Inghams Group Limited (ING) Earnings Call Transcript & Summary

Welcome to the Inghams FY '23 results broadcast. [Operator Instructions] I will now hand over to Andrew Reeves, the CEO and Managing Director of Inghams.

Good morning, everyone, and thank you for joining us today. As just noted, my name is Andrew Reeves, Managing Director and Chief Executive Officer of Inghams. And it's my pleasure to welcome you to Ingham's FY '23 Results Presentation. On behalf of Inghams, I'd like to respectfully acknowledge the traditional owners, both past and present, as custodians of the land we are meeting on today. And joining me for today's presentation is our Chief Financial Officer, Gary Mallett. And at the conclusion of the formal presentation, we'll take any questions you may have on our results and the business. Our FY '22 results demonstrate the breadth and momentum of the operational recovery underway across the business, underpinned by a progressive return to normal operating performance levels across the business. Not only are these results a very significant improvement on FY '22, they provide a strong earnings run rate and platform for earnings growth. Readers of our annual report will also be aware of the high priority we place on the safety of our people, with people safety being a key variable in our short-term incentive framework. I am pleased to report that our intense focus on people safety backed by initiatives such as our Safety for Life program has seen our total recordable injury frequency rate decline by 7% in FY '23. As I noted, a key element of our financial performance has been our operational performance returning to normal levels, supported by ongoing recovery in our farming performance and supply chain conditions improving. The cost environment has been a challenging one, and our costs remain elevated. While our continuous improvement programs go some way while offsetting these inflationary impacts, our prices have required ongoing adjustments. The price increases we have implemented reflect both the significant increase in feed and other key input costs during the year as well as the fact that the market demand for poultry has continued to outplace -- outpace supply. Feed is one of our key costs. While pricing of key feed ingredients stabilized during the latter part of FY '23, it is expected to remain elevated versus long-term levels due to tight global supply and geopolitical issues. A key area of focus for us is on ensuring pricing levels appropriately reflect ongoing feed and general cost pressures, and we will pass on further price increases as required. With the ongoing recovery underway across the business, both operationally and financially, our focus is on the future, particularly our network capacity and capability. While we have not stood still over recent years, which has seen us invest around $350 million in our network, we are in the process of making a series of new investments in automation and our network and future proofing the business through improved capability to meet current and future consumer demands. Supporting our investment program and the significant improvement in leverage during the year, underpinned by a meaningful improvement in annualized earnings. Our capital expenditure will rise in coming years and is expected to increase to approximately AUD 100 million in FY '24 as we invest to improve our capability to meet market requirements. I don't intend to go into too much detail here, as Gary will delve into the financial details shortly. What I would point out, as you can see on the slide, is the meaningful recovery in our business as evidenced by our key financial metrics. Our earnings and profit metrics have shown growth across the board, reflecting the positive impact of our operations returning to normal and the benefits of higher net selling prices in response to cost increases. Group core poultry volumes were slightly lower than the prior period, down 0.4%, reflecting the impact of farming issues and labor and CO2 supply-related processing constraints during the period in New Zealand that affected both our primary and further processing activities. We are seeing a continued recovery in Australian farming performance and New Zealand volumes in the second half of FY '23 exhibited strong growth. At a group level, core poultry volumes established a recovery trend in late -- in the third quarter and continued into the fourth quarter, both in Australia and New Zealand, with weekly exit rate volumes at the start of FY '24 tracking a little over 3% for the same period in FY '23. Leverage has significantly improved, returning to the middle of our target range. Our dividends reflect the ongoing recovery in our financial performance, and we have declared a final fully franked dividend of AUD 0.10 per share. Total dividends declared or paid for FY '23 of AUD 0.145 per share represent a 7% increase -- a 107% increase on FY '22 and a dividend payout ratio of 76% at the upper level of our policy range. Turning now to an overview of the business and our key results for FY '23. Inghams is the largest poultry producer across Australia and New Zealand, and our diverse national network provides us with a number of important advantages as a key poultry provider to major retail, quick service restaurants, foodservice distributors and wholesalers. As you will see during the presentation, we are ramping up investment in our network to ensure we will meet future products and growth requirements. Inghams' operations are vertically integrated and hard and expensive to replicate. Aside from the obvious barriers to entry this creates by effectively controlling all elements of the production process, we're able to realize efficiencies across all aspects of our supply chain, which you can see being realized throughout the years of our continuous improvement strategy and process. As a result, we're able to ensure we achieve the appropriate production balance in our operations, which combined with operational excellence are the keys to growing our returns over time. Chicken consumption has been steadily increasing in the better part of the last 60 years. While we've experienced a significant acceleration inflation in recent years, which has also seen poultry prices increase, poultry continues to maintain a long-standing affordability advantage relative to other meat proteins. The health and versatility benefits of poultry are well established, aligning very well with ongoing trends and consumer preferences for healthier lifestyle options. Combined with the sustainability benefits of chicken, which has a carbon footprint that is estimated to be around 5x smaller than red meat, these factors support longer-term demand. The scale and the extent of the recovery in business profitability can be seen in the following chart. Pre-AASB 16 earnings have increased 36% on FY '22, with the impressive half-on-half growth, which highlights the sustained momentum of the recovery we are seeing. As you can also see, we are making progress on returning to the performance levels of FY '19 and '21 and the normalization of our operational performance, combined with our strong earnings run rate, provides us with a solid platform for earnings growth. Taking a look at net selling prices, the following charts clearly show the results of the work we undertook during FY '23 on implementing price increases across all customers and channels in response to input cost pressures and tighter poultry supply and demand conditions. Group core poultry net selling prices, as shown on the chart on the left, have increased 12.8% versus the prior comparative period and 6% on the first half. At a segment level, Australia grew NSP by 13% versus pcp, while New Zealand NSP increased 14% in New Zealand dollar terms over the same period. Turning now to look at conditions across our channels during the first half. The volume changes you can see on the chart largely reflect the recovery and rebalancing of channel supply and demand for prior -- from prior COVID affected conditions. In retail, Australian volumes were higher than the pcp as mix rebalanced from wholesale. In New Zealand, the prior period was elevated as a result of the 100-day lockdown in Auckland which saw a shift in volumes into retail from the lockdown-impacted QSR, foodservice and wholesale channels. The volume change in New Zealand for FY '23 reflects reduction in production levels due to CO2 supply constraints that restricted further processing capacity during a significant part of the period. In QSR, Australian volumes declined slightly due to supply limitations, while New Zealand was cycling COVID impacted first half '22 performance, further supported by customer promotional programs. The foodservice channel performance in New Zealand recorded good volume growth versus pcp as consumers returned to prepandemic lifestyles and travel activity reopened. This has been further enhanced by the focus on actively growing exposure to the New Zealand meal kits segment. Demand in the wholesale channel has remained strong, supporting price growth. In Australia, a reduction in volume in FY '23 is due to channel rebalance into retail as production returned to normal post COVID. Volumes on the export channel declined versus the prior corresponding period as trading conditions continue to recover, resulting in lower clearance volumes. I'll now hand over to Gary to present the financial results in more detail. Thanks, Gary.

Thank you, Andrew, and good morning, everyone. Turning to our profit and loss for the year. As noted earlier, group recorded a small decline in core poultry volume of 0.4%, with the decline in Australia partially offset by the volume growth in New Zealand during the second half. External feed volumes declined as expected due to the foreshadowed closure of our WA Wanneroo Feedmill in April. Revenue growth was strong at 12.2%, reflecting the price increases that have been applied across all customers and channels during the year. In response to the input cost inflation, the business has experienced. Underlying total cost growth was 11.9% driven by a range of factors, including internal feed cost growth of AUD 123 million with a 9.2% increase for the balance of costs, which includes fuel, freight, ingredients, cooking oil, repairs and maintenance, all of which exceeded general inflation levels. Net interest costs were higher due to the increase in interest rates on the drawn debt and our inventory procurement facility. Our effective tax rate was 18.5% in FY '23, which included the receipt of an R&D tax credit of AUD 8.5 million related to FY '21. The prior year also had an R&D receipt of AUD 8.5 million, and that was in relation to FY '20. Items excluded from the underlying results were largely incurred in the first half and related to the postponed business transformation project, offset by the gain on the Cleveland facility lease assignment. Before moving to the balance sheet, I wanted to make a short comment on AASB 16. As those of you familiar with Inghams' financials know, AASB 16 has a significant effect on our P&L and balance sheet and captures the 2 key elements of our business, being our land and building leases and our grower contracts. We have previously spoken about our intention to change how we contract with our growers. As we progressively move these grower arrangements to variable contracts, this will result in a reduction in the grower-related AASB 16 financial impacts on our P&L and balance sheet. This will have a substantial impact in FY '24 to our post-AASB 16 results. We've included some additional information in the appendix of the presentation released to the ASX this morning to assist analysts with this aspect of our financials. And importantly, it's -- we should note that it will not have any impact on our pre-AASB 16 results. Turning now to the balance sheet. With regards to our balance sheet, the earnings recovery has delivered the expected improvement in leverage. At the core of our working capital increase of AUD 40 million is the impact of higher feed and other input costs. This can be seen in the increase in biological assets, AUD 24 million, and processed poultry inventory of AUD 9 million. The increase in trade accounts receivable and accounts payable reflect the increase in NSP and cost increases, respectively, while feed inventories have declined by AUD 33 million due to a shift away from purchasing and holding inventory at third-party locations. Netting this off was a reduction in rebates due to the resolution of a prior claim. Our AASB 16 right-of-use assets and lease liabilities continue to decline as expected, in line with the lease periods. Our net debt was slightly lower at AUD 262.5 million. Moving now to cash flow. As a result of the increase in working capital during the year, driven by higher feed and other input costs, our cash conversion ratio declined to 90.4%. Noncash items includes the reversal of the previously recognized Cleveland facility lease liability in the first half. Capital expenditure for the year was AUD 72 million, up 16% on pcp. Key expenditure items included AUD 9 million on the wastewater treatment plant at our WA primary processing facility, AUD 20 million on our New South Wales breeder triangle and AUD 9 million on initial payments for automation investments announced at the half. Lower dividends and taxation paid was the flow-on impact of lower earnings recorded in FY '22. Finally, we received proceeds in the first half relating to the realignment of our interest rate hedges following the extension of our key debt facilities for a further 2 years during the period. Now turning to our capital management outcomes. Cash flow from operations was broadly flat in FY '23, with the higher earnings offset by the increase in working capital during that period. Our sustaining capital spend in this period was AUD 34 million, representing 62% of depreciation. While this is again below the target range, it was significantly higher than the last 2 years as normal operation -- operating conditions have returned. As I mentioned earlier, our net debt was slightly lower at the end of the period at AUD 262.5 million. The lower net debt, combined with the significant earnings recovery, has seen our leverage return comfortably within our target range at 1.4x. During the first half, we extended our debt facility tranches maturing in November '23 for 2 years out to November '25. As Andrew has already mentioned, a fully franked dividend of AUD 0.10 has been declared. When combined with the interim fully franked dividend of AUD 0.045, these dividends equate to a payout ratio of 76%, which is at the upper end of our target range. Growth CapEx in FY '23 was focused on a number of key projects. The ongoing development of our New South Wales breeder triangle, the first stage of which is now operational; our new wastewater treatment plant at Osborne Park in WA; and the investments we are making in new automation equipment. In FY '23, we delivered a return on invested capital of 19%. Turning now to the feed market. As FY '23 progressed, we saw feed prices rise and then stabilize. As you can see from the chart, they are very elevated versus historical levels. This had a significant impact on our FY '23 cost base of around AUD 120 million as mentioned earlier. In terms of wheat prices, they are expected to remain elevated, while global wheat supply conditions were seen to ease slightly during the second half, demand remains strong and the renewed uncertainty about Ukranian grain exports has contributed to a recent uptick in pricing after some falls. The other important factor is the forecast onset of El Nino conditions. The pricing story for soymeal is similar to that of wheat prices with the prices remaining elevated during FY '23. As it currently stands, we are not expecting to see significant relief in feed costs as the key input ingredients remain at elevated levels. Inghams continues to maintain forward cover of between 3 and 9 months to secure the supply in line with our procurement strategy. Now I hand back to Andrew to discuss the segment performance.

Thanks, Gary. In Australia, core poultry volume was down 0.6%, due mainly to lower bird numbers processed as a result of the shortage of high-quality eggs attributable to a small reduction in fertility levels from the performance of breeding roosters, resulting in a reduction in day-old chick numbers. Importantly, as I noted earlier, we have had our farming performance recover and egg supply improve during the fourth quarter. Revenue grew by a healthy 12.2%, driven by a 13% increase in core poultry net selling prices as higher input costs were progressively passed on across all channels and an increase of almost 27% in external feed prices, which reflects the steep increase that has been seen in world commodity prices. Cost inflation is now a familiar story. In FY '23, our Australian business saw overall underlying cost increases of almost 12% versus pcp due to growth in input costs, including internal feed up nearly -- or up to around $98 million, with a further $136 million of growth in other costs including fuel, freight, ingredients, cooking oil and repairs and maintenance exceeding general inflation. Importantly, our operational efficiency programs continue to provide meaningful positive offset to the rate of cost growth. In New Zealand, while the business had to navigate multiple challenges during the first half of FY '23, we've seen a progressive and ongoing improvement in the operation environment during the second half. The acute shortages in labor, which affected our primary processing activities and CO2 are now behind us. We saw improvements in labor availability as the first half progressed, starting back to typical levels. And we have successfully converted our Auckland and Cambridge processing plants to be able to use liquid nitrogen. As a result of these operational improvements, core poultry volumes saw a significant improvement in the fourth quarter and grew by 0.8% across the year. Similar to Australia, revenue grew by around 12% due to a 14% increase in core poultry net selling price and an increase of 38% in external feed prices. Growth in total underlying costs of 12.9% mirrored the experience in Australia with significant cost pressures bearing upon key inputs, including feed, supply chain costs, packaging and ingredients. We announced in February that we had agreed to a conditional purchase of Bromley Park Hatcheries for approximately NZD 8.6 million. Bromley Park Hatcheries own and operate a number of breeder farms as well as a hatchery in New Zealand and currently providing them to up to 15% of its day-old chick requirements. I'm pleased to report that we've now received both Commerce Commission and Overseas Investment Office approval, with settlement expected to take place in the second quarter of FY '24. This acquisition represents an attractive option for the company as it avoids the longer lead time, additional costs and associated risks of undertaking a greenfield development project and the Bromley Park acquisition will also reduce network risk, improve hatchery contingency and provide for further business growth. Reflecting on our long-term focus on animal welfare and the sustainability of our operations, Inghams is on track to become the first New Zealand company to achieve 100% SPCA certification across its operations. We have 36 farms in our Inghams New Zealand network, 14 free range and 22 barn-raised farms. Our free-range farms, which supply our Waitoa brand are already SPCA certified, and this will now be extended to our barn-raised operations. Following completion of the initial certification audit, we have now commenced the various works to support that certification. Achieving SPCA certification will be a key achievement as part of Inghams' broader sustainability strategy and aligns with the demand from key enterprise customers and their consumers. Turning now to an update on some of the important investments we are making in our network and automation and our sustainability outcomes for FY '23. As I reported in February, our new breeder triangle in Northern New South Wales has commenced operations with the Yorklea rearing farm coming on stream during the period. The facility is owned and operated by Inghams and is an important investment in our network. Servicing the Queensland market is an important part of growing our capacity and enhancing our overall resilience in our network. We have now commenced works on the second production farm, which we expect to come online later this year. When fully operational, the triangle will comprise 1 rearing farm and 2 egg producing farms and will produce approximately 700,000 eggs per year. Supported by the ongoing strong recovery of business performance, Inghams growth investment focus for FY '23 has been on enhancing our network capacity, capability and efficiency. During FY '23, Inghams announced a series of new investments in processing technology. The introduction of higher levels of automation has been a key consideration for Inghams as part of our network analysis and planning. Our orders have been placed and installation will take place from this month and then progressively into FY '25. During the year, 2 new distribution centers were brought online. In August '22, we opened a new temperature-controlled distribution center in Truganina in Victoria. This was followed in April '23 with the commissioning of a new state-of-the-art temperature-controlled distribution center in Edinburgh Parks, Adelaide. The second of 3 new facilities planned, the Adelaide facility has enabled the consolidation of existing distribution operations and is expected to generate significant transport and freight efficiency savings. We commenced construction in December of '22 of a new water recycling and treatment plant at our Osborne Park, WA primary processing facility. This plant is designed to combine capacity for future growth, strengthening our WA supply chain and enhance our sustainability outcomes. In Tasmania, we've been awarded a federal government grant of net $11 million to upgrade our Sorell primary processing facility. The grant will be invested in key plant upgrades as a part of a landmark sustainability project with work expected to commence in the fourth quarter of '24 and completion by the second quarter of '25. These upgrades will also support future product innovation initiatives. The work we continue to do and have been doing over a long period of time to embed sustainability in our business has positioned Inghams as a recognized industry leader in water stewardship, sustainable agriculture and sustainable food production. We've made good progress in FY '23 against our key targets with measures showing year-on-year improvements. We listed some of these key achievements here. Our safety focus and programs have seen our safety outcomes improve with our total recordable injury frequency rate declining by 7%. On food safety, we are very pleased to have achieved A or AA Global Food Safety Initiative British Retail Consortium ratings across all sites. We have also recorded a good reduction in our greenhouse gas emissions and further reduced our waste to landfill. We submitted our science-based targets calculation to the SBTI for approval in March of '23. And as we have previously reported, we have set Scope 1 and Scope 2 emission reduction targets, and we are currently working on a Scope 3 target. Our annual report will be published in October, and this will provide more detailed information on our ESG progress. The poultry sector remains an attractive and growing one. With significant consumer price and sustainability advantages over red meat and seafood alternatives. Poultry also remains a strategic focus area for our key customers, reaffirming our optimism for a category over the medium to long term. FY '23, was a period of stabilization and recovery for the business. The pace and momentum of the operational and financial recovery during the second half of FY '23 establishes a solid platform for continued growth and future investment. The operational improvements we have seen support our optimism moving into the future. As we noted in the presentation, poultry volumes were steadily recovering in the second half, and we would expect volumes to return to their long-term growth trend, underpinned by continuous improvements in farming performance and with demand growth that is supported by affordability, health and sustainability benefits. The continued growth in net selling price in FY '23 was in response to significant cost inflation that the business has experienced. While the pricing of key feed ingredients stabilized during the year, we expect pricing to remain elevated versus longer-term levels due to tight global suppliers and trade concerns, which have seen a recent uptick in feed pricing. We remain focused on ensuring our pricing offsets these and other cost pressures, and we'll implement further price increases as required. As we've discussed today, our operational performance is returning to normal levels. Farming performance continues to recover, and supply chain conditions are normalizing. Importantly, the second half recovery in operational performance across a broad range of metrics has underpinned a positive start to FY '24. Our continuous improvement program remains a core part of our business approach. And while our progress in some initiatives slowed due to COVID, momentum has returned and the overall program will continue to deliver cost savings and waste elimination, lowering our overall operating costs. As our performance continues to return to normal, we are able to confidently look forward and plan for the future. The investments we are making in automation and the network, which will see capital expenditure increase to approximately AUD 100 million in FY '24, are designed to future-proof the business through improved capability to meet current and future consumer requirements. So finally, a reminder that we are holding an Investor Day on November 15 of this year. Invitations have already gone out, and we'll be also sending out a reminder later this month, and we hope that you're able to join us for this event. On behalf of Inghams' management team, I would like to thank you for joining us today, and we'll now hand back to the operator to take your questions. Thank you.

[Operator Instructions] Our first question today comes from Phillip Kimber from E&P Capital.

Just wanted to explore, if I can, that Slide 30 that you talked about in terms of the AASB impact. If -- and I get that if you focus on pre-AASB numbers, this isn't going to make any difference at all. But I think you've showed on a slide that this year your NPAT was AUD 12 million lower under the current accounting standards and the year before, it was nearly AUD 15 million lower. So therefore, if you do make those changes, should we assume there will be a large step-up in NPAT? Another way of saying it is that gap between pre and post AASB NPAT will narrow, so it will help your post-AASB NPAT. Hopefully, that makes sense.

Yes, It does. So...

Yes. So it won't be a AUD 12 million gap next year. It will be less than that.

So I'll just talk -- take a few minutes to talk about this. So on Page 30, we've included the components that are different between post and pre-AASB 16. So the EBITDA level, the depreciation level, the interest level and then tax is a derivation of those, and you can see the movements. So the way I would read the chart on Page 30 is there will be a significant impact in EBITDA, a significant decrease in depreciation, a slight increase in interest. If you add all of those together, yes, I think NPAT impact will be lower, but not that big, pretty small. So it nets out to not much but a large impact at EBITDA level and a large impact at depreciation level. So what I mean by that is if your take our underlying earnings today of AUD 183.6 million, we then add about $250 million due to AASB 16, which then puts you up into the 400s for post-AASB 16 EBITDA, if that makes sense. And then if you look at next year, rather than adding AUD 250 million and you look at the chart, you would be more like AUD 220 million, AUD 230 million you would be adding to that number. So if nothing else changed, your EBITDA post-AASB 16 would reduce. Okay? Does that make sense?

Yes.

And then depreciation post-AASB 16 would also decrease, interest not hugely different. Net of that is a pretty small number at an NPAT level.

Right. And I just want to say, the D&A drop sort of roughly equate to the -- when I'm working back the other way on the P&L. But like do they offset each other? So at the EBITDA level, it doesn't really change much and at the NPAT level, it doesn't really change much. I just wasn't sure like because -- again, that the EBITDA will change materially.

That's correct. EBITDA -- DA changes materially. Depreciation changes materially. EBITDA, much smaller impact. Interest, you can kind of see the impact there. And then overall NPAT, very small.

And I don't think you meant EBIT, yes. Awesome. And then sorry to ask a sort of technical question. But the tax rate for this company has been hard to forecast, and we have had periods where you get that R&D benefit and then other periods where you haven't. Is there any insights you can give into next year, whether we'll get another R&D benefit, so we'll have a low tax rate? Or do we get back to sort of a more normal number?

Yes. So we've had -- the last 3 years, we've had an $8.5 million R&D benefit, and that related to the R&D years of FY '19, '20 and '21. So this year, the present year we're in now -- sorry, FY '23 year had an FY '21 R&D credit in it. Will there be something in FY '24? Probably. The activities that we do that generate the R&D credit are things that we will be continuing to do. Of course, it's subject to [ Aussie ] industries where they determine whether it's an R&D claim and then also then the quantification in with the ATO. So we've had it for the last 3 years.

Okay. And one last one, just on the momentum. Obviously, the second half was really strong. And I'm not asking for sort of quarterly or monthly numbers but -- specific numbers. But like was the sort of run rate exit coming out of the second half of '23 in an earnings sense? Maybe EBITDA is the best thing to talk about, better than what it went in at. So there was a sequential improvement across the half as well.

So yes, so the earnings certainly gave the momentum across the half and certainly into the fourth quarter, and we've experienced a good exit run rate into the first 7 weeks of the new financial year.

Our next question comes from Mitchell Hawker from Bank of America.

Just with industry volumes seeming to improve moving forward, do you think that's going to negatively impact your ability to negotiate price increases moving forward?

I don't -- no, I don't believe so. I think there's -- we've established a very clear dialogue and engagement with our customers over the last 12 months when we've been dealing with this really quite extraordinary inflationary period. And I think we'll continue to have those conversations, and we'll continue to negotiate increases where it's necessary and required. So no, I don't think the volume improvements will impinge on that ability.

Our next question comes from Craig Woolford from MST Marquee.

Just wanted to kick off and understand the volume performance for the Australian business. The core poultry volumes look like they were down about 1% in the second half of fiscal '23. Can you clarify whether the company won or lost market share in the retail segment? And do you think the volume declines are a reflection of price elasticity to broad price rises in the poultry industry?

I'll deal with the second part first, Craig. I don't believe it was to do with the lack of demand because of prices going up. It was very much not just us, but I think industry issues with the supply. So I think the demand was there. I think the industry was struggling to meet that demand, it was a whole series of different operational issues. And we saw that -- and while the overall year was down, we saw an improvement both in Australia and New Zealand in the fourth quarter and in the -- I know it's early days in the new year, but we're seeing comparative period volume growth heading back to looking like something like the longer-term trends in the first part of the new financial year. So as we're getting more normalized operations and things are getting back to the sort of stability we've hoped for, we're meeting that demand. And I'm not seeing at this point any real risk to volume as a result of the price increases that had been taken because, again, the charts clearly show poultry enjoys a strong relative price advantage. On the share I don't think there's been any significant change in market share across that period.

In both volume and value terms?

Yes, yes. On the data that we get, and we can't measure all of the market obviously because of -- some of it's a bit challenging because we don't have measures for it. But where we do have measures, it looks pretty stable.

Okay. I'll just turn the other question around CapEx. This has 2 parts to it so I won't stress you out. So the AUD 100 million of CapEx that was guided to in FY '24, is the projects that were announced or detailed on the slide deck things like the automation and the water cutting, et cetera. Is that all FY '24 CapEx or do some of those items that have been given on Slide 25 slip into FY '25 as well?

So most of them are in '24, so there was some spend on the automation this year, so about AUD 9 million in FY '23. The bulk of that will be in '24. So really, what you're seeing is clearly a return to our normal CapEx levels and then some on top for that automation.

And so would you expect there's some catch-up CapEx that continues here? These programs are obviously logical irrespective of the operating environment, but it's been harder to implement projects during COVID. Is the AUD 100 million CapEx or an elevated level of CapEx likely to persist beyond 12 months?

Possibly. So there will be some of that extends into FY '25 as well. So yes, I think there is a bit of a catch-up over the '24, '25 year.

Okay. And then the last part of that is, is there going to be a different transformation program coming through given what was announced earlier in the year?

So we announced it was postponed at the half, and that's still the current status. So we haven't made any decision to restart that.

Our next question today comes from Evan Karatzas from UBS.

I just want to just go back to one of the comments you made on the first sort of 7 weeks trading. Is that -- you talk long-term -- returning to long-term trend volume growth. Is that around the 2% to 3%? Is that the way to think about that, that's the volume improvement we should expect for FY '24 back to that long-term trend in that range? Is that what you're sort of thinking out there?

Yes, that's correct. So I think we put a long-term average in the slide deck of just under 3%, and that's where things are looking at the moment.

Okay. Great. Great. And then just my second question, just sort of staying on this first few weeks trading of '24. Is it fair to assume that -- I mean I'm just looking at Slide 10, your sort of 4Q group average sale price exit rate was around the $6.25 mark. Is it fair to assume that the first 7 weeks trading, the average sale price is above that $6.25 mark? Is that correct?

I would say that's probably around that mark at this point, so holding the exit rate.

Yes. Okay. So all things being equal, costs don't move around too much, we should expect pricing to be around that AUD 6.25 mark. Is that fair?

That would be a fair assumption. Yes.

We have no further questions. I will now hand back to Andrew.

Great. Thank you for those questions. And we look forward to chatting in greater detail with some of you later in the day and in the weeks ahead. Thank you.