Barloworld Limited (BAW) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and thank you for joining us for Barloworld's annual results for the year ended 30th September 2023. I'm delighted to have you join us and the management team and mine is to just take you through the agenda. We will start off today with group highlights from our group CEO, Mr. Dominic Sewela, and as usual, he will be followed by Ms. Nopasika Lila, our Group FD to take us through the financial overview. We'll then be joined by our businesses, industrial equipment and services, starting first with Equipment Southern Africa, brought to you by Andronicca Masemola, the CE, followed by Equipment Eurasia with Mr. Emmy Leeka and after that, we'll go through to consumer industries where Chris Wierenga will take us through the performance for Ingrain. And then we'll go through a strategy update as usual in an outlook and take your questions thereafter. Gives me great pleasure to welcome Mr. Dominic Sewela. Thank you.

Thank you, Nwabisa. Good morning, ladies and gentlemen. I'm really pleased to present the sets of results for 2023 financial year-end. As per usual, it's important that we start with the ESG and as a purpose-led organization, we appreciate that sustained economic performance is only achieved through responsibly addressing social, environmental and governance issues. Our transparent reporting and accountability that have been recognized through ESG assessment and ratings including achieving -- achievement of 1 rating -- highest rating across environmental, social and governance for the ISS quality score. I think if I look at this illustration in terms of the bonds that we've issued last year, one on sustainability-linked bond of ZAR 2.1 billion and the gender link bond of ZAR 1.4 billion. These bonds leverage several of our material ESG priorities with our company targets. And I'm pleased that in this financial year, we exceeded all the targets we have set for ourselves and thus continuing to build a better world for all our stakeholders. And I must say, notwithstanding the challenging geographical environment in terms of macroeconomic issues largely punctuated by geopolitical tension, very unstable commodity prices, the results that we've delivered this year are pretty good in my standard. Overall, trading conditions across all operations have been great, notwithstanding the external environment. Revenue is up 14% to ZAR 45 billion. The EBITDA is up 15% from ZAR 4.8 billion to ZAR 5.5 billion. Operating profit margin has grown about 19% to ZAR 4.3 billion. This performance is supported by our efforts to optimize the balance sheet to ensure continuous value creation for our stakeholders. We have reduced our net debt to ZAR 668 million from the previous level of about ZAR 4.6 billion. This is attributable to the cash flow from operations of ZAR 2.7 billion inflow and as partly as attributable to unbundling of Avis in a rent a car last year. I'm pleased to say the Board of Barloworld has approved a final dividend of ZAR 3.00 per share, representing a total dividend for the year of ZAR 5.00 per share in respect of 2023 financial year. This represent about 8.7% growth relative to prior year. And I will hand over to Ms. Lila to sort of give us more color in terms of the results.

Thank you, Dominic. Ladies and gentlemen, welcome to the Barloworld results announcement for the financial year ended 30 September 2023. Another set of stellar performance delivered by the Barloworld group. And to highlight some, we look at revenue, which has improved and is up 14%. EBITDA up 15% and also an improvement in our group net debt, which has reduced by 86% to just under ZAR 700 million. Looking at the overview of our business, some strategic events that have taken place during the year, and that one needs to note as we review with the financials is the discontinued operations. You may recall that on the 13th of December 2022, we unbundled Avis rent a car as well as Avis Fleet. So therefore, it means in our results, we have 2 months and 13 days included. Logistics was successfully disposed of on the 31st of March 2023. On the revenue side, revenue from continued operations is up 14% at ZAR 45 billion. And compared to last year, it was at ZAR 39 billion. Operating profit. This is now from core trading activities, up 19% at ZAR 4.3 billion. The profit for the year is at ZAR 2.3 billion, representing an 11% improvement compared to the previous financial year. I will unpack the finance costs as well as tax in my later slides. Now moving on to the revenue by segment. We see very strong performance coming through from the Equipment Southern Africa business, up 35%, in line with the organic growth strategy. And Mongolia recovered well at up 59%, and the recovery from the previous year is as a result of the Chinese borders that opened for trade during the year. As expected, VT is behind compared to the previous year, however, better than budget. Also with Ingrain up 11%, and it benefited from the favorable prices and the exchange rate. Operating margin for the year improved from 9.3% to 9.6%. Equipment Southern Africa remained resilient, largely influenced by the sales mix with the higher contribution in new machines relative to aftermarket revenue. Mongolia operations, phenomenal performance as a result of the recovery. And therefore, the operating model -- margin looking exceptionally well there at 179%. Ingrains contribution margin was impacted by the high operating efficiency losses and low agriculture -- low agri product realization. Now analyzing the finance costs, the improvement in the current year, it's actually, the movement in the current year is attributable to the increase in the cost of funding. Also, the average increase in investment -- invested capital, apologies there, as well as a foreign currency impact. On the tax side, what impacted us there was volatility in the currency, and this was primarily in Russia, Mongolia as well as Malawi. As well as the release of the deferred tax asset. You will also observe that there is an impairment that has gone through, and that is solidly as a result of our SMD business. On the associates and joint ventures, a remarkable recovery came through from Bartrac, up 56% compared to the previous year. And they continue to perform well on the back of the turnaround strategy that was implemented in 2021. I'll pause on this particular point and allow Andronicca to talk about this at a later stage. NMI remained resilient, considering the fact that their revenue increased by 11%. And they were negatively impacted by the interest rates as well as a reduction in the margins from used vehicles because we saw that the new vehicle market recovered quite well during the year. Now this resulted in the profit after tax, reducing by 47% compared to prior year for the business. BHBW recovered well as well and they benefited from the improvement in the agricultural market during 2023. Now moving on to our headline earnings per share. Headline earnings per share from continued operation is up 5% compared to the previous year. Now the key contributor is, again, Mongolia that performed exceptionally well and contributed to the improvement and increase in that headline earnings. As you can see, their contribution alone was ZAR 2.39. Now on the balance sheet, our balance sheet remains strong, and it reflects an improvement in the working capital as well as the net debt. Now as such, the business is well positioned for future growth prospects. On the free cash flow, now together with our growth, we generated ZAR 2.7 billion free cash flow for the year. The unbundling of Avis, as I've mentioned, released 2.1% from the debt that we had reported at this time in the previous financial year. Zeda loan was fully repaid during the financial year. Now on the group net debt, as I've mentioned, the ZAR 4.6 billion included debt from businesses that were disposed during the year. On the net debt, it reduced primarily because of the strong cash management. And this then resulted in us ending our gross net debt at ZAR 668 million, great improvement compared to the previous financial year. An interesting point to note on our gross debt is that we have ZAR 2 billion in that number, which is linked specifically to the bonded properties in Khula Sizwe. If we had to adjust for the ZAR 2 billion, we would have ended in a net cash position of ZAR 1.4 billion. Our continued focus on reducing the gross debt is evident in our numbers. And we will continue to do so as debt matures and repay the debt until it reaches the levels that we do forecast as a business. Moving on to the group covenants. The group remains well above its covenants and this is indicative of the financial health and strong performance of the organization. ROIC, which is our return on equity improved from 17.7% to 18.6% in the current period. And ROE and ROIC improved from 16.9% to 17.7%. Now both of these metrics exceed our weighted cost of capital, which is currently at 14%. As Dominic has alluded earlier, another set of good news, the Board has declared a dividend of ZAR 3.00 for the final period. And this ZAR 3.00 added to what we did declare at interim is then what adds up to the ZAR 5.00 that would have declared for the year. Compared to the previous year, we had declared ZAR 4.60. So that's another 8.7% increase compared to the prior year. Now this dividend that we do declare is achieving the covenants in terms of our dividend policy, which is at 2.5x. With that, I'd like to thank you and hand over to Andronicca Masemola.

Thank you, Nopasika. Good morning, ladies and gentlemen. It gives me great pleasure to deliver Barloworld Equipment Southern Africa results for the financial year ending September 2023. The division delivered solid results while navigating tough macroeconomic conditions. Revenue was up 35% at ZAR 29.5 billion, mainly driven by strong machine sales growth, up 57% and part sales up 24% compared to prior year. Operating profit after fair value adjustments was up 19% at ZAR 2.5 billion, and EBITDA was up 16% at ZAR 3.2 billion. Bartrac JV exceeded our expectations and delivered positive share of profit, and I'll unpack this at a later stage. Cash generated was ZAR 1.2 billion, a good result considering that high levels of inventory were maintained to support the growth and manage the long lead times. Return on invested capital is at a record high of 25.5%. New equipment sales were strong across all customer segments increasing by 69% on prior year to ZAR 13.7 billion, driven mainly by mining, machine replacement cycle, civil works related to power and water projects and power solutions to close the demand and supply gap, particularly in South Africa. Both mining and construction machine sales were up 107%, contract mining equipment was up 17% and energy & transportation, up 117%. Total mining sales contribution reduced from prior year of 70% contribution to 63% this year, while construction increased from 25% to 31%. And energy & transportation contribution was up 1%, ending at a total 6% contribution. Our exposure to diverse commodity mix serve as a defense to cyclicality as evident in the change in commodity mix year-on-year. Due to the strong machine sales contribution, operating margin before fair value adjustments was 9%, softer on last year, while operating profit after fair value adjustments was at 8.5%. We expect these margins to improve going forward as the mix changes to a more favorable after sales. If you look at this chart, in 2014, the year where machine contribution was at the highest. You can see post that year, aftersales revenue increasing and staying at those levels even in the years when machine sales contribution was lower. This talks to our model of seeding machines and harvesting aftersales. Bartrac continued to deliver steady growth post the turnaround plan, which was launched in 2020, delivering a share of profit of ZAR 223 million, up 37% in U.S. dollars compared to prior year. The increase was primarily driven by aftersales mix, and we expect this aftersales to continue into 2024 as the JV continues to deliver the rebuild program for the 2 large mining customers. Moving on to the outlook. Mining equipment industry is expected to slow down in 2024 on the back of slow commodity demand and weak commodity prices. We are optimistic, however, on construction, and we expect this segment to grow. Although this growth is not reflected in our order book since we generally cannot stock for construction segment. Energy & Transportation is a key growth focus area for us. And aftersales opportunities have increased on the back of machine population that we've installed over the years. We will continue to leverage on technology to improve customer experience and drive services growth. The order book at ZAR 3.5 billion is lower than prior year. However, this balance is still above the averages that we saw before the beginning of the replacement cycle in 2021. We are delivering on our focus areas. We have grown machine population. We are growing services. Customer net loyalty score is telling us that customer experience is improving. We will continue to drive this focus areas while we enhance technical skills, focus on digitizing our processes and drive execution through the BBS culture of continuous improvement. Thank you. I will hand over to Emmy Leeka, the CEO of Eurasia.

Thank you, Andronicca. Good morning, and thank you for joining us this morning. Equipment Eurasia had a strong 2023, supported by stellar results from Mongolia, but also a better-than-expected performance from [ Foster technical ]. The division delivered ZAR 8.2 billion in revenue which was 23% below prior year. Favorable trading margins were generated, driven by good margin realization, cost containment as well as high aftermarket mix. The division generated ZAR 1.4 billion in operating profit, 21% improvement on prior year. Positive cash generation of ZAR 2.2 billion when you look at the free cash to EBITDA conversion, it came out at 141%. Returns remained well above 20%, with ROIC at 33.1%. Aftermarket contribution remained healthy and improved to 62% mainly due to VT's reduced prime product sales. And the aftermarket, if you look at VT only, improved to 67% with Mongolia at 56%. We anticipate fluctuations with the mix by the timing of all the greenfield projects opportunities in Mongolia. Now taking a look at the new equipment revenue on the left-hand side of the chart, new equipment sales to mining sector were sustained above 60% with increase in infrastructure from 19% to 23%. Total revenue contribution by commodities and different asset classes, although gold continued to be the main contributor to the revenue at 32%, coal remained an important contributor in Eurasia region, increasing from 26% to 29%, followed by copper and nickel, from 9% to 12%. Construction remained at 12%. Ladies and gentlemen, we remain resolute, resilient and relentlessly executing on our strategy. With a higher customer concentration in Mongolia, we are looking at ways how we can diversify our customer base but given the footprint that we have within Siberia, looking at other opportunities, while top of mind, we ensure compliance is there. Cost containment will be key for us to realize operating profit margins above 13%. Paramount for us, for profitable growth, we have to capture all the opportunities in Mongolia and deliver on services growth plans in both territories. At the center of it all, it's about the business continuous improvement methodology, as alluded by Andronicca BBS, where we want to improve our cost to [ sell ], reduce our turnaround time, enhance our customer and employee experience but also while sustaining our returns. Now coming to the outlook. As a countermeasure of what is happening in Siberia, we will capitalize on the growth in Mongolia. Ladies and gentlemen, we have unmatched footprint in both regions. We will use this to enhance our product support and continue to focus on operational excellence and e-commerce. We ended the year with a very, very strong firm order book sitting at USD 113 million, post balance sheet of USD 14 million in total USD 127 million, of which Mongolia contributed 97% and when we look back in 2020, when we acquired this business, coincidently, the order book was USD 113 million. Contribution from Mongolia, Zero. In 2021, the contribution was 12%, followed by 2022, where we had challenges with the borders and other challenges as well. The contribution from Mongolia was sitting at 39%. We remain committed to our growth agenda and superior returns. With that, I thank you, and I would like to hand over to Chris.

Thank you, Emmy. Good morning, ladies and gentlemen. It gives me pleasure to talk to you about the results for Ingrain for the last 12 months. We've had a challenging period operationally, but still see good demand for our products in both the domestic and export markets as well. Looking at the financial performance, revenues very pleasingly up by 11% compared to the prior period. Although the operating challenges that we've seen are reflected in the decline in EBITDA and operating profit and consequently, the margin where efficiency losses pull those margins down in the second half. Our cash generation remains very healthy in this business, despite the higher working capital required as a result of increasing prices, increased interest rates in the local economy and our continued investment in PPE to support the current and future growth and performance of our plants. If we have a look at the revenue for the business, it's been pretty stable over the 2 years. We've seen domestic sales hold up well despite the production challenges that we've spoken about. Our agri revenues have been impacted by lower edible oil prices and then also lower volumes as a result of the challenges we experienced at the Germiston mill. Our exports and revenue was in line with the prior period. Just focusing on the domestic sales sector. You can see a slight decline in domestic sales. Alcoholic beverages was up. The confectionery sector was up, and we're very pleased with the progress that we're making in those 2 segments. The coffee creamers sector continues to show some marginal declines that we've seen since 2021. I think as we're seeing consumer pressure in that particular segment coming through in discretionary spend, and then the paper and packaging sector was down slightly as a result of lower volumes of fruit exports out of the Western Cape in the second half. On the agri product side, you can see the effects of lower agri product realizations from the production side and the mixes are certainly not optimal, given some of the issues we've experienced in the period. Turning our attention to the operational performance of the plants. There's some good news to unpack here for us despite some of the challenges we've discussed. For the 6 months to the end of September, we recorded 0 LTIs. So our focus on safety and well-being certainly coming through in our operations. Then the Kliprivier mill, which was built in 1998 has seen its highest grind in the last 12 months in excess of 300,000 tonnes, and that's certainly been a record achievement from the team at Kliprivier. Belville in the Western Cape has also seen a record grind, and that bodes well for that mill's future performance and serving regional customers as well as possible exports into the future. So we're very pleased with the performance that we've seen there and Meyerton as also seen some good ground performance in the wet mill environment. The challenges of Germiston, I'd like to highlight them in the first half, we saw a 20,000-tonne reduction in that particular mill. And then you can see the performance recovery come through in the second half, albeit not at the levels that we would have seen in the prior year. Those are areas of focus that we continue to work on in this business. So talking about those, we are continuing to work on our overall safety and well-being program. The improvements in efficiency through both BBS and then also the deployment of digital tools and digitization to assist in driving efficiencies is critical to the ongoing sustainment of this business. We remain committed to a comprehensive capital investment program in line with our prior guidance of spending our depreciation and amortization on new CapEx into the business. And we've also continued to invest in planned maintenance and maintenance programs in the business during the year and that has seen further investments made in that particular area. As we're very focused on cash in the business, we continue to watch that very, very carefully and also managing our commodity price exposure through a comprehensive hedging program. Just turning to sustainable development. The business uses a lot of coal and a lot of water in our operations. And in the short to medium term, we'll continue to look at ways to optimize water usage and also through closing the loop on some of our process water efficiency and then also initiatives aimed at reducing the coal burn in our boilers and improving the operating efficiency of those boilers will certainly start yielding additional benefits for the business. So looking at the outlook for the business. I think the macros in South Africa are fairly well understood. We are seeing inflationary pressures in the consumer and also higher interest rates will continue to impact our end user markets for our various manufacturers. However, we see the short-term favorable commodity prices should bode well for the first 6 months of this financial year. I think what we will also take note of is that utility cost increases remain well above inflation in this business. But at the moment, we're able to pass those on to our customers and we'll continue to look at ways of optimizing those cost increases so that we do not place too much input inflation into the overall supply chain. Also worth noting that we've secured sufficient maize to meet our FY 2024 requirements going into a slightly drier segment in 2024. I think just on that as well, our customers are still experiencing some load curtailment and then also intimate water shortages as a result of some of the challenging infrastructure downstream. Addressing the business' operational excellence in the coming 12 to 24 months. We should see the benefits continue to be realized out of BBS as well as some of the digital transformation initiatives underway. And also acutely in focus will be reducing the efficiency losses in the business so we can get on top of the issues that we're facing. We think we've got those in hand, and we'll continue to monitor those closely into the year ahead. Looking at growth. We're very pleased that during the second half of this year, we've developed a comprehensive import program to look at certain lines that we manufacture, where we've got excess demand and the ability to leverage our supply chain and network to be able to grow volumes and serve our customers better. And at the same time, our investments into the new laboratories in the business will see us being able to take on additional ingredients and sending those to our customers well to find some additional growth for this particular business. As usual, we expect to see continued benefits coming through from our capital investment program as we continue to invest for the long-term future of this particular business. So with that, I'd like to call on Dominic to come and close us out on strategy and the outlook for the group. Thank you.

I think since 2017, we've really embarked on a significant journey in terms of our strategy, our fix, optimize and grow strategy underpin through our portfolio guardrails capital allocation framework. We've implemented a deliberate and determined strategy to try and trim the business to make sure that we are able to build a business on solid foundation in terms of what we wanted to see in terms of the assets that we have. We have delivered in terms of the strong balance sheet. And this has been achieved through prudent management that has enabled us to take advantage of opportunities as presented either by things like at this connect in terms of intrinsic value and market value where we are able to embark on buybacks are similarly where it made sense to find assets that we could acquire, we're able to pursue that. And I think in terms of cash generation, as I'll show you some of the slides, we've been very disciplined in ensuring that the focus on cash is something that we understand that it delivers value for investors. And -- but more importantly, it was very important that we simplify the portfolio and create that focus into these 2 verticals that we've identified being industrial equipment and services as well as consumer industries. That delivery strategy, I think, is well illustrated in this graph that you see if you look from about 2016 or 2017, where by getting rid of those businesses that were detracting from value creation such as Iberia that we disposed in 2019 -- in 2018 rather. And similarly, we followed by selling motor retail, albeit 50%, but we're able to deconsolidate that. And subsequently, we're able to also unbundle Avis and sell logistics in 2023. But at the same time, we're then able to acquire 2 good business in Mongolia, as Emmy has already covered it as well as Chris with consumers. And that you can actually see in terms of the EBIT uplift in this business. This was very significant because I think 2020, you all know, it's been a very difficult year, but you can see that we are able to take the EBIT from around 6% to about 10% EBIT margin for this business. And similarly, on the free cash flow, you can actually see that we have been averaging around 50% or 49% prior to 2020. But you've seen a very big uplift in cash flow if you adjust for, let's say, acquisition of Mongolia, had we not acquired Mongolia, the cash conversion would be about 74%. And in 2021, where we acquired Ingrain, if you adjust for that, that cash flow would have been about -- conversion will be about 108%. But what's pleasing though is that on continuing operations, you've seen that trend upward to about up to 58.2%. And it's at the back of having invested a lot of money in working capital for organic growth in Equipment Southern Africa, in particular, we see a good delivery in terms of free cash conversion. As we allocated capital in terms of buybacks that were very, very accretive in terms of earnings as well as returns, you can actually see continuing operation HEPS, it is a steadily growth year-on-year in terms of HEPS. But when you look at then the return of capital back to shareholders, be in the form of special divs and dividends, buybacks and even the dividend in specie, we've seen us deliver a TSR of about 125% from about 2020. And if you want to look at it slightly differently, in 2017, end of September, the market cap of this business was about ZAR 26.2 billion. When you look at the ZAR 15.5 billion that we've returned back to the shareholders, it represents about 59% of that market cap. So from a value point of view, these figures basically demonstrate something that's not disputable. I think when you look at returns, as I spoke about, when you allocate capital accordingly, yes, over the last 6 years or so, we've seen a CAGR in terms of ROE about 12% and 9% CAGR in terms of ROIC over that period. But as I said, the significant shift you see it, as we began aggressively disposing of those assets that were detracting to value, the CAGR in terms of ROE is about 23% and in ROIC is about 25%. As I said, results speaks volume about Barloworld committing to staying true to its long-term vision. We are a business focus on creating sustainable future and continue to prioritize creating and delivering value to all our stakeholders. Despite several headwinds, as a group, we recognize the importance of having a firm grip on what we can control because a lot of things that happens around externalities that we can't control. But those things that we're focusing on are very important. As we look ahead, we anticipate the external factors to prevail for the foreseeable future. In terms of cyclicality on commodity prices, geopolitical challenges in various geographies that could actually impact basically global growth. But notwithstanding what we can control is things like aftersales in businesses as we've now increased the population of machines through delivering over the last 2 years in Equipment Southern Africa, we will be able to harvest those. And that will actually improve our profit margins and make sure that our results remain resilient. I think Emmy spoke to Equipment Eurasia. But I think it's important, whilst we gave a guidance around our Russian operation to be at breakeven. It's amazing that the team there has put their head down to really start looking and saying, how do they ensure loyalty of those customers that continue to support our business, particularly on the aftermarket side because there's no product to sell in that market but to continue the loyalty of those customers. So my view is that we'll continue to see the team deliver better-than-expected results. But on Mongolia side, the whole diversification from a concentration of customer risk is something that we will drive, as indicated by the order book in that business. I think Chris spoke about the challenges in the business. And I'm pleased to see that as you deepen the BBS in that environment Chris has displayed in terms of the grinding various mills and also the challenges we've had in Germiston, we're going to be able to see that business turn but also focusing on saying the export market, what opportunities it presents and other opportunities. I'll pause here just to take questions. If there are any online.

Thank you very much. We'll start with one from [ A.J.'s Naman ]. He want some clarification, how much of the one-off benefit of obsolete parts disposal added to Mongolia's U.S. dollar operating profit, he says it will be useful to form a view of what a sustainable margin is for this business going forward. Now I know the Eurasia team has told me that their sustainable margin is above 13%. So I don't know if you want to add anything.

Yes. I guess when you look at a sustainable margin is in around that area. So I think as you see, the order book increase, that margin will sort of trace back to about 13% to 15%.

[indiscernible] wants to know, given the increase in new equipment sales in the mining sector for replacement cycles, what are the sustainable levels that we may expect going forward? And furthermore, what is driving the increase in construction sales? And may we expect this to be sustainable going forward?

I think Andronicca, you can -- want to elaborate further, I think you did touch on the energy in civils, but maybe you want to just expand further.

Thanks for that question. Our assumption is that in the next year, the mining equipment industry will drop between 10% to 15%. Having said that, we are encouraged by the activity that we're seeing in the construction space. Confidence level in that segment has gone up. We are also seeing an increase in our customer order book. The projects that are key that we're looking at really is around road rehabilitation in South Africa, the N2, N3 corridor. In Angola, the Lobito Rail project is creating opportunities. And we're also anticipating that the [ Palmer Gas ] project will resume somewhere next year, and that will drive the demand for construction equipment.

We'll now move to [indiscernible] at 361. Was that a good result in terms of Equipment Southern Africa business, do you expect growth in construction in E&T and aftermarket to offset the slowdown in mining equipment?

Yes. I think we've covered that element. Certainly, I think the E&T is an area where Andronicca, you're looking at, do you want to expand on that, on the E&T specifically?

On E&T, we haven't been playing that much in the retail segment, and we are looking at exploring that area. We've been mainly serving B2B customers, customers that are really dependent on power supply to do business. And we are seeing great opportunities in the telecom space, in the data centers as well and some of our mining customers Thanks.

I'll cover two for Ingrain. In terms of the Ingrain business, what are the time lines in terms of CapEx investments? And how this may translate to an improved operating margin in the business? Is there a targeted operating margin for Ingrain and that's from [indiscernible] . Marc Te-Mors wants to know, could you provide more details to the issues at the Germiston plant and what investment will be committed to address efficiencies?

Thank you. I think through the cycle, we've signaled that we'd like to see margins at the operating level of between 11% and 13% in the business, and we're aiming to get there over the next 24 months. In terms of the Germiston issue specifically, we're -- addressed those through our normal capital program, and in the second 6 months, we've already deployed around ZAR 40 million on a new term dryer and a separator in the wet mill. And now our attention is on the planned maintenance improvements in this plant. And then also just looking for balancing the overall plant and getting the process improvements that we need to get us back to our standard costing in the business.