Capral Limited ($CAA)

Well, good morning. I'm Mark White, the Chairman of Capral Limited. On behalf of the Board, welcome to Capral's 2026 Virtual AGM. And I hope you enjoyed the Capral video to start our AGM. To meet the requirements of Capral's constitution, a quorum of 3 shareholders is physically present here at the Huntingwood venue today. Capral's Managing Director, Tony Dragicevich; Capral's CFO, Tertius Campbell; and myself. The other members of the Board, Bryan Tisher and Laurie Lefcourt are present here online, and you should be able to see them on your screen. Accordingly, I declare the 2026 AGM open, and you will now see the agenda for the AGM. Today's meeting is being held online via the Computershare meeting platform. This allows shareholders, proxies and guests to attend the meeting virtually. All attendees can watch a live broadcast of the meeting. In addition, shareholders and proxies have the ability to ask questions and submit votes. The notice of the meeting and Capral's 2025 annual report have been provided to shareholders and copies are available on Capral's website. The notice sets out the items to be considered at this meeting and are set out on the agenda and will be taken as read. Online attendees can submit questions at any time. To do so, select the Q&A icon, select topic, type your question into the text box and press the send icon to submit. Please note that while you can submit questions from now on, I will not address these questions until the relevant time in the meeting. Please also note that your questions may be moderated or if we receive multiple questions on one topic, be amalgamated together. To ask a verbal question, please follow the instructions written below the broadcast window. Please insert the agenda item at the front of your question to enable us to collaborate questions quickly. Finally, due to time constraints, we may run out of time to answer all your questions. If this happens, we will answer them in due course via e-mail or posting responses on our website. Voting today will be conducted by way of a poll on all items of business. In order to provide you with enough time to vote, I will shortly open voting for all resolutions. If you are eligible to vote, once voting opens, press the vote icon and all resolutions will be activated with your voting options. To cast your vote, simply select one of the options. There is no need to click the submit or enter button as the vote is automatically recorded. You will receive a vote confirmation notification on your screen. You can change your vote up until the time I declare voting closed. I now declare the poll and voting open on all items of business. I will give you a warning before I move to close the poll and voting. Before addressing the formal items of business, I will recap on some of Capral's major activities during 2025 financial year, capital management, safety and sustainability. Tony, Capral's CEO and Managing Director, will also provide comments on the company's financial performance, key initiatives, strategy, Fair Trade, safety, ESG, key operating risks and outlook. I would first like to give you a high-level review of 2025. Capral has again delivered a strong result despite lower volumes. Our business model of diversification across the residential building, commercial building and industrial markets provides resilience to our performance across cycles. This year's financial performance reflects a disciplined approach taken by management throughout the year on cost control, margin improvement and pricing discipline. Underlying EBIT rose 4% to $35.8 million and net profit after tax to $35.6 million, which was $3.1 million higher than 2024. Net profit after tax was assisted by the resolution of a long outstanding claim with Capral's insurers and a tax benefit from the recognition of additional tax deferred assets. For the 2025 financial year, Capral delivered basic earnings per share of $2.15, which included $0.29 of significant items and tax benefit. This compares to last year's $1.88 earnings per share, which included $0.21 of tax benefit. During the year, the business completed 2 bolt-on acquisitions, of which one of these was in the window and door hardware market. In relation to Fair Trade, there was a positive outcome with the continuation of the China antidumping measures on aluminum extrusions, and we remain committed to ensuring there is fair trade and a level playing field for the Australian extrusion industry. Moving now to capital management. Capral continues to have a strong balance sheet. The Board's capital allocation priorities are balanced between investment in ongoing operations and organic growth, growth through acquisitions and delivering shareholders sustainable and consistent distributions through the cycle. The Board has reviewed the company's capital allocation policy and has revised the target distribution range from 40% to 80% to 40% to 60% of annual statutory net profit after tax. This provides a more sustainable capital management framework across the cycle while preserving flexibility to support Capral's growth and manage volatility. The on-market share buyback that we commenced in 2023 continued in 2025, which resulted in equivalent distribution of $0.55 per share in the 2025 financial year. In addition, Capral declared an unfranked dividend -- final dividend of $0.30 per ordinary share that was paid on the 26th of March in respect to the 2025 financial year. The total return to shareholders for 2025 was $0.85 per share or 43% of NPAT. This compares to last year when we returned $0.76, comprising $0.36 of share buybacks and $0.40 in unfranked dividends or 45% of NPAT. We commenced another on-market share buyback of up to 10% of the company's issued shares on the 2nd of March 2026. It is anticipated that for 2026, subject to share trading liquidity, share buybacks will form the major portion of value returned to our shareholders. As Capral continues to have tax losses to carry forward, any dividends, which may be paid in the short to medium term will be unfranked. From a safety and sustainability perspective, Capral is committed to pursuing excellence in its delivery of effective safety and sustainability programs across all parts of its business. In the year to 2025, the business achieved exceptionally low injury rates with its total reportable injury frequency rate at 3.6, well below reported peer averages. The environment is a key priority for Capral. We have a target to reduce emissions by 20% by 2030 and are on track to meet this target. As a group-wide entity, this year, the Board approved Capral's first sustainability report on climate prepared in accordance with AASB S2 and the Corporations Act. In relation to Board movements, we were pleased to welcome Laurie Lefcourt to the Board in 2025, who also took the position as Chair of the Audit and Risk Committee. Laurie brings a wealth of experience to Capral with an extensive background in senior financial management, executive roles and Board positions in the industrial sector. As Laurie is standing for election at this AGM, you will hear from Laurie a little later. Now looking ahead, following increased residential approvals in the second half of 2025, we expect the detached housing sector to commence recovering in calendar '26 with the benefits weighted to the second half of the year. The recent events in the Middle East and other external factors are creating uncertainty in the market, supply challenges and cost pressures. The Capral team is working hard to recover these cost increases. 2026 will be an important milestone for Capral as we proudly celebrate our 90th anniversary, which reflects 9 decades of resilience and growth. Capral and its management teams over the years have continually adapted to changing markets while remaining anchored in our core values and will continue to do so in the current environment. This enduring Capral brand and legacy provides a strong foundation for the future focused on innovation, sustainable growth and long-term value creation. On behalf of the Board, I would like to take this opportunity to thank our shareholders, the Capral team and our other stakeholders for their strong support during 2025. Thank you also to my co-directors for their contributions throughout the past year. I will now hand over to Tony for his comments.

Thank you, Mark. Good morning, everyone. I'll start off with the review of 2025. Trading conditions during 2025 remained subdued, particularly in residential construction and our key industrial markets also softened. Total housing starts in 2025 lifted to 196,000 with growth primarily in multi-residential dwellings. Detached housing starts were relatively flat and below expectation. Higher interest rates and the slowdown in government infrastructure spend impacted demand, resulting in lower volume from the transport, infrastructure and manufacturing sectors. These factors combined resulted in Capral sales volume falling 4% to 65,000 tonnes. Revenue increased 6% to $686 million, primarily reflecting higher aluminum prices. The LME aluminum price increased by approximately 12% during 2025, resulting in higher average selling prices and increased working capital requirements. Despite the lower volume, Capral achieved an improvement in earnings. Reported EBITDA increased $3.6 million on prior year to $61.9 million, and EBIT increased $3.7 million to $38.1 million. Underlying EBIT before significant items improved by $1.5 million to $35.8 million. This result reflects continued cost discipline, operational efficiencies and good margin management in what were tougher market conditions. The result also includes the contribution from recent acquisitions. The group ended FY '25 with a net cash balance of $60.5 million. Debt collection performance remained good with debtor days stable. Inventory values and working capital levels were elevated, primarily due to higher LME aluminum prices. Now turning to key initiatives and strategies. Our strategic priorities remain consistent and focused on leveraging existing strengths in product range, scale, capability and people, driving continuous improvement across operations and investing selectively to support future growth and capability. During 2025, focus was placed on our Smithfield and Penrith extrusion facilities. At Smithfield, equipment upgrades continued to improve reliability and productivity. And the second stage of the Penrith plant upgrade program, a new billet furnace and saw was successfully completed and is delivering productivity gains. The business continues to develop its distribution and direct-to-market capability. The focus during the year was integrating and improving performance at recently acquired trade centers in Victoria and Queensland. During October, we acquired the business assets of Comsupply, a Perth-based aluminum and hardware distribution business supplying into the building and security markets. We also completed the acquisition of a small aluminum sales business in Sydney. We continue to assess opportunities to expand our distribution footprint and participate in adjacent market segments where appropriate. About Fair Trade. Capral continues to engage with relevant authorities and industry stakeholders to support Fair Trade outcomes for the Australian aluminum industry. The Antidumping Commission confirmed the continuation of antidumping measures on Chinese imports for a further 5 years from October 2025 and progress was made on steps to strengthen the Australian antidumping system. Imports remain a significant component of the Australian extrusion market. In the context of ongoing global trade uncertainty, maintaining an effective antidumping framework remains important for domestic manufacturers to help mitigate the impact of unfair trade. Now turning to safety and sustainability. Safety remains our primary core value. This year, we delivered a material improvement in safety outcomes with the total reportable injury frequency rate reducing to a record low of 3.6. This reflects continued emphasis on risk management, training and safety leadership across the business. The business continued to progress towards its net zero emissions ambition by 2050 with a target 20% reduction by 2030. During 2025, Scope 1 and 2 emissions decreased by 9%, supported by energy efficiency initiatives and increased use of renewable energy sources. We remain on track to meet our 2030 target. Initiatives resulted in a 15% reduction in waste, reflecting improvements in recycling practices and operational processes. Capral maintained its aluminum stewardship initiative known as ACI -- ASI, sorry, and remains the only extruder in the region with this accreditation. And demand for Capral's LocAl, low carbon aluminum products continue to increase. Management has considered the potential impacts of current climate-related matters and has not identified any material financial impacts in the short to medium term. Climate-related risks have been incorporated into financial planning assumptions. Capral operates within a structured risk management framework. Key risks include a further slowdown in economic activity, particularly in construction, increased competition from imported aluminum extrusion and domestic entrants, cybersecurity and external IT-related risks and changes to construction standards and regulatory requirements. Now finally, the outlook for 2026. Residential construction activity is forecast to gradually improve during 2026. Detached housing approvals lifted in the second half of 2025, supporting a forecast lift in extrusion demand in 2026. Nonresidential construction activity in our key industrial markets are forecast to remain broadly stable. The Middle East conflict has significantly disrupted global aluminum supply. Smelters in the Gulf region represent 9% of global capacity. Not only are they restricted in supply due to the closure of the Strait of Hormuz, but some have suffered damage by military attack. This has led to a global supply shortage resulting in elevated LME aluminum prices and premiums. Aluminum prices are expected to remain volatile, influenced by global supply and geopolitical factors. The business sources a portion of its billet supply from the Middle East, but we've been able to replace that volume from alternative current local and offshore suppliers, albeit at a premium. Recent higher fuel costs have resulted in unplanned increases in freight and other costs. We are seeking to recover these cost increases from the market. Based on external forecast, we expected overall market conditions to start improving in the second half of 2026. However, recent challenges related to the Middle East conflict have the potential to impact demand and cost recovery. Notwithstanding this, the business expects to generate earnings broadly in line with prior year. And on this basis, subject to performance and capital requirements, Capral plans to return capital to shareholders, primarily through on-market share buybacks supplemented by unfranked dividends. During 2026, Capral celebrates its 90th year of operation. We are proud of our heritage as a long-standing Australian manufacturer. I would like to thank all members of the Capral team, both past and present, that have been part of our 90-year journey. The business remains well positioned to respond to market conditions, pursue opportunities as consistent with its strategy and deliver sustainable value for shareholders into the future. Thank you. I hand back to Mark.

Thank you, Tony. Okay. So we now move to Agenda Item 2. The first item of business relates to your consideration of Capral's 2025 annual report. Mr. Daniel Camilleri of KPMG Capral's auditor is available online to answer any questions you may have about the conduct of the audit. I don't believe we received any written questions on the audit ahead of today's meeting, and we will now address any questions on the annual report or the audit. Just a reminder to please insert the agenda item at the front of your question to enable us to collect questions quickly.

We've received one question from Mr. [ Stephen Mayne ]. He's asking, when did we last tender the external audit and when are we next likely to tender the audit? I can actually respond to that. We tendered it in 2024. So there's only been 1 full year that KPMG has been audited us. So it's not in the near future that we will revisit that.

Thank you, Tertius.

That's the only question.

No other questions? Okay. Thank you for the question, and we will now consider the items which require voting. As indicated in Capral's Notice of Meeting, voting on each of the resolutions being put to the meeting will be conducted by a poll. The majority of shareholders who submitted proxy forms appointed the Chair of the meeting as their proxy. As indicated in Capral's Notice of Meeting, the Chair will vote undirected proxy votes in favor of all resolutions. The first voting item is the election of Laurie Lefcourt as Director. The wording of the resolution is shown on the screen. And before we consider the election of Laurie, I will hand over to Laurie to address the meeting. Welcome, Laurie.

Thank you, Mark. Hello, everybody. Thank you for giving me an opportunity to say a few words about myself. I'm a chartered accountant, both here and in Canada, and I'm a graduate of the Australian Institute of Company Directors. I've been a senior finance professional in industrial companies, mining resources, construction and infrastructure for over 30 years prior to embarking on a nonexecutive director career. I've been a Nonexecutive Director for over 8 years now on listed companies. And I was driven towards an NED career as a result of being very passionate about aligning strategy, risk governance and compliance because I found quite often in the organizations I work with that, that was not always aligned and trying to work with companies to be able to help do that, create a passion for me to get involved as a director in companies. I've had many roles in my executive career where I had carriage of the responsibility for risk management, governance, compliance and across various sectors and industries. And I put myself in a position where I feel like I'm able to add value to Capral, both because of that and my understanding of process and capital management. I've been in the ARC Chair on 5 listed companies, currently 3, including Capral, and I've been the ARC Chair on 3 non-listed companies and have built strong relationships with management and advisers alike to ensure that we're able to deliver the charter of the Audit and Risk Committee and ensure there's integrity in the information that's coming to you as shareholders. I now concentrate all my professional activities on being a nonexecutive director and have ample capacity in my schedule to be able to serve you as the investors and the company as a Nonexecutive Director. I've been with Capral long enough to know that I'm very proud to be part of this organization, and I hope you support me today. I'm happy to take any questions.

Okay. Thank you, Laurie. Do we -- I think we may have a question.

Yes, we've got one question from Mr. Stephen Mayne. He asks, which recruitment firm assisted with the process and how competitive was it? Did Laurie know any of our directors before engaging with the recruitment process?

Okay. So it's probably best I answer that one. I don't think we need to say who the recruitment firm was that ran the process, albeit to say that we did actually run ourselves at a tender for the recruitment. So we did go to a number of recruitment firms to work out who we would like to run the process. There was a second-tier recruitment firm, I guess, you would say. In terms of the -- I think the other part of the question was how competitive it was. It was very competitive. And we just thought Laurie had the best skills and experience for what we were looking for in terms of the Board to balance the Board and also to add value back to the business. Was there anything else?

There was a question. Did anybody know Laurie beforehand?

No. None of us were known to Laurie before the process started. I trust that answers the question. Are there any other questions, Tertius?

No further questions on this.

Thank you. So the total number of valid proxy votes received is now displayed on the screen. And as we have no further questions on that one, we can move to Agenda Item 4, which is the nonbinding resolution on the adoption of the 2025 remuneration report. The wording of the resolution is shown on the screen. The total number of valid proxy votes received is displayed on the screen. Do we have any questions?

No questions.

Okay. So in the absence of any questions, we will move on to the next item of business, which seeks shareholder approval to issue share rights under Capral's long-term incentive plan to Tony Dragicevich, Capral's CEO and Managing Director and subject to the vesting of those share rights on or shortly after 1st of March 2029. The wording of the resolution is shown on the screen. The total number of valid proxy votes received on this item is displayed on the screen. Do we have any questions on this?

Yes, we do have one question from Mr. Stephen Mayne. Could the CEO summarize his past LTI grants as to whether they have vested or lapsed? Also, has he ever sold any ordinary shares in the company or bought any on market without relying on incentive schemes to build his equity position in the company? Please don't say look at it up in the annual report and through ASX announcements. It's complicated, and the CEO would have factually summarized the situation in 60 seconds. Also, did any proxy advisers issue a report on this LTI grant? Finally, how is Tony juggling the Board see that Fletcher Building from the -- from a time point of view?

Okay. Lots of questions there. I'll attempt to answer them. Tertius, you might just remind me as we go through. The question regarding my LTIP grants was asked and answered last year's AGM from the same person. So I will reiterate again. I own around 570-odd thousand Capral shares, which -- and around -- about 35% of those were acquired through LTIP. The balance, which is the majority of them, I purchased on market over the past 13 years since I've been working at Capral. I have sold shares in order to pay tax and for other investment purposes on the odd occasion, but the vast majority of my shares have been acquired on market personally. Okay. What was the other question?

Just a final one, jugging time on the Fletcher's Board? How does it suit your -- from a time point of view, does it impact your work here?

Look, I have the capacity. I've obviously been in this role for 13 years. I know Capral extremely well. We've built a strong business and a very strong management team over the last decade or so. Any work that requirements for me to attend the Fletcher meetings, I take as leave so that the company is not -- Capral is not financially impacted and the work involved around Board meetings, et cetera, are mainly complete out of hours, either on the weekend or evening. So it doesn't have any impact upon my ability to do this role, who I think people will have seen over the last couple of years.

I think the only other question was about proxy comments on the share rights and there were none. Okay. Anything else?

No further questions.

Thank you. The next item of business seeks shareholder approval to approve issuing securities under the Capral Limited long-term incentive plan. The wording of the resolution is shown on the screen. The total number of valid proxy votes received on this item is displayed on the screen. Do we have any questions?

No questions on this item.

Okay. Thank you. So that concludes the formal resolutions. We will now respond to any additional questions submitted in relation to the matters above. We have some questions?

Yes. The first question is from [ Mr. Ronald Guy ]. He says Regional Trade Union Human Rights Shareholder Group. How are you making sure that modern-day slavery is not in your supply chain? Is this something that you bring up with authorities when fighting against products dumped on the Australian market? For example, sorry, gloves in the procurement supply chain. Ansell has been in the news with allegations of supply chain worker exploitation. How does Capral protect themselves against such a problem?

Tony, would you want to...

Okay. We operate under the modern slavery conditions. We have modern slavery policy, and we have a very active audit of our supply lines, which we do on a regular basis, a continual basis. So all of our suppliers, both onshore and offshore are complete request from us to detail the -- any issues around modern slavery that may cause modern slavery. And we also follow that up with site visits by our supply chain team, particularly to those areas of those countries of risks. So it's something we take very strongly, and we have a very robust process around and ensure that we comply with the modern slavery regulations.

Next question is from Mr. Stephen Mayne. We had a question to the Money Cafe podcast from a listener this year suggesting that we use Australia's antidumping regime as a form of government-sponsored protection, which keeps imports out but raises prices for Australian consumers of our products. Please summarize the current situation with our activities in the so-called antidumping space focused on Chinese manufacturers. Wouldn't it be more transparent if the government simply imposes tariffs on imports or paid us direct subsidies to compete? What proportion of aluminum extrusion sales in the Australian market comes from overseas and China in particular?

Look, it's a very good question and one that you got a few components there. I'll answer the first one first. So over -- the aluminum extrusion market in Australia, over 1/3 of it is supplied by imports. Of that -- of those imports, China makes up around 60% of the -- probably 2/3 of the total imports into Australia are from China. Yes, it would be preferable if the government would impose an across-the-board tariff on all imports, particularly out of the low-cost countries. But unfortunately, that is not -- that's not the case. So we rely, but the Australian government does have a strong antidumping commission. That antidumping commission abides by World Trade Organization rules around antidumping. And in order to take a case, an Australian manufacturer to take a case, first of all, you have to be able to prove injury. You have to be a significant -- relatively significant player in the market and be able to prove injury or the threat of injury, which we've been able to do over many years now. And we have a -- we've been doing this for quite some time in terms of taking antidumping cases. And as I said in my report that we were successful in getting duties continued or measures continued on China for the next 5 years. I think that probably answers all the main points there, please.

We've got one more question from Mr. Stephen Mayne around the Investor Relations, but I've responded to him that I'll respond to him directly on this. But he also wanted to thank Capral for disclosing the proxies early and also congratulations on the strong support on all the resolutions.

Thank you.

No further questions.

No further questions. So ladies and gentlemen, that concludes our discussions on the items of business. In a couple of minutes, I will close the poll and voting on all resolutions. Please ensure that you have cast your vote on all resolutions. I will now pause to allow you time to finalize those votes. While those votes are being finalized, we will show you a Capral video. [Voting]

I hope you enjoyed that. We are very proud of that project out of Western Sydney Airport. So I encourage you to look up when you go out there when it does open, it really does look amazing. So I now declare the poll closed. And the provisional results of voting indicate that all resolutions passed. This will be verified and released to the stock exchange later today. There being no further business, the 2026 AGM of Capral is closed. Thank you for your attendance.