Sims Limited (SGM.AX) Earnings Call Transcript & Summary

Good morning, everyone, and a warm welcome to everyone listening remotely. My name is Ana Metelo, and I run the Investor Relations function here at Sims. It's very good to see so many people here in person today. I will cover the agenda for today, which you can see on the screen. We will start today with Stephen going through the SLS business. We will then move on to ANZ Metal. We'll hear from John Glyde and Graeme Cameron on to ANZ Metal just before we break for lunch, and lunch will be served outside. I would like just to go through a few practical points. We set up a PPE station just at the back of the room. And when we finish lunch, we should all get back here into the room and get into our safety gear. Just a reminder that you should leave a few things here in the room. Everything will be locked. And then when we are back from the tour, you should leave all the PPE here, not in the bus, not in the site, just here, so our team can collect it. A few other things, group structure. So you've noticed that we've divided the group into 2, Group 1 and Group 2. And that's so everyone gets the chance to hear the tour and get more exposure. You should have received an e-mail with your group allocation. If you have not or if you're not -- if you're unsure, please find a way from my team, and they will clarify that for you. The part of time, so that's a request I want to make there is for us to finish lunch by 11:40 so we can get back here and have plenty of time to get into our safety gear and then go outside, gather outside and get on the bus and be on time. Q&A, that's my last point here. I would ask everyone to ask the questions at the end of the presentation, so not interrupt the presenters. John and Graeme presentation, it's a joint presentation, so you should wait until the end. And that's all from me. Enjoy the presentations and the tour, and I look forward to hear the feedback at the end. And I'll hand over to Stephen to kick off the day.

Thank you very much, Ana. I will be allowing plenty of time at the end of my presentation for questions on SLS because I'm sure there will be a few. So I'll add my welcome. I think we've got a really good day lined up for everybody today. I'm looking forward to the interactions, but let's get through the presentation. The first point, I've got a couple of slides first, which really maybe talk about a little bit the Sims Group as a whole before I will dive into a fair bit of detail on SLS. I guess the first point I'd make is that we've spent the last 2 or 3 years really honing down to what I believe is now the Sims business that we want to take forward. So if you think a few years ago, we had SRR, we had SMR, which is the municipal recycling business based out of New York. We had SRS, which was very much a small domestic appliance, small electronics type business. We thought long and hard about what businesses do we want to take forward. And we really have got 2 key segments now. That's clearly the metal segments, which John and Graeme will talk more about ANZ on that. And then there's the SLS segment. So we believe those are the 2 segments we want to take forward. We've really simplified the business down to that. There's some common themes between the 2, things like being quality-led and technology-led operations that applies in different ways, but that same theme applies both across the Metal business and the SLS business. And we are really focusing on disciplined investment for long-term value. So there's a big focus internally about capital allocation, making sure we're spending the money in the right place to deliver the returns we want. And I think already, you'll see the last point there, I think we've created a more resilient business with higher quality earnings than we had several years ago. And that was always an achievement we wanted to get to. I'm not saying we finished that journey, but I think we've made a very good start. So that's the way I see Sims going forward. How do we create value? We've shown this slide quite a lot, so I'm not going to go through it in detail. But our purpose does always remain the same to create a world without waste to preserve our planet. And we simply do that by repurposing and recycling. We've then got the pillars there of customers, suppliers, operational efficiency, innovative and agile and invest responsibly, all underpinned by our culture. There's just 2 I want to highlight that I think are particularly pertinent to SLS. All of them apply, by the way, all pillars apply. But I think there's 2 I want to call out, and I think that will help frame the deeper discussion we're going to have on SLS. One is operational efficiency. And the first point there is safe operations. Now from our customers' perspective, that's safe in its broadest possible context. So it's not just physical safety, which is, of course, extremely important, whether you're at SLS or the Metal business, but it's safety around the security of the product that we deal with, the quality of what we produce from that product. Our customers view that as what a safe operation. When we take and decommission a data center, they are comfortable in the knowledge that it is safe to be doing that. Aligned end-to-end supply chain, hugely important in the SLS business. And in many ways, SLS business is a logistics business and an inventory management business as well. And SLS provides that end-to-end supply chain from the time the from the time the rack leaves the data center to maybe ultimately the steel component of the rack is sent off to one of our metal recycling facilities to be shredded. So right across that supply chain, SLS operates everywhere, and that is a key part of its value proposition. And the last one is around scalable and replicable capacity. SLS is growing rapidly. And so to be able to grow rapidly and scale is hugely important. And that is -- that's one of the things that we deliver to our customers. The second one around innovative and agile, I think maybe in some ways, self-explanatory for SLS, but we have responded rapidly to shifts in the market. And those shifts are happening rapidly and probably at a greater speed than any of us envisaged a couple of years ago. So a very, very important part of the value chain for SLS. The use of data to drive performance. SLS is a data-driven business. The amount of data it collects, the amount of -- and the amount it uses that data to drive the business is, as you would expect, quite extraordinary and will continue to be a big part of the business. And lastly, simplified structures. We deal in SLS with a complex part of the market. We've simplified the business down to a few key propositions that we have for customers and customers have got a very clear understanding of where they interact with us, how they should interact with us and what part of the business is dealing with what part of their value chain. So I just wanted to highlight those 2. The rest of them absolutely apply. But in the interest of time, let's move on to SLS or Sims Lifecycle Services. So a couple of points I want to make on this chart or the 2 charts. So the first one is there's around about a 4-year refresh cycle in data centers. So you can see there in 2021, that is the equipment we are now dealing with in 2025. So the dotted arrow going from the growth in data center investment and you're seeing how that investment manifests itself in the growth in SLS revenue. What we're showing there on the orange line is investment per annum, and this is particularly focusing on the U.S. market. And let's be really clear. Right now, the U.S. market is our most important market by a long way, and I'll talk about that. So you're seeing the investment in the U.S. market and how the revenue -- how our revenue profile follows that, but it gets lagged by about 4 years. So you can see the investment in 2025 right now, you can see quite a steep rise up. We would fully expect to see that commensurate rise up in 2029 when that equipment comes out. I want to now briefly talk about uncountable numbers. So how much investment is going into data centers? Well, the McKinsey study from April 2028 estimates that between now and 2030 -- well, sorry, from a couple of years ago in 2030, there's $7 trillion of investment going into data centers. I've been thinking about this, whether it's $7 trillion, $5 trillion, $4 trillion, $6.5 trillion, they're all quite uncountable numbers. And the point being there is huge, huge investment going into data centers and committed to going into data centers. Now in a data center, obviously, the entire $7 trillion is not data center equipment. It's buildings, it's air conditioning, it's data center equipment, it's concrete. The estimates are depending on the type of data center, about anywhere between 30% and 50% of the investment is actually on the data center equipment, which we deal with, whether it be GPUs, racks, DIMMs, all of those types of things. So you can see the investment is very, very strong. I want to go to the right-hand chart. This is the DDR4 chip price. DDR4s in terms of our hyperscaler repurposing and reselling are the absolute core of what we do. You can see the extraordinary growth in price that has happened in a DDR4. And I want to explain really briefly what has driven that. And it's all about -- and I'm going to -- I'm only going to use the word once, hopefully, it's all about AI. I've got the word in. It is actually about AI. So what's happened is that AI uses a chip called a DDR5. It's just such a high-power chip, absolutely purpose-built and suitable for AI. World manufacturers have switched from producing DDR4s and they are now, by and large, producing DDR5s. What does that mean? We still need DDR4s. DDR4s drive everything from your home computer to Alexa to the computer controls in your cars. So that demand is not going away, but there's no new production to meet it. So that is what's driving these DDR4 prices up. It's just the rest of the world outside AI needs these chips. And that is what -- that is the service that we provide by taking them out of the data centers. So you can see there's a strong correlation between growth in AI chips and the growth in demand for DDR4 chips. Looking at the competitive landscape of SLS, a gross simplification here, but I think the principle is right. Around about 95 -- let me make actually the first point. Probably one of our largest competitors is data centers actually doing it themselves. So let's not forget that. We have to compete against data centers doing their own repurposing, reselling. But of our competitors, our genuine external competitors, around 95% of them, we would describe as like independently owned local operators that maybe do some very specific things maybe for the OEMs or maybe for some enterprise customers that we have, probably not for the hyperscalers. If you come back from that 95%, about 5% of them -- less than 5% actually, well less than 5% look a little bit more like SLS large enterprises, multiple geographic sites servicing hyperscalers. And I would argue of that less than 5%, Sims is #1. And we've got a few data points for that. But we do provide a genuine global service in a very secure, very structured, very highly governed way, and our customers are really after that. So that's the competitive environment. So why in particular, SLS? I made the first point that we are global where our customers have asked us to be. So currently, we've got 9 sites in North America. We've got 1 in Brazil, 5 in U.K., a couple in Europe, 1 in Eindhoven in the Netherlands, the other in Frankfurt in Germany, a couple of very small sites in India, very small site in Singapore and a very, very small site in Australia. The bulk of our business, the bulk of what's driving this growth in profit in SLS right now is North America, in particular, the United States. We are seeing growth elsewhere, though. We definitely see growth in Europe. We are currently constructing a large facility in Dublin, in Ireland to service one of our hyperscaler customers out of Ireland. It will be a similar size to the one in Nashville for those of you who saw Nashville, and it will be a very, very similar type of facility doing the same kind -- having the same kind of technology performing the same kind of activity. So we are global, which is important. The first point I'll make on there is we are deeply embedded in the hyperscalers. So it is not a commodity type service that we provide. There's a lot of information flows back and forth. There's a lot of systems integration going on. There's a lot of daily contact. There's a lot of discussions around logistics, where they're going to be bringing the chips in from, where they need them to go, how long they need them to be held in inventory. There's a huge amount of interconnectivity there that you just can't replicate. Well, let me come in and do that for you. It's taken us 4 or 5 years to get to the position we are now, and it's a very, very strong position within our customers. We're a full service provider. We do everything. We actually -- we're the only participant that does everything. We do everything from the initial receipt of the racks, the dismantling of the racks, the harvesting of the parts for repurposing or resale. And then we perform the final function, which is the recycling. So also within the stream we receive, there's non-ferrous, there's copper, there's steel in the racks. So we talk to our customers from the time the rack leaves their facility to eventually part of the rack is shredded and finds its way into a steel mill. Right through that shredding process, we are completely across that we know exactly where that equipment is. And that's very, very important. Innovation and integration. We've spent a lot of time. I talked about being integrated within the business. The amount of time and effort we've spent on making sure that our systems are fully able to be integrated with the innovation that we're looking at around automation. Again, for those who visited Nashville, you saw a couple of the robotics using AI to determine positioning and restamp DIMMs, and that's all about inventory management. We've -- since you've been there, there's another 3 or 4 have been installed, and that type of innovation is growth for the future. And that also relates to the other point I make there around scale capacity. We need to scale, and we have scaled dramatically over the last few years, and we will need to continue to scale. We've proven to our customers that we can do it. I talked about the Ireland facility. We first got the request to build the Ireland facility back in September. It will be up and running by March. So we've got a 6 month from go to in terms of meeting their needs. And the last thing, let's not underestimate this is governance. There is so much governance around data security, so much governance around making sure data does not get out into the public sphere. We have a governance structure, which we've proven over 4 or 5 years now, a governance structure with our customers where they are extraordinarily comfortable that we will handle their material safely, securely and in a high-quality way. So that's why SLS. How does SLS generate its revenue? 3 streams, and I'll talk a little bit more about these. First of all, resale revenue. So that is exactly what it sounds like. That is very good quality equipment that we're harvesting. DDR4s that we're harvesting from the hyperscaler or harvesting from networks or harvesting from wherever we receive IT equipment, we sell that into the market and we do a revenue split. That's a pretty simple revenue stream. With the growth in the price of DDR4s, a very significant revenue stream. The second one is service fees. This is where DDR4s can also be useful in the rebuilding of a new data center. They handle memory capacity overload. They're very, very good at doing that. So the service revenue is where we will take a DDR4, DDR4 DIMM, we will wipe it. We'll reprepare it for repurposing back into the data center. We will manage the inventory and then that equipment eventually goes back into the new data center, and we charge a service fee for that. The third revenue stream is just straight the commodity, as I talked about. At the end of the process, there's some copper, there's steel, there's ferrous, non-ferrous, we recycle that. There's some precious metals, so we recycle and that's a per ounce pound tonne type of revenue stream. So if you look at what is the significance of each one of those revenue streams to the business. So what I've taken here is the FY '25 financial year, and we're looking at sales revenue. So you can see there, 75% of our revenue comes from either resale or service in FY '25 and 22% came from the commodities part of the business, the ferrous and the non-ferrous. So significantly, it's biased towards resale and service revenue with only 22% coming from recycling, even less in terms of EBIT from recycling. And I do a slide on that in a couple of slides on. Revenue by client type, which I think is also important. Hyperscalers in FY '25 were 47% of our revenue, the enterprise type operations, 41% and the original equipment manufacturers, 12%. Let's spend a little bit more detail on that because this chart for me is quite telling. If you look at what has been the growth in our revenue over the last couple of years, let's just focus on hyperscaler. So in 2023, hyperscalers represented around about $100 million of our revenue. In 2025, $200 million of our revenue. If you look at the other markets, they have stayed pretty static. What have we got? OEMs, $49 million, $50 million in 2025. Enterprise, $175 million in '23, $177 million in '25. The growth in SLS businesses has come from hyperscalers. It's as simple as that. It is profitable growth, though, and I'll get on to the half year shortly. It is very profitable growth and it's very cash growth. So here's -- you can see the growth in revenue from FY '23 to FY '25. I've already shown that the majority of that came from hyperscalers. The return on invested capital, FY '25, probably 52%. The return on invested capital is very strong in this business. It is a capital-light business relative to its income. On the right-hand side there, we're showing cash flow generation versus EBITDA. Look, there was an extra growth in FY '24, distorted by the sale of our precious metals business, and there was some working capital went along with that. But what you can actually see, the point I'm trying to make here is that the EBITDA to cash conversion is very strong. So this is a business which is about cash, which I guess is logical, but highlighted in this chart. And that profit is accelerating. We obviously put out a trading update on Friday last week at the AGM. And what we're forecasting for the first half of FY '26 is somewhere between $45 million and $50 million of EBIT. You can see that the exponential growth that has come off the back of what we all thought was already pretty good growth between FY '24 and FY '25. In the same vein, that's also cash growth. It's that same type of high-quality growth that we've been having the cash conversion cycle is pretty quick. The other thing I would say about SLS, particularly as we head into the year into the half year-end, it is easier to predict the outcome for SLS. What is in place for December, we've already agreed. So we have a reasonably high level of confidence in that prediction, makes it different from the metal market, which can obviously be a little bit more volatile around shipping, around weather, those types of things if you're doing a point forecast. The point I want to make on this slide is -- and I think shareholders need to appreciate this is that the SLS business is completely different from a recycling business. If you look at the right-hand chart, and I said I'd talk about this earlier. I've already spoken that the sales revenue was, let's call it, a 20-80 split between recycling and what we call the data center infrastructure services. We think that's a much better description of what we do. I mean some people call it ITAD. I think IT asset disposal just doesn't even begin to represent what we do. We call it data center infrastructure services. So there's that 80-20 split. But by the time we get to EBIT, it's a 90-10 split. So 90% of the EBIT is coming from non-recycling services. So my point here is that recycling is not what we should be compared to when we're looking at the SLS business. And what are the key attributes that make a data center infrastructure service differently? Firstly, it's services led. It is very much services led. It's not a commodity. We have a number of enterprise contracts. Now those contracts aren't for volumes, but they are very well defined around what is the relationship between us and our customer/supplier and the period of that relationship and how the transactions will work. There's a massive focus around compliance and data security. It's got to be extremely scalable and it's low capital intensity. Again, I think a very -- it's a very different business to the recycling business. Our key customers are data centers and hyperscalers, enterprise IT departments and OEMs. What's driving our business right now, though, is the hyperscalers. So I wanted to allow at least 15 minutes for questions. So we are heading towards that point, which is good. On this very brief update on SLS, what are the key messages that I want to get across. Firstly, there are structural tailwinds in place now. These are not tailwinds which are arriving. And those structural tailwinds are all around the amount of resources that are going globally to build data centers to cope with AI and the need for DDR5s. And the world's production is switched to DDR5s and the rest of the world needs to have secondhand DDR4s, perfectly good, but it's a structural tailwind, which is in place now. And I see that tailwind being in place for a significant period of time. We are uniquely positioned. I think when you go compare us to all of our competitors, why do you only end up with Sims? We're global. We already provide high-quality service. We've been proving that for the last 4 to 5 years. And the last thing is we can see it right the way through to the recycling. So we are go to. The volume coming out of the market is supported by the refresh cycles. There is this 4-year cycle that is happening and happening and happening for the foreseeable future, and that is what's providing the volume for SLS. Profitable. It's not a business where we're kind of building the stadium and they will come. It is a business that has been profitable from the get-go. And as it scaled, that profit has increased. It's got high returns. It's a capital-light business. It still means we have to be disciplined around capital. As we invest more and more in automation, we need to be very certain and sure that, that type of automation is what we want to invest in. But the strong cash flow and high returns are a feature of the SLS business. We've had proven successful execution. The success of SLS, and I know the announcement we made last week proves it is a successful business. It just didn't happen overnight. We started the SLS business in 2020 with around about $200,000 of EBITDA. And we've spent the last 5 years really proving ourselves to our customers and suppliers that we can execute and we can execute very, very well. We're at that point now, and I think that's what's going to help our growth going forward. And I think there's a valuation uplift for SLS. I don't think the market values it properly. I think the market is using -- the market is still bundling it into the recycling bucket. That's easy. But that's not what SLS -- that is not what SLS is about. So on that note, which I wanted to finish by 9:30, which is good, I wanted at least 15 minutes of questions, judging by the questions I had over dinner last night, which was a very pleasant dinner, and thank you for the questions. So let's open up the floor for questions.

Just wondering what that 40% would look like now in terms of revenue split in that first half, just given the huge growth in the memory pricing there?

Yes. It would clearly be significantly higher. We'll wait for the half year for that to be the case. But yes, there's no -- I think underlying your question, is the growth being driven by the price increases in the DIMMs, Yes, the answer is yes. So you would expect to see that resale revenue be growing for the half.

And the other sort of service element of that to get to that 75%?

Well, we still think that that's still growing nicely. And the volumes -- the volume growth between the 2 is probably very, very similar, but it's just the price aspect of the resale is significantly higher.

And just sort of following on from that, I guess, it's great to see that price growth driving that EBIT growth. But is there a risk, do you think that, that revenue share agreement is sort of lowered over time, the split you're agreeing with the customers there?

I think there is potentially a risk of that. I'll make 2 comments on that. Firstly, my first comment is I think the volume growth is going to help mitigate that risk, and that's a good thing. As you can see from that chart I showed you, there is significant growth in volume. The stuff that's coming in now out in 4 years' time is significantly higher than what we've got now. So I see growth in volume partially offsetting that risk. And I also see that the service that we provide, while it's hugely significant to us, in terms of its influence on our profit is not overly significant to the hyperscaler. I mean what's driving their growth, their share price growth is AI on the other side of it. So really what they're after from my perspective is -- I mean, I know I'm going -- I'm repeating myself, but they're after secure, safe quality operations. So yes, I acknowledge there is some risk. I think there are countervailing forces as well.

And is there a sort of contractual protection on a multiyear agreement? Or is that revenue share sort of changing every period?

No, the contract defines the revenue share upfront.

And that's multiyear generally?

They typically are 3- to 5-year contracts.

[indiscernible] JPMorgan. Can you maybe talk a little bit about how you you're going to win data centers going forward? Is that a site specific thing? Or is it something to do corporate -- hyperscaler?

So we win in 2 aspects. First of all, the growth of customers that we currently have and the Ireland one is a great example of that. That's an example where an existing customer has come to us and said, we want you to be in Ireland. We have significant need. We know that you can put up a data center in that period of time. So that growth happens as a result of the relationship. I guess the other growth we see is for those hyperscalers who are performing or largely performing themselves is we think there's a great opportunity to grow in there because we've proven that we can do it more cost effectively with higher security standards and really remove what is a back-office function from them because -- and that's our front office function. So 2 areas. One is there is a number of large hyperscalers who we don't have that type of relationship with. And secondly, the ones which we do, which are significantly large, it's growing as they are growing.

Yes. And then how long do you think the pathway for DDR4 lasts? And then is there much of a difference in terms of the AI piece recycling versus DDR4?

Yes. So DDR4s have many, many, many, many years to run because the DDR5 chip is not -- I mean, you're not going to find a DDR5 chip in your laptop. It's just not what it's designed for at all. So DDR4s have many, many years to run. The question on DDR5 is a really good one because we figured out very efficient ways of repurposing and reselling and reusing DDR4s. DDR5s, we're going to have to spend some R&D on that in the coming years because DDR5s will need to be repurposed/resold into new data centers. But you've got -- you're dealing with everything from some of them are sitting in liquid cooling through to other technical complexities on how you would repurpose them. They do need to do it, though. I see us well positioned for that. It's still -- like it's still 4 years away before they start coming out again. So we've got some time to develop the processes to do that. But I actually see that potentially in 4 years plus as quite an exciting opportunity.

Yes. And then a final one. I mean, as you pointed out, it's clearly a different business to the rest of your recycling business. Like how do you actually make sure that the full value of this is recognized in the Sims corporate structure?

Well, we have days like this where we talk to you about it. I think for me, there's 2 aspects to that question. First is how do we make sure that SLS maintains its business culture, which is different from our recycling business. There are certain things that go across our company no matter what, we're nonnegotiable on safety. And our safety is -- our safety policy is a global policy, and we wouldn't tolerate anything around safety in SLS that we wouldn't tolerate in metals. So there's those processes. But SLS does have its own finance, its own commercial, its own HR, its own ops, its own leadership structure that ultimately reports to me through Ingrid. So we've deliberately set it up that it is -- that the culture that it needs is unique to SLS, and we don't try and mix the metals cultures and the SLS culture. So that would be the first point I'd make. The second point, I think, which is going to be around delivery, Lee, is that we will -- I think the market will be forced into thinking about SLS differently as the results come through. And I think already the result that we're talking about at the half year has raised the interest and it's raised the level of investigation, it's raised the level of research. And I know everyone here is thinking about, well, who should I be comparing this to? What are the multiples of company that I should be comparing this to. So I think that will drive it via results. And I think we're on step 1, and that is the significant improvement -- exponential improvement in the first half year result.

Stephen, this is Chen from Bank of America. You mentioned earlier, you think the market underappreciate your SLS business. Well, for us to value this business properly from earnings visibility and sustainability perspective. If you can share what is SLS edge versus other players in this space. I guess you mentioned a couple of times, it's not a commodity type services. It's not easy to replicate -- if you can elaborate on that for us to understand why scale matters, why you can keep winning contracts from a volume perspective? I guess price is more like a market-driven, AI-driven. You do what you can or you win contracts, not lose contracts. So just trying to understand how sustain -- if the earnings provided from last half is sustainable and will grow and how much visibility you have for that? I have a follow-up after this.

So a few things in there. The first comment I'll make around visibility, I agree. And we have been disclosing more around SLS. I mean, even today's presentation, we're disclosing much more around SLS to help you on that. And we will think about further disclosure in the future. There's always the trade-off between what's commercially sensitive and what's sensible to disclose. So the second point is what -- why do we -- why are we confident that we have a proposition that is difficult to replicate. Why we're confident around that is it's taken us 5 years to get to this point. It's very difficult to just -- it's very difficult just to say, well, I'm going to start up a business, and I'm going to go to the hyperscalers and I'm going to get their business from them because you don't have a relationship with the hyperscalers. You don't -- they've got no idea whether or not you have the capability to do it in a safe and secure and well-governed manner. They've got no idea where their chips are going to end up. They've got no idea whether or not you can manage their inventory so that when you -- when they need those DDR4s back in the data center that we will guarantee that they will be there at the time. So those things take years to develop that type of relationship. And the point I'd make with that is this is not the data centers' core business. This is not where they make their money. They want this to be done in an efficient, safe, secure way. That's their outcome. So my argument would be why -- if Sims is performing the service very, very well, and I believe we do. We do this very well. If we do -- and we're doing this really well, why would you risk going to somebody else to maybe to save a little bit of money. It doesn't feel -- it doesn't feel that, that's a sensible decision to make. So that would be my main arguments as to why we -- I mean, we're not -- don't get me wrong, we're not complacent. We're far from complacent. But I just think as long as we continue to deliver what we have, it puts us in a very, very good position.

And then a quick follow-up question on the revenue. You have your service revenue as well as the resale for the revenue share. I guess those 2, you can have them both for the same customer. Is that understanding correct?

Yes, that's correct.

Stephen, Owen Birrell from RBC. Two questions for me. The first one is how volatile do you think the DDR4 price will be going forward? I mean we've seen it obviously driving a very, very strong result for this half. But how much confidence do you have in that price outlook?

It's a really interesting question, isn't it? I think what's fundamentally driving the price is volume, though. And so it's not driven by -- it's not scarcity driven by a short-term cycle. It's scarcity driven by the long-term need for DDR4s. And the only source of DDR4s in a material way is by repurposing and reselling. So I do have confidence, but it's driven by the confidence that the investment in AI will continue to happen. Now whether or not there's -- actually, to be honest, whether or not there's a bubble in AI, it doesn't really impact us because the bubble in AI is whether or not people are paying too much money for companies that are putting AI behind their name. Our growth is driven by the genuine need -- the genuine volume need for DDR4s into the market. And that's been driven by the fact that manufacturers are completely pivoting and doing DDR5s. So as long as you believe those -- as long as you believe those 2 things are going to happen, you do get confidence that the price is more stable and higher. Is there -- would there be periodic volatility in price? Maybe, but it would -- I don't think it's a short-term market, Owen. I don't think it's today, a steel mill is producing, they've got some inventory tomorrow, they're not. I don't think it's that type of classic commodities volatility.

I guess that leads into my second question, either for yourself or Warrick. As a management team, how do you think about capital deployment now? Because this -- according to your guidance, SLS is now half of your earnings. And it's growing fast. So at what point do you starve Sims Metals of capital and deploy all your capital into SLS?

I might do a quick answer on that, Warrick, for you, while I'll just -- yes. Okay. Well, you answer the question, Warrick.

Well, the beauty of SLS is that it's not capital intensive. So if you look at our EBITDA to EBIT conversion, it's very small depreciation, amortization. It's really just -- because with the robotics, we operate basically robotics as a service basis. So we're just paying on a use basis. that's included already in our structure. And then we're leasing premises. So from that point of view, it's not a huge capital investment. I think the question probably comes back more to is there an M&A opportunity down the track for us with that. But that's -- there's nothing there at the moment in terms of -- that's not what we're focused on for this business. It's about continuing to grow at scale under our own model.

Sorry, just to follow up on that. The returns out of SOS are now far superior to Sims Metals. At what point do you divest Sims Metals?

That's -- I mean it's a brutal question.

If we just follow this path as you just described, at what point do you get to that?

Yes. I don't think the operations are mutually exclusive. I think we've got lots of opportunity in metal. We've got -- John and Graeme will take us through what has been a tough time in ANZ at the moment, but just the power of the non-ferrous side of the business. I don't think we're at that point yet. I think we've got at least 2 or 3 years before we would need to think about SLS in that context. And I don't think it would be just getting rid of the metals business. I think we've got the -- and we'll talk -- I mean there's tailwinds in the metal business coming up as well. The non-ferrous is performing fantastically well. There's still -- I mean the world is going to be short of scrap. EAFs are growing. So I think we can handle both, Owen, I think, is the short answer to that question and the long answer to that question.

Stephen, it's Dan Kang, CLSA. You mentioned that hyperscalers are still doing most of the work themselves. And so only 5% or less than 5% are being done by SLS and competitors. I'm surprised about that number because it seems remarkably similar.

Yes, that's not what the graph was saying. That was -- the graph was saying that less than 5% of the competitors are of sort of the Sims scale. Most of the hyperscalers do some form of outsourcing as well. A couple of them do it internally only. So no, that 5% wasn't saying that only 5% of hyperscalers, what it was saying is that of the competitors that we compete against, less than 5% kind of look like us, 95% tend to be niche mom and dad operations in particular markets.

Okay. So if we just take an example of one of your key customers, how much of their work is being done by SLS now or can be gained in the future?

So it's a difficult question to answer specifically because we don't -- I mean, it's not public information for us either as to what exactly is the global DDR4 refurbishment program. What I -- but I will make 2 comments. We know that for at least a couple of the hyperscalers, we get a significant portion of their business. They tell us that. I mean they don't -- I mean, we've got a very trusting relationship. They tell us that, I believe them. So we get a significant portion of their business. The other thing I would say around that growth, which is we want to get more from them and we want to get other customers is we currently have about 50% capacity availability just in North America alone. We would just have to take our facilities, put another -- put shift 2 and shift 3 on, and we can deal with that extra capacity very, very quickly. Beyond that, we then have to start building new facilities, leasing new facilities, Ireland is an example of that. So -- I mean, I guess my answer to your question is we are very significant to a number of the hyperscalers, and we've got a good relationship that's driven that. But we also have additional capacity right now without significant investment.

Just last one for me, Stephen. In terms of your competitors' strategy, what are your thoughts on how you differentiate from their strategies?

We -- I guess the first thing which we completely differentiate on is we are end-to-end full service. So I made the point earlier, from the time a rack leaves a data center to the time it goes through one of our shredders and everything in between, we are in control of that. No one else does that in the market because no one is -- no one else has a metal division internally. That's a point of differentiation. I think the second point of differentiation, what our customers are telling us is our ability to innovate and pivot quickly. We -- over the last 5 years, there's been a couple of moments which were real test points for us, and we proved ourselves. And the first one of that where we really proved our ability to act quickly and innovate was the setting up of the Heil Quaker facility in Nashville. We got set an incredibly quick time line, incredibly exacting standards, and we surpassed the expectation of the customer in that point. And when I look back, that was probably one of the pivot points, one of the -- well, I can't remember where I'm looking for, the inflection points when I look at our growth was when that we proved we could innovate and do something that quickly. No one else has been able to do that.

Stephen, just a couple of questions from me. Just on that point on the capacity, do you need to build new Nashvilles elsewhere in the U.S. to be able to grow with those customers?

Yes, we do. Yes, absolutely, we do, and we will do it. Where our customers need us to be, that's where we will be. And I know Ireland is not the U.S., but that's an example of that. If that same customer said, well, we need something in North Carolina, we would do something in North Carolina. We need something in New Jersey, we would do something in New Jersey, and we've proven that we can do it quickly. So yes, I think -- and I think we will need to do it. We will need to -- as we grow with the market, we will need to open up operations like Heil Quaker, like we're doing in Ireland, we will need to put those in other parts of the country, yes.

And any idea you can give us around the capital employed of opening a new plant or the capital employed generally in this business?

So the capital employed of opening a new plant is pretty small. It's -- we won't own them. It's a lease. obviously, lease is a type of capital. And then it's the robotics. So it's -- I mean that's why -- so I don't have that number off the top of my head, but that's why our return on capital employed is so high in the SLS businesses because it is not capital intensive.

Okay. And then just one final one. The costs, what sort of idea can you give us around the cost of processing, I don't know, is it a tonne? Is it the units of computers that you dismantle?

Right now, the largest cost is labor, being slowly replaced by automation. But right now, the largest cost is labor. The cost is not -- I mean, don't get me wrong, we -- all businesses suffer with cost creep coming in. So we have to maintain discipline. But the bulk of our costs in -- if you take out the management layers, which we focus on, it's variable cost. As we grow, the labor cost grows. And so it's growing -- the cost is growing completely proportionately to the revenue opportunity. I think we need to -- we've got one more question.

I've been told by Ana to keep it very quick, and I'm scared of her. So in 2022, Ingrid gave a presentation that showed 70% of revenue was services and reuse and 50% of EBIT was hyperscalers. Can you just -- in the context of some of those numbers that you put up before, has the -- does that mean the hyperscalers EBIT is now dominant given it was 50% back in '22?

Yes, hyperscaler EBIT is dominant, yes. And I see hyperscalers as the dominant growth in EBIT as well. Okay. Ana, we'll hand over to John first, I believe.

Thank you, Stephen. Good morning, everyone. Really looking forward to getting you out to our Auckland facility later today, and you're going to see some investment we're making on that site, and Graeme is going to obviously talk about some of that investment, particularly around Auckland, Pinkenba and some of the stuff we're doing with a software package at our [ coal face ] amongst weighbridge systems, inventory and production management. But what I thought I'd do is I'd give you an overview of the Australian metals business, an overview of the Australian market, talk to some of the challenges and opportunities in that and certainly lay out our plan for ANZ Metals around growth over the next medium to longer term. The focus of the presentation will be around -- sorry, let me that will be around the change, the structural change in steel manufacturing and the decarbonization of that steel manufacturing and quite frankly, how Sims can participate in that. Also touch on the strength of our non-ferrous business. Stephen mentioned, across our entire metals portfolio, whether it be ANZ Metals, SAR, North American Metals. Non-ferrous is certainly underpinning all our results as we speak. As I mentioned, Graeme will give you a little bit of an overview of some of the infrastructure projects that we've got and the sort of returns that we expect on them around fines plants, improving our pathways to market with what we're doing with Auckland and the delivery of scrap to Glenbrook and what we're obviously doing at Pinkenba. We'll walk through the slides. I'll hand over to Graeme partway through, and then we're happy to take your collective questions. So the Australian market. What can I say? It's a mature, it's a stable, it's a well-established market, very diverse supply channels. Obviously, in states like Queensland, Northwest, Western Australia, huge dominant mining and resource volumes, very heavy generators of ferrous scrap in states like New South Wales and Victoria, very population-centric in terms of the volumes of scrap that get generated there. Housing construction and construction generally are big generators of scrap. South Australia and Northern Territory seeing increased spending around defense, which will invariably give us more volumes from that industry. Overall, the Australian market generates about 4.5 million tonnes of what I would call collected ferrous scrap, unshrunk. Obviously, there is a waste component attached to that and about 0.5 million tonnes of non-ferrous scrap. When I say non-ferrous scrap, I mean things like copper, aluminum, brass, bronze, stainless steel, lead, batteries, et cetera. There is very little consumption of non-ferrous scrap in Australia. In fact, it's aside from lead acid batteries and a couple of small consumers of aluminum, most non-ferrous scrap in Australia gets exported. Australia is also a net exporter of ferrous scrap with the majority going to places like Bangladesh, India, Vietnam and Indonesia. Now that is very different in terms of the country, the destinations to where we were maybe 5 years ago. Countries like Korea, Malaysia, Thailand, were certainly very dominant consumers of scrap going back in time. And that has certainly changed with what's happening with China and the export of semi-finished product, particularly in that Southeast Asian region and the impact that, that has had on our traditional buyers of scrap that now they're simply buying billet and rolling billet rather than melting scrap. New South Wales and Victoria are domestic-facing states, supplying the incumbent steelmakers of BlueScope in Port Kembla, the blast furnace BOF there. And we've got 2 AFs operating, one in Sydney and one in Melbourne, owned by InfraBuild. What I will say, given our geographic coverage and our presence, we're very well positioned to meet any demand growth. Moving to the operating environment and the competitive landscape. As you can see, we have a very significant market share. We sit at about 30%, but that does vary pretty significantly across regions and between ferrous and non-ferrous across regions. It is a very fragmented market. Mostly -- most of the participants that you see on that list are family-owned businesses. And then beyond that, you've obviously got a raft of smaller -- a long tail of what I would call smaller family-owned businesses. There is a couple of exceptions. We have one corporate player or a couple of corporate players, but the obvious one is InfraBuild and their InfraBuild recycling assets. What I would say is the opportunities around consolidating and rationalizing this market certainly exists. The difficult and tough market conditions that we are facing and certainly all our competitors are facing are presenting that opportunity, whether it simply because in family-owned businesses, succession planning plays a role. Sometimes there's not another generation to take on the business. That presents opportunity as some of the family members get to an age that they want to exit, certainly seeing that in a few cases. And quite frankly, the tough market conditions right at the moment is presenting some opportunities with people approaching us. We have a clear leadership position, again, supported by our national presence and our strong outsource volumes. And we certainly have an abundant processing capacity. I think I mentioned it before. We have -- in most of our Australias, we could double the volumes through them and not really need to spend any more capital on that infrastructure. Talking about the ferrous market in terms of where the scrap goes to. So as I mentioned, Australia is a net exporter of scrap, but about 50% does stay domestically. And as I mentioned, the domestic consumers tend to be BlueScope in Port Kembla, InfraBuild in Rooty Hill and Laverton in Melbourne. A small amount also goes to Whyalla. Every one of those current consumers has a project at foot to increase the amount of scrap that they consume. And that, in most cases, is driven by their needs around decarbonization and reducing emissions. In other cases, it's a combination of that and also trying to achieve some productivity gains. I can tell you, all 3, Port Kembla, Laverton and Rooty Hill are looking at significant upgrades and therefore, significant increases in scrap demand over the next 6 months. In addition to that, we've got 4 EAFs that have been proposed for the Australian market. We have in Southeast Queensland, starting with Alter Steel at Pinkenba. We then go out to Ipswich with Future Forgeworks and then Toowoomba GM Holdings. Do I expect 3 EAFs to get built in Southeast Queensland? I can't see that, that makes sense. So our expectation is one. And then, of course, you've got the steel mill that's proposed for Collie Western Australia. And what I would say about that is that it is getting a lot of support from the Western Australian government, a lot of support around not just sovereign capacity, but state-based steel-based capacity with the premier certainly getting behind that project. So our assumptions up there are that if 2 steel mills get built and what we see with the incumbents increasing their scrap charge, we'll see a shift of about 1.2 million tonnes going from export markets back into domestic markets on the assumption that 2 EAFs get built. Obviously, if more get built, that number changes even more. What does that mean? We will see regional deficits. There is no doubt because at the moment, we actually pull some scrap out of places like Queensland and South Australia to feed the needs of the New South Wales mills. And if we end up with a mill in Southeast Queensland, that will obviously change that, and we will see deficits there, and we will see deficits potentially in Western Australia, just depending on how much scrap we can move intrastate back into Collie. That creates some opportunities for us, commercial opportunities. The opportunity to move scrap intrastate, interstate and quite frankly, potentially even import scrap to meet the needs of these mills is a real option for us. And I got to say our assets, not only in ANZ, but our assets on the West Coast of North America, whether they be SAR or NAM, are well positioned given that they're very export focused to supply some of that demand. In fact, even Glenbrook. At this point in time, Glenbrook, they're talking about 300,000 tonnes of scrap use. There's already some suggestion that, that may increase. We will have to get creative if that does increase and potentially look at import options into Glenbrook. And as I said, because of our presence, our participation globally, our coverage nationally across New Zealand and Australia, we are very well positioned to meet that demand should it happen. So turning to New Zealand. New Zealand is obviously a much smaller market than the Australian market. It generates around 0.75 million tonnes of ferrous scrap and about 90,000 tonnes of non-ferrous scrap. Almost all the ferrous scrap and most of the non-ferrous scrap is exported currently. Bangalore (sic) [ Bangladesh ] and India, a lot like Australia, are major destinations for the scrap that comes out of New Zealand. The other name on there, you'll see is Australia. We occasionally move scrap out of New Zealand currently back into Port Kembla to meet the needs of BlueScope and subsequently the needs of InfraBuild in Rooty Hill. So obviously, if we end up with a mill in Glenbrook consuming all our scrap on the North Island, the opportunity for that to go that way is probably not going to exist. Scrap generation in New Zealand is largely population-based. We obviously don't have the same sort of mining resource industrial generators that you do -- that you see in Australia. Obviously, a big focus here on agriculture and tourism does generate some scrap, but not a lot of scrap. So as I said, it's mainly population based. And on that basis, most of the scrap that gets generated in New Zealand is actually on the North Island. This is all going to change the fact that we're pretty much 100% export in ferrous scrap out of New Zealand. Come -- I think the power on date is you guys probably find on your tour tomorrow, but we're certainly talking late Q3, maybe early Q4 as a power on, and I expect there will be a ramp-up. But at some point in time when Glenbrook comes on stream, the dynamics around scrap in this country are going to change. And we are very well positioned to fill that need. We've signed a supply agreement with New Zealand Steel for a minimum of 200,000 tonnes. That makes us the largest supplier of scrap into that mill, and it will certainly consume a lot of North Island scrap. And potentially, we need to consider how we can find an efficient pathway to market from the South Island back into the North Island to meet that need if that need grows some more. So market conditions. Look, the market is -- ferrous market is really, really tough. China is exporting eye-watering amounts of semi-finished and finished steel, and that's certainly impacting both our domestic consumers and also our traditional markets, as I mentioned, in Southeast Asia. Non-ferrous, on the other hand, the demand is phenomenal, both in terms of the actual demand for the metal, but also pricing attached to it. If you look at copper today, I haven't looked exactly, but it's probably sitting somewhere between $10,500 and $11,000 a tonne. Aluminum is closing in on $3,000 a tonne. And quite frankly, with all the disruptions around tariff, the demand for ANZ scrap, I can say, non-ferrous scrap is really, really strong. Why is this demand as it is? The electrification of the world is certainly driving some of it, data centers, AI, green metal agendas, recycled content, all these things serve really, really well. Everything that we're seeing in the decarbonization and emission reduction space in the ferrous market, we're also seeing in non-ferrous and our expectation that, that will continue and perhaps even grow. The New Zealand economy, it has been exceptionally weak. If you look at growth, it's stagnant at best, population is stagnant at best, lots of businesses doing it really, really tough. So it's, I got to say, a challenge. The dynamics here, as I said, will change once Glenbrook comes on stream, and Graeme is going to talk to you about a couple of investments that we will make in New Zealand that will certainly add some revenue and EBIT to the bottom line here around MRP upgrades. I think Graeme is going to give you some detail around that and down the track of fines plant. The Australian economy has certainly fared much better and certainly, construction activity. There is an expectation that it will expand and grow. Overall, there's no doubt volatility exists. Your guess is as good as mine around what happens in China. Certainly seeing production cuts there. There's still a lot of discussion around the migration from integrated steelmaking to EAF production. I guess on the flip side of that, whilst we've seen production cuts, we've also seen domestic demand and in-country demand diminish more, which has meant that exports are sitting at levels that we haven't seen since still about -- go back to about 2015, 2016. So certainly a challenge for us. But on the flip side, non-ferrous is really, really strong, and it is certainly underpinning the earnings that we have in both non-ferrous retail and obviously, in our NFSR business, as zorba, twitch, zurik business, the byproduct of our shredding operation. So just a quick overview of ANZ Metal. We employ around 970 people. In F '25, we sold 1.6 million tonnes of scrap. Obviously, Australia is the very dominant contributor with the majority of intake and revenue. A couple of subtle differences. Our market share in New Zealand is stronger than the average in ferrous, but weaker than the average in non-ferrous. And I think there's a real opportunity with some of the investments that we're making in Auckland and also some of our growth strategy around growing our non-ferrous retail business here will serve us well. New Zealand is obviously smaller, but it is strategically important to us, especially as domestic demand grows and the advent of Glenbrook coming on stream. Overall, our revenue across the group was -- in F '25 was $1.6 billion. And as I mentioned, very much supported by very strong non-ferrous performance and quite stable intake volumes. Three things I'd like to highlight on this graph. Firstly, the periods where we see elevated Chinese steel exports, semi-finished steel exports, you can see the very predictable pressure that is putting on pricing and on our trading margin. Two points I would highlight to you from that is if you look at the period F '23 to F '25, you can see the divergence in lines, and that is absolutely driven by the strength in non-ferrous business, whether it be non-ferrous retail or zorba, zurik, our NFSR business, and that's caused that divergence, which is a good thing. Lastly, the other thing I'd highlight, if you look at F '16, when we hit the bottom, when circumstances changed and conditions improve, we bounced back very, very quickly. Immediately, trading margins recovered, and that will be the same as we go into the future. So this slide pretty much summarizes the fundamentals as to why our ANZ Metals' business is so structurally sound. We obviously operate in a well-developed, diverse market. We are the largest player in both markets, Australia and New Zealand. We have a fantastic global -- sorry, national footprint in both countries, albeit we've identified some gaps, and we are going to pursue some opportunities to fill some of those gaps. But we certainly have a very dominant position given that we are national. And quite frankly, that does appeal to some of the big corporate accounts, the Rio Tintos, the BHPs, the [ Telstra ], to name a few, because we do have that national presence, we operate at scale. We've got good corporate governance. They like doing business with us. The other thing I should mention is the ANZ business has had a long history of participating in the non-ferrous business. We have a very strong non-ferrous retail business. And quite frankly, that is serving us very, very well as we speak. We do operate quality assets. And as I mentioned, we have an abundance of capacity within those assets. So if any growth opportunities come along, any market rationalization or consolidation comes along, and we do have a few vulnerable parties out there at the moment. If that comes up, we will be keenly interested. The obvious benefit is whilst we've got capacity in those assets, we can direct those volumes into it without any more capital and obviously lower our fixed costs, improve our market positioning and improve our logistics. Our investment in downstream technology continues. And as I said, Graeme will talk you through some of the things that we're doing in Auckland, and we've got the fines plants that we're building in both Pinkeba and Broadmeadows, and they will serve us well in that they increase our overall yields of metal that we extract from our waste fraction, which is a double benefit. Obviously, if you're bearing metal by sending it to a landfill, that comes at a cost. And obviously, when we're talking about metals such as copper and that, there's an enormous amount of revenue sitting in that metal. So we've made a lot of investment in that space, and we will continue to make more investment in that space. The other thing that I'd highlight is that we have invested in making premium products and at a differentiated price. Both in ferrous, where we now sell what I would call a premium shred product and we're also looking at upgrading some of our cut grade outputs, again, to meet the demand around not only increased scrap, but the demand around increased quality scrap. Our domestic and export optionality absolutely gives us flexibility regardless of regional market conditions. And we do have very well-established pathways to markets and consumers in those markets. We've been doing this an awful long time. Turning to non-ferrous. As I said, the tailwinds for non-ferrous are incredibly strong, and it is the core pillar of our earnings in ANZ as we speak. Non-ferrous represents about half our revenue, and that's a combination of both non-ferrous retail and our NFSR, zorba, zurik business. And we do -- the fact that we've got this collection footprint, we do get a lot of scrap outsource. And we add value through either shredding it, baling it, granulating it in the case of cable. We hold a very, very big corporate account at the moment that we're granulating a vast amount of cable for them. Copper at $11,000 a tonne or close to, it's very good business. And of course, we've -- as I mentioned, we're investing money in fines plants and beneficiation plants and advanced alloy separation, which again will allow us to differentiate our products. The ability to sell straight 6,000 series aluminum that we extract from our zorba, the ability to extract 3,000 series aluminum that we can extract from our zorba are obvious opportunities for us. We do hold a large number of large non-ferrous industrial accounts. And I got to say, we've managed to secure a few more in recent times with InfraBuild's vulnerability, and we continue to target building that base volume of industrial accounts. Having said that, dealers do represent a sizable proportion of our intake, and we use dealers as a natural extension to our own footprint. We don't have a scrap yard in every town and every city in Australia. And therefore, we do rely on dealers to give us that market coverage. So they are a natural extension to us. Our non-ferrous, as I said, is largely exported from both Australia and New Zealand. Our trading office in Singapore manages that. We export to most parts of the world. In fact, I don't think there's a place that we don't export. And right at the moment, with everything that's happening around tariffs and that, we've even got the dynamic at the moment, we actually push some Australian scrap into North America and do that and pay the tariff and still be a very good business for us. So the world is changing. Just a bit of an overview of our physical operations. We do operate 47 yards across Australia and New Zealand. We have a shredder in each mainland state in Australia and a shredder in both islands of New Zealand. We actively export from 20 ports, and that's important, particularly because those ports don't necessarily just serve export demand. We also use some of those ports to feed in back into domestic mills. As I said, we move scrap from Queensland and South Australia and on the old occasion, Western Australia and New Zealand back into Port Kembla to meet the needs of BlueScope and/or InfraBuild. We have 6 other idle ports and a good example of an idle port would be Newcastle. We have the ability to export out of there. At the moment, that scrap makes its way into the domestic market, but another good example would be there is a large power station, Liddell that's coming down, and there will be a vast quantity of scrap that comes out of that. And therefore, the opportunity to do something different with that scrap out through Newcastle presents itself. Our collection footprint provides good market coverage and penetration. As I said, albeit we have identified some gaps and we intend to pursue those gaps. Our processing facilities are very well placed to service the needs. You can see on the map there where the steel mills are currently and the new ones proposed. Our processing facilities are very well placed to fulfill their needs of both the incumbents and any new proponents that get built. So decarbonization driving scrap demand, not a new story. There's no doubt Australia is transitioning to lower emissions steelmaking. Safeguard mechanisms, recycled content mandates, things like that are certainly driving steelmakers to consider using more scrap. Even your traditional BOF, blast furnace combination, they can use -- BlueScope actually leads this. They consume about 30% scrap in each of their charges. I think -- sorry, I think they're sitting in the high 20s as we speak, but very close to 30%, and the ambition is to go into the low 30s and consume more scrap. Obviously, an EAF can consume up to 100% of scrap depending on the product that they're pushing out and the chemistry attached to that product. But steel that's made in EAF produces 83% less carbon dioxide than anything that's made in an integrated furnace. There's also not just the demand for scrap is increasing, but the demand for high-quality scrap. The needs around chemistry to make things like flat products, particularly if you're trying to make it in an EAF needs clean scrap with very low residuals such as copper and nickel and chrome and other things. The other benefit that density brings is the ability to charge more scrap at a time. So in the case of BlueScope, I think they charge about 85 tonnes at a time in their shoot. They'd really like to lift that to 100 tonnes. So increasing density facilitates that. If you're thinking about an EAF that uses basket charges, simply fitting more scrap in the basket and then getting that scrap into the furnace also gives them some productivity benefits. And we're certainly seeing that with Rooty Hill. I mean they're traditionally pushing 22 to 25 melts a day. I think at the moment, with some high-density scrap, they're getting up into the 30. So it gives an enormous productive benefit, too, by increasing the density. It also reduces explosion risk. The more dense the product, the less chance you've got of that, reduces nonmetallic content, so it has environmental implications. Lots of reasons to improve the quality of scrap. And quite frankly, there's a premium price attached to it that we hope to and are capitalizing on. So I'm sure most people are familiar with the various types of steelmaking. As I mentioned before, every steelmaker in one form or another are looking to increase scrap into their charge. Obviously, in the EAF, it's a little dependent on whether they're a long product producer or a flat product producer, depending on the chemistry they need. Flat product producers obviously need very clean forms of scrap, in the form of busheling and very clean grades of cut scrap. And the other obvious opportunity there is low copper shred, I'm sorry. How do we make low copper shred? It certainly starts with source separation. So as the scrap comes into our yards, identifying problem items. A good example of that would be tinplate cans, baked bean cans, are a contaminant in the steelmaking process and the tolerance of them is pretty limited. So identifying them and extracting them if we get straight loads of them and taking them to a different market is obviously an opportunity. As I mentioned, increasing the density does a couple of things. It certainly improves charge rates, which all steelmakers want to do. But by increasing the density, you also give the opportunity to liberate any contaminants, whether the contaminants be in the form of other metals, non-ferrous metals or nonmetallics. So the more dense your scrap is, the more of those contaminants you liberate. And then you need the technology on the back end, obviously, to, quite frankly, extract those contaminants. And there's value in that. If we think about our shredded steel scrap, the biggest contaminant we have is copper. And anything we can do to extract the copper is -- obviously adds value, but then also gives us the opportunity to sell a low copper shred. There's a couple of photographs there on the screen that we can in commercial quantities, make sub-0.1 and sub-0.2 copper shred, which has great appeal, particularly the 0.1, for flat product producers. But I got to say, even the domestic consumers in Australia and Glenbrook, sub-0.2 is certainly appealing to them. So we are a supplier of choice. We do have a long-standing relationship with both the incumbents, both BlueScope and InfraBuild. We have a mix of what I would say, exclusive and preferred supply status. As I said, we -- with Glenbrook, we've signed an MOU supplying up to 200,000 -- actually a minimum of 200,000 tonnes of scrap, and that is on a preferred supplier status. We are the largest supplier into the mill and the investment that we're making at Auckland that you'll see later today, there is actually some shared investment. We intend to put rail infrastructure into our site and then use that rail infrastructure to dispatch scrap to Glenbrook, which is a good thing. A, it takes trucks off road, but it makes it a very efficient pathway to market. So we are going to co-invest in some rail infrastructure in the form of containers with BlueScope to move that scrap. And it actually is pretty clever. They move billet back to Pacific Steel, which is our neighbor that you'll see later today. They move that on a daily basis back to Pacific Steel. So then the opportunity is then to reload those wagons with scrap with containers containing scrap. So we'll have a daily run of billet coming back to Pacific Steel and scrap going back to Glenbrook, a very efficient means to move it. We also -- a few months back now, signed that MOU with Alter Steel for the proposed steel mill in Pinkenba. That is an exclusive arrangement. Up 550,000 tonnes is what they're looking for. Again, we will do our best to secure as much scrap as possible locally. But quite frankly, if we need to pull scrap in from intrastate and interstate and even imported on occasions, our Pinkenba facility obviously serves us well to do that. The arrangement that we do have with Alter not only sees us supplying scrap, but also managing their scrap on site on a just-in-time basis. It's a pretty close relationship. The other mill in Western Australia, Collie, Green Steel WA, we are actively engaged with them. We're still negotiating. We have a very significant market presence in Western Australia. So they absolutely need us. And we're just working through the details as to how logistically, we get scrap to Collie. And given that a large proportion of the scrap gets generated in the Pilbara from the various mines up there, whether it be BHP, Rio, Fortescue, Gina Rinehart, it's a bloody long way to transport scrap on road if that's the only means to get it into Collie. So the opportunity to use our port infrastructure and move it that way is something that we're seriously considering. What I would say, the price basis, traditionally, Australia has been based around -- and New Zealand, if we go back in time, has been based around an export parity price basis. With the changing dynamics and the obvious regional deficits that I think will emerge with Glenbrook and potentially 2 other steel mills, I think we'll end up with a mix of export parity and import parity to meet their needs. And as I said, that's where I believe there is some commercial opportunity for Sims to fulfill that need. Hand over to Graeme. Thanks.

Thank you, John. Got that wrong, but we go -- good morning, and thanks again for coming to visit us in Auckland today. I'm particularly excited to show up our Otahuhu operations shortly. For those of you that I didn't meet last night, my name is Graeme Cameron, and I'm responsible for our operations in both Australia and New Zealand. Today, I'll give a short update on our infrastructure enhancements and new growth opportunities in both Australia and New Zealand. We're investing ahead of demand with strategic EAF aligned infrastructure in both Australia and New Zealand with Pinkenba and Otahuhu, as John has mentioned in his presentation. These sites give us capacity, logistical strength and proximity to mills, positioning us to support rising domestic scrap demand, a strong shift to high-grade, reliable domestic scrap. Along with our investment in physical assets, we're rolling out a single global digital platform that delivers real-time visibility of logistics, inventory and cost of sales for the first time. This replaces a 25-year-old legacy inventory system, along with integrating logistics planning and management systems. Currently, for Sims Australia, we have 6 individual instances of the legacy [ SAI ] system that we'll be replacing. This old system is obsolete and will be unsupported after we go live with AMCS in North American Metals. AMCS starts with the customer, enhancing the customer or as you'd probably refer to as the suppliers' experience. For example, the new system will provide us with real-time tracking of bins that are placed in our suppliers' operations, providing a smooth experience in our yards with faster reception at the weighbridge kiosk and at unloading points with digital inspection tools eradicating paper tickets. A faster response -- sorry, faster responses, clearer weights and grading, digital portals and greater transparency across the whole transaction. It strengthens margin disciplines and lowers our cost to serve through faster and more consistent automated processes. The new AMCS system will not only capture key operational data points, but also provide intelligence that will differentiate us from our competitors. AMCS will be delivered under a SaaS or Software-as-a-Service model. And as you can see up there, New Zealand goes live in May 2026, followed by Australia later that same year and North America in 2027. Think about it. This truly is a unique opportunity. With this asset, Sims Metal is the only processor of scrap metal with operations at a deep-sea wharf in Australia, rapidly improving ship loading and discharge rates while reducing truck movements. Pinkenba is an existing heavy industrial site that has usable infrastructure, including concrete, storm water, buildings, deepwater wharf and rail, allowing for the development of a truly integrated metal processing and logistics hub. Total investment is expected to be circa $215 million and has begun with an initial Board-approved $40 million site upgrade through FY '26 and '27. The initial investment includes, but is not limited to updating the site's existing infrastructure, including recladding sheds, redeveloping amenity blocks, upgrading the wharf and importantly, the installation of copper refines recovery plants that John referred to earlier. Additionally, 1 of the 2 incumbent Southeast Queensland steel mills is flagged to be developed just 1 kilometer down the road from Sims Pinkenba. This mill will be known as Alter Steel. Alter, as John mentioned earlier, has signed an MOU to exclusively source 550,000 tonnes of ferrous scrap from Sims per annum. Traditionally, Sims has moved unprocessed scrap from regional feeder yards to shredder sites by road, for example, from Cairns to Brisbane. Road freight is increasingly expensive and periodically inaccessible. We have traditionally loaded Handymax vessels with our processed ferrous scrap at the often congested Fisherman Island wharf at the mouth of the Brisbane River. This illustration shows the strategic value of Pinkenba in connecting our regional scrap sources to domestic mills and export markets. It enhances our competitiveness and value proposition to Australian and New Zealand steelmakers. Adding Pinkenba to our existing network of locations means that we can now ship unprocessed and processed scrap from our far north Queensland feeder yards directly to the Brisbane shredder at considerably lower cost than by truck. We can both export processed scrap to our overseas customers, including New Zealand Steel and import process scrap from our U.S. and New Zealand operations to meet domestic Australian customer needs. Pinkeba's rail connection brings further supply chain resilience and cost savings. As you'll see today, we're in the process of upgrading our core New Zealand processing hub in Otahuhu. You'll see our recently commissioned non-ferrous baller along with the civil works that will see the installation of a new rail spare. The site upgrades also include an MRP enhancement in FY '27 and an additional copper recovery plan, which will follow in FY '28, uplifting quality, yield and margin. We're upgrading Auckland into a modern rail connected hub, giving us faster, lower cost delivery into New Zealand Steel's Glenbrook EAF. The new rail siding and train loading capability significantly improves logistics efficiencies and reliability with circa 480 metric tonnes of processed scrap in train movement direct to Glenbrook. 480 tonnes, typically, we would load 20 tonnes in 1 truck. So it's taking significant vehicles off the road. We're co-investing with New Zealand Steel to move scrap via rail and strengthening our role as their primary long-term supplier. Overall, this creates a fit for future Auckland facility aligned with rising domestic demand. The EAF shift changes everything. Domestic demand steps up sharply as New Zealand Steel, Alter, Green Steel Western Australia and others move to lower emission steelmaking and that immediately reduces our export exposure. That's in addition to the plant production improvements in the existing hot mills in New South Wales and Victoria, as John mentioned earlier, i.e., Rooty Hill, Port Kembla and Laverton. The markets flipped from volume-driven export to quality-led domestic supply with these supply-demand gaps creating fulfillment opportunities, including imports. Commercially, we get a better revenue mix, more domestic sales, more price stability and stronger margins driven by quality differentiation. Shorter, tighter supply chain improves reliability, lower volatility and releases working capital. Operationally, this is a full model shift. Our network, technology and logistics align directly with regional steel producers, underpinned by data, automation and real-time integration. Sims moves from exporter to critical enabler of domestic decarbonized steelmaking, strengthening long-term mill partnerships and locking in multi-decade relationships. Capturing new opportunities. Operational growth. John has mentioned in his presentation, I touched on it a little bit in my slides, we're lifting our core performance in New Zealand with our MRP upgrades. So this will see a dramatic improvement in our recoveries of non-ferrous metals from our waste. And as we're walking through Otahuhu today, I encourage you to have a look at that waste and see if you can see those non-ferrous metals that will be recovering. In addition to that investment in Otahuhu across the group, there are plans over the next 2 financial years to install 3 new fines plants to unlock additional yield and deliver a high-quality product that commands a better margin. These fines plants are similar to what we've already installed in America and are an enhancement on that technology. We're refreshing our branding, marketing and supply side engagement to strengthen our position with our key suppliers. And underperforming feeder yards have been targeted with turnaround plans to restore productivity. These initiatives return -- deliver strong returns. Strategic expansion. We're actively pursuing bolt-on acquisitions. A 5-year program identifies a number of new feeder yards to strengthen supply resilience and meet growing EAF demand. As volumes scale, we unlock significant leverage with our existing asset base, lowering fixed cost per tonne. We're engaging closely with industry and government to reshape regulation enforcement incentives that support quality scrap, green metal uptake and domestic decarbonization. This ensures Sims is positioned as a policy leader and a key partner in the national circular economy. Thanks a lot.

Just the key messages, I guess, just in summary, before we take your questions. Ferrous markets are difficult, and this continues to weigh on pricing and margins. Having said that, non-ferrous remains a strong and growing earnings contributor and certainly adding resilience to our earnings stream in ANZ. The tough market conditions does present us with some opportunities. And as Graeme mentioned, we do -- we have found gaps in our collection footprint, even though it is a very sizable footprint. And our belief is that there will be opportunities to acquire smaller businesses and potentially even larger businesses. The tough market conditions are not something that we're just facing, the entire industry is facing. And there is some vulnerable players out there that I believe that we can participate in. The investments we're making around fines plants, MRP upgrades, quite frankly, it's a no-brainer, taking metal out of waste and not bearing metal is -- you saw the sort of returns ranging from 20% up to 30% and 40%. It's very easy, particularly when you saw the Auckland MRP, a 60% increase in non-ferrous yields. We're talking about literally moving from a 3.5% yield to 5%, 5.5% yield. So very -- something that provides a very quick payback. We are well positioned. We have a very strong market presence in most regions. But as I mentioned, our market share varies a bit from region to region, particularly ferrous and non-ferrous, and there is some opportunities there for us. Having said that, happy to take any questions.

Just a couple of questions for me. Obviously, the operating environment is very, very difficult. Is there anything on the cost side you can do self-help or anything like that, that you can maybe give us a bit more color on? There was a few initiatives there. Are you able to give us a bit of an indication of what to expect there on margin or costs that could come out of the business that could help, I guess, manage the current tough ferrous environment?

Yes. So a couple of things on that front. As Stephen mentioned, our cost group is something that we target across our entire business, obviously, within the ANZ Metals business, but also at a group and corporate level. We're always endeavoring to chisel out costs, but some very significant cost factors in the metals business are things like waste disposal. That's a big -- a very big number for us in both Australia and New Zealand. And it's not going to get any cheaper. You've got a lot of labor state governments at the moment. They're talking about harmonization of waste levies as an example. The challenge there when anyone says harmonization means, it probably means that we're going to go to the highest jurisdiction. So in all likelihood, we're going to see our landfill costs increase. So anything we can do to get metal out of waste and get moisture out of waste and anything out of our waste stream to lower those costs is certainly something we're pursuing. On the technology front, as I mentioned, we are upgrading these plants and quite frankly, looking to replace some of our technology with some of the AI machine learning sort of devices, put robotics in, take labor out. At the moment, we have guys picking on conveyors. I can see in the very near future that they won't be humans, they'll be robots in some form. I think the biggest opportunity for us is around fixed cost dilution. And any volume we can add through our shredders and through our MRPs with any of this market rationalization consolidation, simply taking that volume and jamming it through our existing cost base gives a massive dilution in unit costs, fixed unit costs. The other place that Graeme alluded to is with Pinkeba. As you said, road transports with COR regulations, anybody that's participating in the road transport field is doing it tough, trying to find trucks, let alone drivers to carry product is becoming increasingly difficult. And that's why we're really, really keen on this opportunity around moving scrap potentially on barges from places like Darwin, Cairns, Townsville, MacKay, Gladstone, maybe even Bell Bay into Pinkeba and processing that scrap in Pinkeba and not moving it on truck, enormous cost saving, enormous.

Great. And just on that point around fixed volume leverage. On the M&A side or consolidation side, are you seeing any signs of distress by some of those smaller players? There's been talk about InfraBuild. Is that actively being marketed out there or other potential opportunities?

Certainly, InfraBuild published their F '25 accounts a couple of weeks ago, and they were pretty sad and sorry tale. So something we believe will shake out there are obviously not for sale today. We would have keen interest in the recycling assets if they did become available. In most cases, those assets are probably nearing the end of the life, but there is some opportunity with a couple of their shredders. But for the most part, the value in that business in particularly sits around their feeder yard network and quite frankly, their book of business, not so much their assets. So yes, we would have interest. And in terms of the smaller players, whether they be single yard operations or we've got a couple of larger family-owned businesses, as I mentioned, for 2 reasons, tough times may actually force a few people to sell. In a couple of other places, a lack of succession planning may also force the sale of those businesses, and we'd be very keen to participate in that.

I had a quick question on the detail you're giving on EAFs. And particularly, if you look at that, I think it was a 10-year chart, if my eyes don't deceive me on the prices of Chinese -- at various times when China ramps up exports versus when they don't. With EAFs coming into the market, if I'm not incorrect, most of -- as you're saying, most of the pricing will be export-import parity, which presumably is caught by the weaker conditions at the moment. So I guess as we go to a world where we're getting more EAF capacity in New Zealand, potentially more in Australia, is there a way out of the pricing side where you're being hit by regional conditions? And is there an opportunity at all to look at? Is there a more favorable domestic price that's able to be accessed in the event that we don't see the reversal of Chinese activity on finished and semi-finished products?

It's a really good question. Look, any demand, even the growing EAF demand, you would like to believe will underpin and escalate pricing over time, both domestically and globally. And we're certainly seeing that demand change. What we're trying to do and have been successful is, quite frankly, upselling our products into the domestic mills. They want high-grade, high-quality scrap. And quite frankly, we're going to charge them a premium to do that. So that's certainly an opportunity for us. And the other opportunity sits around improving our logistics and pathways to market to get some cost out of either road freight, rail freight and as we talked about, even barge and ocean-going vessels to try and lower that cost of delivery from the point where we pick up the scrap and buy it, process it and then deliver it to the customer. There's plenty of opportunities across that spectrum to try and wedge out extra margin.

Just I mean -- so I take your point. Thank you. The EAF demand coming in, I think we can all see that one of the problems in the regional market is there is just a surplus of supply of steel coming into the market. Do you -- the EAF demand locally, that will help, I get that. But is there any -- in your experience, and you can claim it's out of your pay grade, but do you think there is a potential for Chinese steel in the next few years to actually be consolidated itself?

Look, 2 things I'd say on it. I know that because I've sort of participated in some of the meetings through a couple of different industry groups. The domestic steelmakers, both the incumbents and some of the new proponents are actively lobbying government around antidumping and tariff protections for the domestic steel, sovereign steelmaking. We're seeing lots of countries going down that path. Vietnam are doing it. India doing it. Obviously, we're seeing what's happening in Europe, talks of carbon border adjustment mechanisms and stuff like that. And of course, in Australia, you've got the safeguard mechanism, which invariably that will flip on its head, and that will -- people like BlueScope will be challenging the government around how they protect the domestic industry around that. So there's all that happening. The Chinese question, I'd say is probably you guys might be better positioned than me to comment on that. The only thing I would say is for a long, long time and obviously, in a decarbonizing world, the talk of Chinese taking some of their most polluting integrating steelmaking and closing it, taking it out and closing it down. I got to believe that's still part of the longer-term agenda. We do know that China do play the long game. So when that actually happens, but they are cutting production, and they are generating more scrap internally. And eventually, you got to believe that, that scrap will migrate into EAF production there, too, maybe at a lower overall production, but certainly a shift from integrated steelmaking to electric arc.

You talked a bit about cost-saving opportunities with logistics and also sort of selling more locally, less export. There's a mix benefit there. Can you help us sort of appreciate how material the benefit can be? Maybe it's a dollar per tonne uplift you could expect in the medium term or similar way for us to appreciate how material the saving could be, please?

Look, in terms of the rail infrastructure, using that back freight, that's an opportunity. That's -- I think the saving there is in the order of $5 a tonne, on every tonne by taking the product into Glenbrook on rail. I think that's something that we've shared with BlueScope, but it's about $5 a tonne. As you said, as you saw on some of those IRRs and ROI, sorry, on some of those projects. If you think about that 60% uplift in metal extraction from waste, the product that we're talking about there is zorba and zurik, which currently trading for around about $2,300 a tonne in the case of zorba and in the case of zurik, about $1,200 or $1,300 a tonne. So you haven't got to get too many percentage points, and you saw on the IRR, it's massive. In terms of fines plants, I think the figure up there was 3% or 4%. But again, when you're dealing with a product that's $11,000 a tonne, even a few percentage points in extracting that. And quite frankly, the fraction that we're talking about here is sub-30 million. And in that sub-$30 million, there's also precious metals. We also hit gold and silver thresholds on occasions, too. So that will also add some benefit to us. But the sort of payback on those sort of projects is very quick.

Just a follow-on on the cost out. If we look near term, the implied 2Q profit in that update on Friday in the business given that Q1 was breakeven in ANZ. How should we think about the cost-out opportunity in the second half of this financial year versus that kind of run rate, assuming a steady-state ferrous and non-ferrous market?

So what I would say, the first quarter was obviously a very disappointing period. We had 2 scheduled shredder outages, one that was out for an 8-week period. It was basically out for the entire month of July and August. And then we had another shredder that was out for about a 3-week period. And then unfortunately, we had an unscheduled outage with our Brooklyn shredder in Victoria. So 3 shredders out in the quarter certainly impacted our earnings in that first quarter. We are still clearing the backlog of scrap as a result of that, and some of that will play out in Q2. And then actually, there will be a portion of it that will play out in the second half. We just won't get it all processed between now and Christmas. So the scheduled outages were well planned. They went to time. They went to budget. In the case of the [ Samer ] shredder that was out for 8 weeks. This is -- we replaced key components of that shredder. This was a 20-year sort of -- we pretty much replaced the entire shredder. We've only got one major component that we need to replace at some point. But basically, we've got a brand-new shredder. There's never a convenient time to do it. And obviously, with things around fire risk and stuff like that and accumulating stockpiles, a lot of planning goes into it. And when you set a date to get on with it, there's -- you charge forward. And yes, unfortunately, Q1 results were pretty disappointing in the backdrop of a very tough ferrous market. But what I will say in Q2, you've seen an obvious improvement in earnings. Non-ferrous is definitely underwriting those earnings. And with what we're talking about with -- starting with Glenbrook and elsewhere, second half, a few green shoots. And we've got some of these fine plants coming on stream, too. So a few green shoots on the second half.

But John, it's probably fair to say that with the fines and -- steel facility, that's more FY '27.

Yes. There'll be a ramp-up. Absolutely.

Chen from Bank of America. So non-ferrous, you are very obviously bullish on that half of your revenue from NZ and your recovery and yield improved significantly. Well, your non-ferrous recovery improved from 3.5% to 5.5%. That's already happened, right? So...

No, no. We yet to -- those plants are under construction as we speak. So that will happen in H2.

Right, H2. And then by looking at the AGM guidance from last Friday and also you mentioned the maintenance of shredders. So I'm just wondering how much the impact is from the outage of shredders and how much is market driven because you've got a lot of self-help out, your recovery, hopefully, we will see that improving your trading margin from -- just if you can give us some confidence of that recovery from NZ?

Yes. As I mentioned, [ Samer ] was out for 8 weeks. So that's about 40,000 tonnes of scrap that we had to accumulate over that 2-month period. And then obviously, now that we've got the shredding running, we're obviously slowly working our way through that stockpile and it's scattered across various yards and there's logistics to get it to shredder and things like that. So that will play out. It will largely play out in Q2, but there will be some that hangs over into Q3. As I've said, the ferrous market is extremely tough. But the non-ferrous market is extremely buoyant. And thankfully, it is certainly underwriting earnings and certainly underwriting earnings in Q2.

There's obviously a lot of different grades of products out there, John, and you've chatted around high grading generally. Can you give us an idea of the spread? Like if you think like a lower grade to a high-grade product, has that spread lifted over the last 2 or 3 years on demand? Or as the technology improves, you're seeing that compress?

We expect the price spread to increase over time. But I can tell you, low copper shred in the U.S. is now trading for around -- when I say low copper less than 0.2, is trading for around USD 30 premium over regular shred. If we want to talk about things like busheling and stuff like that, it sits above low copper shred. So probably maybe another $10 or $20, but this moves. Market dynamics move depending on availability in any one moment in time. So that spread tends to move in and out. But in rough terms, that's what we're talking about. That sort of difference between what I would call a regular spread and a premium grade spread. And the ultimate cap on that price is busheling price, is the ultimate cap. If we want to talk about cut grades, if we look at places like Turkey to sell what we would call a bonus grade or a HM1 grade into Turkey, they're paying a $20 premium over regular HMS today. So the spread is certainly widening -- widen.

Okay. Yes. So I guess if you take those numbers on a 5-year backward-looking number, you think it's higher than it has been in the past?

Yes.

Okay. And then just on the ferrous side, like clearly, it's hard and China is a large part of that. Are you seeing anything in ANZ just from like rational competitor behavior or anything else that might be more temporary rather than just kind of waiting for the China piece to improve?

No. Right at the moment, as I said, there's a lot of parties out there that are vulnerable. Lots of them are talking to us. I think a lot of people can see the opportunity around domestic demand, but some are not going to write it out. That's the simple answer. Daniel?

John, you spoke about the opportunity in InfraBuild. If they do decide to sort of sell it as a whole, would that be a consideration in terms of vertical integration to EAFs for the group?

Simple answer. I think I can answer for both Warrick and Stephen, no. But we would -- have very keen interest in the recycling assets. And quite frankly, if someone else did buy it as a whole, we'd actively engage with them because we think we can bring value to those assets and get a better outcome for whoever owns them.

I think you said that utilization is around 60%. Is that...

Capacity utilization shred? No, it's less than that. It's under 50%. It varies a bit from shredder to shredder, obviously.

Okay. You're still interested in other assets that are coming on to the market? Is there a time when -- I mean I know you're hoping that, that gets fueled by growth, but is there a time when something has to be done about that excess capacity that's taken out?

Some of the vulnerable parties that we're talking about operate small shredders. And I think it's important to differentiate between a small shredder and the sort of shredders that we operate. The only way you can make low grade -- sorry, high-grade, low copper shred is through a high horsepower large shredder. The simple reality is you can't get the density to a level that you need to in a small shredder. And I think the sort of price premiums that we're talking about $20 or $30 a tonne, that's going to put them at a very significant competitive disadvantage. And I do think that there will be some rationalization and consolidation of shredder capacity. Absolutely. But it will be amongst the small shredders.

Sorry, John, just one follow-up to that. How the -- I'm going to say, obviously, there's a bit of black market trade in Australia where scrap gets shipped out illegally. Do you see any appetite from government to actually stop those sort of practices?

Simple answer is yes. Because I've been involved in some meetings recently in Canberra and suddenly, we seem to have some traction with a couple of government ministers and a couple of local members. Things like cash for scrap in New South Wales and Victoria, there is a ban on paying cash for scrap and yet people do it. There was an article in the paper 2 weeks ago about copper and wire and piping and hot water services getting knocked off in Sydney and getting sold to the metal recycling industry. No one is going to sell it where you get paid a check and you have to take down details. It's going to the illicit trade. But I'd have to say that we are getting traction with the government. And some of that, quite frankly, is we have got the steelmakers on site. We've got this ridiculous scenario that we're seeing the scrap. If you think about a car getting baled holus-bolus, seats, upholstery, wiring, engine, everything, just put in a bail, shoved in a container and shipped to an offshore destination that probably doesn't have the environmental rigs that we have. So we've got that happening, product going out through Port Botany. And yet you saw in our chart there, I'm bringing scrap in from Queensland, South Australia, New Zealand and even West Coast of America. So the steelmakers who are obviously big employers are saying security of supply, if you want us to migrate down this green metal agenda, we need security of supply. So let's stop this illegal trader product going out through our ports.

What minister or department federally is in charge of that?

[ Minister Ley ] has been one that's been pretty active on it.

Just another follow-up. John, you gave us a bit of color about -- around additional scrap demand in Australia if some of those projects go ahead. Just with -- are you able -- just with the existing 3 major users, you also mentioned they've got plans of increasing their use. What would that existing sort of 3 customers make up of that 1.2 million that you're expecting?

About 400,000 tonnes. So -- and it's 3 things. I can tell you that Laverton is looking to increase their ladle furnaces, which allows them to drain more molten metal out of their EAFs, and that's a project they're actually undertaking at Christmas. It's been well telegraphed. They're taking their mill down for a few weeks. They're also looking at a combination of something similar in Rooty Hill, but they're also, I think, playing around with, I'll say, their electrons that gives them more efficient melting and also increasing the load side, which is about another 100,000 tonnes. And BlueScope are also looking at one particular project that involves preserving heat in the transfer of liquid metal from the blast furnace to the BOF. At the moment, they use these things called torpedoes, which moves liquid metal from one furnace to another. And in the process, they lose a lot of energy. So they're actually looking at means or a method by which they can preserve that energy in the movement, which if they add a couple of hundred degrees over here, it means they can melt more scrap. There's a point in time where if you add too much scrap, you basically chill off the furnace and then you're in trouble. But if they can preserve the heat, they can charge more scrap. So there's a couple of hundred thousand tonnes there, I think.

Okay. Great. And just a broader question around scrap generation. I guess it applies to North America, too. With the tougher consumer backdrop we're hearing, particularly in North America, are you seeing any sort of impacts to the rate of scrap generation or obsolete scrap generation as people, I guess, delay scrapping their vehicles or white goods or anything like that?

Certainly still some overhang from COVID. Certainly on the post-consumer front, intake volumes are tight. That is being offset by, I got to say, pretty robust mining and resource generation of scrap in Northwest and out of the Bowen Basin in Queensland and a couple of major demolition projects. But post-consumer scrap is tight. And some of it is exactly that, a lack of consumer spend. Some of it is people are hanging on to their vehicles longer. I think there is a hesitation still within consumers generally about migrating to electric vehicles. People are just hanging on that a bit longer to their internal combustion engine or maybe doing a halfway sort of by a hybrid, but there is a general hesitation around vehicle.

And you're seeing that in the U.S. as well?

Yes, I would say so, yes. It's a bit state-based. I mean, California is obviously a whole lot more, how would you say, proactive on the electrification infrastructure than other parts of America, but yes. Thank you for the questions.

Okay. I will close up and say thank you very much for your attendance. Thanks for the questions. I thought they were insightful on both the SLS front and the metals front. I think that's the end of the presentation part of the day. We will get out now. We're bang on time. We'll head out, grab some lunch. And like Ana said, be back here 11:30-ish, 11:40, and we'll get into our PPE and head out to Otahuhu. Thanks very much.