I would now like to hand the conference over to Mr. Tony Dragicevich, Chief Executive Officer and Managing Director. Please go ahead.
Thank you, Harmony. Good morning. I'm Tony Dragicevich, the CEO and Managing Director of Capral. It's my pleasure to welcome you to Capral's 2024 full-year results presentation. I'm joined this morning by our CFO, Tertius Campbell, who will run through the financials as we go through this agenda today. We hope to present what we believe is a healthy set of results in what has been relatively soft market conditions. Just in terms of what we're going to cover today, I'm going to do the overview. Just on the agenda on page two, I'll do the overview, the highlights. Tertius will come back, come in and do the financials in more detail, and then I'll finish off with a strategy and outlook. Turning to page three of our presentation, before I talk about Capral, I just want to talk about aluminium.
Obviously, it's been front of mind in the media in recent times. Just a bit of background on aluminium and on Australia. Aluminium is a very important metal. It's used in a wide variety of applications. It's both strong and lightweight, making it the preferred construction material in buildings, transport, marine, and many other fabrication applications. Because it is lightweight, aluminium also plays a critical role in global decarbonization. Aluminium is very important to the Australian economy. We are unique in that Australia has a fully integrated aluminium supply chain, from bauxite mining to alumina refining, aluminium smelting, and downstream manufacturing of aluminium extrusion, as Capral fits in, and then a wide range of metal fabrication businesses. Primary aluminium is Australia's largest manufacturing export earner, and the industry is responsible for over 20,000 Australian jobs. A very important industry.
As we run through the presentation, we'll talk a little bit about what we believe are some of the concerns with the recently announced tariffs coming out of the U.S. All right. Just a bit about Capral on page four and business at a glance. We're Australia's leading supplier of aluminium extrusion and raw products. We're the number one manufacturer and distributor of aluminium extrusion. We're the number one distributor of aluminium sheet and plate, and we're also the number one supplier of aluminium value-add services. Turning to page four, just a little bit more detail. Capral operates six manufacturing plants with eight extrusion presses, 65,000 ton of annual capacity. We've also got 22 distribution and trade centers spread right around Australia.
Our key markets are commercial and residential building, and also a wide variety of industrial applications, the main ones being transport, marine infrastructure, solar, and general metal fabrication. Our market share in Australia is around 28%. Annual revenues around AUD 650 million, over AUD 440 million in gross assets, and in excess of 1,000 employees. Now turning to the results for 2024. On page five, just a very high level. Our earnings, we're pleased to announce, are above the top end of our latest guidance range, around 8%. The industrial demand remained solid throughout the year. Residential demand was weaker, weaker than prior, and continued through low commencements and a reduced pipeline of work coming through that residential sector. Our margins were maintained through very effective cost management and recovery. Now turning to page six, just the performance highlights.
What we believe is a strong earnings result in a soft market, 8% above our top end of guidance, as I previously said. A very pleasing and satisfying result demonstrating how far Capral has progressed in being able to deliver solid earnings during a slowdown in the housing market. The volume is just under 68,000 ton. It was 5% down on last year. However, the sales revenue held up at AUD 650 million due to higher metal costs and higher selling prices. Our EBITDA at AUD 58.3 million was down AUD 3.2 million on last year. However, last year did include AUD 2 million benefit from a one-off claim write- back. A pretty solid result. Net profit after tax was above last year at AUD 32.5 million, but it did include a AUD 3.6 million tax benefit from the recognition of future tax losses. Earnings per share, AUD 1.88 a share.
Balance sheet remains very strong with net cash of just under AUD 70 million, AUD 69 million for the year. Net tangible assets were up 12% to AUD 11.25 a share, and we declared an unfranked final dividend of AUD 0.40 per share. That brings our total distribution to shareholders for 2024 to AUD 0.76 per share, including the share buyback equivalent of AUD 0.36 a share. Unfranked dividend tops up the AUD 0.36 share buyback, bringing our total distribution to shareholders for 2024 to AUD 0.76, which is up on the prior year. We also delivered a strong safety performance for 2024. Turning to page seven, when we look at more detail on our volume, you can see from the graphs on that slide. Our overall volume was down 5%, as I mentioned.
Market conditions were softer, mainly due to a slowdown in activity in the residential housing market and the backlog of work in that channel dissipating. Capral also experienced reduced demand from aluminium resellers as import supply chains returned to normal. The demand remained solid in our industrial markets, which allowed our manufacturing plants to run at good levels of efficiency throughout the year. This industry diversification has supported our volume during the housing downturn, and our exposure to the housing market has reduced by five percentage points to 39% over the last five years, with a corresponding increase in exposure to the industrial sectors. That certainly helped our business get through this current downturn in the housing market.
You can see from the pie charts there, just on the middle donut, you can see that the industrial market now represents close to 50% of our total volume. We'll see a wide range of applications in there. The biggest single markets are still residential building at 39%, but less exposed than what we previously were. In terms of how we take our product to market, the donut graph on the left-hand side of that page, almost half our volume goes directly from our manufacturing plants to our large customers, both window fabricators and industrial customers. The other half of our volume goes through our regional distribution centers and trade centers, of which extrusion makes up 35%, and raw product, which is sheet and plate, making up 16%.
On the right-hand side of this page, this is a six-monthly or half-yearly volume, and you can see that historically the second half of the years have been traditionally higher than the first half in terms of volume as we work towards, particularly in the residential market, strong supply, particularly the window fabricators who are looking to lock up buildings or work for builders prior to Christmas. In the last three years, we've seen a much more balanced flow as that residential market has come off. We do expect, and I'll talk a bit about the residential market in more detail on the next slide. Moving to page eight. Housing commencement, here we are, remains soft. We are expecting a recovery in the second half of 2025. The residential market has slowed, impacted by high interest rates and affordability.
Housing starts are estimated to finish 2024 at just under 168,000, which is slightly above the prior year, and down around 25% from the highs of 2021 and 2022, obviously post-COVID years, which are highly stimulated by a low interest rate environment and government support. Starts are forecast to lift later in 2025 on the back of reducing interest rates and immigration-driven demand. The outlook for 2026 and 2027 is looking positive for that residential market, albeit we do not expect to see a lot of that kicking in until next year with 2026 year. Okay. Now we turn to page nine, and just to give you some examples of where our product ends up, some recent residential projects, standalone housing. One here in WA, a quality residence built by Phil Kelleher Homes, and with windows supplied by Busselton Windows, using our framing systems.
We've got an apartment block there in Queensland, also using Capral's AGS framing systems, and then another home using our residential products in New South Wales. On the next page, turning to page 10, just some examples of some recent commercial projects we've undertaken. The Donnybrook Railway Precinct is a converted railway yard, converted into a commercial building there in Western Australia. It was a notable building. In the center there is the refurbishment of the Southern Ocean Lodge, and we're pleased to have our Capral framing systems installed by KR Installations into that iconic lodge. A brand new Neil Perry restaurant, the latest one in Sydney, the Song Bird Restaurant. We've also got Capral's commercial framing systems used by Arch Systems in that particular building. Hopefully, some of you will get to experience lunch there. I've never had the pleasure just yet.
Turning to our industrial markets, which, as I say, have helped us particularly maintain our volumes during this housing downturn, it has been very important to us. That sector has remained solid with broad industry diversification. Transport market in particular has been very strong, and you can see the chart on the bottom left-hand side of that page, or page 11, showing new truck and van builds over the last 12 years, and the growth in transportation and building of trucks since 2020 has been record levels and continues to be so. We expect that to flatten off a bit in 2025 and 2026. It has been a big build program over the last few years, as you can see. Capral is a major supplier into that sector, truck building sector.
Marine has been good demand for commercial ferries, particularly out of Incat in Tasmania, and we're forecasting a lift in defense shipbuilding in the year ahead from Austal Shipyards in WA. The solar market has remained steady. This is a tough market for Capral. 90%, well over 90% of solar rail is imported at very low pricing, anodized rail. We're competing with a non-anodized product in the sector, and while we do have a share, we do not have a significant share of this quite large market. However, we are aligning ourselves with future Australian solar panel manufacturers that are being supported by the government sunshine initiative, and that does provide a good future opportunity for those companies, in particular Tindo Solar and a couple of others that we have aligned with, but that's for the future.
In terms of industrial construction, the infrastructure investment has been significant, and we'll talk about probably in our next six months, half-year results about the Western Sydney Airport. We've been supplying quite a significant amount of product into that new facility. The standout for us in the past year has been in the cladding sector. Demand continues to grow for facades and sunshades, and aluminium is gaining share in that market. We'll talk a bit about that later in the presentation. The manufacturing general fabrication markets have remained solid. However, our volume to other aluminium resellers has softened due to the return to imports and supply chains have normalized. However, offsetting that to a degree, we've also expanded Capral's footprint through acquisition in 2024 with the acquisition of two trade center businesses, one in Victoria and one in Queensland.
You can see there our industrial volumes continue to be strong relative to where they have been in previous years through the focus we have had on this market and growing share. Turning to page 12, just some recent examples of projects and builds in particular. In industrial, there is a set of wide variety of applications, and from aluminium seating in grandstands produced by BAB Aluminium in New South Wales. Muscat Trailers are one of the largest truck builders in Australia and based in New South Wales. We are a primary supplier with the truck bodies. Incat, the major ferry builder down in Hobart, is a very good customer for Capral. I will now turn to Tertius to take us through the financials for the year. Over to you, Tertius.
Thank you, Tony, and good morning to everyone.
Despite the challenges posed by inflationary pressures and reduced volume, Capral has delivered another good performance. Our fully integrated value chain continues to benefit from reasonable volume levels, effective asset utilization, and our stringent cost control and prudent capital expenditure practices. In summary, the key financial highlights for this year encompass healthy earnings that exceed our expectations, a strong balance sheet, and an excellent cash position. If we look at page 14 on the metal cost, as you'll remember, in 2022, the metal prices, that is the LME plus the premiums, reached record levels, placing significant pressure on our working capital requirements. Since then, the LME price has moderated somewhat, but remained volatile due to the global supply factors and geopolitical trade issues that Tony has mentioned earlier as well.
In 2024, the average LME price increased by 5% to around AUD 3,600 per ton and ended the year around AUD 4,000 per ton. It is currently trading just below AUD 4,400 per ton and expected to remain high or a bit higher for the remainder of 2025. Moving to page 15, Capral's earnings for the year surpassed our expectations, as we've mentioned, with EBITDA at AUD 58.3 million, which is only marginally lower than the prior year after taking into account the AUD 2 million claims provision that we released in 2023. That was a non-recurring benefit in that year. The higher metal cost and improved selling prices supported the revenue to remain on par with 2023 despite lower volumes. Our lowest sales volume had a AUD 1.4 million adverse impact on our earnings, and inflation on non-metal costs impacted earnings by AUD 5.5 million.
However, this was offset by the sales price and mix gains, as well as cost savings and efficiency initiatives. You will be able to see on the graph at the bottom there, the price and mix, we had an AUD 3 million benefit, as well as the cost savings and initiatives, AUD 2.5 million. That basically offset inflation exactly. EBIT at AUD 34.4 million was down on last year, predominantly driven by the volume reduction impact of AUD 1.4 million, and that prior year one-off benefit, as mentioned earlier. AUD 3.6 million income tax benefit flowing from additional deferred tax asset recognition for future years. Our net profit after tax of AUD 32.5 million surpassed previous year, primarily attributed to the items above, but also supported by the AUD 3.6 million income tax benefit.
Earnings per share at $1.88 is 6% higher than 2023, also positively impacted by the lower weighted number of shares on issue due to the share buyback program we had in 2024 and 2023. Forward to page 16 on the balance sheet, Capral's financial position remained strong, with a net cash position just short of AUD 70 million at balance date, noting that no working capital loans were utilized during 2024. The cash position allows Capral to continue the share buyback as announced today and also progress our CapEx program and any potential acquisitions that may come our way in 2025. Business days outstanding at 43 days is a really good result. Inventory increased due to higher stock levels to support our expanded service offer, combined with the higher metal prices. The average monthly working capital requirement fell by approximately AUD 10 million compared to 2023, to around AUD 93 million.
Based upon the higher sales levels and aluminium input costs during 2025, the average working capital requirement is anticipated to increase. Although Capral has no franking credits available for distribution, there are still AUD 72 million in net accumulated tax losses eligible for recognition as deferred tax assets in the future. Turning to page 17, we'll see that cash generation remained really strong, assisted by a further release, although much smaller than in 2023, of some working capital, especially driven by the strong debtors collection and some timing of payments end of December. This contributed a free operating cash flow of AUD 22 million after outflows for capital expenditure and the two aluminium center acquisitions during the year. A total of AUD 12 million was returned to shareholders through dividends and the buybacks during the year. Page 18 shows the capital management costs.
This graph shows the progress Capral has made in regard to cash return to shareholders. An unfranked final dividend of AUD 0.40 per share will be paid in March, and total cash returns relating to the on-market buybacks in 2024 were an equal of AUD 0.36 per share, bringing total distribution to almost 46% of earnings before income tax. Since the start of the buybacks in the second half of 2023, Capral has bought back just over 1 million shares, or around 6% of the shares at that point in time, and canceled as such. The continued buyback of up to 10% of our shares has been announced, and this will recommence on the 3rd of March. Tony, I think that completes my financial section, so hand back to you.
Thank you, Tertius.
Okay, I will now run through the high-level strategy and finish up the presentation by talking about the outlook for the year ahead. Okay, let's move to page 20. Our high-level strategies remain consistent with prior years. We look to build on what we're good at, building on our strengths, which is our product range, our footprint, our scale, our capability, and most importantly, our people. We optimize what we do, so we're a business with being better every day is one of our core values, and continuous improvement in all aspects of our business is a key focus with a number of projects every year to make us better. With an eye on the future, we have leveraging these capabilities to develop new and develop new products, expand our footprint, and into adjacent markets either organically or through acquisition.
This is a mantra that we've been following the last five or six years. It's put us in good stead, and we'll continue to do this as we go forward. Talking just into a little bit more detail on our key segments. On page 21, firstly, just talking about our manufacturing operations. In 2025, we will continue the focus on our Smithfield and Penrith extrusion plants. Smithfield is the youngest plant to come into the group a few years ago. We'll continue to focus on upgrading our equipment to improve plant reliability and productivity. We completed the first stage of the Penrith plant upgrade, which was replacing the entire extrusion press in 2023. The second stage, which is to replace the billet furnace and saw, billet saw, will be completed in 2025, with the final stages to be completed in 2026 and 2027.
We are also in the process of upgrading our shop floor control systems throughout our manufacturing operations, with four plants already completed and two plants remaining to complete over the next year or two. In terms of Capral's distribution operations, which are regional distribution centers and aluminium trade centers, one of our key objectives is to grow our distribution business, with the objective being to increase the volume and profitability of Capral's direct-to-market channel so that we are less reliant on other distributors. A new residential framing system was recently launched with a more thermally efficient variant to follow in 2025. During 2024, as I said earlier, we added two aluminium trade centers, two new ones for the Capral distribution footprint and the acquisition of existing businesses in Melbourne and Brisbane. This makes a total of four new sites over the last few years.
We continue to seek other opportunities to expand our distribution footprint and into other adjacent market segments. In terms of sales and marketing, we continue to invest in technology to improve our sales effectiveness and service. We have completed upgrades to our website and e-store, recently completed, and we have also implemented a sophisticated transport management system to give ourselves and our customers visibility over where their deliveries are. We are also continuing to promote our customer partnerships through our Crafted with Capral series of videos. Turning to page 22, talking about market development, first of all, lower carbon aluminium. Capral is the only ASI-certified provider of lower carbon aluminium in Australia.
ASI is a globally recognized certification body, and this enables Capral to offer certified lower carbon alternatives through our trademark brand, LocAl, and we continue to gain traction in the market with this offer, with volumes lifting in 2024 by close to fourfold over the prior year. Turning to solar, I did mention this earlier, but solar is huge in Australia. While we may have some inroads into the solar rail market, it does remain dominated by low-cost imports. We are working closely with two local fledgling solar panel manufacturers who are looking to capitalize on the government-funded Sunshot program. That is for the future, and we hope to form a strong alliance so that we can assist the local manufacturer of solar panels in Australia.
The cladding market, the cladding facade sector, continues to grow on the back of new fire standards and also the durability and aesthetics of aluminium products for these applications. In terms of fair trade and imports and anti-dumping, Capral continues to lead the local industry in the pursuit of fair trade. Key points to note are we have submitted an application for continuation of measures, anti-dumping measures on Chinese imports for a further five years. As we have advised previously, those measures are due to be renewed at the end of 2025, and we have recently submitted an application for their continuation, which is very important. We do have measures also in place against Malaysia and Vietnam, and they remain in place until 2028.
On a positive note, China recently announced the removal of export VAT rebates, which should lead to a lift in import pricing in 2025, and the big word there is should see a lift in pricing. While some share gains have been made over the last few years, imports still represent over a third of the total aluminium extrusion market. Now that supply chains have normalized and the international trade flows are in a state of flux, it is even more important that we continue the fight to retain a fair share for the local extrusion industry, which contributes over 2,000 direct jobs to the Australian economy. Okay, now turning to page 23, our sustainability and ESG slide. I'll just pick out a couple of highlights here. Capral's journey to net zero emissions by 2050 and a 20% reduction by 2030 is well on track and progressing well.
During 2024, our scope one and scope two emissions fell by 9% as a result of operational energy efficiencies and an increase in the use of renewable energy sources. During 2024, Capral increased its focus on waste management and recycling by introduction of various programs at our key sites. These initiatives led to an increase in recycling and a 12% reduction in waste, and we'll continue this program in years ahead. Capral has enhanced its data capture capability and accuracy and is well placed to meet the requirements of the new climate reporting standards that come into effect for the FY25 financial year. For us, that means the year that we're current calendar year that we're currently in. Okay, turning to, most importantly, our outlook and guidance for the year ahead.
Firstly, talking about the residential market, forecasts for the residential market show detached housing approvals lifting later in 2025 as interest rates start to fall. Obviously, there is strong pent-up demand for housing. We just need the right mechanics in the market to enable it to happen. Total residential starts in 2025 are forecast to be slightly higher than 2024. However, the pipeline of work that sustained volumes over the past couple of years has now been completed. We are not really expecting to see any significant benefit from the sector until late 2025 at the earliest. The non-residential market is forecast to be steady in 2025, as are our key industrial sectors. Overall, we are expecting our earnings in 2025 to be broadly in line with the prior year. Aluminium is volatile and subject to international influences, as you will be well aware.
The threat of tariffs by the newly elected U.S. government led to aluminium soaring in early 2025 to its highest level since the Russian invasion of Ukraine in 2022. Based on external forecasts, Capral expects aluminium to remain at elevated levels throughout the coming year on the back of higher global demand and increased uncertainty. This will inevitably lead to an increase in our working capital levels in 2025. The recently announced 25% tariff by the U.S. government on steel and aluminium will not have a direct impact on Capral. However, it could influence international trade flows, and Australia must be vigilant in maintaining a robust anti-dumping regime to ensure a level playing field for local manufacturers.
Just to expand on that for a minute, the tariff on steel and aluminium into the U.S. not only affects primary aluminium coming out of the Australian smelters, and the U.S. represents about 10% of the volume from those smelters, but that tariff also applies to aluminium extrusion and sheet and plate. Really importantly for us, any aluminium extrusion going into the U.S., which will ultimately see a redirection of trade flows around the world where aluminium out of Asia, and in particular China, will be looking for new homes for those exports if they're blocked out of the U.S. market. Unless we've got a vigilant anti-dumping regime in place here in Australia, we potentially could be heading our way. Albeit, as I said earlier, imports do make over a third of the market already.
We're already competing against it, but we just don't want to have dump product coming into the market. That would make it really difficult. Inflationary cost pressures will continue to impact in the year ahead. Obviously, in the last few years, we've got higher wage inflation, certainly higher energy prices, higher freight costs. To date, we've done a pretty good job in being able to recover, at least partially, through price increases and cost reduction. It's going to get harder in the years ahead. The overall market for Capral's aluminium products is forecast to remain steady during 2025. We expect to retain a good proportion of the post-COVID market share gains from imports, and we do expect to see towards the end of the year a lift in activity in that housing market.
On this basis, and at this time, and in the unforeseen events, we expect earnings for 2025 to be broadly in line with the prior year. On this basis, Capral should be in a position to continue to return capital as shareholders have already announced by way of share buyback and topped up with unfranked dividends as required. Thank you for listening to our presentation this morning, and we're now happy to answer any questions and do our best to answer those that may be coming through.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Andrew Johnston from MST Access. Please go ahead.
Good morning, gentlemen. Congratulations on a cracking result. Just want to sort of bury into some of the details around that. Can you just talk through the surprise or the increase in the result from the guidance in mid-December to what you delivered?
We advised in December that we would be at the top end of the guidance. December is always a tricky month, being a short month, so our result came in a little bit better than that. The markets certainly in November, December held up a little bit better than expected, and we were able to push that number up slightly above that top end of guidance. Nothing particularly stand out there, Andrew. Just continuation of the solid result throughout the year.
I'll just ask if I can just ask two more short questions, and then I might come back with some more. The two trade center acquisitions, did they make a significant impact on your revenue or your EBITDA?
Look, they added positively in the year. I think the first one we took place in around was in the second quarter, and the one in Queensland was in the third quarter of the year. They did have an they did lift, yes. There was a contribution, probably just in excess of AUD 1 million from those two acquisitions, contributing to the earnings in the 2024 year.
That's to EBITDA or to revenue?
EBITDA.
EBITDA. Yeah. Okay. Slide 11, Tony, I don't think I'm not sure you may have done that. You may have put that chart in before, but it just shows industrial volumes.
I thought it was interesting there was that peak back in 2021. What was the driver for that peak? Because it doesn't look like it was new truck and van builds because that's pretty steady.
No, no, no. That's pretty steady. Very simple answer to that question. That peak came from other aluminium resellers who weren't able to access imports at that time.
Of course. Okay. During the supply chain disruptions. Of course. Of course.
That's correct. You see? So that was where that peak came from. You can see that it came back to probably normal in the year after. As I said in our presentation, this year and the year before, quite a bit of that volume was migrated back to imports from those other aluminium resellers.
Okay. Terrific. Look, I've got a couple more, but I'll let someone else ask some questions.
Yeah, congratulations on a great result again. Well done, guys. Thanks.
Thank you, Andrew.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. We'll pause a moment for further questions to register. Once again, to ask a question, please press star one. Questions. Thank you. You do have a follow-up question from Andrew Johnston from MST Access. Please go ahead.
Yeah. I might as well ask a couple more questions. I've got to say, guys, this is an extremely busy week. It seems way busier than previous reporting seasons. I think everyone looked at your result, thought, "Cracking result." Let's look at some of the others that perhaps are a little more tricky.
If I can just go to one of the measures I look at to try and understand your top line is gross profit per ton. The last couple of years, that's just continued to surprise me on the upside. Is there anything particular in that, or is it really just a reflection of all the things that you've been doing to drive the margin that you can extract from your sales?
Yeah. Look, that's a good observation, Andrew. The answer to that is, I won't say it's simple, but it's twofold. One is that as our business has become more consistent and a more reliable supplier and a better supplier to the market, our service levels do allow us to attract customers that are more sticky to us and value what we're able to provide.
We've invested in value-adding capability over the last five or six years. We do routing, we do cutbacks, we do some processing that does enhance our margins. Probably the biggest factor, apart from our increased reliability and offer to market, has been the mix of our sales. Our lowest margin sectors are the major window and door fabricators who service the residential market and other aluminium resellers, naturally. That is where they are typically large customers buying directly out of our factories at very competitive-type pricing. As we've just spoken about, with the residential market coming off and with those resellers going back to imports, the mix of our business has moved more to, I guess, the small to medium-sized customers where we do make a better margin generation. That is reflected in our average improvement in our average margin per ton.
Okay. To what extent has been the—forgive me for the—I've forgotten the name of your proprietary framing product?
Our capital building systems, yes.
Yes. Building systems.
Yeah. We've got a number of proprietary systems within that range, either AGS or Urban and Amplimesh as well. They're all proprietary window and door and security framing systems that we take to market. Yes, we have grown our share of that market, which is probably the highest margin returning part of the aluminium industry in Australia.
Most of that, a higher proportion of that product goes into residential? Would that be right?
No. A proportion of it goes into the—it doesn't go into the project housing market. It goes into the more, I guess, bespoke building market, but also primarily into the commercial building market.
Right. Okay. Okay.
That's also benefited from—
When we're talking commercial building, we're talking low-rise apartments and also some of those commercial buildings we're seeing on that page.
Yeah. Okay. I mean, part of that is the swing away from the commercial, away from the project housing with a weaker housing market. Also, if we see a swing, if we see an improvement in low-rise apartments, then you should be able to pick up some additional building system sales through that over the next 18 months as housing improves as well.
Correct.
Okay. Excellent. The CapEx AUD 11 million, that's a bit higher than normal. Is that really just to tidy up, finish off some of these projects that you mentioned, Penrith, etc.? Or should we expect AUD 11 million sort of for the next few years?
Look, AUD 11 million is at the high end.
We'd expect that to come back down probably to the 6-7 million in the year or two ahead.
Okay. Just finally, if I can get in one more, please. I'm fascinated with the imports on the solar rail business, and you sort of would hope that we could actually start manufacturing this product here. Are they somehow avoiding the anti-dumping regimes, or are they coming from a different region? Why is it so hard for us to compete in that space?
Yeah. There are two reasons why it's hard for us to compete in that space, or probably more than two. First of all, the distributors in that sector, a number of them are Chinese-owned who have relationships with extruders in Southeast Asia, in particular China. The product that is traditionally used for solar rail applications is an anodized product.
We closed our anodizing process down in 2019 because it is highly energy-intensive. The discharges to waste are high. Most importantly, from a cost perspective, it is highly labor-intensive. When you have high energy costs, high waste disposal costs, and high labor costs, it makes it very, very difficult to manufacture product in Australia. We closed down our anodizing operations in 2019 at Bremer Park. Solar rail typically comes in anodized. We are competing with a non-anodized mill-finished product against an anodized product, which has been the market acceptance. Given the fact that those solar rail distributors are largely—most of them, the largest ones are Chinese-owned—it is difficult for us to break into that distribution channel with a non-anodized product. We have made some ground into some of the Australian-owned suppliers, but we have really struggled in the bulk of that market.
The initiatives I'm talking about here going forward are not to do with solar rail. They're more to do with solar panel manufacture, where there is obviously aluminium framing around the solar panels. That's what we're looking at for the future. That's some years away until those programs come in. No, it's not particularly around avoiding anti-dumping. It's more around the nature of the product and who owns that distribution channel.
Difficult to compete with a non-anodized product? I mean, are there performance issues?
No. No. It's really aesthetic issues, to be fair. There's no performance issues.
Right. Right. Okay.
On the top of a roof under a solar panel, you wouldn't have thought that aesthetics would have really come into play, but they do. It's just not the case always been.
It's sort of just—is it more of a historical sort of fashion rather than any—okay. Okay. In the building industry, those things often take a long time to change, right?
They do. Yes.
Yeah. Okay. All right. Terrific. Thanks very much.
Thank you. The next question comes from Rohan Koreman-Smit from Forsyth Barr . Please go ahead.
Hi, guys. Hey, just a question if I may. I'm just wondering if you could provide some color on the competitive landscape in the kind of industrial portion of your business. Do you think you're taking share? How are the competitors—well, what do you think you're taking the share from, if you are? I guess, how do you think the competitors are, I guess, generally reacting in that space? Just be interested to hear your thoughts on that.
Yeah. Look, thanks, Rohan. Good question.
Look, I think we made a really concerted effort during that COVID period to create relationships with large industrial end users, some of which were importing at that time. Obviously, with the impact of the supply chain disruption through that period, we were able to develop those relationships and cut dies and grow our share of that sector and become a reliable supplier to some large industrial users that were importing. That is the first part of that. We have also, given the fact that we have grown our industrial distribution footprint, grown our share as a result of that, growing through acquisition, that footprint. Some of the other key competitors in this area, such as Ullrich and Vulcan, or Vulcan acquired Ullrich. Vulcan, as you know, are largely historically a steel distribution business.
Their acquisition of Vulcan, and they're going through a rationalization of their network, and they are selling steel and aluminium alongside each other in those facilities. That has created, as they're going through their rationalization of their business, that has also created a few opportunities over the last couple of years to expand our share. Those are probably the two big areas that we've focused on.
Thanks.
Did I answer the question?
Yeah. No. No. Good answer. I was just wondering, in distribution and aluminium, is service level what you guys are largely competing on, or do you think there's a decent amount of price competition as well?
Yeah. Certainly, there's a decent amount of price competition, for sure. It is competitive.
We are at an advantage against most of the others in the market in that we can supply a direct mill offer at a competitive price, and we can offer a distribution offer at a higher price through our distribution centers. If customers have large quantities of a certain shape that they want to produce, then we can offer that mill direct at a competitive price and compete against imports. If they require a next-day service delivery, we can hold stock and service it that way. There are not too many others. In fact, we are in a pretty unique situation to be able to offer that in the Australian market. That is one of the key benefits of dealing with Capral, is that yes, you can have your cake and you can eat it too. We have got an offer that is difficult to replicate.
Excellent. Thanks for answering my questions.
Thanks, Rohan. No worries.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Dragicevich for closing remarks.
Thank you, everyone, for your attendance this morning. I hope you found the presentation informative. On behalf of Capral, thank you. We are very pleased with the result and being able to produce some really good financial numbers in what is at the bottom of the housing downturn, something that Capral has not been able to do in the past. I do not think we are completely out of the woods. I think 2025 is going to be another challenging year. The prospects in 2026 and 2027, as the residential market kicks back into life, mean we are in really good shape.
Thank you for attending us today, and look forward to catching up in six months' time as we present our half-year results. Thank you.
That does conclude our conference for today. Thank you for participating. You may now disconnect.