Sims Limited (ASX:SGM)

Earnings Call: H1 2026

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Feb 16, 2026

Today's presentation has been lodged with the ASX, along with the results release. It may contain forward-looking statements, including statements about financial conditions, results of operations, earnings, outlook, and prospects for Sims Limited. These forward-looking statements are subject to assumptions and uncertainties. Actual results may differ materially from those experienced or implied by these forward-looking statements. Those risk factors can also be found on the company's website, www.simsltd.com. As a reminder, Sims Limited is domiciled in Australia, and all references to currency are in Australian dollars unless otherwise noted. I would now like to hand the call over to Stephen Mikkelsen, Group CEO and Managing Director of Sims Limited. Please go ahead. Thank you, and good morning from Sydney. Today, we're here to present our half-year results for FY 2026. Presenting with me today is Warrick Ranson, our CFO. We are fortunate today to have all of our business units leads here with me in Sydney. So we have John Glyde, our ANZ Managing Director, Rob Thompson, our President of North American Metal, and Ingrid Sinclair, our President for SLS. The presentation has been lodged with the ASX, along with the results released. First up, I will provide an overview of the results and strategy. Warrick will then take us through the financial results. At the end, I will return to talk about the outlook, after which we will have Q&A. I will turn straight to slide 5, which looks at our strategy and strategic priorities. By now, the left-hand part of this slide should look familiar, as it has guided us for the last few years. I'm going to focus on some of our recent key strategic achievements. From a customer and supplier perspective, we have made great strides in increasing our unprocessed intake, particularly in NAM, and this is definitely driving increased margin when we process it into higher value material. We have signed a couple of significant key supply agreements in ANZ with New Zealand Steel and Alter, and SLS is expanding into Ireland. Looking at operational efficiency, NAM has really improved its logistics infrastructure, particularly the ability to deliver domestically through rail, and this has allowed us to take advantage of the domestic shred premium. Work on Pinkenba continues at pace, including a fines plant, and rail infrastructure works at Ōtāhuhu will allow us to effectively service the Glenbrook EAF. From an innovation agile perspective, we are transitioning to an outsourced global shared services model, which will improve our service offering, lower costs, and improve our ability to integrate new operations as we grow. We've just about completed relocating this SLS senior management team to Irvine in California and are already seeing the benefits around innovative thinking and ideas from the increased collaboration. We've also added a new position to the senior team with a chief digital officer. Given the strategic importance of deeper integration with hyperscalers, we've appointed a dedicated role to drive closer alignment with their operational workflows. The first three bullet points under invest responsibly are linked. Warrick and I will talk more about Tri-Coastal, the Houston land base, and the property strategy lead role in the coming slides. It is also worth noting that we've extended our debt facilities by 12 months as we position our balance sheet for further growth. Moving on to slide 6. Firstly, safety on the left-hand side. Total recordable injury frequency rate for the first half has been maintained at best-in-class historical lows, and just as importantly, we are tracking well on our lead indicators. As a management team, we all continue to focus on making sure our employees can go home each day just as they came to work. On the right-hand side, you can see that we are progressing nicely across governance, systems, strategy, and risk assessment in support of our climate commitments, including the integration of climate data into financial and operational systems to enhance transparency and decision-making. Moving on to slide 7, and I'm conscious that Warrick is going to take us through the financial results in some detail, so I'm only going to highlight a few points from the consolidated result. Metal sales revenue is flat despite sales volumes being down 2%. This is all about the price and contribution of non-ferrous, whether it be copper, aluminum, or Zorba. The market is very strong. SLS revenue is up nearly 70%, and repurposed units are up close to 18%. SLS has had an incredibly strong first half, driven by the demand for DDR4 memory, and we will talk about this in subsequent slides. A more subtle point to highlight is the flat metal trading margin percentage, despite the significantly higher revenue from non-ferrous, which has a higher absolute margin but lower margin percentage. This means that we have grown our ferrous trading margin percentage through disciplined buying of non-dealer material. I'm very happy with our cost control, and it is also pleasing to see the growth in return on invested capital. Returns have improved materially over the last 2 years, and we remain focused on closing the gap to our cost of capital. Slide 8 separates the main performance highlights between metal and SLS. The only additional points I would comment on here is the 3.5 percentage point increase in unprocessed scrap in metal, driving higher shredder capacity utilization in metal, and the 7.7 percentage point increase in EBIT margin for SLS. Slides 9 and 10 look at the factors influencing our metal businesses. Let's look at slide 9 first.... The top 2 slides actually show how tariffs are providing protection for NAM and SAR in North America. You can see on the top left-hand slide, the falloff in U.S. construction activity over the last year or so. All things being equal, this would have resulted in quite a depressed steel market in the U.S. But look at the right-hand top slide, and you can see the falloff in steel imports, commencing with the introduction of Section 232 in 2018, and then continuing with the tariffs. U.S. steel manufacturers have benefited more from the fall in U.S. imports than they have suffered from falling construction spend. What these charts indicate for the scrap market, is that domestic pricing has been supported by strong demand, although softer construction activity continues to constrain intake volumes. The bottom charts explain ANZ's dilemma and depressed ferrous results. Quite simply, global ferrous scrap prices have fallen as Chinese exports have risen. Slide 10 shows why non-ferrous is, in many ways, the hero of the metal results, and it is quite simple. The chart shows the price in Australian dollars that Sims actually realized for its sales of ferrous and non-ferrous products. Ferrous has fallen from a bit under AUD 570 to around AUD 545. Non-ferrous, combined, has risen from around AUD 4,100 to nearly AUD 5,000 on a blended basis. Focusing on NAM on slide 11. These four charts capture the progress we have made at NAM, and explain not only the turnaround of FY 2025, but now the continued improvement in FY 2026. Firstly, the top left chart shows the benefit of focusing on profitable tons. We have grown trading margin percentage by 5 percentage points over the last two years. This has been achieved by focusing on, among other things, unprocessed ferrous, which has increased by 12 percentage points over the same period, and this has increased shredder utilization by the same amount. Those shredder tonnes are producing more Zorba, which, like all non-ferrous products, has risen nicely in price. Finally, you can see that we are exporting less as we have grown our domestic channels to market. This is particularly so for shred, where domestic premiums to export have been growing and currently sit at $50 per tonne. As a point of interest, we sold around 85% of our shred domestically from the East Coast. This would have been around 10% just a few years ago. It is important to note, we still maintain our export optionality if market dynamics change in the future. Slide 12 summarizes the Tri-Coastal acquisition we announced last week. As I said at the time of the announcement, over the last couple of years, we had materially turned the Houston business around, but we needed access to better options, both domestically and internationally, to really drive performance. We had a suitable piece of land to achieve this at Maya Shell, but the capital cost to upgrade the port at Maya Shell and the size of our existing ferrous business did not justify the CapEx. TCT gives us this deep water access and therefore optionality, but it also materially increases our presence in the market, in excess of another 350,000 tonnes. Significantly reduces our operating costs through the infrastructure service agreement contract, and it frees up the sale of all our land in Houston. We estimate in excess of $100 million, including Maya Shell. From a numbers perspective, we have paid a bit less than 4x EBITDA post synergies. The combined businesses, and by that I mean our existing ferrous and non-ferrous operations, plus the TCT acquisition, are expected to have an annual EBITDA of $25 million and a return on invested capital of over 20%. Turning to Slide 13, SA Recycling. As the chart shows, SA Recycling has done a great job in ensuring resilience in its trading margin percentage. They have been pretty consistent at around 30% for the last 5 or 6 years. In the last 2 years, this has been achieved by increased revenue from non-ferrous, including Zorba, and this has combated the more depressed ferrous market. SA Recycling has strategically developed a really strong hub and spoke model in regional markets. It now has a very consistent source of unprocessed material, being fed from around 150 feeder yards into its 24 shredders. This means more Zorba from shredding and more opportunity to attract retail non-ferrous from peddlers. I expand on this theme a little more on slide 14. Firstly, you will note the deliberate acceleration of the hub-and-spoke model. Since 2021, SA Recycling has acquired 76 yards, compared with 52 for the ten years preceding 2021. You can see from the map that it is still a highly fragmented market, so there remains considerable further opportunities, and there is significant headroom in its existing shredders. Its strong cash flow and balance sheet strength support the growth. SA Recycling has developed a real expertise in integrating these small bolt-on acquisitions and implementing its operational and commercial practices. What all this means is that the business is underpinned by strong, unprocessed inflows and strong non-ferrous markets. This provides a very solid earnings base in the current market conditions, and when the ferrous market cycle turns, SA Recycling is very nicely positioned to capture the upside. Moving to slide 15. There is no doubt that ANZ continues to operate in a subdued global ferrous environment, and it does not have the protection of the tariffs that NAM and SA Recycling enjoy in the U.S. It does have a very strong non-ferrous business, a good hub-and-spoke network, and good domestic access for sales. In many ways, it is a business that is structured very similarly to SA Recycling. It is worth noting that the non-ferrous contribution is even more important to ANZ, as the ferrous market conditions are considerably worse than North America. However, it will also benefit from an upturn in the ferrous market, although the next couple of years, this is largely dependent on a meaningful reduction in Chinese exports of steel, which seems unlikely. Beyond two years, however, the structure of the ANZ market is likely to change as domestic EAFs come online, and this is the focus of slide 16. The chart shows that currently, about 50% of the scrap generated in Australia is exported. However, by 2027, maybe 2028, this could reduce to under 20% as a result of increased EAF demand and additional charging of scrap and blast furnaces. This local demand is likely to support prices and potentially de-link Australia and New Zealand from the full impact of Chinese exports. In our view, our Pinkenba site in Queensland will play the major logistics role in facilitating scrap finding its way to the right location at the most efficient price. This could well include importing scrap from our facilities on the West Coast of the USA. No other participant in Australia or New Zealand has the capability to manage scrap flow between all states, New Zealand, and the West Coast of the USA. I now want to turn to SLS on Slide 17. The chart on the right tells the headline story of the dramatic rise in DDR4 chip prices. But what has driven this? There are four interrelated points I want to make. One, we still need DDR4 chips, as they are the workhorse of many of our devices and the Internet of Things. 2, manufacturers are switching to making DDR5s, with the demand from hyperscalers building AI data centers is almost insatiable. 3, this has created a structural supply-demand imbalance for DDR4s. High-quality, repurposed DDR4s are a practical solution, but they are also limited. 4, a number of suppliers and market commentators are saying that the imbalance is likely to persist beyond 2027. I want to provide an update on our SLS expansion into Ireland, and this is on Slide 18. Firstly, the expansion is well underway, and we expect we will open the 120,000 sq ft facility in early April. There will be some ramp-up and other costs, so I expect meaningful contribution to EBIT will not happen until sometime in June, maybe July. As the analysis shows, Ireland is an ideal place for expanding our data center infrastructure services. It is a major hyperscaler hub in Europe, where we already have a presence. We have a proven track record in these types of facilities, and I expect it to look very similar to our Nashville site, which a number of you have visited. We currently anticipate growing the business over the next 2 years to repurpose approximately 1 million units per annum, with a skew towards DDR4s. This is an exciting opportunity for us and is driven by an existing relationship we have with a major hyperscaler. I'll hand over to Warrick now for a more detailed look at the financials. Many thanks, Stephen, and good morning, everyone. Despite mixed construction activity in Australia, continued elevated Chinese steel exports and softer US consumer sentiment impacting prices, ferrous scrap markets remain supported, assisted by the progressive expansion of EAF capacity globally. With export markets exposed to global scrap dynamics, we continue to leverage the arbitrage in our key domestic and international markets and sell volume proactively between the two to maximize margins, reflecting the significant agility and flexibility embedded within both our inbound and outbound logistic chains. In parallel, non-ferrous markets delivered a structurally strong performance and provided meaningful earning stability, with LME copper increasing by approximately 13.5% year on year, while LME aluminum prices rose by 9.8%. The Asian spot price for aluminum reached its highest level since 2022, supporting considerable Zorba price increases, as Stephen mentioned. Not surprisingly, non-ferrous trading accounted for over 40% of group revenue in the half, up from around 35% in the comparative period. Concurrently, of course, prices for DDR4 memory continued to increase exponentially, rising by over 450% year-on-year, as demand continued to increase against diminished supply, with manufacturing shortfalls and a focus on new generation cards continuing to uplift, repurposing, and resale activities. Across the business, we continue to deliver disciplined cost efficiency initiatives. Current activities, such as moving to a global shared services platform and the operational changes now targeted for our Houston operations, will continue to provide performance improvements in the business. We saw our overall cost base remain relatively flat, despite increases from higher inflows of unprocessed material in NAM, and volume growth in SLS, and of course, general inflation across the board. I'll come back and talk about our cost performance shortly. Our statutory result reflects targeted restructuring initiatives and non-cash hedge book mark-to-market adjustments associated with the significant rise in copper and aluminum prices at period end. We continue to work on the recovery of our UK metal receivable, following collapse of that third-party business in an extremely difficult market. But in line with prudent accounting practice, we updated the potential credit loss on the residual by a further GBP 30 million to reflect the current estimates. Although we have effectively reversed our prior accounting position on this sale, we remain pleased with our decision to exit the UK, the price we got for the business, and the way we were able to maximize cash flow, particularly given the number of subsequent business failures in the industry there of late. Moving to slide 21 now, and I've touched on the principal drivers of most of these already, so I won't dwell on this slide. Positive contributions by both the NAM and SAR businesses absorbed the impact of the current market pressures on ANZ. While the strong performance from our SLS business and a range of cost reduction initiatives, as I've mentioned, contributed further to the uplift in underlying results, reflective of the strength of the geographic and their diversification aspects of our business. I'll expand on some of the other factors driving these various movements in subsequent slides. Moving to the metal business, more specifically, and in North America, total material inflows remain consistent with the prior comparative period, and converted metal volume moderated by 3% as we prioritized unprocessed intake in line with our value strategy, improving our overall margin position. While this added to comparative costs, the team were able to generate a number of offsets through further site restructuring and productivity initiatives. Period-on-period, we actually experienced around a 5% reduction in average realized ferrous prices, generating a circa $13 million impact on the underlying EBIT for NAM, which we mitigated through that margin discipline and our cost out initiatives. In ANZ, ferrous margins were again impacted by the subdued international market, which also flowed on to domestic prices. Favorable non-ferrous prices provided overall revenue support and helped offset shredder downtime at our St. Mary's operation in the first quarter. Notwithstanding elevated consumable input costs, particularly in the areas of waste disposal and electricity charges, net operating costs continued to be well controlled here as well, noting the current result does include an AUD 8.8 million reclassification reduction. While U.S. steel spreads improved over the course of a half, influenced by tariff constrained imports, which are reflective of the U.S. domestic market, in December, our SA Recycling joint venture actually reported its first upmarket for ferrous pricing since April. Despite the comparative headwinds, the joint venture was able to close out the half year strongly, riding the uplift in non-ferrous prices as Zorba continued its surge. Our global trading platform was able to keep its costs flat. They saw reduced broker revenue following the cessation of trading activities for Unimetals in the U.K. early in the period. Moving to SLS now, and Stephen covered a number of the drivers here already. As we've noted, the business continues to see significant growth in the number of repurposed units, as well as benefiting from the dynamics of the market. Pleasingly, we also expanded our hyperscale service offerings, adding diversification to the business's revenue streams. Increases in operating costs reflect both volume gains and expansion activities, and the team continues to look at additional opportunities around automation and robotics to support its cost management program. The result further validates SLS's positioning within a structurally expanding hyperscaler ecosystem and its connected drivers. Moving to slide 24, and touching briefly on central and functional costs now. As previously mentioned, we continue to look for cost out efforts in this area. We recently relocated our corporate office to further reduce costs, as well as successfully transitioned our purchase to pay function to our new global shared services hub as part of a more extensive shared services model being progressed over the next two years. Following stabilization of the company's SAP platform implementation, project costs fell by AUD 2.5 million, noting that we continue to incur costs in developing our new yard management software, which we hope to take live later this year. As previously advised, we elected to cease work on the development and commercialization of the plasma-assisted gasification technology that was being undertaken by Sims Resource Renewal during last year. This further reduced the central cost pool by some AUD 10 million-AUD 12 million per year. Moving on then to our overall cost performance for the half, and we continue to look for opportunities to simplify and optimize our organizational structure, as well as further rationalize the existing operating portfolio. At a group level, we were once again able to keep total costs relatively flat over the period, limiting the increase to just on 4% of the rebase comparative half. Included in this was $16 million in additional variable costs related from the increase in unprocessed material and the higher repurposed units at SLS. Labor remains our largest cost element at around 40% of operating costs, and ongoing labor efficiency initiatives continue to provide significant benefits in this area and in line with our previous cost out commitments. The group completed the year with net assets of just on AUD 2.5 billion at balance date, broadly consistent with June, reflecting a stronger comparative Australian dollar at period end, dividend payments, and the further provisioning of the Unimetals receivable. Of note, this includes a AUD 200 million expansion on working capital levels from the uplift in non-ferrous prices, impacting both our inventory and receivable values, and a AUD 72 million transfer to broker deposits related to our derivative trading activities following the run-up in copper and aluminum prices. I'll talk a little bit more about the impact of this on the next slide. Pleasingly, as a result of our positive trading performance, the board has determined an interim dividend of AUD 0.14 per share, payable in March. A little bit more on our working capital movements and the group's focus. On Slide 27, we've isolated the overall movement to show the impact of those higher non-ferrous prices on the business, which has been quite significant on a number of fronts. The impact of the run-up in the copper price from October, in particular, is certainly reflected in our numbers. Working capital performance through better managing inventory levels, receivable conversion rates, and payment terms continues to be a key focus for us. Moving to Slide 28, and we put up this slide last week as part of our announcement on the Tri-Coastal acquisition. We've highlighted the potential to generate better returns from our property portfolio, a couple of times now, and I just wanted to reinforce our focus on this area. We've broadly categorized our properties into four areas, with the third category, the most complicated, and the area where we're most likely to spend a fair bit of time working through. As Stephen has previously mentioned, these are the sites where it's becoming obvious that over the next 5-10 years, the most valuable use of that land will not be in metal recycling. In most cases, this will require comprehensive planning, permitting, and other dependencies to fully capitalize on value. As such, we're committing to a dedicated resource to ensure full management of the opportunity, opportunity going forward and continuing our approach to disciplined capital recycling and unlocking embedded asset value. All that summarizes into our overall cash movements for the last six months. I've talked about most of these already, but just to touch on capital. The majority of this spend occurred in our North American operations, primarily focused on improved metal recovery and incremental throughput initiatives, including the completion of channel dredging at our Claremont operations. In ANZ, investment continued into the redevelopment of our Pinkenba site, including the construction of a new copper recovery plant. We expect to remain within our previous guidance in this area of between AUD 120 million-AUD 140 million of sustaining capital for the full year. We've pulled out the restricted cash allocation on the derivatives to better reflect underlying EBITDA to operating cash conversion, noting these deposits will unwind in the second half. In October, we made our final dividend payment of AUD 25 million in relation to the 2025 financial year, and as previously noted, the board has determined an interim dividend of AUD 0.14 per share, fully franked, for 2026, in line with our capital management framework after taking into account the restricted cash impact. Back to you, Stephen. Thanks, Warrick. Let's turn to the outlook on Slide 32. In our view, the outlook for secondary market pricing of DDR4 chips remains very strong, and it is the DDR4s that are materially driving the excellent performance in SLS. This strength comes from the demand for DDR5 chips driven by AI. Global production of chips is understandably heavily focused on DDR5, and this is creating a structural imbalance in the supply and demand for DDR4s. We also anticipate continued strength in the non-ferrous market, underpinned by the substantial copper and aluminum requirements for global renewable energy implementation and product electrification. Tariffs are expected to continue to provide some protection for our North American ferrous businesses, and this is likely to result in the continued premium for domestic shred sales in the U.S. Furthermore, whether it be in the United States or New Zealand, rising EAF capacity provides a strong outlook for our ferrous scrap products. Finally, we cannot ignore the impact Chinese exports are having on ferrous prices, particularly for our business areas exposed to markets outside the domestic U.S. market. While it appears that prices have been trading at or near a floor for a while now, there is little evidence to suggest China will reduce exports from current levels. Importantly, much of our recent improvement in earnings has been self-help driven. As market conditions normalize over time, we believe the business is structurally better positioned to benefit from cyclical recovery. Before we open for Q&A, as always, I want to thank our employees for their drive and commitment in delivering on our purpose, and most importantly, doing that safely. Back to you, operator. 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, and if you are on a speakerphone, please pick up the handset to ask your question. Your first question comes from Will Wilson from UBS. Please go ahead. Morning, everyone. Yeah, congrats on what looked like a strong result. Just on ANZ, looks like conditions picked up post the AGM trading update. Do you mind talking us through just, the moving pieces there and what happened to the end market? Thanks. Yeah, sure. We've got John in the room. So John, why don't you take us through that? Yeah, sure. A couple of things. Certainly saw improved volumes in the second quarter, particularly in non-ferrous and Zorba on pricing. We also, as you would remember, we had the outage in the first quarter, and we largely caught that up in the second quarter. As I said, volumes are up a little bit. We managed to take a few- a bit of volume from our competitors. Good cost control. We did deliver it a little better than expected. Cool. And then just more broadly across the metals business, with non-ferrous, just curious about how quickly those price rises result in more benefit, more volume, more benefit to the business, more broadly. Conscious that the rise in price has been going for, you know, a while now, but you really had to step up over the last quarter. Say, copper, for example, have you seen a kind of corresponding move in the activity in that sense, in volume activity? Well, let me give sort of a few general comments, and then maybe Rob can talk about NAM and John about ANZ. So I think overall, the answer to that would be yes. I mean, higher prices, by definition, drive more volume out of the market. That relationship's been here for a while now. And you're right to say that the, you know, non-ferrous has been very firm for the last 18 months, but particularly firm over, you know, like the run-up we had in price leading into December was quite extraordinary, and you would expect to see that drive more volume out, and we're well positioned to take that. But maybe, Rob, a little bit on how you see it from NAM's perspective, and John, and by Zorba as well, by the way, too. I mean, we'll talk about that a little bit later. Then, John, maybe ANZ's perspective. Yeah, the only thing I can add is, you know, from a NAM perspective, about two years ago, we started to embark on our non-ferrous improvement story, if you will, and fully integrated now with Alumisource, fully integrated now with our Northeastern Metal Trading Copper Granulation Company. Those relationships, those consumer relationships, you know, dovetailing with, you know, the infrastructure of data centers going up in every neighborhood in North America, it's been phenomenal. Stephen mentioned Zorba. Utilization of our shredders is up 10% over two years, and, you know, the capture and for that demand is definitely there. So volumes up, margins are absolutely playing a part in our turnaround story. Yeah, what I would add, obviously, Zorba, as Stephen mentioned, we saw, you know, considerable improvement in Zorba pricing late in the half, but over the half. And you ask from- you know, remember that Zorba really is a by-product of our shredding activity, and therefore, any gain in that price, sort of, in some way or another, filters through to revenue and quite frankly, EBIT. So that certainly helped. But from an ANZ perspective, you know, ferrous markets are incredibly, you know, still very, very difficult. Obviously, in very recent times, you know, we've seen, you know, the Aussie dollar strengthen, which isn't helping, you know, our translation in on an FOB basis on export sales. I think Warrick mentioned, you know, even on our translation on domestic sales on an export parity basis. So strengthening dollar certainly isn't helping, but still difficult. Ferrous, non-ferrous is pretty strong. And, I think as I said in my commentary, I really would describe non-ferrous as the hero of this six months result from a middle point of view. Yeah, well, just to summarize it, it is- it will get more volume out of the market. It must do. It's logical for that to happen. Yeah, okay. I mean, it's hard to see what changes are in that regard. But just one last quick one for me on SLS. I'm just curious about the lags between DDR4 pricing. And when it flows through to SLS, I'm somewhat a little bit surprised, if being honest, in terms of you gave your guidance 45-50 back in November. You saw another step up in December in pricing, that that didn't come through. But yeah, maybe touch on the... And then you came into the top end of guidance, I know, but just, yeah, if you wouldn't mind touching on the lags there. Yeah, I'd, I'll get Ingrid to maybe comment more specifically, but my overall thought on that is our, you know, our contract position is pretty set, as we go into December. We know what volumes we're getting, we know what sales we've made, so there's, there is definitely a lag on that. I wouldn't say it's a particularly long lag. Ingrid, any further comment on that? Oh, I think that's spot on, Stephen. We're normally a month or two months out from what you see in the price increasing, so obviously we'll start seeing it in this year, this half. Just the second half, yeah. Yeah, okay. So, so fair to say that the December price rise and even the back end of November really had no, it was too late to kind of flow through that first half? Yeah, I mean, some of it, a little bit of it got through. You see, like, you know, we were at the top end of... I mean, I'm to be frank, I'm getting my head around how we provide this guidance on SLS because we haven't done it before. So we're at the top end of what we provided, which is that some of it's coming through. But you're right to think that as Ingrid said, it's a month or two before it fully comes through. ... Okay. Yeah, I held back from asking about SLS guidance, but that's really helpful. I'm sure, I'm sure we're gonna get that question. Exactly. Cheers. Thank you. Good result. Thank you. Your next question comes from Peter Steyn, from Macquarie. Please go ahead. I'll oblige, Stephen. Thank you, Peter. Thanks very much for your time. So perhaps curious on two angles as it relates to SLS. Firstly is just run rate. It sounds like you would basically say that the run rate for the second half is probably incrementally higher than what you finished the second quarter at. And then I'm also interested in how one thinks about the Irish facility. You mentioned that you'd be sort of running it full tilt in June, July. But how material would this facility be in the context of the network? Yeah. Sort of give me the sense that it is quite material. Yep, sure. I'll get Ingrid to cover off Ireland, 'cause she's been heavily involved in that development. Maybe I'll cover off the implied question about second half for SLS. So the first overall comment I'd make, you're right, the strong pricing that we saw in December is now flowing through into our results. And it's fair to say that the start to the year for SLS has been very, very good. In terms of what does that mean for the full year, I'd make the comment that we're only one month in. And I think it's probably best what we've decided, it's best that we will provide some additional guidance next month at the March investor presentation in Nashville. By that point, you know, we will have had... We'll have a pretty good idea of where our first quarter's coming in and what pricing's looking like for the balance of the year. So we just ask for some patience on that. We will do that additional guidance in March. But suffice to say that, yep, absolutely, the volumes are still good coming out of SLS, as you—and it's very obvious the prices are still high, and we've got lots of reasons why we believe that those high prices remain. I think there is absolutely a structural imbalance there. So, certainly a very good start to the half for SLS, but we'll provide more guidance in additional guidance in March. Ingrid, how are you thinking about Ireland? Ireland, yeah. So, Dublin will be ramping up in the second half of this year, and we expect to deliver full run rate sometime in fiscal year 2027. So that's when we'll start seeing the full impact in 2027. It's probably fair to say, too, it is material to SLS's result because it's a big facility. I mean, it's, you know, at ramp up, we're expecting to repurpose another 1 million units out of there, and as Ingrid, it's oriented towards or skewed towards DDR4s. Right. It'll be very similar to the site in Nashville. Yeah. So it's, it is material, it is material, Peter. Let's just see when it's up and running, how things are. But it's, it's— we've highlighted it because it's, it's, it is, it is important to the, to the future of, of SLS. And I think it also signals, you know, potential further expansion, outside the US. You know, our strong growth has been US, no doubt about it. Absolutely no doubt about it. But Europe's a market where we have a presence, but I think with the likes of Ireland now, our presence is going to, is going to become much more meaningful. Yeah. Could I ask, Ingrid, just a quick follow-up? So the 1 million units, is that backed by the existing contract, i.e., so you're on full run rate at some point in 2027, will that be your run rate of units repurposed? So that... Yeah, in at the start of ramping up, it will be off of an existing contract that we have now and an existing client relationship. So yes, that will be. Yeah, yeah, I agree with that, but I wouldn't—I mean, it's certainly not at capacity. No. There will be room- At the start. Yeah, there'll be room, you know, in later years. There will. Let's focus very much on servicing a very important customer, but I think in later years, there's further capacity in Ireland, for other, for other inflows there. Gotcha. So 1 million is an eventual target for repurposed units, and your initial, start and your initial contract does not necessarily supply that level of volume? No, I think it's the other way around. The million is the initial- Yeah. and it's, it's how do we grow beyond a million with the- Okay. Got you. - with additional activity. Perfect. Sorry, I'm gonna sneak one last one in for Ingrid. It just around the customer relationships, how you think about the pull and push and pull from a commercial point of view. You're obviously making a lot of money out of this activity, Ingrid. Just curious how your customers view that, and if, with current prices, they think differently about economic sharing. Well, we have several relationships, commercial relationships going on. It took us years to get here, into this market, right? The quality that we deliver, the loyalty we have built with this particular client, in it's really, truly a partnership. We offer services, servicing, which is a flat fee, but then on the resale is where we share revenue. And that is an agreement we have negotiated with them and remains so even as pricing changes. It's Warrick here, Peter. I think it's fair to say that, you know, we didn't – we're not – we haven't set up Ireland with the hope of gaining customers. We actually set up Ireland in response to a customer request. And, you know, the customer – we've been quite, well, obviously have a transparent relationship with that customer. They understand our operating model and our earnings, et cetera. So, you know, we're actually responding to the customer need, and I think that really sort of signifies, you know, as Ingrid said, the relationship that we've been able to develop. As Stephen said, you know, the millions are a starting point. It's a strong growth area. You know, we'd be looking to hopefully grow that, that part of the business further. Right. The 1 million is a bird in the hand. Fantastic. I'll stop there. Thanks so much. Thanks, Peter. Thank you. Your next question comes from Lee Power, from J.P. Morgan. Please go ahead. Hi, Stephen, Warrick, team. Stephen, I kind of get the reticence of not wanting to give too much guidance now on SLS, given the moving parts, but can you maybe chat a little bit about what you saw on a backward-looking basis? Like, what did SLS actually contribute EBIT-wise in the second quarter? Yeah, again, it contributed, you know, obviously more in the second quarter than in the first quarter. But I think probably the most relevant thing I can say is that that ramp-up has continued into the first half. That's probably the best way to put it. And pricing is still strong and volumes are good. And so, you know, the activity that happened in the second quarter has continued and frankly grown as we come into the first quarter, which is- Third quarter. into the third quarter, sorry, the first quarter of the calendar, third quarter of this year. Which is why, like, I'm very conscious that we will need to provide some more guidance around that. I just need to think we just need to get that first quarter under our belt. And by the time we speak next month, we will have the actual results for January and February, and we do find it easier to predict that result for March than we might for the metal business. So we'll have a very good understanding of what that March quarter is like. I'm expecting it to be good, and then I think based off that, we'll be able to provide some additional guidance of where we think the year-end's going to come in at. Okay. So through the back half or the first half, so through the second quarter, it... Like, is there much volatility within the quarter? Was that trend continuing? Because, I mean, the pricing only really lifted in the back, very back- Yeah end of the calendar year, right? So let me first of all, it was a strong half. It wasn't just a strong quarter; it was a strong- Okay. -half. And yes, there is some volatility, but in some ways, it is the right expression, self-induced volatility? Maybe that's not the right expression, but it's volatility that we're not particularly worried about because it's just whether or not it does suit, you know, our customers to ship the DDR4s at the end of a quarter or the beginning of the next quarter. So there, yeah, there is definitely some volatility, but we get a good understanding of what that volatility is going to be well before it happens, which is why I think we were, you know, by our standards, we're pretty accurate at the prediction of the SLS result for the full, you know, for the half. Okay. And then, maybe for Ingrid, it sounds like your comments to Peter, just around the commercial rate, relationships, and revenue sharing, that you think the leverage to pricing holds. Like, obviously, the battle I think that everyone's having is that you look at what the pricing has done, and I get the lags, but it kind of averaged $18 a unit for the pricing, the DDR4 pricing unit you gave for the first half, and it's tracking at, like, $67 for the half currently. So it's obviously a very material dollar move, half on half as well. So, just any sort of color you can give us around, you know, the revenue sharing piece or that leverage might not come through for the business? Well, you know, as I mentioned, you know, the revenue share that we've negotiated stays in, and the partnership that we have, in particular with this client, is very strong, where we're investing back into the business. So the expectation is that we will increase productivity through automation and use some of this just to improve the business for them. And moving into Ireland really is to meet their capacity needs, and this is what we do throughout. So I don't see that a clawback trying to occur. This is a very solid relationship, and the market fundamentals are strong. I just don't see that. Well, I agree with that, and the thing I would say that, which I think I said last time, the thing I would add to that, having now, you know, visited a number of these clients, is that this is not core business for them. This is our front office, their back office. And while it is absolutely meaningful to us, and well, that's clear, it's hugely meaningful to us. Their focus is very much on their front office, which is about getting as much of these hyperscalers data centers built as they can, getting AI rolled out, putting their resources into that area. So this is nowhere near as material to them as it is to us, and so therefore, what they're valuing is, they value that we do it safely, they value we do it securely, they value that every single SLA that we've put to them, we achieve. And that's through, to be frank, from Ingrid's perspective, that's through five or six years of hard work of building up these relationships. And just to repeat myself, yes, very material to us. I'm not so sure that they would wanna switch suppliers to save themselves, you know, maybe a few $10 million a year and run the risk that they don't get the same level of service that they do from us, and that's what's hugely important, Karen. If I can add, what's value to them is getting the repurposed DDR4- Exactly, yes. Right? It's not the money. So we have this client who's starting their decommissioning earlier because they need the parts in the new builds. So it's very much value on getting the tested, repurposed DDR4s going back into their data centers. So that's really where the value. Yeah, and imagine if we turned up late, and we promised that you would have the DDR4s on this date, and they're not. I mean, that's the risk that they run by going with someone else, and we've now got a really strong track record over the last four or five years to prove that we can do it. Thanks for that. And then maybe just one more if I can sneak it in. To John, like, I feel like you've undersold yourself a little bit, given ANZ was breakeven in the first quarter, and you've delivered AUD 22 million of EBIT for the half. Can you just maybe chat a bit about, you know, when we think about using that second quarter number going forwards around, like, what the catch-up was, or seasonality, or something else going on? Because it's obviously a pretty solid quarter given what the backdrops look like. So honestly, Lee, the second quarter was always gonna be stronger than the first, simply because of that catch-up process, which I've got to say, we quite frankly completed quicker than I thought we would. So we largely got it all done in the second quarter. So what I guess, where you're leading to is how should we look at the second half? As I said, ferrous markets haven't improved internationally. I would argue that we're sort of bouncing along or near the bottom in US dollar terms. Non-ferrous markets are strong, there's no doubt about it, both in retail non-ferrous and Zorba. But I guess the other headwind, aside from, you know, Stephen mentioned a lot about, you know, China and the amount of semi-finished steel making its way into our markets and our consumers, is the Aussie dollar. That's certainly, you know, what have we seen in the last sort of six-week period, eight-week period? We've seen the Aussie dollar go from around $0.67 to $0.71, so that is certainly hurting. So I, I would've said, you know, second half at this point, and I will say, Lee, we are one month into it, we are in January, but I would say, you know, I, I think our second half's broadly going to be in line with our first half. Yep. Excellent. Thank you. Really appreciate the color. Thanks, Lee. Thank you. Your next question comes from Brooke Campbell-Crawford, from Barrenjoey. Please go ahead. Yeah, thanks for taking my question. Listen, I just had one on SLS, and trying to kind of understand how it all works, like some of the others here on, on the call. But maybe just for the first half, on slide 23, you talked about sort of 70% of revenue uplift relating to price. So that, that implies about $90 million increase in sales because of price, and then the total EBIT for the business is of $35 million. Just can you kind of talk through that? Why, why wouldn't you have a greater drop through from revenue to EBIT, given, you know, the majority of it's driven by price? Thanks. It's Warrick here. Brooke, remember, you know, we don't get... You know, the revenue is gross, and then we obviously take out the percentage of that, you know, that we retain in terms of that sale, so you don't get the full swing through. Gotcha. Okay, that's the revenue share. Yeah. Great. And then maybe just one on, I guess, on the Dublin side. I mean, is the way to think about this, you know, 1 million units, we can see what the DDR4 price is. We can assume, you know, let's say a 30% revenue share, and then an EBIT margin in line with what you've just delivered to kind of result in, you know, AUD 5 million EBIT from that facility once it ramps up. Is there- That's obviously very simplified, but would there be any large flaws with making those assumptions? The main one is that some of the units will go back to be repurposed, not resold, and repurposed as a service fee, which is less than Sixty. Yeah, less than the resale. Just what, I didn't quite hear, what number did you come up with? I'm not gonna say whether it's right or wrong, I just want to understand what number you came up with that back of the envelope. Yeah. Listen, I was just using your 1 million unit comment. Yeah. And then, you know, we can see the DDR4 price, like $70 a unit, I'm pretty sure. And then we could assume a revenue share of, you know, 30%, call it, and then just use the EBIT margin for the division of, you know, 15% in the half, which I think gives you around AUD 5 million EBIT from that business. I was just using that framework and hoping to get some sort of steer if that's sensible or not. I just need to go through your math here, 'cause I'll be frank, I think that's a little light. It is frankly a little light. So just, let me just think about your, your math on that, 'cause I'm just not quite sure that last bit that you're coming into, maybe we can talk a bit about that. But I'm, again, maybe, yeah, part of it will be in March, we'll be able to provide much more color with this additional guidance. But, my initial reaction to that is that feels very light. Okay, great. Well, that's very helpful. I'll pass it on. ... Thank you. Your next question comes from Daniel Kang from CLSA. Please go ahead. Good morning, everyone. Just to continue with the SLS discussion, maybe Ingrid, I just wondered if you can talk about the market share position of SLS at the moment. I think the initial plans was to get to around about 10% share of the addressable market. Are you there already? And maybe if you can shed some color on the competitive landscape on what the others are doing, given that, you know, you're branching out into Dublin, what are their capacity plans as well? Well, I don't think we're anywhere near 10%. I think the market share is continuing to grow, just as, you know, AI is exploding and this adjacent market is exploding accordingly. So I don't think we've captured anywhere near 10%. There's still a lot of upside to go. Our competitors, you know, we talk a lot about Iron Mountain, SK Tests, but it also is, you know, the hyperscalers themselves taking it in-house. We, we don't see hyperscalers doing it because they're competing with their data centers, and they make more margin in their data centers versus switching to what we do. So we don't see much movement there. Certainly for, SK Tests and Iron Mountain, they are in Ireland already, so the Ireland is the basically the, the nucleus for Europe for European data centers. It's all located there. Still plenty of market. Is it fair to say that our biggest opportunity to grow market share is the work we're doing around showing to the existing hyperscalers who are not either doing it themselves or not doing it all, that there's significant value by using SLS services? I think that's one of our main growth levers. Definitely, because this is a way to get material- Yeah. - at a cost-effective- Yeah ... price point. It's a big market, Daniel. To get, you know, 10, 10% is aspirational. That would be fantastic. It's a big market. There's plenty to go. Thank you, Stephen and Ingrid. Maybe a question for John. I think you commented on ferrous scrap markets still being pretty tough out there. What are the things that are you looking for, for the markets to, you know, improve? But so- Can we see some improvement into the back end of this calendar year? A couple of things that Stephen's talked at length and hard around the self-help piece, and that doesn't go away. You know, ongoing cost discipline, ongoing discipline around buying, trying to direct more unprocessed product through our shredders is all a sort of internal self-help. But I would say, the other things that we've got coming on stream is Glenbrook, the New Zealand EAF, comes on late Q4, around May, I think, is sort of power on, and then there will be a ramp up here from there. That will be good for us. We're very well positioned with the investment we've made there, in rail infrastructure to service their needs. We've also got 2 fines plants that are currently under construction now, and they will go through a commissioning, you know, late Q3 into Q4, and we'll start seeing some very, you know, significant benefits, more so in FY27 from those 2 plants. We've got the MRP upgrade in Auckland, which is, again, as Stephen talked about, self-help, metal out of waste. Very, very good returns on that sort of investment. So it's a mix of things. You know, as Stephen said, you know, we don't – and you guys on the call are probably as well positioned or better positioned than us around the whole piece around China and when they're going to, and if they're going to change direction. But, you know, ongoing strength in non-ferrous markets, strong, really strong export pricing, driven by, you know, the underlying copper and aluminum pricing. Ferrous is still tough. What we are seeing, and, you know, this leads to, you know, the conversation about, you know, well-positioned. You know, we are seeing that a lot of our competitors are doing it tough, and I think that will present us with some opportunities, down the track around industry rationalization and consolidation. Makes sense. Thanks, John. Thank you. Your next question comes from Chen Zheng, from Bank of America. Please go ahead. Good morning, Stephen, Warrick, John, and Ingrid. Thank you for taking my question. Maybe first question to Ingrid, SLS. Big increase of the revenue share from resale, I guess, majority due to higher memory prices. I'm just wondering what is the strategy for SLS to grow your earnings if it's structural versus a one-off sugar hit when the DDR4 prices normalize? I guess the SLS business is not only solely on DDR4 prices, what are the levers you know you can pull from here, given the market is still, you mentioned, very fragmented, and you are less than 10% of the market share? Thank you. ... Yeah, well, that, that's very true. It's not all just DDR4. So we're also seeing increase in pricing in hard drives and the other elements we sell. So we don't just sell memory, we sell all components that are accessories to the data centers. How we're gonna grow is through volume. So we're gonna see more volume coming through our current contracts and expanding geographically. And don't forget that once DDR4s have run their course, we'll start seeing DDR5s coming out, so that this will replicate and just go on to the next technology shift. Can I have one more thing, Ingrid? Yeah. Xin, you made an interesting comment about prices normalizing, and it's a—look, it's a very valid and interesting point. But the way we're looking at it, and this is, you know, this is a very unusual market structure, but the way we're looking at it is, what does normalizing mean? Because you've got two really interesting things going on. Firstly, DDR4s, as I said before, DDR4s are the workhorse of the Internet of Things. They're the workhorse of our computers. DDR4s are not going away anytime soon, so you don't have this falling demand in the next couple of years. It just. You just don't have it. So you've got this demand, which is strong, but what you have is this falling, dramatically falling supply, which has been absolutely turbocharged by AI. And anyone who can make chips is making DDR5s. So that's what they're turning to. No one's setting up new factories to make DDR4s of any quality, because why would you? You might as well put all your resources into DDR5. So from an economics point of view, you've got this, weird is not quite the right word, but you've got this unusual situation where you've got strong demand and supply not there to meet that demand, and normally you would think it would, it's because it's been completely diverted somewhere else. So I'm not sure to say... I mean, time will tell on how it plays out, but I'm not sure what normalizing means when you've got that market dynamic. Sure. Thanks, thanks for that, Stephen. I mean, normalizing, I mean, it almost trades like a commodity, so, I'm not talking about demand, but more like a- Mm ... like a price, given how the price has been- Yeah over the last Where it doesn't- 5-6 months? Yeah. Xin, where it doesn't behave like a commodity, and I keep on saying, we're grappling ourselves with this, because it's, you know, this is a new, this is new for everybody, what AI is different doing. Where it doesn't behave like a commodity, when demand goes up, and pricing is going up, you would normally, a commodity, there'd be more supply come on. People would invest in things, and more supply would come on, and that would dampen the price, and normally they overinvest, and so down price goes, and then they all pull out, and there's the commodity cycle. This doesn't really follow that cycle because you just can't bring on more supply. Right. That's a very good point, Stephen. I appreciate that. And second question, if that's okay, again, focusing on SLS. Are you able to provide any color on the resale revenue sharing across corporates or hyperscalers? Is that, like, how the contracts work? I understand, Ingrid, your team spent, you know, four to five years over the last four or five years building a very strong relationship with hyperscalers, and hyperscaler revenue has been growing, CAGR like 40%-50%. But if you can give us any color on your existing contract position, as well as any new contracts, rather than just leverage to the DDR4 prices. Thank you. Well, that's... Don't think we can get into too much detail because it's commercially sensitive on our contracts and what we've negotiated. But once we do, our contracts do run 3-5 years long. The percentages are negotiated upfront, and just sticks through the contract. Yeah, I think I agree. There's a lot of commercial sensitivity in that, Xin. But I'll go back and remake the point that what, why are we successful and why is Ingrid's team successful? It's around we've spent the last 5 or 6 years building up our proven capability to deliver, and delivery, particularly when repurposing, which has the benefits, we get some resell as well. It's really important for these hyperscalers. But yeah, I'm with Ingrid. I just, like, I just don't wanna get into detail on commercial contracts. Understand. Understand, absolutely. I fully understand. Well, let's put it, put it another way. From, like, contracts or relationship or even how your revenue model work, how that different to your competitor, Iron Mountain, and other small competitors, given it's a such a very fragmented market? I don't know if that's perfect competition or- Yeah. I think the- or is that, is it- Ingrid, I don't want to, but for me, the business model is fundamentally the same across the industry. That's not... It's- Pretty much. Yeah. I mean, what we are doing though, as far as repurposing DDR4s, going back into the data center, we are the only ones that are doing that. Yeah, we're absolutely marketing on it. We are testing, reprogramming, and it's going back into a data center, so it's competing against virgin material. So that, that is something very special that we do, and that is in strong demand by the hyperscalers. They need, they need the parts because they can't get it on the market, so. Yeah, that, yeah, good point, Ingrid. That's a big differentiator. The industry structure generally, but that's a very good point around that service that, we're particularly good at. Sure. Sure. Thank you very much, Stephen and Ingrid. I will pass it on. Thank you. Thanks. ... Thank you. Your next question comes from Owen Beerle from RBC. Please go ahead. Hey, good morning, guys. Just a few questions from me. As with everyone, first question on SLS. Couple of angles here from my perspective. The first one is just looking at slide 23, useful revenue by segment splits between resale, service, and other. I'm wondering if you can give me a sense of the 5.3 million repurposed units during FY 2026 or first half 2026. What, what split of those units by volume went to resale versus service? Just let me. I mean, we obviously know that number. I'm just thinking, just from a commercial thing, does that do... Warrick, what's your thoughts? Let us have a think about that. Yeah. I'll want to come back to you. Okay. Well, then let me ask a subsequent question to that: Is that split likely to change going into the second half? Like, do you have forward commitments for more service volumes as opposed to resale or vice versa? We do have service commitments, but the way it works, Owen, when you get in a rack, there is only a certain percentage that is fit for purpose to go back into a data center. So technically, there's only a certain percentage that can go in. So regardless of the increased need to go back into a hyperscaler, there still is a percentage that is for resale and... Yeah revenue share. So the increased need would be, would be met by a faster decommissioning cycle because they need the parts. Yeah. Yeah. So, indicatively, the splits between resale and service from a volume perspective are largely constrained, and therefore don't fundamentally change from period to period. Is that kind of what I'm getting from that comment? Yeah, right, because in a fully populated rack, there is only a certain percentage that can go back in. So I just think the other way of looking at it, we would not be expecting second half splits to be materially different to the- No to the first half. But I would expect the volumes to go up because they need more parts. Yeah. Okay, excellent. Now, just on SLS, I guess in terms of from, from our perspective, understanding how the, the business, the, the operating leverage, you know, flows through. Given, given the lease model that you operate, is it, is it fair to say that it's a very high variable cost business? And, and are you able to give us a sense of, I guess, what the, the, the fixed to variable splits in the operating cost base is? Yeah. Well, the way we're attacking that, Owen, is we're automating. So we're gonna automate wherever possible, so we can bring productivity into the process and control that variable cost. But yes, normally, as you would scale, you would expect costs to increase, but we're gonna attack it with automation. I mean, my understanding was a lot of that automation was actually going to be leased anyway, so essentially becomes more of a variable cost. Some of it is. We do have a... Yes, you did, right. We, the stuff we showed in Nashville was a per volume basis. Yes, that's correct. But I think there's, I think what Ingrid's talking about is we will end up turbocharging. I think there's two things about SLS going forward. One is, one is we will turbocharge automation because I think there's definitely productivity savings to be had there, where we can effectively use a leased facility 24 hours a day through automation. The other thing I would say is, moving forward, expect to see some additional expenditure going into R&D, because what we know for sure is that in 3 or 4 years' time, the DDR5s that are going in now are gonna come out, and they present a completely different challenge to DDR4s. Now, some of them are in liquid cooling. You know, that some of them are more sensitive. So we are going to spend some money on R&D to make sure that we've got a business here that, you know, has the potential to last for decades, because there's constant replenishment cycle with new equipment. Okay. Just one final question from me, for Warrick. Free cash flow conversion was quite weak during this period, and I understand there's often seasonal swings and trade swings. Just were there any sales booked very late in the period that you haven't received the cash flow yet? We always have some sales. I wouldn't say it's a material amount. I'd probably dispute the calls about free cash flow being weak. I mean, I think you have to sort of, you know, for us, you have to back out the amount, like, in our working capital, we, you know, we have to include the margin deposits. And, you know, we had, as I pointed out, you know, effectively, we had sort of $200 million sort of come through because of non-ferrous pricing. We managed to maintain our total working capital balance at around about, you know, pretty much the same level. So, you know, actually converting our activity into cash has actually been quite strong. So, like, if you take out that AUD 70-odd million that went into those margin deposits, you know, EBITDA to operating cash was, you know, pretty close to sort of 95%. So, I just- It's just timing. I guess what I'm getting at is just timing, and it should- Yeah should essentially rectify itself into the second half. Correct, because, yeah, those margin deposits, et cetera, will come back down. One thing I would add, and at the risk of, as Rob's got a great expression, breaking into jail. The one thing I would add to that, though, is that if non-ferrous prices keep rising, we see them keep rising and rising and rising, two things will happen. That will boost profitability, but it also puts, I mean, and we've always been honest, it puts more money into working capital. We've done a huge amount to hold our inventory levels, and I think Mark's right, we've done a great job. The team has done a great job in managing that. But, you know, rising non-ferrous prices boost profitability, but they absolutely increase our working capital requirements. So, you know, for the end of this year, at the end of 2026, we have another, you know, surge in prices and non-ferrous, you will see a similar thing happen. Sure. Just one final question on SLS. You talked about sort of that pricing, I guess, at a one month in advance. Is there a risk that you get a, I guess the opposite trajectory? I mean, if prices come back down, is there any exposure that you have to a falling pricing environment from an input cost perspective? Well, I think- Surely just revenue share. It's revenue share and service fees, so I don't think so, because it would flow through at this. So we're not, we don't take in. I think what your question is, do we take inventory risk? We- Basically, yeah. Yeah. There is a small amount, but it's not massive. You can't be perfect. It turns over pretty quick. Yeah. Yeah. Okay. That's great. Thanks. Thank you. Your next question comes from Harry Saunders, from ANP. Please go ahead. Morning. Thanks for taking my questions. I'll start off with NAM for the sake of variety. So came in ahead of guidance. I mean, anything you would call out to not sort of use this as a run rate for NAM in the second half, you know, given sort of current market conditions, perhaps? I'll let... You're right, we've got Rob in the room, and for the sake of variety, I think Rob's feeling a little unloved. Harry, no, I think you could safely say that, you know, as John said, we're only one month into our third quarter. The domestic market has increased twice in this third quarter for us, AUD 30 in January and another AUD 30 or so, depending on the grade. So some markets are good. Non-ferrous pricing is holding. If you recall, last year we had some severe weather where we operate. That is recurring this year as well with inbound flows. But I would say margins are gonna hold this year and we'll have a better third quarter than last. So probably fair to say, Rob, from an EBIT point of view, the impact of the cold weather has been nothing like it was- Not at all. Last year at all. Yeah. Right. So this implies overall, you know, a reasonable increase year-on-year in 2H EBIT. That's cool. I think that's a fair conclusion to draw, but I know Rob's comment. We're one month in. We're one month in. Right. Thank you. And I will go back to SLS now. I'm just wondering if you can outline the percentage of SLS revenue that is, that is reselled, that was 61% in the first half. Like, what is memory within that? DDR4 memory in particular. I think that comes back to Owen's question. We'll take that offline, Harry, and have a think about coming back to you on that. Yeah, well, obviously, to the extent we do disclose something, we'll disclose it to everybody, but it's... We're just grappling in our minds what is commercially sensitive and what is sensible to talk to everyone about, which doesn't impact our business with either, you know, our competitors or our customers. But let's get back on that one, so, and we'll definitely will. Okay, thanks. Then, I'm gonna ask this anyway, and I know you probably won't answer, but you know, if the memory price does hold at the current level and based on, you know, you were saying earlier, the repurpose versus resold or reuse versus resold units don't vary materially in percentage terms, you must have some idea of what the pricing benefit should be in the second half. So, I mean, can you talk through the potential benefit there in terms of quantifying, please? Yeah, well, holding—I mean, if you're right. If you hold all those, if you hold all of those things constant, you would expect the second half to be materially better than the first half, because the prices rose into the sec- into the first half, and if they carry into the second half, we're clearly going to have increased absolute resale. We will, without a doubt, volume is looking good, so you expect some increase in service fees. So that is, you... Yes, so if you hold all of that equal, you would expect a materially, a material improvement on the second half versus the first half. What we'll do in March is try and provide some additional guidance on, from what we're actually happening, where we think that number is. Okay, thanks. And then maybe just asking Brooke's question a different way. I mean, any reason not to look at Ireland as the 1 million annual units as a ratio of your existing, well, you did 5.3 in the first half, so call it 10 or 11 annualized, looking at that as just an EBIT ratio to, to unit? I think the mix is different. So to you, when you're looking at the whole business, and I think this is the correct answer, when you're looking at the whole business, which includes much more than just ... hyperscaler activity. So, it would skew higher than the business as a whole. Okay. Thank you. Last question, if I may, on SLS. Just wondering if you get a pricing benefit from customer reuse or if that's kind of a fixed dollar amount, so you're only benefiting on the actual resale percentage. And also just the revenue share. I mean, is there anything to stop customers lowering that percentage when the contract is eventually renewed? And are there any major renewals coming up? There aren't any major renewals coming up shortly. We're still another couple, 2, 3 years out on our existing contracts. So the service fee is a fixed percentage? Service fees are fixed, that's correct, and it's volume. Yeah. But Ingrid made a really interesting and valid point before, is that in terms of the service fee of putting it back in, it's—when a rack comes out, it's not 100% redeployed back into the unit. There is a substantial amount of those DDR4s that are not suitable to go back in, and they find their way to the resale market. So just because we're getting... Well, in fact, if we get more activity around the service revenue, we will pick up more resale revenue with that as well. Okay, thanks. I'll, I'll sneak one more in. Just, are you seeing any new competitors enter the market recently in SLS? Well, as you know, Stephen's mentioned before, it took us years to get here, and to get to the level of qualification with the clients, to make their technical specs, the security specs, data security. So we are not, at this moment, seeing anybody, any new entrants. It takes years just to achieve this. I think we've said it all along, our, our biggest competitors remain the hyperscalers doing it themselves- Mm-hmm ... or not doing it at all. Those are the- Yeah. That's where our next frontier. Great. Thank you. I'll leave it there. Thank you. Your next question comes from Scott Ryle, from Remer Equity Research. Please go ahead. Hi, thanks very much. I'm gonna start, if that's okay, on slide 22. And it's a question, I guess, for Rob and John. Specifically looking at the trading margin, just an observation first. Rob, I hope you're giving John a bit of a needle about beating him for the first time in five years or so, based on my numbers. And I guess my question for both of you, to Rob, is your aspiration to get your trading margin up towards SA Recycling over the medium term? And John, is that decline - I mean, you've spoken about the top line and the ferrous markets and non-ferrous markets. How much of an impact on the trading margin did the outage have in the first half phase? I'll go first. As I said, over the half, we actually managed to clear most of the inventory that was accumulated during the outage, so we've got a small amount of overhang that'll, will wash out in H2. So over the half, it was pretty much cleared. The, the other thing I should point out around trading margin is, you know, proportionately having higher non-ferrous volumes, and, and higher non-ferrous pricing actually impacts trading margin in percentage terms- Percentage, yeah ... as opposed to dollar per ton terms. So actually doing, you know, more volume at higher pricing in non-ferrous has a negative impact on trading margin percentage-wise. Beautiful. Okay. So is that, is it fair to say that's the biggest driver then, John? Sorry? Is it fair to say that that's the biggest driver- No, no, that- - the trading margin down? No, ferrous is extraordinarily challenging. Yeah. Yeah. Yeah, I guess, Scott, first of all, thank you for noticing that. A lot of work to the team. In terms of SA Recycling, they're a heck of a model to aspire to be. And I think the simple answer I can give you will be that, yes, through, you know, examples like TCT, the recent acquisition and some roadmap activity that is yet to be released to the market, some of the feeder yard bolt-ons that we've talked about over the last several years, that's where we differentiate with SA largely. They have, you know, more than twice as many shredders, and more than two times the feeder yards, where they're able to collect material at a much lower level of volume, but also at a higher margin. So, NAM in the past has been built on big cities, big populations. We can have something in the middle. So yes, there's more work to be done, and we're gonna, we're gonna continue clawing at it. Great. Thank you. And then my second question is predictably for Ingrid, but it's a bit different, I think. I guess what I'm wondering, just when you're planning your business, Ingrid, what is the visibility that you actually have on a rolling 6- or 12-month basis? And you mentioned there's about a 2-month lag of pricing. So do you—does that mean whatever the traded price is now, you're getting in 2 months, and therefore, in 3 months, you're not—you can take an educated guess, but you're not quite sure what the price will be? And then I guess the same for the units. Do you have pretty clear line of sight on a rolling 3- to 6-month basis, or is it-... longer based on your contracts that, you know, like what you've just done in Ireland. I'm just interested to hear how your business settings actually work. Well, Scott, a tool that we use, which you can also subscribe to, is trendforce.com. And that gives some visibility, certainly in this market, on the memory market pricing and so forth. Depending on the client, we do have some visibility because we're in their inventory systems, they're in our inventory system, so we can see the decommissioning cycle. So we don't necessarily know what's coming out of there, but we can see when racks will be decommissioned and come to us. So that does give us some planning visibility. Ingrid, it's probably fair to say that when it's varied from that, it tends to come earlier- Correct. Not later, is what we've found. Yeah. That's been our planning challenge, if something has arrived earlier than we do. Yeah. So when do you feel most comfortable with making, you know, 95% confidence interval as opposed to, say, 80% or something, or 75%? When—like, is it... Do you feel really confident on a three-month basis as opposed to 6, 12, you know, those sorts of things? I can say, and Ingrid, I'll let you even think. I, by definition, the price is something that two months out gives you a lack of confidence in terms of what it's actually going to be. We've got confidence around what we think drives it. So you know, when I look at our results, I feel pretty confident about what Ingrid's predicting, two, maybe three months out. Beyond that, there is just some variability of what you think the price is going to be, is probably the main variability. Ingrid can show me what the volumes are. I think three months out, we're reasonably confident volumes. Maybe it's gonna come in earlier, which is, I guess, why we think we've chosen the March... You know, the March date should give us some degree of confidence around additional guidance for June. I mean, whether it's at the 95% or 95% feels a little bit like a utility. We're not, we're not that, but it's certainly, it, you know, it's a, it's a, it's a reasonable level of confidence. Yeah. Okay. And so just with that in mind, and I know, you know, you've got very good reasons for having followed a customer to Ireland, but how... So how, when you go and spend the money, and I know what you're saying, Stephen, about R&D and automation and things like that, how do you get... You know, there's no business plan in the world that's riskless, but how do you get the confidence of, you know, at least making your minimum return on capital for that investment decision, please? Maybe, Warrick, you give, you think a lot about capital maybe. Well, I think, I think the beauty of the SLS model is it's capital light. So our investment there is, you know, in terms of, you know, is really around the lease commitment and how we structure that. So, you know, we obviously cater for that within the way in which we approach that. But, you know, from a capital investment perspective, it's actually, you know, it's a great model. It doesn't, you know, there's not a huge amount of capital that goes into it. Okay. That's fair enough. Okay, thank you. That's all I had. Thanks. Thank you. Your next question comes from Ramon Lazard from Jefferies. Please go ahead. Thanks, guys. Just a couple of questions on NAM and SA Recycling. Just on NAM, comments at the AGM for a meaningful step up into the second half. Could you maybe build on Harry's question around NAM and how to think about the second half, given the seasonality that we saw last year? And I guess what you're seeing there with the step up in non-ferrous pricing, what could we expect from NAM in that second half period? To me, it's around market. I'm gonna let Rob answer the question, but to me, it's around market pricing and, and our, our operations within that market. But Rob, you, you think about this all day, every day. Second half, you know, what, how do you feel about second half, and what's driving it differently from last year? Yeah, I would say this to you, the way we've structured, and I think, the presentation that you've been able to see, the pivot over towards domestic consumption, whether it's ferrous or non-ferrous, and having those customers, it's a self-hedging margin preservation. So I'm buying and selling in the same markets. The international side, we're optimizing, when it suits, and we're dramatically changing the compositions of our cargoes, you know, based on best prices by commodity. So, and non-ferrous resilience is there. I think the scarcity of copper and aluminum, and really the demand pull is, has been good. In terms of what Warrick mentioned earlier about construction spend, I think we're coming into the season in the next 45 days or so, where we'll start to see some more construction demand. The steel mills are running in the high 70% utilization rates. Their margins are tremendously good, and they're not gonna miss a heat, so they're looking for raw materials. We're looking pretty solid in the second half. Yeah, okay. I guess the step up in non-ferrous would have given you more confidence around that meaningful step up versus what you said at the AGM. Is that fair? ... I think, and unlike ANZ, I think in NAM, you need to be thinking about ferrous as well. So ferrous does give us, we do have some confidence in NAM ferrous as well, unlike, I mean, ANZ, we're fairly confident that China's going to keep depressed, and there's nothing going to happen in ANZ. Everything's about non-ferrous. NAM, you know, the shred, the domestic shred premium, the what we've done around our logistics to make sure that we can sell domestically, and that number I said before is quite amazing. You know, 85% of our East Coast shred went domestically. Two years ago, we would have been capable of doing 10%. So you know, the increased demand in EAFs, there's more EAFs that have come online. You know, Rob's right around the construction activity. So we are feeling reasonably good about ferrous as well in North America versus first half. Okay, that's helpful. And then SAR, I guess, pretty meaningful step up there in the first half versus PCP, and you're not that far off the strong second half 2025 result. I guess, how are you sort of framing that business into the, into the second half? Anything to think about in terms of headwinds or- I- costs or anything like that that could impact us? No, I don't think there is, Ramon. I think SAR will enjoy the same market structure that ANZ that NAM is. What I would add to it, they continue to produce a lot of Zorba, and we don't see Zorba coming off in any meaningful way. I think Zorba's strong. We don't see copper coming off. We don't see aluminum coming off. They have a good non-ferrous. So no, I'm not seeing headwinds in the second half versus the first half. But you're right, second half of last year was very, very strong for them. And that would be great if they could replicate that, but you know, we're one month in. Okay. All right, I'll leave it there. Thanks. Thanks. Thank you. Your next question comes from Charles Strong, from Jarden. Please go ahead. Hi, Stephen and team. I was just wondering whether you could quantify the impact of trading margins in percentage terms there has been from greater non-ferrous mix, whether at the regional level or across metals. Not specifically, but what I would say is, by definition, greater non-ferrous lowers our trading margin percentage because we make greater margin per ton on a much, much higher. So it's weird, when you're selling copper at, I don't know, $12,000-$13,000 a ton, your trading margin percentage is always gonna be lower because you're making more in absolute dollars. So if I should then say why I think that's been. Why NAM has done particularly well is despite that dynamic, NAM has actually grown its trading margin percentage, which I think goes back to Ramon's question a little bit, which has come from ferrous. It's grown up quite nicely. Thanks, Stephen. Just one more, if I might. You've had net corporate cost saves. Do you see any further opportunity there with outsourcing shared services or anything of the like? There's always opportunity. I think, you know what we've said before, we took, you know, a fair amount of cost out of the business, sort of a year, 18 months back. We did say that we would start to plateau in terms of those, major structural, changes to the business. But we're always looking for sort of cost out, but I'd say they're more on the fringe. And it's really about just sort of maintaining our cost levels, you know, at sort of current, current rates, at the moment, Charles. The only thing I would add on cost, Charles, is if non-ferrous was the hero of the result in many ways, costs were a pretty good support act. I mean, if you back out the variable costs that came from increased unprocessed and increased activity in SLS, the actual underlying cost base has performed really well in some, you know, some still pretty inflationary times. I agree with Warrick, it's a relentless. It's relentless, the cost program, and we will continue being relentless. But I think probably the major, major cost reduction programs, well, I think we're more continuous improvement now, Warrick, aren't we? Yep. Yep. Thanks, Warrick. Thanks, Stephen. I'll pass it on. Thank you. There are no further questions at this time. I'll now hand back to Mr. Mikkelsen for closing remarks. Well, thanks everyone for joining the call. Thank you for the interesting questions, very good questions, and I will see a number of you, or we will all see a number of you, over the coming days as we get out and about. Thanks very much. That does conclude our conference for today. Thank you for participating. You may now disconnect.

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