Thank you for standing by, and welcome to the Redox Limited FY 2024 results call. All participants are in a listen-only mode. There will be a presentation, followed by a question-and-answer session. If you would like to ask a question by the phones, you'll need to press the star key followed by the number one on your telephone keypad. If you'd like to ask a question via the webcast, please enter it into the ask a question box and hit Submit. I'd now like to hand the conference over to Mr. Raimond Coneliano, CEO. Please go ahead.
Thank you. Good morning, and welcome to Redox Limited full year 2024 results briefing. Moving to slide two. I'm Raimond Coneliano , CEO and Managing Director of Redox, and presenting with me today is our Chief Financial Officer, Kian Yap. Turning to slide three. As per the agenda on slide three, I will open the presentation with some of the year's performance highlights and talk through some current issues that have impacted the operating environment and our results. I'll then pass you to Kian to take you through the financials before I come back and add some comments on our strategy and outlook. We'll then be happy to finish with some Q&A. Moving straight to slide five, the twenty-twenty-four highlights.
Despite the geopolitical and macroeconomic headwinds that impacted the industry over the past year, Redox was able to achieve volume growth in line with the historical average and successfully improved gross profit margins in FY 2024. While price discovery continued across the chemical distribution industry in 2024, we stayed vastly refocused on executing on our strategy and controlling factors within our influence to provide customers compelling value and drive future revenue. As a result, we recorded an uplift in underlying net profit after tax and FX to AUD 94.8 million, up 11.4% versus PCP, and a 2.6 percentage point increase to our gross profit margins to 23.4%. Underlying EBITDA FX margins also improved 0.8 percentage points above PCP to 12.2%. The business continued to generate strong cash flows in 2024.
Cash flow from operations was AUD 115.9 million, representing a free cash flow conversion of 87.6%. Overall, our net cash position at the end of the year was a healthy AUD 177 million, providing us with significant capital for M&A when the opportunities arise. So for our shareholders in 2024, we produced pro forma earnings per share growth of 11.8% and an after-tax ROIC of 19.1%. The board has declared a final dividend of AUD 0.065 per share, which takes the full year dividend to AUD 0.125 per share, equating to a payout ratio of 73% of net profit after tax and in the middle of our target payout ratio range. Turning to slide seven, key drivers of revenue in 2024.
As all investors will be aware, operating revenue trends will be influenced and impacted by factors, some of which are in your control and some of which are not. On slide 7, I've tried to provide some of the macro themes which have impacted our revenues in the chemical distribution sector and on Redox. In FY24, the sector was buffeted by global price discovery, industry destocking, geopolitical uncertainty, which affected trade flows and shipping times, and reduced customer demand from ongoing macroeconomic weakness. At Redox, we are focused on controlling factors within our influence to drive future revenue. We've continued to invest in our sales team, which has expanded to 181 representatives. We've sought out new business opportunities, increasing our active customer list by 20% in North America.
Our product portfolio also expanded in FY24 as we consolidated exciting new products from our acquired businesses, alongside new product launches, successfully expanding our product offering by over 71 active product groups. Our unique in-house developed CRM, RediBiz, continues to facilitate growth with more than 30,500 new sales opportunities being tracked. Moving to slide 8, performance by segment. On this slide, we have laid out the volume and revenue outcomes across our various industry sectors. You can see on the right-hand side, the volume growth was evident in most sectors, despite softer trading conditions and a volatile pricing environment. Animal health and nutrition benefited from supplemental feeding opportunities, while crop production and protection volumes rose as sales environment improved and fertilizer prices stabilized.
Plastics, rubber, and foam volumes continued to outperform, boosted by the integration of the Element Raw Materials acquisition and the onboarding of new suppliers and customers. Water care volumes and revenue increased on the back of upgraded technical support. Turning to slide nine. Performance by region. While volume growth was robust in the first half of the year across APAC, it slowed somewhat in the second half as customer demand eased off the back of a challenging economy. Pleasingly, North American volumes grew strongly throughout 2024, while revenue grew a modest 2.6%, impacted by pricing headwinds. The US team recorded a 36% increase in the number of invoice sales to customers. This compared to a 9.6% increase in invoices to customers across the broader group. Turning to slide ten.
Delivering on our M&A strategy. Redox completed two acquisitions in FY 24, Oxygen Ingredients and Element Raw Materials. Post-financial year, we then completed the Oleum acquisition. Oleum specializes in surfactants and specialty chemicals and pleasingly was fully integrated into the business in July. All acquisitions are in line with our stated acquisition strategy and have added new products, customers, suppliers, expertise, and capabilities to Redox, which we believe will drive stronger growth in the future. We continue to review several strategic acquisition opportunities in APAC and North America. Moving to Slide 11. Sea freight update. As you know, the vast majority of Redox's products are imported, with containerized freight rates being a key driver of price for our customers.
As you can see from the chart on slide 11, the China Containerized Freight Index has lifted noticeably in recent quarters as geopolitical events result in longer ocean transits and capacity constraints. These costs will flow to higher customer prices in FY twenty-four. We continue to monitor this situation closely, and we will ensure that we provide value to our customers during this period of disruption. Turning to Slide 12. Gross profit. Despite the challenges of FY twenty-four, I've been very pleased that our gross margins have held up so well. They jumped 2.6 percentage points in FY twenty-four to 23.4%, well above the historical average.
We believe that margins are a variable we can manage well, and the improvement in 2024 should be attributed to improvements in our product portfolio mix, the fact that our sales team sold a larger proportion of smaller and therefore more profitable sales throughout the year, and ultimately, the value that Redox creates for clients being rewarded appropriately. It is important to note that as the global chemical prices stabilized in 2024, gross margins did moderate during the second half of the year, albeit at levels above their long-term average. I would like to now pass to Kian, who will take you through the financial results in more detail. Turning to Slide 13.
Thank you, Raimond, and good morning, everyone. I will now take you through the financials, so we are moving straight to Slide 14. This slide sets out some of the key P&L numbers for two thousand and twenty-four, comparing them against the performance of the business in twenty twenty-three. I will talk to some of the highlights. Notwithstanding the revenue challenges already discussed, we are pleased to report an uplift in gross profit margin in twenty twenty-four. The 2.6 percentage point increase can be attributed to our disciplined focus on margin management, which also will help to drive higher profit to AUD 226 million, AUD 266 million. We also demonstrate a strong profit uplift in EBITDA margins to 12.2%, an improvement of zero point eight percentage point.
Pleasingly, we achieved an underlying net PAT of AUD 94.8 million, up 11.4 against FY 2023, which we think is, was a good performance given the challenging environment. Net PAT was largely driven by higher profit margins and the AUD 7 million contribution from the interest income. While our EPS growth in 2024 was an impressive 11.8, the return on invested capital eased 2.5 percentage points, but remained strong at 19.1%. Turning to Slide 15, the net profit bridge. Slide 15 shows our net profit before tax bridge for 2024. You can see the net profit before tax increased by AUD 13 million to AUD 129 million versus last year.
Higher operating costs were mainly due to strong volume growth, and the decline in sales revenue was more than offset by the higher profit margins and the contribution from the net financing cost. In summary, the improvement in net working capital and the cash position provided a positive contribution to the FY twenty-four results. Favorable mark to market on the outstanding FX forward exchange contract movement also provided a small positive contribution to the net profit before tax over the period. Turning to Slide 16, Revenue and Gross Profit. As we have done previously, we have split our total revenue regionally. Australia, New Zealand, and sales of AUD 1.05 billion were 10% lower than last year.
We have already discussed the key drivers of this decline, but to some extent, we did see some of the decline offset by some of the share of wallet gains and some of our large customers and product portfolio expansion in some specialty products and some new customer wins. Meanwhile, growth momentum in North America sales continued in 2024, driven by new customer wins, strong volume growth, and geographical expansion. The small dollar decline in other markets was due to a relocation of a point of sales from one large Malaysian customer to Perth. The sales just moved regionally and was not lost to the group. Moving to Slide 17, Cash Flow. You will see the strong position that Redox is in.
In 2024, we generated AUD 160 million in cash flow from operations, down $4.4 million, down 19 million from last year, representing a free cash flow of 87.6%. The small decline in cash flow in 2024 is mostly attributed to the now completed unwind of our inventory position last year. Net working capital fell to AUD 350 million in 2024, equating to 13.8% of revenue, which is within our normal historical range of 30%-32%. The 1.5 percentage point from last year was due to the significant unwinding of working capital post the global supply chain crunch in FY 2023.
Our net cash position remains very strong at AUD 117 million, and we net zero debt on our balance sheet. We have the flexibility to take advantage of organic and inorganic growth opportunities. Turning to slide 18. Our dividend and dividend policy. As Raymond has noted earlier, our board has declared a final dividend for FY 2024 of AUD 0.065 per share. They take the full year dividend to 12.5%—12.5 cents per share, representing a payout ratio of 73% of the after-tax profit, close to the middle of our stated target policy of 60%-80%. The final dividend will be paid on the twentieth of September 2024. I will now pass back to Raimond to cover our outlook and strategy. Moving to slide 19.
Thank you, Kian. So, I hope you can see the business remains in good shape despite the challenges that the industry faced through 2024. Let's move to slide 20. Leading distributor of chemicals. For those of you who are still unfamiliar with Redox, slide 20 provides a snapshot of our business, which highlights some of our key operational strengths and differentiators, many of which we've built over almost 60 years. Today, we link over 1,000 active suppliers with over 7,000 active customers. We've carefully chosen our supplier partners to ensure Redox customers have access to the widest range of compelling quality products. We currently offer over 1,200 product groups, capturing over 5,000 SKUs.
Supporting our operations, we have a dedicated team of over 400 employees, including more than 180 salespeople across APAC and North America, and more than 100 stock locations. We are a highly diversified business with minimal reliance on any single supplier, industry segment, or customer, and due to our leading position, we have strong purchasing power, which ultimately benefits our customers. We have an excellent sales team that was supported by our innovative, internally developed CRM, ERP RediBiz. Taking 10 years to develop, every aspect of our business is enabled by this technology, which provides real-time, high visibility into operations and helps us identify and take advantage of opportunities. Furthermore, our team are highly skilled and experienced with strong technical know-how. This is particularly important in the complex regulatory environment we operate in.
All these features together have identified and delivered consistent growth for our business, achieving a thirty-year compound annual growth rate of close to 11%. Redox is a truly robust and profitable business, and we continue to focus on growth opportunities globally. Turning to slide 21. Slide 21 demonstrates the diversification of our business. The pie chart on the bottom right demonstrates the diverse nature of industry sectors in which Redox operates. Human health and nutrition represent our largest sector by sales, and in 2024, Redox sourced products from 53 individual countries. Importantly, there's no single customer or supplier risk to Redox. Indeed, our largest customer represents only 1.8% of the year's sales, while our largest supplier accounted for 3.1% of 2024 sales. Moving to slide 22.
During FY twenty twenty-five, Redox will continue to expand our geographic footprint in North America, bolster our product portfolio, increase our share of wallet, and grow our client base. We remain focused on driving organic revenue growth and anticipate strong volume growth at or above historical average in FY twenty twenty-five. We continue to review strategic M&A opportunities, which will contribute to positive momentum. Due to uncertain geopolitical and macroeconomic conditions, the company has chosen not to give specific guidance at this time. However, the company believes that price deflation and destocking to be largely complete. Gross profit margins are expected to ease towards the longer-term average in the medium term as a result of expected expansion in the U.S. and commodity sales volume increase. Redox's strategy and resilient business model has delivered consistent long-term growth and business expansion.
The fundamentals of the business are strong and remain well placed to grow in the future. Turning to slide 23. So to finish up, before we move to Q&A, a brief summary. I'm proud that despite the geopolitical, macroeconomic, and headwinds that impacted the industry in FY 2024, Redox was able to achieve volume growth in line with historical average and successfully improved gross profit margins. I believe this reflects the growing importance of chemical distributors and the value that we deliver. Redox has performed very well, which illustrates our strategically sound and highly resilient business model.... Redox is highly cash generative, reported strong operating margins, and return on invested capital, while it's maintained its leading position in APAC and with a growing North American presence.
Redox retains a strong, flexible balance sheet, which provides the company with the ability to drive future growth, both organically and through strategic acquisitions. Despite the various challenges in twenty twenty-four, we were proud to lift the final dividend to AUD 0.065 per share, from AUD 0.06 per share in the first half. On that note, I would like to thank you for your interest in Redox. Kim and I will now be happy to take any questions you have.
Thank you. If you would like to ask a question via the phone, you'll need to press the star key followed by the number one on your telephone keypad. If you'd like to ask a question via the webcast, please type your question into the Ask a Question box. Your first question today comes from Tim Piper from UBS. Please go ahead.
Good morning, Raymond and Kian, hope you're well. Just first one, you've done well on volume growth over the last little while, and you've called out FY 2025. You'll continue to see strong organic volume growth.
Yeah.
Is that gonna translate into strong organic revenue growth as well in FY 2025?
Yeah, look, I think, you know, with the price deflation largely behind us into FY 2025, you can expect strong volume growth will result in strong revenue growth. But look, we haven't given specific guidance about revenue growth. Just to say that there is a restocking effect, I think now coming into play in areas like crop, which I think we're seeing a lot of green shoots already, and you know, just to give you a flavor, July, you know, we had a volume growth of around 13%, so 13.5% in volume. So, you know, if that's maintained and improved over the year, I think we're in a very good place for growing revenues in FY 2025.
Yeah, great. And that pricing headwind from a year-on-year basis, did that get easier or harder in the second half of 2024 versus the first half of 2024?
Pricing, you know, is hard to talk about as you know, Tim, with so many products, and some are still going up and others are still going down. But, you know, if you wanna talk generally, prices have moved within a band of, you know, if you take the whole basket together, 5%, you know, since September, October last year sort of thing. So, you know, up a couple% on average, down a couple% by average month to month. So it wasn't as big a deal in the second half. I guess, second half was more a question about fluctuations in demand and volume.
Yeah, so has that kind of normalized now as you exit the second half? You did call out some sort of destocking. What's customer activity looking like in the first couple of months so far of one H twenty-five?
Like I said, July was very strong and, you know, just talking regionally, I think we had an outstanding result in Adelaide recently, and that was mostly into crop in July, which is very positive. I think in New Zealand there's a big turnaround coming. Yeah, look, I think there's a lot coming down the pike now, especially in fert, which has had the toughest time, I guess, from a destocking perspective.
Understand. And just to clarify your comments around gross margin, you sort of talked to moderating gross margin, I mean, but it is higher in the second half versus the first half. To understand that, you mean it's moderated through the course of the second half? And, and if so, sort of what kind of gross margin are you entering the first half of 2025 at, compared to that sort of second half number of 23.7%?
Oh, we haven't given those numbers, but I think the point that I should leave you here with, Tim, is remember, each product category has a structurally different, you know, ability to extract margin and, you know, especially products, generally higher margins, commodities, lower margins. If you do indent business without, you know, warehousing goods, then those are lower margins. So it's about the mix of. And that's quite a complex answer, as you can appreciate. But, you know, the US margins are structurally lower, but we do want to grow sales there strongly, and we think there's a lot of good stuff coming, there. And, you know, the fert business is generally at probably a slightly lower margin as well.
So, you know, if you start thinking about plastics increasing for the US business, a lot of volume coming back in some of those lower priced commodities, then the margin can drift lower. But it'll be a good news story, Tim, because revenues will be a lot higher, and it'll be. We'll all be dancing down the street.
I want to squeeze one last one in, if I can. Just what you're seeing in sea freight container rates at the moment have obviously gone up. My understanding is, you know, very much price pass through style industry around that as well. What kind of materiality, if any, do you have sort of late in the half, in the second half of 2024? And, you know, is it gonna provide a notable tailwind for revenue heading into FY 2025? I know we're not sort of back to where it sort of rocketed to in the COVID conditions, but it has gone up.
... Yeah, I think, if you assume during the supply chain crunch, you know, the container freight was making up about 10% of the selling price back then, we're heading back towards that again after a pretty, you know, much lower rate in 2020 - FY24 for most of the year. So look, those prices are passed through to customers. There's no way we can absorb those. So, and yeah, the impact doesn't happen quite instantaneously. I mean, you see on slide 11 that the uptick starts in January 2024, and, you know, that takes months and months and months, maybe six months to start being evident. So, I expect it to start being a factor, a notable factor anyway, in August and onwards.
Great. Thanks. I'll leave it there. Thank you. The next question comes from Rushil Paiva from Ord Minnett. Please go ahead.
Morning, Raymond and Kian. Thanks a lot for taking my questions. Just want to maybe just circle back to some of your comments on pricing and volume, particularly in the second half of FY twenty-four. It does look like your revenue did fall at a, I guess, an accelerating pace in the second half. I'm just trying to piece together some of the volume pricing comments. It sounded like you said that pricing has been relatively consistent since September of last year, sort of down that 5%, give or take, but volume seemed to have exited the year pretty strongly. You mentioned July, up 13.5%.
Can you provide just maybe a little bit of color on how pricing and volume dynamics have progressed sequentially in the second half of the year, just to, I guess, make that a little bit clearer in terms of what you've seen?
Yeah. Well, I mean, you know, let's pick one industry to talk about specifically. Let's talk about animal health and nutrition. So, you know, first half, very, very strong volumes, a lot of strong revenue. Second half, complete reversal, and that was just down to weather conditions. So, but, you know, each industry has a story like that. I'd say just generally, what we were sort of taking, what's sort of been the thing that we didn't count on was, yeah, just a general, you know, hesitancy, a bit of holding back orders, you know, trimming back the, the, you know, customers', regular orders. So I assume, and I'm not sure, but I assume that's, you know, because of the economy and interest rates biting in, and the tougher economic conditions that they're feeling.
So, you know, outside of some specific ones, like the animal health and nutrition, which I think is pretty clear, and there are a few of those, otherwise, it just seems to be down to, you know, yeah, general malaise. But there are areas where, you know, the volume has just continued to grow, like, water, for example, water treatment. That's been a strong one.
Understood. No, thank you for that. Just wondering, just again, on revenue development in the second half, you've noted some of the shipping issues that are affecting the industry. So were there, I guess, were there any events like the shipping issues or related that have impacted your revenue development in the second half? You know, I guess events that were unexpected at the start of the second half, that have potentially pushed revenue into FY twenty-five. Anything abnormal like that to point to?
Oh, look, there may be shipments that are stuck in Singapore. There's a lot of shipping transshipment problems in Singapore presently, and so maybe there's some revenue that may have crept into FY twenty-five, that you know, otherwise, if everything was a bit more normalized, it would've came in in FY twenty-four, but nothing material, I don't think. Yeah, no, I don't think so.
Yeah. Understood. Thank you. And just want to circle back as well to, I guess, Tim's questions on the gross profit margin. So it did increase in the second half of the year. I guess, have you seen you have noted that there are smaller, more profitable orders that have been, you know, going through your book in FY 2024. Did the, I guess, frequency of those types of orders increases in the second half, and that's what pushed your gross margin higher? Or I guess, what dynamic or what's pushed it higher versus the first half? And I guess you talked about that normalization, and if you could provide a little bit of color as to how the gross margin has progressed sequentially again in the second half of the year.
Yeah, look, I think, you know, what we're doing is concentrating on those products with, you know, outperforming margins. There's something special about them. They're unique products or they've got a great future and we've got some advantages, you know, intrinsic to them. I mean, the larger proportion of small orders is a Redox special strategic initiative, you know. We don't discriminate against smaller customers. We love them, and that's been paying good dividends. I think our salespeople, seeing that, you know, times are tough all around, are reaching further into their smaller customers and trying to help them save money, too, and those smaller orders are always gonna be more profitable.
So I'm excited and happy to see that dynamic at play, and see our KPIs and our incentives working as they should.
... Okay, great. Thank you. Maybe just one last question just on pricing. I understand it's obviously hard to talk about forward pricing given your large product suite, but maybe if you do have any expectations regarding pricing or even any commentary regarding what you're hearing from your manufacturers and their expectations for pricing in FY 2025?
Yeah, I think the talk of deflation is now sort of swinging around now. Yeah, I'm always, you know, careful not to turn anecdotes into anecdata because you can go down the wrong road there, but certainly there's less talk about price decreases, more talk about price increase. I think that'd be fair to say and not too controversial.
Perfect. That's all for me. Thanks for taking my questions.
Thank you. Once again, if you'd like to ask a question, please press star one and wait for your name to be announced. The next question comes from Pierre Prentis, from Asymmetric Asset Management. Please go ahead.
Hi, Raymond and Kian. Congratulations on a solid result in tough circumstances. I just had a couple of questions. One was another question on volumes, which are important given the price deflation for we analysts. So you seem to be using invoice numbers as a proxy for volume, and you said that overall they were up 9.6% in FY 2024. And so my questions are: Are they a reasonable proxy for volumes? And if so, could you split that into what happened in the first half and what happened in the second half?
Yeah, I guess, I guess because it's, it's clear that we're, we're not giving out the actual volumes, that we're trying to give you other points of interest that might sort of get across to you, the increase in activity and just give you another sort of point of, comparison. So yeah, look, I don't have the numbers split by halves, but, but I think the, the 9.6% is, is a good, is a good sign. It's, it's a sign that we're, you know, we're, we're still growing. It's the business as usual, as it has been for the last 60 years. And I think especially the volume increase in, in the U.S. has been, very heartening to see.
Yeah, look, I don't have a specific half on half, but the number of invoices is a good measure. I think it's the sign of a healthy company. But of course, if we made fewer invoices but invoiced a large dollar figure, that'd be great as well, wouldn't it? But yeah, look, I think it's a nice dynamic and something interesting that we follow anyway.
Okay. We'll take whatever bone you throw over the fence. And so if that's our best indicator for volumes, you seem to be saying that or suggesting that in the second half, the volumes were up. We'll call it volumes or invoices, nowhere near as good as the first half, but they were still up in the second half. Is that correct?
Yeah, that's correct. Yeah, that's right. It's just, you know, you've got to remember that there's still this price deflation that's sort of, you know, really holding back-
Oh, sure, sure.
Right?
Yeah, I'm trying-
That's why, yeah. Look, it's. Yeah, but there is still volume growth. I mean, volumes are growing, and, you know, we're satisfied the business is going along as it always has. You know, there's been some areas of weaker volume growth and stronger volume growth, which is why I try to give you some sort of indicators on slide eight to sort of see the relative areas. And they're not all growing as well as others, and certainly industrial has been especially subdued from a volume perspective, with negative volumes actually in that-
-in the, FY 2024.
Yeah. Understood. My second question relates to the differential in the margin improvement between the gross profit line and the EBITDA line. So a 2.6 percentage point improvement in gross profit margin had been whittled away to 0.8% at the EBITDA line, and that 1.6% differential equates to about AUD 16 million of costs on your revenue base of AUD 1 billion. So I'm just trying to understand, why would selling, general and admin costs have to increase by that much?
Kian?
As you can see, because, with the strong volume growth, our distribution costs will continue to grow even though there's a price deflation, because most of the costs are based on volume. In addition to that, in the other overheads, we have a strong expense growth in insurance premium, in the outgoing, such as land tax and council rates. Also, being in the first year of leasing companies, there was increase in the compliance costs as well, compared to FY 2023.
Also, it may be worth adding, when you're talking about EBIT, you exclude interest.
... Yeah, sure, sure.
We have finance.
Yeah, the difference is what happened. I was just looking at the difference between gross margin and EBITDA. I said just not EBIT, EBITDA. So here, increased the difference between those two is selling general and admin costs. And look, we all know what's happening in terms of compliance, insurance, and so on. So you certainly expect a lot of upward cost pressure there, but that's growing at something like two times your volume growth.
Maybe you have... Yeah, I'm not sure I follow. But if you go to slide 15, you'll see the NPAT bridge, and yeah, look, I don't see a large increase in cost anywhere, so perhaps you can-
You can go to slide twenty-eight, where we have split up in terms of where the cost pressure are. Where we have the distribution cost has increased by AUD 2 million. Some of the main costs is increased by AUD 1 million. As I said, the majority of costs are in the increase is in the insurance costs, the outgoing costs in terms of land tax, and then in the compliance costs, in terms of being in the recent environment.
Okay, good, good. I'll study that table. Thank you for that.
Thank you. As there are no more phone questions at this time, we'll pause a brief moment and then take questions from the webcast. First question from the webcast today comes from Christian Angelis, from Blue Ocean Equities. Christian says, "The outlook summary says the gross profit margins are expected to ease in the medium term. Can you define what you mean by medium term, and talk a bit about what the drivers of margin decline are? Also, you mentioned that the margin increases are due to product mix. Will this lead to a higher than historically normal margin for the business going forward?
Oh, well, I, I thank him for his question. The medium term, I, I understand to be within a couple of years. Now, I won't sort of give any further color to that other than to sort of say, I, I thought medium term was pretty well understood to be that two to three years. Now, I don't remember the second part of that question, so...
The second part of that question there, Christian asks, "You mentioned that the margin increases are due to product mix. Will this lead to a higher than historically normal margin for business going forward?
Well, no, that was in the paragraph there that said that we expect margins to ease to their long-term average as we increase sales in the US, and as we get more commodity sales as well. Of course, we're gonna try to keep margins at this level, but I wanna be upfront, and that's why the outlook statement specifically says that, you know, the longer term average is going to be closer to the accurate gross profit margin over the medium term. So as we grow sales, as we grow commodity sales, as we grow in the US, which is a structurally lower margin, we will head back towards that longer term average.
Thank you. The next question from the webcast comes from Matt Ryland from Greencape. Matt Ryland asks, "Were there any loss-making trades made during the FY twenty-four that won't be repeated?
Oh, look, with the number of transactions that we do, I have to assume there are some loss-making trades in there, but I don't have that information to hand. Certainly nothing that would be material or significant, so I don't think that's much of a factor.
Thank you. The next question comes from Gordon Livingstone, from Reunion Capital Partners. Gordon states, "Congratulations on a solid result. You mentioned M&A in the opening remarks, and highlighted the three small transactions you have completed over the last twelve months. How should investors think about timing, size, and location of future acquisitions? And more broadly, what characteristics would a business have to make it an attractive opportunity?
Yeah, good question. Look, I think we're looking at a wide variety of businesses. Some, as you know, hundreds of millions of dollars of revenue, and some quite small. But how I would sort of try to guide people here is that we think there's a lot of bolt-on sized acquisitions. So not transformational size acquisitions that we can do. But certainly, you know, maybe there'll be a larger number of small acquisitions in Australia. But in the U.S., if we carry out an acquisition there, perhaps it would be necessary for it to be larger, to be worthwhile, because so much of the management team are here in Australia, of course. And so, yeah, we are looking at to grow, especially North America, by acquisition.
You know, what I will say is we won't make any, any acquisitions where we can't improve the business. Whether it's not a strategic fit, it's not a good strategic fit, and where it's not providing value to shareholders. So, we're gonna be very disciplined, as we always have been, with this, but we're working very hard on it.
Thank you. The next question comes from Louis Bannon from Barrenjoey. Louis asks, "Can you provide some details on your purchasing power relative to peers as you've grown? Do you track your peers' prices? What are your prices relative to your competition broadly?
Yeah. I would say maybe that we have great relationships with suppliers around the world, manufacturers of products. Those friendships and the business we're doing with them gives us, you know, very warm reception if we say, "Look, we'd like to expand that relationship and sell your products into the United States or Mexico or Singapore." You know, I think we had almost AUD 1 million worth of sales into Singapore this year, so you know, those relationships are very strong because of the volumes that we buy into Australia, but you know, our prices are competitive, they have to be. Sometimes they're very competitive and sometimes they're close to our peers.
I would say, you know, I'd caution anyone to say that we have some sort of outsized influence. It's just, it is. You know, because of our Australian volumes, going into the US, we're not. We have some experience, relationships, and throughput with producers, and they recognize our strengths and abilities.
Thank you. The next question is a follow-up from Louis. Louis asks, "Can you discuss the competitive advantage gained from RediBiz? How difficult is this to replicate? And why can't a well-capitalized business like Brenntag or others replicate this advantage?
Yeah, that's a good question. It's incredibly difficult. You know, if you think about our business, Redox's business, we're really leveraging data, and so data about every manufacturer in the world, data about the logistics chain, data about the regulatory environment, all the data that goes into all the paperwork and documentation, all our customer information and what about what they use and all that sort of thing.
RediBiz is certainly a key enabler for us, and I can only, I don't want to talk about any specific competitors, but we've hired ex-employees of other companies, and to 100% of them have told me that our system is leaps and bounds above what they used to use at some leading firms. I'll take it from them. I haven't used anyone else's system, but my people love it, and anyone coming into the business is excited and refreshed to see a system that's custom-built for what we do. It's not off-the-shelf, made to sell refrigerators or computer software or something else. This is specifically designed for what we do, and people love using it. That's why it's a powerful tool.
Thank you. As there are no further questions at this time, I'll now hand back to Mr. Conliano for any closing remarks.
Great. Well, thank you everyone for joining us today. I really enjoyed the chat, and, hopefully, we'll talk soon. Thank you.
That does conclude our conference for today. Thank you for participating. You may now disconnect.