Sims Limited (SGM) Earnings Call Transcript & Summary

Good morning, everyone. For those who don't know me, my name is Ana Metelo, Group Director, Investor Relations. A warm welcome from all of us here at Sims Limited. For those of you participating via webcast, welcome to you also. I would like to begin by acknowledging, the traditional custodians of the land I'm on today, the Gadigal people of the Eora Nation. We recognize and respect their deep and continuing connection to land and waters, their long tradition of innovation and their continued stewardship of this place. And I pay my respects to the elders, past, present and emerging. I know we are joined today from people around the country and around the world. And so I extend that respect to all First Nations people, including those joining us at this event. Just a quick reminder that we have launched our presentation with the ASX this morning. So we are excited to get through that over the next few hours. Today's presentations are covered by the disclaimer on the screen behind me. And now I'll say a few quick points on safety and some housekeeping and evacuation procedures. [Operator Instructions] Today's presentations will be recorded and an archived version will be made available on our website as soon as possible after proceedings today. [Operator Instructions] Days like today take a reasonable amount of work to put together, and we want to make sure that we improve these types of events. So we will distribute a survey next week for you to have your say. Several members from our group leadership team are here today. If I can quickly introduce each of them. So in the room today, we have Alistair Field, Group CEO and Managing Director, if you can wave, yes; Elise Gautier, Chief Risk and Sustainability Officer; Ingrid Sinclair, Global President for the Sims Lifecycle Services business; John Glyde, Chief Operating Officer, Metals; Brendan McDonnell, our Group Chief Technology Officer; Steve Skurnac, Group Chief Development Officer. Unfortunately, Stephen Mikkelsen came down with COVID yesterday. So he won't be presenting today. Todd Scott, our Global Head of Strategy and M&A, will cover Stephen's presentation. Safety is very important for us here at Sims, and everyone from our team here today has tested negative to COVID. So it's safe for you to be here. The agenda for today is on the screen behind, and it is not accurate, so not helpful. The one you have on your tables are actually -- it's updated, and I apologize to the ones on webcast. But -- so the major change there is that we started at 9:00 a.m. and not at 8 a.m. So apologies for that. So let's get started. Our first presenter is someone you all know very well. Alistair Field, if you could join me, please.

Thank you. Good morning, and welcome. I'm going to give you a little bit of an update, and I see there's a number of faces I haven't seen before, met before as well. So I'm just going to start a little bit earlier in terms of the year 2018, and walk you through a little bit of the journey that we've undertaken. Part of that is obviously to then share with you our progress in terms of that strategy that we set, and then also to take some questions at the end of the function. So if we have a look, 2018, Sims just over 100 years old. A lot of work in terms of the metal industry had been undertaken for many, many years. And part of that was a new management team that had come into play. And part of this was also the journey that we needed to undertake. And we decided to have a look at where was Sims going. If we wanted to be here for another 100 years, what do we need to do readily do. And that was really about the management team, the Board, top executives, over 100 folks were involved in setting that journey. And part of that was really creating the purpose. Where do we want to go? A lot of work was put into it. It took us probably 8 months to make sure that we'd expanded that right across the globe. And part of this was really to create that purpose and create a world without waste to preserve our planet was that light that we put on to the horizon and to be used as a filter and how we're going to run this business. That's just a statement over there. But obviously, part of this was a purpose narrative. How do you actually achieve that? How do we work to get that? How does that link with our values? So that lens is not only about acquisitions or the journey, but it's also about how we get there, how we behave, how we actually walk in the yards, how we treat each other. So also, again, a lens of how we run our business. So a very clear light for us that was set in 2018. Part of that journey, when we had a look at it, we obviously set a target of looking at 30 to 40 years ahead of our company. We were we in the major trends of the world, be it from a technological point of view, be it just global trends and digitalization. And that's really where we spent a lot of time. And from that, we determined that we needed to structure our business accordingly. And Sims metal, as you know, have been the core business for 100 years, 1917. And these divisions really came out of that. How do we actually achieve the strategy and make sure that we are structured accordingly. And that's really the divisions that you see above you. Sims resource renewal. That was all about a product that we had in our company, which was waste. We produced 1.3 million tonnes of waste. There's a box of it at the back there, that please have a look at it later on. That's ASR. That's the waste that we put into landfill. That was the real creation of that Sims Resource Renewal. To meet our purpose, we needed to have a long-term view. That was a strategic decision for us. Sims Lifecycle, that division, we had an e-waste division, which was really a European division. It was a compliant division. It was really about handing stuff in according to government protocols and really not going anywhere quickly. So part of that trend that we looked at, that mega-trend, that digitalization process was a very clear opportunity to have a look at the infrastructure in the cloud. How was that developing and that for us was becoming a really key feature and the Sims Lifecycle Group was created. Sims Energy, we obviously have a division or an LMS joint venture here in Australia that have been doing exceptionally well. They had certain technical capabilities, both from an engineering point of view, but also the ability to actually extract gas out of landfill, the biogas. And that obviously, for us, having a look at that where the synergies and could we take that model overseas. Sims Municipal Recycling. That was obviously a division based in New York focused on the recycling of materials in Manhattan. Obviously, it was a long-term contract. And for us, it was all about creating that division, but then making sure that we can actually optimize. So that's really the divisions that we created. So we set a purpose, we set a strategy and then the structure to support that. Part of that is also just we need to actually have a look at it internally. Our capabilities in order to be able to deliver that strategy, how do you align your company, how do you align your people? So part of that journey was the business transformation. What did we need to do internally to be able to deliver that. And I'll be obviously, for anybody that is undertaking change in a corporate or global corporate, you know that this is not an easy undertaking. Part of that was really having a look at our model. We were a regionally focused model and really for us to be able to deliver faster in today's times, we decided that a combined regional model was not going to suffice. And that's why we went to a functional model. That was really with a lot of benefits. So if you take the commercial group, the buyer used to typically report through it in an operating environment. So now by putting the buy and sell into one commercial function and running it globally from a central point that made a lot of sense, and there were benefits inside that, which has really got to do with being able to have quick communications, data at your fingertips, but also to be able to make sure that you improve communications. Likewise, with financial and operations, the operating environment that we wanted to create was an environment in which you could actually move a lot quicker. And on a global basis, there are a lot of benefits around that. So we needed to change that functional organization. Obviously, part of the benefits of doing that is delayering. We actually find in some cases, we had 1 person, but 2 people reporting to them. So by actually giving people more responsibility, widening that base, there were some benefits in that. It started to look at the succession, the leadership that needed to go into this organization to deliver that strategy. Part of that view was obviously, well, what's your systems? Where are your systems, how you're progressing and utilizing that. And that's where the ERP was derived as well. Naturally, looking at all your systems over 100 years, there's a lot of work to be done to be able to upgrade systems and to go in an SAP system in our case. So that ERP system should be finished by the end of July, August after a little bit of hyper care. Part of that journey is understanding we're taking our folks with us. The employees are actually moving with us. And it was pleasing to see that the engagement score was high. But part of that lesson is it's find asking people what they're feeling and how they're doing, but it's really about what you're actually going to do with that information. So for us, that body of work has been done a few times in terms of employee surveys, but it's really taking that feedback we get and making sure we act on that. So really a key part of that journey for us is setting purpose, setting structure, making sure that the strategy is aligned with all of our folks as well. One of the key aspects of any business going through a change. And particularly when you have a look over the last 6 years, we've had quite a volatile environment, geopolitical, geographically, regionally, everywhere. One of the pleasing aspects for me is that we've continued to improve on safety. And this, to me, is a key issue. Fatalities in our industry are real. Man interface with machinery is probably one of the most critical risks. And you'll hear a little bit more about that. But this aspect for us is a key aspect in terms of being able to continue to operate. Last year, obviously, and continuing this year, the least amount of critical injuries or serious injuries have occurred in our business, which is really pleasing that we're actually making place for safety in our lives every day and also going home. If we have a look at the performance of the core business, Sims Metal. How have they performed in terms of ferrous. Organically, we've had a number of yards that we've grown over the last couple of years. And obviously, for us, choosing that yard is a process. And likewise, when we're choosing our acquisitions, there's a number of filter processes that we go through. But we've done a number of acquisitions. I think more recently, Alumisource, and we'll talk a lot about that today. Atlantic Recycle group, done in Baltimore in the United States as well. So a number of acquisitions have been undertaken. From an engineering point of view, and we'll hear a little bit more from John as well. Obviously, the equipment that we have, are we optimizing that and are we making sure that it is running at the most efficient levels. And that's really the expansions of some of our shades in Australia, Auckland and Victoria in particular. That's really about making sure that we actually maximize that capacity and we can grow in our regions without having to put new shredders in some cases. One of the key issues for us coming forward is obviously environmental management. The communities in which we operate is critical. And obviously, the emissions, and we're seeing that standard raise across the world, and I'll talk a little bit more about that later on. We have spoken to you a lot about technology, and part of that is the upgrades done from shredder. And that's really when -- as an example, you'll put a motor car through a shedding process. And obviously, one of the key aspects is you want to take the ferrous. You want that ferrous to be as pure steel as possible. But you're also extracting copper and aluminum. And all of those 3 streams as an example, is where our upgrades have taken place across the globe, and we've obviously spent a lot of money, and that's paying dividends. I think one of the other key aspects for us is what are we doing in terms of our logistics and are we moving forward? So when you consider some of the opportunities for us, putting hydrogen into diesel here in Australia, as an example, you can actually look at almost a 10% saving. These are the types of aspects that we're going to have to continue doing and trialing across our global group. Electric vehicles is also obviously something that we're looking at. And when you have a look at the amount of aluminum and copper that goes into these electric vehicles is probably a good thing for us to do because we'll actually get the benefit on both sides of selling that material as well. One of the key aspects for us in logistics is the U.S., I mean in the New York region. And obviously, barges are a fundamental and very key part of our operation and being able to move through that congested environment. So barges and rail cars very critical in the U.S. One is to have a good set of assets in terms of rolling stock and on likewise at the barges that they can move up and down the coast. So a lot of work has been done in the ferrous to be able to achieve the targets that we've set out. When we have a look at the nonferrous business, again, a very key component, something that's been driven very hard from a buyer strategy point of view, as you can well understand, managing margin is critical. And that's really where the centralized global trading team, which sits in Singapore, which Graham has been running for many years, that was a really key focus for us to grow nonferrous. And that's both retail as well as our shredder residues. From an engineering point of view, we've had a number of successes going through. We've trialed various technologies in the U.K. and the U.S. and obviously wanted to grow that. One of the more latest aspects for us is around polishing that material, and that really allows you to separate to a greater degree. In other words, you can extract more your yield is higher. And John will talk a little bit about that as well. Obviously, for us, expansion, cable shredding, being able to separate plastic on a cable is critical. As you know, the Chinese standards changed a number of years ago, and that was one of the first changes was that you had to separate a piece of plastic from the cable itself. So you could get to the cable, and that was all you were allowed to be selling into a market and not that plastic. So that technology granulation. And for those of you that going to Mopira, you can see that tomorrow as well. In terms of the sales strategy, we are seeing a lot of demand from customers being very particular around quality. And as you know, and I have explained, we've spent a lot of money on that technology to lead the world in making sure that we're actually extracting every bit of yield, but it's now becoming a basic right. The aluminum business, in particular, if you want to sell aluminum, recycled aluminum at a certain grade into a primary smelter, you need to meet certain conditions. And then that's understandable where they're going. That's obviously part of the actual decarbonization journey, we're starting to see that now. All the customers are now starting to tell us the levels of quality that we want. In terms of the challenges we faced, global diversification. We've mentioned this to you as well. It's not only the collection parts, but where we sell, we want to make sure that, that is diversified across the world. So when you have upheavals in the world, we do have opportunity to sell elsewhere. And that's exactly what's happening this week. One of the best acquisitions we can talk about is obviously the Alumisource, that was a very specific targeted acquisition. And the reason being is that we were in the aluminum business in terms of recycling, but in secondary. This allowed us to go from a secondary to a primary smelter, and that's one of the first times that that's happened. And in order to be able to do that, you've got to have a certain quality that can go into a primary smelter for obvious reasons in terms of energy consumption, waste and from a safety point of view. So Alumisource gave us that technology. That Alumisource capability has now been brought into the group. So obviously, a lot of focus being put on to that group, but obviously, for us, one of the best is that it's actually performing way above what we actually thought, and it's opening doors faster than what we thought. So our group is -- John will talk a little bit about it, but obviously, for us, technology and using that technology now across our group faster is going to be a key issue for us going forward. And it certainly has enhanced our capabilities of dealing in 6x and 3x aluminum, which is quality grades of aluminum. So really good for us and certainly meeting the expectations we had and improving it. When I have a look at obviously, the performance in terms of where we're tracking against targets, we set some very aspirational targets for the Metals division and nonferrous is obviously in ferrous particularly focus was on the U.S. in ferrous, but also more particular was around improving our nonferrous business in the United States. It was too small. And obviously, for us, we set some very strict targets, and obviously, we want to go after that. They are aspirational. We have some work to do. As you can see, in the U.S., we wanted to get to 6.5 million tonnes and as a group, 9.6% by '25. So tracking, obviously, pretty much aligned where we want to be going slightly ahead in nonferrous. So it's pleasing. I'm quite confident that we're going to be able to get there. But again, the discipline about acquisitions for us is absolutely essential. That is an aspirational target. It doesn't mean we just go out and buy anything. So I think we've shown you in the last couple of years that this is a very disciplined approach. And if we can't get the returns, we don't go there. Obviously, we are seeing growth in margins, both copper and in ferrous and aluminum, very clearly way above what it was 3 years ago. It's almost doubling cases of nonferrous and zorba as an example. So very pleasing that we're actually heading towards our targets and pretty much on track. When I have a look at Sims Resource Renewal, as I said, this is a strategic long-term program of work that is in that division. We started that pre-feasibility in '19. And obviously, through the course of the next couple of years, obviously, FY '20, we slowed down considerably given the COVID expansion. But for us, it was really about making sure we could get the Victorian operation up and running. Unfortunately, the waste cap from the Victorian government came into play. It had been in role, but it was not clear for us and we were not going to get the permitting and the right timing for that. So without being given to the confidence of a permit, we would not continue with that project. So we've put that on hold. We'll continue working with the Victorian government until they've settled what that waste cap definition is and when they make decisions. But what we did was obviously accelerate the development of a facility in Queensland, which is our pilot facility, and that should be up and running later this year. Obviously, the target that we set in 2019 was obviously a very aspirational target. Today, we're looking at probably 120,000 and even that's going to be quite a stretch. So we'll do the Rockley pilot facility. Once that's proven up and running, we'll then go to the commercial process in Queensland and Brisbane. We have very strong support from the Queensland government, and Brendan will take you through that later on. But also, again, a long strategic project for us. In terms of Lifecycle Services, typically of metal scrap dealers. We started over here in '19 with measuring things in tonnes. This is obviously a very technological division and our customers gave us feedback fairly quickly that this was not really a measure. And taking that server, recycling that for the purposes of metal, getting copper and that was very clearly not where we were going to play. We learned very quickly, and Ingrid and her team has done a fantastic job in resetting that. And this is really about repurpose units. So instead of a recycling process that we originally thought we'd be getting into, this became a repurpose, a reengineer, reuse. And very quickly, that is what the tech companies are wanting. And that's the re-opportunity for us. And the growth potential, Ingrid will take you through later on, you can just see the opportunity for us. This is, obviously, for us, a key focus, and it was one of the reasons why we felt that the European business would not match that long-term strategy and the effort that was required. We have obviously performed better than we thought in terms of EBIT. And obviously, for us, an aspiration target of 8.5 million units. So we'll go into a lot more detail a bit later on, but very solid performance on track. In terms of the Municipal Recycling, this was an existing contract. Obviously, we had a number of opportunities to improve the business as it was from '19. We had the nonferrous Nespresso contracts that came into play. We obviously had some paper arrangements with the Pratt industries to make sure that we derisk down position of just commodity selling of paper. So we've obviously had some successes as well. We actually continued looking for further contracts up and down the East and West Coast. And obviously, in Florida, we took a contract up which was really a benefit for us. It was more of a service orient contract and rewarded accordingly. So really for us, the new contracts and having a look at strategic options was a key component for us. Part of this was obviously for us, was trying to find a partner that could actually take this business and move it faster than what we could. That was a very large contract with the New York City. And for us, it was about understanding where we could really grow. And the energy and requirement for us as a management team was going to be challenged in this space. Part of that was where we started to speak to Closed Loop partners who obviously have a lot of strategic management capability. They are in the waste management business. They have a lot of expertise. But also more importantly, they have a lot of support and backing the Nestle's, CocaColas of the world. And as you well know, we then created the joint venture. Today, Ingrid and Steve sit on the Board, we have a list of, obviously, opportunities that are being presented to the Board. And obviously, we can work with Closed Loop and actually speed that process up. So quite exciting for us in moving through that. Sims Energy, one of the key aspects for us was to take some of the learnings that we had from LMS business, and to make sure that we understood the technology, whether it was able to be taken offshore using obviously the support of our metals business in the United States. Part of this was having to look at opportunity to take that technology and obviously make sure that it was meeting all our hurdle rates. And that's really where we came around a purchase in Florida. This was an opportunity for us to demonstrate our capability in terms of biogas. We purchased a facility that has the 6.7-megawatt capability now, but obviously, to grow that to 9.6%, but even to use that asset with a small amount of capital and get it up to 20 megawatts. So quite a sizable growth opportunity here, very long-term rights that we had in this facility, and this is now moving as per plan and on track. So quite pleasing to see that we have been able to make that transfer. LMS overall in Australia has grown. I'm not going to go into too much detail, but we certainly have increased the generation capability from 395,000 to 525,000. It's obviously one of the largest carbon abatement companies in Australia. And certainly, from a strategic point, having a look at anaerobic digestion. So there's a number of opportunities in LMS to grow that. And we'll obviously review the process with that joint venture and that partnership. So that's really a bit of an update on those structures, those particular divisions. So just talking a little bit about the future and some of the tailwinds that we're seeing at the moment. I think when you consider the divisions and some of these structural tailwinds we talk about, you can see there is a connection, environmental concerns for our customers, that's copper smelters, aluminum, our steel mills. Obviously, a lot of pressure is being brought to bear upon the customers and obviously, our interface and how we react with that. There's no doubt that the stringent environmental controls have lifted fundamentally. We have competition in the United States that built a $100 million plant in Chicago, and that was probably 8 months ago. They have not been allowed to run by the looks of things, they're not going to be running for another year either. So the aspect of managing your communities is really key in our environment. So obviously, for us, making sure that we are compliant with all the rules is really key for us and making sure that we plan accordingly. The demand for recycled copper and aluminum is growing, be it electric vehicles, be it wind turbines, and I'll show you 1 or 2 of the trends shortly, but we're seeing that demand continue right through aluminum as well. Landfill costs, when you have a look at the U.K., Australia, there's almost plans every year to grow 10%, 15% in terms of landfill costs. So that is not turning around at all. I think we're all familiar with the electrification of both trucks, cars, et cetera. And obviously, that is also driving the prices of copper and aluminum. We're seeing that continue to rise, and we don't see that coming down for quite some time. The global push, as I mentioned, for high-quality materials. We've seen China change the rules over the last couple of years, both for nonferrous as well as ferrous. Whilst they might not be taking a lot of ferrous in, they've opened the door to have a standard and that standard you have to meet before you can sell into China. And part of that, John will walk you through that. But overall, the long-term picture is that in ferrous markets, the world is going to be quite short, fundamentally short. In terms of our demand for cloud services, Ingrid will tell you and take you through the growth of that, but it is enormous. It's over 200% growth that you're going to see growing in data centers and that infrastructure being put into place. So certainly, that trend is going to continue. And obviously, the cloud services, meaning it's not the recycling part, it's the refurbish we use. When you look at the challenges that are being faced in terms of the freight and the shipping around today, a lot of our customers are struggling to get these components and hence, the reuse and refurbish is going to be one of the major options for our customers. As I said, part of the challenge for us is the stricter controls emissions and rightfully so. Our challenge is to make sure that all players in the market obviously do need to meet these standards. And we're seeing that in various examples. Obviously, the EPA in Victoria stockpile limits, and that's really got to do with management of fires as well and air controls. And obviously, we're now seeing the ban on export of waste out of the European Commission. And obviously, a lot of work that is going around that to make sure that all of that waste is restricted as well. And obviously, standards for imported recycled metals. We had Malaysian folks here not so long ago that we're actually testing all of our material before you may send it to Malaysia. They do not want waste entering Malaysia, rightfully so likewise with China. So we're starting to see that trend of any place you want to send material to, you've got to meet certain hurdle rates. And that really plays into one of our strengths, which is our technology and our high-quality drive. In terms of decarbonization, I think we're very familiar that this is obviously becoming not a buzzword but obviously a very key focus for decades. And obviously, we're starting to see a lot of companies now committing to it or making pledges towards decarbonization. We've seen the governments, be it by law or by pledges or commitments that they're all heading down the certain. So not only from an industry and company point of view, you're seeing all your governments make commitments around decarbonization. So when you look at Sims, we're actually extremely well positioned to be able to be supporting this. Part of this decarbonization process is not just around being able to use renewable energy as an example. There's a lot more work that's going to be entailed if you want to deliver the goals that we've set out. And part of that is understanding that about 45% of it is actually stuff that we need to be doing daily in manufacturing. It's not just about renewables. And this is where when you have a look at landfill gas to energy, you've got to extract that value and reuse it again. Resource Energy, that waste that's in the box at the back there, we can turn that into hydrogen. That's what we need to do instead of burying it in the ground. Our Metals division, recycling. We've got to actually be recycling that through parts harvesting with Ingrid's business is reusing that and not having virgin materials made if you can reuse. So there's a large part of the manufacturing that needs to be undertaken and make sure that we actually reduce the CO2 that is emitted just in manufacturing daily. We're not being smart about that, and that's really what needs to happen. When you have a look at, obviously, the trends, we're in the steel industry. we're a key part of that supply chain. And 7% of global emissions comes from this industry that we're operating in steel. Sims but pure tonnage is very small in that, and I'll share that with you as well. But Obviously, for us, using recycled metal has a large impact on our customers, literally 83% less CO2 per tonne when you're using recycled metal. Part of the journey that we've seen in China and in the United States is the journey from blast furnaces to electric arc furnaces. And obviously, for us, the ability to use recycled metal goes into electrical furnaces, that's 100%. So the growth in EAF is really good for us. The blast furnaces themselves, both in the U.S. and in China, you get between 20% and 30% of scrap can be put into those blast furnaces. We are seeing that push to 30%. And there's even a strong belief that if we can actually improve our scrap densities and chemical composition, you could probably go past 30%. So there's a really strong view that we can actually improve our supply of raw materials to the steel industry and obviously support that decarbonization journey. Just some of the longer-term trends in terms of aluminum. Obviously, for us, watching the inventory levels drop. Obviously, the usage that we are seeing in our customers in the aluminum smelters but obviously, the drive for that in solar panels, in wind farms, electrical vehicles. So that trend has not changed, and I think you're all very familiar with that. Copper. Some stats here, which is quite impressive in terms of conventional cars using between GBP 18 and GBP 49 of copper and then moving to GBP 183. Just an example of 1 car and you consider that multiplier. Batteries for trucks. We've obviously challenged ourselves walk on. We use big trucks, and they obviously use that in electric fine form. The conversion of that into copper requirements is huge. So when you start extrapolating this, you can understand the demand for copper is not going away, just in the electrification process. And over the longer term, when we -- have a look at copper part of this is where does the primary copper come from? How is that tracking? And then obviously, you can see the role that recycled copper from Sims is going to play an integral part in how we take that journey. Again, just more information on the actual copper, the inventories that are dropping and the primary capability of mining companies to have to produce copper is going to be challenging going forward, particularly from some of the examples we've seen both in Africa and in Honduras. I think this is one of the key aspects for us that we've discussed, is the scrap demand in China sitting at this 245 million, 248 million tonnes a year. We're going to see more of that obsolete scrap come out. And are they going to be using that scrap in China? And the answer that we're seeing very clearly is they are going to be putting that into EAFs. As they grow more EAFs, more of their production of steel will come from an electric arc furnace, you can see the demand for that scrap material. Obviously, scrap has a challenge in terms of how far it travels. So obviously, a lot of that domestic scrap is going to remain in situ in certain regions in China because of the absolute cost of logistics. But very clearly, that is quite a large growth. And the indications are that is even going to happen a lot faster than 2030. So for us, this is obviously a very strong view that obviously that setting of that new standard of importing ferrous into China was not done without some design and thinking in the future that there are going to be shorter scrap and hence need the ability to actually import scrap. In terms of the United States, I think we've all seen that there's been a lot of growth in electric arc furnaces and a lot of focus. We've seen consolidation taking place now in the United States. And this is really about this growth. There's obviously 13 million tonnes and that's growing coming in over the next couple of years. That's obviously also going to challenge and then obviously demand a lot more recycled material. And part of this is the difference between prime ferrous material, obsolete scrap, and John will take you through some of the examples of what that is and what it's not. End-of-life IT assets. I think we've mentioned the growth of this. But obviously, for us, this is part of the decarbonization journey as well, is that obviously, that recycling reuse of a component of the server, and you'll see quite a bit of details, there's some on the table over there. But Ingrid is going to take you through exactly what that business does, what do they actually refurbish, what do they reuse again. And obviously, the customers that Ingrid and his team are working with are demanding that. Your big tech companies are wanting to be able to make sure they reuse and optimize that process. And Ingrid will take into the detail of that. So that is a definite trend. It's growing, and it's an expectation in that industry. The focus on waste management, as I said, this is a key focus for a large part of the world. In terms of the solid waste landfills that are growing, and produced 1.3 million tonnes of waste a number of years ago, and that's growing to 1.6 million tonnes over the future 2025. So this challenge in terms of costing growing, the actual waste generation is growing as well. There is going to be more and more pressure on companies to deal with your waste, that end of life. So this is a key aspect for us why the Sims Resource Renewal project. For us, it takes time to develop that classification process, that technology, and that's why we want to lead that. But we do not want to get a surprise in 2026 or '27 or '28 from certain governments that just put a mandate down. We need to be ahead of that curve, and that's really why this project is up and running. So when you have a look at Sims, how are we positioned overall. We do believe that we have the competitive advantages from a technological point of view, from the market position, the way we've structured this company, that long-term view that we took in that strategy has been key to us being ahead of the game. When we actually had a look at Sims Lifecycle Services and the e-waste business as we were in at that time, I remember in the room, people talking about, well, maybe it's going to take 5 to 10 years to happen, will COVID hit us. And in 2 years, we've seen such a growth in this division. And fortunately, we were positioned to be able to move into that and make sure that we took our position and use that technological advantage. Obviously, we have a number of strength both from a financial point of view. We're in a good position. Sustainability. Obviously, we've got a number of credentials that have taken place over the last year. We have some bragging rights, but obviously, we have a lot of work to do. So from a growth point of view, the core business, obviously, we made some very clear targets in terms of metal volumes we wanted to grow. We wanted to make sure that each one of these divisions had a very clear trajectory, a set of targets and that we were heading towards that. But I'll also caveat this. Those divisions all have to perform. And they are taken under review every year or every 18 months. And we obviously challenge that division, what's it doing, how the targets and how it's playing in today's dynamic world and obviously changing. So they are challenged. Our sustainability strategy, obviously, coupled with our growth strategy is very clearly. We need to operate responsibly, close that loop, I was talking about in the manufacturing environment and partners for change with our communities, really key for us to operate. When we actually decided to look at these divisions, one of the things we also agreed on was that we needed to be #1 or #2 in each one of those fields, just being #10 in the world and not making good enough returns, not acceptable. And obviously, we're keeping this commitment to ourselves as well. The metals business, obviously, has got a number of aspects from an organic and an M&A point of view that we've looked at. There are certain filters and then Todd probably can answer a couple of questions later on. But obviously, for us, making sure we don't get hedged in coastal operations with export optionality. So you must be able to feed domestic as well as international, do not get trapped. Obviously, from a hypercompetitive market, we don't want to just go and acquire a company and then up in a massive price well, we need to be a lot smarter than that. In terms of the markets, we obviously choose where we actually get the material from. And obviously, that's the large METRO populations and obviously, going at source. In other words, trying to get past the middleman and going right to the source of the recycled material. Focused areas for us has been the U.S. and the ANZ, both from a returns but also from an opportunity point of view. Obviously, from a nonferrous point of view, where we're sitting today and what we've learned from Alumisource in the last 12 months, and while we went after that, there's a lot of opportunity for us to grow the U.S. volumes, but also to take that overseas and to grow that globally. And we're going to move fairly quickly on that. And from an NFSR point of view, technology and obviously improving the yield. We do not want copper, aluminum and ferrous going into that waste bucket of the back. We need to extract it all. That's part of our commitment, but it's also part of our returns that we need. So in summary, we're pretty much on track to achieve our targets. I'm really pleased that the discipline that the team has undertaken in spending capital and going after the targets. We structured our business both from a people point of view, but also a divisional point of view to be able to achieve those targets. We need to obviously remain in a position that we can grow and that we can meet in particular 1 or 2 of the divisions have to move a lot faster than others, and we need to be cognizant of that and give them the capability of growing quickly. Obviously, for us, growing the core business and obviously making sure that we extract all the synergies is going to be key. For us, the review that we're going to do in the next 4 months is also going to challenge this existing strategy. We're very comfortable with the study. We think it's delivering, but we need to challenge ourselves. Are there any other adjacencies that we need to consider. And we've had a lot of questions about batteries and the like. But we'll obviously challenge ourselves again as to why we have gone down that journey. So I'll stop for a minute. I'm happy to take any questions now. We're obviously going to delve into each one of these business groups in quite a bit of depth. And obviously, that would give you a better understanding of how they're operating, what they're doing and then how they connect to the strategy. So that's a kick off.

Lee Power, UBS. So if we think about those targets, like I guess we've always thought the 9.6 million tonnes were predominantly M&A led. If that's not the case, can you maybe split out what proportion of those targets is M&A versus organic?

We didn't split out in terms of we wanted to grow organically where you can, obviously, just choosing a yard to grow organically. It's got to be connected to a what we call the Shredded facility. So you've obviously got to engage in that. Organic growth is much slower in terms of being able to open yards though -- ferrous yard would maybe get 1,000 to 2,000 tonnes a month. And obviously, you can build on that, but it takes a long time to be able to do that organically to get to those targets. So without a doubt, we knew we were going to need any M&A to get there.

Okay. And then obviously, your first move on technology, and you talked about a lot today. Can you just maybe talk about where you think some of your peers are, not just the large ones with the smaller players in being able to invest? And are they kind of catching up to you? Or have you found they just haven't have been able to invest in their businesses?

So I'll separate there's 2 parts. One is obviously ferrous and nonferrous. We have 1 or 2 very good nonferrous competitors in the United States, and they are probably equal with us and, in some cases, ahead of us, but they're much smaller operations, but they are obviously very focused purely on the nonferrous. In terms of ferrous, I think all the larger players are aware of what technology. It's really about speed to that. I think where Sims took a big step forward was in our technology around the offline recovery plants where we were probably 2, 3 years ahead of others. A number of them have not caught up, a number of the smaller players have not gone down that path to the extent that we have. So we definitely have a benefit in a higher quality. And obviously, we have a wider variety of customers to sell that to, and we do get a premium for that pricing. So there's -- it's actually quite different. There's obviously a lot of private companies with private wealth. And obviously, you don't quite know what they're up to, but we also get an indication when they want to sell their products to us because they can't sell or meet the quality standards. Graham, I don't know if you've got any other comments.

[indiscernible]

Peter Steyn from Macquarie. Alistair, a number of drivers across the business that are fairly structural in their nature. I'm curious how you think about your share of value as a lot of these migrations or changes take place, be it in as in the nonferrous space or in cloud computing. How strong do you think your role as a, call it, a recycler? How strong is your position in that value chain to capture an outsized portion of the value? Or do you think that you end up sharing a lot more of it with other participants in the chain?

In first, I do believe that we're going to be able to extract that value because of the prime products that we're actually producing. Moving obsolete scrap to much higher quality, there is a premium today for that. We do believe that our technology that we're running now and we're improving and John will talk a little bit about that, we're going to be able to extract that premium as a recycling company and not pass it on to steel companies. So I think we're very well positioned in both ferrous and nonferrous to actually get that value. Now there's obviously a lot of language in terms of green steel and et cetera, et cetera. We're quite clear on what that means to us. And I think part of that journey for us is not just in that division. But we'll talk a little bit. And Ingrid -- sorry, Elise will actually talk about some of the commitments we've made about renewable energy. And that actually factors into our customers that are wanting a green recycled product, and then we can talk that through. But our technology and that commitment to renewable energy, we believe we'll actually get that value.

And the same in cloud and [indiscernible]?

In cloud most particularly, Ingrid will take you through. It's an expectation when you look at being able to be a neutral company in terms of the commitments and pledges. It's an expectation. And if we can get that, which is what we are obviously intending to do and are doing, we believe that we'll be able to stay in the company in terms of their process and they obviously move up that process because part of their expectations that they have of us is not only being a sustainable company, but you've got to add more services to them. And that means the fulfillment component of that as well. So Ingrid will take us through a little bit more there. But certainly, in that industry, from an environmental sustainability, decarbonization is one of the metrics, and we think we're actually well positioned for that.

Peter Wilson, Credit Suisse. Just to think about, again, the structural changes in the industry and the import and export mix. So I was interested in your presentation where you said you're very focused on not getting trapped with any of your acquisitions. Do you think that structural change is North America in particular, there's a growing view that there will be less exports, more scrap continue domestically, including from your JV partner, George Adams had said something similar. How do you think that plays out for Sims given that it is an export-focused business as it currently stands?

So we're about 70-30 in the NAND business. And obviously, SRR is part of our strategy and obviously part of that. So their domestic feed is obviously feeding a lot of the steel mills into the center of the United States. But George can also actually export out of the Savanna operations and we can obviously free domestically and export. We just don't want to be caught in other one of the centers. So for us, choosing acquisitions, it needs to meet that filter. We are quite comfortable that the East and West Coast will need to continue exporting. There's not -- you're not going to transform material from New York City all the way into the center belt. I think it's going to be very costly. So plus we have to be exceptionally high if you're going to move rail cars into the center to the United States. So we're quite comfortable that the export model that we have and capability of going domestic is good.

Okay, good. And on the targets, I guess the characterization that you're on track for those targets, when they originally set, it was a North American target, but the region target by FY '22, you're going to be more than halfway there. So that's going to be 1.1 million tonnes of growth. So I guess, how do you characterize it as on track? And then you think about what's changed potentially since FY '19? Would it be fair to say potentially the organic growth has been a bit harder and even there's more competition for inorganic growth as well.

There is obviously the ramping up of decarbonization. We have seen a number of acquisitions by steel companies but in the center of the United States. For us, that target is aspirational. It is going to be a tough target. We knew we have to do that both organically as well as inorganically. Obviously, we do have opportunities, and that's really what we're going to be working on going forward.

Lyndon Fagan, JPMorgan. A lot of your discussion was on some of the newer divisions, which are largely in R&D phase. I'm wondering if you're able to quantify them on a 5-year view. Just wondering how relevant to earnings some of this stuff is, are we going to see some new reporting lines and a new division that's actually providing a meaningful share of earnings relative to what you've got today because ultimately, what the market cares about? And what shareholders want is earnings growth? And I just found it really hard to quantify a lot of what that discussion meant for that.

Good question. We're obviously, as I mentioned earlier, one of the key aspects for us is we've set these divisions in motion, but they all have to perform to certain criteria. And for us, it's about extracting the best value we can out of these divisions. And obviously, for us to be able to challenge ourselves whether that division is going to meet those hurdles in the longer term. This is not a short-term plan, this is a longer-term plan. Sims Resource Renewal is something that does take a long time to be able to develop. If we don't develop that capability, we could run into serious problems in the future. So each one of these divisions has obviously a long-term view. If you take the SLS division, that is really almost a start-up. But when you have a look at the growth in the last 3 years, it's definitely performed better than we originally thought. So we will have a look at each one of these divisions. And if they're not going to meet in terms of percentage of the larger business, we might make decisions accordingly.

And just one follow-up, just on the end-of-life IT. So obviously, a huge volume target there. Is it as simple as extrapolating the current volumes and earnings per tonne and growing it by that. because there were some comments that they're lower-margin tonnes coming in and -- at the result. And I'm just trying to work out what that massive volume number means from an earnings point of view. Is there any way to model that?

I think when Angela and Ingrid take you through the business and how that actually works. I think the growth that we put is obviously aspirational. It is it -- I do believe we can achieve that, and there's a very strong belief that, that EBIT line that we're going to see growth is also related. So I'm quite comfortable that, that target and the actual EBIT that goes with us will actually grow like that.

Anderson Chow from Jarden. So two questions. One is sort of short term and the other one is -- second one is probably a bit more long term. Are you -- how excited are you in terms of the spike of ferrous and nonferrous scrap metal price just in the recent 4 to 6 weeks. And the volume -- on the volume side, we're hearing in Europe because of the Ukraine war, steel mill supply chain disruption. Turkey has picked up -- suddenly picked up a huge amount of volume in they are short of scrap. Are you seeing much higher prices versus first half? I mean looking at the slide like $120, I think you're talking about third quarter being similar to the second quarter. Is there a bit of a lag in terms of the pricing and also in terms of volume? How do you see it?

Obviously, the war has an impact. We've seen the pricing increase, and it's actually been quite volatile. And in 1 weekend and jumped over $100 a ton. Whether it's going to stay there, I cannot tell you. But I can tell you we're trading in around the $670, $680 per tonne mark currently as we stand. So obviously, that's much higher than what we are used to in the first half and previous year. So we've seen that change in pricing continue to escalate literally over the last 3 years. I think what we need to focus on is really that margin management because in volatile periods like this, both buy and sell and that team that works on that needs to be very focused. And that discipline is really how we want to extract. Our margin growth has been very good. And obviously, for us, we want to make sure we remain disciplined, whether the pricing stays in now, I can't tell you. I think the demand from a decarbonization point of view, whether this drops slightly, but I do see over the longer 5, 10 years that demand for material remaining and therefore, I think prices structurally, we'll come back to a more reasonable level, I would think, in the longer term.

Okay. The second question is you touched on the EV recycling a bit. But I guess, if I think about the EV vehicle. I think processing the frame is very similar to the conventional car. But are you also thinking about recycling the battery and other sort of electronics within the car, which probably may require sort of different technology to just metal recycling.

Yes. Obviously, we don't put a battery through a shredder. That needs to be separated. So that process will always, and it does today with lead acid batteries comes out. We have not chosen to go into that. As I mentioned earlier, that is something we will have another look at. But I think you also need to understand that the lots of Tesla and some of these motorcar industries, they're going -- they are recycling their own batteries and wanting to do so. That, but also coupled with what technology ultimately is going to be in all electric vehicles is something we want to watch carefully. We don't want to go down the path and find out we have to turn around. So we're just very cautious. Environmentally, also, there's a lot of challenges with recycling batteries as you probably know.

It's Paul Young from Goldman Sachs. And I know a lot of work goes into this. A question on the 9.6 million tonnes targeting. Because if I look through the presentation, it's probably the only number that we can really measure on because there's no work targets, there's no EBIT guidance. There's no margin target. So I'll just focus on that. Where do the number come from? Why isn't it 9? Why isn't it 10? I'm just trying to figure out from a bottom-up perspective because it probably hasn't changed in 3 or 4 years. Where did that come from?

When we sat down initially, we obviously had a look at where we were sitting in terms of volume at that stage and where we believe we're looking at defaults of population centers where we wanted to grow. And we absolutely felt that growing by 40% was a reasonable target. You've got East West Coast. And for us, there were opportunities that allowed us to calculate to 9.6%. Sims when it used to have the Midwest operations many years ago, we're sitting above 10 million tonnes in those days. And I think Todd was obviously involved in some of that work. Part of that 9.6% was really having a look at realistic growth in those 2 corridors, and that's really the 9.6%. It wasn't just a dot. There were obviously listed items that we felt. I think in FY '20, we probably lost a little bit of momentum that I would have liked to have kept up, COVID hit us, and I think it slowed us down a little bit in some of the parts that I want to grow on.

Okay. And then at Part B, I mean, it looks like that in that case, the focus is the U.S., but locally here, you're #1, but obviously it's a pretty concentrated market. Are there opportunities here to still grow? Or are there actually competition challenges from a regulatory perspective?

There are 2 aspects. One is when you look at the competition in Western Australia, there's probably opportunities to grow there. I think in your metropolitan centers, both Sydney and Melbourne, there's opportunity because you've got such a fragmented market here and in discussions with ACCC's in past where we had opportunities, we have sort of been quite clear that if we wanted to grow, could we grow? And the answer was yes, you can, but there's obviously always going to be a challenge from some of the smaller players. We do believe that there's room to grow in Australia.

Great. I'll sneak a last one and that's on the nonferrous side. It's still a bit of a hidden business within Sims, and maybe we'll talk about it a bit later. But I'm just curious about your comments around margins. When -- how have they tracked in percentage terms because it's hard to tell and probably, in fact, it's impossible to tell how the margins are tracking in nonferrous. But as these -- as copper and aluminum head into a deficit and particularly aluminum, what happens to margins? What are you saying to margins?

I'm going to let Todd answer because there's a couple of metrics that he wants to share with you later on. So I think he's going to get to some of that clarity that we want to share with you. All right, I'm going to stop and hand over now to Ana. Thanks.

Thank you, Alistair. We will move on to the sustainability update now. So I would like to invite to the stage, Elise Gautier. Elise has relocated from the U.S. to Australia in December. So lucky for us here in Australia, we will see her more often at investor events. So when Elise joined us in the Sydney office, I've told her that sell-side analysts in Australia provide great lunches. So please don't let me down and work on your menus. Elise, if you can join us on the stage.

Well, thank you, Ana, for this introduction, and I also do love wine. So any good recommendations, I will take them. So good morning to all of you. I'm delighted actually to be here today and share with you the progress we're making in ESG. Our focus on ESG is not new. We started reporting on our environmental disclosures via the CDP since 2008, and we've issued our first sustainability report in 2013, and we continue to do so. Since we've sharpened our focus with a well-articulated sustainability strategy that captures our ambitions and targets. We have also improved the quality of our disclosure with the rollout of a global utility bill management system that allows us to track and report on our utilities. We've also increased the level of disclosures with the issuance of our first TCFD report summarizing the climate risks and opportunities this past fiscal year. And we are in the process of calculating our emerging the emissions of our -- within our supply chain that is our scope free. So we'll continue to be transparent and provide our stakeholders with useful information. Let me touch briefly on our business model. Sims is really well positioned for success as the world transition to a lower carbon economy. All other businesses enable the circular economy by enabling and keeping resources in use as long as possible by reducing waste and by helping in the decarbonization effort. For example, our metal business. This past fiscal year diverted 8.6 million tonnes of metals from landfill. Just to give you a visual of how much that is imagine a line of back-to-back loaded trucks that stretch from Sydney to Manila. This is how much scrap will be injected in the economy and in the making of new metals. And through that process, reducing the need for virgin raw materials, reducing the environmental impact associated with extractions of those raw materials. And also reducing the amount of energy needed to make new metals. And you've heard Alastair talk about the benefits of using scrap in making new metals and they're not negligible. So that position really well since in a decarbonizing world. We are proud of our credentials and for being recognized way the work the company does. This year, we ranked 11th on a Global 100 list of most sustainable companies. And we were included in the Clean 200 list of publicly traded companies that are leading the way in building a clean economic future. As you can also see, we are also ranking well with many ESG rating agencies. I will now switch to sustainability strategy. When we bought our sustainability strategy, we considered a number of inputs. We looked at the trends of the future, the tailwinds. We also considered input from our stakeholders and what matters most to them. And as you all know, a common economic performance is key. That's why we've embedded our growth strategy into our sustainability strategy. This is how we ended up with a strategy that is built around 3 pillars and 9 ambitions. I invite you to watch a 4-minute video, explaining our strategy in more detail. [Presentation]

So, this client is quite important. You've heard about the ambitions in the video, and this slide translates those ambition into '26 targets. Because as we all know, what gets measured gets done. As you can see in the orange dotted squares here are our growth targets. So again, as I mentioned previously, as growth strategy is embedded into our sustainability strategy. I will now speak to some of our ambitions and targets, starting with the decarbonization of our operations. It is the first time we are presenting the changes we made to our climate targets. The decarbonization of our operation is a priority for us, but it is also key for our customers who are looking to decarbonize their own operations, but also the supply chains. That is why we've committed to using 100% renewable energy by 2025 in our operations. That is why we will also have our SLS division become carbon neutral by 2025, in addition to the existing target we have of reducing our carbon footprint by 23% and that's an amount of time. We have also brought forward our sense company carbon-neutrality goal forward by 12 years to 2030. And we remain committed to become net zero by 2050. Our carbon footprint is 147,000 tons of CO2 equivalent. And to put that into perspective, it's the equivalent of the emissions of electricity used by roughly 27,000 homes. So it's a small town when you think about it. Scope 1, that's mainly derived by fuel. It makes up 55% of our carbon footprint and 45% of our emissions come from electricity. Our largest carbon footprint is with our metal business in North America and not surprisingly either because it's where also we have our largest footprint, operational footprint. So how are we going to get to our 2025 target. The waterfall chart behind me shows what we have accomplished against our fiscal year '20 baseline. And what we have identified on -- with current initiatives to actually decrease our emissions in our operations. We are currently on point to decrease our emissions by an additional 7% from our baseline in fiscal year '22. Our immediate priority, as you can see, is going to be switching to renewable energy. This alone should allow us to meet our decrease in emissions by 23% by 2025. What else are we doing? Well, we are in the process of introducing a shadow carbon price in CapEx decisions. We've also created a cross-functional team to further identify initiatives to decrease emissions in our operations. And we intend to use offset, but using offsets as a last resort when there are no commercially viable solutions. This slide captures some of the progress made in more detail. So from a renewable energy, we will have converted an additional 13 sites, bringing the total sites operating on renewable energy to 45 by the end of fiscal year '22. The conversion of these 13 sites equate to a 10% reduction in emissions on a full year basis based on our fiscal year '21 Scope 2 emissions. From a fuel efficiency standpoint and conversion standpoint, we are in the process of rolling out a shredder optimization software across our Australia and New Zealand shredders that will drive energy efficiencies, and we continue to electrify our equipment across our sites. So this is a brief summary of the efforts that are underway and have been undertaken. Next, I'm going to touch on our ambition to close the gender gap. We recognize we have work to do, to attract and retain women in our company. However, there's 2 things I want to leave with you today. One is that we're making progress in increasing the number of women in senior management. This is really an important metric. While it's important to attract and retain women in any organization, it is equally important to understand the roles they play. And we're really pleased about the progress we've made. 21% of our senior management is made of women. And that is up when compared to our fiscal year '20 baseline of 15%. The other metric I want to draw your attention to is that we met our target of board gender diversity. Currently, 57% of our nonexecutive board members are female. Finally, I will speak to -- this was not intended. And hopefully, I won't repeat that. I will speak about what we are doing to foster a safe work environment. And it's unfortunately, it's talking about safety, and I might get stuck. Anyway, we made significant progress again in decreasing a number of critical risk incidents and injuries in our sites, across our sites. And we achieved this by focusing on really 2 key things: mitigating critical risk, and we validated and identified those critical risks by looking at 10 years' worth of data and incidents that took place at Sims. An example of a critical risk is for us is traffic management, right, management of humans and machines on our sites. The other thing we've done is we're really focused on our timeline employees. So a safety management system is really geared and tailored to them. So let me show you what we did. We have posters that are displaying our key risks on all of our sites, raising awareness of those risks. We have standards that are very simple that captures the minimum requirements and expectations. We have training to those standards, and we do this via videos because our employees told us that they learn best by watching videos. We have uploaded our requirements into a map, allowing us to capture data and picture of the gaps we have, but also the controls we have in place across our sites. Based on a repository of information, we are able to identify preferred controls and standardize those across our organization. Our dashboard provides visibility into our safety performance and also drive action and accountability. And regular communication emphasize the lessons learned and preferred practices. In conclusion, sustainability is a value growing -- part of our value proposition. Not only our business model, it contributes to create a better world by enabling decarbonization, but it is who we are as an organization. That is why we brought forward our carbon neutrality target by 12 years. We have a relentless focus on safety. We continue to execute towards our goal of gender diversity, bringing diversity of thoughts into our organization. We are proud of what we do and of our contributions. We will continue to report on our progress and the efforts and actions we're taking. With that, I'll stop here and open the floor for questions.

Scott Ryall from Rimor Equity Research. I was wondering if you could tell us as how many customers you visited in the last 6, 12 months, please?

That's a little bit difficult with COVID, but we do have discussions with them, whether it's very often with SLS businesses because our customers are very often good chips companies, and they're very involved in the -- in meeting their sustainability target. So very often, they do want to hear and they want to make sure that who's in their supply chain. They understand what we're doing.

Okay. So I'll include virtual meetings in that. I'm just interested in how many face-to-face or virtual meetings you've been involved in across the firm, is it 10, 20, 100?

Not 100. We don't necessarily have 100 customers and you'll hear from Ingrid about that. But probably in the last month or 2, it probably was 5 or 6 that conversation.

And then if electricity is 45% of your emissions profile and you move to 100% renewable by 2025, why is the target not 45% down, 2023.

23% is just a general reduction in emissions. So it's Scope 1 and Scope 2. Part of that 23% electricity reduction in emissions from electricity is incorporated into this. So it's in addition to, as an interim target, if you will.

But if you move 100% to renewable generation by 2025, you should eliminate your emissions from electricity. Is that correct?

Correct. That's what we're targeting. But remember that there is no growth in the model. So achieving 23% in reduction in emissions, just by electricity, we believe we will get there by switching our electricity to renewable energy. But as we make acquisition, we don't know what that growth in emission is going to be.

Lyndon Fagan, JPMorgan. Just wondering, producing energy from waste dumps and burning the gas, I imagine there's a fair bit of methane in that. Just wondering if you can talk about the emissions profile of that energy and how that fits with the decarbonizing story because I guess the faster you grow that business, the more emissions come with that.

Yes. Good question. And actually, I will let my colleague Brendan talk a lot more about -- he's going to be talking a lot more about that aspect of the business. There is -- the technology he is putting in place is actually taking care of the emissions from burning waste.

And also just wondering, with regards to any green premium, there was no discussion about that in relation to your products, which is something that other commodity producers are talking about. If you're producing scrub with 0 carbon footprint, is there an opportunity to extract more revenue, i.e., get a premium to the scrap price or is this just still fantasy land. And obviously, wasn't really concrete enough to make it into your presentation?

No, we do believe that there is going to be a premium for producing green scrap. There is a lot of discussion in the steel industry actually as to what green steel is. And so we do believe that there will be a premium. Well, how much that premium will be? I don't know. And I know that, Graham, you'll talk more about that in your discussion a little later on. Okay. So if there are any other questions, I'm around and we can continue the discussion then.

Thank you, Elise. Fantastic update. So we'll break for morning tea now. If you could be back here at 10:35 am, please, would be great. Enjoy your morning tea. [Break]

It gives me great pleasure to introduce John Glyde. John has been with Sims for more than 30 years. He is a scrap metal expert. So no surprise he will give us one-on-one session on metal. Just a quick reminder that John will also be joining us around the St. Marys and Mel Para facilities tomorrow. So don't result on this opportunity. John, if you could join me up here.

Thank you, Ana. Sounds very well. Firstly, thank you for the opportunity to speak with you today. I have a question for you. Do you believe in the need to decarbonize globally? I'm going to run a bit of a poll, hands up. Do we believe in the need to decarbonize? I think we have a unanimous decision. Thank you. Well, certainly, we at Sims certainly do believe in the need around decarbonization and emission reduction. Today, I plan on giving you an overview of our metal operations. What differentiates Sims, why the quality as well as the demand for scrap will increase, how Sims can provide a pathway for our customers to decarbonization and how can Sims capitalize on this demand and create value. I thought I'd kick it off with a video of our Claremont New Jersey facility and our Western Australia facility from a scale and complexity perspective, these are 2 of one of our finest facilities. So please enjoy the video. [Presentation]

To give you some perspective, that Claremont facility can process around 300 cars an hour. And if you think about that, that's a lot of metal moving quickly. So we talk about our metal operations. We can pretty much break it into 3 streams. We have nonferrous retail, which is largely any sort of nonferrous product you can think of. So think about brass taps, copper pipe, insulated copper wire, stainless steel sinks, lead acid batteries, mag wheels, long mill bases pretty much any sort of nonferrous metal you can think of, we buy, we process, we it, we trade. Each of those products has its own unique market, its own unique price and its own unique consumer. If we go to our shredding operations, which is largely what you saw on the video, we pretty much fragment products such as cars and white goods, appliances, microwave ovens, refrigerators, pretty much any sort of light gauge scrap goes through to the fragmented there is a box over in the corner here that will show you the ferrous output from our shredder. Next to that is also a box of the waste that's generated through shredding, which I'm sure Brendan is going to talk to a little bit later. The shredding process then splits the product between metals and waste. Again, at this point in time, that waste either goes to landfill or in the future it'll end up with SRR. The nonferrous outputs go through MRPs as recall and Zorba separation plants, which is where we have made a very significant investment in the last few years. As to Alistair's comment around extracting metal out of waste, that's where our investment has been in getting this metal out of waste. This area is something new. This is where we take the product and refine it further. This is where we look to sort respective alloys, different aluminum alloys Alistair referred to 3,000 to 6,000 Series A million. But we go further than that. We actually polished the metal. I presented in a form whereby customers love the presentation. It's free of any sort of oxides, paints you name it. They can basically charge it direct to their furnace, not have any concerns or consideration around pollution. It's at a known chemistry and it can go directly into a primary market. Shredded steel. We trade in a variety forms, a lot on bulk vessel, but also in container, rail and on bars to end customers. A lot of which ends up surely, sorry, currently in AOF EAF production, but some also ends up in BOF or blast furnace integrated steel production. There is limitations around that, and I'll talk a little bit around that later. The reality is that BOFs and blast furnaces have a tighter requirement around tramp elements that restricts the total amount of scrap that they can currently use, and that's where our opportunity is. The third aspect to our business is sheering and torching. So this is where we take things like demolition scrap, beam structural steel plate, typically heavy gauge scrap that's too heavy to go through a shredder, and we will sheer it and we'll process in a form again where it becomes furnace ready and can either be traded to an EAF or a blast furnace. Our global footprint Obviously, Australia, the U.K., North America, including Canada, with U.S. and of course, I always forget B&G. We have 259 facilities scattered across the globe. 47 shredders, numerous sheers, MRPs, ZRPs and cable granulation plants. During the first half with our JV partner, SAR and RSR, we collectively handled more than 6.2 million tonnes of scrap. Our footprint allows us to favorably source product from different geographies and then direct it to a very diverse consumer base where optimum demand and pricing exists net of any freight cost. In other words, at the end of the day, it's all about the FOB pricing. So if we want to trade off the East Coast into Turkey, we back calculate the freight. If we want to trade into South America, we back-calculate the freight to work out the FOB pricing. Graham might talk about that a little bit more. Diversified supply of scrap. It definitely spreads risk. It protects margins and ensures the resilience of the business. We're pretty much by about anything from anybody. That's a simple reality. Plumbers, electricians, demolishes, records, scrap dealers, industrials, mining, resources, waste companies, local government, utilities, military, you name it, we pretty much trade with them. Each geography is a little different. Obviously, in Australia, mining is very prominent. In the U.S., they generate huge volumes and cars, simply because of the population base and their love of cars. So how do we collect scrap? We have an enormous amount of infrastructure in the form of trucks, bins, barges, rail wagons, mobile balers, mobile sheers, out there collecting scrap, wherever it's generated. Collecting the scrap at source moves us further up the value chain allows us to enhance margins and improves our supplier stickiness. And this is certainly one of our ambitions is to improve our collection of scrap at source to enhance margins and move up the value chain. This particular job here involve the scrapping of about 32, I think, diesel electric locomotives for one of our Queensland-based rail companies. So the demand for scrap is definitely increasing. China, with exporting or without exporting, there is definitely going to be a deficit of scrap long term. Short term, China may actually need to import scrap. China have certainly signaled their intention to reduce emissions. And as such, they've certainly signaled their needs to migrate away from blast furnace BOF to EAF. We expect that to happen in an orderly fashion in the -- as scrap generation grows, the capacity or lift in EAF production will match that. And therefore, we believe that China will not be exporting scrap. And if you look at the deficit, in 2040, without the export of China, it's very significant. China has also signaled its preference to maintain resources onshore. And as such, we expect the demand for scrap to accelerate. So scrap demand driven by decarbonization. We all recognize that decarbonization around emissions reduction is an ambition that we all agree with. Most steelmakers, and there's plenty out there, have highlighted increased scrap use as a means or a core strategy to decarbonization. Most of targeted carbon neutrality, if you have a look, around 2050. Migration from BOF or the blast furnace to EAF is a common theme as part of that strategy. Alistair touched on our recent corporate activity around acquisitions of metal recycling companies by steel mills supports this strategic thinking that they need more scrap. With that, the demand for improved quality will come. Flat product producers require a tighter cleaner grade of scrap, with lower residuals. That's the simple reality. Traditional long product, EAS, obviously, have a lower requirement with respect to chemistry and tramp elements, but they will experience increased competition for scraps for scrap as BOFs and blast furnaces migrate to make flat products. Many steel producers are already talking about this improved quality need, and you'll see out there, Newcor and BlueScope are both already talking about the needs around improving the quality of the scrap. So often heard this argument prime versus obsolete scrap. I've heard a lot of conversations around what's the difference between prime and obsolete scrap? So why not simply source more prime scrap? The simple reality is it is limited in quantity. It is highly contested. It's a very competitive market. It has no nonferrous contribution, and you would have seen on my previous slides. A lot of our infrastructure has been around -- built around extracting nonferrous and the value attached to it. There is no nonferrous contribution that comes with prime scrap. And lastly, there are very low barriers to entry. All you need to service a prime scrap generator is a truck and a series of bins. There is no sophisticated equipment, no downstream processing, no nonferrous extraction needed to service the likes of a prime scrap generator. But what I would say, prime scrap is limited in quantity. Obsolete grades, however, are available in abundance. You can see in this graph here, the quantity of obsolete grades versus prime grades. Our footprint is focused on large, developed countries centered around major cities. They generate a lot of obsolete or post-consumer scrap. With that and our investment in technology on the back ends of our readers to extract nonferrous, we are very well placed to capitalize on obsolete scrap. So the simple reality is that obsolete scrap is needed to fill the supply gap in the absence of prime scrap. There are some challenges, however, obsolete scrap does contain tramp elements. And if you do get the opportunity, have a look in the bucket over there of some shredded steel scrap. That is our current product. You will find in there free copper, you'll find in there aluminum, you will find in there stainless steel, things that currently aren't liberated or extracted as part of our process. The steelmaking activity and refinery process, unfortunately, can't remove these tramp elements. So it's up to us as middle recyclers to extract those elements from our current products, and that's where the opportunity exists. If we can do that, we can upgrade the scrap and direct it into premium markets that are making flat products as opposed to long products. The simple reality is, for a steelmaker, if they have too much of that in the mill, the only way they can get it out is to dilute it with high input materials, such as DRI or HBI or pig iron. Dilution is their only solution at this point, and it is expensive to do that. So what's the opportunity? What's in it for Sims? Obviously, we can capitalize on demand driven by decarbonization. There's no doubt about that, the needs around scrap to meet the needs of steelmakers that all have an ambition to use scrap as part of their decarbonization path is going to increase, and it's going to increase quickly. As I mentioned, we can obviously extract valuable nonferrous from our existing obsolete grades. Copper aluminum stainless steel, all these things are worth a whole lot more than steel scrap. So if we can employ technology to get that out of our steel products, there's value in that also. Most importantly, however, the ability to attract a premium to take our obsolete grades up a level or 2, up to near what I would call prime scrap that's going to appeal to those flat product producers. If you look over to the right here, you can see recently, in less than 3 years, the price spread between obsolete grades and prime grades has moved from $50 to $70 a tonne to currently trading at around $100 to $160-odd a tonne. So the price spreads for premium scrap or high-quality scrap are already there and already increasing. We expect them to increase further, particularly if you think about green steel. If consumers are prepared to pay a premium for green steel, this will get passed back down through the supply chain. Similar opportunities exist in nonferrous. Hydro, I've highlighted up there. Hydro generated a product, and again, Graham will talk about this a little further. A product called Circle 75. It doesn't just simply mean 75% recycled content. It is actually 75% post-consumer obsolete grades of scrap. It's not go-around scrap or industrial scrap, it is centered around obsolete and post-consumer grades of scrap. They make it because their customers want it. And invariably, the consumers are driving that demand. Decarbonization like in ferrous is driving primary producers to pursue increased recycled content. The graph illustrates the opportunity that exists in redirecting product that gets traditionally sold into secondary markets to product, as Alistair was referring to, 3x and 6x in the primary markets. This price spread is again expected to increase. The Alumisource acquisition has given us a great head start over our competitors. We certainly believe that we can take that business model and roll it out globally. The opportunities that exist in Europe certainly supports our U.K. footprint to supply into that market as does the opportunities from Australia to go into Europe. So how do we seize the opportunity? Comes in various ways. First thing is improved inbound inspection and source separation. That may seem easy, but it's not that easy. If you think about one of the triumph elements is in tin. Tin in steel largely comes from tin plate cans, you or baked bean cans. So extracting baked bean cans from our infeed when you're shredding something like 300 tonnes an hour is a challenge, but it can be done. And it's all about source separation. Separated at the source and then separate it from our streams. We need to increase density. And the reason we need to increase density. Again, if you look at that bucket over there, a lot of the nonferrous is unliberated. It is still attached to steel, and that's why it's in that bucket. If we increase the density, reduce the particle size, we can then liberate the nonferrous and then target extracting it. Most of the nonferrous you see in there is actually still attached to steel. We can do this. We've invested heavily in our downstream, both in ferrous and nonferrous. The sort of technology that we're talking about is tack on. Tack on to the existing infrastructure that we have. And we're looking at some emerging technologies such as using artificial intelligence to identify things like the copper and aluminum that presents itself on a belt and then using robotics as an example, to extract it rather than relying on humans. These are all opportunities again to lift the quality of that scrap and make it available to flat product producers, which is where the genuine demand and the premium pricing is going to come from. As I mentioned before, in nonferrous, the opportunity to alloy separate, so literally take mixed alloy scrap 3,000, 4,000, 5,000, 7,000 and sort it into its various categories and then directed into premium markets, polish it, it's presented in a form that the customer wants. And Graham will tell you a story that customers don't want dust when they see a load of scrap tipped in their facility. The actual act of polishing it makes it a mill finished product. It looks like brand-new version material. They can introduce it directly into their furnace. It's of a known chemistry. It's of a known standard. And they can be very confident that they're going to get what they paid for. So lastly, there's opportunities for Sims in summary. The demand for scrap is going to increase, both ferrous and in non-ferrous with the migration from BOFs and blast furnaces to EAFs, there is going to be greater needs around scrap. The quality of that scrap, however, needs to improve, and that's where the opportunity for us exists. Our footprint is such that we capture a lot of obsolete scrap. We obviously have invested a lot of technology in extracting nonferrous value out of it. But the price premium by taking our obsolete creative scrap and promoting it into a prime grade is very significant. As I mentioned, the opportunity to extract the nonferrous that currently exists in our ferrous scrap also presents an extra revenue stream. And lastly, the opportunity in nonferrous to simply redirect traditionally secondary product into primary markets. There is a huge price opportunity in doing so. Thank you. Happy to field any questions.

Dan Kang here, CLSA. I guess, the opportunity there, can you talk about the investment required for the technology to move some of your material into prime scrap quality.

So if we talk about specifically nonferrous, aluminum resource has given us a huge head start well in front of our competitors. We're actually running some R&D trials at the moment around alloy separation that we're very, very confident that's going to get us where we need to be. If we're talking about ferrous, it's a mix of using existing technology that we already have on our rates, just modifying it slightly. And then as I said, taking on emerging technologies such as AI and potentially robotics on the back end of that existing infrastructure. There is a cost but obviously, shredding it smaller, burns more energy and that's where the price premium. The offset of increased costs to do so versus the price premium gain by upgrading that scrap is significant.

Okay. And you talked about the benefits of obsolete in terms of nonferrous, I guess, profits that you can generate from that. Is it fair to say that obsolete is more profitable than prime scrap recycling at this point? And therefore, you would be, I guess, less inclined to move into that prime space.

Don't get me wrong, we do trade in some prime scrap. But as I said, it is highly contested, highly competitive -- it has no nonferrous contribution and therefore, no nonferrous margin attached to it. And as I said, there are very low barriers to entry to participate in that particular market. But we do trade in prime scrap. We have, we will, we will continue to, provided we can extract the right margins.

Lee Power from UBS. I guess when we've seen like what's happened with obsolete prices, and obviously, prime is up pretty strongly but obsolete as well. It feels like we haven't seen the volumes come into the market that we would have thought. And kind of if you talk to your FY'19 volumes in some of your presentations. Why do you think that is given the kind of the trip-term trajectory that you gave for obsolete volumes?

Well, quite simply, some of our regions have certainly still been COVID impacted. Australia has certainly been COVID impacted. New Zealand has been very definitely COVID impacted. Supply constraints and transport is a challenge at the moment, not only on outbound, so bulk vessels, but also on sourcing trucking to pool scrap into our facilities. So that's certainly playing a role currently.

Okay. So it's not -- because I guess when we saw the chart, the obsolete chart before it obviously has some uptick, but it kind of levels out at a point. You don't think we're hitting that earlier than we could have thought.

No, I don't believe so.

And then I guess, Alistair was asked by Pete earlier in his presentation around how you capture value between the buy and the sell. And it sounds like you're talking to both, progressing more down the buy probably capitalizing a little bit around buy price and pushing further down and then also high grading and capturing on the sale price. Do you think -- do you see kind of one delivering more to the business over the longer term?

So they somewhat go hand-in-hand. At the end of the day, we sold the product, we deduct whatever freight cost is associated to delivering it to the customer wherever they may be. We obviously have a cost of collection from the client who ever generates the scrap, and we also have our processing cost. At the end of the day, all those things form part of the calculation as to what sort of margin spread, we want to sit in there. At the moment, we're obviously facing some fairly significant inflation pressures on a whole range of things, transport, labor, energy, but invariably, our competitors are faced with the same challenges and invariably, that will get passed through to the Bifrost.

Lyndon Fagan, JPMorgan. A lot of different projects that you outlined there. I'm just wondering if you were to rank those, what would be the most valuable project opportunity from a near-term earnings point of view, again, trying to bring it back to that? Is it on the nonferrous side or is it on the ferrous side? And I guess, how meaningful could that be?

Certainly, with the long resource, the demand is there today. There's no doubt about that. And as I said, companies like Hydro, Novelis and others are certainly looking to increase recycled content. So the more we can do today to deliver product that they want is certainly going to leave us well placed and certainly a competitive advantage over our competitors. Ferrous is a little further down the track. As we talk about decarbonization path these steel mills have got a long way to go before they actually migrate away from BOFs and BFs into EAFs. But there's no doubt even you talk about companies like Bluescope, they're always looking to increase the amount of scrap that they can charge. And even over the last 10 years, I think they have taken their charge rates in the BOF from very low numbers in the low teens up to 20%, maybe 21%, 22%.

And what sort of return hurdles do you assess your sort of suite of opportunities against?

It would be fair to say that the sort of projects that I'm talking about certainly exceed our internal hurdle rate.

And just a final one. There was a mention of going upstream almost to the point where Sims would be directly involved in the demolition process. Can you maybe expand a bit about that. And how much of the volume opportunity would be getting involved in that?

So we actually currently do, what I would call, ground-level demolition. So -- we will go on to industrial sites. We do a lot of it in Canada. We do a lot of it in Australia. We do a little bits and pieces, obviously, in North America. We recently participated in the destruction of the -- what was the -- Tappan Zee bridge. So we already do a lot of that going out on the mine sites, cleaning up salvages, laydown yards, knocking down pretty basic sort of low-level structures is something that we already participate in.

Is that a significantly better margin than just receiving scrap to a shredding yard.

Absolutely. Absolutely. If you think about sort of the infrastructure we're talking about, a, it's going to have nonferrous co-mingled with it; b, we're moving up the value change and we can charge for our services for the service we provide.

Anderson Chow from Jordan. Just have 2 questions. First one is I just want to understand how are the sort of middle management or the actual traders of scrap are incentivized? Are they incentivized to produce the best possible trading margin? Is that the sort of structure?

Yes, there's obviously guidelines and boundaries set around by price based on what we sell for and our known costs around freight and processing, but we're actually running a couple of pilots at the moment that I'm not sure who's going to talk about, perhaps someone. But we're running a pilot that actually has a different incentive structure around how we can reward some of our buyers. But right at the moment, we set parameters simply around what our known sale price is, what our cost to collect, what our cost to deliver and our processing cost yields, nonferrous contribution. That basically is backed off to what parameters we set around what we want to pay for scrap.

And the second question is, you showed a slide about a diversified source of supply. But I guess every part of that supply has different ferrous and non-ferrous content, and of course, non-ferrous is much more valuable. But just thinking if I think about auto sales, which are in U.S., which has been very weak for 2 years, but that actually provides you with more sort of non-ferrous. Is it...

Believe it or not, a car, sorry has something like 8% nonferrous -- and a complete car will have 8% nonferrous in it.

Right. Yes. But I'm just wondering if the -- so I think given the weak auto sales scrapping of old cars probably have come down. So I presume the volume intake on that perspective has come down in the last couple of years.

Only marginally.

Marginally.

I mean the other opportunity as I see it, as we migrate to electric vehicles, and we move away from internal combustion engines, the argument then becomes over the next 5, 10, 15 years, you're going to see a lot of internal combustion engine vehicles come to market. And the days of stripping parts, there's a whole trade out there, the wrecking trade that extract engine blocks, extract transmissions, extract some of the nonferrous. That's not going to be needed going forward simply because there's no future for it. If we are going to go down the electric vehicle path, the needs for internal combustion engine type parts won't exist. And therefore, we expect our volumes of cars to be more complete, and therefore, have more non-ferrous.

Is it possible if you could give us a sense of the breakdown of different sources, like what percentage of your intake volume comes from auto, what percentage comes from rail tracks.

It varies so much from region to region. As I said, in Australia, obviously, coal mining, iron ore mining makes up a very large proportion of our supply base. We hold major contracts with the DHPs, the Rio Tintos in Queensland, obviously, some of the Bowen Basin coal mines. We hold a couple of very major rail contracts in Queensland and New South Wales. So much more mining resource related. If you go to North America, as I said, the sheer population and the sheer love with the automobile and perhaps a lack of public transport means that there's lots of cars available in North America.

I was just wondering if that -- if we have that split, it will be -- it will help us to track your -- how your trading margin to more.

Something that we can consider.

I was just hoping to follow up on Lyndon's question. Can you give us -- sorry, Scott Ryall. Could you just give us a sense of how you are seeing competition for sourcing at the moment given all the market conditions you've spoken about?

Competition is always there. But it would be fair to say that for the most part, people are relatively playing nicely in the sandpit. But competition is, competition in Australia. We have 3 or 4 major competitors here. In North America, we have competition everywhere, the U.K., the same. So competition is always there.

Okay. And you've spoken about your downstream investments. Is upstream all about what you're talking about in terms of making investments to, I guess, have an enduring competitive advantage in sourcing absolutely is the going upstream that you're talking about getting involved in bridges being knocked down and big...

Or more investment in transport infrastructure to collect the scrap from source. So it can come in many forms, but the whole key here is to get it at source and not buy it through a middle man.

Peter Wilson, Credit Suisse. So you talked about investment in improving the recovery of non-ferrous trade. How has that manifested? How big is the improvement been? I think from my memory, about 10% of the ferrous volumes that we see is non-ferrous trade. How has that increased in recent years?

As you know total zorba production...

As we said, ferrous, the reported ferrous include non-ferrous trade.

I'm not sure whether I talked about that in my presentation. I'm sorry, I don't have it off the top of my head.

Volume compares a 3% recovery 5% or not Okay. And is that -- what would have been reason. It wouldn't have changed materially. Certainly, what we do in downstream recovery adds a lot in margins. But in terms of moving the needle on in tonnage terms is it wouldn't take it from, say, 1% to 2% to 3%. So it would have been relatively the same.

It would also be fair to say with the increasing requirements from China and Malaysia, Thailand. If you go back 5, 10 years ago, we were selling a zorba product that had 90% metallic content. The reality is today that we need to sell something in the 99 plus range. And therefore, that in itself has actually reduced our volumes because we're not shipping waste anymore, if that makes sense.

It does. It's a on. And John, could you -- compared it with the SAR business, that twice as profitable per tonne. Can you compare and contrast what is different about their business in terms of sourcing, recovery, all other.

So George, obviously has a platform across the southern part of North America. He has obviously benefited from the very strong domestic demand that exists in the North American steel industry at the moment with potentially some of the tariffs that exist. But the simple reality is George runs a lot of shredders. And traders generate a lot of zorba and zurik and other nonferrous products. He runs more shredders in North America than we do, and that adds to his margin.

Is that because it's got more cars coming through or a different source.

No, it simply means he's got more shredder across more locations.

Could -- it seems North America invest in more shredders.

Absolutely. And invest in more capacity. So we're actually looking at 3 shredders in North America to actually expand our capacity.

How much just to add to that. It's a great question because -- and I'm glad you're asking it because we cover it later on. We have a few slides on that And what you see is they have nearly twice as much nonferrous recovery proportionally than -- now the difference is are you looking at it back in a percentage terms, trading margins or per tonne terms. So obviously, nonferrous recovery is much more valuable in per tonne terms. So that will inflate that per tonne profitability. But yes, they do much more NSFR.

It's Michail Paraskevopoulos was from Marktfeld. This might seem like a strange question, but I'll ask it anyway. I was once told and I guess we've seen this over the years that the metals business, if you think about a year, has a good quarter, was a really bad quarter and has 3 pretty average quarters. I think we've seen a fair bit of volatility in the earnings in the business over the years. I'm just wondering, in terms of everything you're telling us and everything you're talking about going forward, does that reduce the volatility in the earnings? Or are we going to still see maybe higher earnings level, but still extreme volatility that we've been used to.

I'm sure Graeme is going to talk about the levels of volatility that we're talking about and some of the risks and opportunities around that. But the simple answer is we have some very good tailwinds. As Alistair mentioned, copper and aluminium with the electrification of everything will certainly support our business given the NFSR and nonferrous retail make up a large portion of our business. And the reality around decarbonization, scrap demand is going to be strong. And I'm talking ferrous scrap. So we have some very good tailwinds.

Okay. Just another one, Alistair, in his opening remarks made a comment about sort of continuing to -- I think it was investing in engineering and technology and then logistics as well. Can you just sort of -- in terms of your journey, if you started at 0 and you finished at 100 on each of those 2 buckets around engineering and technology than the logistics piece. How far along your journey are you? And how much further is there...

So what I would say is our ANZ business is very much focused on scrapped source. We've got some way to go in North America and the U.K. with respect to capturing more scrap at source, which will require infrastructure in the form of trucks business and other equipment to go and get it at source. So it's a little bit dependent on geography.

So that's the logistics piece.

That's all logistics piece of capturing it source. For the most part, there's obviously exceptions, but for the most part, most of our downstream are in a pretty much best practice level. We've got a couple that we're working on at the moment, 3, in fact, that we're bringing them up to the latest technology. And then, of course, this extra technology that you want to put on the back end of our ferrous downstreams, is something new.

Right. But that's pretty consistent across the 3 major geographies.

It is.

Andrew Scott, Morgan Stanley. Just want to ask, we've obviously seen this development recently of the U.S. steel manufacturers getting more integrated into the scrap part of the value chain. Interested in how you see that playing out. And in particular, you've got a player there that there's no interest in the nonferrous part of the market, no core capability. How do you see that playing out? Does it open opportunity for some sort of a partnership or something that seems to participate in that part of the value chain?

Sorry, you mentioned that there's a party that has...

The U.S. steel guys are to go into their business. I understand a lot of that will be focused on prime, but they don't have a real interest in the nonferrous coming out the other end. Is that an opportunity for Sims.

Absolutely. We have a couple of opportunities right at the moment at a very nonferrous centered.

John, I'll stick on John, I'm trying to understand the operating leverage of the business and a question on utilization rates across different regions in Brazil, that's driven by availability scrap price. But broadly speaking, what is the upside in volume, if scrap is available at the right price, for each reason you could summarize or percentage terms what the [indiscernible] utilization.

So I would have said that we're probably sit around the 80% mark of capacity. But I can tell you that we have 4 shredders at the moment that we are addressing current capacity constraints that will change that number considerably.

Talking locally or just globally.

Globally. So a couple in ANZ, 3 in North America.

Great. And second question is on sustaining CapEx. We've seen an underinvestment across many industries. What do you sit on sustaining CapEx across your business? Have you underinvested or you're about right.

Our sustaining CapEx levels have been pretty consistent. But as Alistair highlighted, the requirements around emission controls, in particular. Shredders is certainly going to be an area that we're going to need to spend some capital. And that's a good thing because it will differentiate us from other players and create high barriers to entry. So we don't see it as a bad thing.

Just a quick follow-up, [indiscernible] . Just in terms of the strong views about not going down the lithium battery recycling path, I thought you might be the right guy to explain why that's not of interest to Sims given all the infrastructure is there to accept vehicles. It just seems like a logical path to follow. We all know what lithium multiples, the stocks are trading on. If seems had a lithium stream, I'm sure it'd be very well received. Why is it that -- this is just not an opportunity you guys are looking at?

I wouldn't say it's not an opportunity that we're looking at. But lithium batteries do come with some considerations. I don't know whether you've ever seen a lithium battery that's been, I would say, broken up they are a bit like a flare. They burn and they burn very heavily. The reality is that we will consider it. The reality is that electric vehicles have a long life cycle. So it's going to be any number of years before we actually see any electric vehicles coming through our strand.

So -- but there's obviously a huge market opportunity. Is there a technology side to it that is putting you off? Or is it more the safety aspect? Or you're just not thinking the margins are there?

Certainly, the safety aspect is a concern. But when it comes to electric vehicles, there's more to electric vehicle than just a lithium-ion battery. And I think someone mentioned before, a lot of the major manufacturers of the Tesla's of the world are actually doing buyback arrangements around those batteries and then repurposing those batteries. So they will take the battery, each battery contain something very similar to AAA battery. So there's just 1,000 hey, they pull them out, they reap up and maybe they go into the next cordless drill or something else. So -- so it's not going to be a first go around. It might be a couple of go-arounds in repurposing before they'll actually make it to the scrap market.

It's Daniel Kang from CLSA. Just a very quick one in terms of -- just in back on your capturing supply source. Sort of a few question surfing around that. I just want to confirm what proportion do you actually capture at source at the moment. Is this something new? What sort of target are you -- is a realistic target you can get to over the next 5 years within different regions.

I'm not sure that we've set a target. And again, as I said, it is very much geographically driven. In some parts of North America, the opportunity to capture it source just don't simply exist, but it is a business model and a decision, and it's part of our strategy that we do want to increase and capture outsource volumes. But no, we haven't set a target.

And in Australia, what sort of proportion would that be?

Yes. And sorry, I didn't hear that one. Probably 60%. And if you think about that, as I said, mining industry, waste companies, industrials probably sits around that range from a days plumbers, electricians also in that sort of at source sort of level. But we do trade with other merchants in Australia too.

Thank you, John. Great presentation, followed by with a good Q&A. So we are going to change it a little bit. We thought that rather than going very slight heavy for the next -- what we would do is just jump right into the questions that we always get asked by investors. So it's with great pleasure that I introduce Graeme Cameron. I know some of you already have met Graeme in the past. He is our Global Head of Trading. So Graeme was telling me last week. So we flew from Singapore, so he's based in Singapore. He will be moving to Australia soon, but it's now based here. And he's been working from the Sydney office in Sydney obviously. And he was telling me that the story that on his first day working for Sims. He rode 20 kilometers in his bicycle to get to the Melbourne office, that's a true story here. And at the time, he was the only person at Sims riding a bicycle to work. This was almost 20 years ago. Graeme, which is straight out of his masters and had started working for Sims as a graduate. He's in charge of ferrous and nonferrous metal and has been mentored by several commercial leaders here at Sims, including Will Schmiedel and Michael Movsas. By the way, you also told me last week when we caught up that he now runs to work, if you can believe it. Apparently, he shredded his bicycle last month when aluminum hit for $1,000. So I'm not sure if we'll get your bicycle back, sorry. But -- so it definitely takes advantage of the prices. So Graeme, if you could join me up here.

Thanks, Ana.

We don't get the second.

Thanks for introduction Ana did not, unfortunately. Good morning, everybody.

Did you run here today.

I didn't, unfortunately.

That's good. So one of the questions that Alistair, Steven and myself are asked quite often is what are the risks you are seeing at the moment in each of the Sims' markets. So U.K., Australia, U.S.

Okay. I guess looking at 1 of the risks, it's not specific to each of those regions, but it covers all the regions. It's really right. I guess in recent weeks, we've seen increased volatility in the freight market as we've seen as the Russia moved into Ukraine. And we're seeing spikes in COVID cases in China, who maintains a COVID zero policy. So looking specifically at the Ukraine situation, how that's impacted trade. It's really looking at the bulk side of things. We're seeing bulk, dry bulk markets inflated over last few weeks. And how that works is a lot of the cargo that we're shipping into Turkey, the shipowners would then return those vessels back to other parts of the world with exports from Ukraine, Russia, et cetera. And with the contract in Ukraine at the moment, a lot of that opportunity is dried up. So you're seeing ship owners looking to either inflate prices to cover that backhaul cost or a reluctance to go into the [indiscernible]. The other factor that we're seeing as well in terms of chartering costs is you're seeing replacement goods. So those commodities that were coming in particular for Ukraine, iron ore, crude steel, grains, et cetera, they're being replaced from further afield. And so your per tonne mile of a vessel has increased. So those goods are now moving from commodities moving from places like Brazil or Australia. And therefore, the vessel time is increased in tonnes per day. So that's one of the risks that we're looking at and we're managing. COVID-19 specific is I'm more thinking about containers. So we haven't seen any significant changes in the market. It was already a very, very tight market. But the concern is if you have a lockdown of one of the ports again in China, then container movements may be further restricted. So that's where the risk we're looking at. So I guess questions to that would be as a follow-up would be how we're managing that risk. So we have a very experienced chartering team. We have excellent relationships with ship owners. We're negotiating deals, backhaul deals, et cetera, with ship owners. So we're collaborating with them. And we have an excellent relationship with [ SINO-Ship lines ] when you're looking at containers that's one of the risks that I would highlight something there, but emphasis we're managing. I guess one of the other things I could mention in terms of managing the risk, some of the investments that were made into systems has certainly helped us on a container front. So we have better clarity as into container movements and forecasting what happens to container movements will be so it really gives us to extend an opportunity to manage that risk further. And in terms of opportunities, look, you've heard a lot of the opportunities today. It's a really fun time to be in scrap. It's a great time to be at Sims. I guess I've always really enjoyed working in Sims and during my job, even more so at the moment. But some of the opportunities that we have, and I hate to repeat some of them. So you've heard some from John, you've heard some from Alistair and the rest of the team. But we're seeing high prices at the moment. That's really driving, particularly on the nonferrous side, an acceleration in some of the company's decarbonization strategy. So you heard from John, a couple of companies that we deal with. We're seeing just that a long-term demand for scrap or increased demand for scrap with as companies land their decarbonize strategy. It is an easy move for companies to make our customers to make -- to get their goals to increase their scrap consumption in their manufacturing. I guess -- there's more talent, we've invest a lot of time and effort into our teams. We have some good young people, men and women coming to the business that we're mentoring -- and the technology advancements that we're seeing that John's mentioned makes it really exciting so we can capitalize on those opportunities in a decarbonizing world.

Good. So another interesting question we get all the time is what does the China opportunity mean for Sims?

Okay. I guess the best way of answering that question is really have to look at what the China opportunity is. So I think the easiest way is to break it down into different commodity sets. So scrap, as you know, is -- Sims regularly finds it as nonferrous and ferrous but in the nonferrous bucket, there are the commodities as well. So I'll just look at the majority of metals we trade. So copper, there's a shortage of material, copper units. We're seeing mining supply has been weak through the COVID period. There is some new mining capacity that's coming on board or instead come on board at the end of this year. Looking at the forecast that supply will start to decline into 2025 and most of new projects are brought on board. But scrap provides an excellent substitute and it's definitely being captured in China. We've seen increased importation of scrap units -- copper scrap unit studies. It also provides a great opportunity for some semis producers that we're selling to in China instead of having to work through refined metals. They're taking our scrap and putting it straight into their semis products. It's 1 less processing cost, 1 less introduction of energy. So it's a strong opportunity there. Carry talking back but get to move on to Aluminum. Aluminum is -- the continuous development in primarily in China are ADC12 manufacturers. There's -- I think the opportunity for Sims is really around the technology that John has been talking about. So we've got a great opportunity to move directly into China, further afield. We're going to make -- we're going to differentiate ourselves from our customers with a product that is going to be very welcomed into the Chinese market or is very welcome into the Chinese market. And so I think that's on the Aluminum front. On the steel front or the ferrous front, as I think John mentioned [indiscernible] Alistair also mentioned, we've seen -- we saw a change in regulations in China is now accepting scrap, albeit with very high standards of quality. What we have seen is an increase in movement of prime scrap, particularly coming out of Japan into China. What that's done is that's created a void because that metal lot of that middle in the past was going into Vietnam, South Asia, et cetera. And that's created an indirect opportunity where we're able to provide obsolete scrap into that market and into those markets outside of China. So the option is still at the [indiscernible].

Thank you, Graham. The next question, actually, I think I should address it to Alistair. So again, a very common question we get is why doesn't Sims pursue a vertical integration strategy and by PAFs, for example.

Especially -- that's going -- has to align with our purpose. And obviously, that is always going to be an issue for us. But if we ever did choose to go down there, we'd have to have, obviously, renewable energy. If we went down the part of electrical furnace -- that's 1 point. The other point, obviously, from a capital point of view, it is a large sum of money, and it actually requires quite a different technical skill set that we have, not that you can't get into it. So I think it's not off the road completely, but we'd be very cautious moving down that path.

Thank you, Alistair. Going back to Graeme now. So under the revised regulation on waste shipments, sorry, the European Union is proposing a restriction on waste exports to non-OECD countries. What is the impact of this regulation on our U.K. business, Graeme?

Okay. So I guess the best way to -- the best way to answer that question is just to find what our European businesses and U.K. businesses, our European businesses sits in the U.K., we don't have any operations in Continent Europe from the metals business. So in a post-Brexit environment, we're not -- our metals business is not subjected to these changes or proposed changes in regulation. So just starting with that. Looking at the change in the regulation. So where does that metal go currently? A large portion of that metal is exported into markets where we traditionally trades scrap. So into Turkey, East Med, North Africa, Middle East, even into South Asia. So that creates a void. And in many ways, creates an opportunity for Sims. So where we're not in Continental Europe, we can backfill some of those provide scraps to some of those customers that are missing out on [indiscernible]. So that's -- that's the way I see -- we are working very closely, though, with a number of organizations within Europe, [indiscernible] as well as some of the other market participants.

Very good. The next question is about Turkey. So Turkey is a material market for us. And in FY '21, Turkey represented 17% of the sales to external customers. What is the impact of the lira's devaluation on the Sims operations?

It's an excellent question. So Turkey has extremely high inflation of an per the numbers. But surprisingly, we haven't seen any negative impact on our exports in Turkey, our sales is taking even having a look at our competitors. So we regularly look at that market, we're counting material that's delivered into that market. And in fact, what we have seen is an increase, and that's even prior to the conflict in Ukraine. So why is that? So it's quite a simple answer to look at if you think about it. So 90% of the steel products that are produced in Turkey are exported. And then if you have a look at those -- the remainder of the middle units sort of consumed in Turkey, a large portion of those exported as well. So looking at auto production numbers and auto export numbers for Turkey, it's something like 50% of the autos that are produced in Turkey or exported as well. So all that trades in euros or U.S. dollars, and that's [indiscernible]. Although, I mean, the scrap is not the only input into making steel, obviously. So energy has -- we're seeing record highs at the moment. And so there are inflated conversion costs. But if you have a look at the price of steel versus the scrap prices today, you can see that those inflated conversion costs are more than covered.

Okay. Good. So we touched a little bit on this before, but hoping that you will give us more detail on this. How does Sims benefit from both bulk and container capabilities?

Okay. I guess, firstly, you said bulk containers is what we use for export, but we have a whole network of different modes of transport. So just to highlight, and we have rail access to many of their facilities. We have a great barge network that John is talking about expanding in his presentation there in North America. We have our own trucking fleet, et cetera. So we have multiple modes of transport. But looking specifically at the export modes we have. We have an advantage in that we have around 20 or we do have 20 deep sea around the globe, and we're able to -- they're under our control, then we have access to further docks to export. So in an environment where you've got restricted availability of containers, we're able to take advantage of that network of docks. And I guess in addition to that, it's put had. We've got our own chartering team that has the ability to source vessels. So we're able to move our material where perhaps some of our competitors have been restricted during the, I guess, restricted availability of containers. The other nice bit of advantage what I'm thinking about is a lot of our scrap yards are adjacent to these docks, you saw a video of [ Clermont ], it's on the water. So that also gives us another transport advantage. We're not moving the material to a dock. We're on the dock. So we have another advantage there that perhaps some of our competitors don't have.

So now this is the last question before we take questions from the audience. What are the implications of the Ukraine Russia conflict to the scrap market and just seems in particular?

Okay. Just firstly, it's a tragedy what's going on there and we really do think about those people that have had their lives disrupted. But it has -- it's really hard to say this after you're thinking what's going on in Ukraine, but it's had a tremendous impact on commodity prices. Ukraine was a major exporter of iron ore. I believe the world's fifth largest exporter of iron ore, circa 45,000, 47,000 tonnes -- 47 million tonnes a year. A large producer of -- both Russia and Ukraine were large exporters of crude steel, around 45 million tonnes. A big exporter of basic pig iron as well. So we've seen prices inflate and I did a calculation for Ana. And I was looking at the differential between copper, aluminum, HMS and Zorba prices at the beginning of February to today. And HMS prices are up 35%, aluminum prices are up 17%, Zorba prices are up around 20%. Copper already had a very tight supply, not as impacted by the conflict in Ukraine and Russia, but that's up 5% as well. So it's had a huge impact on pricing. Why is it impacting scrap, some of you are probably asking, is well, that production capacity has come out. The Turkish mills in particular, as well as the U.S. mills, have been able to turn on their hot mills. So they may have been importing some [ semis ] into or long products into Turkey to go through their rolling mills. The Turkish mills have increased their utilization of their hot mills and so that increases the demand for scrap as well. So yes, that's my answer to that.

Thank you. So now we'll take questions from the audience.

Lyndon Fagan, JPMorgan. Can we just talk about the scrap price and how sustainable you think it is? And how much is a result of the Ukraine conflict? And I guess also do you see potential for volumes to increase as a result of that price? Or were volumes already coming out at a maximum level, given that we were already at a pretty good price?

I think you kind of answered the question. Part of the reason why the scrap price has improved and was already on the up before the conflict in Ukraine was because supplies have been tight. So COVID-induced supply tightness, whether it's around logistics or around operations, has definitely impacted pricing. There is still a void of products. And so that's, I think, in the short term, going to see some buoyancy in prices around these levels.

Okay. And then the follow-up was on China. You spoke about the rule changes. We got to 220-plus iron ore last year. Yet, we still didn't see China import scrap, which at that time, there was a large incentive to move more towards scrap and increase scrap charging blast furnaces. Why do you think that is? And given the excitement about that rule change and the fact that we haven't really seen volumes take off into China, do you really think that, that is a proper opportunity going forward? Or what are the factors that are preventing that volume going in, in a large way?

Yes. It's a good question. So this is -- with the Chinese market, there's always the cloud of obscurity, right, so -- but from what we see, you've got -- China has got a -- maintains a high energy cost at the moment. We don't have -- we're talking about -- or China is talking about increasing EAF capacity. There is a maximum amount of scrap that can be introduced into a blast furnace. We're sort of at those rates, if I understand it correctly. So we are looking longer term for China to increase the amount of scrap that's imported. Although one thing that John did point out was that China also generates its own scrap. So there is its own domestic [ scrapper risings ] that are being utilized and probably have some potential to be utilized further. I don't know if that answers the question.

Thanks. So really, there's no conviction at this stage on China increasing volumes.

We have seen increases, as I said, on prime grades coming from Japan, creating quite a lot of competition in that market, but not on obsolete grades.

Peter Steyn from Macquarie. Perhaps a complex question, but in the context of what's going on in Europe and some of the energy, transitional energy alternatives that are currently being discussed, how do you think that plays into your business, both in terms of the U.K. operation, but also your sales into Turkey if you roll forward and think about gas and various other things that are going to change quite dramatically? Just curious how to think about that.

So I'll look at it at ferrous and nonferrous. So on -- from a nonferrous perspective, I think it plays very nicely into our strategy. Aluminum is, as you saw some of the numbers I put up on the screen before, it -- scrap uses a lot less energy than it does going through the whole primary process. And there is an immediate demand for aluminum. We're seeing premiums at record highs. Midwest transaction price at over $0.40. European prices also at record prices. So I think it plays quite nicely into the nonferrous space. As for the ferrous space, yes, there is a concern about energy costs. And the Turks have been able to maintain and manage their energy costs or their businesses. As I've touched on before, we've seen an increase in conversion costs, but that's being reflected in the sales price for their goods versus the price or input costs of the [ grain set ] process. So it's -- that's I guess the answer to my question or your question.

And perhaps a quick follow-on. Do you think that there's potentially any significant dislocations in the steel industry across Europe as a consequence of this? Maybe the Germans think about their mills differently, the Dutch think about their mills differently, and that has knock-on effects on some of the trade?

We haven't seen anything at the moment, no. We're still seeing the same participants in the market as we were seeing pre the conflict. Maybe longer term, but what we can say at the moment, no.

Paul Young from Goldmans. Maybe continuing on from Lyndon's question earlier about the market. You've highlighted the risk around higher freight, and we're seeing that across pretty much all size of ships, to be honest, and industries. Can you tell us here today that the price of scrap has actually offset -- is offsetting the higher freight rates and that your margin in the last couple of months in percentage terms is expanding?

Probably another way of looking at that is we look at the delta between the buy and the sell, and so that's how we manage our business. We manage our business from a buy-side and a sell-side perspective. And I guess that's what John was alluding to before. We sort of -- you're suggesting that maybe I talk about the FOB price. So we look at sales less costs that then enable us to look at our margins.

So am I reading that correctly, you're thinking in dollar per tonne terms rather than percentage terms?

Yes. I guess so.

And any color you can give us on just recent performance?

In recent performance...

Of that margin?

I guess Todd is probably going to touch on that a bit later.

Whole a lot of things we'll touch upon later. It's still a long way to go, guys. If you talk about -- I guess the question you have at hand is rising freight rates. And is that getting covered in the sales price. Well, ultimately, it's a free market, and that scrap will flow to whoever is paying the highest price. So if there's a higher price that's being paid domestically, well, we'll sell there and unless an offshore buyer can cover that freight in their price, then it won't go there, it won't flow to that market. So yes, it does get covered. It's largely a pass-through. Do we think about things in percentage or per ton terms? Well, it depends on what's practical at the moment. We'll get to in the afternoon session when I'll present it in the last session. How we're more thinking about things in percent terms on a trading margin, which is the spread between our sales price and our effective raw material acquisition price. And that's, I think, the way we can talk about things going forward, because then that puts everything in relative perspective. Because it's no use talking about margins in per tonne terms and trying to compare ferrous versus nonferrous versus non-ferrous [ trade ] recovery, because they're wildly different in per tonne terms, but they're all comparable in percentage terms. So that's the way we'll be structuring the conversation going forward.

Just 1 question for me. Peter Wilson, Credit Suisse. One thing that, I guess, we have observed in recent weeks, maybe for obvious reasons, is that the Europe and Turkey scrap price has gone up much more than the U.S. and Asia price. Is that kind of change in the spread important or meaningful for Sims? Or should we ignore that kind of regional change?

I mean there's always arbitrages between markets, right? And they typically set themselves [ in ]. And I think Todd pretty much touched on that. So yes, I mean it's important we are active in the Asian market as we are active in the North American and the European mid-market. But yes, there's an arbitrage, it can be worked around. And the trading that we do, right?

Is there a consistent position, like is that clearly a windfall if Turkey versus U.S. increases? Or is it -- depends on what your position is at any time?

Well -- so we don't -- we're not trading a position as such. We really look at our buy and sell margin and that's what we're working on. So as we're selling, we talked about in our business transformation. We've got a very close commercial team. We're constantly working together in the buy and the sell. And we're trading that position simultaneously. So we don't have a long position or a particularly short position so that we could have a windfall on it, so -- that's not our business.

Anderson Chow from Jarden. I just have a couple of questions on the Chinese market opportunity. I think a long, long time ago, probably 2015 or '16, Sims used to have direct ownership of the Chinese scrap metal, Chiho Environmental or something like that. But of course, we got out of it. I mean is there -- from hearing presentation so far this morning, I think we are only going to benefit or getting involved with the Chinese rising demand in scrap metals sort of indirectly, so selling into markets that China has sucked out the volume. Is there a scenario where we could actually consider teaming up with a local player or going direct again? Are we waiting for something to happen? Or are we just definitely going in the next 5 to 10 years, just stick with indirectly benefiting from the Chinese increase in scrap metal demand?

I think if you're alluding to whether Sims is going to move into the Chinese market with a physical operation, I think that's probably a question for Alistair. Is that -- yes, so maybe save that one for Alistair for later on.

He's just left. Convenient. So I think we'll break up for lunch now, and we should be back here at -- in 45 minutes. That will give us time to have a nice lunch, and enjoy your lunch. [Break]

Okay. so I hope you have enjoyed your lunch. The next presenter is Ingrid Sinclair. We deliberately timed this presentation for after lunch to ensure that no one falls asleep and I'm sure you won't, because Ingrid, she will tell us everything about the exciting opportunities happening at SLS right now. So over to you, Ingrid.

So April 2019, 3 long years ago was the last time I was here. And last time some of you were here. A long time ago, right? So let me remind you of the journey. At that time, we were Sims Recycling Solutions. We were all about e-recycling with a strong desire to grow our ITAD business. We then divested all our European compliance business, which at that time represented 80% of our revenue, effectively dropping us to 0 EBIT. It was fun, I tell you. So then what happened? We hit COVID, right? We're all at home. We're working at home. Our kids are at home. I have 3 girls. Two of them were 16 at the time and then 1, 18. They're online at home, I'm online on home. My husband is playing Fortnite. So we're all fighting, right, for bandwidth. But thank goodness, we had the Internet, right? Thank goodness. So we did this. We're Sims Lifecycle Services. We're focusing on data centers, that's our core market, that's where we're putting all our energy to grow. And Angela Catt, who you might remember as being the Investor Relations Director. She came over to the U.S. and she's now my CFO. So that's pretty cool. So with that, last year, we ended at $22 million EBIT. So from $0 million to $22 million. So pretty cool, and we did what we said we would do. So with that, I want to give you just a quick 2-minute video of what we look like today. [Presentation]

It's a little bit different from what we used to be. So I'm going to spend a bit of time now talking about data centers, so you can understand why we're focusing on that, why we see value there. And the growth. And again, a short video. I promise I don't have all videos. But we borrowed this from Facebook, from their website, so. [Presentation]

So with that, it just gives a really quick overview of what a data center is, right, a big building full of racks. There are 3 main types of data centers, and we focus on these. So the cloud, that's the one we all know of, right? Amazon's AWS, Microsoft's Azure, the big hyperscalers. Then you have co-locators, which is basically a third-party person setting [ up building ] and you rent part of it to put your servers in. Then like us, enterprise data centers. So a lot of companies have their own servers. They manage their own servers, but also use the cloud, right? Sims, we have our own servers, but we also use AWS. Amazon, if they're in a geography that they don't have a data center, they will use a co-locator. So it's all interrelated. People are using all these different types of data centers. What's important, right? Power consumption. So power is important for a data center, which also means sustainability is important because they need to offset all that power that they're using, all right? And then uptime. You want to get your bank statements, right? You want to be able to go on there and get access and not have any downtime at all. So uptime, very important. And the last one here, where you see the animation. Hardware availability. That's where we're putting all our efforts. And it really came to light during COVID, during this -- we never expected this to happen when we were here 3 years ago, but the availability of hardware is really key. Just think of all these cars that are sitting, brand-new cars, but can't be sold because they're missing a little chip, right? It will be the same sort of thing in a data center with your server rack. You're missing, your $5 fan isn't working, right? It's the same type of concept. So that's really pushing where we're going in our business, and I'll get to that a little bit later. So to think of how big a hyperscaler [ a ] data center. I love shopping at Costco: if Costco doesn't have it, I don't want it. Data center is 8 Costcos. Imagine 8 Costcos. That's how big they are. They're huge. There's 100,000 racks, server racks sitting in there. It uses enough power that 600,000 homes consume. So 600,000 homes use as much power as 1 data center. That's about the size of Adelaide -- or San Diego for Steve, a California boy. All right. deep dive into what a rack is. So the rack. It's a piece of steel, 350 pounds of steel. If it can't get reused, I send it to John to his metal yards. So he's getting nice, clean steel. Then within the rack, you have the server, 30 to 40 servers per rack. Some of them are focused solely on storing data. So your Netflix videos, right, or your cat videos are all being stored there. Otherwise, they're processing servers. So they're the brain. They're doing calculations, they're doing your AI. Then within your server, you have the motherboard. And on the motherboard, so these are the items we are specifically targeting. The processor. So that's the brain. Then your search and memory, it's the DIMM, the memory module and hard drives, where you're long term. So here, I have a DIMM, we'll get to it later, but this offsets -- redeploying this offsets 12 kg of carbon by reusing this. So we have 1 or 2 processors per server, 4 to 8 DIMMs and then your hard drives. You have your old-style mechanical drive or your newer style, the solid-state drives, and all can be reused once they've been cleansed, right, and cleanse the data off and it can go back into service again. So also on the rack, we have switches. These can be redeployed as well. It's basically the traffic cop, right, that directs your data through the rack. Then your lower value: your fans, the cables, the power distribution unit. And then the $5 fan. If that doesn't work, your whole unit's out. So why data centers? So we talked about the pieces that we repurpose, but why are we focused specifically on data centers? Cloud is enormous. It's huge. It's gigantic. And thank goodness for that. Otherwise, it would have been hard for us to keep on running our businesses when we were all locked at home, right? So if we didn't have that, it would have been a big trouble. So and it's a large opportunity for us. In 2021, we estimated the repurposed market to be 85 million. So 85 million units. And we're on track to achieve 2.7 million repurpose-ed units, which is 3% market share. So the market is large. And in addition to that, it's a growing market. So 60 seconds, all that happens in 60 seconds, right? You're Googling, you're doing your e-mail, all of this is going on, almost $0.25 million in Amazon shopping, right? All these 0.5 million Facebook users, 60 seconds. It's huge. It's enormous. And again, in my house, it's even worse, right? We're all competing for streaming and my girls are gamers, too, so -- with their father. He's top in Fortnite. Anyways. So everything we do, right, is driven on the Internet, we're using it, we're interacting with it daily. So you can see it's a large market, and it's rapidly growing. So how are we, SLS, going to grow in this space? Well, we're the global leader in circular cloud solutions. We operate globally because our clients are global, and they expect us to be consistent, compliant, comprehensive and sustainable. We focus on circularity, right? It's all about reusing and extending the life. So reuse, redeploy, re-engineer and finally, at the last bit, if you can't do it, recycle, very end. We focus on the cloud, because again, it's huge, the market is huge and the opportunity is huge. So we'll continue our leadership in circular cloud solutions because we have a strong focus on growth in our pillars. So we're going to expand our services. We're going to add -- fulfillment is 1 of the exciting service that we're going to get into, which I'll explain later, expand on-site services, and then grow our current client base by adding more geographies. They're global, they need us to be in other areas. And we're going to add services to it as well, offer them new services, then add new clients, add more hyperscalers, get into the colocation market and then add more Fortune 500 clients, enterprise clients. So we have a plan to deliver clear growth going forward, and we've demonstrated consecutive growth over the last 3 years in a really tough and challenging market. We did what we said we would do, right? And if you heard at the half year results, we are experiencing some slowdown because of supply chain constraints, because these clients cannot release their equipment because they're waiting for everything to come in. But in speaking with them, 2023 it should start loosening up, and we're on target to get to our 2025 growth. So we're going to see the growth kind of go up in '23, '24, '25. So this fits perfectly with our market position around security, sustainability and global reach. So this past year, even in spite of COVID and everything being shut down, we expanded geographically. We added 3 sites in the U.S., Chicago, Nashville, Atlanta, and then added Ireland as well. So we're going to continue to grow in other geographic areas as needed by -- required by our clients. So we set some really ambitious targets, really ambitious targets, right? 300% over the next 4 years, so. And I'm confident that we'll be able to achieve this with our strategy and exacting our plan on how we're going to deliver this. So how are we going to do this? How are we going to grow? How are we going to execute and deliver? Well, we have an operational readiness team, which is a team that is completely separate from the day-to-day operating folks. And their sole purpose is to search a site, get it ready and hand over the keys. And they also are responsible for putting in operational solutions as we move forward and as we change and we add new services to our clients. Then we have our tech development. So again, the space that we're operating in with these hyperscalers, you have to move fast, you have to stay with the tech. So a lot of technical development. And innovate. We have to innovate to continue to grow. So we also have an innovation team, and that's actually where Angela sits in Florida, at our innovation lab. So she can tell you some stories about some things that we're working on. So delivery and execution is a core skill set, and it's really demonstrated by our ability to pivot and scale. And here's an example for you. This is our site in Chicago where we had to convert to meet manufacturing standards. It's not remanufacturing anymore. It's really manufacturing standards because that's the space we're playing in when we do redeployment. So 30 days later, this is it. We had to completely level the floor, epoxy and so forth, because we are moving server racks. And it's a product, it's deemed a product. It's not recycling. It's not scrap. It has to be treated like it's a brand-new piece of product, right? So completely level, we have the anti-static controls because we have to protect it. We have the climate control, again because we have to protect the equipment that's in there. No dust, no static. Security everywhere. There's cameras everywhere because again, this is something that's high-value material. So this taught us that you have to be able to pivot and scale up quickly if we're going to play in this market. And it's shown that it's a competitive advantage to us because we did it. We did what they wanted us to do, and we won a lot of business because of this. So let's touch a little bit on how we are positioned in the market. So we have a truly diversified base. 50% of our earnings is coming from hyperscalers. The other 50% is coming from the tech. And you don't see co-locators here. You will see that next year because we just entered that market. So really diversified. This represents 100 clients and no more than 1 is 15 -- more than 15% of the earnings. So if you look at the revenue categories, where are we getting it from. So when I was here 3 years ago, that green would have been the majority. That's recycling. And over year-over-year, you're going to see that getting smaller and smaller, because our earnings are going to come from repurposing. We're best in the market, and why? Why? Why us? Right? Why, right, because we're an integrated service provider, we're your one-stop shop. We enable sustainability for our clients. We're a secure partner. We're linked to the larger Sims group. That really helps us, especially with our linkage with metals. We do some really nice projects for a large hyperscaler where they have basically portable mini data centers. It's just a large container. We get -- we repurpose those. We bring them to John's steelyards, drop it off. We pull off all the material that we are going to reuse, redeploy, and then his guys will cut up the steel. So it's a great, great -- and that's a competitive advantage that a lot of my competitors don't have. So global service, right? Global clients, we have to give a global service. So let me touch a little bit in detail on some of these. We're a secure partner, and we've performed well and will continue to perform well in this space. And our clients value this. It really is important. You think of the data breaches that happen. In particular, here this one you might have seen in the news, a large bank was fined $60 million because of a data breach, right? It was a class action lawsuit, and there was brand damage coming from that, because whoever they used released data out into the market because they didn't do their due diligence. So it's really important that you have a secure partner. And that's key. So we also offer global service. So we're strategically positioned around the globe, close to our clients. And where we aren't and they need us to be, we have a subcontractor partnership set up. So global offering is key. And if we looked at integrated services here, so reuse. Reuse is, okay, that's the old style, it's starting to diminish. This is, okay, you have my stuff, go ahead and sell it, and we're going to share in the revenue once you sell it to a third-party person, right? We get a laptop in, we clean it and then we'll sell it and then we do a rev share. Redeploy. This has really grown, especially through COVID, because this is where people were getting hurt by not having their equipment -- not being able to repurpose or repair on their own. So redeploy is a service offering. We charge service fees, but we bring in the client's equipment. We clean it, do whatever, test it, and it goes back into the original service. So it goes back into the original service. Reengineering. This is, okay, my DIMM doesn't work anymore. This one doesn't work anymore, but we'll pull off these [ chips ], and we'll make a new one. So we're doing that as well. Then fulfillment. That's our new, exciting offering. Fulfillment is basically all that, where we test, we get it ready, but we warehouse it. So we inventory it and then the client will say, hey, I'm ready to have this part or I need some fans or I need a full server unit, and then we'll ship it out to them. So that's really the exciting, exciting growth area. And this came all about because everybody used to be just in time, right? Just-in-time manufacturing. Now it's just in case, because they're not going to be in a situation again where they can't get equipment. So we're a one-stop shop. We're linked to the larger Sims Group and businesses. Publicly traded, which is a big thing. We're dealing with large companies. Publicly traded means something, right? We're secure, we're compliant. We have all the corporate governances that go along with that, fully audited and sustainable. So we're a trusted provider because we're tied to the SIMS Group. I kind of touched on this earlier. So sustainability is becoming more and more important to these big guys because they use so much power, right? And they can do -- yes, they can get green power to power all their data centers, but then what are they going to do further beyond that. And if you see, we just took some examples that are out there. You can find this. Microsoft says they want to be carbon-negative by 2030. Carbon-negative, which means they want to go back to the 1970s. They want to recover all the carbon that they've emitted since then. So how are they going to do that? You know you're not going to do it just by having green power. They have to do more. So it's partnering with the likes of us to help them reach some of those sustainable targets, right? And how do we do that? So how do we help them with their sustainable goals? We provide them bespoken, accurate reports on all their carbon, right? All the carbon that they're offsetting by redeploying. We have agile and strategic processing locations. We have options to use low-emission freight. And we have recently, well, Angela, launched our sustainability calculator and she can tell you all about it. So we have a complete sustainability offering, and we're going to continue to expand on this because this is going to be a growing area where we're going to see, sustainability-as-a-Service is going to become a huge opportunity in our space. So this is what I want to leave you with, okay? We did what we said we would do. We have a clear growth strategy. And we have a plan to deliver on that aggressive growth. And with that, I'll leave it open for some questions. And I do have some props over there. I've got 2 server blades that you can go around, poke in and see what we go after is the processor over there, some DIMMS and so forth.

Lyndon from JPMorgan. Very interesting presentation. With that 300% growth in volumes, what capital investment is required to achieve that?

That's a very good question. So we're very different from what we used to be and from John's. We're not spending a lot of money on equipment. We're not big shredders. What it is are leases, IT solutions and then some testing equipment. But where we're going to see as we go -- continue to grow and we're going to have to have some quicker solutions. We're going to bring in some automation. So robotics and so forth. So that will be where we'll have our spend in 2, 3, 4 years.

So are there any numbers we can try to model for that?

Hello. It's Angela here, CFO of Sims Lifecycle Services.

She controls all my CapExes.

Exactly, that's the job. But look, I think Lyndon, Ingrid was spot on here that really SLS doesn't need much capital to grow. It's really more of an operating cost base that we'd need to add on. So as Ingrid was touching on, it's more the operating leases. It's more the head count, actually do some of the processing and those sorts of things. So I think on a capital basis. If you're looking in previous reports, it's no more than $10 million or so each of the years. So it's a pretty low cost base in that sense.

And just a follow-up on my earlier question. So we've got 300% volume growth, you made $22 million. Is it just going to be a $90 million EBIT in FY '25? Is it that simple? Or are there economies of scale or with the additional volumes, do you have to offer discounts? I'm just trying to think about projecting that.

It will track fairly close. But yes, we'll have to be very careful as we grow that we don't lose some of that by splitting the margin and so forth. But it will track fairly closely as far as we can. Do you want to add to that now?

Yes. Spot on. I think it's feasible that it would track fairly closely to the growth in repurposed units, and the earnings will track closely to that. However, I think it's also important to note the environment that we're operating in. It's a high inflation environment. We also have some costs to expand as we were talking about, with new sites. And there's also some timing differences of when we incur those costs. So opening up a new site, and then there's a little bit of time before those units, and therefore the earnings associated with those units, come through as well.

And just 1 final one. Just to understand the business a bit better. Why does this stuff actually need to be recycled? I just don't know anything about it. It would be good to understand why doesn't it just sit there and continue to be used?

Well, good question. So normally, the life cycle is 3 years. So they're refreshing every 3 years, that's the normal cycle. But you're right, it can just sit there. Processors, which I have over there, they could go on forever. So you could continue to recycle them. The DIMMS, after a while they will degrade. So we'll get probably 2 or 3 cycles through these, but they'll eventually degrade. So it's really the clients that are going down this deployment path is more that they're concerned about sustainability. So they're pulling that in. Yes, there's a savings because they don't have to pay for virgin but there's also the offsetting and the reuse, the redeployment just helps them meet their targets, their sustainability targets. But it is -- do you want to add to that? But we are competing. So it raises our level because it's not a recycling site anymore. It's really manufacturing, because that's what we're competing against. We're competing against brand-new, out-of-the-box manufacturing. So that's why our sites have to be to a higher standard.

Michael Ward from [ Tindall ]. So just to be clear, when you were here 3 years ago, there wasn't really much talk about redeployment.

No.

So the opportunity that you're presenting to us today is multiples bigger than what you thought it was?

Yes. Yes. And then -- and really COVID helped us. And we probably would have been talking solely about reuse if that hadn't happened. Three years ago, we thought it was all about the reuse, right? So get my stuff in, test it and sell it, and we'll share revenue. That's where we thought the market was. But since we all went through this lockdown where everybody is on the Internet, we're all working from home, our kids are studying from home, really just made this space expand and it's huge. So and the redeployment came out of that, by people not [ being ] the supply chain constraints, not being able to get parts or pieces to repair. So it was really, well, we can use it again.

And so the 85 million units you spoke of is just the hyperscalers? Or is that the whole data center market?

So yes, we estimated that on trying to -- because there isn't a clear number out there, right? So we took it based on data storage. So there's third party publications where we can see how much data storage is there. And so we kind of calculate it backwards from there.

Okay. And this question might sound a bit blunt, but I'll ask you anyway. So I apologize in advance. You've just spent 15 minutes telling us how great your business is, how come you're only 3% of the market?

Good question. Good question. Yes, why not 10%, why not 15%, why not 20%, right? Because we have to scale up in a controlled, disciplined manner. These clients are such that if you were to make a mistake, I mean it's over, right? We have some of our people that are in the hyperscaler site. So our people, they call them smart hands and we're in the live data center processing, removing units and swapping it out. So we can't make a mistake. You cannot make a mistake. So it's really scaling up in a disciplined, controlled manner because we need to maintain that perfection. And it's getting -- we're all feeling this sort of labor constraints. So we know that we can't just flip quickly. We have to get people on board. We have to get them trained and get them trained to a higher standard. It's not how we used to be, where we were just tearing down, pulling out and shredding. I mean it's a really skilled labor. So it's just that we have to be controlled and go there -- going into new geographies. We have a new -- we just won a new business, which is going to -- I'm allowed to say this right?

[ Just not say the client ].

Okay. So which is going to expand our business in Japan, right? So that's not something that can be done overnight. It's going to take time to get everything set up properly, and we want to do it right.

So the other 90% -- 97% of the market is done by cowboys, is that what you're...?

Or it's not being done, because the redeployment -- part of our challenge is going to be converting some of our reuse clients to say, look at this, you have these huge sustainability targets. If you were to redeploy and reuse, you would offset it much quicker. So it's partially having us convert a lot of these folks, and they will have to, right, because they are publicly traded companies, and they have targets that they have to meet. And in order to do that, you have to do more than just have green energy. So I don't know if I answered that.

Sorry, I'm now little bit confused. The 85 million is the size of the market.

Yes.

But that's not the size of the market that's being redeployed every year, that's actually being redeployed?

So a lot of the market is not.

And how much of the market is?

So the 85 million repurposed units that you saw us estimate as the market size in FY '21 is about them being reused and redeployed. So that's the size of the whole market as we estimate it. We represent 3% of that market at this point in time. We have an ambitious target to hit 10% of that market. And we believe that, that's an ambitious target because as Ingrid was touching on, we have to grow in a controlled way. We have to grow in a secure way. We have to grow the right way so that we can service our clients and retain our clients. There can be no errors, no mistakes. But what we are doing is making sure that we are growing as quickly as we can, and in also in growing as quickly as we can, if there's an opportunity to speed that up and still do it the right way, we certainly will. but we don't plan to stop at 10%.

That's right. And sorry to be confusing. And we have, in 2 instances have to turn things around quickly. So this is a market where we have to be able to pivot and scale quickly. So even though we might want to stay measured and controlled, oftentimes our clients say, "Well, look, I need you here. So go set it up." So which we have done. So we have 2 that are at manufacturing standards for the sole purpose of redeployment.

Scott Ryall. Am I correct that the process of repurposing is quite manual, as opposed to chucking things through a shredder in some of the other parts of the business. So is this a -- is it when you need highly skilled labor, is that because it's a manual process?

Well, partially. Yes. So a lot of it will be, yes, you have to remove it. So you'll see the blades over there. We have to remove -- so yes, it is manual in that you're inspecting and then testing it. So the automated part of it will be testing, and we're looking to automate further some of the separation of good versus bad.

So is -- can you -- is it a scalable business in the sense of once you're at one site, is there something that happens to productivity that allows you to put a lot more volume through, or does your growth have to come with new sites?

No, it is scalable. Yes. Yes. And how we are going to scale, as I touched on briefly, was sort of getting in some automation and robotics. So our innovation team are looking at ways that we can automate some of the sorting of the good versus bad memory or processors. So that's how we'll get the scale.

Okay. And when you go to new markets, what brings you to those markets?

So either geography or new services.

And when you say geography, what do you mean, sorry?

Adding geographies, so...

So -- why would you go? For instance, if you went to the West Coast on your map before, what would take you there?

So normally to be beside a large hyperscaler. So that's where you don't want to be freighting it everywhere, because then that kind of offsets anything you're doing on the sustainability side. So what we see coming up, I think I'm allowed to say this, Ange, going into the Northwest in the U.S. because to be closer to there's some large data centers that are being built. So that means that there will be a need at that point, normally 2 to 3 years down the road from a new data center going up is when they'll need kind of the repurposing.

Peter Wilson, Credit Suisse. This might be a question for Ange. But honestly a little bit confused about the revenue contribution of this repurposing. So you've given the breakdown, 70% of revenue comes from repurposing. So it's 70% of the business, which is doing annualized now $350 million. So that would imply $250 million from repurposing. Is that all from 2 million units, that's what, that's kind of $125 per unit? Or is there some other revenue that's not attributable to the units?

So the revenue that's not attributable to a repurposed unit would be the other and the recycling portion.

Are my numbers right, I said $350 million per annum [ division ]?

Yes.

Okay. Okay. So we're going from 2 million units to 8 million units. We're going from $350 million to $1.5 billion business revenue?

Yes. And so you're assuming then that obviously, the dollar value of a unit is consistent. If that assumption is true, then that would certainly be the case.

Should we assume that? I thought we were talking kind of $10 a unit was -- I'm surprised that it's this much. Which it's easy to surprise me, because I don't know anything about it. But is that the correct assumption? Is it $100, $150 per unit and going from 2 million units to...

Let me just double check your maths, and I will come back to you.

Well to complicate things further, is that a lot of the revenue will be coming from service fees. So it's not necessarily the value of that unit, right? Ange can help you with that.

Anderson Chow from Jarden. I just have 1 question on -- you mentioned about the repurposing unit kind of competes with a virgin new machine. But my understanding is the computing power has been increasing exponentially as the data consumption goes up, right? So is it possible you could give me a sense of what's the repurposing cycle versus a replacement of the service? I mean how -- can you only repurpose once and then the data center provider or the data service provider, I should say, has to buy a new machine, just because it's getting old.

That's a good question. So on the processor. Todd, do you want to grab the processor that's over there, the gold. Yes. So this is a processor. So basically, that's your brain, right, for the data. This can go around forever. Like there's no reason, right? Brendan, my CTO, can confirm that there's no mechanical reason for this to ever get pulled out of service. It can keep on going. So the cycles are infinite. This, your short term memory, your DIMM. This is normally 2 cycle maybe. This is where that will -- eventually cannot continue to be repurposed, and then will eventually get recycled. But at that point, too, what we can do is remove some of the chips and make a new one. So it can be reengineered because as time goes on, your sectors don't hold as much memory as they used to, they degrade. So this does not. This can go on forever, is your processor.

Ingrid. Sorry, I'm hopeful that the supply chain issues which exist today won't be permanent. How does that impact the longevity of your repurposing endeavors?

Well, what we're seeing, especially for the client -- the 1 client that is very much taking this on, it's becoming more of a sustainability play. So it -- yes, it started because of supply chain constraints, that they couldn't get the pieces that they needed in order to keep on growing, to add more data centers and so forth. But it's becoming such an important part of how they're going to make their sustainability targets. So I don't think once things start to open up again, I don't think it's going to change, because especially once they start getting that -- just recovering every time -- they're calculating it based on each PC unit. They know exactly how much carbon they're offsetting. So that's becoming very important in the sustainability front.

It's Daniel from CLSA. Just in terms of the 85 million unit level that you provided 3 years ago, what is it now? I mean, over 3 -- what's the annual growth of this market?

That's a good question. I don't know if I have that off the top of my head.

I think if you're looking at, for instance, one of the slides Alistair presented earlier, you can see that we had a forecast in terms of storage of 250% growth over -- I think -- was that a 5-year period, Ana? That was over a 5-year period. So that was, I think, a good example of the data storage and how quickly the market is looking to grow, and that would be the pace that it's currently at now.

And the second question is just in terms of, it's phenomenal, your performance in terms of building a business from basically $0 million to a $22 million business in a couple of years. One of the -- you talked about the barriers to entry, but what challenges a new competitor to repeat what you've done and seeing the success that you've done, to just replicate this?

Right. That's a good question. Our competitors, we don't have 1 competitor that we're competing in every sector. We tend to -- our competitors are regional. So they're not global players. They're not publicly traded. We're one of -- now there's a second publicly traded 1, but we're the main 1, publicly traded, global. So it's the fact that we have a global presence, and these companies need a global presence so that they want to be able to have one main vendor that they deal with globally. And as we're adding services, we tend to compete against different types of people. So it could be your warehouse providers as we're getting further into the fulfillment space. So it's not just 1. To be able to add the fully integrated service is very special. And that's why we sort of have that competitive advantage there.

I think that's a super clear example of the competitive advantage that we have. So firstly, there's, as she was saying, this global service, that's very difficult to replicate, expanding around the globe. The second thing is a full integrated suite of service offerings. So we are a 1-stop shop. And then I think the third thing is that we're a very secure partner. We have R2 certification, ISO certification and we have a very good reputation in the market. And we certainly want to be focused and retain that reputation. So I think that -- and on top of exactly what Ingrid said earlier, being a publicly traded, trusted provider is also very key.

With all the corporate governances, we're not going to disappear overnight. In the old days, a lot of our competitors would be small, privately held that can just disappear. Something bad happens and then they're gone, right? This is a very...

[ And somebody else is out ]. Remember, a lot of our customers that we're dealing with now are also working out what they want to do. Some of them, Ingrid was talking about a full supply chain suite of services that we're providing. Some of those companies are actually working out what they need to be doing. They're actually on catch-up. So you've got, [ led ] saw a Tier 1 level operator 1 of the large customers that we have. They're doing the full suite. But there might be another 5 or 6 that actually don't know how that whole suite actually could develop. And I think that's part of the education program that Ingrid's team is actually bringing to some of these customers, to say "Hey, do you know that you can do the following. So there's actually a bit of to and fro between working with customers, sharing best practice, and actually inviting ourselves further into their business. So there's a bit of an education program going here to some of those customers as well.

Ana, does this, do we... Okay. So we may stop the questions there at the moment. Great to have all that excitement on SLS and our business, but we'll have more questions, and Ingrid will be up on the stage again later on.

Thank you, Ingrid and Angela. Our next presenter is Brendan McDonnell. Brendan is in charge of the Sims Resource Renewal Division, and will give us the latest on that front. As you may have seen in the announcement that we put out to the market back in February, Brendan is retiring from Sims. This will be his last presentation to the market. So for us here, it seems that hopefully, for you as well, this will be a special one. No pressure, Brendan. If you could join me up here.

Thanks very much, Ana. Thank you for that introduction, and thanks for putting me on after Ingrid. That's really helpful. And thanks for putting the pressure on. We'll see if I can do something about it. All right. Thank you. The reason that Sims Resource Renewal exists, the reason we created it in the first place, was for it to be instrumental in achieving our purpose. So when we came up with our purpose 3 years ago, we realized that we had a whole lot of waste we had to deal with, and we specifically created Resource Renewal to do that. What that means is that you've seen this sort of chart before, where we had it up earlier on, we've added a new line to it. And that is where rather than the stuff going into the landfill, we're actually going to take that around and bring it back up into the top end of the resources of the process. So in that waste hierarchy, we will now have and recycle and redo most of our waste material. What does that mean? Well, we are going to close the loop in our process. And we're closing that loop in an organization that's basically been a recycler for over 100 years. And that's a very monumental step for us to actually now turn 97% of all of our waste into commodities and products that we can sell. So stuff that we used to pay to put into the ground, we will now earn revenue for. And it's -- and 97% of that we will be able to do that for. So that's a huge step for us as an organization. So we'll take the residues that can't be refurbished or recycled that Ingrid does, and we'll process them as resources and not waste. This will create value for Sims, it creates value for our customers. It creates value for our partners, and it, most importantly, creates value for society. We will be at the forefront of decarbonization, not just of Sims, but of the industries that we service that we look after. And that is a great step forward for us as an organization. All right. A little bit about our journey. Like Ingrid, I was here 3 years ago. And we've put this concept forward about how we were going to do. And at that stage we were calling it waste-to-energy because that was the way we looked at it. And we had spent a lot of time since then researching our technologies, the ones that we were picking, the ones that we thought we liked. And we tested our material through a number of technologies. And what we found was that, yes, as waste to energy, interesting concept, but waste to energy and the technology we looked at didn't fit with our purpose. And the simple reason is that when we turn waste into energy we create, like any power plant, a whole lot of carbon dioxide. So Ingrid was -- not Ingrid, Elise, sorry, was mentioning this morning in her ESG talk, conversation that Sims total output of CO2 is about 147,000 tonnes per annum. One single waste-to-energy plant when we went through and modeled it all up using these technologies. One single waste-to-energy plant would put about 80,000 tonnes. So more than half of the carbon dioxide emissions that Sims produces. That instantly said, that just doesn't fit our purpose. That's not creating a world without waste, to preserve our planet. So we said, what are we going to do about that? And what we quite -- had the fortune of doing is that we've selected a technology called plasma gasification. I'll talk a little bit about that shortly. But plasma gasification gives us absolute flexibility about what we do, because what it does is it doesn't incinerate anything. It doesn't burn anything. And what it does is it turns things into a gas. And that gas you can then do many different things with, and you can make many different outputs with. And because we do that, we said, well, rather than waste to energy, what would we do with this gas that we've created? And what we can do is we can then say, well, it's quite easy. We'll turn that into creating hydrogen and CO2, because that's the sort of stuff we can pivot to without having to really change or throw away our process. So we started here going to do waste to energy. We looked at that and we said, no, that actually isn't environmentally very good. But what we can do with the technology we've selected is we can move to production of hydrogen. Hydrogen, and we'll also produce food-grade CO2. So we've captured the CO2. It's not going to the atmosphere and all get reused. And that's great for the Australian market. But the Australian market, our plants aren't there terribly large. They're geographically spread. So you don't get the opportunity to do things at significant scale. When we move to places like the U.S., we've got like 800,000 tonnes of waste material there that we need to process and do something with. It currently gets railed to landfill in the center of the States. We can actually take that material already to a large center and process it there. And then we've got scale, and that's where you can start to do different things, and we'll talk a little bit about what that means as we go through. But ultimately, even when we said we wanted to do waste to energy back at the start, we always said we wanted to be able to close the loop to do the full circular economy. And that meant that we didn't want to just create energy for [ out ] all the time. We wanted to be able to get back to taking that material that is our waste, turning it back into what it really became -- started from, which was basically a plastic. So we wanted to go to the building blocks of plastics. And that's either producing an olefin or a methanol or something like that, so that you can actually turn that into a plastic later. And that's really our aim is to get there. And that's where we can do that in scale when we get to somewhere like America. So let's talk a little bit about, this is the sort of the boring technology bit. I like it, but I understand other people won't. But that's all right. You have to suffer it for a little bit. This is the technology bit where we just sort of talk about what we're doing. ASR. John has quite nicely brought in a lovely boxed sample of it over there. It's beautiful looking stuff. It used to be, I think, a terrible thing to look at. But I just think it was awful, but I actually like it now because it's a resource. And it used to be waste. Now I look at it as something that's got a monetary value, to be honest. It's made from all the things that John put through his shredder, whether it's a car or whether it's a washing machine or a clothes dryer or a toaster. That's where -- it's the residue that comes out of what metals -- after he takes the metals out, what's left. A couple of things about that, though. And I also talked a bit this morning about sort of what sort of levels of waste we're going to have going forward. But we do over 1 million tonnes of waste globally at the moment. That's going to rise quite substantially over the next few years. And the reason for that is that decarbonization, as you know, is going to drive increased use of scrap. And so with more scrap comes more ASR. And with more ASR, you've then got to do something with it. And now on the other side of that equation, it's also a problem, is landfills are decreasing. In some of the areas that we operate at the moment, landfill, directly landfilling is actually not even possible anymore. And so landfill is diminishing. Even in Australia, we're seeing that landfill is diminishing. So we're going to have an issue of landfill getting less, ASR becoming greater. And for us, that means there's going to be an upward pressure on the cost of disposal. And that is inevitable. Now we can talk a bit about that. But we already see that they've got these increases in landfill levies across Australia, for example, over the next few years. But this is not a short-term play. This is about what happens in the next 10 years. This program is like a 10-year program because we need to get in front of the landfill issues. And what we see in other parts of the world and other parts where we operate, is that landfill is now becoming very difficult to do. And if landfill is difficult to do, then 1 of our big problems will be what do we do with our waste stream, and we've got to have a solution for it, and that's what this is about. So we're going for plasma gasification. Let me explain what that is a little bit. It sounds very exciting. Plasma is a great term. But what for us that is, is that what we do is we'll take our ASR and we'll fit it into a gasifier, which is just a large vessel or a large cylinder, a reactor, if you want to call it that. We don't burn it. We don't do anything like that. What we do is we heat it. We heat it to a really high temperature. And to do that, we use what's called a plasma torch. And so think of a plasma torch as being just a permanent and continuous lightning bolt. So it's just a lightning bolt that's running all the time. And in that lightning bolt is really, really hot. So it's called indirect gasification because what it does -- the plasma doesn't actually touch any of the material, it just heats the air, heats the air to a really, really high temperature. And what that does then is that, well, you've got these plastics and wastes in there and they just then disintegrate down into their basic elements, their molecules. And it's from that, that you form your gases, and that's where you can then start to manipulate those gases to make other things. That's all exciting stuff for me, but obviously, not for everyone, but you had to hear it, I'm afraid, sorry. So we produce a syngas and that syngas -- this process is not new. It's done all over the world at the moment, not with our waste material. But how do you think we get most of the hydrogen that's made in the world at the moment, or most of the ammonia that's done in the world at the moment? Or how do you get most of the carbon dioxide that you buy -- when you buy a beer, it's in your drink or your water fountain at home. It's come from natural gas. Natural gas that has been split and turned into carbon dioxide or hydrogen. In much the same way that we're doing this with our process, that's where that comes from. So when you look at all of that and you say, "Well, okay, that's great." But what we're doing is we're actually doing this from a waste stream. So we don't have the carbon intensity legacy that sits with current production of hydrogen -- current production of CO2. We actually have a very clean waste stream and a very clean process, which means that we actually end up creating a very green syngas. We'll talk a bit about that shortly. But we just don't have that carbon legacy. And that's what the big difference is for us. Gasifier. Sims residue conversion technology is what we're calling it. As you can see, I employ a lot of engineers and not too many marketing people. So that's one of my problems. But so it doesn't roll off the tongue easy, and I still struggle to remember it. But that's the technology, and that's a lovely little scale, little model. That's actually what we're building in Brisbane and Rocklea at the moment. So what does it mean? Well this technology has been around commercially since about 2000, processing ASR of around 2000 in Japan originally. So it's not something that's new. But what it was done is it was being used to do specific tasks. And so what we've said is our value here is to create something that we can create a very, very pure syngas. And then from that pure syngas, depending upon where we go in the world, we'll decide what we turn it into. So in Australia, I'll pull out hydrogen and CO2. In America, I might make a methanol. One of my favorites, I might make an ethanol or I could do something else with it like create an olefin. And so I can do those things independently of the process of actually converting that waste to a syngas. It's that post process that gives me the flexibility of what I do with my technology. And that gives me options. The other thing I will do with this technology is we've got a little gadget over here. So what we want to do is we want to make sure that to bring this stuff up to the standards that we think society expects from a technology these days. And that's one of the things that we'll make proprietary. So this thing is a heat recovery unit. So rather than use natural gas to turn run boilers and things like that. This is where the syngas comes out. It comes out at 1,100 degrees. We can recover that heat and start to make steam and other things that we need to further down the process. We can do these things without actually using any more fossil fuels. And we'll be out creating any greenhouse gases. So we can make this a very, very green process and create very pure materials. And that's really why -- we'll have our what we call our proprietary version of this. And so it's a safe process. It's been used for a number of years for 2 decades really. It will meet all of the highest and stringent standards in the world for these sorts of processes around emissions and the rest of it. So it's -- it will meet the European standard, absolutely. And what it does do is it can be used from multiple types of waste streams. Sims will always be focused on getting rid of our waste. That's our primary task. So we will be focused on that. But we will be able to use partners to take this technology and actually do other hard-to-handle waste streams, things like medical waste, stuff like that. It can do all of those sorts of things as well and without any real modification or change. More on the technical boring, sorry. But so our first commercial facilities will be in Australia, hydrogen, carbon dioxide. And the other thing we have is a glass like vitrified product. At the bottom of the gasifier, well, it's 1,100 degrees at the top, it's actually 1,600 degrees at the bottom. So anything that can't be turned into a gas will come out at the bottom as a vitrified product, in other words, just like glass. And that's we always used to think that this was a very useful thing, but not all that exciting because it doesn't have a lot of monetary value. The material comes out. It has good monetary value, but not a lot of monetary value. What is real benefit is that it's actually a carbon sink. So it actually pulls carbon out for us. So we've got this process, and we're actually getting greener every minute that we run it because we've got carbon that's being trapped in a vitrified product at the bottom. That vitrified product will turn into road base, but there's other things we can do with it, too. It has actually got some real high-value components. It's an SCM or a supplementary cementing material used in concrete and things like that if we grind it up. That is a product that would automatically replace -- it's a [indiscernible] replace things like fly ash in the market. Now you say, well, people get their fly ash at the moment. So why do I need a different fly ash? Well fly ash comes from coal-fired power stations. And so the less number of coal-fired power stations, there are less amount of fly ash that will be in the market. So as we go down this green path and start to make these differences in how society operates. We will find that some products that we actually rely on will start to disappear because coal disappears. And we have some supplementary products that we can replace some of that with. So it will be a market for these products all the way. The other thing we do is when we gasify our ASR what do we really do? Well, anything that is not carbon, hydrogen or oxygen turns into a vitrified product. So that's the stuff that will go out and become a fly ash. Anything that's carbon, hydrogen and oxygen, we capture. And when you've got carbon, hydrogen and oxygen, you can do different things with it, and that's where the chemists come in, get involved. So that syngas is what we can then transform it into. So the simplest thing that we do, we could do for example, is we could just supply someone raw syngas. So in America, if I build a large plant and I sit it beside an industrial that needs a syngas to make things, I could just pipe them the syngas, not a lot of capital required in that particular process because once you've made the gas, you're just giving it to them. And you'll pay a natural gas price for it. The other thing I can do with it is, as I'm doing in Australia is, I'm just going to push out the hydrogen. So that's a fairly simple process. You just push the hydrogen out of the gas stream, bottle it, it's 99.98% pure hydrogen. It's pretty cool. The other thing I do is I'll push out carbon dioxide because carbon dioxide is naturally formed there. And so I can pull that out, and that will also be about 99.7% pure carbon dioxide. That's food grade. And I know carbon dioxide sounds like it's a bad thing these days because everyone talks about decarbonization, but everyone still likes beer. And so you need to have your food grade carbon dioxide. It's not just beer, it's processing poultry, it's for processing all sorts of things. Australia has a deficit of CO2 manufacturing. And so we don't produce much -- enough CO2. We import CO2 into this country. And that will actually get worse as we go along as well. So the main manufacturers of CO2 in this country are the ammonia producers. So people that produce hydrogen take it out from either coal or they take it from natural gas. And that is the main source of CO2 in this country. As those guys decide to go green and use electrolyzers and produce their hydrogen and the ammonia in a different way, the CO2 market in Australia actually shrinks because we aren't producing CO2 anymore. And so CO2 will go down, and we still will want to drink beer. So it's one of those things. Beers are constant and you just need to meet the market demand. Okay. The other thing that we will do, as I said, when we get to somewhere like North America, we will look at how we can, with volume change and go to the sort of the building blocks of plastics. The very common process at the moment is to go through methanolysis to create methanol and then turn that into an olefin. That's the normal process at the moment. And you need scale to do that. And so we won't have the scale in Australia but we certainly have the scale in the U.S. to do that, if we wish. Now methanol is fairly, it's a simple cracking process, but it's fairly easy to produce out of our syngas and we'll have a very good match for methanol We could also do ethanol, but methanol probably will get to plastic first. So what does happen to that olefin? That olefin then gets sold to a -- or methanol gets sold to a plastics producer who goes through a polymerization process and turns it into either polypropylene or polyethylene, any one of those of the -- which are the most common plastics used in the world. And that's where your original ASR got chemically turned back into its molecules then turned into an olefin and then turned back into the plastics, which is where it first started or entered into our society. The other things that we do is there's now -- and this is new tech, which is where we're going to put some energy into R&D, into producing straight from syngas to olefins. And if we can do that, if we can avoid that whole methanolysis process, that will be actually the ultimate for us. So instantly go from our ASR through our process and then into something that can be the building blocks of plastic. So that's sort of the technical side of what we do, and I'll sort of leave it at that. and just give you a very simple diagram. So this is what we do. John provides cars, things he puts them through his shredder, turns them into those little bit of metal over the back there. And his waste, which is over the back there, we pop into a gasifier. We only do really 2 things with it. We create a syngas and whether it's producing olefins or whether it's producing hydrogen, the syngas is exactly the same. So we will have one model for this, no matter what we do. So that's fully replicatable for us. We produce syngas, and we can either go to olefins or hydrogen and CO2. Then the vitrified product comes out at the bottom here, and we will either sell it as a simple road base, which doesn't really require any sort of certification. But what we would want to do in Australia is we would want to get that ground down to be [indiscernible] . So a supplementary cementing material. And what we do with that is that it actually gets through a bit of a process for the [indiscernible] society and you have to get that approved, but -- and that might take 18 months, but then you can get a premium for that particular product. Okay. All right. And this is the important part of our technology, though, is -- and everyone always asked Well, will you be able to sell your hydrogen? And will you be able to sell it for at Blue grade or will you be able to sell it a gray grade or will you be able to sell it at green grade. And this has always been the challenge, right? So what we found is that everyone talks about colors of hydrogen and really they mean very little because something can be green, but can be also quite dirty. So it's all about what is the carbon intensity of that product that you've made. How many kilos of carbon dioxide did you create to make 1 kilo of your hydrogen. That's the carbon intensity, and you do the analysis through a life cycle analysis process. And so we've done that now with our -- you have to do your whole design of your plant and work at all your inputs and outputs, and then you can actually do this. And we've done all that. So we've now done an LCA on our hydrogen. And look, it's a preliminary study at the moment. We've used experts because -- to do this. We will actually take it to the next step and get another third party to come in and actually review all that and what we've done. And then we'll start publishing out what actually the methodology we've used and how that works. We won't do that. So we could call it at the moment until we've done another stage of certification but it's a preliminary result. And basically, it says that our hydrogen is right at this lower level of the green band, in other words, and the lowest of the oil in that band, the better you are. So we produced 2.45 kilos of CO2 on a life cycle analysis for every kilo of hydrogen. That is as good as most electrolyzers in the marketplace and there's many electrolyzers that will be a lot worse than what we do. So this is sort of the band for green. We're down near the bottom. And that means we've got a very green product. And that means for having a green product that comes from waste. It's a very unique product. And because it's unique and because it's green, we'll be able to attract a premium price for that product. And that's one of the things that really makes us very comfortable that we will be able to get premium hydrogen pricing for our material. The other thing I want to talk about -- I mean now we've passed the technology a bit is we want to talk a little bit about what is our process, what is that -- how are we going about this? And what I wanted to really talk about is our staged pathway, our very staged approach to this. That means that we don't take risk that means that we don't put anything in Sims at risk, that we are doing this in a very measured and calculated way to ensure that we will a, succeed, but b, that we don't put any risk into our organization. And so there's a 3-phase approach. First phase is what we are in now, which is about building a demo plant, which I'll talk a little bit about shortly, about doing 2 commercial plants in Australia first and then doing some R&D here, particularly around converting syngas direct to olefins and about wherever there's any CO2 that's left behind, turning that into a solid product. So that's where we're putting a bit of energy at the moment, and I'll talk about those. Our Phase 2 is really what we talk about when we say we're going to a North America large-scale facility. We used to call it a mega facility, but we thought that one must scare everyone. So we now call it a large scale facility. But really, it's not one single facility. So in America, we've got 800,000-odd tonnes of ASR to process. We will do that in one physical location, but that might be 6 or 7 smaller plants that we build to do that. So we can scale that over probably about 5 years or so of development, and we can actually take that and make sure that that's very low risk. Phase 3 will be all the remaining sites that we've got and replicating that U.S. business model. And so -- and incorporating all our R&D learnings into those next [ lots of sites ]. I'll just talk about those as we go. First of all, let's talk about the Campbellfield or Victorian project. I'm sure you all are aware that we started that program, and we actually submitted our application to the EPA and our application to the Hume City Council. And not long after we did that, the Victorian government released its waste policy, a thermal treatment of waste policy, which basically brings in a new regulator and a new licensing process for doing thermal treatment of waste. And that regulator still has to go through the Victorian government to be approved, and the licensing process needs to be worked out. So for us, that meant that there was uncertainty about getting a permit to operate a plant. We were pretty comfortable we'd get through the EPA and other regulations, but there's now a new permitting process in place. So with uncertainty rather than continue to consume money, we put this project on hold until we could get some certainty. We thought that was the most responsible thing that we could do. The Victorian government acknowledged that. They've been very supportive. They are going through the process of getting regulations in place, et cetera. And it will probably be a 12-month process from when they started this, which was November last year. Before we get to that position where you can actually start to apply for a permit. And so we will do that as soon as we are able to at the end of this year and hopefully be allocated a license to process waste at Campbellfield shortly after that. We will then need to go through some more of those process. So probably got 2 years before we could deliver a completed plant from around about January to March next year, that's our current estimate based on what they're doing. So yes, it's delayed, and that was unfortunate, but we didn't feel it was -- it was good for us to continue this project going on whilst there was uncertainty about getting a permit. We are very comfortable, and we are fairly confident we will get one, but without the regulations and things being in place, you need to wait. What that did was it made us pivot them towards what we're going to do in Queensland, where we're doing the second site. So first part of that is to produce a demonstration plant. Now this is a very important facility for us. We're building that at [ John's Yard ] at Rocklea. And it's going to be a plant where we really minimize our risk and -- to Sims for on a commercial plant. So you've got to derisk your commercial plants construction and risk and operating risk. And this is what the demonstration plant does. So it does 2 things. First of all, it allows us to give the state government and the Department of Environment science in Queensland, stats or data to validate our technology and what it does. They're already quite comfortable with what our technology does, but we have to actually back that up through a process. And so this gets us -- we will run ASR through this plant. We'll have continuously monitoring all the emission stacks and we'll be actually looking at all of the material that comes out and being able to prove that, yes, we can operate this plant within the approved levels and limits. The other thing that we do for this -- the other thing is much more important. It's about providing certainty to our Board and to our management that when we go operational, we will be able to operate this plant and operate this plant efficiently. When you look at that little bucket of ASR over there, if you do, please do it, it's a beautiful stuff. When you look at that little bucket of ASR over there, you'll see that it's -- it's strange. It's not a homogenous thing. It's all sorts of different materials in it. And depending upon what John's putting through his shredder at the time, it depends on what that ASR looks like. And so it is variable. And so in the area land of variability and with the chemical reactions, you're actually going to see, well, how do you manage that variability and what does that mean to you. Now honestly, in Australia, that's not going to be much of a problem because all we're doing is putting it in gasifying it, pushing out the hydrogen, pushing out the carbon dioxide. It doesn't really matter much about the variability to do that. But when I go to do an olefin or something like that, it's going to be important about what is the mix of carbon, what is the mix of oxygen. What is the mix of hydrogen that's in that at any point in time. So I've got to get that process working well. So not really a problem for today but something we need to be actually certain about for when we go to build larger facilities overseas. So that's the project at the moment. It's in construction at the moment. It will be operational before the end of the year, and we'll go through probably a year or so of testing, applying for a permit for a commercial site in Queensland at the same time can be done in conjunction with that being operated. So it's not a serial process. I haven't got to do one and then do the other. They will run in tandem. And so that brings me then to doing the commercial facility in Queensland. And this is actually a drawing of what one of our plants looks like. So yes, it's more like a petrochemical plant than it does a scrapyard, but that's pretty much what it is. This process of doing a commercial facility in Queensland, I have to be honest, the Queensland government have been most helpful. They're really, really working well with us and helping us in this space. It's very good. We're looking at a few sites at the moment. We need to find a piece of land, and we expect to make a decision on a piece of land this financial year, so before the end of June. Once you've selected your site, your process for approval starts. And you can't do it until you've got your site because it determines the pathway you go through for approval. So we think that, that will take probably about 36 months from start to actually delivery of the plant operational. It can take a little bit longer if you trip the EPBC at Australia, it's a federal government act, environmental protection and biodiversity conservation act. And then that probably adds about 6-month tier process if that occurs, but it is very site dependent. So that just depends on where your site is and what you've picked. So until we pick that site, we won't know where we start. But we're really comfortable that we'll be able to do that in about 36 months. as long as we start by about June this year. That means that plant in theory, can be up and running by FY '25. And also the Victorian plant, which we talked about taking about 2 years from when we get approval, that also can be up and running in '24, '25 timeframe. Now to Alistair's point he made this morning, it's a little bit of a stretch. Would we actually do 2 of them that close to each other? Possibly not. But we'll have to see how the approvals go. And that's just how we'll look at those as we go through those. So based on a commercial plant and whether this is actually this is for Queensland, but it's actually exactly the same for Victoria. We will produce or we'll put through about 60,000 tonnes of ASR. John's 3 main sites in Australia, all produce around about 60,000 tonnes of ASR each. So Queensland will do 60,000 tonnes, the Victorian one will do 60,000 tonnes. That 60,000 tonnes of feedstock, it will produce 4,400 tonnes of hydrogen. Now everyone says to me, is 4,400 tonnes of hydrogen much hydrogen or not. It doesn't sound like a very big number. It is the largest element on earth. So a tonne of hydrogen is a hell of a lot of hydrogen, but 4,400 tonnes of hydrogen. If you equate that to something, if you were -- owned a large bus fleet, say like the Brisbane City Council. They have 1,200 buses, which supply services all around Southeast. It would be enough hydrogen to completely run about 600 of their 1,200 buses a year. So about half their fleet would be fully serviced completely by that sort of amount of hydrogen. So that sort of gives you some idea of the size of what 4,400 tonnes of hydrogen is. And our target market for our hydrogen is as a diesel replacement in the -- in that sort of industry, heavy vehicle industry. Diesel replacement is the most appropriate use for our hydrogen and that's where we would like it to go -- to go into fuel cell vehicles, not to be burned. We also produce about 80,000 tonnes of CO2. And that is a fair bit of CO2. Queensland is a great place to produce 80,000 tonnes of CO2. It currently imports CO2. It has one of its large CO2 manufacturers there who's in the process of moving over to doing a green hydrogen deal. So that means a whole lot of CO2 is about to disappear out of the Queensland market. So Queensland is a place where we think that -- in the next couple of years that they'll need to import almost 80,000 tonnes of CO2 into the market there because there won't be enough produced within the market. So it's a perfect place for us to actually build a facility producing CO2. The other thing that we would also produce as well as CO2 would be about 40,000 tonnes of the vitrified product. So there's a cementitious material or as a road base or aggregate, it's about 40,000 tonnes of that. So they are the 3 main output products. And we will -- that's sort of what we get out of there. The -- we would not continue to optimize these designs for these plants to -- for our CapEx optimization, OpEx revenue and obviously emissions. We were certainly very keen to make sure that we are as clean as we possibly can be. We actually think our products are fairly attractive because in nearly all cases or most cases they're replacing products that are already produced by the -- that produce greenhouse gases that are fossil fuels. And so our products basically replace these and people and with a very low LCA, gives people a very good opportunity to buy into that sort of material as a green material. And as far as financials go, all of our projects will be -- will meet sort of the Sims' financial hurdle rates. And that's how our approach. All right. If you're doing global projects and you're a global business, you need to behave globally and you need -- and you can't do that yourself. You need to have some partners. So we look at partners in 4 different areas, partners around ownership and so an investment into the projects that we do particularly, as I said, if we are doing other hard and difficult waste streams, that's not something that Sims will do it by itself. It will that with partners because our focus is on Sims and Sims alone. You will have partners that are offtakers that are offtakers for your materials. So in some markets, it may be that you just want to sell your CO2 to an aggregator. In other markets, you might say, well, actually this market is so good that we want to take the premium price on that and so we'll do this handle the CO2 ourselves. So you have to have partners that you're going to work with, whether it's with hydrogen or whether it's with your CO2. Suppliers. Whilst we've got a lot of material to sell and I've got one major supplier and that's John. He provides me with the ASR, and I charge him nicely for it. The other suppliers that we have, particularly that we use electricity and green electricity as a core for what we have to do. The other major supplier is oxygen. We use a lot of oxygen. So we've got a few partners around those sort of supply materials and one difficult one who is John. And then there's other R&D, which is what we really have to do a lot of work around. And in R&D, obviously, what we're focusing on is trying to get to that olefin journey as fast as we can. So it's not critical for today, but it is where we need to get to within the next few years. And because of the emerging technologies there and they're firming up fairly well. We're very comfortable we'll get to that ability to actually to do olefins. And the other one on that is actually, as I said before, is turning any spare CO2 that we have into some sort of product. What we've already done in our process is wherein you build these plants, traditionally, there'll be a lot of CO2 that's produced that goes to the atmosphere. We've put a lot of energy and effort in our designs to capture -- or not just to capture that, but to eliminate that CO2, get rid of natural gas burning or boilers, get rid of anything that actually produces CO2 and that can't be captured and just get that out of the game. So we only have very small amounts of that sort of CO2 that we have to deal with. What we've got then is a whole lot of CO2 that we capture and we can easily capture. And then the question is, well, what do you do with it? If you start to create an olefin which actually uses carbon, hydrogen and oxygen, then you need to get to that point where you actually say, okay, I've got some CO2 left. I don't actually want to do anything. It's not enough to actually worry about trying to turn into a product ourself. So let's try and turn that into some sort of solid product that doesn't -- that has captured that CO2 permanently. So they are the areas that we are focusing on for our partnerships. As for scope and for size, we're doing the 3 phases. As I said, our first phase is those projects in Australia, and we will do 2 commercial plants in Australia. Probably the only thing that interests you guys. After the second commercial plant, we are very cash flow positive. So building further plants won't impact on capital. So we turned that to a very cash flow positive spot after the second commercial plant. So everything from then on is pretty much self-funded. We will get to North America where we've got our large-scale facility. Now we've drawn a bubble there, and it's a bubble chart. So apologies for this. It's the wrong shape. It should be an oblong. It's going to take probably 5 years or more to deliver that. So don't think that that's just a very large, a lot of cash and capital that gets spent in a very short period of time in a few years. It actually will take 5 or 6 years for us to deliver that North American facility. And then after we sort of do that, we'll come in and we'll do the other projects, which are plants which are ones are sort of left over. There's things like the U.K., other plants in Australia, we haven't got to and any other ones in America that aren't within the natural catchment area for our large-scale plant. Now in saying that, our main driver here is around our waste costs and our risks on waste. That is what really this is -- apart from our ESG view of the world and how we are trying to do this the right way. We need to make sure that we manage our waste issues and our risks around waste. So any one of these could become important if waste disposal becomes difficult in that region. And as I talked to you about, ASR, it's a problematic material when it comes to waste. It is a material that we have -- because it's -- we do it in the landfill at the moment and landfills are drying up quite rapidly. It could become problematic and more problematic in some areas, and we need to deal with it earlier. In that case, any of those ones may be elevated or brought forward in the process just because we've got an issue in that particular area. We don't want to lose our opportunity to operate because of a waste issue. At the start, I sort of explained how resource renewal would be instrumental in achieving Sims' purpose. Well, what I hope I've shown you is that we're going to do that in a responsible and measured approach, I aim to deliver financial benefit to Sims whilst being led by our purpose, our purpose drives us. And we are going to deliver on Sims' ESG performance. So the sorts of things we'll deliver on, we will reduce our landfill significantly. We will help decarbonize Sims and we'll also help decarbonize our customers and other industry through our products that we deliver. We will grow the circular economy, simply by actually having that waste stream revolving around into the circular economy. These are some of the ESG goals that we have that we will achieve. But we've got other goals that we're going to achieve. And these are ones like -- and particularly reducing the commercial risk we have with rising landfill costs. And as I say, it's not just a risk over the next few years. It's a risk going out quite a long way and it will only get worse. So it helps us derisk that quite significantly. And it will create new consistent and dependable revenue streams. That's the best part of it is once you start doing this, you've got a good dependable revenue streams for different types of commodities. And there's other opportunities there for us to expand with our partners into other hard-to-treat waste streams, if we wish or if our partners wish. These will be all done in a careful and measured way, and we will not place risk on Sims in achieving these goals. It actually really allows Sims to deliver on its purpose to create a world without waste to preserve our planet. And that's really it. So I'm open for questions.

It's Lyndon with JPMorgan again. Are you able to share what Sims spends every year on ASR disposal into waste dumps just to get a sense of what the prize is?

So Sims' disposal costs a year running around about $100 million, I think, for waste. That's what we spend at the moment. That's the prize for our current cost to dispose of waste, but that's not what the future cost of disposing waste will be.

And I guess the economics of these facilities, I'm assuming relies on not spending that? Or do they stack up in their own right.

They stack up quite well. So if John still spends that sort of money, I will improve on that by about a multiple of 4. So it represents about -- the revenue stream of SRR facility, it's about 20% of the revenue stream of an SRR facility. So the other 80% comes from the products that we sell.

Brendan, Peter Steyn from Macquarie. Probably a very similar question. I'm just going to ask it a slightly different way. But would the returns of your -- or returns on investments stand up without any of those sales. Now what you've just said, if I got that correctly, the vast majority of your revenue streams actually dependent on the revenue streams from CO2 and hydrogen sales as opposed to the $100 million saving.

Yes. Yes, you're right. The revenue from the CO2 and hydrogen is around about 70% of the revenue stream for the facility. And -- but that's -- but yes, CO2 and hydrogen or what we're going to do in markets where there is a good market for CO2 and hydrogen. The best part of this is that when we actually go to somewhere like North America or even somewhere else, I can actually change what that output product is to meet the market demands. So if I've got a much better opportunity around methanol, I'll do methanol. I've got optionality because of the gasification process gives me this consistent gas that I can then do different things with. And so I'm not wedded to hydrogen and CO2, but the Australian market for hydrogen and CO2 is a good market for hydrogen and CO2. So that -- because it's a good market, yes, that's what we'll do here. But other places I will do to completely different things.

Andrew Scott, Morgan Stanley. If I recall rightly, last time we were speaking about this a few years ago, there was talk about also looking at alternative waste streams as a revenue stream, you just spoke to 60,000 tonnes there. Was that just some indicative modeling? Or has the thinking changed?

No. So that 60,000 tonnes is purely our waste stream at the moment. I am quite open to alternative waste streams. I suppose I wasn't doing too much about it about 3 years ago because some of the EPAs were going to -- can you just look after your own stuff. And so we're sort of a little bit tentative about it. But times have changed. Three years is a huge difference to what everyone thinks about things like decarbonization. We didn't even talk about it 3 years ago. And so now people are much more interested in whether we are -- want to do other waste streams. And economies of scale, put a little bit extra capital, and throw another 50% volume through your machine, the returns are good as long as the market can support the volume of product that you're delivering. So you've got to match that market with what you're going to make. So if I produce far too much CO2 for a market, then there's no value in it. So it's always about making those match to the markets. And we do a lot of work around understanding the markets and what opportunity there is for us to sell product.

And maybe on that, when you think about locations, what's the bigger imperative? Is it closer to the strata or closer to customer that's more important? And would you actually consider co-locating with a customer, for example?

That's a really good question. That's a really good question because 3 years ago, I would have told you I was going to collocate them with my shredders because I wanted to eliminate the transport leg. And that's true. I do, I was really keen on doing that. I'm less an advocate of -- I'm less wedded to that at the moment. So where the opportunity is to move your output products without having to transport those a long way, and you just have to balance the 2 up, you really do. So we are quite comfortable to build a facility that's standalone from our own facility as long as the transport leg isn't too onerous. And in the case of North America, is a perfect example, where we already have a well-established process where we rail all our ASR to West Virginia or middle of somewhere. And we rail it all there, and we've got large places where we deposit it. And that's all great. That's all good. To shift that to -- a plant in Claremont, New Jersey to shift -- to move something by truck there is almost impossible. So it's that sort of thing if you've got an established process that is quite reasonably clean, then let's just use that. And that then gives me the opportunity to build large facilities reachable by or -- by rail that in North America, where I can actually take all of my waste to, like we do for landfill at the moment, I could take all my waste to another location. That sort of changed my thinking since 3 years ago, yes.

[ Ward ] from [ Tindall ]. Sorry, how are we meant to think about the capital requirements of this opportunity?

The capital requirements?

Yes.

I think what -- I know you guys all love to model these things and which is your job. I get that. I truly understand that. After -- 3 years ago after seeing all the questions I got about how to model it was quite entertaining. But there's one thing about here. Because of the variability of what I could build, depending on the market, the capital requirements of each individual one will be quite different. So if I give you a model for capital now, it's not one that you can apply across the whole lot. You just can't do it.

What about the first one?

Well, yes, it's 15% return. So that's really all I would like to say because if I give you a number, you're just going to multiply it. And I don't want to do that because that's misleading. It really is. But as I said, we will be cash positive after the second one.

That's a wrap-up.

It's on the same track. The cash flow positive after the second one. What are you assuming there in terms of, I guess, the cadence for building from there after? Because it's kind of cash flow positive after 2. It's -- you're almost saying, it's kind of like a 2-, 3-year payback if you're building one every year.

Yes. So cash flow positive after 2. And so what we've always said is that, we always go fairly conservative. Now Alistair often sort of says to me once you've done a few of them, you may go a little bit faster, please. And I'm a particularly cautious type of guy so I don't tend to, but he wins. But when we get to North America, we will build -- it will be a different market. Now the one thing I haven't explained which really drives how fast you can go is the regulatory framework of wherever you're going to go. And I've got to say even in Australia, we have to deal independently with each individual state. And so in North America, it's even worse because it's still state-based and even sometimes it's locality-based, so city-based as your regulator. So you have to be able to move at whatever pace those regulations -- regulators allow you to do. Now for me, that means that I'm always going to have around about 3 projects on the go at once that are prospects that we're trying to make happen. Some will fall. We'll get approval, like chances are in Australia we'll actually have 2 that could go at the same time. But in North America, I might lose some, and I might only have one that I can go at any time. So it's all about that regulatory approach. We think if we're going to do a large facility in North America if we can get that approved in one location, and it's just a series of building 6 plants, we'll be able to put a certain cadence into that where there just one follows the other and keeps the risk low, but that's sort of our current approach. But it does depend on how that regulatory process works for you.

Thank you.

Thank you very much.

So we have now a 5-minute break, that's all we have for now. But you all benefited from there -- from the question and answer with Brendan. So if we can go to stretch your legs, come back here, please, in 5 minutes, and we'll continue with finance. [Break]

Waiting everyone to be seated. Hi again, so the last session of the day will be finance. As I said earlier, Stephen Mikkelsen is infected with COVID and can't join us today. We will have Todd Scott covering Stephen's slides. While Todd was recent addition as a speaker today, he has a long history with the company going back to 2012. Most recently, prior to his role Todd was the CFO for the ANZ Metals business since 2018, working with John Glyde in his former capacity as an MD for ANZ Metro. Over to you, Todd.

Thank you very much, Ana. Ladies and gentlemen, it's time to talk about the numbers. If [ Linden ] was here, I'm sure his eyes would light up. Before I get started, I want to address an elephant in the room. In some circles, small circles of the finance community, I've heard a rumor that people think that it's difficult to financially model Sims and that some of our key drivers are not that easy to recognize. There may be some truth in this. At least in how we traditionally talk about our key drivers. We've traditionally talked about Sims in terms of EBIT per tonne. What we're recognizing now is there's better ways to discuss the key drivers. So when we were putting this material together today, we were reflecting on is there something that we could release new in terms of new information to better explain and understand our core drivers to ultimately make it easier to model the company financially and to hopefully derisk and increase the confidence in what you project out into the market. So with this in mind, there are several areas we want to focus on today. Firstly, we're going to expand upon the concept of trading margin in percent terms as well as disclosing for the first time, new financial information, new granularity of this trading margin, both as for the Metals business as a whole, but also for the individual business units of the metals, ANZ, NAM and the U.K. Trading margin percent terms, in our view, is a far more it is far more stable and a far more reliable way to forecast earnings and gives a better reflection on really what one of our key drivers is. Secondly, we're going to spend some time looking at nonferrous and now [ Graham's ] eyes light up. Both on its scale and its profitability drivers, but also its long-term potential and growth potential for the company. Thirdly, we're going to look at inflation. How inflation is impacting our business financially, surprisingly both some positive and negative ways. Fourthly, we're going to look at the balance sheet and the various linked relationships between commodity prices, working capital, net cash, CapEx and capital management. And lastly, our SA Recycling joint venture business is a increasingly and now a very large part of our business. So we want to take some time looking at that business, specifically some of its key drivers to try to give more clarity around how that unique business, how its composition of its earnings come together to help you again model that business in better ways. So before I turn to the first slide, I want to point out that this presentation is largely focused on the Metals business, as you would have heard already, the SLS business. Ingrid's gone through that business in great detail. And then in terms of SRR, Brendan has gone through that business in detail as well. So starting off introducing this -- reintroducing this concept of trading margins in percent terms. So we're going to start with something that we've already been giving for a while now. And so if you look at this table on the right-hand side, these are numbers, we've consolidated a few of them, but we've been giving these numbers at a group level P&L for over 10 years. We just don't talk about them that much and it's hard, even though some people use them, it is hard to model out the granularity of the company based off of a group P&L. But you see all the different elements there. So we're going to use this as a bit of a way to reintroduce the concept trading margin. But if we step back for a second and look at the business at a high level, there are 4 key earnings drivers for Sims, at least the metals business. Firstly, we have our sales volumes. The volumes that the business buys, processes and sells. Secondly, we have the prices achieved for those and outputs in the markets, be that ferrous or nonferrous. Thirdly, we have the trading margins or otherwise said the spread between the price that we buy these raw materials for and ultimately, the price that we sell them for, and lastly, we have the operating costs required to process and sell those materials. So while the selling prices are relatively transparent. And the sales volumes are largely a reflection of the macroeconomic environment and how we can procure more of those metals. The trading margins are generally unique to the conditions of each business unit. As I've said, as you can see here, trading margin is worth elaborating on what exactly that is. There's many different ways of calling this, some people call it gross margin, gross profit we call it trading margin calculated as the cost of our raw materials plus freight on process raw materials. And that is a subtraction from the sales revenue to give us our trading margin. When you look at -- even on the group basis, over time, that trading margin percent terms, let me see if this works. It does not work. There we go. That's the one. You can see over this line here, it's actually relatively stable, and that's on a group basis. That's not the number we're going to be highlighting later. But it is relatively stable despite all the things that are happening with commodity prices over the last 5 years. When we look at then one level down on operating costs, this is all those costs incurred to turn that raw material into a salable good. And then again, looking at that group P&L, we -- we can break that down further into employee costs, employee benefits, your repair and maintenance cost and then a big basket of other costs. And again, we're presenting this -- been presenting this in our 4E and annual reports for a number of years now. So when we look at this slide, these are brand-new numbers. We haven't presented these before. These are now the trading margins and operating costs for the metals recycling business separately. Firstly, when you look at that trading margin percentage, it's remarkably stable. I think, again, all the things that happened with commodity prices over the last 5.5 years, it's ranged from 21% to 23% despite that significant volatility. And so again, what is this trading margin? So if you think of how do you visualize this, this is the margin that we capture across the end sale of the commodity. So depending on how much value you add to the product, it will determine how wide that margin is. So in many ways, if you think of sort of 2 different types of products or services we have, at the one end, you would have brokerage. So very, very little value-add put into that. So a very small trading margin. On the very end of the spectrum, you have all these clever things that we're doing from shredding cars, 300 cars in an hour, which go through an enormous shredder probably in a well-located facility on a lot of acreage. It will go through a downstream recovery system to do a sorting of nonferrous and nonferrous shred materials. And then it'll maybe even do another process after that to take absorbent and [indiscernible] outputs to turn them to Twitch and [ savit ] and other upgraded products. You're capturing an enormous amount of the value chain at that point, which is much, much higher than you'd be getting from just brokerage. That's the area we want to live in, and that's where our core competitor advantage is. So keep that in mind, the blended bill is this 23% to 21% at a group level. So the more value you can add to either ferrous and nonferrous, the more of that what you get. And the way you think about this, why we like this better than in a per tonne term? Is it stability? And that's the key. In the gold bar there, you'll see that even though our trading margin percent hasn't changed because the prices of the commodities have gone up. So much of that falls through to the bottom line. So we've gone from in '17, $122 a tonne to in the past half year, $194 a tonne. Compositionally, we haven't changed that much. Probably -- we've been doing a lot of clever things within our business in that time, of course, but as the commodity prices have fallen through to bottom line for us. And again, what we want to build into this is adding more and more processing, more and more value-add extraction be that either collecting more material from source and processing it further and adding more value to it. Moving down, again, at this aggregated metals business, operating costs, that has to be subtracted from trading margins. And this is a mix of fixed and variable costs. Roughly 70% of that cost base is -- now when you think of the key, the biggest driver within that of all operating costs, about 50% of this is employee benefits. The remainder are certainly waste as we've talked about, that's a big variable cost, also fuel, power, SG&A, that will form the bucket. And that's a mix of fixed and variable costs. Now getting granular, looking at the North America Metals business. Now what's encouraging here is you look at that same chart on the upper right-hand side, and the trading margins are still pretty flat. We haven't introduced a new volatility there. But there are as always, there's some different nuances within each business and so come to light as you see ANZ in the U.K. And it depends on the composition of what that business is processing or what it's running through its plants. Now one of the unique features of the North American Metals business is one of his competitive strengths. It has, I think, at last count, 10 deep water ports -- this is a great competitive advantage. You saw the video that John showed of Claremont, our marquee facility, in New Jersey. It is right on the port. It has enormous capacity to process and sell. In fact, there's so much process -- capacity that plant and actually nearby port in Newark can actually put more throughput through those facilities, than we are generating ourselves. So what happens is you're actually buying a lot of processed dealer tonnes with a skinnier margin. So that does influence the trading margin still a very smart thing to do financially because you're increasing your utilization rates of the ports. It's all done profitably, higher return on equity, but it does impact that trading margin slightly. Now there some local impacts with the operating costs, of course, when you do have those big facilities, you lower the operating costs because they're best-in-class, but you're also blending down the operating cost per tonne because you're getting through so much volume through them. ANZ, again, encouragingly, that trading margin is fairly stable. Now what becomes interesting here is you've noticed the trading margin is higher than what we saw in NAM and then on the average. So why? Now what this becomes interesting and highlights what we're trying to do in adding more value-added processing. What is unique about ANZ has proportionally more shredding in this business. It also has proportionately more feeder yards across its network to get more at source material. So if you're going out to Parra tomorrow, which has a large granulation facility or St. Mary's tomorrow, which is a large shredding and downstream recovery facility, they're all supported by good feeder yard networks. And this ecosystem creates wider trading margins. So as a result, when you look at the trading margins are higher, but also operating costs are relatively higher too because we're doing more processing. We're actually doing more activities. So on a per tonne base, it can be a bit higher. U.K. Metals. So we're seeing in the U.K. Metals business a little bit more volatility than in the other regions. Now big picture, if you look at the table on the bottom right-hand side, there's -- yes, there's volatility, but it's far less volatility than EBIT percent, EBITDA percent and a lot less volatility than if you're looking at this in an EBIT per tonne basis, which is traditionally how we've -- I was covering the stock as an analyst on the sell side back in way too long ago. But back in 2008, 2009. And we all talked about it in EBIT per tonne terms. And it's whippy and it's all over the place. But you look at these numbers and you look at the trading margin, it's actually even with that relative volatility, much flatter. Now what are the nuances that are happening within the U.K. Metals business? Well, there's a couple of things happening. One is that the local market does have a lot of competition in that market. There's more competition for materials. There's a different blend in the sales mix. They have proportionally a little bit more retail nonferrous, which has just a little bit less -- naturally a little bit less trading margin within it because there's less processing done on that retail nonferrous that type at least. And then there's other dynamics with the short sea market versus container market that they have where just a little bit more volatility because the cost comparison between containers and short sea costs are closer than where you have deep sea shipping costs. But in the big picture, still relatively stable trading margin. So with trading margins established, and I do expect plenty of Q&A on that one. I hope I do, at least. We'll move on to that next subject, which is nonferrous. Now this is something else that we haven't talked a lot about in the past. Now the way we normally talk about our product lines is in tonnages. So if you look at our composition in the right hand in the top -- top pie chart, sales volumes dominated by ferrous, 92% ferrous, 5% retail nonferrous, only 3% nonferrous shredder recovery. So you would think this is clearly a ferrous business. But when you look at revenue terms, 1/3 of our revenues are actually exposed to nonferrous in some way. This is positive in many ways. Firstly, because we are trying to expand that exposure to the nonferrous segment gives us exposure to all those positive things that we've been talking about all through today. The, I guess, higher price from that commodity, but also the longer-term exposure to nonferrous metals that are going to be a big part of the decarbonization movement and the electrification of the economy -- just to add some more nuance to it. When you look at nonferrous now nonferrous isn't a commodity in itself, there's underlying commodities to it, predominantly almost exclusively copper and aluminum and not proportionately, and I'll speak in tonnage terms because it's more stable, but about, roughly speaking, 75% of those volumes in the retail nonferrous bucket, 75% of those volumes are aluminum and 25% are copper, again in volume terms. So we're going to keep on doubling over -- doubling over our old ground, just to drive home points. What we want to do is continue to increase that non-ferrous shredder recovery and to continue to increase our value-added products and product segments. You may not see it come through -- to turn that dial from 3% to 8% takes a lot just because of sheer tonnages and the weight of ferrous, but we do want to continually increase that number. The next thing we want to talk about and you have to talk about these days is inflation. So you would think inflation is all bad. We're, luckily enough, a company where inflation isn't all bad, particularly when inflation is being driven by higher commodity prices. So it is a mixed bag of tailwinds and headwinds, I would say, overall, the tailwinds are a little bit stronger than the headwinds. On the tailwind side, of course, higher commodity prices for ferrous and nonferrous are getting pulled through. Again, remember, trading margins in percent terms, the higher the revenues equals higher trading margins in dollar terms, equals higher EBITDA and everything else, it flows through. So higher commodity prices are helping us in that way. Also -- and what's quite unique is when you get these higher metals prices, it creates opportunities for further downstream processing that might not exist if you didn't have a higher commodity price. And so if you think of extremes, if the copper price was very extreme, $100 a tonne, but cost you $300 to upgrade and process; a material into a foundry grade or just a much higher furnace-ready grade, you wouldn't do it. But when the copper price is over $10,000 a tonne and the aluminum prices these days, where is it, Graeme?

[ 37, 38 ].

[ 37 ]. It goes up $100 a tonne, I think, every day. When you have those numbers, it actually creates incredible opportunities for these capital projects to add more value. Another nuance, which is interesting is in the current environment with higher energy prices, particularly for things like aluminum, to create primary aluminum, just the energy costs are so high. There's, I think, a stat I saw. There is 20x more energy that's put into aluminum for primary production versus secondary production. So just the economics for scrap become more attractive in these price conditions. There are headwinds, though, of course. So the biggest one for us -- and consider, I've just told you that 50% of our operating costs are employee benefits. There is inflation. There's inflationary, a lot of inflation on labor costs. So we're seeing it both in our salaried and our permanent staff -- our salaried and our temporary staff. And that's -- that will flow through. We're also seeing it in freight costs. Freight costs not only just for pure numbers, but it's also creating more volatility that we haven't normally got when our chartering team goes to book a ship, and sometimes that number comes back higher than we would have expected, which can create challenges in planning for chartering and shipping. Of course, increased fuel costs, be that in our internal fleet of trucks and our external fleet of trucks. And something else that becomes interesting around capital items, those capital items for CapEx or just repair and maintenance. It's getting more expensive. And for bigger projects, the lead time to get some of these items is blowing out. So over the next 6 slides, we're going to look at the impact of higher commodity prices, the impact they're having on the balance sheet as well as how we're viewing CapEx, use of capital recycling and capital management priorities. So as you might expect, and as that chart clearly shows higher commodity prices reflected in that gold line, revenues over tonnages sold are very tightly correlated with our working capital needs. The one thing to highlight, yes, that's a very large working capital bar there and a good portion of that is inventories. But this doesn't infer that we have now a significant uncovered exposure on those inventories. A lot of those inventories are actually covered by a sale and they're just waiting to be shipped. So we do manage that very closely. We don't want to have that recovered exposure. Now getting into the nuance of not just the inventory, but the AR and AP side. This is the finance presentations, we're getting down to that detail now. But on the accounts payable side, we generally pay our supplies, particularly our smaller suppliers of materials quite quickly. That means a lot of our accounts payable is really trade payments. So it might be the person who's taking away our waste or the person who is providing professional fees, professional services. So they're not tied to commodity prices, whereas on the accounts receivable side, this is almost exclusively metals-related and then does fluctuate with quality prices. Working capital in absolute dollar terms, you could just see that arcing of working capital going up with commodity prices. The important point to note here is that this isn't inventory build. This is really commodity prices. When you look at that number in more relative terms as average monthly working capital as a percent of revenue, it's actually quite stable. Over the last -- geez, this is over 7 years in there. Is it -- yes, over 7 years in there. It's really ranged from between 7% and 9%. We're right now about 8%, a little bit below. So we're not really outside of the boundaries of where we'd expect to go. And that's a good thing. One of the important points for that is the working capital build is related to commodity prices, it's not related to stock in the ground per se. So it's really a part of the natural cycle. One thing just -- there are nuances, of course, this number can go up and down over time. Different things that would impact this would be in the U.S., particularly if you sell into the domestic market, they have longer accounts payable terms. So you could get 60 days or more before you get paid versus export can be within days depending on the terms. And depending on, I guess, availability of containers and ships, you might have to keep more stock on the ground depending on the availability of those ships. So bringing that all together. Chart on the right-hand side, you can see this inverse correlation happening between that blue and gold bar. Working capital -- quite sensibly. Working capital goes up and it eats into net cash. It's not such a bad thing overall because that -- what we do see, it's almost a buffer in many ways. We do see in declining commodity prices when the cycle turns, that working capital actually releases back into the business. As you buy your next raw materials for a lower price, it flushes back into your balance sheet. So while we're sitting right now below our net cash target of $100 million, that doesn't mean we don't have that, I guess, future potential to monetize that working capital should the cycle turn. So we keep that in mind when we do reflect on that $100 million target. So we -- while we are conservative and we want to keep near the $100 million target, we're also conscious that we don't have to cut capital spending or cut the dividend to get back there because we have that buffer. We -- if and when we do have excess cash, we do, of course, focus that on capital growth projects and then returning to shareholders. So when we look at that first part of how we spend our cash, capital expenditure. There's a couple of different elements in this. When we see sustaining capital -- sustaining CapEx, the blue bar there, that has gone up somewhat. It went up a little bit in '21, projecting to go up again in '22. This is reflective of a couple of things. One is we did pull back on a little bit of -- nothing dramatic, a little bit of spending in the COVID period, in part because there were some pretty serious times at the very beginning of COVID. We weren't sure how bad it was going to get. And then as that progressed, it actually just became challenging to get projects off the ground, to get ourselves back in that rhythm of capital spending and getting the sustaining capital projects moving again. So there's a bit of catch-up in there to get us through into -- and through FY '22 and a little bit into FY '23 to get us back on track. The other thing which is interesting to note there is we have $25 million in buy versus lease. So with the advent of the change of the leasing accounting standards, the attractiveness of leasing equipment versus outright ownership of equipment dramatically shifted into outright ownership. Leasing just does not make as much financial sense as it used to. So we're going to be doing a lot more buying, outright ownership of our equipment, starting with our mobile plant. That's one of those more logical things and something we do a lot of right now, we'll be buying that in the future. The other thing we'll be doing is spending more into environmental CapEx. What we found is -- while we think our facilities are of a high standard right now, it actually pays and there's great benefits to have best-in-class standards. Not only does this give you security of license -- better security and a license to operate in the communities you serve, but it's also increasingly valued by our customers and suppliers, particularly the large customers and suppliers, which share our same ESG values. They want partners up and down their supply chain that actually have those values, too. So we're putting money in there, but we think it's a smart thing to do. All CapEx, of course, requires a 15% post-tax IRR. So we try not to only do our capital spending from the -- our earnings, we want to utilize capital recycling as much as we can. So we're constantly reviewing this landscape of our assets to see what can be divested to monetize if they are, say, if they're noncore or core businesses or perhaps idled and nonstrategic blocks of land. Can we monetize that, flush that out and then recycle that into new core spending, strategic spending. And so we've done more recently is we sold our 51% stake in our Sims Municipal Recycling business in New York. And then a little while ago, as Ingrid mentioned, we sold our European waste recycling business, largely based in Germany and a couple of other countries in the area. This flushed a lot of capital back into the system. When we look at the SMR sale specifically, that nearly fully funded 2 core business transactions that we had, the Brisbane-based Australia -- Recyclers Australia, and the Baltimore-based ARG. That brought 200,000 tonnes of metals into our business, including a shredder, core businesses in core geographies. So bringing this all together in our capital management plan. So we have a target set for a target $100 million net cash through the cycle, which does have some variances depending on where we are and where we're sitting with working capital. We use our money to invest in growth CapEx for acquisitions and delivering shareholder value by hitting an IRR above our -- well above our cost of capital and above the threshold of 15%. And once we have surplus cash, we distribute that back to shareholders either through dividends and buybacks. In the most recent half, which is a good example, what we've done is we took 50% of the NPAT that we generated in the period. We sent 30% of that into a partially franked dividend and the other 20% of that cash was utilized for a buyback. Now we're not about to start a hedge fund, but I would say we bought 6.9 million shares at $15.96, easily could have gone against us. Thankfully, it hasn't. So we're happy. It's always good. It's a nice feeling when you do a buyback that actually you know you're delivering your value in a tangible way like this. Worth highlighting just lastly, there's CapEx in the joint ventures, the SA Recycling, LMS, these are all funded through those structures themselves. It doesn't come off our own balance sheet. So these days, no presentation is complete with the very discussion on our key joint venture Sims Adams Recycling. And I know George Adams is probably listening to this, and this is music to his ears, but he's right, this business has grown enormously over the last 5 years. In fact, when you look at our last half year's earnings for the first half of '22, it's now over 30% of the operational earnings of the total business, a total of all of Sims. This business now has 125 facilities, 23 shredders, does well over 4 million tonnes of metal a year. This is now, stand-alone basis, one of the largest metals recycling businesses in the United States. Over the next 6 slides, what we're going to do is we're going to try to give more color as to -- a context to this business. This is a start. I know that when it comes to financial disclosures, there's never too much in the analyst community. We're going to start here, and we'll try to tell the story better and better over time. So starting off with how did they grow so fast. So a large part of this has been an M&A story. Going back to 2017, they've done over 20 acquisitions. That's roughly an acquisition every 3 months. This pace has recently accelerated just in the past 6 months, they did one of their biggest transactions ever. The PSC Metals business, which added 800,000 tonnes of metals recycling to that business a year, including 30 facilities and 8 shredders. Now that reached financial close around the start of December, this past December. So a lot of the financial benefits will start accruing in this current half. How is SA Recycling able to do that? Well, they have a very good management team and a very good overall business. We're proud to be a partner with this business. They're good at what they do. They have a 125 years management experience, led by George Adams who has been in the business to be the manager, the CEO of that business since its formation in 2007. A very experienced Board, including Sims executives on that Board. They have very strong internal M&A processes as well, everything from due diligence through to completion and integration of M&A. When you do 20 acquisitions in 5 years, you start to get good at this sort of thing, and they have. They've also created a very results-driven culture with clear strategic rationale for growth, which includes consolidation within the markets that they operate, trying to create greater intensity of their footprint in those markets. But they also have a clear idea of when they expand into new markets, trying to say, is this market and is my business model replicable in this market? Now back to numbers. Looking at the top left, you can see that volume growth, 14% CAGR over -- since 2016. And now the other 3 charts are new financial disclosures. We talked about it a little bit earlier, but the one standout noticeable thing about the SA Recycling business is that nonferrous shredder recovery number, 5%. Just remember back into context, our overall -- Sims' overall business is doing 3% in terms of tonnages, nonferrous shredder recovery across its footprint. So what does that tell us? They don't have significantly better downstream recovery systems than us, but they have far more shredders than us or far more shredders than anybody else. They have 23 shredders across the United States. That's more than any other metals recycler in the United States. When they have that much throughput of shredding, they have so much more recovery. And so I think that get this -- think of all this again in the context to how you're going to model this and how you think about trading margins and how are you going to actually put a number to this? They have more processing of shred, they have more shredding material, so they do more value add, more value-add extraction. So there, we don't disclose it in granularity, of course. But their trading margins, it's fair to say will be closer to do something like an ANZ number and that compositionally will be greater, more to think along those lines than say a business that does less processing. As that flows down to sales revenue, you can see an even greater proportion of nonferrous in their mix. So they're over 40% now nonferrous in their sales mix, which gives them all the same benefits that we've been highlighting for own business, the exposure to higher commodity prices, higher nonferrous commodity prices and exposure to that long-term trends, long-term thematic stronger for longer nonferrous metal prices. Looking ahead, Sims Adams is going to be focusing on integrating those businesses that they've bought in the last 6 months. They're not going to stop there because they're going to continue to look out at the landscape. They have a lot to integrate right now, but of course, as any sensible business manager would do, they would continue looking. But they're also going to look internally, try to invest more in technology and infrastructure that have broad benefits for their business as well as invest for the downstream in some of the same ways that we're looking at. How can we upgrade and how can they upgrade the materials they process to get higher selling prices to create more value-add in those materials. So finally, just bring -- reminding everyone, the key things we touched upon, we did do a whirlwind tour there. Trading margins is the focus in percent terms. We're going to be looking at this a lot in the future. We do believe that when you look at your model and now you -- there's new information that hopefully you can benefit from, to look at something that's more stable in our business, align that with your own commodity price forecasts, use the detail we're giving around operating costs to drive more granularity in terms of how you view Sims. Nonferrous metals. It's much higher than what you would see on in tonnage terms for us, over 1/3 and for -- as they're recycling over 40% of their revenues. Inflation a net positive, driven by higher commodity prices. Working capital, really a reflection of the commodity price, how are commodity prices we're seeing, and can obviously unwind if a combine -- commodity prices unwind. But we hope they don't. There's a cash that flushes out of that. We're always going to remain disciplined in our capital expenditure, always making sure that we hit that 15% return on capital or above. And our management -- capital management program will always be aligned with delivering shareholder value, delivering excess cash back to shareholders, be it the appropriate mix of dividends or buyback. So with that in mind, I'm happy to take any questions you have. Anybody, but Lyndon though.

Thanks for that, Todd. And I appreciate the extra detail. The one bit that I wanted to touch on was nonferrous, and I know Paul Young highlighted this earlier. But the 1 missing link was, given the volume percentage, the revenue percentage, is it possible to allocate costs to nonferrous, so we can actually figure out EBIT profit, EBITDA? What I'm getting at is we've seen a broad-based rail in commodity prices, but -- in the future, we could see copper and [ alloy ] fall, yet scrap steel continue to rise, and it would be actually great to be able to separate out the earnings somehow.

Yes. So I would say we'll start at trading margins in percent terms, and that will add more detail. When we look at that bottom line of EBIT in product terms, Certainly, we do that. We have that internally. There are different nuances of how you allocate cost between the different cost centers. There's nuances of capital infrastructure allocations. But we do have those numbers available. There is, unfortunately, a limit to disclosures in some ways. When we start isolating in different ways, the profitability of different segments, it does create more challenging conversations across the marketplace and how we have those conversations with both are our suppliers and customers. So it's an evolving conversation, disclosures. We want to give as much as possible, but we always have in the back of our mind, what are the negative externalities of releasing the information. So we'll take it on board, but some things we can't release.

Maybe another way to ask it, is it massively more profitable to have nonferrous versus ferrous or vice versa?

So what I'll use is the context of the trading margins in percent terms because this is how we want to speak about it now. If you think of the 3 different product lines that we have and then the average, ferrous is near that average. Nonferrous retail is maybe slightly below. We're talking in aggregate global sense, maybe a little bit below and nonferrous shredder recovery is higher, arguably much higher than that average. So you can see that context. Of course, there are different costs that go into and operating costs that go into creating those products, but on a trading margin sense, a little bit lower on nonferrous retail, a little bit higher -- well, higher on nonferrous shredder recovery and ferrous is about the middle.

And just a final question. With SAR, now that you're the M&A guy, which is great. How do you avoid a conflict of interest? So an asset comes up for sale in the U.S., Sims North America want it. SAR want it. What do you do with that?

Well, there's -- and Alistair can speak with this -- to this, there's conversations at the Board level constantly. And in many ways, there's certainly a lot of respect for each other's strategies and what we're trying to achieve. They know we operate in coastal markets. And certainly, that's where our core competitive advantage is operating in large facilities with export optionality in large coastal markets. The SA Recycling business model is really focused on shredder consolidation in these days, domestic markets. So there's -- a lot of it's complementary. So when they look at how they're going to expand their footprint, they're looking at places like Kentucky, they're looking at places like Tennessee, when we're looking at expanding our footprint, we're looking at the coast. So there is more of a complementary relationship.

Todd, it's [ Michael Ward ] speaking. Just back on Lyndon's questions around nonferrous margins. Just as a general concept, they demonstrate the same level of stability that we've seen at the group level?

Correct. Each of those product lines, it's -- there is some variability in the nonferrous shredder recovery, probably more so than the other 2. But ferrous, nonferrous quite stable, a little bit of flex in nonferrous shredder recovery just because of -- just higher numbers. But generally much, much stabler than what you see in other places.

Okay. Then just pushing to SAR. I was intrigued you gave the disclosure around domestic versus export for SAR, but you didn't give it for the metals business, but that doesn't matter. I guess, historically, the Sims business did have a bigger domestic business and they got rid of them all because we were told there was channel conflict and it was difficult to compete against your customers. I was just wondering how Sims -- how SAR manages that because they seem to obviously have quite a strong domestic position when, I guess, we've been educated that, that wasn't necessarily the way to go.

So thank you. Good questions. I try to give context on a couple of questions you asked, and maybe some that you didn't directly ask. So the -- what's interesting I find about the SA Recycling pie chart is that if you went back 10 years ago, that would have been much more export focused. And what they've done and what you've commented on rightly is that they've pivoted to a domestic focused strategy. So then what do you ask this, if I'm hearing correctly, how are they getting that right? What they're doing really well there, and we hadn't historically, is they are consolidating markets and they are really good at complementing their shredder network with feeder yards and making sure that they take the greatest share possible of shredding capacity in the markets they enter. When we were -- we're going back a number of years when we were last in those domestic markets. I think we're talking 2015 and, in some ways, 2012 in other markets that we're in, post the Metal Management acquisition. We were really in pockets at that time. We would have a shredder, maybe not supported by feeder yards in Colorado, maybe 1 in Salt Lake City. That has proven not to be the right strategy. SA Recycling, I think, is doing it the right way. Now our strategy still though, wouldn't be to go and do that. There's no export optionality. What we really do well is export optionality. We have trading agents around the globe. We have relationships with all the major export markets and to have that export optionality to either go domestic or export is really in our sweet spot. So to go back to Mississippi, it's not really what we're aiming to do, and we have bandwidth to do our core strategy first.

Anderson Chow from Jarden. Just 2 questions. In terms of the nonferrous volume, if I kind of -- in my very simple mind, if you increase the number of shredders in your existing North American metal business or upgrade existing shredders to become even more efficient, do you have a sense of how much more nonferrous metal volume we could probably generate out of it? In addition to, of course, we probably need to do some acquisition to push the volume to our 2025 target. But I just wonder if there's any sort of low-hanging fruit that we could kind of potentially get?

So again, a great question. The -- there's -- as with all things, there's nuance. So the nonferrous you get out of the shredder is largely a reflection of how much you put in. So it depends on what -- how close to source you're getting. If you're getting cars full of all the nonferrous or if they have been stripped out. Or if you have other -- yes, attractive products with nonferrous feed in it. Now I think, John, you mentioned a number earlier today, you said there's in a car...

8%.

In a car, 8%. So if we're only shredding cars and only shredding cars that had that much, that would be the proportion. So that would be -- so tonnage as you could say. There's some math you can do on it in terms of -- would be the car -- it might be a 1 tonne?

A complete car.

Complete car, exactly. But a lot oftentimes, they're stripped. But think of those parameters, but also understand we don't only shred cars.

So how many shredders are we adding this year and next year, probably?

That is -- I bet the question you'd love answered. But it really depends. We're -- my title is strategy and M&A. So obviously, we're looking. But it really depends on what's available, if there's something attractive that we can acquire at the right price. It's not always up to us. We did acquire a shredder with ARG in Baltimore, and that will assist and they have a downstream on that. So those things and, over time, we hope to build out that portfolio.

Yes, I can see Ana sort of breathing down on me. But just a very quick question, just on the nonferrous operating costs, right? Is it generally correct to say the actual operating cost for nonferrous metal and ferrous metal is actually not that different, but the initial investment into getting the nonferrous metal is high. So...

So it really depends on how much value add you're processing. And not retail nonferrous if you're just bailing, it's relatively low. But if nonferrous shredder recovery, it's quite high.

So before we do our last round of Q&A with all presenters. I would like to invite Alistair at the stage to cover outlook. While we wait for Alistair, I would like to say for the ones attending the site tour tomorrow, I'll be sending an e-mail after when we finish up here. Thanks. Bye.

Thanks. Bye. Okay. I think you'd find it rather remiss if I had changed something rather radically in the last 4 weeks since I last saw you about an outlook statement. I guess I do want to just highlight that, obviously, certain conditions have changed. Obviously, the Ukraine issue has raised an awareness. And I think you've heard a lot of -- had a lot of discussion today around the freight and shipping. And then I'm very comfortable that we actually, as an organization, are addressing this, obviously, as best we can, but it is obviously a heightened watch for us. I think the aspect for us is the inflationary pressures, obviously, as we've mentioned, are going to continue. But the good part is, obviously, we've gone through the month of March, and that is definitely the continuation that we've seen for the first half of the year. So I'm actually very pleased we're still on track in terms of that performance over the last 6 months. So I'm not going to change any major outlook terms, but other than commenting that the heightened awareness around the Ukraine issue is going to be something we're going to have to watch very carefully. Obviously, inflation is occurring. And obviously, we're trying to offset that. So we've been very careful about our maintenance, but obviously, we're going to make sure that we continue spending the right money in the right places. And obviously, from a capital expenditure point of view, I'm very careful again with all our M&A type plans and making sure that we can take that into account when we're doing due diligence, integrations, et cetera. So part of our role going forward now also is to sort of support George and get that business up and running fairly quickly as well. So I'm going to stop right there, and I'm going to ask the rest of the management team to come and join me and take any other questions you can throw at us. So anybody want to have a go whilst I get the rest of the team up? Anyone, in particular, you want to watch out? Sure, go for it.

There's a lot of information there and 160 pages in the pack sort of highlights that. So a pretty direct question, understand why all these businesses are there, they all make sense. But is this business too complex? There's a lot going on.

There is. And I think part of the issue is when we started this journey 4, 5 years ago, that purpose and setting up those divisional structures was there on -- obviously, part of that design was that the core business couldn't stand on its own just going forward. There were challenges that we needed to accept. By putting those in very particular divisions, it allowed me to make the group focus on that structure that, with the resources that we require, manage the capital apportion. But as I said earlier on, every one of those divisions has to be able to perform and be part of the group going forward. Obviously, building that up, giving it capability gives me options in the future. Pete #2.

Great. Okay. I'm not sure if this is a question for Alistair or John. But I'm looking at just a bit of a steer on costs, both OpEx and CapEx, I guess, mainly in the North America business. And there's 2 parts to that. On the one hand, we've got this network with excess capacity, like 80% utilization, but also it sounds like we're going to install some new shredders. So I guess I got a question. Is some of this excess capacity, is it stranded in a sense? And you're going to have to increase CapEx. And then anything you could tell us on OpEx. How much are all of these initiatives, these efficiencies? What can they dent in terms of the inflationary pressures?

The first is, obviously, building the new shredder from scratch on a greenfield site. The last one we did was Kwinana. And that obviously takes a number of years to get there and obviously quite expensive as well. Part of our journey going forward is there M&A opportunities? Is the shredder in the right location? The filters that Todd was talking about. So obviously, that is a part of our focus. If we have the ability, which we did mention this morning and John can highlight that, where we have an opportunity to increase the capacity of a shredder in Auckland or in Victoria, we need to do that as a priority. But for us, that obviously then matches the feeder yards and making sure that they can supply that capacity. And obviously, we can then increase the actual -- the volume going through that. There are some shredders around the world that are obviously more challenged. Some of them are capped in terms of permits environmentally, and we need to be smart about that then. The feeder yards that go to that, can we actually get that volume moving to another shredder? So part of it is there are shredders that are at max and there are shredders that are running at 80%. The volume growth, the organic growth we talk about. You want to make sure you put that around a yard that's running at 80% and has that ability. So part of the M&A activities, where you see a shredder like that, can we actually acquire any small businesses around to actually maximize that shredders rather than going to spend more capital on the shredder? Does that make sense?

It does. Anything you could give us on the OpEx side inflation versus the efficiency initiatives?

Obviously -- I'll give you an example. So when we run the numbers on mobile equipment, as an example, we've got over 800 that we need to plan for over the next 10, 15 years. Typically, we lease, we buy, et cetera. And that's done on that regional model I was talking about. One of the reasons why we've gone to a functional model is all of that. Such was John, a whole lot of [ managed ] operations, a head of procurement that's come in now to our business, then looks at that whole grouping of 800, and we go to manufacturing, we're going to actually try and optimize that. That to me is the smart way of doing our procurement. They can go to PPE equipment, that can go to other opportunities. So those are the smart efficiencies that we need to do, because we actually now can from a group perspective, we function in managing. So that type of initiative. John, I don't know if you've got any?

[ Say, we got up to ] 1,000 units now. So critical mass ability to leverage a better deal with the OEMs, full life cycle costing, all those sort of things come into play. The one thing I'd say about the Brooklyn shredder, we're actually taking an idle shredder that we had laying around, that had been laying around for a number of years, and we're actually relocating it into Brooklyn and that will add significantly through our capacity in Victoria.

It's getting right behind you.

I may as all cap it off with another question. But Alistair, we heard a lot about the grand plans and everything from cloud recycling to extracting gas out of waste products. I'm just wondering, in your corporate plan, if a lot of these opportunities come to fruition, do you expect your margins from all of this additional revenue to actually go up? Or are these similar margin businesses to your core scrap trading business?

I would say that some of the divisions are going to have better margins than others. That's a simple term. I would expect that to -- where you're not putting massive capital in, I would expect your returns to be better. I think your longer-term projects like Sims Resource Renewal is going to take a while for us to make sure that we get to the levels we want.

So I guess if we are trying to model some of the things that we talked about today, at this stage, I'm still not that sure if I'm putting all this revenue in, whether -- I'm going to grow earnings, obviously, but am I ending up in FY '25 and FY '30 with a higher-margin corporate business or not?

Good question. I don't have that in my head, to be perfectly honest. So I think one of the commitments we're trying to give all of you and having days like this is to understand some of your questions. We understand what you're obviously trying to do and trying to make sure that we can actually support you see-through, so that we can actually get that transparency as much as we can. So we will work with you on that. I don't have all answers for you.

And another element to that question, do you see different cycles in some of these other businesses, i.e., with swings in the scrap and commodity prices, do you believe there'll be less cash flow at risk from having diversified earnings stream? It seems like there would be. And is that partly why you're doing this? Are you trying to...

It's part, though it's not the main reason. I think when you look at the SLS division, that, to me, is a different growth projectile. That is not a commodity play, that is really a services operation now with the technical companies we're dealing with. Sims Resource Renewal is pretty much stable. We're dealing with waste and obviously, converting that to hydrogen. So that's a far more stable environment. Likewise with our municipal recycling business. That was pure commodity. Now we're obviously making sure that, that group that we actually wanted to grow in, we were actually having service contracts, which was moving away from just a commodity play. So we have tried to balance the portfolio a little bit.

A quick question for Ingrid, if it's okay. Just wondering, the hyperscale cloud computing. I mean, would it be right to say we are kind of getting involved with the kind of an outsourcing trend? Because I'm assuming up to now, the cloud computing guys are probably doing the maintenance, maybe they don't call it repurposing, but maybe they're doing some sort of maintenance for their service, right? But we somehow could probably take those to our hands going forward. Is that kind of the right way to think about it?

Yes, yes. Certainly, you could look at that, and we're already -- I mentioned that we have -- we call them smart hands. So it's our Sims people inside a hyperscaler's data center. So we're doing the work on their equipment and taking out. So yes, we are -- you could say that's part of the business.

Yes. So if I look at the charges per unit and if I look at some of the cloud computing, this is the guys, the -- what their cost is, then I'll probably get a sense of how fast that kind of outsourcing trend could potentially be? I mean if there's a cost saving, if you're doing it cheaper than they can.

Yes, because we tend to.

We just need to separate between the services we're offering and what they do to keep uptime. That's a fundamentally different responsibility to managing uptime in that environment, to doing just repurposing, which is our skill set and the fulfillment role of that. So that service is probably going to be very different to somebody that manages maintenance and uptime of the business. We're not getting into managing client centers, that I'm sure, very different.

And just a last question, if I may.

You've been saying that for a while, but yes.

Sorry. I'm a newbee. So...

No problem.

Just in terms of major shareholder, Mitsui, how involved are they in kind of our strategic planning? Are they involved at all? Or just...

Normal shareholder relationship. We're very careful and stick to that, Peter, one.

It's coming. No? There it is. Peter Steyn from Macquarie. Appreciate it's probably extremely hard to get a bit of a sense of this. But between yourself, Graeme and John, I'd be really interested to get some scenarios, sort of a worst case and a best case scenario out of the uncertainty that we're seeing in the European context at the moment. If we've got peace tomorrow, what would that mean to your business? If this dragged on for another 6 months or a year, I'm just curious if you wouldn't mind playing a little bit of a scenario game with us to give us a bit of a sense of how you're thinking about managing the business in this very uncertain geopolitical environment.

That's a good question and something that, obviously, we have thought through. Let me be clear on the first instance. I would love that war to stop, period. And I think we're all in this room would -- I don't think we agree with that at all. So let's be clear that, that's obviously a goal that I would like to see. From a business point of view, obviously, we are in an environment where we are watching the actual infrastructure around steel and the [ mid ] change. That flow of bulk shipping is changing. The actual container ships are going to be impacted. And obviously, the export of Ukraine and Russian still coming out is changing the dynamics to the steel market. For us as a Sims, obviously, there's a price that we've seen rise in that sort of volatility, but there's also been a price rise, obviously, in the freight and the management of that is, obviously, more costly. But we've seen that reflected in actual sales of ferrous materials. How long that's going to last for? If conditions stay as they are for the next 3 to 6 months, I would expect pretty much where they're at now. I think from a point of view, if we do see some cessation of that sort of invasion. And obviously, there's some protracted period of 4 to 6 months or even to a year where they are going to actually come to some arrangement where it's going to be a reasonable peace settlement, and they can actually go back to normal. I think we would see probably some of that pricing come down, both in freight as well as ferrous pricing. And I would think that over the longer term, the structural changes we've seen in ferrous pricing where you -- in 2020, let's say, it was at $240 a tonne. We've seen it go up to 300s, 400s and become a little bit more stable. I would think over time, the decarbonization is going to set that pace or that level of ferrous pricing, I would think you probably see that after this issue in Ukraine start to materialize. Any other comments, Graeme, you might have?

I just -- I think you've answered it well. The only thing I'd add is that there's, obviously, been significant infrastructure damage -- I'm getting a bit of an echo. So in Ukraine, so in practical terms, if there was peace settled tomorrow, which we all hope for, it's going to take time to -- steel mills are down, roads have been destroyed. Rail networks have been destroyed. Ports have been destroyed. So that will take time to recover. I don't know how long it will take, but that's something that we have to consider.

I think we've all seen one of them and steel mills that we're familiar with, it was actually taken out as well. So it's going to take some time, Pete. Last questions and then drinks, I'm told.

Sorry, Alistair. Just a point of clarification on Slide 46 in the ESG presentation [ 9.1 ], you talk about generating -- it talks about generating 10% of our EBIT from new business models and opportunities that enable the circular economy. Is that referencing everything we've heard today? Or -- and what -- 10% of what EBIT? Because your EBIT is all over the shop generally, it just -- I'm a bit confused about what that -- is it referencing the other things in the red bullet points? Or what is that? Because that 10% number seems quite low relative to the opportunities that you presented around...

I'd have to come back to you on that one.

Yes, it just doesn't make sense.

Good point. Last question? Anything? Well, just from Sims team standing up front and thank you so much for engaging with us today. A lot of good questions. Hopefully, we've actually been able to impart a lot of what we're trying to do and where we're heading. And I think it's really important that, that process that we've undertaken, literally putting the purpose out in front, structuring this organization to deliver the strategies that we've committed to. And obviously, being able to show you that we're on journey. Obviously, we've got speed bumps. I think we've had more challenges in the last 5 years than I've seen in many years and we're moving through that. Now this is a long-term focus. This is not about a 6-month plan or hitting a budget. This is about us shaping this organization, setting another trajectory that we want to see for the next 40, 50 years. And obviously, bringing that capability into our business, both from a technical aspect, but also people and getting people into this business so we can actually continue to grow. So this is a long-term plan that we have in place. Naturally, we want to hit our short-term targets, but let's be clear, it's about setting this business up for the future. That's people, technical and, obviously, the rewards for shareholders as well. So thank you and join us for a couple of drinks, and happy to get chatting when we see [ soon ]. Thank you.