BlueScope Steel Limited (BSL.AX) Earnings Call Transcript & Summary

Good morning, and welcome to BlueScope's FY '25 Financial Results Presentation. I'm Mark Vassella, and I'm joined this morning by David Fallu, our Chief Financial Officer. David and I will take you through the results materials, then we'll open it up for Q&A. We're joining you today from BlueScope's head office in Melbourne, part of the Eastern Kulin Nation. I'd like to acknowledge the traditional custodians of this land, the Wurundjeri Peoples. We pay our respects to elders, past, present and emerging and to all First Nations people joining us today. To the highlights. FY '25 was a challenging year, but one way BlueScope executed well and continued to make progress. Despite volatility in U.S. spreads and trade policies and cyclically soft conditions in Asia, driven by record steel exports from China, the group delivered a resilient result. Underpinned by our diversified portfolio and multi-domestic strategy, we recorded $738 million in underlying EBIT and a return on invested capital of 6.2%. We made great progress on our cost and productivity program, continued to advance major capital projects targeting $500 million in annual earnings growth by 2030 and positioned our strategic property portfolio to realize value starting in FY '26. We also continued to drive cultural and operational improvements through our global refocus on safety program and made solid strides in our decarbonization initiatives. Our financial headlines. Underlying EBIT of $738 million was lower than FY '24, mainly due to lower steel spreads. We maintained a strong balance sheet, finishing the year with $28 million net debt. During the year, we returned $293 million to shareholders through dividends and buybacks. And the Board today has approved a 50% franked final dividend of $0.30 per share and extended the buyback program to allow it to be used over the next 12 months. Disappointingly, there's been a delay in achieving our expectations of the BlueScope Coated Products business, which we acquired in 2022 and an impairment of $439 million has been recorded. This business remains core to our North American growth strategy, and we continue to invest in the turnaround of the business. Now these results would not be possible without the ongoing hard work and capability of the entire BlueScope team who I again thank for their dedication and support. And David will take you through the individual business performance in detail shortly. To safety. Over the last year, our global refocus on safety program has driven cultural and operational improvements. While our TRIFR improved to 8.5, this still remains above our long-term target range. We continue to embed a culture of care, learning and accountability with over 1,300 employees participating in HSE learning programs, and we completed 192 critical risk control projects. Across the group, we're recommitting to our safety basics and freeing up our leaders to spend time on the plant floor, supporting their teams in operationalizing the refocus. This is manifesting itself in stop for safety events where critical risks are reviewed and Blueline/Blackline assessment are worked through with our frontline operators. We're then taking those learnings and applying them across the network. Despite this effort, some of our people suffered life-changing injuries with significant impact on them, their families and our people. This is something we're absolutely committed to addressing. We continue to progress on climate change. While we recognize there will be volatility along the way, we've been pleased to make further progress in reducing emissions intensity during FY '25. Driven by higher volumes at North Star and efficiencies at Glenbrook and Port Kembla, steelmaking emissions intensity declined to 1.41 tonnes per tonne of steel, making a cumulative 14% decline since FY '18. We progressed Project NeoSmelt, including the announcement of Woodside and Mitsui as new partners to the project, and work is continuing on our Australian DRI option study. Further, in New Zealand, construction of the new electric arc furnace at our operations in Glenbrook remains on track for the commencement of commissioning by the end of this calendar year. We continue to also focus on our broader material sustainability topics. Female workforce participation remained at 25%, and we continue ensuring the sustainability of our supply chain. We held stakeholder forums and webinars to strengthen responsible sourcing and climate action across our supply chain. Now turning to the group outlook. We're entering FY '26 with confidence. Underlying EBIT in the first half of FY '26 is expected to be better than the second half of FY '25 and in the range of $550 million to $620 million, subject to spread, foreign exchange and market conditions. Improved spreads in the U.S. are the key driver of this, together with the benefits from the group-wide cost and productivity program. Before we get into the detail of the results, I'll take a moment to revisit our growth and performance objectives. When we delivered our half year results 6 months ago, we set out detail on how we're positioning BlueScope for better near-term performance and how our initiatives and investments are going to deliver growth through to 2030. This page provides a good overall summary, but I'd like to address the key elements specifically. Starting with the near term. In October last year, we communicated a target of $200 million of cost and productivity improvements by FY '26. I'm pleased to report that across our businesses, good progress has been made during the year with net savings of $130 million achieved on a like-for-like basis when compared with our FY '24 cost base. These savings have been derived across a range of areas, but predominantly in direct manufacturing and raw material costs. $200 million or more of net savings continues to be our goal, and we expect that to be broadly evenly split across North America, Australia and the rest of the portfolio. On the cash front, we're continuing to target a reduction in working capital of $200 million to $300 million by the end of this financial year. This will exclude the transitional inventory accumulation associated with 6 blast furnace reline commissioning. Part of the benefit will be achieved as we realize projects and land stock in BlueScope Properties Group with a wind down in activity, and David will address that shortly. Looking further ahead to 2030, BlueScope has a range of initiatives and investments underway to drive sustainable earnings and growth. We're targeting $500 million in incremental EBIT from our growth initiatives. This includes North Star debottlenecking, COLORBOND and TRUECORE volume growth, ASEAN volume recovery and opportunities from the transition in New Zealand to an electric arc furnace model. Pleasingly, all regions are contributing to this growth ambition. There's obviously been significant change in trade policy and geopolitics in the last year. Despite this volatility, in my view, North America remains the most attractive steel market in the world, and we continue to believe the U.S. is a great place to focus on and continue investing in. There's clearly a pro business and pro manufacturing environment in the U.S. The increase of steel Section 232 tariffs in June reinforced the administration's commitment to domestic steelmaking and other companies and countries are taking that into account when making investment decisions. The tax elements of the One Big Beautiful Bill are a significant positive for manufacturing and therefore, still demand. The tariff-based support of assembling vehicles onshore is also a potential tailwind to manufacturing as this is one of the largest sectors for steel use. And electricity prices, whilst rising remain globally very competitive. Whilst the significant trade policy changes has resulted in higher uncertainty and volatility in the short term, with some impact on demand, we seem to be moving through that. With the longer-term fundamentals for the North American steel market well supported to underpin activity, growth and further investment. I'd like to call out the write-down in BCP. This has been a very disappointing transition. The integration has been more problematic and taken longer than I had anticipated. The negative impact of that is being recognized in my STI for the year. It was my call and responsibility. Having said that, I fundamentally believe we've acquired a base that will provide great opportunity for growth in the medium to longer term. This is a business we know and make money out of around the world. And it's in an advantaged market, as I've just described to you. I've got no doubt these assets will turn around and contribute to our growth in North America in the future. Focusing now on our land opportunities. We have a 1,200 hectare portfolio with about 1,000 hectares of adjacent strategic land, which is under careful review for value realization. The sites have significant value with locations near key activity centers and port, rail and electrical interconnector access. Potential use cases include energy, data centers, logistics, and other aligned businesses together with social infrastructure. An early example of progress is the agreement we've reached with New Zealand energy operators to install a grid-scale battery energy storage system at our Glenbrook site. Recognizing the strategic significance of the site with no capital outlay, this arrangement over 5 hectares of our land will generate $4.5 million per annum over an extended lease term. With our Head of Property development now on board, we have increased capability to accelerate opportunities for value creation and realization with a focus on stage development and retaining flexibility and control of our strategic assets. An immediate and major land opportunity is the 200-hectare West Dapto site, some distance from the steelworks in the Illawarra. As we've previously flagged, we're targeting value realization from 33 hectares of zoned residential land at the western end of this site with a potential for 350 to 400 housing lots. We're advancing terms of agreement with a national car import logistics operator to build and lease a 14-hectare hardstand facility. The development cost is expected to be funded by the proceeds from the residential land divestment. And the lease should provide around $7 million of annual income and again, points to the significant value in the site. We also have other industrials owned land on the site that has great value potential given its advantaged infrastructure, and we're reviewing appropriate opportunities to achieve value for this land. As many of you will have seen, we've been monitoring developments at Whyalla for some time. Not only is this the only domestic manufacturer of certain types of heavy long products. Importantly, it's a prospective location for future production of low emissions iron. With the transition into administration, we were asked to assist as a technical adviser to the administrator. A small group of our senior people from Port Kembla have spent many weeks over the past 6 months carrying out this assessment. Two weeks ago, we announced that we had formed a consortium with Nippon Steel, JSW from India and POSCO to review options for the assets through the process the administrator is commencing. The consortium has submitted a nonbinding expression of interest. We will leverage our detailed knowledge of the Australian steel industry and the Whyalla assets as the consortium assesses potential options, opportunities and capital requirements, particularly around the potential for a future direct reduced iron production and export hub. We'll also engage with the South Australian and federal governments regarding the announced funding support to maintain a sustainable steel industry in the region and the form that, that might take. Any decision to make an offer to acquire and develop Whyalla would be subject to the consortium members return on investment hurdles. Now there's a considerable amount of work involved here. And in this process could take some time to work through. So bear with us and we'll keep you updated as appropriate. Before handing over to David, I want to highlight a critical issue threatening the future of Australian manufacturing, energy costs. I've been warning about Australia's energy crisis for over a decade. Today, the situation is more dire than ever. Manufacturing is at a tipping point with energy prices that are no longer just too high, but unsustainable. What was once our competitive edge has gone. At BlueScope, we see energy costs across our global footprint. Australia is 3 to 4x more expensive than the U.S. Last Friday, we made a submission to the federal government's Commonwealth gas market review, and we, more than any company in Australia wholeheartedly endorse the Prime Minister's future made in Australia vision. We're supporting that by investing billions of dollars in capital through our blast furnace reline, MCL7 and plate mill upgrade. But without immediate intervention in the East Coast gas market, there will be no future made in Australia. Here's what we're contending with. We're a major gas user today. And to decarbonize steelmaking at Port Kembla in the future, we'll need 10x more gas than we purchased today. That shift would cut our emissions by 60% or 3.6 million tonnes of carbon per year, more than any other industry, while supporting high-value regional jobs and sovereign steelmaking capability. But Australia doesn't have a functioning domestic gas market. Since 2015, LNG exports have gathered liquidity and driven prices up by nearly 300%. We prioritize exports over domestic supply, both industrial and retail. That's just madness. We need immediate intervention to save industry and lower prices for all Australians, businesses and households. That means redirecting uncontracted LNG spot cargoes to the domestic market at competitive prices. And let me be very clear about this. This does not increase our sovereign risk. Restricting exporters from buying domestic gas for reexport and prioritizing domestic supply over LNG imports. In what world does exporting LNG in massive quantities only to reimport it to supply a shorter domestic market makes sense. As the Energy Users Association CEO, Andrew Richard said, this is like importing sand in the Sahara, and we need to strengthen and enforce the instruments the government already has in place. Beyond this immediate action, we need proper structural reform. We need a permanent domestic gas reservation and price mechanism. This is not radical. It's common practice around the world. We need a market design that boosts liquidity and transparency, and these need to be simple, effective and enduring reforms with ACCC oversight and proactive engagement. Now I've been around long enough to see the highs and lows of our industry. We've reduced capacity in the face of massive oversupply of steel globally from China. We reduced costs, increased productivity and we've grown our premium products like COLORBOND and expanded geographically to the U.S. to increase our resilience, and we worked our way through the COVID crisis. If we truly want a future made in Australia, and I believe that is possible, we must act now before it's too late. I'll now hand you over to David, who will take you through the FY '25 results in detail.

Thanks, Mark, and good morning, everyone. Let's turn to the results across our region for the year, starting with Australia. The Australian business delivered an underlying EBIT of $262 million in FY '25 and a return on invested capital of 6.2%. Domestic dispatches were stronger compared to FY '24, particularly driven by the residential construction segments. COLORBOND steel sales remained at historically high levels, slightly weaker realized spread and higher conversion costs weighed on the full year results. Cost escalation across energy and labor remains a significant challenge for the Australian business. With timing of implementation and realization of cost improvement initiatives, unable to offset these step change increases in the same time frame. Looking at the specific end-use segments for ASP on the next slide. Across the board, we saw stronger dispatches in the financial year compared to FY '24. The higher result was driven primarily by the dwelling construction segment, including robust alterations and additions activity. The nonresidential construction and manufacturing sectors also contributed to the stronger result in the year. We remain confident in the fundamentals supporting the medium-term outlook and the ongoing shortage of housing stock, combined with interest rate and policy support. ASP business conditions in FY '25 continue to highlight the importance of driving cost efficiency in our steelmaking operations and a focus on growth in domestic value-added products to support mid-cycle ROIC. The business continues to focus on our Australian steelmaking cost base with the necessary ambition for it to be cash breakeven, including sustaining CapEx at the bottom of the cycle. In Australia's relatively high cost operating environment, driven by labor, energy and broader import costs, it requires ongoing optimization of our cost base each and every year. The escalations we're seeing in Australia mean that we are not where we need to be today, but we're confident that continuous execution of our identified initiatives will address this. The shift of volumes into the domestic market and up the margin curve towards value-added products shown in slides here is an ongoing focus and supports through-cycle margins. The criticality of this domestic strategy has only become even more important with the current unavailability of opportunities to export to the more attractive markets associated with North America, an elevated level of China exports continuing to depress markets outside of North America. With these priorities, we continue to position ASP in the upper band of the chart on the right-hand side of the slide, which is necessary to have confidence to invest through the cycle within the ASP business. Our North America business produced underlying EBIT of $514 million and a return on invested capital of 8.8%. The EBIT result was approximately half that of last year, and this down step we shared evenly between North Star and BlueScope and Coated Products North America. At North Star, we saw materially weaker spreads in FY '25. However, improved cost performance and higher volumes supported the result. Importantly, in the second half, we saw a big improvement with a performance roughly 3x that of the first half. Building and Coated Products North America saw margin normalization and lower volumes with some relief from lower costs. Focusing on a couple of matters relevant to this segment. The Engineered Building Solutions business continued to perform well, pleasingly, we saw strengthening order intake towards the end of the year as customers appear more willing to commit to projects as they see more certainty in the trade policy environment. Following our strategic review of the BlueScope Properties Group, we determined benefits across our Buildings business were not sufficient to justify the required allocation of capital. As a result, we are progressing the realization of the current portfolio of projects through normal market channels, which we expect to conclude over the next 12 months. Performance of BCP deteriorated in FY '25 to a loss for the year on sales challenges, which limited operational throughput. This has been primarily driven by lower volumes from the foundation customer contract combined with soft demand at the heavy gauge paint lines. Additionally, the substantial shifts in U.S. trade policy and tariffs in early '25 impeded the ramp-up of BCP's regionally tailored packaged and branded paint offering, which was initially leveraging the supply of metal coated and painted products from our Australian and New Zealand operations for market seating. Whilst turnaround efforts are well underway, BlueScope has recognized an impairment charge to the goodwill and intangible assets of the business of approximately $439 million due to the business' near-term underperformance and the extended time frame to deliver our business case. Despite the write-down of intangibles, work continues at pace to deliver improvements in the operational and sales performance. BCP is a strategic platform for BlueScope to grow in North America, leveraging our advanced capabilities in metal coated and paint, which has been developed over the last 6 decades. The broader strategic rationale and long-term value of the BCP assets remains, and we expect it to contribute meaningfully to BlueScope's North America growth ambitions. Looking at activity levels across our North American end-use segments, activity across key steel consuming sectors remain solid. Nonresidential construction activity remains at elevated levels, leveraging support from the Investment and Jobs Act. Auto demand remained solid, held up by lower interest rates and with the consumer preference for more steel intensive vehicles continuing. And manufacturing is also showing resilience. At an overall market level, we've seen a complicated demand environment with uncertainty as global trade actions unfold, but we continue to expect fundamental activity levels to be supportive as fiscal support remains in place and certainty from a policy and trade perspective plays out. Our Asia business generated underlying EBIT of $139 million and a return on invested capital of 14.2% in FY '25. Southeast Asia, led by Thailand, delivered a solid result across the year with an improvement in the second half of FY '25. Indonesia and Vietnam also contributed to the better outcome in the year. China's performance deteriorated in FY '25 on broader weakness in the Chinese economy. And India's performance reflects the capital charge from increased manufacturing capacity supporting the joint venture under the new supply agreement with Tata. The New Zealand and Pacific Islands business performance deteriorated in the second half of FY '25, leading to a $17 million loss for the year. The weakness reflected the ongoing lower levels of construction activity as well as softer realized spread and particularly in the second half, elevated conversion costs primarily from power prices. However, with the imminent commissioning of the electric arc furnace, we are confident that we have a solid business that can withstand the current external challenges and is well positioned to benefit from an improvement in economic and market activity in the region. Whilst not materially changing economics at the top of the cycle, the future EAF operating model will improve down cycle performance through fixed electricity prices, contracted at commercially more competitive rates, scrap feed costs more aligned to global steel pricing than current relatively fixed iron production costs and modular production model that increases flexibility and allows reduced exposure to exports. We've set out on the slide our estimate of the economics that the EAF model would have if it was operational in FY '25. EBIT would have been indicatively around $65 million, an improvement of around $80 million. We look forward to sharing updates on the commissioning of the EAF in New Zealand later in the year. Bringing it all together now with the group underlying EBIT movements, the full year picture FY '25 to '24 shows the extensive impact of weaker steel spreads combined with unfavorable volume and mix impacts, particularly in Australia and the building and Coated Products North American segments. You can see the benefits of cost improvement programs in the conversion and other costs totaling $104 million and other benefits primarily in raw materials accounting for the balance of our net savings for the year. The first half to second half walk forward shows an improvement largely driven by spread, which was predominantly at North Star. Looking now at the outlook for the first half of '26 across the regions. In North America, we expect a result around 1/3 higher than second half '25, particularly driven by stronger spreads, costs and volumes at North Star. The Building and Coated Products segment is also expected to deliver a better result, particularly through improvements of BCP. In Australia, weaker realized spread and export earnings, along with cost escalation, are expected to be partly offset by a modest improvement in volume and cost initiatives. This will also be supported by the expected profit on the West Dapto partial land sale, which will see a moderately better result than second half FY '25 overall. Asia is expected to deliver a result around 25% higher than the second half, largely on typical seasonality in China. New Zealand is expected to return to around a breakeven performance, benefiting from the delivery of cost and productivity initiatives. And the corporate and group line is expected to be similar to the second half of '25. Turning now to the financial framework and key financial indicators and settings. Our financial framework is integral to how we manage the group through the cycle, with our focus on returns, a strong balance sheet and a disciplined approach to investing for growth and returning funds to shareholders. With weaker EBIT and incremental capital invested, return on invested capital for the year was 6.2%, down on last year. Cash generation before CapEx remained robust, supporting our capital investment program on growth and sustaining projects. And in coming years, we expect those growth investments to continue to contribute to a strengthening return on capital being the $500 million incremental EBIT goal that Mark mentioned earlier. One of our core financial disciplines is to maintain a strong balance sheet with investment-grade credit metrics, recognizing that with meaningful operating leverage, we are best placed to have prudent financial leverage. At 30 June, net debt was $28 million on the stronger side of our $400 million to $800 million long-term target range, being a sensible position as we work through another high CapEx year with a weak ASEAN region macroeconomic backdrop. We retain deep liquidity and have positive momentum in our S&P and Moody's credit ratings. Our capital expenditure, both in FY '25 and '26 has been focused on major projects such as New Zealand EAF, the reline of the #6 Blast Furnace in Australia, the Western City metal coating line and debottlenecking investments at North Star. In all, we're expecting nearly $1.5 billion of CapEx this year, up from the circa $1.4 billion of investment in FY '25. More information on the capital spend profile for these projects is included in the analyst support materials available on our website. Turning to shareholder returns. As Mark mentioned at the outset of the call, the Board increased the annual ordinary dividend level to target $0.60 per share per annum in August last year, which reflected the increased scale and resilience of BlueScope's portfolio as well as the reduced share count. The Board has approved the payment of a $0.30 per share final dividend for the half being in line with our target of $0.60 per share per annum. Our reduced availability of franking credits means this dividend will be 50% franked. The buyback remains an important component of our capital management strategy. And today, the Board has approved an extension of the buyback program to allow it to be used over the next 12 months. Noting as usual, any buyback activity will consider prevailing macroeconomic conditions and other factors as part of its execution. And with that, I'll hand it back to Mark, and we'll be here for Q&A at the end. Thank you.

Thanks, David. Now before we take your questions, just a couple of comments on the BlueScope investment proposition. We have a strategic asset base, including North Star and our Australasian network, a premium brand portfolio led by COLORBOND Steel, a resilient multi-domestic business model and a disciplined financial framework. We've returned over $3.8 billion to shareholders since FY '17 and maintained a largely unlevered balance sheet, while investing over $3 billion in growth. And we're targeting $500 million in annual EBIT uplift by 2030 from those initiatives already underway. We are a different kind of steel company, a premium steel producer with proven returns and a strong growth trajectory. So thanks for your time this morning. And with that, I'll turn it over to Q&A.

[Operator Instructions] Your first question comes from Paul Young from Goldman Sachs.

First question is on the steel demand outlook in North America. I know you've commented about auto demand holding up, but just wanted to dig into the steel scope and core coatings, Mark, a little bit for the first half of FY '26. And just observing on your annual report, you said that Steelscape volume is still, I think, 10% in FY '25, and you saw some tariff impact coming through last year and also observing your EBIT breakdown of $500 million, which is it's good you provided that. And I thought North America might have been a bigger component of that. So just wrapping all that up, just curious around what you're seeing as far as what you're assuming, I should say, on Steelscape and coatings volumes outlook for the first half of '26?

Yes. Paul, thank you. So maybe let me talk a little bit about the macro. David can give you some of the more specifics. But there's no doubt what we've seen, Paul, is a bit of a softening in demand as all of the volatility of tariffs, non-tariffs trade, et cetera, has flowed through. So there's no doubt that that's had an impact. But again, if you look at the fundamentals and the underlying demands, whether it's auto, as you've called out, which remains quite resilient, the level of quoting and activity that we're seeing in the BBNA business, still quite strong and potentially with some relief on the horizon for interest rates. We're starting to see some of the project work free up. So I mean, the way I've described it is uncertainty created a bit of a lull in demand, that situation where people don't necessarily want to make a bet on inventory, for example. But we're working our way through that. And if you continue to look and think about the amount of investment that's incurring -- that's being put into the country, whether it's manufacturing or reassuring the support that industry is getting from the administration they're all signs, I think that this is the right place for us to be. So that's the sort of broader macro. It's uncertain and volatile, and there's no question that's had some impact, but from our perspective, still fundamentally and underlying a very good place for us to be.

Okay. And then maybe moving to just likely how are you saying about the escalation in energy prices, et cetera, and that's a bit of a headwind. So maybe just turning to what's going on down in the South Australia, what might happen? I mean building an EAF and DRI facility long term is probably pretty challenged, I would have thought as well based on the energy and electricity cost outlook. So I'm just curious, I know that's a long-dated sort of study option with that consortium, but is the near-term price here potentially getting your hands on those magnetite assets and running those mines and feeding that into Port Kembla, so just curious around maybe the 2-step sort of process here.

Yes. You actually just summed it up really well. You've answered the question for me. So it's a really complex situation, Paul. This is not something we could do on our own. We recognize that. I think the consortium is very credible, some fantastic partners, longer-term magnetite, iron ore -- iron making potential for use, not only in our own facility at Port Kembla, but there's enough resource there for it to be potentially an export industry as well, plus used by the other partners. I mean clearly, the POSCO's, Nippon's and JSW's of the world would consume some of that material, assuming we got to that stage. But I just want to caution everybody, this is really early days. We've been advising the administrator who's obviously working with the state government. Our team have done a fabulous job. And I'll give a shout out to the people in Whyalla too. I mean the people in Whyalla have done a remarkable job under the conditions that they've been operating under. So our guys and girls that have been down there have been helping them. It's helping us get into a position of understanding what the issue is. But this has got a long way to run, Paul. I mean the last administration went for 18 months. This kicked off in February or March, whenever it was. It's early days. We put our expression of interest in, it's nonbinding. We're not sure whether we're going to go through the second stage, that's all going to play out, and that longer-term scenario that you paid it, which is a credible scenario, that's 5, 10 years of investment and profile. So this is not something that's imminent, and we're very aware of that. So I just don't want people to get ahead of their skis on what's happening in Whyalla.

Your next question comes from Lee Power from JPMorgan.

Just on BCP, can you maybe give us what you're getting in terms of early feedback from John Nowlan, like is it more of a sales issue or an operational issue that you're coming across at BCP? And then -- maybe when we think about the medium term, the phasing to your 2030 target, does they seem pretty much unchanged for the BCP business?

Yes. And it's a bit of a grab bag of all. I mean, as we've called out in previous calls, Lee, this is -- this has been challenging from an asset perspective and operational perspective. You get in that cycle of where we've seen volumes declining, these assets run well when they run hard and when you can get volume into them. You can find out where the issues are and someone like John with his incredible capability can work his way through the various problems and move to the next one. When you got falling volumes, that makes it very hard. So that's been an impact, the loss of volume from the foundation customer, the integration took longer than we expected. We've called that out before. There's no doubt there's been an impact because of tariffs, the anti-dumping action that's been taken by the major steelmakers in the U.S. have impacted the flow of metal coated into the U.S., which would have been feed for BCP. So John's been getting his hands around all of those issues and has got a plan in place. We've just announced an appointment of a full-time U.S.-based executive to take over from John. So John is going to return to Australia, and we've announced his retirement after 47 years of incredible service to the organization. So we've got a gentleman out of Valmont in the U.S., who is taking over as the full-time President of BCP, which is a fantastic outcome, those coatings knows the steel industry, been involved in multiple turnarounds, done some international work. So he's been quite an add for us. But John has done a fabulous job. And we've got a plan -- we've certainly got a plan, Lee, and we're working our way through it, and we're seeing improvements, and it's heading in the right direction, but it's been way slower than we expected, hence the write-down.

And the phasing to the 2030 target given that the volume target seems unchanged in your overall North American uplift is still the same?

Look, we've still got that -- I still think the aspiration and the opportunity is there. There's no question about it. This is a big painted market. We've got 5 of those light gauge assets, 2 of the heavy gauge assets. A couple of them are big volume facilities. The other 3 are more suited to more batch and boutique types. So we're getting ahead around all of that. So look, we haven't put out there in any great detail the phasing over the period between now and 2030. I'm still comfortable with those targets. It's just taken us longer to get there. So by definition, the phasing will have increased from where we had it 6 months ago because we haven't made yet the progress that we had expected, but we're heading in the right direction. Lee, I don't know that we'll be splitting out specific volumes by year but I'm still comfortable with those broad targets that we've put out there.

That's good color. And then maybe a final one, if I can. Just continuing on from Paul's question. Look, it seems in the U.S., as you pointed out, that the near-term volumes have probably been a little bit softer than people might have thought previously. You see -- you saw kind of more discounting, I guess, to index pricing. Can you just give us your view of like where inventories sit in the market that discounting around index pricing? Do you think that's kind of normalized or what into FY '26?

Yes. I mean we've seen it -- you've seen it fritter away. You've seen the prices fall from $900 down to sort of the mid-800s. I think Nucor's published price last week, they dropped at $15 to $8.75. So we've seen the price fritter away, and that's really been reflective of that lack of certainty or uncertainty in the market and people not taking volume positions. The inventory levels and the lead times are all okay. There's about 658 days of stock in the system. So it's not dramatically overstocked, and that's probably reflective of what we're seeing. We're seeing very much hand-to-mouth purchasing. It's not people taking inventory positions at all. It's buying materials that they need at the time. And we saw a bit of that, obviously, in the production of North Star through the half, where there were periods where we weren't running flat out because the market wasn't there, quite frankly, and we took the opportunity to do some other things around particularly the capital work that's there. But we talk about a market and volatility and uncertainty. And the U.S. market is strong and as prospective as it is for us, I mean it's been the poster child for uncertainty over the last 6 to 12 months, it's been extraordinary the amount of change. You just think about what's happening with tariffs and -- we're going to have tariffs on pig iron at 50%. That puts the whole electric arc furnace industry into a spin and then a week later, they're reversed. So there is a whole bunch of uncertainty that's reflecting itself in that softer demand as you described.

Yes. But as we stand now, just to be clear, you're confident that as index prices have come back, the level of discount has kind of reduced as well. So it's not a large discount on a lower index price.

No, I think prices are stabilizing. I mean I think we've seen them fritter away. I think they're stabilizing. I mean you can never be confident about pricing, right? It changes. It's so volatile. But I think we're getting to a bit of a balance now between supply and demand, where I think we're starting to see any decline in pricing slow down a bit. Now having said that, I'll be wrong for sure. But that's my best guess at this stage, right.

Your next question comes from Ramoun Lazar from (sic) BlueScope [ Jefferies ].

Just maybe if I could start with ASP. Mark or David, can you maybe just touch on your expectations for that Dapto sale in the guidance number, firstly? And then secondly, it looks like you're guiding for a higher spread in ASP for first half '26, but you're also pointing to lower domestic prices. Can you maybe just touch on what you mean there and what you're seeing?

Yes. So from a domestic pricing perspective, Ramoun, that really just reflects the domestic premium more at the commodity end of the market. And I guess that's really reflective of the level of export pressure out of China and those products being import price parity. So it's a bit of -- at that lower end, there's a softer performance there. Pleasingly, the offset we have there from a mix perspective is obviously at the premium and value-added end. And in terms of our outlook in corporation, look, the sale value for the property, I probably won't go into -- in the context of a process that we're currently undertaking. Our timing expectation of that is for incorporation within the first half. In terms of where ASP's performance would be absent that sale rather than being moderately higher, it'd be moderately lower, excluding the property earnings.

Yes. Okay. And that's primarily reflecting that lower domestic price. Because it sounds like yes, spreads are a bit higher and you are saying that volume should be a bit higher in the first half.

And probably the other aspect, Ramoun will be a full half impact of -- from the export performance. So each market that you move away from that favorable North American market has a lower margin from an export perspective. You've currently got exemptions -- you currently have no exemptions for Canada and Mexico. And so that means our product is more likely going sort of Middle East, Europe. And then there will also be some phasing from a coke perspective from coke sales.

Yes. Okay. Okay. And just secondly, just on North Star. I guess taking your 480 a tonne guidance into the first half. Again, I would have thought just based on your volumes and your conversion cost, the guidance there looks a little bit light just using your kind of volume and that spread assumption. Is there something else in there that's impacting the first half? Is it realizations or costs -- conversion costs or something else that's dragging that potential first half number for North Side down?

Look, it's -- I think to Mark's commentary in the -- at the start, we've seen a stabilization in terms of discounting and realization. But in terms of how that plays through in the immediate term within the first half results. We've obviously incorporated that into our guidance.

Okay. And finally, David, if you could, maybe the comments just around Steelscape and the tariff impact there continuing in the first half. Is there a point where that potentially turns into a tailwind just given you do sell into the Western U.S. markets, and they should be more based on import parity given the tariff environment?

I don't think that's a fair comment, Ramoun. We typically see a degree of tailwind where you've got rising prices. And so I think that could be an opportunity there. And I think, look, in fairness, it's probably one of the areas where Mark referred to. You saw some caution through the uncertainty. The order book has been quite pleasing towards the end of the second half and into the first half of this year. So I think that's right.

Your next question comes from Brook Campbell-Crawford from Barrenjoey.

Just firstly, on the cost out program. Do you mind just providing a bit of an update there, given it looks like you've realized pretty good benefits there in FY '25. And I do recall, I think the last update, you were expecting pretty minimal benefits from the $200 million cost-out program in FY '25. So just, I guess, what's gone better than you did expect a few months ago?

Brook, we've given a bit of a split out in terms of the areas that they come from. I mean I said this when we put the target out there 6 months ago, part of the DNA of this business, and I take my hat off to the people in ASP and in North America across the portfolio, quite frankly. But -- this is stuff that people do and do really well. There's not one particular area of focus that I'd call out. This is a game of inches, and it's just continuous improvement. It's hard. [indiscernible], the teams roll their sleeves up and they get into it. And I think that $130 million is an admirable start in terms of our $200 million objective for FY '26. So I'd just take my hat off and acknowledge all of the effort that's gone into it. And it's broad-based. It's not just cost, it's productivity, its yield, its product losses. It's across the businesses and the teams have dived into it with great enthusiasm. And we need to, reflecting the softness we're seeing in ASEAN, that uncertainty out of the North American market, the really tough conditions in New Zealand we needed to step into this, and I'm thrilled with how the teams have done that.

And I think probably the reflection would be we've started that process across the group. And we've seen more net benefit in those areas that haven't had the same degree of escalation, and that's where that benefit has come from. And obviously, in those regions where there's been greater escalation, we expect that contribution to be more weighted into '26 and second half '26.

Got it. That's clear. And just on the North Star, similar question, I guess, to Ramoun. I think in your -- so you're sort of suggesting no change really to discounting for contracts, which kind of suggests there's some cost pressures coming through there in the first half '26. Can you just confirm that's the case? And can you provide some examples of which raw materials are sort of moving against you? And any sort of magnitude would be helpful.

Maybe just to correct that book, Mike, whilst you're still seeing sort of pressures in sort of alloys and broader inputs. What I was referring to with Ramoun was we did see an expansion in the level of discounts through the course of the second half through that uncertainty period. We've seen that stabilize, and our forecast incorporates an expectation that, that stability continues. Obviously, if that contracts, that's a potential benefit, but that's not what we've incorporated in the outlook statement.

Got it. I missed that one. That's super helpful. Last really quick one. Just the phasing of the major capital projects seems to have changed very slightly with a little bit more in FY '27. Just want to check if that's sort of deliberate your choice on the savings or if it's due to constraints around labor or you're getting equipment into the country?

Not so much, probably greater clarity. I will say Brook, that we -- in terms of how we are approaching those major projects, with the blast furnace reline, MCL7 plate mill, where we're making those trade-offs between time, cost and scope. Obviously, we're prioritizing cost versus time because we've got blast furnace 5 sitting there in the background, but that's not a material change as we sit here today.

Your next question comes from Rohan Gallagher from Jarden Group.

A lot of questions have been answered. But Mark, with regards to energy, first of all, I wholeheartedly agree with your preprepared remarks with structurally higher energy costs. Can you just run us through your expectations across the U.S., Australia for energy costs going forward, I'm conscious of the likelihood of contract rollovers in the next 6 to 12 months, please?

Sure, Rohan. And so look, in the U.S. As we touched on in the call out around the broader U.S. macro environment, we're seeing energy cost pressure in the U.S. typically on the back of demand from AI, data centers, et cetera, which is extraordinary. But then God Bless America this morning in the metals press, there's massive investments that's going into transmission across the country to deal with that increase in demand, to have the same speed of response in Australia where my real call-out on energy costs was focused today and particularly around gas and particularly in the context of the federal government's gas market review. I said on the media call just a little bit earlier. I think potentially, we're at an inflection point around gas on the East Coast of Australia, where there's a convergence of views around people's disgruntlement around pricing and what's happening with supply and costs, and we're starting to see what we think are proper and appropriate issues like reservation discussed and price mechanisms discussed. And we've got a government that's got a couple of terms, maybe more a willingness and a commitment around future made in Australia. So I'm hopeful that maybe for the first time of me banging on about this in 10 years, there might be a situation where we can potentially drive some change and that would be good for the East Coast market and for manufacturing. And when I talk about manufacturing, I'm not just talking about us. What I worry most about, and you've heard me say this before, our customers. That's what I really worry about. So from that perspective, I think we're maybe at an inflection point perhaps. So we put a submission into that gas market review. And then as we've called out in the chart, I think important for you guys and quite frankly, for us to articulate what the EAF looks like in New Zealand, and that's a significant change in these bottom of the cycle conditions where the energy cost position in New Zealand is going to improve materially when we move into the contract for the electric arc furnace, and we tried to call that out a bit because I could imagine one of the questions we might have got was why are you investing money in New Zealand when it's loss-making. So we felt it was important to demonstrate that. So there's a bit of a mix across the portfolio. Energy, whilst important to us in Asia, not as important as it is or not as material, I'm sorry, as it is with our steelmaking assets. But trending higher, but still very competitive in the U.S. We've got to fix Australia and New Zealand are fixed on the way with the electric arc furnace model. So hopefully, that's answers the question.

And Rohan, just to round out to your question around timing. Within Australia, we're effectively reset. So it will -- yes, we were effectively purchasing at market within the U.S. that is -- we'll be seeing that come on over the course of the second half of '26 and a full year in '27. And within New Zealand, it's a progressive load from contact coming on from December '25 and then the balance of the contract coming on December '26.

Excellent. And a follow-up question, if I may. It's forecasting the known -- unknown that is tariffs is probably dangerous as we all know. But in regards to your guidance assumptions, can you just walk us through we understand you're a net beneficiary of all the tariffs in the U.S., but I'm interested in the growth area. And Mark, you touched on Brazilian pig iron we've got imported coils into Steelscape and its impact on profitability. Can you just run us through your best guess at this point in time? Because that's what it is, right?

Note the time down, Rohan, because it will change in 5 minutes, right or an hour. Look, best guess is, it's hard to tell on some things. The pig iron scenario was the classic scenario, potentially a 50% increase in cost of pig iron, and then that was immediately reversed when the industry screamed. What we've typically seen on the West Coast with Steelscape because it's still an import market is those tariffs and cost increases passed through to the market. And perhaps to Ramoun's question, I think it was earlier around Steelscape. I mean the issue there is when you get to a point where demand destruction becomes an issue. We're not seeing that, but that's something that we're mindful of. So that's certainly the impacts that we see on the West Coast. And then what we're seeing, and it was a bit of an impact in ASP in this last 6 months, as we've called out right from the start on tariffs. And as you rightly point out, we are net beneficiaries but ASP is a bit of a loser in this. So that 200,000 to 300,000 tonnes we've talked about that would typically come out of ASP and go into what was a good returning market in the U.S. is now trying to find home elsewhere at the point David made earlier. So net beneficiary in terms of the U.S. but there has been some impact on ASP, certainly in terms of the exports. So they're probably the biggest impact for us. I mean, we were planning and starting to export material out of Australia and New Zealand to feed BCP, which was part of our growth story for BCP. So we're now rethinking that given the tariff situation and how we deal with that.

Your next question comes from Peter Steyn from Macquarie.

You there Pete? Are you on mute? No, we can't -- we don't seem to have, Pete. Maybe you'll come back.

Yes. Just drilling in quickly on the cost out. Obviously, ASP is a little bit behind the curve. They've noted that it's been timing of getting some of the initiatives in, and you're clearly confident on the $200 million. So could you give us just a good sense of specifically in ASP, what you're doing and why you're still so confident in delivery in '26 on that front?

Yes. Well, I think as David alluded to, Pete, a bit more of a timing impact for ASP. They've probably or certainly suffered more from some of the escalation impact in the near term. But I'm really -- the ASP guys, I think it's also fair to say over the years, and you've been on the journey with us over this period. We've done this more than once in ASP. So it's already a pretty tightly run business. So just by definition, getting into ASP and trying to find the next round of cost out is probably a bit harder than perhaps getting into some other areas. So I'm still confident on the total and the FY '26 time frame, Pete. I think what we would say with ASPs, it's probably just more weighted into the second half than it is in the first half of FY '26. But no concern about the objective or the achievement of the objective, more just a timing issue.

Perfect. While we're talking about costs, just another pickup on sort of the medium-term outlook and particularly in the North American business. It was interesting in the supplementary pack just an incremental lift in the averages you'd apply on spread, but a reduction of about $100 million in EBIT outcomes in North America. I was just curious what the drivers of that is. Is the incremental costs that you're expecting to be structural? Or is it perhaps BCP's performance that's maybe slower in recovery? Just a perspective there?

Yes. No, it's probably more of a structural piece as we work through what still is a high-cost environment for all steel producers. So effectively, Pete, what we're seeing is that those higher spreads are actually in part necessitated by the fact that the overall cost environment is a bit higher as well.

Okay. That makes sense. And then perhaps just relatedly, obviously, it's only 6 months down the track that you put your midstream investments on hold. How are you thinking about that in the context of where coatings is today and the impairment that you've taken?

Yes. Look, I think, Pete, the game hasn't really changed for the coating asset assessment. What we said 6 months ago is there's lots of moving parts. It's a large capital expenditure. I want to be absolutely convinced that it's the right thing to do before we assign that check off. The recent changes with U.S. Steel and Nippon, I think, create other options for us in the market, and that's the work we're going through. So before we race into any capital spend, I want to make sure that we've thought through what are the options that are capital-light options, quite frankly, supply arrangements or offtake. We've got a strong relationship with Nippon as you know. They're a partner of ours, not only in ASEAN, but now also in the Whyalla situation. So we're just going to make sure that we've exhausted all the options to grow and build BCP around domestic metal-coated supply and Orion's one of those. But at this stage, still an option.

Your next question comes from Chen Jiang from Bank of America.

Mark and David, just a first question on your cost out program, maybe a follow-up. So FY '25 delivered $130 million and incremental another $200 million to be delivered in FY '26. But by looking at your EBIT, earnings per division. It seems like your EBIT is still largely driven of course, by your -- by the spread business and driven by the market. So if you can point out like how the $130 million got realized in your FY '25? And also, for -- is your guidance. Looking across all the segments, North Star is the main driver of the higher EBIT. If you can provide any insights on the cost-out program over the next 6 to 12 months?

Yes. No, no problem. Chen, what I might just point to is the sort of the cost-out program that we're working through. Very importantly, we're doing that on a net basis. We've tried to highlight that for you in the EBIT bridge. And the majority of that is coming through the conversion cost other line with some benefit in raw materials. We do that on a like-for-like basis with '24 to '25. So we adjust for volume growth and FX changes, for instance. And as we move forward to FY '26, it's a comparison to that FY '24 baseline. So that $130 million, it's not an additional $200 million. That $130 million moves to a net $200 million versus 2024 on a like-for-like basis. And as a result, you're right, the material uplift in EBIT for FY -- for first half of '26 predominantly relates to the improved position that we've seen in North American realized spread.

Right. Just to clarify, the $200 million cost sale in FY '26, does that include FY '25 or exclude FY '25?

It does. Effectively in -- to use your language, Chen, it's an incremental $70 million on top of the $130 million that was achieved in FY '25.

Right. Got you. So for FY '26, the cost out program versus FY '24 as the base year, the incremental cost out left from the initial program now is $70 million.

You got it.

Okay. Excellent. Can I have another follow-up just on the Australia business. The outlook mentioned moderately weaker realized domestic prices. From memory, I think COLORBOND had a price increase, I think, in the last 6 or 12 months. So if COLORBOND had price increases, why over the next 6 months, you are expecting weaker realized domestic prices. I guess that's not related to COLORBOND must be some related to Asia, the steel prices referenced to Asia or the China HRC prices. Is my understanding correct?

Yes, that's right, Chen. So we had a price increase for COLORBOND in February, which has been supportive. Really, the as we move forward to the first half of '26, it's reflective of the -- more at the commodity end of our portfolio mix, where the sort of domestic premium and pricing is reflective of import price parity.

Right. And excluding -- if we exclude the land sale half Australia should have relatively lower EBIT if we exclude the land sale?

That's right. It will be moderately lower rather than moderately higher.

Your next question comes from Will Wilson from UBS.

Just a super quick one for me on ASP. So I was supposed to be you guided at moderately higher and you also had a $30 million benefit from your sensitivities. I understand you flagged distribution, weaker and higher cost. I guess just on that, what level of inventory do you think is in the system? And how long would that take to normalize? And then secondly, in your first half '26 guidance, do you assume increasing conversion costs or energy costs? Yes, that's it.

Yes. I think from an inventory point of view, Will, reflective of the low spread environment that we're operating in, inventory is pretty tight. I wouldn't say that there's any great buffer in the system at all. People are, again, with spreads, the ASEAN spreads that we've seen bumping along below $200 a tonne, there's no need for people to take an inventory position, no signal yet of an improvement. And I guess what we're forecasting, Will, is short of some really tangible change in China. I don't think we're going to see a benefit in the immediate future. Hence, the importance of the respond and cost-out program because I think we're in that sort of lower for longer period. So that's just the environment that we're operating in.

And then just on your -- sorry?

Yes. And we'll just cover off on the other part. Kind of from an energy perspective, the business is largely reset, there'll be sort of what I would describe as more normal inflation in the energy cost rather than the step change that we experienced this year, probably the softness within the export channels has an implication for how hard we drive volumes. And so that will have an implication for conversion costs moving forward because you've just got a little bit less throughput.

Your next question comes from Harry Saunders from E&P.

Just firstly, wondering if you could discuss the COLORBOND growth seen in the period, maybe versus your estimate of the end market volumes, and the price realization to date within that just given the price rise in February and sort of is there more to come there? And I might just add a follow-on now, just given the comment on New Zealand being $80 million better if you had the EAF running. Can you just give us an idea of what you think that business could generate sort of mid-cycle EBIT once that EAF is up and running, please?

Yes. Yes. So look, I think the COLORBOND story continues to be a positive one. We've talked about the fact that more than 60% of new starts now have a steel roof and COLORBOND steel roof importantly. So from that perspective, I'm still a really strong believer in the opportunity for COLORBOND. And again, if you think about where we are right now in the housing cycle in Australia. It's certainly not shooting the lights out. So as that corrects then we will be the beneficiaries of that, both in terms of absolute volume, but in terms of growing share as well. So I'm really confident with the COLORBOND situation. TRUECORE as well in terms of framing the logic -- part of the logic of the MCL7 investment is to give us more metal coated capacity to allow us to continue to grow in that TRUECORE market as well. So -- that's -- David touched on the COLORBOND price increase that was passed through and that was supported. So that's really the situation from a COLORBOND perspective in Australia. New Zealand. We've been there recently. The team are all hands to the pumps and unfortunately leaning into almost a perfect storm in New Zealand, unbelievably high energy costs through the year. I mean, numbers that even make Australia look reasonable, which is saying something. So very, very high energy costs, very soft domestic market. You've seen all of the press around that. I think quite a lot of political pressure building in New Zealand for some sort of correction. Infrastructure spend off, we were the beneficiaries of that in years gone by recently, particularly with our long products component of our business. So the EAF is very timely. The call out that we've given is at the bottom of the cycle. And we've talked in the past about New Zealand giving us numbers of between sort of $100 million to $200 million of EBIT, quite frankly, and that would be the expectation for the business. So really what the EAF model does, as David touched on a little bit earlier, is it gives us much better results at the bottom of the cycle, lower fixed costs -- lower level of fixed cost raw material, scrap more cyclical modularity around the EAF to take advantage of energy costs and just a fixed contract around energy that's a much better position than the position we've been in for the last year, certainly in New Zealand.

Got it. So sort of lifting the bottom of cycle performance rather than that...

That's correct. That's right.

And just asking another way, lastly, on North Star, just thinking about the upside scenario there. Given the $60 sort of improvement in spread assumed in your assumptions, it would imply a result a bit higher than sort of roughly $300 implied in the guidance EBIT. I just wondering, I guess, what -- exactly what the delta is? I know you've touched on that, but maybe more explicitly. And then -- you also said in the Q&A, you weren't running flat out through the whole of the second half. So maybe what would the incremental EBIT be, say, if you weren't curtailing any output in the first half '26?

Yes. So Harry, look, I guess I would describe the second half, in particular, as being a really relatively complicated demand environment in the U.S. for all of the changes. That's resulted in service centers, not really -- and customers not really wanting to take a huge position. You're seeing that in their inventory numbers and they're basically buying for projects that they need today. I think the -- and that's seen an increase in the level of discount to benchmark that's kind of been a result of that softer or complicated market environment. I think that what would make us cautiously optimistic as we look forward is, to the degree that you see, I think, particularly Canada or Mexico, not being granted in an exemption from the tariff regime, that would give a lot of clarity to the market and customer base. And I expect that, that would see a more usual pricing environment for what is fundamentally a reasonable demand environment.

Your next question comes from Owen Birrell from RBC.

I just got a couple of questions around the Glenbrook and the Port Kembla transitions to the new mills in both cases. Are you able to give us a sense of what you guys are expecting in terms of additional costs in that commissioning year and any potential impact to volumes during that year? Just noting that we've got Glenbrook coming on next calendar year, if I recall correctly.

Yes. So I might take it in reverse order there, Owen. So in terms of sort of impact from volumes. The team in PK will sort of build inventory for the cutover period. So I actually expect the cost will sit within working capital for that transition. And from a New Zealand perspective, I think we wouldn't be expecting a volume implication and the reality is because that's been commissioned during a relatively soft market. So we're not -- we wouldn't be seeing a challenge from a volume perspective as a result of those 2 respective commissionings.

And in terms of, I guess, one-off costs, you're not going to see any sort of cost of running effectively 2 mills for a crossover period or mobilization of contractors and things like that?

Not in the first half. That would obviously come in more within the second half period.

Okay. And can I just confirm the rough timing on when you expect Port Kembla's commission closer and closer to it?

Yes. What we've talked about in the past is August '26. So that's still the target date. And if there's any change to that, we'd obviously update that. But the team at Port Kembla doing an outstanding job. I was there recently. It's a remarkable project and we're on time and on budget, which for the scale and complexity of the project that it is something that they should be very proud of. It's -- they've done a fabulous job. So August '26 and for New Zealand we'll start cold commissioning the EAF at the back end of this calendar year and then hot commissioning early in the new calendar year, Owen.

And just one last one for you, David. You've called out for the $200 million to $300 million of working capital relief, including BlueScope Properties portfolio release. Are you able to give us a sense of, I guess, what the book value of those BlueScope properties, that portfolio is?

Look, it would be sort of in the order of $180 million.

Okay. And just to confirm that $200 million to $300 million doesn't include the West Dapto, so that's separate.

Correct. Correct. And that won't have a meaningful implication given what it's held for a book.

In terms of the profit on that sale?

In terms of the profit on the sale, that obviously assists the profit. But in terms of working capital release, it's not held in stock.

Your next question comes from Dan Kang from CLSA.

I think most of my questions have been answered. But just a very quick one on Slide 21. It looks like a nice gradual uptrend in domestic demand. I guess just your thoughts on the different segments remind me where the margins are different for the different segments there. And just while I've got the floor, across the ditch, are you seeing any green shoots at all?

No, across the ditch, sorry. So that one is a really easy one to answer, Dan. No. And it's very much bump along the bottom, as I said, both from a residential consent perspective, but also industrial and commercial and infrastructure has really been tied up. So no, nothing to call out for New Zealand, I'm afraid. In Australia, I mean you'll recall, obviously, with products like COLORBOND and TRUECORE, much better margin environment in the resi construction alterations and additions, a really important piece for us. been elevated since COVID and remains so and industrial and commercial, to a lesser extent, but still some of our premium products, our premium products go into that space. Then in your more manufacturing, engineering, transport segments, that's much more of a mix in the commoditized products, Dan. So that's the mix across the segments. And I mean, as I said earlier in one of the answers, nothing that's got us particularly excited about resi construction right now. But I think all of the conditions are there for it to grow and be stronger. Industrial and Commercial has been okay and the other segments okay as well. But I think we're all hanging for the next pop in resi, which will obviously benefit us significantly.

Your next question comes from Nick Herbert from HESTA.

You there Nick? No, we don't have Nick.

Your next question comes from Paul McTaggart from Citigroup.

I'm just asking the question, I want to get your thoughts. Does it make sense to have this ASEAN business still in that -- I mean, you recall the genesis of it, it was really to soak up excess domestic production capacity here in Australia many years ago. But you've kindly given us an update in terms of COLORBOND and TRUECORE volumes out to FY '30 with an additional -- and you're going to take domestic tonnes to 2.7 million tonnes at which point you have not many export tonnes coming out of Australia. So does it really make sense? Is it a distraction?

No, it's not, Paul. I mean it's earning well. So that's first thing I'd say, particularly Thailand and the West Coast business, right? That's part of the joint venture with Nippon as well. And we're starting to see improvements in Malaysia and Indonesia. Vietnam has been very competitive. Whilst it takes some product from Australia, Paul, right now, that won't be an issue. I mean if I'm -- if Tania is selling out in Australia, we've got no export to Asia, I'll be a very happy chappy because it's pretty skinny margins on the stuff we sell into Asia. The volumes are nice, but it's pretty skinny margins. So that business still largely is a domestic purchaser of substrate in Asia. So it's not really dependent on what's happening in Australia. And we would find -- or particularly given the current export position, we would find other sources of supply for that. So no, I think it does make sense because I still think there's -- whilst we've leveraged and got great returns, and we have a great business story in Thailand, I still think there's lots of upside for us, particularly in Malaysia and Indonesia, Vietnam we're doing a lot of work on to try and improve that business. But yes, it's not a big distraction for us, Paul. It's not dependent on domestic Aussie supply to be exported to it, and it's making a pretty good return. So no, I'm very comfortable with it.

Okay. And just on -- can I just follow up on working capital as well. So obviously, you've got a target in terms of reducing working capital. So we should expect that through FY '26, much that's going to be achieved? I mean you feel confident around that?

Yes. That's right, Paul. We -- ex the buildup of inventory to support the blast furnace reline. We expect an improvement in working capital throughout the business.

Your next question comes from Scott Ryall from Rimor Equity Research.

First of all, Mark, thanks for addressing the remuneration issue on BCP upfront. I note in the annual report that both yourself and David have elected to receive 100% of STI in share rights. And then you're also doing the same for next year. I was wondering if you could comment -- I know there's an election, [indiscernible] 100, but what's the rationale for both of you electing 100% as share rights, please?

I hope the answer is because David knows how to pick stock at the right time and then it's good value. I'm hoping that's the answer he's going to give me. But no, seriously, Scott, I mean, I made the decision right from the get-go when I started in this role that I was going to take my STI in equity, and I've done that since 2018, 100% every year. So it's a continuation of that approach from me, and it's really about the faith in the organization. I've got -- I'm very comfortable where our share price is, and I think there's lots of upside. So I'm very comfortable to take my STI in stock. And David is about to tell me that it's cheap, and that's why you're doing it, right?

If I was picking stocks, I'd probably be on the other side of this call. So look, Scott, in all seriousness, I think it's an important obligation of management to ensure there's kind of an alignment with the outcome for shareholders. So -- and I guess my tenure here is a little bit shorter than Mark, only a little. And I want to make sure that alignment is right at my end as well.

Okay. Great. And then on BCP itself. So John wasn't the first BlueScope guided you flew in mark to have a look at that business post-acquisition. Now you've got a new management team coming on there. How does that affect in your mind, the timing of turnaround, please? And I guess I'm just wondering whether someone has to come in and make a new plan for turnaround? And as you sit here at the moment, you've given some 2030 volume stats. But what are the key operational milestones that you are looking at in between now and then to make sure that you feel like you're on track for that recovery?

Yes. No, you're right, Scott. So I mean we had a gentleman who ran the business before John and he'd come from the business previously. So he advised us through the acquisition, worked with the team that I put on it here through the acquisition, John Kuzdal and John knew the business. We then -- John then retired and that was the opportunity for us to put John Nowlan, sorry, too many Johns into the business. And of course, all of that expertise, 47 years of unbelievable expertise. He was -- he spent the last year or so in the business. I think it's important probably to say just because I take your point about a new leader, new plan, this is about volume, it's about cost. It's about efficiency. It's about finding the right segments to sell the product in. It's about getting the right substrate at the right price. So this is not going to be new CEO, throw out the old strategic plan, introduce a new strategic plan. I think what Anoop, who is the gentleman who's replaced John is going to do is, he will build incrementally on the work that John has already started. And we have put some other resources in there, Jeff Joldrichsen, who formerly was the Chief Operations Officer at North Star. We've taken Jeff out of North Star and he's been in the role in BCP now for about a year. I'm going to guess, I'll stand corrected on that. But Jeff's been there for about a year, bringing all that incredible expertise and operating discipline from North Star and applying it to BCP. So I'm comfortable with the plan, and it's not going to be new CEO, throw the old plan out and start again. It's really continuing to build on the work that the 2 Johns have done and the other resources that we've committed to it.

Okay. So new guy, you said his name is Anoop, sorry?

Correct. Yes.

He's bought into the current turnaround plan?

Yes, he has. Yes, he has. And he's been -- he was a 20-year employee or 18 years, I'm sorry, I think it was of Valmont, so a very senior and experienced executive in Valmont. It's taken us quite a while to find him and then to attract him into the business. So I'm -- and he's got a great -- he had a great track record at Valmont was highly valued having been a long-term employee, their senior executive there. So we're excited about having Anoop join us and to continue with the plan.

Your next question comes from Keith Chau from MST Marquee.

I'll be very brief. Just a follow-up question on North Star again. So apologizes for laboring the point, but just looking at some of the support materials, it looks like conversion costs were actually EBIT contributors, i.e., they were down half-on-half on from the first half to the second half of '25 and so too were volume and mix. So just, David, in your comments on the broader cost environment, it doesn't seem like they've moved materially half-on-half, like whether the alloys, fluxes, I think your electricity or the nucleic grid and contracted. So are there any contract rollovers in particular costs that we've got to be aware of because for that magnitude of differential and spread versus EBIT realization. I mean it can really only be 1 or 2 things. One is the discount to price is going to be actually significantly higher, which I think you were saying that at least it did go up in the second half and stabilizes then either that or it's going to be some sort of cost rollover that's impacting that business. So any further color would be appreciated.

Yes. No, no, that's correct, Keith. Probably the most material contributor would have been sort of the discounts outside of benchmarks. And in terms of sort of energy cost step-up, that won't be a first half implication that will be more second half to the North Star.

There are no further questions at this time. I'll now hand back to Mr. Vassella for closing remarks.

Thanks all. Now it's a busy week. Appreciate your time and attention and the comprehensive nature of the questions. So we appreciate it. Thank you.