck bodybuilding companies based here in New South Wales. As part of our customer partnership program, we introduced another key marketing initiative last year. That has been the development of our Crafted with Capral series of 5-10 minute videos together with print company, Printmedia. These videos showcase our key industrial customers and their businesses. They're used by us and our customers in digital and print marketing.
I'd just like to show you. These videos normally last 5-10 minutes. We'll show you a condensed version, 90-second version, of the Sloanebuilt one, which was completed last month.
The transport industry is funny. It's like a drug. Once you get hooked on it, you're hooked. You know, it's, it's a bit of a passion. We've got trailers that suit grains, bulk commodities, fertilizer, asphalt trailers, to nurserymen's equipment for garden centers, biocycling, recycling. We offer a great range to a diversified market. Aluminum's always been available in the tipper market, probably since the late seventies.... It's such a good product and so versatile. It's ageless, it's lightweight, it doesn't rust, so it's low in maintenance. It's an easy product to work with, especially the extrusions. We can get dyes for certain sections, so we can put the trailer together simply. Its return on your investment far exceeds other options that are available for the tipper industry. Capral supply all of our aluminum.
We'll regularly meet on a one-on-one basis, and that personal link, face-to-face contact, makes a lot of difference to us. We've tried many suppliers over the years, and we find Capral exceeds right the way through. Our two businesses work in synergy. They're not a supplier, they're a partner, and how they look after Sloanebuilt is outstanding.
Thank you. What we're trying to do with these initiatives around the Crafted with Capral program and also our Can-Do Capability videos, we're trying to differentiate ourselves. We are differentiating ourselves, from our both our local competitors and import competition, by providing more than just aluminum to customers. We provide a high degree of value-add offer in terms of being able to semi-fabricate, drill, punch, and cut aluminum, and also, route aluminum plate. In addition to the, our Manufacturing capabilities and service capabilities through our distribution network and the design and innovation around our own systems.
What we're trying to do with these videos, is to promote and differentiate Capral from our local domestic competitors, who tend to be regionally based, and also the import importers who are unable to offer the level of services that we do. I hope you enjoyed that. I'll now hand over to Tertius Campbell, our CFO, to talk about the financials.
Thank you, Tony, good morning to everybody. Amidst the inflationary pressures and slightly reduced volume, Capral has demonstrated yet another strong performance. Our fully integrated value chain has reaped the benefits of solid volume levels, good asset utilization, tight cost control, and prudent capital expenditure practices. In summary, the key financial highlights for the half year encompasses: robust earnings, strong balance sheet, and a healthy cash position. Moving on to page 16, the profit and loss. Capral's earnings for the first half exceeded our expectations, with underlying EBITDA amounting to AUD 32 million, aligning closely with the previous year's performance. The decrease in the LME price of aluminum and lower volume contributed to a 5% decline in revenue.
Whilst the 2% dip in volume in sales volumes had a minor adverse effect on earnings, enhanced margins and a more favorable product mix culminated in a noteworthy bottom line, on par with the record first half of last year. Continued strong demand ensured efficient utilization of our production and our warehouse facilities, thereby maintaining favorable operational leverage. However, the impact of inflation on non-metal costs, surpassing 6%, dampened our earnings. Nonetheless, price increases, cost-saving initiatives, and efficiency projects provided a measure of mitigation. The release of a prior period claim provided provision provided a non-occurring benefit. Underlying EBIT, at AUD 20.7 million, mirrored last year's performance, therefore, no additional deferred tax asset recognized re-recognition required this half.
Our underlying net profit after tax of AUD 17.2 million was marginally, marginally lagged the previous year, primarily attributable to the heightened finance costs, driven by increased interest rates and the higher average debt. The underlying earnings per share of AUD 0.96 supports the de-declaration of an interim dividend of AUD 0.20 per share. Moving to page 17, the balance sheet. Capral's financial position remains strong, with a net cash position of AUD 41 million at balance date. Noting that all working capital trade loans were settled during this first half. The cash position allows Capral to not only declare an interim dividend, but also commence the share buyback that we announced earlier in August. The debtor days outstanding improved to 44 days, a very good result.
As anticipated, inventory levels have begun to normalize, resulting in the release of cash, a trend that is projected to continue during the second half. The aggregated working capital requirement fell by approximately AUD 9 million year-on-year, and AUD 20 million since December 2022. Further moderation is anticipated over the next 6-12 months, contingent upon sales levels and aluminium input costs. Capral currently holds approximately AUD 4 million in franking credits available for distribution, of which around AUD 1.5 million will be dispersed along with the upcoming dividends. Additionally, there are AUD 120 million of accumulated tax losses eligible for recognition as deferred tax assets in future periods. Turning to page 18, the cash flow. Our cash generation showed a significant improvement in comparison to the corresponding period, facilitated by the release of working capital, as explained earlier.
The contributed, this contributed to a free operating cash flow of AUD 25 million, after the planned AUD 4 million expenditure on outlined capital expenditure program. An additional AUD 9 million was returned to shareholders through dividends earlier this year. In conclusion, the interim dividend of AUD 0.20 per share will be distributed in this, in September. Due to the impending buyback initiative, the dividend reinvestment plan will remain inactive for this distribution. The share buyback program will commence shortly after the record date. Thank you, and Tony, back to you.
Thank you, Tertius. I will now turn to talk about the strategy. Would you want to do the distribution one, Tertius, again?
Sorry. I, I missed this slide. We've included this slide this year just to show the history since we started paying dividends back in 2016. Showing that we maintained our interim dividend with an additional potential AUD 0.15 per share, equivalent of AUD 0.15 per share in the anticipated buyback during the remainder of this year, bringing the first up to AUD 0.35, with a final dividend to be declared. We hopefully, if everything is according to forecasts and plans in the at the end of the year, at full year results. You, you can see that there's been a good progress or increase in our dividend payment since the 2019 restructuring that happened in Bremer.
Capral's board is of the opinion or wanna focus on returning more benefits to the shareholders and the distribution to the shareholders to improve with this buyback of shares as well. Sorry, I missed that slide.
Okay, we now turn to the strategy and outlook. Our overriding objective is to drive the return on the investments that we've made and continue to improve our long-term competitive position. Our strategy has remained... If we turn to the next slide, has remained consistent over the period, building on our strengths, which is our, our range, our capability, our national footprint, and our innovation. Our people continue to optimize what we do. We have a, you know, strong focus, particularly on our manufacturing and distribution operations, on focusing on the key service metrics and the key productivity metrics around all of our manufacturing facilities. We continue to invest significantly in, in new technology, not only at the front end of our sales operations, but also in the manufacturing and, and supply chain operations as well.
That enables us to grow for the future. Leveraging these capabilities, our knowledge, our national presence, quality, and service, we've discussed to develop new products and, and channels to market and new customers, bring them on board. Our key things is the volumes that we've secured from imports over the last three years, the focus is on retaining those through high levels of customer service and value add. Turning to the next slide, is talking around our three key parts of our business. First of all, manufacturing.
The key initiatives around that over the next couple of years, we continue our process improvement programs that we have at all of our plants, to ensure that we continue to be more efficient and are able to continue, continually to drive our costs, cost inflation out of our business. That's proving a bit harder to do because inflation is running at rates we haven't seen before, not for many, many years, but that, those programs, that's what they're designed to do. We continue to spend maintenance capital on our plants to ensure their reliability. We're progressively upgrading all of our, all of our shop floor control systems to the latest technology to help improve, improve our efficiencies. We've still got to complete the upgrade of the Penrith extrusion plant.
The first stage was done over the Christmas period with the, with the new press. We, we, we have log heaters and, log heaters and billet saws to be installed next year, early next year, and then some downstream equipment in the year or 2 after that. That's the manufacturing operations. Turning to our distribution business. The key thing here has been the, the, the release of our new window and door product range and the systems software, the fabrication software, to support that. It was released late last year, and we continue to focus on increasing our customer base, utilizing those systems. That range was enhanced by the purchase of the EDGE high, high thermal performance window systems in the middle of last year, and that's gonna become really important as.
The changes to the National Construction Code come into place in the cold climates of Australia, or they come into play, come into in place on a state-by-state basis over the next 12 to 18 months. The impact on windows and doors will be primarily in the cold climates of Australia, which will require, higher thermally performing window systems to meet that new construction code, We're well placed to, to be, to take advantage of or service that market. We installed a new paint line in New South Wales, late last June, commissioned it earlier this year. First time we've had, finishing capability or powder coating capability in New South Wales, That's going to be a good value to us in one of our largest markets.
Our overall goal is to grow Capral's direct distribution channel, both through our mill-direct business, but also focusing on growing our distribution customer base as well. In terms of sales and marketing, we, we continue to invest in technology to improve our sales effectiveness. The big things in front of us at the moment are upgrades to both our website and our E-Store. We hope to have those released in, within the next quarter. Very exciting developments for us for going forward. We've already spoken about the partnership program with the Crafted with Capral marketing initiatives and also, more recently, the release of our promoting our capability and differentiating Capral with our Capital Can-Do videos. We will continue to look for opportunities to expand our regional footprint where it makes sense.
Those, those are the key things, key initiatives in terms of our high-level manufacturing, distribution, and sales. Turning to the next slide, just continuing on a couple of key areas. Talk about quickly, solar. Spoke about growing demand for local product in the sector. Clearly, solar panels will continue to grow in Australia over the years ahead. The panels sit on aluminum solar rails to support them, both on roof structures and standalone facilities. Most, as I said earlier, the vast majority has historically been imported, and us, together with other local players, are looking to carve out a growing segment here for local supply. Defense. There's a lot of activity around frigate, new frigates, submarines, et cetera. Capral is an approved supplier.
It's been a slow burn because these projects take a long time, but we are approved supplier to those defense, defense contracts. Cladding, we've spoken about, working with cladding system suppliers to address the new fire standards and recladding opportunities. That's something that we're working, working closely with our key customers in that segment. As, as we have done for, for the last decade or more, really focus on managing and ensuring that we have an even playing field and continue to fight, fight for fair trade in the Australian aluminum extrusion market. The two big cases that we've taken in the last 12 months, we appealed the removal of measures on Malaysia and Vietnam, and we applied for a variable measures review on Chinese imports.
That really is looking for higher duty levels and a higher minimum export price out of China for aluminum extrusion into this market. Both those reviews, the draft reports were released recently, those, they're not final, but those outcomes of the draft reports are looking very positive. Watch this space. That will all be concluded by October. We turn to the next slide, talking about sustainability, and we will go into a lot more detail at this in our sustainability report for the full year. I just want to highlight a couple of key initiatives that we undertook in the first half of this year. First of those was, very importantly, we became the first aluminum extrusion and supply company in Australasia to be awarded the ASI, Aluminium Stewardship Initiative certification.
Which allows us to provide to the performance standard of the materials we supply and chain of custody to the materials we supply, which becomes very important when we're looking at low-carbon aluminium offering to market. That certification took us nearly 12 months to achieve, a great initiative and a lot of work done by the team to get us there. It's going to set ourselves, set Capral up at the forefront of low-carbon aluminium supply to the Australian market, or lower carbon supply to the Australian market. Internally, we're focusing on reducing our Scope 1 direct emissions, which is gas, primarily, from our operations, and the Scope 2 emissions from our electricity consumption, obviously, which we rely on the grid. Apart from the solar panels we're installing on the roof of our, our buildings.
We're, we're looking to embrace the circularity of aluminium. Aluminium is continuously recyclable. Currently, or certainly up until very recently, the vast majority of aluminium is shipped offshore for recycling. We are working with the local smelters to increase the level of local local recyclability of, of aluminium. That will certainly also lead to a lower carbon footprint for both the smelters and, and for us as downstream users. There's a couple of other key initiatives for the just to talk on for the half year. We, we've established diversity targets within our business. We are starting to roll out the LocAl, low, lower carbon options to our customers, which is being, which is the demand is slowly but surely increasing.
We're on track to achieve our emission reduction targets through initiatives in the last six months of installations of LED lighting and solar panels, optimizing heating and cooling power use, and supporting green energy, and being able to take green energy where we can out of the grid. At this stage, we're on track. Still a long journey to go in terms of meeting our greenhouse gas emission reduction targets. Next slide, talking about the all-important metal cost, which fell, as you can see there, from its record highs in 2022, 2022. The average LME decreased, on average 10% compared to the same period last year in the first half, and it is continuing to fall into the second half of this year.
Still relatively elevated from where it has been historically, as you can see that going back into, pre-COVID times and during COVID, 2018, right through to 2021, at around the AUD 3 mark, including premiums. Our metal cost AUD, but currently sitting at a, you know, got up to the well over AUD 5 at the peak, down to AUD 4 and slowly but surely reducing, we think throughout the second half of this year. Now we turn to the final slide from me, which is the outlook, the all-important outlook. We have, as it said, the headline there is we have lifted our earnings guidance to the top end of the range.
Just talking that through, we do expect the residential building, just market to soften, and for our demand from that sector to start to soften. It has been held up very, very strong to date, but that demand will start to ease off in the second half of this year and into 2024, before lifting again as that cycle turns due to demand. Our other key markets, commercial and industrial, are, are expected to remain at relatively high levels and to be relatively strong and hopefully underpin our volumes for the next year or so. LME peaked at record levels, we spoke about 2022, but, and forecast to fall moderately during the balance of this year. We are seeing inflationary cost pressures that we've never seen before, especially in energy.
Energy costs have, in some of our operations, have gone up, two or threefold. A big, big cost we have, we're getting increasing as our EBAs come up for renewal, we're getting increasing pressure to lift those above, above where they've been historically. Freight costs and packaging costs still remain high. We haven't seen any drop in, any alleviation in, in either packaging and freight, freight costs are, are now increasing 'cause there's a, a lack of, shortage of labor in that market in certain truck, trucking routes. Absence any unforeseen events, we expect we've lifted our earning guidance to the top end of the range, with the underlying EBITDA around AUD 58 million and the underlying NPAT around AUD 30 million, which would be earnings per share of around AUD 1.66 for the full year.
Our working capital levels have reduced, and we expect that to continue in the second half to increase our free cash flow for this year. Our capital expenditure will be broadly in line with where it was last year, which is AUD 10 million, which is, the last couple of years have been high for us as we've invested in growth opportunities and new equipment. That will return to normal levels probably in 2024 and beyond, 2025. On this basis, we would be in position to continue the return to shareholders in the form of both dividends and share buybacks, in accordance with our published capital, capital allocation policy. Thank you very much for listening this morning. Hopefully, you found that informative, and we're now ready to take any questions that we may have.
Thank you. If you wish to ask a question via the phones, you will need to press the star key followed by the number one on your telephone keypad. If you wish to ask a question via the webcast, please type your question in the Ask a Question box and click Submit. We'll pause momentarily to assemble our roster. The first question will come from Andrew Johnston with MST. Please go ahead.
Morning, Tony. Morning, Tertius. Congratulations on a very solid result. Just two questions. The first one is around inventory, good to see that cash starting to come out. You made a comment that inventory volumes have fallen. Are they back to normal levels, or is there more, is there more to come out of where inventory volumes are sitting at the moment?
They've, they've returned close to normal levels. There's a little bit more to come out in terms of in terms of the volume and in terms of the tons of material we carry, that's pretty much back. We'll be back and balanced by the end of August, end of this month. It's a moderately lower level than where it was at the end of June. The big, the big fall out or the big reduction, it will be in dollar terms as the lower metal prices flow through our, our inventory. We carry, you know, up to four months worth of inventory in our distribution business, both in extrusion and rolled product and security systems.
That, that inventory has been sitting in, at, you know, at high metal costs, and that will, that will wind its way out over the next, the next half of the year. The biggest volume drop in terms of tons is, we've, we've seen that in the first half. In the second half of the year, we expect to see more of the lower metal prices flowing through and a reduction in dollar value of inventory coming, coming down in the second half of the year.
Okay. Yeah, if you look at the aluminium price, from March to May, it was about AUD 3,450, and we're sitting down at AUD 3,200 now. Assuming they stay around that same level, it looks like there's a little bit more.
Yes.
cash to be released from, from inventory. Yeah.
Correct.
Just moving on to CapEx. You mentioned that CapEx returned to more normal levels in 2024 and 2025, versus AUD 10 million in 2022. What are more normal levels?
Around the AUD 5 million-AUD 6 million mark.
Okay. Just, just the final question. It's escaped me, so it can't have been important. Okay, thanks very much.
You're, you're only, you're only allowed two.
All right. Okay.
That's fine.
Again, to ask a question, please press star 1. I would like to turn the call over for any webcast questions.
Yes, thank you. We've received a question from Simon Mawhinney, from Allan Gray. Says: Would you mind making some comments regarding the competition in your markets from incumbents, both local manufacturers of extrusions and importers, especially in light of forecast falls in activity levels and its impacts on margin?
Yeah, look, a good question, Simon. Let me deal with imports first, and I'll talk about local competition. Imports are returning to normal in terms of supply chain. The, the supply chain disruption that we saw post-COVID has dissipated, and those lines, those import supply chain lines are back down to the normal 3-month, 3-4 month delivery requirements or periods. We've also seen international freight costs reduce as well. Imports have always been a, you know, a large part of the market. The market share got up to close to 38% pre-COVID. They're probably down to sort of the 33%-34% percentage of the total market that we've secured back. They will always be part of our market.
We believe that, you know, as long as we stay in front and we have a, you know, strong anti-dumping regime in Australia, that the worst of the dumped imports will be kept out. We'll be able to compete against imports on our service delivery and our capability, which we've spoken quite a bit about this morning. We will be continuing to market and differentiate ourselves from importers in terms of our short lead times, the credit terms that we can, we offer locally, and the capability that we have locally. It's pleasing to note that all of the direct end user customers, or the fabrication and manufacturing customers, that we secured back from imports during that supply chain dislocation, we have been able to retain. We're, you know, we've got good relationships and good partnerships with those, those customers.
In terms of local competition, all of the local competitors. Our local competitors are made up of pretty much those competitors that we that are standalone, and we compete with in their regional areas. Those are, those extruders, talking about extrusion manufacturer here. Those extruders that are owned by or associated with a an aluminium distribution business or a window fabrication business. For example, G. James, which is the second-largest extruder in Australia, the majority of their volume goes to their downstream window fabrication operations, both residential and commercial. INEX, which would be the third-largest in Australia, is owned by Alspec and AWS, the majority of all of their volume goes to their downstream or their downstream owners.
We're, we're left with three or four other independent, regionally-based extruders, one of which was recently acquired, Victoria, by a major window fabricator. Bradnam's have acquired one of those competitors, sorry, one of our competitors, which, which will, which they have bought to secure their, their supply going forward. We, we, we see the market as being, as a result of things that have happened over the last three years, probably been, as less, a bit less competitive than that. It's always competitive, but a little bit less competitive than what it was probably pre-COVID, with some of those changes that have taken place. We've acquired one of the G.James presses.
The business of extruder in Victoria being sold to a window fabricator, has taken a little bit out of that segment. I think that, our biggest challenge, you know, over the next 18 months will be the, you know, the inevitable downturn and softening in demand in the residential sector. Given the demand for housing, we expect that to be relatively short-lived. Hopefully that answers the question, Simon.
All right. I think that might be the end of the questions.
Well, thank you very much for your attendance this morning, on the webinar. We're very pleased to be able to present what we believe are a solid set of financial results for the business and our prospects going forward. Thank you, and we will talk again soon.
Thank you very much.