BlueScope Steel Limited (BSL) Earnings Call Transcript & Summary

Welcome to day 2. Really fantastic [ that I'll be working with now ] Middletown facility, it's one of the [ 7 newly-acquired ] coated assets. So [indiscernible] 1970. We have that [ 19 ] employees here. And [ I have given ] opportunity to do a walk in and actually see through the operations. So the agenda for today, we'll start off with an update from the BlueScope North America Buildings Group. So Susan Stark is going up today, who heads that business. And then we'll move into the properties group with Matt Roth giving an overview, which is part of [ Sue's ] business. We'll have a break for Q&A, and then we'll lead in the coated products business overview, and John [indiscernible] with us today. A lunch break and then [ the site tour ], as I mentioned. And I think [ the site tour ] [indiscernible] that will be 40 minutes, 45 minutes. Yes. So that's what the plan for the day. Very good. I'm going to hand directly over to Susan.

Wonderful. Thank you so much. So as Kristie said, I'm Sue Stark. I'm President for BlueScope Buildings North America. I'm really happy to be with you here this morning. I hope you guys had a great time at the baseball game last night. So we're going to share with you a little bit of what's going on with BBNA. So with BBNA, we manufacture -- design and manufacture pre-engineered building solutions for the nonresidential low-rise construction market. We have a national organization of manufacturing facilities of 7 around the country that service our builders. And our competitive advantages include our ability to service a wide range of complexities in our projects as well as our proprietary technologies, our in-house engineering capabilities and our deep customer insights. Building North America contributes meaningfully to the U.S. strategy for BlueScope. By focusing on maintaining our position as a leading player within our markets, we do that contribution. We work to continue to target our key markets and deliver enhanced insights as well as expanding our product offering to expand our customer base. So our BBNA strategy is going to continue to drive us in that leading position of transform, grow and deliver. We're looking to transform our customer experience by enhancing our innovation process as well as redefining our segmentation approach to our markets. We're maximizing our growth potential with a growth -- with a focus on aligning our manufacturing capabilities and capacities to target profitable growth opportunities within the markets and delivering value to our customers through our services, solutions and our approach to sustainability. Our 2,000-plus strong builder network is national and long-standing in nature, and we worked through 2 premium brands, Butler and VARCO PRUDEN. Our builders use our proprietary design software to win work and add value to the construction process as well as our software handles complex structural designs to meet our customers' needs and requirements that others cannot. Key advantages that help our builders like our wide span product provide large open spaces to maximize flexibility for our building owners and the Butler MR-24 Roof System is the gold standard in the industry. As far as end markets, we are exposed to end market segments that are well positioned to benefit from some of the key trends that are out there. We have a solid exposure in manufacturing made up of equipment storage, warehousing and production. We're well positioned to capitalize on growth in the e-commerce and with our data centers warehousing distribution and last mile logistics. And the increased activity in recreation and travel supports our demand -- the demand for our products in those arenas as well with sport stadiums as well as other recreational centers. Product development is core for our business focus. We're looking to grow within our existing segments as well as expanding beyond PEB for further -- to unlock further growth opportunities. Customer insights are key to that understanding of where that demand is trending now. New segmentation approach and the use of this data will be key to this. We continue to look at innovation and partnering with internal and external partners as an exciting way for us to reinvigorate our innovation process as well as working with customers and specifiers to understand solutions required for their needs, including hybrid building opportunities. And just to give you an example of one of those hybrid building opportunities, we recently had a project in Oklahoma. That was a great example of success with the hybrid solution for the commercial warehousing segment. This project consists of 5 buildings of almost 170,000 square meters of building space, and it features Butler's new LogistX product. LogistX combines the efficiencies of a built-up steel member normally found in a pre-engineered building structure and tied with BBNA's proprietary Truss Purlin XT. This provides a cost-effective alternative to conventional steel buildings. We're also continuing to drive efficiencies through our manufacturing excellence. Modernization and upgrading equipment allows us to take advantage of the digital technologies, which deliver efficiency gains and reduces labor bottlenecks. We've installed an automated weld trim cell in our Jackson facility, which has greatly reduced our labor content there. And we're upgrading our facilities across our footprint on the automated welding side to continue to improve our productivity. We continued our focus on margin and volume initiatives by focusing on our growth in the conventional market as well as order intake optimization and overall price and margin initiatives. And lastly, a key enabler to our success has been our approach to sustainability. Health and safety has been an ongoing focus, and we're bolstering up that focus and strength with the broader HSE program across BlueScope, including training and critical risk projects. Across inclusion and diversity, we're working to better reflect our communities. And on climate action, we're working on products that enhance buildings operation emissions as well as within our own facilities, our own emissions through solar projects and efficiencies in our shipping and painting processes. And with that, I'm going to turn it over to Matt Roth.

Good morning, everyone. I think I met most or some of you last night. My name is Matt Roth, and I lead the small team at Properties Group who are dedicated professionals in the real estate development business. And the reason why we can have a small group is that we really do leverage the builder network and use them, as Sue said, we go back to that map with 2,000 builders across the nation. And ultimately, construction development is a local business. And having those local partners that would have already been vetted, already a partner, a trusted partner of ours is a key value to our group and a key piece of leverage for us. So what do we do? So we are a ground-up developer. What that means is we take raw land, we build buildings, take it through the permitting process, build buildings. We then lease the building up, which is we stabilize it and then we sell it to institutional investors. So take that profit from that, recycle and move on to the next project. We do a mix of build-to-suit and build-to-demand, which is type of projects. So build-to-suit means we have a tenant or a lease in place prior to acquiring the land and starting the building process. When it's a build-to-demand, it's a speculative build. So we're building to where we believe demand is. And so we're focused on putting the building up and then leasing that building during the construction process. Our projects range from around USD 10 million to USD 30 million. That can vary a little bit depending on location opportunity, but it's -- that's sort of the rough rule of thumb. And currently have about $170 million committed from capital and $110 million of that's done. We have 3 projects that have been completed, and that's $110 million that's in inventory. I do want to touch on -- you can see the competitive advantages here. And I do want to touch on, I think, 3 that are really important. I already spoke about the builder network. I think that is something that not only do we use them for advantage locally for going into local markets, but also we provide them with an advantage. There are opportunities that our builders would not have to build projects without our ability to come in and step in as the equity partner is the developer. So that's happened several times. And it's sort of a 2-way street. We bring deals to them. They bring deals to us, particularly with our build-to-suit model because they have clients and customers that maybe want to use their money on machinery, on other types of capital, not necessarily warehouses and -- but they still want to build it for them, right? And so they can call us up and we can set up a situation where we become the landlord, the Butler builder, the VARCO PRUDEN builder becomes the GC on the project and then their customers are tenant. Also, right now, particularly our equity position. So right now, we fund all of our projects off of BlueScope's balance sheet so we don't use debt. And that's a big advantage at the moment, right? So in the debt markets in the U.S. right now, there's a lot of developers -- there are developers that use equity as well. But there's a lot of developers that are on the sideline right now because they can't make deals pencil because of where interest rates are at right now. So we are seeing deals and opportunities where people can't make the numbers work for them where we can step in and take advantage of that situation. And then I always tell my team that with our commercial due diligence and our risk management processes, we set up a very type process for how we look at projects, what our internal hurdles are and how we look at every deal, and that's our license to operate. And so when we go through our projects, I think we're -- we have a very, very strict process in how we go through everything, and it's -- really make sure that we're making the right deals and doing the right projects at the right time. So our target customers, it's interesting. So I'm sure as a lot of you know, the industrial real estate market is -- remains to be the darling of the sector at the moment. There's been a lot of shift in end users where they're trying to shore up their supply chain. It's -- they want to get it. Either they're reshoring manufacturing, they're reshoring or getting their supply chain closer to their customers at their home. And so they've really started to relook. It's been -- we always heard the inventory just in time, and now there's been a shift of just in case, right? So folks are -- they need more warehousing space simply to make sure that what we all experienced when we couldn't get -- people are going out and buying lots and lots of whatever because they're worried they couldn't get it. And so we're now making -- they have the just-in-case inventory. So there's a lot of demand. And they're refocused on -- they realized that supply chain is more strategic than just an afterthought. And so there's a lot of people -- there a lot of companies that are reassessing and redoing their supply chain networks and then also the reshoring of manufacturing and all that. E-commerce, we've all heard about that. Obviously, that continues to be a big aspect of the warehouse demand. But frankly, traditional retailers as well are really starting to look at how do we -- they're changing the way they use their stores. They're not seeing as much inventory in stores and they're sourcing it more in a regional sort of supply chain network. So there is demand not only from the new kids on the block with the e-commerce, but also the traditional retailers. And the other thing that I think is important to note is the buildings we build are very simple, right? So they're boxes. I don't want -- when I say if a building starts to look more and more like a letter, I start to get concerned, right? I like big, beautiful boxes because if some -- if a tenant or an end user does leave, what we want to be able to do is say, anyone can step into that space and take over that space without a lot of big retrofitting. And so it's very much something that someone else can come in and use. And so that's something we always look at. So we do have a -- as I talked about this a bit, our comprehensive risk management is very important. We look at it not only at a project, as I discussed, but also portfolio levels. So we have a variety of tests and things that we look at to make sure that from a portfolio level that we are appropriately risked and that we're mitigating the risk and that we're at the project level the same way. So we're quite diligent on that. I do want to mention we had announced that we were going to be selling a project this fiscal year. Under the current macroeconomics and in the capital markets, we've decided not to do that. It's not an appropriate time to do that. We're not in the business of holding assets for a long period of time, but we're not just going to sell them in a down market, either. So -- and we don't need to sell them now. So -- and it's a property that is fully leased. It's generating income or will be generating income. And so it's -- that will be done next year. And just the typical case study, these are relatively short projects, right? So it's somewhere between 18 and 24 months is a full cycle of a project from when we start construction to when we would sell it. So call it 12 to 15 months for construction. You go from there. There'll be -- if it's already been leased up, then we go directly into a sale process, which is roughly a 3-month process. And with that, we'll use national real estate brokers out there to help us run those processes. And then -- but if it's -- if we're leasing it up, we give ourselves some time post construction to lease it up as well and then sell once it's stabilized. So that's what I have. Thank you.

Perhaps just one on the building side. Could you give us a sense of the integration across the -- your value chain within the context of BlueScope's operations elsewhere? So commonalities either in customers or product flows or just that we understand the natural integration between those businesses better.

So in the context of demand on residential commercial market, I think we share, obviously, some customer base, end user base from that perspective. From a product flow-through perspective, we do buy a portion of our sister company, Steelscape, but limited other channels from that perspective.

Maybe I'll ask another question just on the properties group. Just the thinking about the other side of just-in-case inventory. Do you think that this redesign that you're seeing in supply chains presents any risk of excess supply on the other side or at least an impact from a demand point of view when all of this settles down? Or do you think that e-commerce and other developments essentially step in that you don't have any demand risks in the medium-to-longer term?

No. I don't think there's demand risk. I think there was -- even in the event that -- so of all the products -- we hear a lot of products being built. And if it were all -- so I don't have the exact stat. But the risk of being overbuilt and all being vacant. So let's say that say, I think it's like 600 million square feet of product that's being -- that's under construction. If it were to be fully right now tomorrow, it's online, it's up, but vacant, it would still be -- the vacancy rate within the United States will still be below 7%, which is historically lower than what it's been. So no, I mean, there's -- I think as you look in different markets, and that's why we're very careful with where we build. If you look at certain markets, there could be overbuilt for sure. But at a macro U.S. level, I don't see that happening immediately.

Paul Young here. A question on, I guess, the $300 million of committed capital. And that equates to, I think, 20 projects, if you just do the $15 million on average per project. Just curious about where that $300 million has come from. So in a couple of years ago, what were your spending, how many projects you're building? And what determines the $300 million, was that just that you -- from a bottom-up perspective, that you saw 15 or 20 sites, that's what you could take on and where could you grow? Just trying to get where that $300 million is from.

Yes. The $300 million was really based on making sure that we can provide consistent earnings that are meaningful. So to your point, you're right. It's probably closer to 12 projects, right, when we have a full going out. And it's -- and what that would do is basically you're looking to sell, call it, 4 projects a year. And when this fully gets ramped up and then you're having consistent. Because it's not like they're all being -- we're not deploying the $300 million all at once. It's over a period of years, right? So like we'll have projects that are under construction from just the very beginning where we're just taking trees out and there's others where we're wrapping it up. So that's -- if I'm answering your question, that's how we got to it. So that would give us sort of a consistent sort of flow in the pipeline of projects where we'd be selling and recycling capital and coming through.

Yes. And I guess maybe a question for Mark and Mark. I mean, is that the right level? Do you want to grow that further?

So it's our second level. And the reason it's $300 million is we increased it a year ago. So what we saw, Paul, was we saw the potential of this business and the ability for us to build that pipeline. And we felt like the business has been constrained. So we increased the levels. And that's been nice. The $300 million is the constraint we put on the business. So that's the level that Mark and I have said we think that's enough for us to commit in working capital at this stage to the business and go away and prove to us that you can develop an earnings base around that. But that was a step-up. I think our first level was $100 million. So we started out with a $100 million envelope. So that's a decision that we drive out of the center, and then Matt and the team work on projects under those constraints.

Just a quick question on buildings. When does the team get involved with actually in specific projects? Like are they involved at the architectural stage? Do they come in afterwards? Is it like a tender process for the products? How does that sort of work?

Yes. It's a variety, right, of our builders and their role in with the acquirer of the building. And when they come into play, in some cases, we might be aware of a project that's going on, where we'll bring a builder in. So it's a pretty wide range of touch points and entry points for us and the builder.

I'm just wondering, who are your competitors? I guess you are a small player in the U.S. And what's your edge over your competitors to -- for that builders network? And is there any number like how many projects you do every year just annually?

Yes. So our competitors would very -- like you can go -- I'd like to say we compete with every developer depending on the market, right? So there's -- it could be anywhere from someone who's a national competitor, like a Prologis, to a very local competitor, right? So it's -- it varies on the market, I would say. And they vary from -- and every competitor will have different sort of avenues that they look at, right? So some will hold land longer, others will be looking to hold the buildings and not sell them, they look at deals slightly differently. I would say from our competitive advantage, I mean, I do think that having our builders is a strong advantage for us, right? I mean, a really good example is hand on heart, I was not looking in Laredo, Texas to do a project, right? I mean I wasn't doing that. But we had a builder who gave us a call and said, I have a customer. He needs a building. I'm not going to be able to do it. He going to go to another developer. Can you come down here and help? And we did it. We got down there the next week. And we never -- our builder never would have done the deal, we never would have known about the deal without them, right? And so I think there is that advantage that we can come in. And another advantage is -- I walk in, I go, I don't have to go get bank debt. I don't have to go get an equity partner. We do this in-house, right? So particularly in today's environment, where making a decision on debt or an equity partner is incredibly difficult, people know that BlueScope can come in and move relatively quickly. From a number of projects we like to do, look, I think right now, we're wrapping up 3 projects. We've got 2 others that have just started to build to suit. We've got a couple more that we'll be getting going. So ultimately, with the $300 million, it would be somewhere between, call it, depending on size, right? So 10 to 15 -- 10 to 12 projects a year.

Mark, another sizable market opportunity in the properties group, what determines the amount of capital you're willing to allocate to that business at any point in time? And can it grow disproportionately to the rest of the U.S.?

So what's going to determine the amount of capital is the return we get. I said -- I think Paul asked the question yesterday, we've got that 15% hurdle that we set internally. This is a business where we actually should do better than that. So we're looking at what the performance of the business is going to be. And David, if we got to a point where we felt like $300 million wasn't enough and we were constrained and there was an opportunity out there, we would consider expanding the envelope. But it's not -- this is a bit of a walk before we run process, the way we've approached it. We've -- it's been very ad hoc in the past. I think you've heard Tania say before, probably the mistake we made as we went into COVID because we were so uncertain about what the outcome of COVID was going to be, we put constraints on all of our businesses from a capital point of view with the benefit of hindsight, correct. With the benefit of hindsight, this is one I would -- we wouldn't have pulled the lever as hard because we effectively emptied out Matt's pipeline for a period of time. So as I look back, I do that differently. But we're taking a cautious approach to this. We actually think the advantages that Matt's talked about, being able to leverage the builder network, the capability that we bring, we believe there's a business unit here that's going to -- we can build to make a regular and good return. What's the absolute level? I don't know the answer to that right now. But at the moment, we feel like $300 million gives the guys and the team enough flexibility and optionality to deal with the opportunities that are emerging.

Paul McTaggart again. I have been listening. So I'm just kind of struggling. I mean, what's the end game here, Mark, right? You're basically saying if this thing can make a return, we're going to keep, we're going to grow it and it's a whole new business. Where does that fit in with the steel company? And what's the 10-year vision, might be beyond my timeframe? But what's the 10-year vision for this business? Do we ultimately sell it, spin it out? How do we think about that?

Well, I don't know that we've come to an answer on that yet, Paul. I mean this is a steel building products company. You're looking at right here. You're at a steel company yesterday. This is a different company. This is a building products company. And that's where we think there's an adjacency and leverage here and the builder network brings that to us. If we didn't have the builder network, to your question yesterday about why do you need to do it? If we didn't have the builder network, I'm not sure we'd probably be in this space. The fundamental advantage that we believe we have with us 2,000 customers who are, in fact, our sales force. And we've got a 0 cost sales force that's operating for us across the U.S. And those 2,000 builders bring these opportunities, and we felt like it made sense for us to play in that market given our current position in Sue's business with BBNA. I'm not sure what the 10-year vision is, quite frankly, and maybe I shouldn't say that or maybe I should have one. But as I said, we're walking before we run here with this. We think there's an opportunity for us to make a really healthy return out of this given the association and the adjacency we have with the builders.

Matt, I'm interested in how much the percentage of your projects are pre-committed versus speculative because obviously, that will change your risk profile. And secondly, based on history, what have been the returns on your projects to date?

So on the split at the moment right now, we're right about 60%, they're build-to-suits. So they've had -- and then 30%, it's built-to-demand. Now I think that's a point in time. It can go to -- probably flip that, right? So 30% build-to-suit, 60% build-to-demand. But right now, that's where it's at, [ probably ] opposite of that. With returns, basically, we've achieved over 20% on all our projects.

Sue. Paul Jackson. I think from memory, you've got a fairly strong market share, I think, in the Butler business, and that you've had that for sort of like 20 years. So could you comment a little bit on that? And I also think in your buildings business, you've got a bit of proprietary type thing in this type of product that you -- in terms of the structural product and stuff like that, that you're doing within that business. Perhaps talk about your competitive position within your buildings business?

Yes. So from both brand positions, I think both of our brands are in that top 3 to 5 position across all of our competitors. And I think what we've been seeing, we have stronger suits in some versus others, which gives us the opportunity as we start segmenting the business to hone in on where some of those market opportunities might be more available to us. So manufacturing, as I showed you, we have a strong position there, and we look to hold that, and that's where some of those advantages and the proprietariness of our software and design really comes into play. We can really play a really strong role with our builders and the end user in designing that product and maintaining that and pushing it as far as we can go. Some of the opportunities, though, is to take some of these, like I showed you, the hybrid solution and really start growing that commercial market and expanding that and taking full advantage of some of the market conditions that Matt was kind of talking about. So I think we're in a strong -- we are a strong player in these markets, but we have opportunities to really start dissecting a little bit stronger and going after utilizing some of our proprietaries.

And your market share was sort of [indiscernible].

Yes, the big 3 Nucor, NCI...

It's [indiscernible].

Cornerstone. Sorry.

I shouldn't remember that...

Cornerstone and ourselves, all in the sort of 20% to 30% market share range.

No further questions. Great. We might -- given we're running well in time. We might kick straight into John's session, I think. Way to go.

Good. Thank you, everyone.

Thank you.

Good morning. I'm John Kuzdal, I'm the President of BlueScope Coated Products, which is the business unit that was created last year when BlueScope acquired the assets, the coding assets of Cornerstone. And before I get going, one, I didn't have a chance to welcome everybody here. As Kristie said, this plant was built in 1970. It was substantially modernized in both 2003 and also in 2012. So what you'll see when you go out there will be pretty state-of-the-art, a lot of capabilities and a line that is general purpose. So it can serve all different types of customers and produce different products. The other thing I want to do real quick is introduce your host, Daniel Bridge. He's our plant manager. And to speak of the flexibility of BlueScope employees, Daniel was at North Star and helped commission Aristotle before he came down here. Ryan Wesley sitting next to him. He's our Quality Director. Kelly Garvin is our Marketing Director. And then Robyn Edmonds is our VP of Finance. And then our lead engineer for the business is at the end, Yusuf Durbar. So I just want to introduce those guys to you. So the business acquired by BlueScope has 7 sites. And there's really kind of a business within the business, which I'll get to shortly. But you have 2 facilities that specialize in painting hot-rolled steel, 5 facilities that specialize in painting light gauge metal, both steel and aluminum. And the business on the light gauge side was largely operated as a toll processor, and we'll talk a little bit more as we get into this as to how the toll processing business model works compared to another business model, which is the single bill business model. But the plants have very robust capabilities, probably the most robust of the industry that it competes in. And when I say that I'm talking about the ability to produce coils -- painted coils of both aluminum and steel, heavy thickness, light thickness or light gauge, as we call it, various paint systems, a lot of customized and boutique capabilities, but at the same time, also able to produce for the high-volume end users. And so in the United States, you have a lot of people, you have people that have boutique capabilities and you have people that only have the capabilities to produce the high-volume products. This set of assets can actually do both, which makes it pretty appealing. The business has a history of having a strong customer service acumen. But where they were lacking was in some of the technical capabilities that BlueScope can bring to the business through BlueScope's expertise and painting coils. This business is an obvious fit to the North American strategy and that there's just 2 things that it supports. The first being that it serves as an intermediate point in the value chain. So it helps to close the gaps within the overall value chain. And then secondly, it fits within the BlueScope scheme of being able to provide value-added branded products. They can bring the branded products to the United States market through this business. And everybody, I'm sure, is familiar with COLORBOND. That's one of the products that we have the ability to bring over to the U.S. through this business. And then how does this business fit within the overall BlueScope strategy to transform, grow and deliver from the transformation standpoint, we have the ability to actually take this business, and we can transform it in a way where we now have the ability to not just sell product the way this business has historically sold it, but we can also add another leg, another swim lane where we can sell product through single bill means, which allows this business to ultimately broaden its competitive base. In terms of how we can contribute to the growth strategy, we have a lot of opportunity to improve the hot-rolled business, which I'll get to shortly because BlueScope has the ability to support the supply chain for the hot-rolled business in part through North Star and in part through being able to leverage other relationships so that we can supply the business with hot-rolled steel, that will allow the business to grow. The previous owners were constrained that way because they didn't have the ability to support the supply chain necessary to grow that business. That business was in a status quo mode for many years. On the light gauge side, we have opportunities to grow that business through branded products and through improving and transforming the business model and also by improving and transforming the customer experience. And then to be able to deliver, a lot of it comes down to being able to employ best practices. BlueScope has great operating practices that can be superimposed over this business that will lead to operational improvements over time. I mentioned there's really a business within a business. And on the surface, you have 5 light gauge plants that can coat light gauge coils, steel and aluminum. And I talked about the capabilities. We have the ability to produce for boutique applications, small end users, specialized products, but then we also have capabilities to produce for large end users who run 1,000 tonnes a month and more. The hot-rolled business is a little bit different. It's a business that is solely to support the construction industry. They co-product that goes into secondary structural members, similar to what this photo is right here, painted purlins and [ guards ]. And with the capabilities that those 2 facilities have, we can actually cover the entire Eastern United States market out of those 2 facilities. And we feel like that that's underserved right now. When you talk about the pre-painted metal market, it kind of runs hand-in-hand with the metal building market in terms of where the opportunities are out in the marketplace. There's about a 4.5 million tonne market in the U.S., and about 90% of that consumption is East of the Rocky Mountains. And so that's why we have a concentration of plants East of the Rocky Mountains. When you get down to it, the construction market is 70% of that 90%. The rest of it being things like automotive, containers, other transportation, consumer products. And in our case, we have the capabilities of supporting all of those markets. But the clear focus is on construction because that's what we're good at. Those are the kinds of branded products that we can bring to the market to support, and it's probably the most stable market. It's the less cyclical of the various markets that a business like this can ship into. And over the last several years, there's just been a consistent 2% CAGR. So I mentioned the business model. So the business that BlueScope acquired was a toll processor. And up until about 10 years ago, the entire pre-painted coil market in the U.S. with the exception of maybe one person was served through toll processors. And the mills began to gain an interest in this. And about 10 years ago, you started to see mill-based suppliers of pre-painted coil to the market, and those mill-based suppliers would sell a painted coil. And what was attractive to the customer when that started to happen is they no longer had to work with a mill to get their metal. So customer buy substrate has it delivered. And then they have to hold that working capital and they have to manage everything until they're finally ready to receive it. So as a toll processor, we kind of have it easy because the customer owns the metal, customer manages it, we go buy paint, we apply the paint, then the customer takes it. The problem is the customer was getting wise to it. And starting about 10 years ago, customer said, "Well, no, this is way simpler. I can just show up, place an order for a painted coil and then call ships." So as that's happening, it's starting to change how the entire market now operates. And the beauty for BlueScope is that this plays right into their strengths. And the beauty of this business as they acquired it is that this business already had some experience selling single-bill coils through its hot-rolled business. So we can take the practices that we deploy in the hot-rolled business, bring them to the light gauge side, and then the BlueScope expertise and the BlueScope capabilities to manage the supply chain will allow us to establish a single bill channel in addition to maintaining our toll painting because you still want a toll coat for certain customers for certain end uses, and we would never want to walk away from that, but we want to also develop this lane because this is where the growth is going to be in the future as the market shifts more and more to a single bill customer acquisition model. So in the end, when you get down to the value proposition for us, it's really there's 4 legs to the stool, but these top 2 are really what we're focused on. We're trying to establish differentiation with our products and with what we can offer in the way of service to the customers. And to that end, we're doing a lot of work on our customer portal what we acquired needed a lot of work in that area. We've begun that work, and we really want to ultimately end up with a best-in-class customer portal that makes it easy for customers to do business with us. A lot of the discussions we've had with customers about what they're looking for, what their needs are, have really opened a lot of eyes as to what it would take to become best-in-class when it comes to how easy is it to do business with us. Synergies, largely based in the areas of supply chain, utilization and ultimately, paint supply. In supply chain area, we'll get to in a minute, some challenges there. We had to rebuild the supply chain processes to make them more functional because, again, the previous owner was in a status quo mode, where the supply -- they didn't want to invest in the supply chain. And that was actually hampering their ability to grow the business. For us to be able to grow the business, we have to have a robust supply chain, robust processes, and we've been working on that since acquisition. Utilization, another big component of the synergies. That really comes down to being able to run the lines more productively. A lot of the things that we're investing in, in the facilities are going to contribute to higher line speeds that run closer to what the equipment capabilities are rated at. And ultimately, that will allow us to bring more products through the process and be able to generate growth in volume and ultimately, growth in revenue and outcome. Just to touch briefly on what the experience has been since the acquisition. There's a lot of successes, particularly when it came down to bringing employees on board, trying to establish the BlueScope culture. Some of our initiatives, COLORBOND, for example, there's already work to get that developed and get that close to coming to market. We had -- I mentioned we had to rebuild our supply chain processes. We have a very robust S&OP system now that in the environment we're in with steel prices fluctuating, it's working well. But then some of the challenges we had, again came back to supply chain. It was a big task to rebuild that S&OP process. A lot of equipment reliability issues that we've had to address, and we're still addressing. And then we -- from the IT perspective, the IT transition has been very long and drawn out. And that was partly by design. The previous owners needed a year to be able to disconnect the business from their business because they were a highly integrated business with shared services all over the place. So to disconnect those blood vessels has taken a long time. And the original projection was for 1 year, and 1 year will be up at the end of June. So we're getting close. But that has been a challenge because we still have infrastructure failures on the IT side that come up that are kind of related to that transition. But we're almost through that. Safety has been a big opportunity for us coming in. BlueScope is known for having best practices in this area. We've been able to bring a lot of that into this business and achieve a lot of wins. In particular, this business has a lot of forklift movement in all of its plants more so than you would see in a normal steel mill because in the steel mill, you're dealing with much bigger equipment. And in these businesses, you're dealing with a lot of stuff that's sitting on pallets. So a lot of the work we had to do from the safety perspective had to do with material handling and movement in -- forklift movement. Sustainability. One of the good things about being here today to see this plant is you'll see probably our largest -- well, easily our largest project in this area. We're replacing the afterburners on the paint line here with regenerative thermal oxidizer, which is going to substantially reduce the greenhouse gases coming out of this facility. Of all of the paint line that we acquired in this acquisition, this particular site had by far the most greenhouse gas generation through the afterburner technology that was on this line, and we're replacing that this year as we speak. And on the tour, you'll probably be able to actually walk out and kind of see how that thing is going, and there's going to be a large stack and there's going to be some duct work that actually goes over a bridge to get to the building and it's kind of halfway constructed. But by the end of this year, we'll have the whole thing up and running. And we're going to take out a substantial amount of greenhouse gas and create a substantial amount of savings around that. So that's a win-win where you not only can improve your environmental performance, but you're going to improve your cost performance. And then we've got some other things that we bring -- brought to the table in the way of recycling activities and waste handling and things like that. So are there any questions? I'm sure there are.

Megan Kirby-Lewis from Barrenjoey. I'm just keen to get your thoughts on the pricing strategy for COLORBOND once it eventually launches. And how we should think about that in the U.S. market? And I guess sort of the key point of my question is whether or not you can price it at a steady price like what we see in Australia? Or will it move with the underlying, the cold-rolled price?