Vulcan Steel Limited (VSL) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Vulcan Steel Limited First Half Results for 2025 Financial Year. [Operator Instructions] I would now like to hand the conference over to Mr. Rhys Jones, Chief Executive Officer and Managing Director. Please go ahead.

Thank you, everybody, for attending. I have with me Gavin Street; Adrian Casey; and Kar Yeo, and we'll start the presentation now. If you could just move to Page 6, the performance highlights, please. I'd like to draw your attention to -- in this chart to our operating cash flow, which is $81 million. We thought it was a credible result. $34 million of that was used to reduce debt. And our customer performance was a highlight for us as well. The real focus on stock availability and excellent customer service meant that our customer ATAs or active trading accounts increased slightly in an environment where a number of clients weren't buying as frequently. This enabled us to limit our EBITDA reduction to 30% in the period. If we move to the next page, please, Page 7. This describes our Vulcan business as a total. It talks about our 6 verticals, 3 in steel, 3 in metals. And just to remind you, steel distribution is all broad ranges of steel for general engineering, construction and the like. Plate processing is very much focused on heavy equipment, automation, a lot of unique capability and equipment where we actually delivered a process that will manufacture product to the client. And coil processing specifically to manufacturing industry where sheet and coil is manufactured as stuff. In the metal side, we've got stainless steel. Principally focused on a broad range of stainless steel, including fittings and pipe. But also, we have stainless sheet and plate processing. Engineering steels, as the name says, very big bars of steel, principally focused on the mining industry. Very long lead time often, these products, hard to handle a broad range of product, very specific need and are very much linked to mining. And lastly, aluminum, a new vertical, we have 2 plants where we make our own extrusions, and then we have a broad range of sheet plate and sections across a network wide across Australasia. So those are our 6 verticals. We trade with roughly 22,500 clients, and our top 20 clients represent around 9% of our revenue. So we've got a very broad customer base. A wide number of market segments, so we really do reflect what's going on in the economy. The only segment we're not overly exposed to and have a small position in through our coil business is residential construction. So in food and agriculture, sheet metal, transport, mining, fabrication, broad ranges of manufacturing, export and domestic and engineering. Lastly, I'd like to draw your attention to our geographic spread. We're right across Australasia, but it's important to note that both Queensland and New Zealand combined represent roughly 60% of our revenue, and I'll draw attention to that later. And separately, Victoria, which is a challenging market, is 11% of our revenue, and I'll reference those at a later date. We move now to the next page, Page 8. This is a description of what our network looks like, 66 sites, 1,307 employees and 22,500 clients. The number of sites has marginally reduced simply because we've consolidated 2, 3 positions into 1 in a number of locations. And that's basically generated efficiency and customer benefits by being a one-stop shop. If we move to the next slide, please. Our growth strategy, we're always focusing on making sure in our brownfield expansion that we're growing all our businesses by gaining more customers, focusing on the right customers, the right segments offering the right range of products. That's an ongoing relentless process across all 66 sites. We've also entered into new geographies. Aluminum, in particular, enabled us to do that. We've also, through our hybrids, opened up completely new positions, for example, in Campbellfield in Melbourne. Separately, we've expanded into new products and service offerings. A good example of that is our Metals division. 10, 12 years ago, we weren't in metals. We've expanded into aluminum in the last few years. Prior to that, it was engineering steel, and prior to that, it was stainless steel. So new verticals are on the horizon through our mergers and acquisitions, our yellow bar there, and we're always looking at either building out and expanding our current market share in some of our existing verticals or entering new verticals. We believe some of those opportunities will emerge in the near term. And lastly, business improvement opportunities, ongoing focus on managing and maintaining service levels or improving them. And particularly, when we acquire new businesses or start up new hybrids, we really put a huge focus on getting those businesses up to the standards of our pre-existing model, and it's an ongoing program. The next page is really talking about how even though it's been a very difficult environment, we want to look back and look at what we have the ability to influence directly. So outside just straight market conditions, what is it that we've achieved as a team. First of all, we're fully integrated our aluminum business. And again, just to highlight the fact, it was over 30 branches right across Australasia, broad product range, IT system here to be altered, and we have to completely change their business model into the Vulcan system. So that's now completed. We've also, in the period, implemented 13 hybrid sites. So that's -- we're very pleased with that progress. And there'll be more sites coming each year as we've mentioned previously. We've maintained a very high service level. So despite a very tough environment where we've a lot of focus on cost, we have not compromised on service. We've maintained our employee numbers by absolutely doubling down on customer service and stock availability and ensuring that we're supplying an absolutely superior service. We've also managed to grow our non-aluminum customer base by 8% over the last 2 years, which we think is a credible effort in a very tough environment where customers are buying less frequently. We've lowered our costs in an environment where cumulative inflation has been very challenging, and we've improved our cost position year-on-year, and it's a very detailed, focused approach primarily focused on better efficiency, better gains, not just random cost cutting, very focused disciplined programs. In terms of strong cash flow generation, $395 million of operating cash flow generated since FY '22. Working capital is a good example of this, $130 million through a very disciplined approach, making sure we still have the right product range, AA stock availability, making sure our customers, when they ring up, we have what they want, but ensuring that disciplined approach reduces over time, the amount of working capital required to reflect the fact that demand is down. We also reduced our debt by $148 million. So that matches the debt-funded acquisition of Aluminum for $149 million. So again, we think that's a credible result. In terms of our return on capital employed, we use that as a core metric. At the peak of the cycle, FY '22, very unusual set of circumstances. We were running in the mid-50s return on capital employed. Now we're running at 10 to low teens. We don't believe either of those reflect the trend line of the business over time that we had a very, very high peak, visually unheard of. We've had a low, which we haven't experienced such poor demand for many decades. We believe the business is real return on capital employed that's over 30% in the trend line, and that reflects the fact that we can achieve above cost of capital and probably the most challenging environment, a number of companies have experienced for many years. The next page, please. In terms of our priorities for FY '26, obviously, we're absolutely driven on making sure our customer service mindset and focused on absolutely doing things to the highest possible standards, whether a stock management, performance in terms of our processing delivery or our calling on new clients and giving them the best service they can -- they desire as a key focus. We also want to absolutely match up our skills with the fact that the market is turning and is going to grow in the near term. So we want to make sure we capitalize on the emerging economic upswing. We're also building our bench strength, people like Gavin Street and others, we're bringing into the company, and we're absolutely building our bench strength and focus, and that's having a marked effect already in places like Australia. And we're further exploring acquisition opportunities in this very challenging market. You've seen a number of businesses struggle, and that's leading to some opportunities that we believe could possibly emerge later in the year. And we want to continue with our rollout of our hybrid sites. We completed 8 in '24 and 5 in the first half of '25. And the next session is Page 13, and we're looking here at the operating backdrop during the first half of '25. I'm going to do this first slide, then I'm going to hand over to Kar Yeo, our CFO, to give you more details about the financial performance. But in terms of our general market performance, our customers across Australia and New Zealand, they definitely hit a very challenging environment. We had subdued customer confidence. We have very, very high interest rates across the environment, Australasia-wide, and we had very weak trading conditions. We particularly exposed in New Zealand, which had probably the weakest period of economic demand for many decades. Also, Victoria was really struggling, high interest rates, high costs and a complete lack of business confidence. We also faced aggressive stock liquidation by some market participants who are desperately trying to turn steel into cash due to balance sheet pressures. And we also saw the industry mark by several participants experiencing significant operating losses. So all of those factors mean that the absolute last 6 months was one of the most challenging periods we have faced for many years. The global economic outlook is certainly uncertain. The tariffs recently announced by Donald Trump in terms of steel and aluminum, it's unsettled things. And with exchange rate decline over the last period, particularly in the last 4 months, it's declined by 5%, which has meant that product pricing is affected by the depreciating dollar. Lastly, inflationary pressures on operating costs have been very high for the last 2 years. They're definitely moderating, but we're still seeing a lot of rental costs go up. So they're quite elevated in specific locations. So we still face that cost pressure. So we're going to have to be very, very mindful and systematic in driving further costs out of the business. I'd now like to hand over to Kar Yeo. He's going to go through some of the overall economic trends we're facing and some of the interpretations of how we've seen the last 6 months. Kar Yeo?

Thank you, Rhys. Good morning to everyone on our results conference call. Turning to Slide 14. Just echoing Rhys' comment on the economy, as you can see, our economies have been well below trend for an extended period now. The economic growth in Australia has averaged at around 1% over the last 2 years, whilst New Zealand economy has experienced virtually no growth over the same period. That said, the most recent business conference survey in both markets or countries point to strong economic outlook for New Zealand and certainly also, in Queensland. As shown on the next slide, Slide 15, the building and construction sector in both Australia and New Zealand appears to have reached a trough in the present cycle. Turning to reference prices that we follow for base metals products on the next slide. Aluminum has performed the best in the December half year of calendar year 2024. Now turning to Slide 18 on our financial performance. Overall decline in revenue in the first half of 13% was due to 8% reduction in volume and 5% reduction in price achievement. Encouragingly though, our active trading accounts in the first half were steady. Our gross margin was steady, while gross profit dollar per tonne fell by on a year-on-year basis, reflecting weaker market conditions. As a result of this, EBITDA declined by 30% year on year. Despite the weaker earnings, our operating cash flow came in at $81 million in the first half of our current financial year, which benefited from ongoing disciplined management of our working capital position. Turning to Slide 19, half year volume and financial trends. This really reflects the strength of our business over the cycle, as Rhys mentioned, how -- basically how it has impacted by the Australia and New Zealand economy through the cycle. As Rhys mentioned earlier on, the key point I wanted to highlight here is that our reported return on capital employed was 10.3% on a rolling 12-month basis to December -- 12 months to December 2024. However, the key measure that we internally use as a more traditional measure is done on a pre-accounting leases basis. For IFRS 16 basis, our return on capital employed is currently hovering at 15% at this point of the economic cycle. Turning to Slide 20. This reflects the key drivers of the 30% decline that we mentioned earlier on at the EBITDA level. Sales volume contributed to $17 million of this decline, whilst gross profit dollar per tonne accounted for $10 million of the decrease. Some of these were somewhat offset by lower operating expenditure, which reflects our cost management discipline. At a segment level on the next slide, starting with steel. Volume and price achievement fell approximately 9% each year-on-year basis. New Zealand experienced a larger decline than in Australia. In Australia, the Victoria State was notably weaker than other regions in our business. Gross profit dollar per tonne in steel fell by 14.5% year-on-year. As a result, EBITDA for this segment declined by 42%. Turning over to the Metals business. Our Metals business, which comprises engineering steel, stainless steel and aluminum. Our revenue saw a 9% decline year-on-year, whilst gross margin overall was steady. EBITDA fell by 16%. Finally, on the operational side of our review for the first half. Our group OpEx -- on the next slide, our group OpEx was broadly steady, and some aspects of our business, we were able to actually reduce our cost to operate the business. Selling and distribution costs benefited from our focus on productivity and moving to and in-house freight model to reduce costs and improve customer service level as measured by DIFOT. As an aside, what I would like to point out is that whilst we had a 3% increase headcount in terms of our overall headcount costs, this was a combination of slightly higher headcount and an increase in our base pay rate. We expect that our headcount have reached a low point as we continue to expand into new geographies. Turning to Slide 24. Despite weaker earnings, our operating cash flow, as I mentioned earlier on, came in at $81 million in the first half, reflecting ongoing disciplined management of inventory while maintaining good level of stock availability for our customers. Our capital expenditure was steady year-on-year at $14 million. We expect -- we now expect our annual CapEx to be in the range of $25 million to $30 million this year. This reflects an adjustment for the timing of certain investment initiatives that we've got in place. Turning to the next slide. Vulcan sees itself as a growth business long term. We aim to strike a balance between returning funds to shareholders and investing for a business cycle recovery as well as our growth opportunities. To maintain financial flexibility, our company has taken the position to adjust our annual dividend payout policy to 40% to 80% of net profit after tax from previously, a range of 60% to 80% of net profit after tax. Accordingly, we have declared a $0.25 dividend per share with 100% franking for our Australian domiciled shareholders and 20% imputation credits by New Zealand domiciled shareholders. We are targeting a total dividend payout in the range of 40% to 60% of net profit after tax for financial year 2025. Finally, our banking syndicate continues to be very supportive. As announced in October last year, the banks have agreed to provide a relaxation of our existing banking covenants threshold until the end of this calendar year. I will now turn the session back to Rhys for concluding remarks.

Thank you, Kar Yeo. And look, I'm just going to give you a brief update on what we believe the outlook shows. I want to first of all focus between both Australia and Queensland, which I talked about 60% of our revenue. Both these 2 markets are demonstrating similar trends. And in Queensland's case, they've got the Olympics emerging soon. Business confidence has deeply increased. They've had a new state government, which has increased business confidence further, and have had migration from different parts of Australia and increased numbers of people in Queensland. So we're seeing definite uptick there, even though the full Olympic projects haven't yet started. A number of projects have been actioned, and we're seeing genuine improvement in demand. We believe that will continue on. We're getting a similar story in New Zealand. Clearly, the interest rate impact is slowly starting to occur. We've got a number of larger clients, particularly in our stainless segment showing signs of improvement. Certain big clients have actually increased their sales dramatically. So we're seeing genuine signs of growth emerging. We believe this will just be progressive. The commercial construction segment isn't likely to really gain much strength until the second half of the year. That's simply the lead time required, even though the project may be ticked off, resource consenting, planning and process before our products are used, it's much later in the process. So our gut feel is that the rural segments are really showing signs of improvement, and we believe that's already in play. But the Christchurch and Auckland segments far more reliant on larger construction projects, that's going to be slow, it's probably going to be second half of the year. So we believe the tide has fully gone out and is now returning in New Zealand, but it's going to be variable in pace by segment and by product type. Back to Australia, again, the real concern is Victoria. That's 11% of our revenue. There's a state government that's got very high debt levels. A number of projects on the horizon are basically stalled or there's no more coming. You've got very high costs. And you've got a very negative investment environment. Hence, we see Victoria, which is a large user of structural steel, being in a very slow environment for some time. We don't see any real improvement in the near term there. Separately, New South Wales has been stable, but we do believe that will improve progressively over the 12 months as interest rates drop and confidence emerges. The balance of Australia, particularly Western Australia, we're seeing real signs that will continue to be a strong area, and we believe that earnings here will improve further. We're quite confident. And in South Australia, Tasmania, much smaller segment for us, geographic segment, but they're stable to small improvements. So overall, we're seeing a turning point, but it is mixed by geographic region and by product. But New Zealand specifically, we are seeing a turning point emerging. I'd also like to highlight the seasonality of our business. Our second 6 months, we actually have 10 fewer working days, and we're very much a working day business. So that's a significant impost on our earnings in the second half year. I'd like to conclude now by just thanking you all for attending, but we'd also like to just have a Q&A session, and I think we're going to go back to the controller, who's going to manage that process.

[Operator Instructions] Your first question comes from Lee Power from UBS.

Rhys, just your comments around New Zealand presales activity. Like, when you've looked at that in the past, like how long would that typically take to come through? And then the quantum and kind of shape of recovery that that's suggesting?

Well, I'll give you a specific example. We've got 1 larger account where they placed a whole lot of orders for the steel, and they will progressively buy that from March onwards, which gives you a pretty good indication, Lee, it's a large project. Then we've got a number in our plate processing division, for example, where they've got orders, and we know that they've got a number of orders that will keep the clients going for 6 to 8 months. And so they're starting to order off us. So what we're seeing is patchy real behavior in that area, multiple examples, stainless steels are numerous examples as well, but it's not a broad brush yet. We've still got Auckland and Christchurch, particularly small, medium clients, with the high interest rates, high mortgage costs in these big cities, that still hasn't kicked in yet. But we do expect that to occur later in the year.

And your view just around like the pace of any recovery, is there any kind of other moving parts? Obviously, everyone's kind of running pretty lean at the moment and taking a lot of cost out of the business. Is there something that means that the industry can't normalize to the degree that it might usually do? Or is it just kind of once the market turns, it's all back on?

No, I think it will be just progressive. I think it's not -- I think our improvement is not going to be accelerating up rapidly. I think it's just going to be slowly progressive improvement. Maybe Gavin, do you want to talk about Queensland? Your comment there because that's a very good item as well, Lee, because clearly, that's a big part of our business.

Yes. I think obviously, Queensland, change of government late last year, which has been important, I think, from that state in order to be really focused on what they need to do for the Olympics. Projects are still very much in the design phase. I think there's a bit more pressure on the government around determining where the stadium is going to be. But we're now starting to hear the conversations are starting to take place with various players in the industry around what that needs, what needs to be done in Queensland over the next number of years, out to 2032. So I think the outlook period looks pretty positive if anything. The amount of work that needs to be done around there is positive. And then also the tracking of people to Queensland will be significant because I'll need to drive trades in order to do the work. So pretty positive over where things are going to be around that opportunity in Queensland.

Excellent. And then maybe just one more, Rhys or Kar Yeo, not sure which of you would prefer to answer it. But I mean you've obviously done a pretty good job on controlling OpEx. In your comments, you called out some growth initiative that you got kind of irrespective of what the market does. And yet we're trying to match that with 10 fewer trading days. Like what's the -- what do you think is the appropriate kind of start point for EBITDA, when you match off the cost, those initiatives you've talked about irrespective of what the market does. Should we be thinking on a half-on-half basis to start what like what is the net of them in terms of a headwind if it is a headwind?

Lee, it's Kar Yeo. Happy to take that question. So if you start with the first half numbers, and on average, the average revenue per day effectively is hovering at about that $4 million mark and to date across Australia and New Zealand. So if you use that as a reference point and make some broad assumptions around the up to 10 fewer working days, immediately, the headwind, if you like, sequential movement, other things being equal in the operating environment, we will have a $40 million headwind that we need to make up, right, from improvements. So then you then take the gross margin at a group level, and you apply that against that $40 million. That should help you bridge the differences between first half and second half before factoring in any margin recovery from recovery on the back of the economic cycle and market conditions.

And do you think we should be factoring in any sort of meaningful shift around just OpEx control or those other growth initiatives that you talked to into that number? Or do you think it's appropriate to start there and then just factor in what we think the market is doing?

I think you start in the first instance with the seasonality, and OpEx will naturally be a factor to be considered in terms of ongoing initiatives when it comes to hybridization of some of our existing sites as well as rolling out new hybrid sites in new geographies.

Perfect. Thank you, team. Appreciate the color, as always.

The next question is from Harry Saunders from E&P.

Firstly, you just talked about the geographies separately, but just wondering, overall, if you could talk through recent trading at the group level, are you seeing any improvement in recent weeks, post-December? And can you just maybe talk through that first, please?

Okay. Yes. We've been quite deliberate in our commentary there. We've called a turning point. So we've definitely seen that. So we're seeing definite signs of improvement. And Kar Yeo went through quite a detailed description of how those investments even activity surveys are improving. So we are seeing some of that emerge. But the point being, it doesn't all happen at once, somebody might approve a project, but then it might be 3, 4 months before they actually order the steel, but we know about it. So versus this time, July, August, if we were getting the opposite feedback, it was -- mid last year was very, very challenging. The really positive element is that we're seeing that definitely emerging in both Queensland and New Zealand. And I think New South Wales has never really dipped to greater level. So that can pick up relatively quickly. But the one that worries me, as I mentioned, is Victoria, because I can't see that improving at all.

Got it. So it sounds like on a net basis, given Victoria's 11%, effectively on a net basis, you've got sort of some sequential volume improvements on that on a trading day basis, if that makes sense?

Yes. Yes. And I think what you'll see, and it's obviously very hard to predict. But what we -- and obviously, these interest rate are lag before they actually kick in and the like, that you're starting to see that emerge. And we've got a slate of interest rates coming potentially in Australia, but highly likely in New Zealand. So you've got a scenario where that will just continually build momentum, we believe, going forward.

Okay. And maybe just on the steel GP per tonne decline flagged was particularly weak. I mean how are you thinking about that in the second half? Do you expect some improvement there? And then just also the implied metals GP per tonne was relatively strong. So can we extrapolate that into the second half?

Yes, a couple of quick points I'll make, and I'll get Kar Yeo to comment as well, he studied this very closely. The metals includes aluminum. So aluminum, remember, we've got self-help initiatives, which we've talked about repeatedly that we margin management service, the service levels weren't high enough in aluminum, we're progressively improving those. So the margin per tonne in aluminum is going to be definitely just to straight out self-help. But we've also had a subsidized exports from China, which dominates the world aluminum market with 60% output being eradicated in December. So the price of aluminum has gone up. So that's helpful on a margin per tonne basis for us. And then separately, we're seeing pretty strong improvements in demand, potentially in metals generally and stainless in New Zealand, in particular, and opportunity and growth with our hybrids in Australia. So all of that argues quite strongly to sustain or improve margins in metals. In steel, we've got some challenged environments. We referenced the fact that a number of people are struggling. I don't think there's any secret that our [ InfraBuild/Whyalla Gupta ] has been in the media a lot probably in the media today, again. That particular behavior of the -- I think they're obviously running the business for cash. The -- and there's all sorts of duress. That has been very negative to the margin on steel. So that could have an impact on us if something happened there. Does that answer your question?

Yes. Thank you.

Do you want to comment at all, Kar Yeo?

No further comment.

Sorry, one other one here. Just on corporate costs, pretty reasonable performance if we strip out the divisions. $9.5 million versus I think it was $11.8 million in the second half last year. And sort of given fewer trading days, how are you thinking about corporate costs in the second half of '25?

Yes. I would -- Harry, good morning. I would expect corporate cost to remain at about similar level in terms of run rate in the second half. There are projects that we are continuing to undertake both in terms of functional costs, especially in IT that may end up bumping up our corporate cost somewhat in the second half compared with the first half of the current financial year.

Got it. So a similar run rate, but then some other projects may bump it up. Sorry, finally, just on working capital, reasonable performance in that first half. Depending on the macro environment, is there an opportunity to bring net debt down further for the FY '25 end?

Yes, it rose. The quick commentary would be that we have deliberately maintained good stockholding so we don't let the clients down, but there is a further opportunity to improve. And we have had a scenario where, for example, the issues with InfraBuild, with [ Whyalla ], they're not opening, being closed down. We've had to import a significant amount of product, which affects us. So you see where I'm coming from. We've had a few disruptions to our working capital because of that. So we believe there's still further improvement and are determined to do it. The other comment I'd make is just generally in aluminum. We're progressively getting near stock management to an improved standard. And again, that has provided us with some opportunities for further working capital improvement, but improving stock availability. So we're trying to do both. So it's going to do it in a very carefully in a measured way.

The next question is from Grant Swanepoel from Jarden.

Well, fantastic. My first question is just around your changed dividend quality for the full year. And I understand you're a growth company, your words. But normally, when you go into a down cycle, the payout ratio goes up, not down. Is this because you're worried about your debt covenants? I thought you've got some relief on that. You told me that your debt has continued to go down at the year-end. Can you just give a bit more color why you've cut your dividend? Kar Yeo?

Yes. And so we're repositioning our payout ratio for the long term. Both -- in fact, both short and long term. The short-term dynamics is actually -- as you know, we've got obviously, $9 million earnings in the first half, and we leave the market to conclude what our annual earnings is compared with $40 million last year. So if you think in the context of the reduced cents per share payout, even if we kept the payout ratio at 68%, it will naturally be lower in absolute terms compared with this time last year. So coming back to your covenant point, our banks are absolutely maintaining their support for our business and absolutely understand the timing differences between recovery and the economy and what it means for our business. But as far as the way we think about our business, we're not managing to a debt number. First and foremost, we're managing to customer service level. And that's the key thing that comes into play as to how we think about our debt management.

My second is a double question and my last question. In terms of your outlook, we've had full start before we have expected green shoots. How does this start to the second half different to the same time last year and the interim year end results where you're also hoping for some sort of green shoot recovery? And then when the recovery does come, it looks like volumes will come first and margins, because of such a deep cycle will probably be delayed. Is that the right way to think about how the recovery comes? And does your a little bit of indication that you've got some forward book purchases support the view that it's more by volume and margin in the near term?

Okay. I can have a crack at that and also let Kar Yeo comment as well. Look, first of all, the volumes we experienced in -- I'm talking in New Zealand in particular. The volumes we experienced in New Zealand, the last 6 months, Grant, my God, if they continue, I think we'd have a train rig of an economy if that persisted. So it was always going to recover to a degree. So what we're specifically saying if you're wanting some green shoots, 1 very large client, for example, that were literally hundreds of employees, started back on the sixth of January. 5, 6 months ago, they were very quiet. Now they're very busy. Another client, similar scenario, were laying people off, now placing significant large orders and they're fully back into it in February, March, April, and they've got 6 to 9 months workload. So we've got genuine green shoots. Then we're getting the overall sentiment across our client base, which is a lot more positive than what it was. So we don't think this is a false storm, so to speak, like last time. So that would be the first comment. The second comment is, yes, I agree, volumes -- I think volumes in New Zealand will progressively increase better -- it could be a -- it could be an up and down rate. And remember, we are heavily exposed to the export related industries. So particularly with our stainless and the like. So that's a real advantage which other parties aren't necessarily exposed to. So they could be still very challenged, particularly if they're heavily reliant on commercial construction and infrastructure, which I don't believe is going to start until later in the year. Then on top of that, we've had inflationary cost basis, and we've had a depreciating dollar and driving up cost of some raw materials. So all in all, I would actually argue that there'll probably be a margin turning point as well because I don't think it's sustainable, the way people have been pricing in some segments. But it will be by segment. Does that answer it? Or maybe you could comment, Kar Yeo, you've got another comment?

Happy to add to that respect. So if you think about March quarter of last year, this time last year, our tonnes per day specific to New Zealand and in some instance, there's actually some segments in Australia. In the March quarter tonnes per day average higher than what it was in the December quarter. Specifically in 10th February and the first few weeks of March, the volume was actually running quite strongly compared with the December quarter sequentially on tonnes per day basis across both sides of the ditch. If you think about visibility, which is the other indicator that we look at, our visibility of order into the future a year ago was relatively low. Now what we're seeing is we're seeing a handful of customers, not everyone, a handful of customers are starting to actually order forward as far as 2 months out. Whereas a year ago, we were seeing maybe only 2 to 3 weeks out. So that to us, alongside with the presales activity, gives us more comfort that this is -- this feels like a turning point, albeit early.

That's great. Thanks for those tangible price. That's it from me.

Your next question is from Rohan Koreman-Smit from Forsyth Barr.

Maybe just -- sorry to labor the point, but just talking about your certainty and this being an actual turning point. Can you just maybe give us some color on tonnes per day, say, first quarter, second quarter and third quarter to date in terms of what you've been actually seeing on the ground?

So if I think about the tonnes per day average, so if I can -- because we've not disclosed the numbers on a quarterly basis, Rohan, not keen, actually, to call these numbers out. But what I can tell you is in terms of exit, and we thought about the tonnes per day on a quarterly basis in financial year 2024, for the most part, they were steady within a very narrow band in each of the quarter tonnes per day across Australia and New Zealand. However, in the September quarter in New Zealand, we saw a significant step down in the September quarter. Australia also stepped down somewhat, but not as significant as has New Zealand. In the December quarter, we saw a marked step down in New Zealand again compared to the September quarter outcome in New Zealand. In Australia, December quarter stabilized. Hopefully, that helps to provide some color.

And just a...

Yes, the current trading seems to reflect when we got those GDP data, which was just the refi for New Zealand. Our volumes seem to reflect that, Rohan. And we believe has definitely moved on from there. Obviously, we've had January, we're into February. So we've got a bit of specific evidence for that.

Just to put in context, the December quarter tonnes per day in New Zealand, you would have to go back probably close on 15 years, i.e., the GFC period in terms of absolute tonnes of data we're currently experiencing.

Okay. you called out 13 hybrid sites up and running. I think previously, you've said 12 was kind of the target. And you've also said you're going to go on from 13. Can you kind of give us some sort of new target and maybe some color on how the current sites are running versus expectations?

Yes. So I think in the past, we've talked about up to potentially 20 locations in terms of site hybridization. And so obviously, we've done 13. So we will continue to move towards and strive to watch those targets in new geographies as well as existing geographies.

Just a quick comment, Rohan, some of the delays on some of them are just getting their property sorted out. It's actually in some of the smaller locations, probably is tightly held at you've got to get sites built. In terms of performance, look, it always comes down to getting the right people with the greenfield startup, you have to have the right person. Where it's preexisting, we're adding a product range that's going a lot better. We've had a couple of greenfields. We've had one misstep, but the balance have been overall pretty good. And when we have a misstep, we just go all hands on deck, what are we going to do to fix that. Maybe Gavin to comment because Gavin has done a lot of greenfields historically in his career.

Look, just really emphasize your comment Rhys in getting the right people. I mean that's the focus around making sure we've got the right site leader, the right capability in that site so we can actually make a success. And then what we've got here as well is a really good support network that can get in and help and actually drive and know what we're doing and know how we actually can build that capability on that side.

Perfect. And I actually did have a question more directly for Gavin, if I'm allowed. I was just wondering given he's new to the business and come from a very successful business, maybe you can give us some high-level thoughts about strengths, weaknesses, opportunities of Vulcan as he's found it over his first few months?

Yes. Thanks for that. Look, probably from my perspective is that this is really a values-led business, and I think that's something that I've been familiar with in the past. And I think that's something that's really important for us to really embrace and drive for the future. I think we've seen some really strong capabilities in New Zealand, deep expertise capability that's been developed over many, many years has been really strong, and I spent my first sort of 6 weeks in New Zealand and learning the business, understanding what we're doing. I think in Australia, the opportunity is significant. I think we're really working towards building on our bench strength and capability. We brought in someone who I previously worked with, who's been coming to started with the business in the last month. And he will have some responsibility to really drive some of our capability. I think the opportunities are really positive. And I think there's opportunities for us across different segments and different countries that we need to continue to focus on and continue to drive.

Just a quick comment, Rohan, because we often bring people into the business, but it's very rare to have somebody that's adapt so well to our company. So Gavin has been a great hire. And I think the values and culture -- and we use the good to great sort of mechanism a lot, and that -- the overlap between our 2 -- our business and the business experience in 19 years is very, very close. So we're very pleased. And we obviously got a lot of skill set around growing a business because he was there at Reece, it was about $1 billion and went up to about $7 billion or $8 billion in his tenure. So that's great addition to our ability as a team to understand how to grow appropriately.

And sorry, one final one, if you'll indulge me. Just a competitive environment at the moment. Have you noticed any change, given that sector profits are quite low, possibly negative for some at the moment? Is there any change in behavior?

Yes. Look, I'd quickly comment on that. Certainly, one competitor has put a price rise letter, as we have. And look, my sense is the profitability and challenge a lot of parties are facing. They're starting to see the real results and the -- who knows what will happen in the future, but -- there are some signs that the behavior is slowly changing. Do you want to comment on that, Adrian?

Yes. Look, I agree with that, Rhys. So I think when we look at price increase and understanding what the markets are doing, it's not just the steel cost now. It's the inflationary pressures we've had over the last 3 years, leases, people, et cetera. That's coming into account now more in Australia and New Zealand. But from a competitive point of view, we have noticed some companies dropping stock at prices that we don't go near. So volumes could be down a little bit because of that. But we have some core disciplines. We just don't break. But it's always a competitive market. So that's the point I would make. We look at our own company and how we can navigate that, not so much the external side.

The one thing I would observe, Rohan, is that in these very difficult environments, often, parties performance drop as they restructure and reduce staff or reduce stock or get very tight on credit terms or there's a variety of elements that actually impact the service to the clients. So we try to avoid those pitfalls.

Thank you. There are no further questions at this time. I'll now hand back to Mr. Jones for closing remarks.

Look, thank you, everybody, for attending our call. It's really -- we really enjoy this opportunity to talk to you and answer your questions. We're looking forward to, hopefully, a good calendar year, and we'll catch up with you in the near term in person, no doubt. Thank you.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.