Thank you, Wyatt, and good morning to you all. Thanks for your attendance today. Richard and I are pleased to provide you with Ridley 's financial performance for the 2025 financial year and a progress update on the strategy front. We will be talking to the slides that were uploaded on the ASX website this morning. Starting with slide two, the FY 2025 financial summary, the business delivered a record EBITDA of $97.8 million, a year-on-year increase of 8.6%. Both the Bulk Stockfeeds and the Packaged and Ingredients reporting segments increased their earnings in the year, and OMP exceeded acquisition expectations in our first full year of ownership of this business. I will speak to the performance of each of the segments in the next few slides.
Statutory net profit was $43.3 million, an 8.7% increase year-on-year, and our focus on disciplined capital management has continued with a healthy operating cash result of $93 million, a cash conversion of 97%. When excluding the cash from the capital raise, the underlying leverage of the business is 0.6x , and this is after funding both OMP and the Carrick Feed mill acquisitions. On the back of this performance, the strength of our balance sheet, and the outlook for the business, the board determined a dividend of $0.05 per share, fully franked. Moving to slide number three, the FY 2025 strategic summary. As you can see, it has been a busy year for the business. In the second half, we undertook a significant restructuring of the organization to support the next phase of our growth. The reset streamlined the business, exited lower returning operations, and resourced priority growth areas.
In total, the number of roles was reduced by 5%, which will deliver annual cost savings of $5 million EBITDA in FY 2026. As announced in April, we sold the Wasleys Feed mill in South Australia to Baiada, who accounted for about 90% of the mill's production, and we sold the mill for a fair price of $22 million. We continued our organic growth with the completion of the Clifton expansion for $7.9 million, the Carrick Feedmill bolt-on, which cost $8.1 million, including inventory, and we commenced the construction of our new OMP f acility in Timaru, New Zealand. We also secured contracts with key packaged pet food customers to fill the extrusion capacity vacated by the phase-out of our Aqua Feeds business.
On the 12th of May, we announced the acquisition of Incitec Pivot Fertilisers for $300 million, with the put and call options for $75 million on the Geelong property. I'm pleased to advise that we are on track to deliver this at the end of the third quarter, as previously advised. To partly fund this acquisition, we completed a retail offer, placements, and institutional offers, which netted $122 million. Moving to slide four, the Bulk Stockfeeds segment. This segment delivered an EBITDA of $47.8 million, up 8% year-on-year, which is a pleasing result achieved by 11% volume growth in ruminant sales, including high-margin supplementary feeding of beef and sheep during the dry conditions in the second half of FY 2025. We enjoyed a 3% volume growth in the monogastric sales, including the recovery in layer feed sales in the second half following the avian influenza outbreaks.
Ridley Direct has grown since we established this business three years ago and has made a meaningful contribution in this period. The Carrick Feedmill, which was acquired in September last year, was scaled to a second shift, which has now been filled. All in all, a very sound performance in Bulk Stockfeeds. Moving to slide five, Packaged and Ingredients segment. This segment delivered an EBITDA of $62.9 million, up 5% year-on-year, achieved by the full-year contribution of OMP , which yielded margin growth and cost efficiencies. We also had volume growth in ingredient recovery, with a 7% increase in raw material supply and also a 7% increase in packaged dog sales produced at the extrusion plant.
However, lower sales prices for tallow and meals when compared to the prior year have created a headwind, and we've also dealt with lower aqua nutrition volumes, reducing the Narangba operational efficiencies. Overall, this segment has delivered thanks to the performance of OMP, offsetting the lower commodity prices in meals and tallow. I'll now hand over to Richard, who will go through the financial results in more detail.
Morning, everyone, and thank you, Quinton. I'll now present the financial results for FY 2025, beginning with the profit and loss summary on slide seven. As Quinton has already taken you through, the operating segments delivered a combined EBITDA for the year of $110.7 million, representing an improvement on the previous corresponding period at $6.6 million or 6.3%. The corporate costs increased by $1.9 million- $13.2 million, with the increase primarily associated with the employee incentive schemes, which align with our business growth aspirations. The net significant items in the period were actually a gain of $200,000 versus an expense in the previous corresponding period of $2.8 million.
The FY 2025 balance included the gain on the sale of the Wasleys Feedmill of $7 million, which was largely offset by the IPF acquisition costs incurred up to 30 June of approximately $3 million, and the business reset costs of $4.7 million, which, as Quinton indicated, are expected to deliver an annual benefit of $5 million for the year from FY 2026 onwards. In the previous year, we incurred $2.8 million associated with the acquisition of OMP . Depreciation and amortization for the period was $30.3 million, a $4.2 million increase on FY 2024. This mainly related to the depreciation and new amortization from the acquired OMP business, which totaled $2.3 million. The increase in underlying depreciation included several significant capital projects that were depreciated for the full 12-month period, including the Pakenham Deep Bottlenecking and the Narangba packing- line.
As anticipated, finance costs increased from $7.8 million- $9.7 million on the back of the higher interest rate environment and the increase in debt relating to the acquisitions of OMP and Carrick. This cost was partially offset in the last two months by the interest income on the cash received from the capital raise undertaken to fund the acquisition of the Incitec Distribution business. The income tax expense decreased by $1.9 million as a result of the benefit received from the tax treatment of the various employee share schemes. The underlying effective tax rate was 28.4%, a decrease from prior periods. The net impact of the above was an increase in the net profit after tax of $3.4 million or 8.7%. Now turning to slide eight. As set out on this slide, the group working capital increased by $10.9 million versus the previous year.
However, this included a net increase of $7.8 million associated with the take-on balances from the acquisitions of both OMP and Carrick. The underlying business working capital increased by only $3.1 million, which includes the following components: a $6.9 million increase attributed to the net of the higher receivables and payables associated with the increase in volumes during the period. This was partially offset by a $3.7 million decrease in inventory associated with the exit from the aqua business and the lower commodity pricing of poultry meal and tallow in the ingredient recovery business. Moving to slide nine, the capital management net debt position. At 30 June, the business reported a net cash position of $64.7 million, contrasting the net debt of $50.8 million in the previous year.
This movement is largely associated with the cash proceeds generated from the capital raising completed prior to 30 June, which contributed, excluding the $120 million of proceeds from the capital raise, the net debt would have been $57 million, an underlying increase in net debt of $6.2 million, which related primarily to the funding in the year of the payments for the acquisitions of OMP and Carrick. As expected, this strong cash position means that our gearing ratio and leverage ratios are well within our covenant requirements, with underlying leverage still only 0.6%, well below our targeted range of 1x- 2x . To support the acquisition of IPF's distribution business, the available core debt facilities have been increased by $200 million. All debt has now been split between three and a new five-year facility.
The rollover of the three-year facility and the introduction of the new five-year facility provides much greater certainty regarding the long-term financial capacity of the company. Turning now to slide 10 and the capital allocation framework. This was first implemented in FY 2021 and has become pivotal in prioritizing capital within our business by better aligning investment decisions to shareholder returns. During the period, the business delivered strongly against the model, including a focused approach to investing in our underlying asset base through the targeted allocation and prioritization of sustenance capital, with spend aligning to 75% of depreciation, which is towards the higher end of our committed range.
Continuing to operate below the targeted leverage range has provided the flexibility to support the increase in the interim dividend to $0.05 per share, up from $0.0465 in FY 2024, and to enable the business to pursue and deliver on the acquisition opportunities of IPF Distribution's distribution business and the Carrick Feedmill. Pulling this all together, the business has delivered a shareholder return for the last 12 months of 42%, well above our targeted 15%, and provided the shareholder confidence to support our successful $125 million capital raise in May 2025 to support the acquisition of the Incitec Fertilisers Distribution business. Slide 11 provides an update on our sustainability scorecard. We continue to make good progress in the delivery of milestones towards our 2030 sustainability commitments.
Whilst our diversity targets are slightly behind, the organization understands the benefits of having a more diverse workforce and remains committed to achieving both the annual milestones and the 2030 vision in this area. Pleasingly, all other milestones are on track or ahead of expectations. That concludes the financial component of the presentation. I will now hand back to Quinton, who will take you through the remaining strategy slides.
Thanks, Richard. Picking up on slide 13, we've now completed our FY 2023 to 2025 growth plan, and you can see that we've steadily increased the EBITDA over the period, as is reflected by the numbers in the green boxes at the top of that slide. The traffic lights on the right-hand side show our scorecard against each of the key initiatives. No doubt, many of you will be pleased that this is the last time you'll be seeing this slide, as we've shown it at every presentation for the last three years. I'll show it to you one more time, and that's on page 14, where we reflect our journey for the last two growth plans, doubling the EBITDA from $48 million in 2015 to $97.5 million in 2025. We've done that whilst reducing our underlying net debt by threefold.
Whilst we've done a lot of work on strategy over the last 12 months and are well advanced in our FY 2026 to 2028 growth plan, given that we ended up entering into the acquisition of Incitec Pivot before we publicly launched the growth plan, we've decided that it'd be better for us to complete the profit improvement plan for Incitec Pivot and then provide you with a consolidated plan, which we hope to have for you by the AGM. We move to the next slide. What you can expect from the FY 2026 to 2028 plan is that we'll have an even more diversified agricultural services portfolio, which will be leading from fertiliser to feed. On page 16, we just reflect the three segments in which we are market leaders in our respective businesses. We're number one in Bulk Stockfeeds, with circa 20% market share.
We're number one in rural Packaged Feeds products , with circa 25% market share. We're the largest renderer in the country, with the benefit of having multiple species. We're soon to be the number one in fertiliser distribution, with circa 46% market share. Each of these segments had their own plans for growth. Whilst we won't be presenting that in a consolidated form today, the next few slides are just a growth and an update on the growth within each of the segments. Going to slide 17, in Bulk Stockfeeds, we continue to grow with our existing monogastric customers as the industry continues to consolidate. Within the ruminant sector, we're continuing to expand our offering in this sector, and we've got some new capability coming online during the course of this coming year.
Ridley Direct continues to access new customers and broaden our reach, and the Carrick Feedmill has provided capacity in Tasmania and relieved some capacity for growth in the Gibson, Victoria region. This combination of growth opportunities gives us the reason to be considering further de-bottlenecking and network expansion options for Bulk Stockfeeds. Moving to the next slide, the Packaged and Ingredients segment. We've just launched a new initiative, Oceania Pet Food Solutions, and this is a one-stop shop for pet food customers, supplying our own products and also being a distributor for other products, along with some technical support. We've recruited a number of key staff with the capability from within the pet food sector, and we think this has the potential to become a Ridley Direct equivalent for the pet food sector.
The new OMP facility will be commissioned in Q2, and you'll recall that the business plan that we presented a year ago was this was a $9 million spend for a payback of less than six years. We've started having some success in Asian markets for the sale of our meals and frozen block products direct to pet food customers in those countries. In packaged products, from Q3, we will return the Narangba extrusion facility back to capacity. This will complete our withdrawal from the Aqua Feeds sector and replace that capacity with higher returning dog food sales. Lastly, we're making steady progress in NovaqPro, with booster registration now attained in India, Indonesia, and Thailand, paving the way for commercial sales in these countries.
Moving to the next slide, and to provide you with an outline of our activity in regard to the acquisition of Incitec Pivot , we're viewing this in three distinct stages. Completion, which is really about Dyno Nobel separating the fertiliser distribution business into a new entity that we're acquiring, and we're on track to complete at the end of the third quarter. The next stage is integration, integrating Incitec Pivot into a single Ridley operating environment. We've moved quickly in this regard to establish a project management office with a well-experienced lead person employed to spearhead this. We've appointed a systems integration partner to plan the transition of Dyno Nobel's from the Dyno Nobel system onto our system, with the objective of getting off the transitional services agreement as soon as possible.
Within integration, we're planning corporate cost savings, which we estimated back in May at $7 million per annum by the second year. The final stage is transition, which is really moving the Incitec Pivot business from a manufacturing entity, which they have been, to a pure-play distribution business, which is efficient and responsive to customers. We've commenced a number of reviews, but we'll wait to get ownership to be able to progress this to the detail that we require. Once the performance improvement plan is sufficiently robust, we'll bring a summary through to you as part of the consolidated three-year growth plan. Finally, that brings us to the outlook statement. In FY 2026, Ridley expects earnings growth from its diversified business portfolio, driven by Packaged Feeds and Ingredients margin growth from continued premiumisation in the pet food sector and efficiency gains.
Bulk Stockfeeds volume growth from existing and new customers will help offset the impact of the Wasleys Feedmill sale. In the fertiliser segment, we'll have earnings from the acquisition, including initial efficiency gains through the integration and transition of this business. Importantly, for shareholders, Ridley intends to continue its capital allocation framework, targeting a 50%- 70% dividend payout ratio. Thanks for staying on the call to the end of this presentation, and I'll now hand back to the moderator to take your questions.
Thank you. If you wish to ask a question, please press star, then one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star, then two. If you are on a speakerphone, please pick up the handset to ask your question. Your first question will come from Apoorv Seh gal with UBS. Please go ahead.
Hey, Quinton, Richard, good morning. First question, if we go back to the avian influenza event back in January that saw those export restrictions get put in place, my understanding is that left you with a bunch of excess poultry meal and oil inventory that had to be diverted into the domestic market at some lower prices. I think when we last spoke, you sort of said that was maybe a $3 million or $4 million sort of EBITDA impact in the second half. My question is, does any of that impact extend further into first- half 2026? Where are we at with those export restrictions? Are we still sitting on some kind of excess inventory that needs to get cleared for a couple of months? Is there any kind of lingering impact in the first- half?
Thanks, Seghal. The brief answer is yes. The restrictions have been lifted into a number of the Asian countries, but that's just recently. Now there's a fair backlog of volumes, and we've got limited volumes planned and moving. It'll take a while. We still have depressed poultry meal prices, as well as meat and bone meal prices at this stage. There's a fair quantum in the country of meat protein meals around, and that's weighing on the pricing at this point.
I think just in terms of expectations in this financial year , we would probably anticipate that the first half, the slowness in the first half will probably be very similar to what we saw in the second half last year, with it picking up into the second half of FY 2026.
Got it. Okay. Basically, this half has a substantial period where that impact sort of stays, and then you're kind of back to normal second half.
That's right.
Okay. Can we talk about tallow prices then? Across FY 2025 as a full year, I think it's been a headwind for you guys. It's down year on year. Are you able to quantify that impact for 2025 at the EBITDA level, but also more importantly, looking into 2026, it seems like tallow prices are a bit higher year- on- year over the last, so call it, six months. Is there like an EBITDA tailwind we can expect from current tallow prices if they hold into 2026?
You're absolutely correct. In the first- half, we obviously saw tallow get down to the lows of the cycle, and we called out that there was about a $3 million impact in that first- half. You're right that we have seen tallow move back up from about $13.50 up to about $17.50 a ton, which is certainly providing us with some opportunity on the high side to offset some of that poultry meal. When we gave the guidance in relation to the second half of FY 2025, that was a net position of the tallow versus the poultry meal. We would certainly hope that in FY 2026, with where tallow sits today, there is some upside to the FY 2025 year.
The $3 million impact in the first- half, in the second half, was it actually like a tailwind?
Yes, it was part of the net of the poultry meal down versus the tallow up.
Okay. Gotcha.
Yeah. Yep.
Okay, in simple terms, though, in 2026, there might be a few million bucks of an EBITDA tailwind coming through if prices hold.
Yeah, yep, that's correct.
Okay. I think before I go back in the queue, maybe one just for Quinton, so on the same topic of tallow prices, just maybe Quinton's macro perspective, like just remind us sort of where are we at, like current U.S. administration, their stance on biofuel policy. I think some of those, there are a couple of biofuel plants in the U.S. that previously had some delays. Like where are sort of things at with the whole biofuel tallow demand story?
Yeah. The U.S. industry is a little more bullish, although I would say they do feel the recent experience where they climbed in on the back of the Biden government's support, and then the incentives were capped out, and there was that importation of used cooking oil that came in from Asia. As a result, I think they're all a bit cautious, but returns are improving to the domestic players there, particularly in soy crushing. However, we're not seeing a significant demand for imported tallows at this stage. It is supporting, you know, the sentiment there is supporting what we see as the rally in the price that we've seen to get to $17.50 today. The longer- term is more favorable. You know, I think it's going to be a steadier build as opposed to the rapid rises that we saw two years ago.
Okay. Thanks, Quinton. Thanks, Richard. I might jump back in later.
Your next question will come from James Ferrier with Wilsons Advisory. Please go ahead.
Thank you, and good morning, Quinton and Richard. Thanks for your time.
Thanks.
Could I ask you about the Bulk segment first? I mean, a great result. In particular, that ruminant volume, huge uplift in the second half. I think first half growth was at 3%. Full-year growth, 11%. Huge uplift. Was that just supplementary, or did dairy have a particularly strong second half? We're just thinking about how dry it was in Victoria and milk prices pretty high and figured dairy might have had a nice run in the second half.
Yeah. Volumes have been pretty good, both monogastric and ruminant in this second half, definitely aided by the supplementary feeding. That is supplementary feeding in the Victoria market predominantly, Victoria and Tas. It's really the southern part of the country that's had the dry conditions. We've been selling both to increase volumes into dairy due to those dry conditions, but also a fair bit into sheep feed lotting and a little bit into beef.
Historically, you've talked a bit about that. Given that supplementary demand profile is probably the most variable part of the Bulk business customer set, you've talked historically about what that sort of high-low range looks like from an EBITDA perspective. What sort of contribution do you think you got in the second half just in that ruminant supplementary activity?
Yeah. As you know, we've historically spoken about a sort of a $5 million EBITDA contribution in the second year of a draft. Much of that comes in our Queensland and New South Wales Feedmills, which have latent capacity and are able to swing. That region's had lots of rain, and they haven't had the supplementary feeding. It's probably a couple of million dollars' worth of benefit that we've had in this half from supplementary feeding in the southern states.
Yeah, that's helpful. Where I'm going with that is just to look at your outlook statement. What impressed us about that in relation to the Bulk segment is you're sort of saying you expect underlying volume growth can offset the Wasleys exit and essentially, if I read it right, deliver a sort of a stable EBITDA result in FY 2026. Given your cycle in such a strong ruminant result, you're essentially saying you can grow again on volumes on top of that?
We do see growth. I don't believe that we'll replace the Wasleys volume in FY 2026, but through a number of different initiatives, including bringing on some new product development, we are hoping to offset as much of the $3.5 million reduction that we've had with not receiving Wasleys proceeds in 2026.
Yeah, that's helpful. Do you sort of assume that supplementary feeding activity repeats, or do you sort of back it out when you give that outlook statement?
We can't bank on it continuing for as long a period. We've still had good July and August pricing. I would say that if the Bulk Stockfeeds sector repeated its performance this year in 2026, that would be a stellar result. Offsetting the $3.5 million Wasleys is our ambition and our target. A couple of things have to line up, and we have to get other growth, and the new product development needs to materialize within this period.
Yeah, no, that's great. I'll jump back in the queue. Thanks, Quinton.
Right.
Your next question will come from Paul Jensz with PAC Partners. Please go ahead.
Just two questions on fertiliser, and again, I'll jump back in the queue. Just any indication, Quinton or Richard, on, I suppose, the second half performance of Incitec Pivot ? You reiterate the 2024 number, obviously, but the 2025 number?
Look, we don't have a clear line of sight on that, Paul, and I think it would be inappropriate for us to comment at this stage in terms of where Dino's at in relation to fertiliser.
Okay. You mentioned supply chain risk. I think back to Quinton on the Incitec Pivot Fertilisers group you're bringing in. Can you give us some, I suppose, some indications as to where you might look at with supply chain risk across fertiliser and combining it with feed? Just to give us a flavor, please.
Yeah. Whilst the underlying businesses have the same skill set and requirements, it is a longer supply chain than we experience in, for example, our Bulk Stockfeeds business. It's a procurement of commodities, some supply chain management, conversion, some value-adding, and then straight into the rural retail sector. What's different is that we're buying, we can buy grains four weeks in advance and line it up through our mills and then deliver it to customer within a few days the other side. The supply chain is much shorter, and as a result, you can manage the price risk within that. When you look at fertiliser, a lot of the fertiliser is imported from the Middle East, and bringing it on those supply chains means that we've got a much longer shipping period through to selling it and being able to pass on the price risk.
There are processes in place that Incitec use because they're obviously importing significant volumes currently, and those are quite effective at managing the risk. We are doing some further work on unpacking that to make sure that those systems and processes meet our requirements and dovetail with our risk profile. There's a piece of work on that. That will be the nature of this business. A little bit of volatility is where you make your money, both in Bulk Stockfeeds as well as in fertiliser. It's the big movements where there's a macro or a war-related disruption that we need to make sure we've got adequate processes to cater for.
Just a supplementary because the second half one fell flat. Have you looked at the, I suppose, the combination of fert and feed and with leading motto that you now have? Is there some crossover that you're potentially looking at?
There will be, down the track, some opportunity to optimize transport. A fair amount of the grain comes into our Feedmills and fertiliser out at different times of the year, so there's transport overlap. There could be ultimately funding models that we could deploy to finance fertiliser in and take delivery of grain on the other side. I would cast those in the light of three to five years as opposed to the immediate integration and transition that we're going to be focused on, which I think is much closer to, you know, more accessible to us in the short- term.
Excellent. Thank you. I'll jump back in the queue.
Thanks, Paul.
Your next question will come from Apoorv Sehgal with UBS. Please go ahead.
Hey, guys. Thanks for taking the follow-ups. I wanted to ask a question on OMP. Are you able to quantify the EBITDA for FY 2025? I think the last disclosure we got was the first quarter, which was like $3 million, but you have said it's kind of outperformed initial expectations. I mean, ballpark, can we kind of annualize the $3 million a bit higher? Just any indication?
Yeah. Look, I mean, obviously, there's commercial sensitivities to it, but I think we did actually guide that at the half, the $3.2 million had been doubled. I think it's probably not an unrealistic assumption to assume that we're somewhere around that mark in the full year. That's right, AP.
Oh, brilliant. Okay. That makes sense then. Going forward for OMP, you've said a couple of interesting things. You've got the efficiency opportunity with the new facility, the second quarter coming online. You've also got this new direct opportunity you've talked about that's coming through. Are you able to give us a sense of what kind of incremental EBITDA you think you can add to OMP in FY 2026?
If you look at the efficiencies, those are fairly predictable given that we're going from blast freezing to plate freezing and some of the automation that will be in the new facility. Those efficiencies would be confident in unlocking. As we gave as an indication, it's $9 million with a payback of six years. That will give you some indication, but there is some volume growth within the base case model. It was pretty modest, as we've indicated, because we've done a significant expansion in the capacity of the plant, but we're not expecting to pull that into utilization for a few years. I think on that front, developing new markets in Asia will take time. It'll be a steady increase. I'm not expecting that we would unlock significant value in year one. We need to build this business for the long- term. We're building up with pet food majors who just increase their suppliers on a steady basis. They don't make big swings in their supply arrangements.
Okay. Yep, some growth in year one, as in the next year, but a lot of the value's being unlocked probably would run after that with some of the initiatives you're talking about?
That's our plan.
Okay. The Carrick mill, if I go back to the first- half result, I think you said it was about a break-even EBITDA outcome from that mill. What kind of EBITDA contribution did it make in the second half? Was it positive? Into 2026, what kind of incremental might it help deliver?
As we indicated, we put on a second shift, and unfortunately, you can't turn on the demand simultaneously. We spent a fair amount of the second half running at the midpoint between one and two shifts. By the end of the half, we're at a nice full capacity. Our profits in from Carrick, yes, it's positive, but I think the benefits will flow through in FY 2026 now. I think that should be a $1 million- $2 million Feedmill as we grow it to its potential on a two-shift basis. That, together with how it helps the network in East Gippsland, is part of the solution to getting Bulk Stockfeeds to repeat its number in FY 2026.
Okay. That's helpful. Can I ask just one more? The business.
Sorry.
Oh, sorry.
W e might have to put you to the back of the queue, mate .
No worries.
The other guys have got questions as well, mate.
Sure.
Sorry.
Our next question will come from James Ferrier with Wilsons Advisory. Please go ahead.
Thanks, James. Just following on from some of AP's questions there about the Packaged and Ingredients segment. He sort of covered up on the ingredients side and some of the drivers there into the year ahead. On the packaged side and the pet food side in particular, you sort of talk about margin improvement there within the outlook of 2026. What sort of volume growth, or I guess it doesn't sound like you're assuming volume growth given your focus on margin growth in the comments. I would imagine that there should be some volume growth coming through in pet food in FY 2026?
Yes. In Packaged products , dog food is our biggest growth contributor. The other rural packaged products are steady to modest growth. I'm referring there to horse and chicken poultry feed in particular. The dog production, we have secured coming online in Q3 contract volumes for major grocery supply, and that will take Narangba back up to capacity on a seven-day cycle. That improves our margins insofar as 12 months ago, that capacity was producing Aqua Feeds at low margins.
That's sort of where my second part of the question is going. On one hand, you've got the volume growth and the associated profitability that comes with that. That should be complemented also by a more efficient, lower-cost operation at Narangba progressively.
Yes, that's correct.
You get a double benefit to the earnings.
Get a double benefit to this transition year that we've had. Yes.
The Narangba upside from the efficiency will come through in the $5 million component of the $5 million reset.
Yep, understood. Thanks for your time.
Great. Thank you.
Your next question will come from Paul Jensz with PAC Partners. Please go ahead.
Just back to Richard on working capital and the dividend, because it was a very impressive effort raising the dividend with the number of shares that you've got on issue. Can you talk through the sustainability of the working capital improvement there and the dividend policy and signals that the board set? Maybe that's back to Quinton.
Yeah. So, I mean, breaking it down, we're obviously very pleased with the working capital. We've delivered a 97% operating efficiency from working capital. I think the reality is, Paul, over a long period of time, we've demonstrated strong ability in that area. The only real swing we see generally is in relation to what position we take in relation to strategic inventory holds at different points in the cycle. Other than that, I think we've demonstrated a consistency there. I wouldn't anticipate there'd be much change from that perspective. That sort of conversion rate is in line with the expectations of myself and Quinton and certainly the ones where the board pushes us. In terms of the dividend, obviously, this year is strange because we've got new shares on issue.
We thought it's important to demonstrate our commitment to wanting to try and, as part of our capital allocation model, to try and demonstrate a progressive dividend. That's what we've been able to do. We don't see that changing going forward. I caveat that against operating conditions, but that's the clear intent and the clear expectation, I guess, through the capital allocation model, which is why we put it in there. I'm pretty comfortable on that side of things, Paul.
Just delving into the fertiliser side with inventory and cash flow, are you confident that you can keep that progressive dividend policy going forward, or is that going to be reviewed once you get across the fertiliser division?
Paul, I would say, obviously, theoretically, you can't keep a progressive dividend forever. However, if you look at where we're starting from and the base that we're at and with the growth in earnings, we think we can. We've progressively gone from $0.02 to $0.03 per half up to the $0.05 that's declared now as the final. We think that we can continue to increase from $0.05 per half based on the projections that we've got and the growth in earnings. That's the progressive part. Staying within a 50%- 70% payout ratio is the guideline.
That's excellent. Thanks very much, Quinton and Richard. Well done.
Great. Paul, I might just add, we've got $30 million worth of franking credits. It's an effective distribution tool for shareholders, and that does come into the board's thinking.
Oh, absolutely. Thank you.
Thanks.
Once again, if you wish to ask a question, please press star, then one on your telephone and wait for your name to be announced. Your next question will come from Apoorv Sehgal with UBS. Please go ahead.
Thank you for round three. I'll hopefully keep it shorter. Just want to double-check the business reset cost program, $5 million. That's definitely a full contribution in 2026, it's not like an annualized number.
That's a full contribution in FY 2026. Yep.
Brilliant. Okay. My last one is just the AJ Bush opportunity. If I just cast my mind back, I think you called out like a couple million dollars of EBITDA contribution in 2025 from taking the volumes into the, I think it was the Laverton and Maruta mills, from memory. Just give us a quick update of where things are at with that opportunity. I think from memory, Quinton, you talked about having to spend some CapEx if you needed to unlock further gains out of that. Just give us a bit of a progress update, please.
Yeah. AP, yes, we've got the, and that's part of the volume uplift we refer to in ingredient recovery. We're getting the benefit of that. Operationally, we're full at that site. As you would know, there's been a significant amount of rain in the Sydney Basin, and we've had some challenges just managing the way we operate that site. That has put some constraints on us as we have the process water and the systems for that, requiring us to have to transport some product to Victoria and to other renders further afield. We've had some challenges. They haven't been to the materiality that's required us to call it out. That's all part and parcel of us adapting that site for the increased volumes. The capital plans are ongoing. The team's done some good de-bottlenecking initiatives. I would say that it'll actually take us more than FY 2026 to get the full benefit from those volumes that we've taken on from AJ Bush.
Got it. Okay. In the 2025 result, you haven't really got much benefit there. Yet to come, maybe a little bit in 2026, but it might take a bit longer is the message.
Yes, that's correct.
Okay. Cool. Thanks, guys. I appreciate all the time.
Thanks, AP.
There are no further phone questions at this time. I'll now hand back to Mr. Hildebrand for closing remarks.
Thank you for joining us today and thank you for the questions. I think we will beaver away on our plans for the profit improvement of Incitec Pivot and the consolidation of the growth plan. We will target bringing that to shareholders, hopefully, by the end of this calendar year so that can give you a little more insight into the plans for the next three years. Thank you for joining us today and appreciate your time.
Thanks, all.
That does conclude our conference for today. Thank you for participating. You may now disconnect.