SIMS Stock

Good morning, everybody, and welcome to Houston. For those of you online, welcome as well. First thing I want to do is provide a little bit of context for the heading we've got here, Leaving Base Camp From Turnaround to Scalable Growth. As we were turning around Sims, and that sort of began about 3 years ago, we used the concept of must-win battles, and I might talk a little bit about those later. I think what must-win battles have done is have got us to a level of really good sustainable earning now, but that was never the final objective. The final objective was scalable growth, and we now describe that as leaving base camp.

I want to go through the presentation for today through the disclaimer there. On the agenda, the first thing I can say happily for those of who of us were here last time, there are no TSA issues. We don't need to rush through this presentation and miss the tour. So we can take it at a leisurely pace today, which is good to see. So I'm going to start off with, I guess, an overview looking at group strategy but with more of a focus on Metal. Tomorrow is about SLS. Rob is going to come up and give us a more in-depth presentation on the Metal business. Warrick will come up and do what CFOs do, and he will cover off on everything to do with capital management. We'll come back for Q&A. If we could just hold questions to the end, that would be great, able to get through the presentation. Then we're going to do a tour of the Woodhouse Terminal. We no longer, I guess, refer to it as TCT as such. The Woodhouse Terminal is where it's located and it's part of the business now. It gives us plenty of time to head off to the airport. And I guess I'll see everyone tomorrow morning again in Nashville. So that's the run-through for the day.

Let me, first of all, I guess, set the scene. We've had a purpose for a long time now to create a world without waste to preserve our planet. That has been a purpose that's guided us for several years now, and it's -- I think it's going to guide us for the next foreseeable future as well. Within that, we've got 2 businesses. We've got the Metal business, and we've got the SLS business. And in many, many ways, they're complementary around the circular economy. Obviously, in the Metal side, we focus very much on recycling steel, aluminum and copper. And clearly, the nonferrous is going very well at the moment. We service the infrastructure manufacturing markets. We've got operations in Australia and New Zealand. And in the U.S., we've got operations right throughout the U.S. Some of them we own 100% through NAM, some of them 50% through SA Recycling.

The SLS is also all about circularity as well. But it deals much more with hyperscalers and enterprise type activity. It recovers it slightly differently. It's more about reusing, redeployment, resale as opposed to straight out recycling, but the principle behind circularity is there. And it has a global footprint. It's all throughout. The U.S. is where it dominates. We're in Europe. We're out throughout Asia, India, in particular, Australia, Brazil. So very much a global business as is NAM, but in more locations. I think the 2 businesses work really well together. And I think for both businesses, we've got significant growth coming up over the coming period.

This is a slide that we've presented a lot over the last 2 or 3 years. So I want to maybe put this into a real-life setting. And how did this -- how did our strategy to repurpose and recycle, how did it drive our thoughts around Tri Coastal, TCT when we purchased that back, and I think it was January this year. What was the actual essence of that deal that fitted in with our strategy? I want to go through each of the vertical blocks there and talk to you about it. So if we look, first of all -- and part of it under customers is developed domestic channels and global network. That sums up TCT. It's got both access to domestic channels and global through export. So it fitted very, very well within that category.

In terms of suppliers, efficient access to supply hubs in large markets, the second point down there. Well, Houston is an extraordinarily large market, and that's what Sims does very well in. So it fitted nicely within that part of the strategy. Now we go to the third column, aligned end-to-end supply chain. Houston and TCT very much delivers on that. It's typical of our whole business from getting in scrap, doing some level of processing and then having access to either domestic or export market. So it's very much in that category. Fourth column, innovative and agile. I guess what I'd call out there is one called simplified structures. And I think TCT delivers on that. We have a third-party supplier that does the processing for us out at TCT, and you'll see them today. So really what TCT for us now and what the Houston business is very much a commercial operations has really simplified the business, and I think that drives value as well.

Fourth column under the one of strong capital management. To me, that summed up the TCT acquisition. It allowed us to free up land that we no longer needed. It allowed us to consolidate onto that site. And right now, we've got 3 pieces of sizable land on the market all at various stages of due diligence. So very much delivered on that shared strong capital management. Last comment I'll make on this slide is on the right-hand side with the ROIC of 11.7%. It's these type of transactions that we've been putting together over the last few years and driving the business through the must-win battles, which has allowed us to deliver this 11.7% return on invested capital. And let's be honest, and frank, it's been a while since we've returned above our cost of capital. So it's very, very pleasing to see that in FY '26 and no reason why we won't continue that.

I want to move on now on to the North American platform. And I guess what I would say, the way I look at ourselves and SA Recycling within that platform is we're better together. We have slightly different market structures, but there's no doubt that the combined operations work better. And the way I think shareholders should think about it is as far as the North American businesses go is you look at that map, we are really nicely laid out right across the U.S. We've got where we need to be in terms of domestic, where we need to be in terms of export, where we need to be in terms of getting supply. The way I think you should think about the business is you own 100% of some of the facilities and you own 50% of some of the other facilities because believe me, they really do work in tandem.

If we just go into that a little bit, if we look at NAM first, and these are broad generalizations, but like all generalizations, they are a very useful starting point. NAM tends to be -- have large-scale shredders in large metropolitan areas. Think Jersey, think San Francisco, think Chicago, we've got very large facilities in those types of places. We have very extensive access to global markets, and that gives us true optionality, and I'll explain and Rob will explain that actually in a little bit more detail. It's also worthwhile noting that for SAR's ferrous exports, we are -- we act as the sole agent for that, and we act for the majority of their nonferrous. So we very much hunt in a pack when it comes to that from a selling point of view.

If we look at SA Recycling, it's got a very dense network of feeder yards and shredders. And the SA Recycling has really excelled in that, probably starting 8 to 10 years ago. It's built itself up very dense feeder yard networks around shredders. And as a result of that, has really secured an awful lot of at-source material. If you look at the map, you can see there in the blue, very, very strong across the southern states and in Southern California down to Florida, very complementary sites to where we are. And as a result of that and their more hub-and-spoke model, they've got a really deep local sourcing, and that becomes clear as well later on.

So when you put that all together, I think the 5 bullet points summarize it there, broader sourcing and customer reach, exposure to distinct regional markets, greater domestic and export optionality, shared safety standards. And that's actually worthwhile pointing out. We do share operational and safety approaches. We have some different technology, and we really do get the best of both worlds there. And amongst that whole -- the whole facilities, we have really good domestic exposure to what is a growing market in the U.S., particularly around the EAFs and the ferrous side of it. So very much complementary platforms, and I think that's the way we should think about it.

What that does is it gives us what we call a structurally advantaged position. And to me, I can use the must-win battles language here again and run you through these 5 areas here. Strong sourcing position. Our diversified feeder yards allow us to buy right. And that's one of the first must-win battles that we talked about, buy right through strong sourcing positions. Next must-win battle was process best, and you look at that valuable processing infrastructure. Between the 2 companies, we have extraordinary access to technology, to experience around how do we process this material best because that's the [indiscernible] of Sims and where we add value is by taking unprocessed in-feed, upgrading it to produce processed output.

The third one, the attractive domestic demand with export optionality. That's the right part of the must-win battles. And if you think about where Sims in particular, was 3 or 4, 5 years ago, we talked about optionality, but we didn't really have an enormous amount of optionality. We have the ability to export extremely well, but we didn't have the same opportunities domestically. We have solved that problem now. And between the 2 entities, we have fantastic access to EAFs right across the U.S. Multiple routes to market, also a sell smart must-win battle. I talked about the domestic mills, strong relationships. We can get there by rail, barge, we can export by a port. We have so many truck. We have so many different ways that we can access both the export and the domestic market. And I think what this gives us in the last point here, the market in the U.S. is still pretty fragmented. What it gives us is the ability to consolidate that market. And I'll deal with that on the next slide here.

So if you look at both NAM and SA Recycling over the last few years, there has been a consolidation of the market happened already. NAM's acquired 24 sites in the last 5 years, SAR 72 in the last 5 years. And I think that's really helped to cement our position in the market and give us a good platform for going forward. Let's look at the 2 charts on the bottom there. Clearly, what we're seeing between '24 and '26 is a robust growth in underlying EBIT. 2023 which was also a particularly strong year. Think about that, we were still benefiting from, frankly, the Ukraine shutdown of their steel mill and what that did to world markets and ferrous was going great guns at that point.

But if you look from '24 to '26, it's very much been self-driven. There's no doubt that we've had very strong nonferrous markets, and we'll talk about that but look at NAM there in particular. FY '24 was when we set out across our must-win battle growth and the growth has been quite extraordinary. Look at the right-hand side of the chart. And to me, there's a few -- well, there's 2 main points to make here. Firstly, NAM's growth in EBIT hasn't come through just growing volumes. It's come through growing the right volumes and giving up volumes that we didn't want. So you see there's actually a slight trend down in volumes in NAM over that period, but there's very much a strong trend up in EBIT. To me, that's a proof point that showed on our must-win battle of buy right that we've been sourcing the right material, we've been buying more unprocessed, buying less processed material and really driving margins.

Second point I'll make is that NAM has absolutely increased its trading margin percentage there. You see when we began the must-win battles, we were down around the 17% trading margin. We're up at 21%, 22% now. But if you look at SA Recycling, SA Recycling has typically been around 28%, 29% of trading margin. And that is very much driven by the number of shredders that they have and the amount of zorba that they are produced in the nonferrous capabilities as well. I don't see any reason why over time, NAM cannot lift itself to those types of margins as well. We have just begun this journey. We're 3 years into it, and we're about to leave base camp.

Let's particularly look at the ferrous market. What this map now adds is it adds in where the EAFs are located and also adds in our barging facility. So in the green dots, you'll see barges. The gray dots are where EAFs. What that to me really highlights is we -- whether it be SA Recycling or NAM, we're really nicely positioned to take advantage of these domestic EAFs. SAR benefits there from a tighter hub and spoke network. NAM benefits from established port access and scalable barge transportation. So you should expect to see in the coming periods more barge transportation. You should also expect to see more rail domestically from us as well. We are really nicely positioned to take advantage of this growing EAF market, and it has grown a lot over the last 7 or 8 years, and it's still got more growth to go through the balance of this decade.

The other point I'll make is on the bottom of the chart there, you'll see the ferrous sales volumes, domestic versus export. And you'll see NAM is definitely more export-oriented than SA Recycling. And I guess that's driven largely by shred versus cut grades. And a gross simplification here, but generally speaking, cut grades will hit offshore and shred material will be onshore here in the U.S. as a general principle. SA Recycling shreds more than we do, so they've got more domestic sales.

Looking next at nonferrous. It is fair to say that over the last 2 years, nonferrous has been the hero of the Metal result. That doesn't matter whether you're in ANZ or the U.S. or in fact, probably anywhere else in the world. The nonferrous market has really driven the results. Look on the left-hand side there, and what we're showing is the combined NAM and SA recycling results. And if you look, first of all, sales revenue, you can see that nonferrous has, in fact, exceeded across the 2 entities, nonferrous exceeds ferrous from a total revenue point of view. And when you break it down, so you see that 53.7%, you break that down, 70-odd percent of that is retail, and that's your plumber bringing in some copper, your electrician bringing in some wire, just whatever we get the nonferrous part from. And the balance is NFSR, close to 30%.

And that is largely Zorba, and that has driven a significant amount of our results over the last couple of years and particularly in the last year. Zorba is currently sitting at $2,600, $2,700 a tonne. It has a very low short-run marginal cost. So you're really managing to upgrade an in-feed that, say, I don't know, let's call it, $200, $250 a tonne, you are able to upgrade a portion of that to $2,700 a tonne zorba.

So before I hand over to Rob, I just want to look at what I say, the foundations that we've established and why I believe we're now ready for the next phase. So this slide here is particularly as it relates to NAM. What have we achieved over the last 3 years and where does that take us to the next phase? Can't just underestimate the point around stronger leadership and accountability. Under Rob, who's been -- how long you've been with us, Rob now 4 years, 4.5 years. Under Rob, we have had stronger leadership. We've really managed, I think, to unite NAM around a cause of getting ourselves back up to base camp, and that's been -- worked very, very well.

Under better integrated planning, sales and operating plan is the core of the way that we run NAM, and that allows for just much better efficient use of our resources and much better targeting of the scrap that we want to buy and where we're going to sell it to, improved operational and commercial discipline. We do run extremely good shredder operations. We run extremely good downstream operations, and that allows us to extract as much value as we can from every tonne that comes in. We've integrated the acquisitions into the network. Like I said, we've acquired 20-odd sites over the last 5 years. They're now fully integrated, TCT being the latest one. I think you'll see how integrated that is within our operations. Strong relationships with domestic mills. We have really driven that over the last 2 or 3 years. And if you want to have domestic optionality, you've got to have those relationships.

Greater logistics and sales opportunity, whether that be barges, rail, truck, we now have access to the domestic mills we need to have access to, but we still have that export optionality. We will still export a fair amount of the East Coast here, particularly in cut grades through to Turkey off the West Coast into Asia. And last point here, increased focus on unprocessed material. When we put in the must-win battle of Buy Right, one of the biggest benefits from that was just a focus on making sure we're getting the right material into the yard because that gives us the opportunity to upgrade it and maximize our margin.

If I look to the next phase where I think we're heading, we want to have increased control of at-source material. That's about filling in feeder yards around our shredders. Moving on to our shredders, we've got plenty of room in our shredder capacity to increase throughput. So we can infill without having major capital expenditure on shredders. I think that's a big advantage. Recover more nonferrous value. We have put an enormous amount of effort to making sure that we are not sending nonferrous to waste as such. It is such a waste of EBIT. We've been working very hard on that. Some of the downstream work we've been doing around fines recovery plant, which basically takes the very fine material, which has got a lot of copper in it and making sure we extract that.

Integrate TCT to the broader network. We're well on the way there, and I'd probably say I almost declare that a won battle. When we further expand strategically into the broader network, we have got ourselves a very, very favorable starting position. We've got ourselves great facilities in the right locations. We can expand into that network. And I think we can expand without disruption, largely from inorganic growth. Directing material to the highest value market, that's key to what we do. S&OP allows us to do it. We've really driven improvements on that, and I expect future improvements. And the last one, I guess, is pursue disciplined organic and acquisition opportunities. This market is going to consolidate. Rob will probably talk a little bit more about that. We are in a position to be a really lead consolidator of that with high-value transactions.

On that, I will hand over to Rob.

Okay. I'm going to spend a little bit more time on this first slide because I think it will help with speeding through the rest of the slides. As Stephen said, I think the self-help journey, as I call it to my team, has really started back in the end of 2024. We -- it coincided with the divestiture of the U.K. assets, relook in the mirror at what was working and what wasn't working and a strong change in the leadership organization. I'll talk to you a little bit more about some of the things that we've done. Stephen mentioned some of the transactions and acquisitions we made.

Some of the best things we got out of those on top of the synergies and the consolidation opportunities were the leadership that came into the organization. And it really started to take hold as we integrated those assets. People that were willing to look at the data, look at the facts, the market in intel and kind of the analytics. And that really started to drive that change. You can see in the left-hand column there or the left-hand chart on margin. We changed the motivation. We changed competitive people want to do competitive things. And we put margin as more of the discipline or the obsession rather than just pure volume. And really, without sounding too boring, it was a back-to-basic sort of strategy here. We needed to get back to kind of a strong foundation. We had a very solid market in North America. We already had 2 iterations of tariffs and there was a strong demand curve that we needed to be able to penetrate in a much more meaningful way.

On the trading margin side, Stephen mentioned this a lot, so I won't dwell on it too much, but really focused on the products, the raw materials that we're going to be sought after, mostly shredder feed, but ferrous and nonferrous. And we haven't been a very nonferrous focused company in the past. And it's not just capturing the nonferrous fraction from the shredder feed. It's also being able to participate in buying nonferrous retail products as well in the feeder yards that we have and the ones that we want to have in the future. We used the capacity that we had already invested in. It was very important for us to -- there's tens of millions of dollars deployed, state-of-the-art equipment, and we weren't taking advantage of using that capacity, let alone capturing that margin.

So nonferrous retail, nonferrous NFSR, very much an optimized new sales approach as well, and we had to have the capability to do what we said. So it was very good operations to load vessels. What else could we do? We had to spend a lot of money, and you can see that on the far right-hand side of being able to get our products to markets as well. So the last couple of years, as we learned and started to grow our margins, a lot of that was on the buy side, buying the right things, as Stephen said, but a lot of this was focused capital investment in things that we're going to add value. And those are the things like the rail line expansions that we have. And in many of our yards now we've doubled the capacity of being able to bring in railcars on a daily basis and get those cars out. We've invested in railcars themselves as well. So we not only have the capacity, we have the cars to be able to get to markets further away in a very efficient way.

Sort of a more resilient NAM. Stephen had a very similar slide. I'm not going to dwell so much on where we came from. But suffice it to say, we've got a strong foundation now, very results-motivated team. Again, focusing in on the unprocessed side, that won't change for a long time. That was on the buy side. As we said now, there's opportunities. We're going to show you a slide of some voids where we had in the past and just give you, I guess, a bit of a comfort that we know how to do this. We've done it very well in the last couple of years as well on buying feeder yards. The buy-sell spread sort of discipline in ferrous and nonferrous, in particular, just to make a point, as we pivot towards a better optimized sale, the buy-sell margin gets hedged naturally in a calendar year -- calendar month rather, when you're buying and selling in a local market. So that resilience of margin trend is also in focus for us.

The optimized sale or the go-to-market, as we call it, that optionality, we have to have that capability to move to different markets when we require it. And that investment sort of discipline as well, very prioritized and again, the use of data. A lot of little things repeated over and over again. This is an example I wanted to kind of bring up this morning, probably don't talk enough about the Baltimore opportunity. Prior to my arrival, ARG was acquired by Sims back in 2021. It was 1 shredder and 3 feeder yards. And as you look down the map from really Philadelphia South, we had a big void between Philadelphia and where we existed in Virginia. ARG started to fill in that hole. And our existence started to become a little bit more consolidated. The opportunities with EAFs were motivating us. But at the same time, the synergies, we had trucks passing in the night and those costs were real.

Now enter the Baltimore Scrap opportunity in 2023, 4 shredders, 13 feeder yards starting to fill in that network. And this is where we'll continue to bolt on this and the Northeast region, along with the Chicago region and the Western regions as well. Now fully integrated, I would say, very optimized, realized synergies, the costs are down. And as you would expect, the normal market consolidation benefits are coming. A little bit more on greater material at source. We really -- again, I'm repeating myself a little bit here. We took control of a much more disciplined buy and sell on the ferrous and the nonferrous side. Stephen mentioned it, I'll repeat it again.

We weren't a shame to shrink to be able to grow EBIT and value in the organization. We did make some very difficult decisions to walk away from what I would call more wholesale volume in favor of, again, that discipline in the buy-sell and utilizing the assets that add value for us and really chasing the demand curve. As Stephen mentioned and we'll talk about in a slide or 2, the demand on the EAF side, and we're a raw material provider to those EAFs is real, and it's continuing to grow beyond GDP normal growth, but so is the aluminum side and so is the copper side, driven by a very, very strong market here in the U.S.

We drove capacity through our existing assets. We've added capacity to those assets, both in ferrous and nonferrous capture as well. We've gained those efficiencies now. They're well embedded into our results, and we're getting the benefits now of that fixed cost per ton dilution as well. Capturing that high-value nonferrous NFSR, larger volumes. And then as I mentioned before, that sales optimization, all contributing to the results that you're seeing here.

So TCT, some of you that are with us are going to finally see this. As Stephen said, hopefully, there's no unexpected TSA situations today. It's really in a nutshell, to be very simplified, we took 2 ferrous operations, ours and the Tri Coastal operation. We consolidated it into one site here you see in the slide. We still have an ongoing nonferrous operation that's at a different site. We'll drive by that as well today. Really got a lot of cost benefit out of that consolidation, as you would imagine. It is -- we call it an asset-light operation now. We basically have given the operation to our long-time partner. This isn't a new thing for us. We deal with Enstructure at multiple sites, and they have a world-class facility that you'll see here that we have allocated a large portion of.

Improved competitiveness with added deep sea. And that was a difference between our old existing yard that you'll see. It had good bones, I would call it, good barge access, rail access, good processing capability. We've transferred all of those good things over. And now we have also deepwater access with a cost benefit and the consolidation in the market. Stephen mentioned it, I'll say it one more time. Houston is a fast-growing market. It's the fourth largest population in the U.S. rumored to be the third in the next several years, very heavy industry here rather. And it did, and we are under contract, and I'm sure Warrick will mention at the 3 properties that we had in mind when we looked at this strategy, does this make sense? So that monetization, if you will, helping to fund some of these strategies in the journey here.

We're very actively looking at relocating the nonferrous business as well for growth. It's a very, very big contributor to our bottom line. The site you see here, and I'll explain this a little bit more in our tour, but for those on the website, it's a 55-acre site. What you see there more or less visually. We occupy somewhere just north of about 20 acres, 15 to 16 acres inside the Secure port, and then I'll explain this when we get out in the bus, another 5 acres outside. It's important to know that because we want to be able to attract smaller dealers as well. Going into a large port like this is a little bit -- let's just put it, you'll see it today, a little bit intimidating at the best of time.

So we have the same capabilities, the torch and shear. We have cranes and excavators with shear head. We have stationary shears. We have yokes. 20-car rail spur, it's switched daily. We have access to 2 major rail lines out of the Houston port on top of deepwater barging, river barging. And the slip on the left, you can see there, I'll say this is just under 12 meters of water. The slip where you see the boat in front has just over 13 meters of water. The front boat is a Supra. The other slip that's dedicated to us is able to handle handysize vessels, so 30,000 tons. So if we want to go international, we can. The Mexican market is right around the corner, so to speak. The North American market is either by rail, truck or barge, and then we can go anywhere else in the world with ferrous and/or nonferrous with containers.

So on the market optionality side, I'm not going to spend a lot of time here. We've talked a lot about it already. All of our locations on top of that buy discipline, we've really been driving in. We call it bullets in the gun, it's a little derogatory. But if we can't get to market, then we actually -- it isn't our market. And we're creating those opportunities, both ferrous and nonferrous to actually be able to execute the buy and the sell plan. And that is a very integrated plan in North America, soon to be in Australia. It's working capital discipline, but it's also just that margin discipline as well.

Just a little bit on the market. I'm not going to dwell too much here, but a couple of things when you look at this. The ferrous on the left, and I'll raise your attention to, you can see sort of some seasonality in there. Stephen talked about the demand growth. The shred portion of the raw material demand growth is a real thing. And I say this a lot to our team internally, say this a lot to our customers. There's not a lot of new manufacturing happening in the United States of -- that's producing prime industrial scrap. There's a lot new more capacity of steelmaking. So those steelmakers are going to have to make steel in their EAFs using a different recipe of raw materials. I use the word recipe. It's a mix for them.

Shred is going to be highly sought after. It already is on the international front when you break down raw materials consumption. It's going to be even larger here in the United States. We are in the high 70s in terms of steelmaking capacity by EAF. It could go to 80%, 83%, 84% in the next 10 years. That's mostly scrap, 75% to 80% scrap with not a lot of new prime scrap coming to market. Shred and high-quality shred are going to be highly sought after. You see the blips in January, February, that's seasonality. Those are supply problems during the winter months here in North America. But what I want to draw your attention to now is it didn't drop in March and April and June as far as it did the previous years. And that's the value, perhaps the new value that shred is going to have as that demand curve continues to commission.

We've been talking to you about the 20-some-odd million tons of new capacity coming online. It's starting to take shape. And as you see that international Turkish price, it's staying closer because it's -- the domestic market is forcing the international market to be more competitive. If you want to buy scrap here, you have to pay a higher price. Similar on aluminum, the aluminum industry doesn't also benefit or does benefit from tariffs, I should phrase it that way. They always had tariffs, but they were 10%. You can see where we denoted when the big adjustment was made to 50%. Not only were some of the aluminum projects that were sort of on the back burner expedited new capacity, new demand is coming online, but a scarcity or the words that some people were bringing has driven the price and the value for aluminum as well.

We're going to show you another slide in a minute on the demand curve that's going to keep that real. And you can see with Zorba, Zorba is driven a little bit more by aluminum, but it also has a copper bearing portion to it as well. And those, I would say, are going to be higher for longer for the foreseeable future. This is that strong demand curve that I wanted to kind of mention here. And you can see sort of the growth beliefs that we have. These are fact from publicly made available investments. This isn't just our idea of where GDP might go or where consumption may go. These are projects that either have steel going into the ground to build the new steel factories or aluminum facilities that are going to be either in the phase of commissioning or about to be commissioned and then new projects that we believe will come to market.

And why are they coming to market? Some of you have seen that slide on the right-hand side. If you go back a few years of our trajectory, you had the COVID phase where the Amazon Fulfillment Centers and Walmart Fulfillment Centers were driving the growth for steel. They're driving the growth for more racks and conveyors and digital systems and weighing systems, and all the aluminum and copper that went along with the inners of those facilities and garage doors, those types of demand curves.

Then you get to the next phase, probably want to talk about the Biden administration, where traditional infrastructure came back into things as the Build Back Better. You had docks, you had airports. That demand was pulling through. And then there was the green phase with renewable energy, wind towers and solar, and those tax credits still exist today. These steel mills are very busy. These aluminum producers are incredibly busy right now. And this is all on top of the world's largest economy by GDP.

Now in this phase, and we can't keep up as an industry, building new plants, everyday data centers, and the water filtration and the cooling systems and the infrastructure, the buildings around them, the racks, the copper cable that has to go to the grid that has to go into the air conditioning. We've got from Bloomberg, I believe the source was that per megawatt hour, you can see here about 11 tons of copper and aluminum per megawatt hour on top of all that steel demand. So this isn't a flash in the pan. This isn't a supply problem of seasonality. This is a driven market with state-of-the-art infrastructure that's being built here, both in steelmaking, aluminum furnaces and copper refining as well.

And then really on the back end here, scalable model for growth, more of the same, but it is a rinse and repeat. And I say and preach all the time to our team, we have to keep doing this right over and over again. And it is relentless on securing more unprocessed material. We are going to now graduate into not keeping the balance in markets, but we're going to grow into some other, I'd say, tuck-in markets where we have a void, where we have a logistics opportunity to reduce costs, where we have an opportunity to consolidate a market again. We are taking a hard look at our footprint, where should our central processing facilities be? Where should our mindset of innovation be on separation technology. And we've done a lot of this already. We are now looking at should we have more furnace-ready aluminum products? Should we have more copper granulation and furnace-ready refinement there as well, bring those value propositions to the end market and to the customers. And that's both in the nonferrous recovery side of the shredding side, but it's also in the nonferrous retail side.

Of course, religion with sales optionality and really optimization. What we want is the best price. It's obvious in trading margins and it's been working. So what you'll hopefully hear from me in the near future in the next coming ones or coming meetings is some of the opportunities that we've been able to transact on to fulfill some of those voids and those opportunities.

I'll pass it to Warrick.

Thanks, Rob, and good morning from Houston. So Rob's last point on that slide was investment discipline. So I thought an opportune that we talked a little bit about capital management and the approach that we take there. Let's go back on...

So we introduced our capital management framework back in 2024, and it's really been a driver of how we approach our -- both our investment philosophy, but how we manage our balance sheet. For us, it's really important that we do reward shareholders along the way, but we aren't a yield stock. At the end of the day, our opportunity today is really through growth. And both Stephen and Rob have talked about leaving base camp and earning the right to grow. And that's really, I suppose, the focus for us going forward.

At the center of our capital management framework is value creation, obviously, for our shareholders and how we drive that. But we are in a commodity-based industry. We're a low-margin operating entity. It's really important that we maintain strength in our balance sheet and be able to operate through the cycles. Are we seeing a lift in the cycles -- in the cycle or a step-up in the cycle? I think that's still to sort of evolve, but we will respond to that after we get a little bit more experience from what we're seeing at the moment.

But for now, it's really about making sure we've got the right operating assets, and we're investing in those assets and maintaining those to ensure strong operating performance, and Rob has talked about that, the balance sheet strength in order to grow. And then, as I said, rewarding shareholders along the way, but in the sense of, ultimately, our opportunity is around capital growth. Working capital is a key component of that as well. Obviously, with the increase in nonferrous pricing, we need to carry that. And I think that's some of the opportunities that we see coming on to the market where other players haven't been as robust in terms of their capital management framework and their balance sheet strength and are struggling with the rise of nonferrous pricing and the ability to actually purchase that material. That's been one of our strengths in terms of being able to do that and then see the reward come back in through our margin performance.

Okay. So one of the things I just wanted to sort of highlight because I think it's -- there's been a bit of feedback as to how we sort of think about our dividend policy. As I said, one of the aspects is that we're not a yield stock at the end of the day, but we do want to reward shareholders along the way. I think the easy reference, part of our capital management framework is that out of pre-growth, what we term pre-growth free cash flow, we want to pay a portion of that out to shareholders. 25% to 35% is our capital management framework. There's a couple of aspects, though, that I wanted to highlight around how we think about our pre-growth free cash flow. And this is actually highlighted in our OFR within our reporting structure. So it is a readily available calculation. But I think it's useful just to go through a couple of the aspects of it.

The first one is when we think about our tax expense, we use what we call our underlying tax expense. So from a payment point of view, that's slightly different. Obviously, there's a timing element there, but we obviously, from our earnings performance, need to make sure that we can deliver our tax payments at the end of the day. So we use an underlying tax calculation in that. The other aspect of our pre-growth free cash flow is the timing of receipts from our joint venture interest and participation in SAR. So there's 2 aspects there. One is that SAR retains some of the earnings in order to fund the -- both the capital program and their general capital management within that business. And the other aspect is we get paid quarterly in arrears.

So when we have a -- what we saw at the -- in the FY '26 results was an extremely strong fourth quarter performance from SAR. That money came in, in the first quarter of the current financial year. So there's a timing element that flows through there as well. So we have to manage against that, and that's included in the calculation of our pre-growth free cash flow. What we've then shown on the right is how we actually think about it. So if you take the $180 million, 25% to 35%. We've got around about 193 million shares on issue. We paid an interim that the Board declared at $0.14. There's a bit of give and take there. So it was rounded up. That's how we calculated our final dividend. So I know that sometimes we get that question about how do you actually work out, what that dividend is. I thought it useful just to demonstrate that.

Capital discipline is extremely important for us. It's really important that we make the right decisions that we've gone through a process. What we've done over the last sort of 12 to 18 months is actually improve and evolve our capital investment framework so that we really move that through a testing and challenge period. From us, one of the things that we changed early on in my tenure was to move that sort of growth in the business from something that we held centrally to the business. It's really important that the business knows the business. The business puts forward its propositions about where it sees growth. But the role of the center is really to manage the overall capital portfolio.

So when we've got some competing criteria, we put those against each other. And then one of the things that we do now is actually challenge those or go through a rigorous review process around those capital proposals. Have we done the calculation right? Have we undertaken a risk assessment? What are the risks that come with those elements? And I suppose really working through those together with the business to challenge ourselves. And then we bring that forward to our executive team to, again, continue that review process.

I think making the right -- there's a lot of investment opportunities out there, Rob, and the team getting approached every day about opportunities that we could -- that we can consider. But what we need to make sure of is that we're actually making those right decisions. And as Rob said, it's not really about -- it's not about expanding our footprint per se, it's actually about the infill that we need. We've got the existing infrastructure. Our target is really about infilling, improving our unprocessed feed and using that existing infrastructure to its maximum advantage.

So I suppose one of the things I just really wanted to highlight today was that we've done a lot of work in terms of our capital allocation processes. We've got a lot of discipline around the way that we approach that. I know sometimes it actually annoys the business that we go through that process, but it's really a critical part of what we need to do to make sure that we're making the right decisions in line with our capital management framework. And so ultimately, our growth funding is sort of -- we split it up into 3 sort of different areas. That smaller productivity and feeding out some of the opportunities that Rob is currently focused on. A lot of that we can do through our existing cash flow. That's really smaller spend, $5 million to $10 million sort of U.S. dollars something that we can certainly cater out of our existing operations.

The bolt-on acquisitions like TCT, what can we do in terms of recycling capital? What are the opportunities to rationalize our portfolio and fund that through either our existing balance sheet capacity or recycling something like property sales as we've done here in Houston with TCT, a combination of both. Ultimately, though, there's larger strategic opportunities as well. And as we continue to improve our operating performance, continue to grow that -- those feeder yards, improve our infill, I think ultimately, we see that opportunity to really add those -- some more of those, I suppose, Baltimore style acquisitions into the portfolio.

How we fund those will depend on where we are at that point in time. It's really a case-by-case basis, but it comes back to our capital management framework. Are we maintaining balance sheet strength? Are we able to operate through the cycle? What does that cycle look like? We do a lot of work today in terms of our own internal modeling about our way forward over the next 5 to 10 years, what does our cash flow look like? What are we able to sustain and how we should do that. As I said, as I show on the slide there, our considerations include all those principles around our capital management framework, our liquidity, making sure we maintain a buffer, what do we see as the market conditions going forward. So we can't provide an answer in terms of how we actually do that. But I think one of the things, again, I wanted to highlight is that we do see those opportunities come across our desk, and they are ones that we would like to ultimately pursue as well. And I think that's it from me.

Thank you, Rob and Warrick. So before I get the guys back up to go through Q&A, I want to just really summarize or bring together the way we think about what is the investment case, the key takeaways for Sims. And really for us, it's around 4 structural increases we see in demand. And let's go through them quickly and talk about how we are exposed to those structural increases around demand. So firstly, decarbonization. There's a lot of noisy voices in the world at the moment, and it seems to anti-decarbonization. The reality is the world is still decarbonizing. It's going on very quietly despite the noisy voices that are out there.

We are very nicely exposed to that decarbonization theme. The recycling of any material, whether it be ferrous, nonferrous, data center equipment, very, very nicely exposed to that decarbonization theme. Secondly, electrification. The world is electrifying. And that's not going to stop either. We are very nicely exposed to that, our nonferrous business, very good franchise around collection, very good processing facilities, turning messy copper wire into beautiful copper ready to go back into smelting. Same on the aluminum side with zorba, very nicely exposed to that.

AI infrastructure. Rob mentioned it. I think probably if it wasn't for the development of the AI data centers here in the U.S., I'm not sure where the steel demand would have gone up, Rob, over the last 12 months, 24 months. There's a huge amount going in there. We're nicely exposed to that's about EAFs producing that steel. We supply the EAF markets. Clearly, that is ongoing. The amount of money -- we'll talk about this tomorrow, the amount of money being pulled into data centers is almost uncountable. We're very nicely exposed to that. On the technology refresh, well, that's all about SLS, and we'll go through that in detail tomorrow. But I think the key takeaway there is those 4 significant demand drivers that are -- I think they've got decades to play out. Between our Metal business and our SLS business, we are very nicely exposed to that.

I'm going to call the presentation over there. I'll call back up Rob and Warrick. And happy to take your questions. Also, Mark's got a microphone there for the benefit of our people online so that they can hear the question.

It's Lee from JPMorgan. Stephen, just on the trading margin, you talked about lifting it towards where SAR is, like there's obviously some differences between your businesses. I think you've got 50% more shredders, differences in like unprocessed and processed and the nonferrous piece. What do you actually think you can kind of get to? And what's the bit that you need to change in your business too?

So I'll get Rob to answer that one in detail about where we're looking. But the principle is it's around infill, it's around growing our feeder yards. If you look at what SAR has done very well over the last 8 to 10 years, it's acquired feeder yards around their large shredders and really had a very dense supply network. That's driven more unprocessed ferrous into their business, and they can turn that into Zorba. It's by having more feeder yard networks, you get more nonferrous retail as well. And that is the biggest difference between the margin percentage that we make. There is no reason why we can't do that. It's not going to happen tomorrow, next year or the year after. But over the next 3 to 5 years, I see us growing strongly there. And maybe I'll get Rob to potentially talk about the sort of opportunities we look at and really what our filter is around taking on -- deciding to take on a feeder yard or in fact, a medium-sized acquisition like we did with Baltimore Scrap.

Yes. Lee, I don't have a tremendous amount to add to that other than, as Stephen says, there's -- Warrick has mentioned this, we're getting offered a lot of opportunities to have these tuck-ins or these fill-in feeder yards. As much as this is a good market, these prices are driving smaller operations, I'd say, into difficulties with the working capital requirements. So there's a generational succession problem as well in this metal recycling industry, and we're taking advantage of that. It probably wasn't as much in our DNA in the past at Sims Metal North America. It is absolutely on our radar now as a must to capture more and more of that faster margin that's out there.

Sure. And then more of a shorter-term question. Just freight and the diesel price, like how does that actually impact your feed into your business? Like you obviously have a focus on getting less processed scrap. But what does it actually mean day-to-day of getting feed and people kind of bringing it to you, I guess?

Yes. There's -- it's real now. I would say about 6 months ago, it was not translating into as much inflationary pressure. You're seeing some of the price increases, some of the steel price increases around the world. I'm not just talking North America now, but the Turkish producers are having to raise rebar price to cover the price of freight to go to market now. So the costs are getting passed on to the end-use products. In terms of our suppliers coming into us, they're being driven -- again, it's really price is motivating those individuals to go out and find scrap and bring that supply into us. And we're mindful of the costs affecting us, and we're having to be mindful of the price that we pay to get them out of their bed and bring those supplies in. But we are maintaining those margins, and you can kind of see that price escalation also kind of matching.

Okay. And then so maybe more of a kind of medium-term question given that comment. Is there any chance that the nonferrous side of thing business goes from kind of like a margin -- like a trading margin business to like a dollar business. So rather than having a percentage margin on a very high number, people start shifting to dollar like almost dollar per tonne?

Yes. I think we've always looked at both. So as the prices get higher and higher as you go more and more to nonferrous, the dollar per tonne will become more of a feature. So we just -- in many ways, the trading margin percentage is an output. We don't target a specific trading margin percentage. We target the highest margin that we can possibly make and that flows into a trading margin percentage. But you're right, if the business goes more and more and more to nonferrous, in that situation, you would expect to see the trading margin percentage fall because you're obviously not going to make a 21%, 25% trading margin on a $14,500, $15,000, $16,000 copper price. So we look at both. We balance both.

I think what probably drives our decisions is the dollar per tonne, and that results in that trading margin percentage outcome.

Sykes from Jarden. I was just wondering if you could help us a little bit with your process share in NAM. I think it was on Slide 11, you had about 70% was unprocessed. Just in terms of the time line of that, I mean, how is that -- how did that look 3 years ago? And then I think in SAR, it was 90-ish percent. Is that where you'd expect to get through with this focus now? And are there any kind of steps we should look out for in achieving that?

Yes. That growth to 50% -- it was probably closer to 50% about 3 years ago. It's been a lot of hard work. It's been a lot of difficult conversations with old suppliers that we now compete with. The trajectory should continue. We're not stopping with that, whether it's shredder feed or it's material for our nonferrous balers or our ferrous shears. Yes, it really bolts down to what Stephen has been saying about these tuck-ins. If the more we buy at source or direct across our scales of unprocessed, higher margin, obviously, we're adding value. So that's going to be the target. We have that internally within our organization and our joint venture investment. And yes, we're looking to continue on that journey.

I'm very pleased to hear that NAM has made significant progress in the last 2, 3 years. And my question is that what level of earnings do you believe that NAM can achieve over the next 5 years? Do you have any image of the earnings available of the [indiscernible]?

So what do we see in the growth and the level of earnings over the next 5 years? That's something we don't -- I'm not going to comment on specifically. I'm always very reluctant to give out our view on any form of guidance over the next 5 years. But what I can say is if you -- what are we looking about at the fundamentals over the next 5 years. And to me, this chart we're looking at right now is what drives it. If you believe that decarbonization, electrification, AI infrastructure and technology refresh are all growing, then it would be, I think, a very logical case to conclude that Sims will grow with those.

But in terms of where we haven't and we won't put out a target growth percentage over that period. Otherwise, we'd be constantly having to come back and revisit it. But I think it's fair to say that we are comfortable that we are nicely exposed to those 4 structural demand themes. We are comfortable in our position in the market, whether it be NAM, SA Recycling or SLS, we are a major player in all of those markets from a recycling, repurpose and redeployment point of view.

Another question is about the capital allocation. Given the significant improvement in earnings, strong cash generation and the share price performance, do you see any scope of revisit your -- the current shareholder return framework over the time? Do you have any idea of changing that?

So that question has got Warrick written all over it. So, I'm going to hand that one straight to Warrick.

I mean I think, again, we come back to our capital management framework, which is that we will reward shareholders along the way in terms of that percentage. We don't see that percentage necessarily changing in the current environment. Our focus is really about how do we continue to grow the business from a capital reinvestment perspective. So yes, 25% to 35% of earnings, whatever those earnings are, we target to come back to shareholders from a pre-growth free cash flow perspective, but the rest of the earnings we want to reinvest in the business. That's really the opportunity to provide longer-term shareholder returns at the end of the day.

I'll ask a follow-up. Just on the SAR business, we had Tyler [indiscernible] earlier in the year, I think it was. If you think that you've acquired 24 sites in the last 5 years and they've acquired 72, is there any sense that you get -- it seemed at the time he didn't suggest that, that pace was going to slow. Is that still the operating assumption for the SAR business?

Yes, there's two aspects to that question. One is, I mean, it's willing buyer, willing seller. What SAR has done very well over the last 5 to 8 years is build long-term relationships with scrap yard owners. And it's the type of thing -- you just can't go into a scrap yard and say, here's some money, do you want to sell it. There's legacy involved, there's family dynamics involved. So they've done very well at that. It's fair to say that they haven't stopped doing that. So I would expect, is it going to be 70-odd yards over 5 years? Well, that will be a little bit determined by whether or not people are willing to sell. But I'll make 2 comments on that.

One is I think the consolidation of the industry is going to continue. So I don't think it's going to slow down, whether it be the demands on working capital, the demands on downstream processing to maximize the nonferrous that's sitting in your in feed. That requires capital. So I think the industry is going to consolidate. So that would be my first point. The second point is, I guess I can assure you that the Adams family hasn't slowed down their relationships with prospective scraps that they could buy. Is it going to be 70? I don't know, but it could well continue at that run rate.

Okay. And then just like generally, when you run the nonferrous business, and I guess this is mostly for Rob. Like what kind of level of ferrous like you actually need? Like so what can you get the mix to? And how important is ferrous as a kind of a nonferrous feed generally? So where do we end up at, I guess, is what I'm asking?

Yes. It's -- I'd have to answer it 2 ways. So in a feeder yard, you really need to be like you would think in any business, sort of a one-stop shop. You don't want to be selective in what you take and what you don't take. So typically, a feeder yard, depending on the country or the city that you're operating in, it's going to be around a 10:1 in terms of weight. So you're bringing in 1,000 tons. I'm giving you a very broad example here of ferrous and it might generate 100 tons of nonferrous retail.

Now on the other hand, the second part of the answer is we actually operate some fairly large nonferrous operations as well. So depending on if it's a feeder yard that you're just tucking in where you're going to -- again, that spoken hub sort of consolidation or you're buying into a major processing nonferrous operation, it could be thousands of tons as well. So -- and you don't want to take or not take ferrous, but you don't deliberately look to go and buy it either. It kind of comes in as a bit of an accident, if that makes sense.

That does. And I might just end with one for Warrick. Just the broader property strategy? I think -- I can't remember it was a year or 2 ago, you talked about the $1.5 billion of opportunity. Where are we kind of tracking with that?

Yes. So our focus at the moment is on the Houston properties in terms of TCT. As Rob mentioned, we've got all 3 properties through -- going through different stages of due diligence. And our current expectations are to capture those funds through this financial year. In terms of when we released -- provided that information, it was really to, I suppose, just it wasn't to say we were going to sell all our properties. It was just to really show the opportunities, I suppose, that we had. And it really falls into our longer-term planning options. We often talk about Claremont, for example, gentrification around our sites is an important factor. But they are longer-term plans in terms of how we actually need to think about our business.

What that information actually assisted us with is some of our road map work in terms of where do we need to go next, how -- what plans do we need to put in place because we don't want to look -- we want to protect our business at the same time, but capitalize on the opportunities that might exist in some of those assets. So there's -- transparently, there's nothing sort of major on the market. We did sell a couple of Chicago property this year as well or last year, last financial year. And we'll continue to look at those smaller opportunities and rationalization where they make sense. Some of those opportunities will also come up in terms of our acquisitions. So some of the acquisition opportunities will give us an opportunity to free up some of those assets, but they need to work together. So nothing to sort of put on the table, Lee, but yes, constantly part of our capital management.

David Wilson, [indiscernible] Perhaps a question for Rob. Just on the industry consolidation bit, historically, you saw Cliffs, Nucor, BlueScope all buy scrap businesses or scrap assets. And are we still going to see more of that in that consolidation? Or do you think that was more a sort of strategy about putting your hand on having some level of vertical integration.

Yes. It's -- just to kind of go back in time. In North America, this is a very common practice. The steel mills being in to some percentage usually of the raw material requirements, Nucor has long had a scrap raw materials arm. They've invested in DRI facilities now. I will say, on the contrary, Cliffs has exited that space largely. SAR was able to acquire some of those assets and divest some other ones. Gerdau, CMC they're all in, I would say, in a good place. And what we understand of our customers, they're our customers, their attention is now in the upstream. So their attention now is buying rebar fabrication plants or garage manufacturing sort of the customer inside of their customer base. So I don't really see a scarcity of product here. So I think they're comfortable in that regard.

In the section on capital management, you talked about productivity in feeder yards, bolt-on and strategic opportunities. With the strategic opportunities, are they larger versions of your smaller acquisitions? Or are they strategically different investments?

I'll maybe cover the overall answer and Warrick can go into a bit of detail. I see looking forward, the bulk of our acquisitions will be bolt-ons in terms of feeder yards infill with periodic opportunity to buy something more significant. An example of that is Baltimore Scrap. And when you think before then we bought a couple of smaller ones and then Baltimore Scrap came along, and it was a good example of a much larger one. And larger ones will come with shredders and feeder yards. I think it's probably fair to say they won't be in completely different locations to where we are now. They will still be part of our network.

And our network is looking pretty good though. If you think look in North America, it's from -- on the East Coast here, we've got a great network going all the way from Connecticut right the way down through to Virginia and everything in between. So expect to see predominantly bolt-ons, $5 million, $10 million, $20 million type range with the occasional larger one. The timing of that is -- the time of that will be probably largely determined by when the party is interested in selling. So Warrick, do you have anything more to add?

No, nothing more to add to that.

Okay. It doesn't look like there's any more questions in the room. So -- we have one more down, [indiscernible], down the front here.

Just a detailed question about the TCT. So you buy about 350,000 tons of scrap. Are you buying from dealers? Or are you buying at the feeder yard that you have?

Yes, it's a mix. We don't have other feeder yards in the region. This region generates a lot of industrial scrap and manufacturing scrap just because of the nature of the port, the oil refineries, the tube manufacturers, et cetera. So it's a combination. It's more obsolete and industrial question than if it's dealers or not. It's also the other side that is not for today's education class, but the size of the dealer matters. If they're a large capable of shipping bulk or rail or container, or they're a dealer that's doing a demolition job that they have to move the material off the site and they need a good location to be able to operate and ship to 7 days a week, 24 hours a day. We can offer those sorts of things and still make margin.

So it's -- there's another difference, I would say, between Sims NAM and Sims not exactly all of Sims SAR. We're in the big cities in the United States. We cover 9 out of the top 10 combined in the U.S. This happens to be one of the bigger cities in the U.S. So we're going to be more prone to some of the dealers. But that's where we have to have that margin discipline. We pay what we want to pay, and we know what we can get from material.

Another question [indiscernible] is Slide 9 said the number of sites that you acquired in the last 5 years, NAM in 24 and SA 72. So there is a 3x gap. So how do you see -- what is the -- how do you see -- what made this difference? And in the next 5 or 10 years, how are you trying to narrow the gap?

Yes. I mean I don't know if I necessarily think of it as a gap. I think it's just a number. What's driven SA Recycling is that they have put many, many hours starting 8 to 10 years ago into developing the relationships with the peddlers, so that when the owner was ready to sell that they were naturally -- they were a natural buyer of that property and the owner was comfortable in selling it. We're putting in that effort now. And so I'd expect to see us over the next 3 to 5 years. I mean, are we going to get 70 sites? I wouldn't even begin to call what the number will be. It will be what the sensible number is. But it's about putting in the effort now, developing the relationships, and it probably comes more -- it's probably driven more from our commercial teams than anything where they are going around talking to various people and yards and over that time, you develop a relationship. SAR has been very good at doing that. We are getting better at doing that.

And if there was to be -- I hope there's not a closing of the gap. I hope that we have a lot of sites and they also have a lot of sites, whether it's -- whether the gap closes or not, it should be the absolute number that we're talking about. But there's no doubt that, that is a key part of our strategy going forward is to build out a lot more feeder yards around our shredders. We've still got plenty of capacity in those shredders, plenty of capacity to shred and produce zorba, and to produce a very good quality shred product for the domestic market here in the U.S.

Yes. I think it's sort of an obvious question. But when you actually look at the structure of our businesses. We're in very large populations. The feeder yards there are a slightly different size. And the beauty of SAR is it's a lot of smaller areas. So the size of their acquisitions are actually a whole lot smaller. They do acquisitions at $0.5 million. So when you can't really look at it as 72 versus the 24, you really need to look at it as what is the overall growth strategy. So our acquisitions will always, I think, be a little bit larger in terms of outlay, just given the areas that we operate in. SAR will always have those. They do a really good job at picking up those smaller feeder yards, but they're very -- they can do them for $0.5 million rather than $5 million.

Okay. It looks like we are finished. In fact, from a point of time, we should begin... Oh, we've got one more from [indiscernible]. We can't deny that. We can't deny that last question.

I think you discussed this or you answered Daniel's question about this. But on Slide 11, in terms of the NFSR versus retail and prepared versus unprepared, could you talk to the direction and where you think that may end up or if you've got a target or where you think that will naturally go to?

Yes, I might leave that one for Rob. I'm happy to do an overall comment. I mean we see growth in both. I mean, we definitely want to see growth in zorba from the NFSR, no doubt about it. But if retail grows at the same pace and just the whole pie gets bigger, that's fantastic as well. But Rob, I don't know what your thoughts are on that. And maybe you cover processed versus unprocessed as well, the difference between you say and NAM.

Yes. I think a couple of things. So we'll just talk about simple economics. The higher prices are bringing out a lot more metal. If you think about what is invisible to the scrap metal person, but the scrap reservoir, they call it, that building across the street. When the owner of that building has a high enough revenue from the demolition of that building, they will actually execute the demolition of that building and the copper or the aluminum pay for the remediation of the site along with -- so that brings product to the market. We believe because of all the things that we said with the demand curve being a real curve that, that's going to continue. But that's that circular economy that's going to drive even more infrastructure, more steel demand as well.

Second piece on the NFSR. On top of wanting to do more on process to put through the capacity that we still have, our team, SAR, it doesn't matter if you're in New Zealand or Australia, we are trying to get every single piece of value out of what we put through that shredder. And there's still some material that you can imagine going through a shredder with 150-pound hammers hitting it, get fractured into very, very small, what we call fines or a 10 to 20-millimeter and under particle. We don't do as an industry, I'm not saying them, a very good job of getting those types of fractured morsels or ounces but they add up to a lot of pounds and tons at the end of the year.

So there's a new technology wave that's coming along that will allow us to do a better job of getting that product today. We're already getting the product, we're not able to capture it. And that's been something we've been working on for several years. So you'll continue, I guess, what I'm trying to say is to see those numbers go up because we're already getting it, but we can't capture it in an economical way, let's put it that way. The next piece, I would say is we will be driven for, to get that product because of that demand curve. And some of the things that we're doing today where we're selling a, I would call, semi-finished product, you're going to see the nonferrous retail go up because we're going to finish sorting that aluminum zorba to a refined ready-to-melt furnace aluminum raw material as opposed secondary raw material product. So those things are all underway now.

We've already invested at NAM. We have an investment at Alumisource, and we have an investment at SAR as well to allow us to capture even more nonferrous going forward. On the unprocessed, it's hand in hand. It really is, as Stephen says, and I think I mentioned that we're not fascinated with wholesale volume. We have these assets deploy. We've already invested in state-of-the-art shredders. I just talked about innovation and state-of-the-art nonferrous capture systems and refinement to a raw material-ready product for furnace. We're going to continue to do that, and it's going to drive our motivation to get those input units into those processes where we actually add value and have a value proposition to make margin.

Okay. I think in order to our timetable and get them out to visit to TCT, we'll close it there. Thank you very much for participating. We'll close off the video now, and let's get ourselves ready to head out to TCT, and Anna will take us through what we need to do.

Thank you for standing by, and welcome to the Sims Limited FY '26 Results Call. [Operator Instructions] Today's presentation has been lodged with the ASX along with the results release. It may contain forward-looking statements, including statements about financial conditions, results of operations, earnings outlook and prospects for Sims Limited.

These forward-looking statements are subject to assumptions and uncertainties. Actual results may differ materially from those experienced or implied by these forward-looking statements. Those risk factors can also be found on the company's website, www.simsltd.com.

As a reminder, Sims Limited is domiciled in Australia, and all references to currency are in Australian dollars, unless otherwise noted. I would now like to hand the conference over to Stephen Mikkelsen, Group CEO and Managing Director of Sims Limited. Please go ahead.

Thank you, and good morning from Sydney. Presenting with me today is Warrick Ranson, our CFO. Rob Thompson, our Global President for the Metal business, is also in the room, and I'm sure we will hear from Rob during the Q&A session.

We will follow our normal run-through with me providing an initial overview of the results and market conditions. Warrick will take us through the numbers in more detail, and then I will return to talk about our strategic position and outlook. That should leave us plenty of time for questions.

I will turn straight to Slide 5, which looks at our strategy and strategic priorities. The fundamentals of our strategy have not changed to repurpose and recycle. We have, however, updated the left-hand part of this slide to reflect the significant growth and importance of SLS to our overall business.

A couple of examples. Under customers, we now specifically call out deepen hyperscale partnerships. And under the heading of Innovative & Agile, we now include the importance of R&D for SLS to capitalize on opportunities from the next generation of technologies. Consistently delivering on this strategy over the last 3 years has underpinned the EBITDA performance shown on this slide. All divisions, with the exception of ANZ, which has been impacted by factors external to its control, are up significantly on last year, and I'm very pleased to report a return on invested capital above our cost of capital.

Turning to Slide 6. Another very good year of safety performance with our total recordable injury frequency rate at 1.09. These results could not be achieved without the buy-in from our employees, and you can see this in the excellent completion rates of our lead indicator safety metrics.

A couple of other points to note on this slide. Firstly, it can be easy to forget the significant contribution we make to reducing greenhouse gases. As the global economy transitions toward net zero, circular solutions such as recycling are becoming increasingly important.

By recycling 5.9 million tonnes of ferrous, we helped avoid more than 9.5 million tonnes of greenhouse gas emissions measured in CO2 equivalent. That is approximately 1.6x our combined Scope 1, 2 and 3 emissions. The final point I'll highlight is that our pay equity gap percentage has fallen to under 2%. 5 years ago, we had a pay equity gap of over 9%. So it's very pleasing to see the progress.

Moving briefly on to Slide 7 as the detail behind this slide is covered later on. In our metal business, we grew unprocessed scrap by 2 percentage points, which helped lift our shredder utilization by 5 percentage points. SLS had significant growth across the entire business, including a 91% growth in repurposed units.

Warrick is going to cover financial performance in detail, so I am only going to make a couple of overall comments on Slide 8. This has been a very good year for Sims. Underlying EBIT is up nearly 170% to $468 million. And this has fed through to our return on invested capital reaching 11.7%, which is comfortably above our cost of capital. I know return on capital has been a focus for our shareholders for a number of years, so it is pleasing to see our strategy delivering.

This significant lift in performance has been delivered through positioning SLS as a world leader in data center refresh and decommissioning services, focusing on buying unprocessed scrap and upgrading it to more valuable products through excellent operating capabilities, selling into the best available markets and managing costs.

The next four slides look at the state of the markets in which we operate, starting with the memory market on Slide 9. These two very simple charts tell the story. Firstly, on the left, you can see the decline in new production of DDR4s. At the same time, you can see the rapid rise in DDR5 production as manufacturers have switched from DDR4 to higher-margin DDR5 chips in an effort to meet the insatiable appetite for memory driven by AI.

This has resulted in two very positive implications for SLS. Firstly, as DDR4 production has declined, the price of new DDR4s has increased significantly, which is clearly shown in the chart on the right. The demand for DDR4 hasn't gone away. So the requirement for used DDR4s has also increased dramatically, driving those prices up as well.

Secondly, the enormous amount of installed DDR5s will need to be refreshed over the coming years and also repurposed, either back in the data centers or sold into the used market. This provides many years of repurposing opportunities for us, and we are well positioned to capture those opportunities.

While the medium and long-term implications of massive data center expansions are clearly positive for SLS, we are seeing a short-term variability in the refresh cycles, and this is presented on Slide 10. Firstly, on the right-hand side, there is a bar chart showing the annual investment in data centers. Importantly, around 60% of total spend is on compute infrastructure, including servers, chips, networking equipment and related technology.

Right now, the infrastructure capacity to build these data centers is under significant pressure. There are a few bottlenecks causing delays, with a significant one being the availability of both the electrical connection and then the electricity itself. This, in turn, has caused variability in when existing data centers are ready to be refreshed, particularly when they also need electrical capacity upgrades. It is important to note that this impacts timing of refresh cycles, not whether the refresh will actually happen.

Moving on to the metal markets and firstly, non-ferrous on Slide 11. The structural drivers have been strong for 2 years now, and our view is that these drivers will remain. Just to highlight two or three of those drivers. AI infrastructure requires copper and aluminum, driving those commodity prices up, which also benefits silver prices. The electrification of the world continues at pace, requiring conductive materials such as copper and aluminum.

Looking at the chart on the right, you can see the growing gap between U.S. aluminum prices and the LME, largely driven by U.S. tariffs. We are nicely exposed to these higher prices through our U.S. metal businesses. And it is also worth noting that on a number of occasions due to our market expertise, we have sold non-ferrous from ANZ into the U.S. and have been able to absorb the tariff.

Turning now to ferrous on Slide 12. The headline captures the market dynamics. In the U.S., we have tariffs protecting the steel industry and encouraging the reshoring of manufacturing. This has lifted margins in steel manufacturing and is driving investment in EAFs. Data center construction is also boosting demand for steel. Both NAM and SAR are well positioned for this market structure and the increased demand for ferrous material.

ANZ continues to be impacted by Chinese exports, although there has been an overall modest improvement. At a very local level, the shuttering of Whyalla has increased domestic demand for ferrous scrap.

I'll hand over to Warrick now to take us through the financials.

Good morning, everyone. So as Stephen mentioned, global scrap markets for the 2026 financial year reflected a number of dynamics. While the ongoing shift toward electric arc furnaces fueled steady buying in a number of regions, broader commercial construction activity remains soft outside of data center development.

Regional restrictions and stricter trade controls, tightened cross-border supply chains, however, elevated Chinese steel exports despite some production rationalization, continued to dampen Asian and Middle East buying, with demand from Turkiye remaining soft as buyers switched to cheap Chinese and Russian billet late in the year.

At the same time, we saw copper prices surge, driven by a relentless demand for AI-related activities, green energy grids and EV infrastructure, and hit record highs in the year. Tight primary ore supplies and tariff expectations further amplified bidding for secondary copper.

Similarly, geopolitical conflict in the Middle East created primary aluminum supply crunches, pushing global buyers towards aluminum scrap substitution and boosting values despite regional trade friction. Zorba pricing peaked across May and June as a result, adding significantly to our overall financial performance for the year.

As we noted at the half, with both export and domestic markets exposed to global scrap dynamics, we've continued to leverage the arbitrage in our key domestic and international markets and sold volume proactively between the two to maximize margins, again, reflecting the significant agility and flexibility embedded within both our inbound and outbound logistic chains.

Concurrently, our total repurposed units handled this year was nearly double the prior year's volume. Prices for new DDR4 memory continued to increase exponentially, with our market reference price finishing the year over 1,000% above the prior year as demand continued to increase against diminished supply with manufacturing shortfalls and a focus on new generation cards continuing to uplift repurposing and resale activities.

Across the business, we continue to deliver disciplined cost efficiency initiatives. Current activities such as moving to a global shared services platform and the operational changes now implemented for our Houston operations will continue to drive cost and performance improvements in the business. Our average metal fixed cost per intake tonne fell as we capitalize further on existing infrastructure and improved material flows. I'll come back and talk further about our cost performance shortly.

Our statutory result reflects those targeted restructuring initiatives and a slightly lower number than what we had at the half for the write-down of the U.K. metal receivable. We've continued to pursue partial recovery options there where they exist, recouping around $17 million over the last 6 months. Pleasingly, I think we've just about stabilized our statutory to underlying position now and expect to see some consistency in this going forward.

Speaking of underlying and moving to Slide 15. I've touched on the principal drivers of most of these already. June was a particularly strong month, surprising us on the upside, and we were able to move additional volume at attractive spreads. Importantly, that outcome reflected not only favorable market conditions, but also the capability we have built to respond quickly, manage logistics effectively and place material into the highest value channel available at the time.

While market conditions clearly provided support in a number of areas, the more important point for us is that the business is demonstrating a stronger structural earnings base. Lower unit costs, better network utilization, greater market optionality and more disciplined capital allocation leave us better positioned to capture upside in favorable markets while maintaining resilience through commodity cycles.

Focusing in on the individual businesses then and strong performances by both the NAM and SAR businesses absorbed the impact of the continuing market pressures on ANZ. Global trade reverted to its previous levels as broker tonnage reduced following the winding up of Unimetals in the U.K. This year's result effectively represents the cost base of our trading activities to the business.

June itself was an exceptional month for the metal business, surpassing initial expectations from early in the month as ferrous margins strengthened from favorable market dynamics and non-ferrous volumes and Zorba pricing maintained their highs.

Similarly, secondhand memory pricing achieved its highest level in the year on a gigabyte basis, albeit on a lower ratio to new prices given the mix. As Stephen has mentioned, we see some variability in inbound volumes as data center construction and decommissioning pipelines are consistently challenged by a range of external factors.

However, we have deliberately built a flexible operating model, allowing us to adjust cost and activity levels with the inbound volumes. I'll expand on some of the other factors driving these various movements in subsequent slides.

Moving to the metal business more specifically. And in North America, total intake volumes increased by 240,000 tonnes over the prior year as we again prioritized unprocessed material, increased shredder utilization and improved margins. Intake volumes were also supported by stronger domestic steel demand and higher domestic ferrous prices. Even though we increased the level of domestic shipments in the U.S., we continue to maintain full optionality of material placement for best value.

While intake levels also added to comparative costs, the team were able to generate a number of offsets through further restructuring and productivity initiatives. Having TCT in Houston is also now giving us the opportunity to better manage spreads in that region and lower the run rate cost base further.

In ANZ, ferrous margins were, again, impacted by the subdued international market, which also flowed on to domestic pricing, although we did see some demand benefit from that prolonged outage at Whyalla. Favorable non-ferrous prices provided overall revenue support and helped offset shredder downtime at our St Marys operation in the first quarter.

Notwithstanding elevated consumable input costs, particularly in the areas of fuel and waste disposal, which we felt right across the business, net operating costs continue to be well controlled here with most of the increase over the prior year related to trading currency losses, which, for accounting purposes, are classified into operating costs.

Non-ferrous and, particularly, Zorba pricing provided our SAR joint venture with a significantly elevated financial performance versus early June expectations. While ferrous intake reflected a record year following further small-scale acquisitions, the U.S. tariff war and the surging Zorba price ran through to the bottom line, enabling that business to close out the year extremely well.

Our global trading platform was also able to keep its costs relatively flat. They saw reduced broker revenue following the cessation of trading activities for Unimetals in the U.K. early in the year, as I mentioned.

Moving to SLS now, and Stephen has covered several of the drivers here already. As we've noted, the business has experienced significant growth in the number of repurposed units, demonstrating the broader strength of the market as well as specifically benefiting from the dynamics of memory chip prices, with memory averaging around 30% of hyperscaler spend. We saw that pick up even further in the second half as the impact of uplifted prices filtered through and repurposed volumes increased despite the industry's growing pains and planning volatility.

Total memory sold on a gigabyte basis fell from prior year levels as DDR3 volumes reduced and we repurposed more 16 gigabyte cards in the second half. Improved unit costs reflected both volume gains and expansion activities, and the team continues to look at additional opportunities around automation and robotics to support its cost management program.

On Slide 18, I want to quickly touch on the ongoing strength of the SLS business for us. While memory pricing has certainly been a primary contributor this year, the business is evolving into much more than that. The structural shift in demand that we are seeing with both hyperscale and enterprise clients in response to this phase of what is effectively the fourth industrial revolution is being matched by both the current need to source an array of components for growth, but also their recognition of the associated circular and economic benefits.

Our deep relationships and proven scalability to respond to this demand in a secure, trusted and certified manner provides us with confidence about the role that SLS can play in our earnings base going forward.

Touching briefly on central and functional costs now. We continue to look for cost-out efforts in this area. This year, we relocated our corporate office to further reduce costs as well as beginning the transition to a new global shared services hub as part of a more extensive shared services model being progressed over the next few years.

Following stabilization of the company's SAP platform implementation, project costs fell by nearly $5 million, noting that we continue to incur costs in developing our new yard management software for metal, which we are aiming to commence the rollout of in Q2 this year. All of these initiatives are expected to contribute to lowering the ongoing cost base and improve consistency of execution.

As previously advised, we elected to cease work on the development and commercialization of the plasma-assisted gasification technology that was being undertaken by Sims Resource Renewal during last year. This further reduced the central cost pool by some $10 million to $12 million per year on a full year basis.

Just a heads up that in this area, commencing in the current financial year, we intend to allocate costs for centrally provided services that are currently unallocated out to the business in order to provide a more comprehensive and focused approach to their management. This will, of course, result in changes in the comparative performance for the business segments, and we'll provide additional color across this area as we approach the results for the half in the new year.

At a group level, we are, once again, able to keep total costs relatively flat over the period, limiting the increase to around 5% before variable costs and off that rebased comparative prior year. Waste management costs continue to be a major contributor to our cost uplift each year, and we are progressing a number of targeted initiatives at extracting the residual metal in this waste and how we reduce volumes to landfill into the future.

Variable operating costs increased in line with the increased volume of unprocessed material and higher repurposed units at SLS. We also experienced higher fuel costs as a result of those Middle East tensions. Labor, of course, remains our largest cost element at around 50% of operating costs and ongoing labor cost efficiency initiatives continue to provide significant benefits in this area and in line with our previous cost-out commitments.

While we remain focused on all cost opportunities, we maintain the view that our best way to drive further efficiencies in the business is through volume productivity gains and infilling our existing network. We progressed some initial opportunities in this area over the last 6 months in both ANZ and NAM, and expect to progress additional opportunities in this area during FY '27, further improving returns from assets already in the portfolio.

Capital expenditure was significantly higher in the second half as we completed a number of planned initiatives across the business. Redevelopment of the Pinkenba site in Queensland continued, with activities focused on site infrastructure and an extension of the wharf. We also progressed new fines and metal recovery plants across ANZ, including at Pinkenba and in Auckland, and expect to see the benefits of this flow through to the ANZ result in the current year following commissioning.

We also completed our dredging program at Claremont at the beginning of the year as well as several other productivity initiatives at that site. Other growth and productivity projects include extensions to rail capacity and network efficiency, together with small yard infill opportunities in both the East and West United States as well as in Australia to ensure we get more out of the network we already own.

And in February this year, outside of those smaller organic growth opportunities, we acquired the operations of Tri Coastal Trading in Houston to better position ourselves in that market. Total group depreciation and amortization, inclusive of leased assets, is currently forecast to be around $260 million in FY '27, consistent with the current year.

The group completed the year with net book assets of $2.7 billion at balance date, reflecting a stronger comparative Australian dollar at period end, dividend payments and removing the Unimetals receivable. We recorded some $130 million in foreign currency translation differences this year from the stronger dollar, reducing our reported net asset backing in Australian dollar terms.

Of note, this includes a $200 million uplift from non-ferrous prices, impacting both our inventory and receivable values. Despite this increase, we were able to retain overall trade working capital at a comparative level to the prior year. And following stabilization of copper pricing at its high levels, reduced broker deposits related to our derivative trading activities over what we had reported at the half.

Intangibles uplifted by $64 million, principally because of the favorable infrastructure services contract associated with the TCT acquisition, and this will be amortized over the life of that contract. Post the sale of our Houston properties, we expect gearing levels to revert to be more in line with our target range, and we remain deliberate in focusing our growth activities to where we see efficient through-the-cycle returns while protecting balance sheet flexibility.

Pleasingly, our strong earnings and capital discipline uplifted the group's ROIC to 11.7% and together with our positive free cash flow performance, the Board has determined a final dividend of $0.20 per share fully franked and payable in October. This brings the total full year dividend for 2026 to $0.34 per share, but noting that the availability of future franking credits will become limited going forward as our earnings base becomes more U.S.-centric.

So a little bit more on our working capital movement and the group's focus. Here, we've again isolated some of the movements to show the impact of those higher non-ferrous prices on the business, which continue to be quite significant.

Following a relative stabilization in the copper price since the September run-up, we've been able to reduce the amount of restricted cash sitting in margin deposits at June, which, if you recall, was some $95 million at the half. While our total physical year-end metal inventory increased over prior year levels, we continue to align inventory holdings with scheduled sales and are focused on our conversion of receivables and the management of payables to match cash movements, keeping our overall working capital levels steady.

All that summarizes into our overall cash movement for the last 12 months. I've talked about most of these already. We converted over 70% of our EBITDA performance to operating cash and invested some $488 million back into the business through capital and acquisitions.

Funding for the purchase of Tri Coastal is still expected to be covered by the sale of our Houston properties. The Mayo Shell property remains under contract as the preferred purchaser completes its due diligence and concludes legal requirements. This is now likely to be a Q2 transaction for us.

In addition, we have recently signed a letter of intent to sell our two other Houston properties, subject to due diligence. They are targeted to close early in Q3. In October, we made our final FY '25 dividend payment of $25 million and a further $27 million for the FY '26 interim in March. As previously noted, the Board has also determined a final dividend of $0.20 per share fully franked for 2026, in line with our capital management framework.

And with that, it's back to you, Stephen.

Thanks, Warrick. The next few slides will look at our strategic position and opportunities in both the SLS and metal businesses. Turning first to SLS on Slide 26. What this slide demonstrates is that the technical infrastructure required for AI is significantly more compute-intensive and expensive. If you look at the right-hand bottom chart, you can see the growing price for GPUs as they become more and more sophisticated to deal with the increasing demands of AI compute.

We resell some GPUs today, but they're not overly sophisticated and the price is measured in hundreds of dollars. This is about to change. The complexity of repurposing GPUs that will start coming to the market in the next 12 or so months is an order of magnitude higher than what we do today. We are well positioned to capture this and have already commenced R&D to prove we can test and certify these GPUs in a real-world environment.

And I'll cover this in a bit more detail on Slide 27. The left-hand graphic compares the more traditional infrastructure we have been repurposing for the last few years, with what is on the way from AI infrastructure. A couple of points to note here. Firstly, the significant expansion in the technical complexity and value of GPUs that I've already mentioned. And secondly, the density of the racks we will be dealing with.

Right now, a rack we repurpose weighs up to 1,000 kilograms. Soon, these racks will be 5 tonnes. We have already been sent samples of what is coming from a major customer in order for us to assess the opportunities. We are well positioned to capture these opportunities.

We have strong global and embedded relationships. We have proven and global leading technical expertise in the current equipment and are actively pursuing R&D to ensure we are ready for the next wave.

Slide 28 brings this all together to look at the medium-term growth drivers for SLS. Firstly, with all the talk focusing on the rapid growth in AI infrastructure, it is easy to forget that market commentary indicates higher volumes of DDR4 repurposing will last beyond 2028. DDR5 will be the next major memory repurposing opportunity, likely emerging over the next 12 to 24 months.

I've already covered off GPUs, advanced processing and AI infrastructure expansion, but it's worth noting that certification and aftermarket services will be an increasing part of our business as it relates to these activities. We see deeper customer integration as key, driven by our R&D and specialist engineering. This leads to the final point where it is becoming increasingly self-evident that the long-term pipeline of recoverable AI infrastructure is very large.

Switching businesses now to our metal operations, beginning with North America on Slide 29. The demand for both ferrous and non-ferrous continues to rise. Ferrous is being driven by further commissioning of EAFs. Our estimate is that another 7 million tonnes of high-quality ferrous scrap will be required by 2029.

The demand for non-ferrous is being driven by many things, including the building of data centers. The table at the bottom shows that an estimated 11 tonnes of aluminum and 11 tonnes of copper are required per megawatt of new data center capacity. This growth plays nicely into our North American businesses, as shown on Slide 30.

The left and middle charts show just how important non-ferrous is to our North American businesses, with over half the revenue now coming from non-ferrous and over 1/4 of that coming from NFSR, which helps underpin our investment in shredders and downstream processing and recovery technology.

NAM and SAR operate complementary footprints across the United States, but with different network profiles. SAR has a greater concentration of sites in dense regional markets, while NAM is more weighted towards major metropolitan areas. SAR's network comprises 153 sites and 23 auto shredders, giving it almost twice the number of yards and shredders as NAM.

This density allows SAR to buy more non-ferrous material at source, purchase more unprepared ferrous scrap and produce more NFSR. This operating mix was an important contributor to its relative performance during the period, particularly the second half.

Turning to ANZ on Slide 31. There is no denying that the ferrous business for ANZ has been tough over the last 2 to 3 years with exports from China. This will be somewhat alleviated over the medium term with planned mill upgrades in Australia, the Glenbrook EAF in New Zealand and the likely development of one, but maybe two EAFs in Australia.

A reasonable scenario presented in the chart shows that surplus scrap available for export could fall to under 1 million tonnes by 2029. This will be quite pronounced by state with some in surplus and others deficit. Our national coverage and superior logistics will be an advantage as this scenario unfolds.

Like our North American businesses, ANZ has a strong non-ferrous operation, and this is shown on Slide 32. Nearly 60% of ANZ sales revenue comes from non-ferrous and around 14% of that comes from NFSR. This strong non-ferrous position has enabled ANZ to navigate the particularly tough ferrous market conditions it has experienced.

ANZ is investing in more advanced metal recovery plants and fine plants to ensure valuable non-ferrous is recovered and not sent to landfill. ANZ has an extensive national network of collection yards and is growing at source volumes, which will drive further non-ferrous growth. What this all means for ANZ and North American medium-term growth prospects is covered on Slide 33.

The North American market is likely to see further consolidation, benefiting both NAM and SAR. Some of this will be acquisition of mid-tier businesses with shredders and feeder yard networks. Others will be bolt-on feed yards to expand our network supplying existing shredders. This will provide more unprocessed outsourced material, including non-ferrous.

There is still room to improve downstream processing through our existing operational excellence and further technology. The demand for ferrous scrap is a medium- to long-term tailwind as tariffs and EAF expansion support demand foreseeable future.

In ANZ, the commissioning of Glenbrook and potential FID for Alter will provide medium- to long-term support for ferrous scrap demand and prices. As with North America, there are opportunities for bolt-on acquisitions to support increased processing capability and capacity. Finally, non-ferrous is a near-term, medium-term and long-term growth driver for ANZ.

My final slide before going to Q&A is Slide 34, which is more short term by focusing on the outlook for FY '27. Starting with SLS. We expect the first half to produce an underlying EBIT between $75 million and $90 million. Fundamentals remain strong, but as we have discussed on a number of slides, variability in decommissioning in the very short term will be a feature of this market. We are not expecting as much high-speed DDR4 volume in the first half of FY '27 as we had in the second half of FY '26.

We expect that the factors supporting a strong non-ferrous contribution will continue in FY '27 for all our metal businesses. We expect the ferrous contribution from our North American metal businesses in FY '27 to be supported by tariffs, EAF growth and steel demand from data center growth. We are not expecting a material reduction in Chinese steel exports in FY '27, and this will continue to impact ANZ's ferrous business.

Before we open for Q&A, as always, I want to thank our employees for their drive and commitment in delivering on our purpose and most importantly, doing that safely. Back to you, operator.

[Operator Instructions] Your first question comes from Peter Steyn from Macquarie.

Just on SLS, you mentioned the need to engender yourself with your customers. In my mind, what's happening in your services revenue is probably the key one there. And it's lost a little bit of momentum in the second half relative to where you were in the first half, obviously, still growing, but not showing the type of growth that certainly your repurposed units would demonstrate.

Could you give us a bit of a sense of how you focus the team on that, what you're seeing from a services perspective, whether that is the correct way to think about this business and the strength of it and depth of its customer relationships?

Yes. Sure, Peter. So when we -- with those services, the predominant service we provide there with the most valuable service is where we'll take a DDR4 out and repurpose it back into the business. So we're -- so that continued at [indiscernible] pace. There was no issues with that in the second half versus the first half.

What happened is that the customer can get to choose whether or not it gets repurposed back into them or do they want it to be resold into the market. And I think particularly in that second half, a number of customers made a decision, well, we may not need that as urgently back into the center, let's take advantage of some higher selling prices and resell it into the market.

So it's more what was driving the sales. We are optimizing the sales. It wasn't a falloff in the amount of that sort of core service that we do around taking DDR4 out of the call center and the data center and deciding what to do with it from that point.

So I mean, maybe just coming to the strategic thrust of the question, are you actually focusing more attention there than ultimately trying to maximize e-commerce revenue?

So I guess what we focused on is maximizing inflow. And so that is about -- I mean, an inflow comes from strong relationships, embedded relationships, our systems tying in with their systems. What -- the process that we then do on what we inflow is very, very similar, whether it's going to be resold or repurposed back into the data center.

If it's repurposed back into the data center, there's more around, I guess, inventory management and logistics to get it back into the data center at the right place. But we focus on inflow. Ultimately, whether it is resold or goes back into the data center is the core of the data center itself.

Sure. And then maybe just a change of focus to SAR. Could you give us a bit of a sense of how to think about the annualization impact of acquisitions in SAR just rolling into '27?

Yes. I think -- and I might get Rob to have a think about this question as well, but let me give me my initial thoughts and Rob spends a lot of time with SA Recycling up in the U.S. So SA Recycling, its acquisitions in FY '27 were almost entirely good quality bolt-ons. I cannot recall off the top of my head whether they bought another shredder. I think they did bought another shredder down in Florida.

So what that does for SA Recycling is it provides a sort of further in-feed into its shredders, which have also got extra capacity in them. So what would I think -- what does that mean for the run rate leading into sort of leading out of FY '26 into FY '27?

I mean I think a combination of strong non-ferrous markets, which is really driving Zorba and non-ferrous retail and justifying these feeder yards hugely for more unprocessed material. And I think broadly speaking, I think the run rate in the second half is not bad as we go into the first half. But Rob, I'd like to get your views on that as well.

Yes. The only thing I could add, Lee, is that in our slide deck, you see the incoming, I guess, demand curve, we've been talking about for the last 3 or 4 years on the ferrous side. And what SAR and NAM are enjoying right now, and we've invested in our capabilities to get product to market is I won't call it exactly an insatiable demand for shredded product. So we have a very good demand for ferrous, which leads well into the non-ferrous story that we've depicted here today as well.

A very good demand curve for aluminum products, for copper products, all of which we liberate from a ferrous intake. So incredibly good margin uplift there and capacity, still, that we have in our network. We've invested back into those networks, the SAR and NAM both have capacity to do spare as well.

Your next question comes from Owen Birrell from RBC Capital Markets.

I just want to -- probably just going to extend on some of Lee's questions around the volume assumptions rolling into that first half '27 guidance. Your guidance is from an EBIT perspective, down, call it, 1/3 half-on-half. And I just want to understand, should we be thinking about ongoing growth in, say, the input volumes but it's purely a mix or should we be assuming both a decline in the input volumes and then also the mix on top of that?

Because I know last time you gave us a memory sold guide to align with the EBIT guide. This time, you haven't given us the memory sold guide, but it sounds like you have some reasonably good visibility into that. Just wondering if you can give us a sense on when that memory sold number, so we have a comparable...

Yes. I think in the medium term -- so a couple of points in there. As this market has matured, it's really interesting that gigabyte memory sold is still a nice measure, but then it's the mix within there, about speed. So it's not just DDR4, it's the speed of the DDR4s. I think what you should be thinking beyond this, beyond the first half, and like I said, we do have quite a lot of visibility into the first half. We don't have as much visibility into the second half. But what we do know is that the volume is going to increase.

There's -- in the market as a whole, there's not a list coming out from December on. There's more coming out from December on. The timing of that is still -- like is it going to come out in the second half of '27? Is it going to come out in the first half of '28? That's not up to us. That's up to the timing of the data center. So more volume more volume will be coming out because more volume is sitting there than has been in there.

The second point I'd make is that the mix of that volume should improve as well because as we're getting more through the refresh cycles, we're getting higher and higher quality DDR4s that are faster and faster, and those are the ones that are worth more. So I'm sitting here feeling pretty comfortable about the medium-term outlook. I just, unfortunately, can't provide you a half-by-half assessment of exactly when that will come out. But it's not least volume and it's not least quality. It's the -- I think the main point is more volume, more quality than I would make.

Yes. I understand, I guess, the quality of comments that you had provided. But the challenge that we're facing is we don't have a baseline. And it's all good and fun to talk about growth in different metrics of the baseline, but we don't have the baseline. And I guess that's what I'm trying to get at. So is there any better color you can provide around, I guess, how the mix currently stands so that we can move beyond that, it would be appreciated.

Yes. If it -- let me take that question on notice because I don't want to -- I'll be really frank, I don't want to blow out a whole lot of numbers now that we haven't thought through as to what -- as to how you would interpret those because there is some complexity going on here. So it's a good question. Let me take that on notice and Warrick and I will talk to Anna, and we'll see what else we can maybe look at for you -- well, not for you, for the market.

For the market. Sure. And can I just ask -- I mean you mentioned comments around the broader market and [ volume ] has kind of increase in the market as a whole. Can I just ask how you feel SLS is positioned within that market because we're constantly hearing about data center growth coming at pace. I know you sort of talked about the decommissioning cycle kind of pausing for a moment or different assets being decommissioned. But we do know that the growth in the platform is continuing to grow across multiple different clients and across the U.S. predominantly.

But what I want to understand, I guess, is how is SLS positioned within that? Do you -- has SLS grown its customer base as quickly as the market has grown during, say, the last 12 months? And do you feel like you're growing or losing share as a proportion of the total market? I know it's very, very vague, but I just keen to get your thoughts.

Yes. So I feel we -- so if I look at -- 2 aspects to that question, existing customers and potential new customers. We -- I feel we are growing our share of existing customers. Our relationships are strong. We have a good idea of what they are producing in total. We know what we are getting, and I feel very comfortable with our existing customer base that we do. And we're actually doing very well in the existing customer base.

We are -- so, I feel very comfortable about that, and those customers are big within the market. We're not talking a small players, they're big customers within that market. And it really is -- I know I'm going on about this a bit, but it really is the short-term 3 months, 6 months is just not the way that these people think and so, therefore, they'll decommission and refresh however they want to. So -- but I feel we're growing in there.

In terms of new customers, we definitely had some success in gaining new customers. But when you gain a new customer, it's a foot in the door. It's not being -- you're going to get the same volumes as your existing customers from day 1. But I -- when I look at our competitors in the market, I feel we are holding our own at the very least in terms of market expansion, and I could argue growing it.

And can I ask, in terms of the volumes that are coming through, I know you mentioned the sort of differentials between high-speed, low-speed, DDR4s, as I mentioned, DDR3 in here and at some point, DRR5s are coming through. Are you able to give us a sense of your -- the rough splits around the memory that's currently coming through the -- your sales base more particularly?

Yes. Right now, it's virtually all DDR4s. DDR3s probably came to an end through the second half of last -- of FY '26. Most of it would be. I mean, for all intents and purposes, you should think of it as DDR4s right now, and the odd DDR5 is starting to arrive. Some of it is from our customers who want us to check exactly how we're going to handle DDR5s, that there's some slight technical difficulties, nothing -- difference, not difficulties, nothing we can't handle.

And then so think for this first stop, it should be DDR4 is almost exclusively. And then DDR5 will start to come in, I would say, sometime in the next 12 months. But let me be really clear not at the expense of DDR4s. DDR4 will continue to -- there's a lot of DDR4s installed in data centers that need to come out.

The repurpose units numbers are pretty strong in '26. Of your resale revenues, how much is from DDR4 sales versus sales of other repurposed units. Is it like 90%, 95%?

No, it's not as high as that. So repurposed unit is -- can be anything that comes in from -- it could be -- like, for example, a cable. I mean just to use a simple example, cable that comes in and resold is considered a repurposed unit. I do know what that number is. I don't know if we have disclosed it. So...

You haven't. That's why I'm asking.

Yes. So. It's certainly not 90%, but it's more than 50%. Let me -- again, I wasn't -- let me take that. I'm sorry, I see -- let me take questions on notice for you. Let me just double check that, that's not commercially sensitive, and I'll put that into the -- and is taking notes. So I'll put that into the list of things that do we need to disclose that or our commercial guys' saying were made to be disclosing that.

You next question comes from Brook Campbell-Crawford from Barrenjoey.

I just had 2. Firstly, just around new contracts that you're signing recently, the revenue share terms similar to your existing kind of longer-term contracts? Just want to check if -- in case there's any slippage there given, obviously, it's a really profitable business there relative to how it's been in [ used online ].

Yes. So I mean, firstly, Brook, we definitely won't disclose revenue share terms on specific contracts. And I think I know what you're talking about. What I would say is the contracts, moving forward, will have higher volumes because there's more coming out. But we definitely won't disclose what our revenue share terms are on those contracts.

Yes. No, that's fair enough. I guess I wasn't sort of looking for specifics about customers. Maybe just a broad trend. Is it sort of staying stable in terms of your share versus customer in general? Or is it changing at all?

I mean I think as we're rolling contract, it varies by contract. We always trade-off -- I mean, as we're negotiating revenue share, we trade off volume with that rev share to see because we're looking for total margin. I'm not sitting here -- if your question, am I just sitting here worried about it? No, I'm not. I'm very comfortable with the deals we're negotiating at the moment and the rev share split and the volume split and what type of volume we're getting out. Actually, maybe that is a very, very good point that I will make.

And I want to talk about GPUs because the rev share on a GPU will absolutely be lower in percentage terms than the rev share on a DDR4. The GPUs that are going to be coming out over the next 12 months and beyond are extraordinarily valuable. And we will do a lot of testing on them in the real-world situation for them to be either repurposed or resold. And clearly, we're not going to get a 25%, 30% rev share on those because the value of them is just extraordinarily higher. But the opportunity for absolute margin is very, very strong.

Yes. That's really helpful. And maybe just digging into that slightly more. If we think about the opportunity for EBIT in SLS, how you think about GPU that the new product focus for your business? And how could that compare to memory? I guess you could think out medium term, is there some sort of rough split...

Yes, it's a good question. I see GPUs as a bigger opportunity than DDR4s for a couple of reasons. One is -- 3 reasons, actually. One is the complexity of repurposing them is an order of magnitude higher than what we do today. So therefore, the relationships you have with customers, your -- the R&D work you've put in creates an even bigger moat around it. So I see that as very, very important.

Secondly, the volume of GPUs that needs to come out is extraordinarily large over the next 1, 2, 3, 4 years. And thirdly, the value of those is extremely high as well. Fourthly, and this one, I think we're generally still thinking about it. There may be a bias in these new GPUs for them to be resold, we'll have to see because whether or not I want them back, and are they going to be good enough for the compute, that really fast compute they need, I'm not sure for massive hyperscalers but there's certainly going to be good enough for a huge number of potential customers globally. So I see GPUs opportunity is larger than the DDR4 opportunity and the DDR5 opportunity.

Your next question comes from Scott Ryall from Rimor Equity Research.

Stephen, the first one, probably, very quick. Corporate costs. You had good decline this year. Is there further declines that you expect you can deliver over the next couple of years, please?

I will flick that one to Warrick who's been working hard on this.

Yes. I mean, I think it's -- we've continued to chip away there, Scott. So I'd hope to see some further reduction. We do have project costs in there. So they will come out at the -- in this half. We start -- not totally, but partially come out in this half as we move to implementation of that new metal software. So yes, you'll continue to see a reduction in that. And we continue to look at opportunities across the board.

Okay. So can I just confirm then, you would expect to see -- so, if you've got a negative $114 million of EBITDA, that number should be closer to 0 than what it is -- like it will reduce as a loss in '27. Is that fair?

Correct. That would be our intention.

Okay. Great. And then my second question, probably for Rob. I'd just be interested now you've got the North American business in a -- obviously, it looks a lot healthier. And you've talked about the tailwinds from EAFs and the strength of non-tariff pricing.

I'm just wondering now, does this give you a little bit of time now or an opportunity perhaps to think about positioning the business for the next 3 to 5 years, maybe it's taking out some of the cyclicality, maybe it's improving what you think is trough earnings. But how do you -- how are you thinking on the kind of medium to long-term of positioning yourself for both tariffs in the context of EAF and the opportunities that come with non-ferrous volumes attached to that, but also, there's got to be opportunities outside of just collection of scrap metal for the non-tariff as well I would have thought.

Correct. Yes, I think NAM is definitely in a position now, foundationally, I think, solid results with the investments we've made, with the efforts we've made to diversify from largely an export-based company from a ferrous perspective to having the supply chain and logistics capabilities that we've invested in. Our diversification, I guess, has grown beyond my expectations in terms of our ability to optimize on a monthly or quarterly cadence. So we'll continue to leverage that. The demand in the U.S., we will not ignore the customer's customer, as Stephen has explained. It's a good environment, good economy, but the data center environment is just putting it on hyperdrive for us.

So now that we've stabilized and I'd say, earned the right to kind of grow again, much along the lines of SAR. I think the right opportunities at the right time for tuck-ins to continue to utilize the deployed capital we already have in the market, in North America with our shredding aluminum capacity with Alumisource and the granulates that we have on site. We'll continue to look for those opportunities and grow in the market.

Your next question comes from Harry Saunders from E&P.

Just on SLS again, looking at it a slightly different way. If we look at the moving parts, getting to that guide in the first half there's volume, there's other factors. And it looks like the memory price that you've referenced previously, if anything, has strengthened into the half. So just trying to figure out what those moving parts are in broad buckets? And then maybe what is a more normalized figure do you think for this business? Can you then factor in the uplift from Ireland because presumably, Ireland is kind of contributing there?

Yes. So the biggest driver for the first half of FY '27 is the DDR4s that have come out that we're selling are of a lower speed. And so therefore, the discount that they are to the new is a higher discount. So when we -- in the chart that we've traditionally shown, I'm now doing this off the tip. I think the speed of those are 3,300 or 3,600 -- 3,000-something. 100? 3,200. Okay.

So the DDR4s that we're selling in the first half, the ones that have come out they are at lower speed, which is kind of intuitively correct because if you're refresh cycle is being delayed because of various blockages or your new sites are being delayed because of various blockages, you're going to be pulling out the less valuable stuff first and that will continue to come out. And so that's the biggest driver, I think, on first half '27 versus second half 2026.

Nothing else material has changed other than that. And that's why, I guess, I get some confidence you talk about what's normalized going forward. I think I think it's very hard to do normalize because we're in a high-growth business. And so where I get confidence from that is the high-speed stuff, the DDR5s and the DDR4s all that's still to come out. And that will come out sometime after December 2026.

So Harry, unfortunately, I can't say it's a hugely normalized base because we just need to see those decommissioning schedules, and as they get into the higher quality -- back into the high-quality material that they've done in FY '26 as that starts coming out, again, the prices are still -- as you've noted, prices are still very, very strong. And there's been no indication that those prices are falling. There's been no indication that demand for DDR4 are falling.

So haven't given you a specific answer of what's the normalized earnings, but I think normalized earnings in SLS is a very hard concept because it's -- what's going to drive the future is higher quality, more sophisticated material coming out.

I guess we're just trying to understand that because there's a huge swing from the second half to the first half. Sort of whether the second half was overrunning perhaps. I appreciate you're referencing a different speed, but maybe you were selling more to the higher speed than in the normal kind of level of sale. And then also just trying to figure out what the Ireland contribution...

So what I would say now is we're selling -- what we're selling now is less than normal of -- in terms of mix because we are selling more of the low-speed stuff. So I'd say it's a less, not more. And Ireland is not contributing much at all to the first half because it was being -- it was set up and is up and really and running more for the high-speed DDR4s that were expected to come out. They will come out. I mean, it's not it's not they're not coming out, but -- so, Ireland is not contributing a lot in the first half at all because the DDR4 was that it was going to repurpose resell haven't come out yet.

And just to follow up on SAR. Given that enormous step-up in the second half versus first. I mean, is that a sensible run rate going forward? Or is there anything else to sort of bear in mind in that number that we need to normalize for?

So volume-wise, I don't think there was anything particularly special in the second half of -- I think it's the type of volumes that they can -- that SAR can absolutely do. So it really is price, and I would go -- and this be really clear, non-ferrous zorba prices, copper aluminum are the drivers. And I guess what we're seeing -- and again, this is an opinion because it's kind of like a global opinion. It's do you see anything driving down the value of non-ferrous? We don't see anything driving down the value of non-ferrous, but I'm sure you and your research teams will have your own view. I guess what I'm saying is there was nothing special about volume. It's about non-ferrous pricing. What do you see as non-ferrous pricing over FY '27 is going to be the key as to whether or not they can repeat that result.

And frankly, it's the same with NAM. And frankly, it's the same with ANZ. None of them are different. There was -- maybe ANZ is slightly different. Do you see something happening with China in ferrous, that would impact ANZ. But NAMs volume -- the volume that NAM did in that second half, very sustainable, Rob. I don't see there's nothing particularly -- like there was no one-offs that you think that can't repeat itself. So it's about the margins that we're making on non-ferrous. Zorba I guess, in particular. And I think we don't see anything driving that down on FY '27.

Your next question comes from Chen Jiang from Bank of America.

Most the questions have been asked. Just again, a follow-up on the SLS to give us, I guess, more conviction. Your earnings growth from SLS is deferred further rather than disappeared over in the near term. So to summarize what -- from your answer, it seems like -- so over the next 6 to 12 months, you will be selling less DDR4 high margin and your customers are taking more in-house for repurposing because for repurposing units volume continued to grow and the price is strong. Is that how I should read it from all your answers?

Yes. So there's a few -- the one thing I would say is that -- we haven't said that DDR4 high volume will be less in the second half. We've seen it will be less in the first half and we have a line of sight for that. How quickly it recovers after that, it may well recover in the second half. It may take 2028 before it recovers. That will largely depend -- no, that will entirely depend on how our various customers -- do they secure connections, do they secure the DDR5s that they need so that they can refresh and take out DDR4s? I'm not saying -- making it really clear. We're not saying that's not going to happen in the second half.

Then the mix of it, I don't think that's going to particularly change in FY '27. I think what I've seen is beyond FY '27, beyond FY '27, I think more of the DDR4s -- and this is a view here. This is -- more of the DDR4s rolling up in the resale market because it will be DDR5s that are getting more repurposed back into the data centers. Believe me, the world needs DDR4s in the resale market because they -- all the market commentary is that DDR4s are needed right through to beyond 2028, 2029.

Sure, sure. So basically, are you saying your customers are taking more in-house for the -- because your repurposing units are growing, whereas you are selling less. So does the...

Yes. So think about -- yes, so a lot of our repurposing unit growth was for non-memory parts. There's lots of parts that get repurposed and add to that DDR3s as well. So between those 2, I mean, there was a lot of DDR3s in FY '26 they're not going to -- I mean DDR3s are not going to come out in any significant way. From now on, it's DDR4s and DDR5.

So I don't think you can say -- no, let me make it really clear. You cannot conclude that, therefore, our customers are taking more back into the business as opposed to reselling. We're not seeing any particular -- right now, we're not seeing any particular variation between those 2 from what we've seen historically.

Yes. So that DDR4 sales, is that more like a timing thing deferred further into your like whatever medium term you mentioned?

Yes, DDR4s are differently timing. There hasn't -- 100% agree. There hasn't suddenly there's no DDR4s in the world that need to be taken out of data centers. In fact, it's -- that installation happened 2 or 3 years ago. So it's not list DDR4s, it's simply the timing of when they're going to come out.

Okay. Got it. So deferred further. Okay. And then if I can ask about your North American metals recycling business because comparing them, your FY '26 EBIT versus the market being consensus, I think it's weaker than expected. But looking at your sales volume seems okay because U.S. steel production have been, I guess, strong year-over-year because of the tariff. And then now looking at non-ferrous price, copper and zorba, which is the secondary aluminum price, is still strong, which reflected your JV . SRs EBIT, everyone's asked about it. It's very strong, that's how the EBIT should be. And then you continue to implement your turnaround strategy.

So I'm just try to understand what happened to the North American metals for the FY '26? And -- I mean, everyone has their own assumption for non-ferrous, but how should we think about it like over the next 6 to 12 months especially your turnaround strategy.

So broadly speaking, I mean, both -- there's one slide in particular that Warrick showed, which showed the contribution from non-ferrous versus ferrous between FY '25 and FY '26. I cannot remember what slide it was, but what it shows is the 2 big stories in FY '26 where the contribution from non- ferrous and the contribution from with a big growth drivers for the business. How you should think about North America and SAR relatively speaking? SAR is benefiting more at the moment than North America because it produces more zorba.

And as I said, zorba comes -- it's not a 0 marginal cost, but zorba becomes at a very low marginal cost. So as the price rises, it tends to fall straight to the bottom line from an EBITDA and an EBIT perspective. NAM is proportionately doing just as well out of non-ferrous as SA Recycling. It's just SA Recycling produces more of it, on the zorba side.

And then the second thing I'd add because it's got roughly twice the number of feeder yards that we have in NAM, they also do very well out of non-ferrous retail. And non-ferrous retail is just plumbers bringing in copper guttering and electrician dropping off some cable and some copper cabling that they picked up, and then we process that into high-quality non-ferrous products.

So I wouldn't be thinking that SA Recycling has got something that NAM does it. What SA Recycling is twice as ministries and twice as many yards providing this non-ferrous product.

Right. So comparing if your [ JV ] operated SAR with your NAM, so basically, from your ounces, there's not much difference, but you believe they have more high-margin like zorba non-ferrous various metals, which give them higher margins. Is that [ a good ] conclusion?

That is correct. They shred more, therefore, produce more zorba and zorba has a very low [indiscernible] run marginal cost and so that has impacted them in a positive way. Don't get -- it's impacted there in exactly the same positive way, just lease volume.

Right. And you are benefiting from higher U.S. domestic steel production, which we've seen year-to-date because of tariff as well as strong early prices and the copper prices in the U.S.. All right.

Yes. That's correct. Now...

Your next question comes from Daniel Sykes from Jarden.

I was just wondering if you could give us a bit of a time line around some of the other hardware components you're talking about in SLS, particularly the GPUs and the market opportunity there, just in terms of any significant milestones we should expect in terms of kind of testing whether they can be resold any contracts and -- will hit the financials as well.

So we have some of them in our HQ facility right now, some of these high-quality ones, and we are working on them at the moment, testing them in a real-world environment. So -- that's a very important step. We've already developed 3 or 4 tests and have proven that based on those tests, we can certify these things to a certain level. In the next, I'd say, around about from -- 12 months from now, there's going to be another step up in the quality and sophistication of what's coming out. So it really is -- for me, it's starting now and it will ramp up in the next 12 months or so.

But what I would say is we are very well-positioned to be sitting in that market, testing and certifying GPUs. And that's what this market is going to be about. GPUs are not like DIMMs, if a DIMM fails, it's not the end of the world. And the testing that you do on DIMMs is relatively simple. DDR5s and neither of those things, they are more fragile, the tests are more complicated. That's why they're worth more and that's why you need to have the skill to do it. And I think we are -- I do believe we're really well-positioned. It's starting from now ramping up over a 12-month period is the way I'm seeing it.

Great. And do you see any one, I mean, in the market doing this already? I know on the memory side, you kind of talked to hyperscale as being the #1 competitor there and what they do in-house? Is that the same on this side? Or is there anyone you would point to?

This is new. This is new and we've recently written quite a good white paper on some of this stuff as well. I mean, I'm not going to say there's no one out there doing it because it's hard to know what people are doing behind closed doors. But I do believe that we are at the forefront of it because we've been -- particularly with one of our customers, we've been working on this for a while. And that customer has a particularly strong focus on sustainability and making sure that the stuff is not going to landfill.

So we've been working on it for quite a -- for a while, and I feel we're in a good position. I mean, we're never going to have a world monopoly on it that would be lovely, but highly unlikely. But it's -- this takes it to another level of sophistication versus DDR4s and DDR5s.

Your next question comes from Ramoun Lazar from Jefferies.

Just a couple of questions for me. Just with the SAR, Stephen, you mentioned that assuming non-ferrous prices stay where they are, that earnings base is sustainable into '27, I guess, just with all the investments SARs made over the last little while. Are you able to sort of give us a bridge on what sort of volume uplift we should expect from those acquisitions? So any sort of led it would be helpful to try to frame that into '27?

The volume outlook won't be huge Ramoun, and it's not about volume. It's -- I think it's about shoring up their market position. So making sure that they preserve what they've got and they're preserving their margins. So I wouldn't be assuming a huge volume uplift relative to the size of recycling, which is a -- it's got huge volumes down, don't assume a significant -- don't assume a material volume uplift. It's really around shoring up the market position. It's probably the best way to say it.

Okay. Great. And on SLS, it sounds like the second half '26 was a bit of an anomaly in terms of customers just trying to look to monetize a high DDR4 prices. Am I wrong in thinking that using second half as any kind of baseline for SLS is probably the wrong approach to forecasting this business going forward?

I think over the medium term, FY '26 is perfectly fine. I don't think the second half of FY '26 was an anomaly. I think the anomaly is what's happening right now, is the absolute crunch that's happening with everybody wanting to build data centers, everybody looking for electrical connections, everybody looking for land. I think that's the anomaly that's hit everybody. I -- look, and the reason why I'm comfortable in saying that is there is a hell of a lot more DDR4s sitting out in the data center land than what's been repurposed to-date.

So I guess what my argument here, Ramoun, would be 6 months -- I think 6 months is a blinkered eye relative to this market as what -- how quickly it changes. Once those bottlenecks are opened up, which they'll have to be, the material will flow just as strongly, probably more strongly than the second half of FY '26 because there's just simply more out there.

Yes, yes, yes. No, I take your point. Do you have -- I mean how much visibility does SLS or Sims to have with regard to that, Stephen? Like can you see to the June half of next year yet? Or is that just based on the scheduled time lines of your customers or not yet?

We have a pretty good line of sight for the first half, which is what we've got to have a reasonable basis before we can put things out. So we have a reasonable line of sight for the first half. There's some initial forecasts come from our customers for the second half, but they become heavily caveated. So no, we -- it won't be until we get into the second half that they really firm up when the material is actually going to come out in that period.

Okay. And there's no sort of lead you can provide us in terms of an assumed seasonality in that business this year?

No, No, the seasonality, if there will be commissioning seasonality, which is -- it's just entirely based on when they get hold of electrical connections when they get hold of land, when the construction happens. If they've got a data center they're refreshing, obviously, if they're refreshing it with DDR5s and HBM and high-power GPUs, it's going to need more electricity. So they're getting the electric grid connections sorted out.

Once that sorted then bang, all the DDR4s that's sitting in there will come out ready for the new DDR5s and HBM and GPUs to go in. So that's -- that doesn't have a seasonality to it. That just has when is the electrical connection approved and put in place. Those are what causes the variability between reporting periods.

Got it. Okay. And just one final one on ANZ. Do you think that division is now stabilized in terms of the step down given what's going on with Chinese steel exports being partly offset by some of the additions like Glenbrook?

Yes, I do. I do. On the assumption that non-ferrous stays where it is, and we're confident in that. But it's fine. I hope this is not a famous last words, but it's hard to see the ferrous market getting much worse for the impact that China is having on it. So yes, in that sense, I feel that this is the bottom earnings for ANZ.

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

Okay. Well, thanks, everybody, for the questions. Very -- some very good questions there. We will see -you - we will see all of you over the next couple of days, and I look forward to catching up. Thanks very much for dialing in.

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

Well, good morning, everyone, and welcome to Nashville. For those of you who are watching us on the video, you'll be pleased to know that we did make it. If you're watching yesterday's video in Houston, I can confirm that it was a 3.5-hour queue at Houston Airport, but we got through it. That was an interesting experience. And here we are at day 2 of the Investor Day looking at Sims Lifecycle Services. We've just been on the site tour. Thank you very much, Isaac. Really appreciate the tour. It was really good to get your insights about how we go from when the material arrives right through to when we finally dispatch it for resale or back to the redeployed unit. Thanks very much for that tour. The agenda for today is I'm going to give just a really quick introduction, I'm going to hand over to Ingrid. Ingrid and Sean will take us through a presentation, then we'll have plenty of time for Q&A. We don't need to rush to an airport like we did yesterday. My first slide is entitled why SLS matters to Sims. I think after you've been on the tour, it's quite self-evident.

I just want to make a few high-level comments. This has not been an overnight success. I know from the market's point of view, SLS has grown rapidly really for the first half of '26. And clearly, we put out some guidance for the second half of '26. So it appears like a rapid growth. We've been in this business probably since 2019 when we sold off another part of the business and decided to focus on hyperscalers. And so we've been building up relationships. We've been building up our operational capability. We've been building up our sales capability, our redeployment capability over that time in preparation for this. So I'd like to point, it's not just an overnight success whatsoever. And SLS now is a key part -- clearly is a key part of Sims. It's a key part of our growth. If you look at the chart here, I mean, it puts it quite starkly the EBIT contribution from SLS, how it's grown over the period.

And by the time we get through to the forecast year-end, it is going to be a massively significant part of our business and therefore, an area that we've been working on, and we're really pleased that it's now getting the limelight that it deserves. I think you'll see throughout the presentation, it's the skills that we've developed. It's the relationships we've developed with hyperscalers, how we're embedded in their business, the trust that they have with us. This is, I think, the magic sauce in many ways to the SLS business. It's complementary to our metal recycling business. In a sense, they rhyme to create a world without waste to preserve our planet. It's a very logical thing for us to be doing what we're doing at SLS. But in other ways, it's completely independent from the metal cycle or the metal environment as well.

So we've got ourselves another significant EBIT stream in the business, complementary but independent to our metals business, which I think creates a better balance sheet. It creates a more reliable cash flow, creates a more reliable EBIT. I really do think it is very, very complementary. The second last point I make on this slide here is capital light. And I don't know for those who remember, when we first talked about the SLS business, we referred to it as a no-regret strategy. It was always going to be a capital-light business. Yes, we'll be investing some money in robotics, as you saw out on the floor today, but it's not significantly large amounts of capital to get that in place. And so I remember saying right at the beginning, if we turned out to be wrong on the SLS opportunity, which we haven't turned out to be wrong. But if we did, we weren't putting a huge amount of shareholders' funds into it.

It's a very capital-light strategy, very, very high return on those assets. And what the SLS business, the final point I'll make before I hand over to Ingrid is we really do have a good understanding of the secondary markets, whether that be redeployment back into a data center, which is a skill absolutely unique to SLS. No one else does that or whether it's selling into the secondary market. We really do understand those markets. We understand what they need. They understand our quality, they understand our processes. They understand that when you get a refurbished, I guess, what we're talking particularly we'll focus on today, you're getting one of extremely high quality with SLS. On that note, I'll hand over to Ingrid and then Sean, and I've got a really exciting presentation for us, and then we'll come back for Q&A.

Thank you, Stephen. All right, so it's me. So I'd like to introduce you to my executive team. We're independently managed from Sims. So I report to Stephen, but my exec team is completely independent and independent because we tend to move at a different pace from the other parts of the business just due to the nature of the business we're dealing in. So Sean Magann, my Chief Commercial Officer, who's here; Lynn Jacobs, who used to be my CFO last time we had our Investor Day and is now taken over operations, so Chief Operating Officer. Chris Guarini, who joined us from Metals. He's in a new role, Chief Digital Officer, and that's because we felt we needed to elevate digital. So he's going to be all about digitally transforming the business so we can continue to stay at pace with our clients, very fast moving. So Chris has a load of things on his agenda to go through. And Jim Clark also joined us from Metals, and he's our new CFO. And then Marie Burke, our Chief People Officer. And we are all headquartered in Irvine, California.

So we felt it really important for our team to be together so we could move quickly and make decisions and keep strategy moving forward at the pace. And why California? California because that's where most of our clients are, headquartered in the Bay Area, so very much California-based and plus it's excellent. Right, Stephen? So SLS, global leader in circular cloud solutions. Global, we are in 11 countries and where we aren't, we'll use subcontractors. So we use up to -- we're in 60 countries in addition with our subcontractors. So some of our clients need services, somewhere where we're not placed, we'll use subcontractors. Global, because our clients are global. We need to be consistent. The reporting has to be the same. It has to be sustainable. That's why it's really important for our business to be globally present.

Circular, we're all about extending the life of electronics as much as possible. So doing the reuse, the reengineering, redeploying and at the very end, recycling. And cloud, we positioned ourselves, as Stephen mentioned, in 2019, we really turned away from electronics recycling, so we could focus more on hyperscalers and taking advantage of the growth in that area. So we've positioned ourselves to be adjacent to the growth. Who are our clients? Well, as you saw out on the floor, hyperscalers make a big part of it. Enterprise clients. So we have banks, insurance companies also have on-prem services, hyperscaler data center type services that they need as well. And OEMs, so the folks that are making the servers and the racks are also our clients. So we have about 150 clients under contract, and Sean will talk a lot more about that when he comes on later. So as I said, we positioned ourselves strategically to take advantage of the data center growth that's going on that we're experiencing today.

That was a strategic decision we made in 2019 to really focus on this area. And we operate very close to hyperscalers to take advantage of that growth. We partake in the technology refresh cycles and of course, work in the supply chain. So we provide a lot of parts to go into that circular in the hyperscaler space. Stephen mentioned, it took us a lot of years to build these trusted relationships that we have with these clients. We've been working with them for a long time. This site here, it took us 3 years to get the technology approved, the process approved to get it going. But now it's -- you see it's running very well. We provide all the secure services. That's very important.

What you'll see, Isaac mentioned all the cameras we have, security is of the ultimate importance in this area, about data, anything with data, is super important. And what we've proven is that we can move quickly when they need capacity. That's the big part. hyperscalers need capacity. And it normally comes in -- when they decommission, it's big slugs. So what we do is we provide capacity when they need it. We can put a site up in 3 months, which we've done 3 times here. And the high quality. Isaac mentioned how important it is to have quality because we are competing against new material. So manufacturing like process material. It's a manufacturing-like process.

So the volumes to growth, what Sean likes to say, we got to stay on the horse and just continue taking part in the pie growth as it grows, we grow with it, grow with our clients. We're adding new services to continue to grow. We're going in new geographic areas like taking part in the pie growth has -- it grows, we grow with it, grow with our clients. We're adding new services to continue to grow. We're going in new geographic areas like Ireland, for instance, that's also to provide capacity to a client that request it. And then also continuing with our core base of the enterprise clients. So the banks, the insurance companies still need our services, and there's still some growth in that area. So you might ask why? Why the hyperscalers outsource? Why do they do it? So they can focus on their core, right?

So they can focus on their core innovation instead of taking space and personnel to do what we do. We provide operational efficiency because decommissioning cycles tend to be very lumpy. So they can't handle the big sloth of material and then reduction of material, whereas we can because we can overlap different decommissioning cycles from various clients. And then we just help with economic recovery. We help them do a more efficient operation, get some revenue back and also repurpose where it makes sense. So as you saw on the floor, this is the main process. They decommissioned equipment comes from the hyperscaler sites, comes to us. We harvest what is requested. We assess which way it goes. Does it go for redeployment? So testing and preparation relabeling. Does it go to resale where there's rev share or does it end up being recycled, which is a commodity recovery. And with that, I'll hand it over to Sean.

Thank you, Ingrid. Very nice to see everyone this morning, it's nice to see so many familiar faces and some new faces as well. As Ingrid mentioned, my name is Sean Magann. I'm the Chief Commercial Officer here at SLS. I'm based in the San Francisco Bay Area, as Ingrid mentioned, but I spend an equal amount of time at our Irvine office. I did undergraduate work at UC Berkeley and from there went on to get an MBA. I've been in the industry for about 30 years. I was very young at the time. But I started with a Canadian smelter that would process electronic scrap and import that material into Canada for precious metal recovery. And one of the projects I worked on that I'm quite pleased with was we set up preprocessing sites all over the world, specifically in Southeast Asia and would process the material in country and then ship and would ship the semi-process material to Canada for smelting. And what I learned there is to maintain margins and to really keep customers happy, there's 3 pillars of service that we have to maintain.

The first is service itself, right? All customers have SLAs, and it's critical that we meet these SLAs of customers. Isaac does a fantastic job with Crystal here in Nashville, and our customers are very pleased, and that's one of the reasons why we're offered new opportunities is because we consistently outperform on our SLAs. The second is compliance, shipping material cross boundary. It's a multi-jurisdictional process, and there's a lot of different laws that govern the movement of this material. And so it's critical to be compliant. I don't know if there's anyone heard about Super Micro recently. Have you seen the news when you have a chance to read about it, it tells you what happens when you're not compliant with shipping some of these materials internationally. And the third is capacity. As Ingrid mentioned, our business tends to be lumpy. So you have to have the capacity to meet customers' needs. And that was something we employed at my past company, and that's something I'm very pleased that I was able to bring -- that we were able to bring to Sims.

So how do we make money? We have 3 basic buckets of money -- of revenue, I should say. It's resell, service fees and commodity. We'll start at the top with resell. Each of these shapes roughly approximate the relative percentage of revenue we get. So resell is the top now. And essentially, what we do simply put, we take whole units such as laptops and servers and desktops as well as components, hard drives and GPUs, CPUs and memory, and we'll process those materials on behalf of our customers. We'll wipe the data. In some instances, we'll load an operating system, do some of the work that you saw out here with relabeling. So we'll process the material and sell that material to our worldwide buyers. Now my team spends quite a bit of time vetting and approving buyers globally to make sure that they're compliant and that we also receive a fair value for the material. In general, there's a 70-30 revenue split between the client and SLS with the majority going to the client. It works really, really well because it incentivizes us to try to find the highest value because we price participate.

So again, we spend quite a bit of time finding the best sources globally to take our materials in a compliant way. The second bucket you see there are service fees. So most items that we receive will have a service fee usually per unit. In some cases, we still have service fees per pound, but we'll charge the client per unit per pound to process the material. What's nice is, in some cases, we can double dip with the same unit. So the same unit, we may have a service fee, we may sell that unit and also price participate on the resell. But the processes -- the service processes can include redeployment where we put something back into a data center, drive destruction, which I think you saw a little today, remanufacturing of units and also data center decommissioning. So that's the second bucket there. And then the final bucket is commodity revenue. Again, we process something for something that's not available for redeployment or resell, we'll go ahead and sell that for commodity. And again, we'll enjoy a revenue share with the client.

What I really like about this slide is 5 years ago, 6 years ago, the recycling would have been the majority of our revenue. But because we consciously put ourselves in a position to go upstream, we've really balanced our revenue streams where resell and service fees are much, much larger than the commodity side. Why? It's more repeatable. The margins are better, and it's something we can control, can't control commodity prices as we know. So this slide may shock you guys. I want to make sure everyone is sitting down before you look at this slide. It's no big news to anyone here, but data center spending is going up exponentially. A few notes on this slide. You have 2 lines, one is global, one is domestically here to the United States. This only includes hyperscaler spending. Now there's no true one definition of what a hyperscaler is. So we list the hyperscalers that we include on the bottom there. I hope you can read that there.

The question I get asked most about when this slide comes out is folks say, well, does this include land acquisition, concrete, external cooling? It does not. This is only for their IT spend. This is how the data centers make their money on processing and doing AI and whatnot. And this spend is for material that we could process. So you see it's a pretty, pretty steep curve there. Now one thing to note, too, is there's a delay between when something is installed and when something comes to us for processing. Typically have been about a 5-year end of life from installation to decommissioning. We've seen those time frames compress. It's on average, 3 years now we're hearing with some of the AI equipment. We actually have someone well placed in the data center industry saying that, that time has actually been compressed down to 2 years. So we're seeing that lifespan shorten. It's interesting to note that the relationship the hyperscalers have with their data center equipment has changed. Before it was an asset you would sweat long term.

Now it's almost a consumable, something they use and discard to keep up in this AI arms race. But what I like about this slide and hopefully, what you as investors like is with that lag, let's assume it's a 3-year lag. Some of the equipment you saw like even this rack here was probably put in place in 2021, but we'll assume a 3-year refresh cycle. So that means the material that we're seeing, even though we're having a really, really great year is for material that was probably installed in 2022, 2023. So that was before this exponential spending. So if you put 2 and 2 together, it seems like we have a really, really bright future. I'm not giving guidance, but you just see the amount of volume coming -- going in would be the amount of volume that has to come out. And this is why we're excited about our business and hopefully, why you guys are excited as well. I can answer questions on this later at the end if everyone has any questions on that. So memory, right? Sorry.

So memory, there's a lot of talk about DIMMs, right, DIMMs, DIMMs, DIMMs, specifically DDR4 memory, right? The price has gone up exponentially in the last year. And the question we get as a leadership team is, why is it going up? And is it going to last? And hopefully, by going through these 3 bullet points, I can answer that question for you. So what's going on? So number one, DDR4, which is the second most utilized version of memory, DDR4 is being removed, right? It's not being idled. It's not being turned down until prices pick up. It's being permanently removed. And so if you look at the bullet point or the circle at the bottom, it says this is not a pause in production. It's a deliberate strategic exit from DDR4. Samsung, Hynix and Micron all announced last year in summer of 2025 that they would be ceasing production of DDR4. Those 3 companies make up 95% of DDR4 manufacturing. So they've been very public to say we're out of the DDR4 business. The last buys to the hyperscalers is this year. So as we understand it, as of next month, the hyperscalers are done.

They cannot buy any more DDR4 on a large scale. So you have one, the supply being constrained. So the next question I get is, well, why? Where is the money going, right? You said a bunch of money being spent with data centers. Where is this money going? Well, it's going to DDR5 and something called HBM, which is a high-bandwidth memory. So the amount of spending going into manufacturing of DDR5 is unprecedented. As you see the chart there, it was $29 billion in 2024, $53 billion in 2025. And since this chart was created 4 weeks ago, the forecast for 2026 has gone up to $71 billion. So money is being spent. It's just not being spent on DDR4. So all the manufacturers have placed their bets on DDR5. Question, why do the hyperscalers want DDR5? Why isn't DDR4 good enough? There's a lot of different attributes on that make DDR5 better than DDR4. But the main 2 attributes are speed. DDR5 is a lot faster than DDR4. And again, in this AI arms race, speed is everything. And it's also more efficient with power.

And one of the big constraints of data centers is energy. There's just not enough energy to do what they need to do. And so anything that's faster and better with energy is much, much sought after by the data centers. And so because of this -- so now we know why the hyperscalers want it. The reason the manufacturers want it is because they can make a lot more money. Per unit, it's estimated between 5 and 10x the amount of revenue selling a DDR5 versus a DDR4. Even though short term, the price of DDR4 is going up, the manufacturers know that long term, their future lies with DDR5. And so now we have a -- and so now we're comfortable with that there's a supply constraint with DDR4. How about demand? There is a huge locked-in base for DDR4 demand. So this isn't hyperscalers. This is everyone else with a data center, colocation site, et cetera, that they've got assets that again, that they will normally sweat these assets between 5 to 7 years, and it's all built around the DDR4 platform.

DDR5 in general, isn't backwards compatible with DDR4, the exception being the CXL that we saw out on the floor, but that's specifically a hyperscaler technology, and we can talk more about that. But in general, it is not compatible. And so if you're running a system, if you're a bank, an insurance company, again, a smaller tier data center company, you have 2 choices. You can either replace -- if you want to upgrade your system, if you want to add capacity or upgrade your system, you can either replace the whole system, which is built around the DDR4 ecosystem which is expensive or you can pay the high prices on -- the elevated prices for DDR4. Depending on what you read, we expect this demand to last 3 to 4 years. Again, there's a lot of articles about it. You can Google search on your own, so it's not just me, but we see the demand lasting for the next several years where we all know that the supply is going away. One just quick thing to add about the supply.

One of the questions I get most often. I think one of you fellows asked me about it last night was how about China? Is China going to fill the gap for DDR4, right? Can they come in and make a lot of inexpensive DDR4 and try to fill that supply gap. In my opinion, based upon what I've read, that's not the case. The Chinese government has been very, very specific telling Chinese manufacturers not to invest in last year's technology that they want the Chinese manufacturers to invest in DDR5. Again, AI is an arms race. It's an international arms race in a sense. And the Chinese government does not want to be one generation behind. So it's very, very unlikely to see China enter into the market in a big way. There may be some odds and sods that may fill a small gap. But in general, the supply gap should last for many, many years.

And finally, this is just an overview of the transition of memory technology. So the version before DDR4, you guys want to guess what was called as DDR3. And we've seen this transition before from DDR3 to DDR4. When that happened, there was a spike in prices. So we've seen this before. Every time someone talks about prices going up and when the question comes up, is something a bubble, the answer is always it's different this time. But it is truly different this time because what's happening now, when the transition from DDR3 to DDR4 happened, there wasn't this rush. It was a gradual transition where manufacturers still supplied a DDR3 and the demand for the DDR4 wasn't as great as it is now.

For DDR5, 90% of all that capacity I talked about earlier with that spending, that $71 billion this year, 90% of that capacity is already spoken for by the hyperscalers. So you have the supply -- sorry, the demand side being extremely, extremely aggressive. Well, again, on the supply side, it's being turned off instantly. That did not happen before with the transition from DDR3 to DDR4. It was a much, much gradual. Even though we saw a spike, it wasn't as prolonged as I expect it to be now because the fundamentals are quite different. I've given you a lot of information. Happy to take any questions later. I can talk about memory all day long as you probably see. But with that, I'm going to turn it back over to Ingrid. So thank you.

All right. Well, let's pull it all together and walk through what this means to the financial results of the business. The first point that I want to bring you to is that we're introducing a new volume metric. In the past, we were using repurposed units, and that could have been anything. It could have been a laptop. It could have been a memory stick. It could have been a switch. So we're turning away from repurposed units, and we're going to go to gigabytes of memory sold. So the reason being, if you look here, you have 2 sticks of memory. In the past, there would have been 2 repurposed units. But a 16-gigabyte module is not the same as a 32. It's twice the value. And for those of you that are counting the chips, remember, it's mirror image. You've got chips on both sides. So we're dropping the repurposed units going to memory gigabytes sold. And in future slides, I'll explain why this is important for you to follow when you're looking at our financials.

Okay. Sorry. We're standardizing the memory because it just makes more sense for our business as we're going forward. And we've spoken to you before about TrendForce. So this will be the page, the landing page that you go to, if you go to trendforce.com. -- and I'd like to draw your attention to the red box there. That's what we use as our benchmark, and it's a DDR4 3200, and that's the speed. So that is a benchmark that we use to help us guide in our pricing. And if you remember, at the half year results, we said that we were about 50% of that price. Well, that was over here in the gray part. And what we've seen starting in December is this huge hike in pricing. And so really now we're at a 25% to 30% of that pricing of the TrendForce pricing of a new gigabyte. So the first half and different -- second half were quite different. So let's pull this all together. There's a lot of information on the slide, and I think you're going to -- have some good information for you.

Last week, we posted a trading update of our underlying EBIT for fiscal year '26 to be between $165 million and $185 million. So what we're doing now is providing you more detail, especially around gross margin. Sean mentioned the 3 buckets of revenue. So our 3 buckets of gross margin are resale, service, service fees and the commodity. And certainly, the resale is the largest gross margin bucket. 80% of that is enjoying the tailwinds from memory pricing. 20% is your consumer tech. And that's your probably slower growth, PC sales, laptop sales. There will be some growth, but not to the same extent of 80% coming from the memory. So 20% of the gross margin is consumer tech. So that's about $40 million to $45 million of this $220 million to $230 million. Service fees we'll see some growth, but again, not as much as the tailwind we're seeing from memory pricing. And commodity will be probably like your inflation.

You can decide what it is in commodity, but not to the extent that we're seeing in memory. And we're forecasting our memory gigabytes sold for fiscal year '26 between 65 million and 70 million gigabytes. And what we'll have to point out here as well, the first half, the split between first half and second half of the gigabyte memory sold, we saw a higher 60% in the first half, and we're forecasting 40% in the second half. And that's because we're seeing more 16 gigabyte memory modules coming out in the second half as opposed to the first half. Okay. So Ireland, we talked about the geographic expansion, how we're going to continue to grow. We expect to be operational by the 1st of July, so our next fiscal year. We estimate in the first year, we're going to have 4 million gigabytes sold. And as we continue to scale up, it will be 15 million gigabytes sold by fiscal year '29. You can estimate an operating cost of EUR 4 million in '27 and EUR 5 million in '28.

Plenty of room for other hyperscalers to come in. This is dedicated to one client. So we go where the capacity is needed, and this was with partnership of our clients. So plenty of room to add others. Sean is going to work really hard at getting other hyperscalers into this site. This is very exciting for us because Ireland is certainly the largest concentration of data centers in Europe, and it will be a great footprint into that market. So we're structured for growth, as I've mentioned before, we have plenty of capacity. We're probably using about 30 million to 40 million -- 30% to 40% capacity here of 60 million memory of gigabytes for the U.S. and we can add additional capacity as needed by changing some of our sites around. So we have plenty of capacity to continue to grow and to take advantage of this attractive market.

And we also future-proofed it by adding automation. So the automation will allow us to continue bringing in efficiency and also to dial up and dial down as needed with the decommissioning cycles that come through. And it also will be compatible for DDR5 once that comes out. So in conclusion, the key messages I want to leave you with is that we're already a material earnings driver for Sims, which is quite attractive. We are exposed to structural noncyclical growth. We're embedded with hyperscalers. We're capital-light and a high-return business model. We have multiple diversified revenue streams. We are taking advantage of the attractive structural tailwinds in the memory markets, and we have significant growth runway ahead of us, so we can add capacity as needed and continue to grow. So with that, we'll turn it over for questions.

Lee.

[indiscernible] just on the pricing side, so why do you look at an 8 gigabyte price when you sell 32 gigabytes and 64 gigabytes?

No, so that is a chip. So that's 1 chip.

Okay. And then if we think about the...

So sorry, so you would multiply it out. Okay. So 1 chip, that's new 3200 speed chip, and you would multiply it out by 32 or 16 depending on the module to get the price reference and then take the discount to what we're getting.

If I can add too, I think the confusion might be that what you looked at that says 8, it's G little B, that's gigabit, which is 1 gigabyte. I know it's really confusing, but that chip is only 1 gigabyte. So even though it says 8 G little B, that means 1 gigabyte capital B. So that's why we use -- there's 1 gigabyte as a baseline.

8 bits and 1 byte.

Okay. [indiscernible].

So that's why that makes more sense, right? We're not basing it on a [indiscernible] 8 to 1. It's 1 gigabyte.

Yes, that makes sense. And then if we think about the lags that you've talked to in the past of, call it, a month and there's maybe some flex around that if the customer wants you to hold back and not sell immediately. Most people, I guess, track a new pricing series because that's what we have access to. And it seems the pricing has stabilized over the last few months. So I guess what I'm trying to work out is how much of the spot price that we're seeing out there is in the guidance that you've given for the first quarter. Is there some equivalent price that you can say in that series that's baked into the EBIT guidance? What's your assumption...

I'll handle the guidance question [indiscernible] so we've pretty much assumed that -- as you said, that price has risen to that level and stabilized. That's what we've assumed in the price in our guidance. And we've assumed that we get 25% to 30% of that price. So the lag effect is finished, I think. I mean, as it ramped up dramatically, it was a little bit hard to say exactly where it was. But as it seems to have settled at this higher price, that's the price that we've used and 25% to 30% of that is what we've assumed we will receive for the second hand.

I mean, you obviously have a volume story here as well. But if volumes were to stay the same, you would print a similar number of earnings for the next quarter.

Yes, yes, although bear in mind, as Ingrid pointed out, which is why we've gone to gigabytes sold we are seeing more 16 -- and because we can look into the systems, we are seeing more 16 gigabyte in the second half. I wouldn't read too much into that, though. I mean this is just the particular ones are being decommissioned. But we've said 65 million to 70 million. And if you look at -- we've also said that about 60% of that happened in the first half and 40% of that 65 million to 70 million will be in the second half of gigabytes sold. Interestingly, more repurposed units in the second half, but because of 16 gigabyte, less gigabytes sold. I think as we get used to that as a measure, you'll understand the benefit of us moving to gigabytes sold as a much better indication of future revenues.

And if we were to look on that metric, what would have FY '25 or if you go back, what's the level of growth we're seeing in that?

So in FY '25, interestingly, because it's recycling, the gigabytes sold would have been around about 5% higher, to be frank. But the repurposed units in FY '26 versus FY '25 around 22% higher. And it's all to do with the mix at the time between 16 and 32, we had some more 3 gigabytes in that 3 -- DDR3 in that period as well. So what I would say is we're seeing good growth in volumes. The mix this year has been slightly different to the prior year. But again, I mean, I think the point I really need to make is don't read too much into that. It just depends what particular data center is being decommissioned at that time.

And then on the volume side, like we heard on the tour just about the lumpiness that can be in the business just in terms of deliveries. In terms of the capacity and installed capacity, how do you think about adding additional capacity in a world where utilization is relatively low, but it's very, very lumpy and you obviously don't want to disappoint your customers by able to not take a shipment.

So as we're moving off guidance questions now, I'm going to hand that back to -- but guys, I have a general view of how we -- but I'll hand it back to Sean and Ingrid. I mean, I have a general view around how we manage capacity and we manage it well with a number of customers. But let me hand it back to those guys who actually have to manage the cycle.

Right. So we manage capacity by adding additional shifts and with the automation you saw, so you can dial it up, dial it down. And we have plenty of capacity to continue to grow. Sean is going to fill up our sites.

And then maybe for Sean, do you want to give us an idea of how you're tracking R&D about reusing or recycling HBM and rare earth and some of the other opportunities that you have for the business?

We're lucky enough to where they're a bit separate, both of them. So the rare earths, there's several companies, a lot of these with government grants that are looking to have a better story for some of the rare earth. So we've got NDAs and relationships with 4 of the big companies doing that, both domestically and internationally. On the HBM, it's a little bit trickier, right, because you've got the memory manufacturers and you've also got the NVIDIA, the folks making the GPUs. So we're working with our hyperscaler customers. It's really different now that we have a relationship with hyperscalers because we can see a line of sight of what's coming out. So we're working with the hyperscalers. This is why we have those test racks to figure out the best way to maximize the value for the stuff they get. So our line of sight to answer your question, is working with the hyperscalers. They know what's coming out. We know it's coming out. So we're working with them to try to find the best homes.

And then maybe just a last one. Your view chatting to either your customers or suppliers around the relationship between used and new pricing, like do they think that the 35% holds? Or do I think we go back to the traditional 50%?

Well, yes, we're kind of -- that's why we didn't give out so much guidance at the half year. We're waiting to see where things are moving. So far, it looks as though the pricing is staying the same.

It's stable.

It is stable. So we would expect it to go back to 50%.

Yes. With that stability because you're not having that big price curve, I think both the spot and the contract -- or sorry, the new and the used price are starting to normalize a bit. So I suspect we don't have enough data to prove that, that is what's going to happen...

It saves a bit more time.

But it makes sense if that would happen.

I think it is important to say, though, that we didn't assume that in the guidance for FY '26. We assume the 25% to 30%.

Yes. That was why I asked the question.

A quick question on the competitive environment, particularly with the hyperscalers, where are you winning? Where are you not winning and why?

Well, certainly, for us, what we do, we're the only ones who do the redeployment. So that is something that gives us very good relationships with hyperscalers, shows our ability to meet their needs because in redeployment, they're after the parts, the parts they want to go back into their data centers. So that is a competitive advantage for us because we're the only ones that have that technology. And it took us 3 years to get that approved to get through all the engineering specs, the security specs and that -- so it's not something that can be easily replicated. I would say. And then on the other side, do you want to add more on that?

Yes, the customers we work with, and it's not just here in Nashville. If you go around, we've got different sites around the country and around the world that are sort of semi-tailored to that particular client. I'm talking thinking of Atlanta with the other hyperscaler. And so with the hyperscalers we work with, we win the majority of the time. There's still a few hyperscalers that we don't work with. And one of the reasons it's not so much the competitive environment. It's more that they're doing it themselves. But I suspect that over time, that can change. Ingrid mentioned earlier in her slides why hyperscalers look to outsource it. And a lot of it to me is just growth, right? I think the hyperscalers that do it themselves, I think it's easier to do when it's a smaller environment. But with the exponential growth, I think the hyperscalers that do it in-house -- well, I know that the hyperscalers do it in-house are struggling with it, and they're trying to find a better way to do it. So I hope that answers your question.

Do you see more competition in the future? Obviously, there's sort of a 3- to 5-year kind of barrier to entry on getting in this business?

I think so whenever there's money and you guys know this, whenever there's money in the water, the sharks are going to come, right? And so we certainly see people trying to enter into it, but there's something to scale with what we do. We're very, very embedded with our clients, right? It's not just the services we offer. It's -- we're embedded from an IT standpoint. We have APIs that go back and forth from a compliance standpoint. So we've done a really, really good job. On one customer in particular, we have individuals inside their data centers performing some data eradication. So I think we, as a company, have done a really, really good job embedding ourselves to sort of protect ourselves from competition. So I worry about competition every day. That's part of my job. But again, I think we've done a really, really good job making SLS sticky with the clients.

Has there been any pressure on the 70-30 split? Or has that been static over time? And do you foresee any pressure on that?

Well, no, at the moment, no, 70-30 has been fine. We do have other clients that aren't at 70-30. But overall, the average is 70-30. And Sean, you might want to speak to that.

Yes. As I mentioned, again, it's 70-30 to the client's benefit. So first of all, they do receive the lion's share of the revenue. In my experience and what we see now is if we can continue -- it's a rounding error to a lot of -- we never want to take anything for granted, right? So we always want to be competitive. But if we can continue to deliver the highest price, right, by finding the best market for this material and if we can continue to service our clients, we don't see as much pressure. I haven't seen it yet. Now it could happen tomorrow, but I doubt it because we offer such a great service that 70-30 really seems to be the standard. So...

And just on Ireland, so is that hyperscaler you've entered that market with in-sourced before and they've outsourced to you. Can you give us some color?

So they have a supplier currently, but they can't meet the capacity. So they've asked us to go move there to help with the additional capacity.

In addition to the program that you saw in our plant today is unique to SLS. So the hyperscaler, in particular, would like to replicate that process. And because of all the QC demand, the 3 years that Ingrid mentioned, it's not easy for the other supplier to get into the space. So it's much, much easier for us to walk in and do the redeployment and that way, they don't have to certify a whole another vendor.

Okay. So you've got guaranteed supply there?

No, nothing is guaranteed, but we have a very -- we have a line of sight to the volume, and we're very, very confident that we will be able to action on that.

Yes.

Just on the chart that you had up very early on around the dollars spent on data centers. Is it sensible to link that to your gigabytes sold, like there's obviously some mix and a few other things going on. But why -- I mean, I guess, why put that chart up? And if it doesn't link -- if it won't link to your volumes on a lag basis, why not?

So guidance question. So I think we put the chart up for a couple of reasons. Firstly, just to show that the amount of investment that is going into it. And yes, I think you can infer from that, that we believe that we will grow with it. The point that Sean made is that the stuff that we're now putting -- taking out the stuff that got put in '22, '23, not huge growth there. By the time we get to '27, '28, we'll be taking out the stuff that's in '24, '25, '26. So you can see that growth. So absolutely, we think it's going to be linked from a volume perspective. Our job as SLS is to make sure we get that increased share of the pie.

And it's held in prior years, like '22, '23 makes sense with your point.

Yes, it does. And there's no -- I mean, I don't think -- in global picture, we're not global in the total picture, there's no reason to think why it would change. what will change is what's our share of it. And so we think we're doing a very good job of it. If we just maintain our share, our percentage share, we would grow with it. If we can increase our percentage share, we'll grow faster than it.

And have you done any more work internally around where you think your share sits in the past, it's been very, very small for being the #1 player.

We have -- Ingrid and I were talking about that the other day. It's still -- I will hand over. It's still pretty small where we are because Sean noted that there was something like 8 billion...

8 billion gigabytes install of DDR4. So DDR4 for all that we've seen in literature, there's 8 billion gigabytes that are installed.

So in FY '26, we're forecasting to resell 1% of the 8 gigabytes. So it's -- we're still I guess implicit within your question is how much runway is there? I think there's still plenty of runway. We've got to win it. I do need to stress that. None of this is guaranteed to us.

Okay. I might wrap up here. If -- there doesn't look like there's any further questions. Thank you, everybody, for joining us today. I thought an excellent tour. As you can tell, we're extremely excited about the SLS business. It's very complementary to our metal business, but I like it independent and complementary. If you haven't got the message that we think it's capital light, we think there's plenty of growth. I'm just going to reemphasize that message. It's ours to be got. It's a competitive market, but we are genuinely very excited about this business. Last point I'll make, we've been in this business for a long time. This is not overnight success. This is just overnight recognition. That's it. Thank you for the last couple of days, and we will see a number of you back in Australia.

Well, good morning, everyone, and welcome to Houston. Today, it's going to be a challenging day. The wait times at the airport are 4.5 hours. So we've done a slight alteration to today's schedule. Pretty much a lot of it as we present. So 8:00 will go through the NAM business. We're doing around about 40 minutes for the presentation, 20 minutes of Q&A. 9:00, we'll move over to the SAR business, again, same sort of broad format. [Operator Instructions] Let's make sure we're on the basset 1 to be frank, because even at that point, I think we still got a reasonable chance of missing our flight. Fortunately, there is another couple of flights after hours.

So I'm going to first take a quick introduction on NAM and then hand over to Rob. I think we need to address this question right upfront. I'm sure it's on everybody's mind. What has been the impact of the Middle East on our operations.

Well, to date, that impact has been very limited. We've had some increase, obviously, in oil and with the increase in ore we've had an increase in freight costs -- so let's go through -- I really just wanted to concentrate on the top line because I'm sure you can read this slide. What is the current impact on Sims. So very limited disruption to bulk virus volumes. We don't see bulkers through all the various choke points in that part of the world.

Our bulk first through to Turkey. We go down into South America, Mexico, et cetera, and into Asia. So very limited impact on bulk ferrous at the moment. Containerized nonferrous, I'd say a very similar story. Yes, there's some more complications as the -- with flows, but those flows are continuing fine, and we're seeing a very limited impact on that, some increase in freight costs particularly in nonferrous relatively mild to the value of the cargo.

There are higher shipping costs, obviously, with commercial terms, ultimately, higher shipping costs get passed through to a higher sales price or they get passed through to a lower buy price. So my overall summary is the message I'm giving is the very limited or limited impact on our operations.

Currently, where the Middle East conflict ultimately goes, none of us know, and we will deal with that at the time. I've shown this slide in this form for a couple of years now. And what I want to is concentrated on the right-hand side. Again, I'm not going to go through in detail each of NAM's strategy in action, but highlight a couple of points.

The first 1 is on customers and suppliers. We have really done a good job in strengthening the relationship with the domestic mills, and that has given us the optionality, which we have exercised to sell domestically, we are currently -- there are some -- the premiums for Shred over export are really quite worthwhile.

We've also really expanded our unprocessed scrap and unprocessed scrap has been part of the core of growing our margins, and you'll see that NAM has owned its margins nicely over the last 2 or 3 years, and Rob will cover off on that as well. But if we turn to operational efficiency, it's all well and good to be buying more on process scrap, but you've got a process.

And you'll see that the utilization of our plants, particularly [indiscernible] has grown quite significantly over the last couple of years. So we've really managed to take that unprocessed material, do what we do best and turn it into a high-value product through very, very good operational efficiency.

On the innovative and agile, I think the same theme here, we talk about the commercial flexibility between domestic and export markets. That has been a key to the success of NAM over the last couple of years, finding the best FOB bus to maximize our margins.

And lastly, a comment I'll make on best responsibility. The point I want to bring out there is this disciplined capital allocation focused on returns and asset utilization. And I think TCT which we are going to see today. But unfortunately, we no longer will be with this with the airport situation.

TCT is a really, really good example of that, really good disciplined capital allocation, a very very good deal, strengthened the balance sheet, and Rob will talk with the asset sales, the land sales have managed to free up and Rob will talk about that as well.

So my last slide here is just really to summarize the operational reset for them. I believe we can say that, that has been delivered. When I look back at NAM 2 or 3 years ago compared to today, the earnings stream is much more consistent and much higher, so lower volatility and higher. It's been achieved through cost structure. We're really, really concentrated on getting the structure that we want and reducing costs in NAM, so that even when market conditions are poor, and they had -- over the last couple of years, there has been months or it has been poor, NAM is still making a profit.

And that's about making sure we've got the right cost base I've already talked about the greater commercial optionality across domestic and export markets, really, really, really important for them. Frankly, 2 or 3 years ago, we talked about export optionality but really, we just had an export part to market. We didn't have genuine optionality in the domestic market we now do.

There's been a huge focus on cash generation and disciplined capital allocation. And that's been really important over the last year or so as we've seen nonferrous prices increase quite dramatically. By definition, we have to put more money into working capital in that situation, but I believe we've managed that well.

The business now, NAM business with this reset is really positioned, I think, well to capture growth. Rob will talk a lot more about that, and we've got further operational improvements ahead as well. And the last thing, we are actively progressing inorganic growth opportunities. There is plenty of potential for us to get bolt-on acquisitions around our feed yards.

And I think over the next couple of years ago, there will be opportunities for things maybe just larger than just feed [indiscernible]. I'm going to hand over to Rob now with that introduction.

Well, thank you, everybody, for coming to Houston as well. Joining me later on in the presentation will be Ryan Smith, our Chief Operating Officer; and Chris [ Giaconia, ] our Chief Commercial Officer. I just wanted to give you a flavor of the leadership team that's here -- you've seen this before. I'll just give you a little bit of a refresher NAM operations.

We operate in, if you think about our footprint versus our SA Recycling investment, we operate in all of the top 20 cities in the United States. So a little bit more focused on the bigger areas, and that was predominantly from our past with historical export optionality but that proximity to people of proximity to populations has allowed us to continue to grow.

We operate in 19 states, 76 facilities at this point and 15 theaters. I will point out that 2 of those shredders are for aluminum only. So as Stephen said, we've made significant progress operationally and commercially. If you go back to the first half of 2024 fiscal year, our trading margin, we weren't proud of that. And we took a very obsessed look at what we could do to be different and be better at accomplishing a more reasonable trading margin.

And you can see that growth trajectory continues, and we're pretty proud of the progress we've made to date and the things that we're doing to continue to improve. EBIT falls along with it. As Stephen said, we're doing all of the little things. It wasn't one silver bullet. It wasn't just trading margin, but cost, SG&A, those sorts of things that we had to sort out as well.

And not saying we can't have a safe business as well, our total recordable injury frequency rate, a little hiccup and just a small explanation in the middle '24 and '25 we acquired 3 companies at that time. And our safety culture isn't just slogans and discussions. It's actually the way we operate and making sure that our people return to their home safely, better, perhaps even the evening when they go home.

Proud to say our FY '26 resulted us back on the right trajectory of an incredibly good safe operation. From a transformation point of view and leadership, we have absolutely strengthened what I would call getting the right people in the right seats. We align with the right priorities, incentivized and the right accountable culture.

I'll let Brian and Chris introduce themselves later on, but we've strengthened our team with veterans that understand the industry internally and externally from a talent perspective. The simplified performance metrics, some people call them KPIs. We call them now, we also kind of use a little joke internally as keep people interested or keep people informed.

And that was something that wasn't existing in our organization, understanding what is expected of people in their regions what their contribution is to the overall picture. And the balance in ferrous and non-ferrous of volume and spread or margin at the same time can be accomplished.

That ownership and performance at a regional level, operationally, added to simplified decision-making and having those priorities understood aligning those priorities to longer-term goals of our stakeholders and simplifying those longer-term goals into medium and short-term goals with our team with their incentives, reinforcing margin, but also performance reviews.

And then on a leaner and more efficient organization. We've taken our geography, and we've simplified it into 3 regions. So operationally and commercially, we're very aligned with those outcomes in those regions. And let's say it this way, is there wasn't a peanut butter approach. There wasn't one simplified answer to the solution. It was a very regional approach.

Further to that, as Stephen said and alluded to, our planning process needed an overhaul. We're a complex business. We have complex customer base. We have a complex sales and not to mention a supply base. We've introduced the S&OP process. And really what it is, is a data different data-driven decision-making and analytics approach to our monthly plans.

And we're always looking out at a 3-month plan, month 0 out to month plus 2. looking at not only what we can purchase, what we're capable of processing from a working capital point of view, from a capacity point of view, from an operational cash flow point of view and always looking at our logistics capabilities, what we can do to get to market, executing on the orders that we've had.

Stephen alluded to it with employees, we have over the period of time that's looked out in the top right-hand corner delivered on the synergies from the acquisitions, but we've also looked at the need to have versus nice to have. So we've simplified our organization structure, got productivity gains out of it as well.

And as you can see in the bottom right-hand corner, operating costs did jump in 2024. That's in line with our acquisitions. And then you can see we've been holding the line and fighting inflation with operating costs only going up slightly less than inflation over the last few years. All the while, the shredder utilization rates going up.

And on the commercial side, the purchase and focus on process scrap moving up as well. And I'm going to pass this over to Chris to talk to you a little bit more about what they have been doing.

Good morning. As Rob mentioned, my name is Chris [ Ciconi, ] I'm the Chief Commercial Officer for NAM. As Stephen pointed to earlier today, we spend a lot of time making certain that we have sales optionality into both the bulk space and in the domestic space. The first 2 bullet points listed below, speak to that specifically.

The first bullet point speaks to how we go about knowing where the best price is every single month and selling into that best price. That's through normal market discovery, talking with consumers, having relationships with consumers and being able to execute with that consumer when it is -- when it makes sense for us to execute, whether it's bulk or domestically.

It's one thing to have the relationship with the consumer. It's another thing to be able to actually go about accessing the markets from our yards. That's what bullet point two speaks to. We've done quite a bit of that over the past several years, whether it's through railcar investments, shoring up or bolt loading facilities or simply expanding track space in a lot of our yards.

We've made investments to be able to enable us to hit these markets at the right time when there's arbitrage opportunities get into the domestic space. We'll continue doing that. None of these activities are complete. We'll continue working towards moving more and more having and creating even greater optionality than we currently have.

As of right now, there are -- we can certainly move the majority of our seed ferrous scrap from the East Coast, which was historically sold into the bulk space into the domestic market on a dime on -- we can shift into that on a month-to-month basis. The last bullet point here just speaks to the discipline in our buy sales spreads and our trading margins.

The sales of scrap is inherently a global activity. We're selling people throughout the world. The buying of scrap is much more local activity. Once we know where the sales pricing is going to land, we have to be extremely disciplined in the local markets in which we're operating to make sure that we're maintaining our margins and explaining our trading margins except that we can.

The last point here speaks to robust and rising fares markets when that occurs in the stronger markets, our shift focuses or shift changes to focusing on maximizing our margin per ton as the price scrap increases. The second slide is more of a nonferrous base. As you can see, our nonfirst retail volume has gone up.

The first point that we are discussing here relates to our acquisitions of NEMT and [indiscernible] along with those acquisitions, we acquired relationships in the consumer space. We acquired people. We acquired the ability to move our retail nonferrous products into homes that are also being sold by to inventory. So it strengthened our customer base in North America, certainly.

Secondly, as Rob alluded to or spoke to, we've increased our unprocessed ferrous scrap. When you're buying on process various scrap and putting it through a shredder, you're pulling out the aluminum, you're pulling out the or and not only is that helping us on the ferrous side from a trading margin lift.

It's also helping us on the nonferrous side from a trading margin lift as well. And the third one is pretty simple. Customer-centric retail expansion. Retail customers are smaller customers. They're coming in with less volume. And we're making our yards more pleasant for them to visit, whether that's by setting a separate scale up, setting up separate places for them to dump concrete in different areas, different by location, but it's enabling us to be a better consumer for some of these peddlers that are coming in and out of the yards.

That's all that I have. I'll hand it back over to Rob.

Thanks, Chris. I think the next couple of slides just want to talk to you about the demand side of the domestic market here this from Chris. As you all know, the North American market remains one of the largest and most liquid markets for scrap globally. If you think about Canada right down to Mexico, the size of the scrap market is eclipsing 100 million and 105 million tons with a consumption of probably around 95 million tonnes so a very large market, very much stable industrial post-consumer scrap generation and the domestic and export channels that are supporting liquidity.

We've talked a lot in the last several halves about the EAF growth here in the U.S. probably about halfway through the journey in terms of the new capacity that's coming online. It's in excess of 20 million to 25 million tons now. There's more projects that are being discussed. All new capacity or brand-new technology coming online in an already dominating EAF market scenario. All driven really whether you sit on the left or the right side of politics by the tariffs that were put in place, really, 3 administrations ago, and just accumulating now on the latest double down in tariffs.

The U.S. trade measures continue to limit imported supply. You can see that on the right-hand side. The second tranche of 25% that's coming online, making the tariff on steel imports 50% plus potentially CVDs and antidumping duties as well. You can see that decline in imports being picked up by the domestic shipment increases as well.

So there's regular demand growth and then they're picking up the supply that's not coming in as further opportunity to expand their utilization and obviously, the shipments. In the bottom right-hand corner, just a couple of key takeaways on this. We haven't had a wonderful manufacturing environment.

In fact, you could probably have said it's a manufacturing recession for a little while. Industrial production is starting to pick up. There is a new investment. Our consumerism in this country really drives GDP growth at 2/3 percentage of GDP growth. But you can kind of see some of the big ticket items we're expecting and the market is expecting to continue to start to inch up now that with automobile purchases and so on.

So expecting continued growth, continued demand for the new capacity coming online. On the nonferrous side, just equally as excited. This time now, if you go back about 7 or 8 years, we seem to fill in any voids of your traditional nonresidential or residential construction. 7, 8 years ago was fulfillment centers and Amazon centers that were being topped up everywhere.

That turned to renewable energy and electric vehicle manufacturing facilities. And then now what the mantra is, is these data centers that are popping up all along the East Coast in D.C. now in the state that you're in today in Texas, rapid expansion of hyperscale these data centers require not only the steel cladding and the infrastructure, several American football fields long or high but the extensive amount of copper, aluminum and wire that's required and the draw to the power grids.

The top right-hand corner, you can see the expectation by Bloomberg is that there'll be a growth of over 65 gigawatts implemented to just keep up with the data center draw. And somebody a lot smarter than I am is tried to calculate what that might mean for demand for copper and aluminum in the bottom right hand corner, adding about 732,000 tons of aluminum demand and over 750,000 tonnes of copper demand just in this space outside of any other nonresidential demand drop.

I'm going to give it over to Ryan here really quickly to just talk about our operational ability to perform.

Good morning. Ryan Smith, Chief Operating Officer for NAM. We've talked frequently this morning about the NAM's broad footprint in dense scrap generating areas and our relationship with supplier base in mills, both foreign and domestic. Operations goal in that is to safely maximize through discipline and analytics, those advantages. Some primary examples of us doing that are through targeted CapEx into our logistics platform in rail, large fleets and transloading capabilities to have the capability to access these markets, both foreign and domestic as determined. Also, our KPI, which set our utilization.

We've talked about that frequently to maximize the value chain of on process scrap highlighted in the chart to the right. You'll see a small dip that was a well-documented severe weather case that affected collection. Outside of that, the number is trending and continue to trend.

The most important factor that I would say is the U.S. point where we have the team, we have the discipline where we and the assets to scale the capacity to support even higher volumes to gain even more value-add and unprocessed material. On the nonferrous side, we are equally positioned to capture the high value through the nonferrous value chain.

Our NEMT and [ alumsource ] areas are making mill-grade products and shipping direct. They've also given us insight and further access into the domestic market. and shown what we could do from an end-to-end capacity operating perspective to maximize margin.

That could be through granulation or that could be through ratio aluminum, but it has allowed us to maximize. Now we also talked about [indiscernible] utilization on the last slide with that and the room to grow comes our need to operate inside the FSR sphere. So to maximize our metal recovery plants at all of our 15 shredder locations. Through analytics and discipline yet again. We are looking to have KPIs and targeted CapEx to get higher volumes, higher returns through those processes.

Okay. I was hoping this would be a little bit of a prelude to your visit, but you're all welcome to come back. And perhaps in the next year, we'll have renovated our new home.

You've seen this before, but the purchase price at $66.5 million, we think a reasonable EBITDA multiple accretive acquisition you'd see there, adding to an already performing region, adding another $25 million and getting this region a 20% return on invested capital, adding 350,000 tonnes, consolidating the market to some extent, and then with a third party, very cost-efficient operation.

You can see here robust infrastructure in the picture to the right. We have an 18-year service agreement with 2 optional 5 years. So plenty of time to continue to grow in this marketplace. As Stephen alluded, we have a lot of land here. We had plans to develop a property on Mayo Shell Road. As we called it internally, this is sort of our no regrets strategy here where we don't have to put the money into the infrastructure. We have the infrastructure at our hands and it allows us to monetize some valuable land.

Just to describe what you're seeing in the picture in front of you, the vessel with the cranes. That's no restriction from a beam perspective dock. We can load Supramax vessels there on a scheduled basis. The slip to the left side, the upper left-hand side, that's our dedicated space. for handysize vessels of 30,000 ton vessels and/or barge docks.

So we're currently and we are planning to show you today, we are loading domestic barges in that location as well. We have 2 main parts of the yard where you can see right in front the piles of scrap. That's where we would stage the material for loading into barges or cargo, bulk cargo and or barge. And then just behind that is a processing area where we will be processing mostly cut scrap.

On the very left-hand side, just important to know we have an unsecured area. So inside of that space is regulated and controlled by customs and really the Coast Guard. So it's called the secure area. So it's very much regular. We also have an area where we can dump and receive scrap from smaller-sized dealers a little bit easier, as Chris said, kind of wrapping it up then, just looking at the NAM platform for growth.

Proud of the results that we've accomplished. We're not done yet, as Chris said. So looking at growing through network expansion, we've called it from a greenfield point of view or small peddler bolt-on acquisitions, our road map.

Really looking at it regionally, where are we missing material from a catchment point of view where there are logistics opportunities, ferrous and nonferrous to be better and improve from a customer service and also from a capital deployed point of view, what else can we do to drive value through the -- through our investments.

And then there'll be just like TCT, opportunities where the stars and the moon and the plants all aligned, and there's 2 willing parties that see value in a transaction. We're open-minded to those, and we're looking at those opportunities very, very targeted in our search and those discussions that we're having.

Continue with our operational optimization and that coordination with commercial, what we can buy, what we can process, what we can get to market in a timely way from an operational cash flow and a cash conversion cycle point of view. The recovery improvements, critically important. How do we manufacture and recycle societies, products that they have no use for and also look after the recycling needs of the industrial area as well.

And then the commercial side, as Chris has alluded to, direct marketing to the most profitable homes. We're fascinated with not shutting the door on any customers, but we need to get the best price. We need to get the best net revenue price for all of our products. And then obviously, keeping focus on that spread and that margin adjusting our buy prices accordingly. And with that, I will open it up for questions.

Rob or Chris, can you talk a little bit about how you come to your buy price, like maybe the regions that you look at when you're thinking about by price, how sophisticated the person selling you actually is and how they change where they go based on the price?

Sure. Yes. It's the interesting part of this North American market lead is we're self hedged. So the market adjust on a monthly basis, calendar basis. So Chris and his team, and I'll let him jump in with probably more detail than I can give you. We'll negotiate what the mills are willing to pay for scrap on that monthly basis. And like any other business, we have hearing on how we buy scrap.

It's usually -- it's a bit of a reverse commodity. In terms of more volume commands a higher price on the buy side. But we tier that down right to the lowest common denominator across the scale with a retail peer -- anything you want to add to that, Chris?

Sure. I mean -- Yes. The only thing I'll add is it's a regional strategy, as Rob said, in whether you in Chicago, whether you on the East Coast, where you're in the west, there's different competitive pressures in those rigs. We do have competitors that we're dealing with on a day-to-day basis. We're making as many decisions to buy scrap is oftentimes we're making to not buy the scrap. .

If it doesn't make sense from a margin perspective, which you've seen through Rob's presentation on, we're walking away from scrap in some instances, prepare scrap mainly that doesn't make sense. So from a strategic perspective, we're looking at our competitive nature in each region and we're seeing what our sales prices are. And we're being extremely disciplined on making sure we're making the margins that we land to make in each of those regions.

Okay. And then yes, so it seems that I should be thinking about the buy prices ultimately, you look at what you can sell the product for and then you use that to set your buy prices at the way to think about it rather than the regional competitive structure and things like that as to what you should be buying scrap out and then sending it around your network.

Yes. It largely depends on the sale price setting our buy price. Suffice it to say the buy price is a critically important part of profitability in the scrap industry. Our differentiation, we've talked a lot about logistics and whatnot, your capability to get to these markets is critically important as well.

So saving a dollar there, saving. I don't want to minimize the sale price, but the pipe prices is counterbalancing as well with that equation.

And sorry, just going on from that, how sophisticated do you think the person selling to you, like for the bulk of your volumes, how sophisticated are they? Like how much are they paying attention to the price you're getting them the shopping around with other offers?

It depends Lee. I think the -- the -- if we go to an industrial account like a Ford or GM, they're very sophisticated. They're buying new steel, so they're very in tune with the goings on in the marketplace. Nonferrous dealers and processors are very sophisticated and in tuned but right down to somebody that cleans out their garage and not sure what they have in their trucks. So the range and diversity of our supply base is tremendous.

And then just a final one. The middle in base impact on Turkey. Like have you -- can you give us an idea of what you would be exporting now versus domestic? Because if you look at kind of the media reports, it would seem that Turkey is back buying and paying again for U.S. scrap. So just how that's changed for you would be interesting to know.

Got it. We have not stopped shipping to Turkey. Turkey is one destination. It's an important destination as a large importer of scrap metal. Our shift has been predominantly to ship Turkey cut grade packages now. They're not able to pay the premium price for shredded predominantly as a producer versus competing with a flat-rolled producer here in the United States as being able to fetch a lot larger selling price.

That said, Chris has done a tremendous job diversifying our sales base domestically. Our global trade fairs under Michael Gaylord has done a tremendous job also diversifying our sales base. internationally as well. So Turkey is a very important client to us, but we ship to all over the Mediterranean all over Europe and South America and obviously, South and Southeast Asia.

I think, Stephen, when you started off, you said the NAM piece was largely done on the operational front. And yet, I guess part of what came through, Rob, from your presentation. Was this still seems like a decent pathway of operational improvements within them. So do you want to maybe just unpack a little bit of that? And do you think how far along that journey, we think we are?

Yes. The bones in the structure at North America Metals is very solid, very stable at this point. I think the part that we're alluding to is not -- we're giving you a granular number, but it's 15 theaters operating at 70%, not all are equal. There's still some learnings within the organization that we can transfer. The metal and waste side of it is, as you can see with the pure demand for aluminum and copper is a very motivating factor for us.

We're paying to get rid of that failure for us to capture that metal and that's a revenue stream that we generate from a cost problem today. So those are the sorts of things that we're going to work on organically. Ryan sure with his team has capital investments that he wants to make us better or more cost-effective as well.

So nothing tremendously different than what we've been doing, but just continuing on the improvement side. Thank you.

Lee, 1 thing I'd add to that before we move on to SA Recycling is for the last -- your question a question around we've met this operating challenge and now where do we go forward. For the last 2 to 3 years, we've had a program a term called the Must Win Battles, which would really around a transformation and turnaround.

And for them, it will simplify SIMs by right [ SelfSmart ] and operate best. And we've had a huge focus on that. I guess what I'm trying to say is I believe we've -- as Rob described it, the bones, the scout and the structures they're now delivering that. And I guess internally, I'm introducing a new concept, which is about leaving base camp.

And that's kind of the imager around that as we've done the work, I think, to get ourselves to base camp. We've got ourselves fit the metaphor will fall up over eventually. And it's now about leaving base camp. It's about earning the right to grow the NAM business with sensible, disciplined capital investment.

And I think TCT is a good example of that. So yes. That's the way I kind of differentiate between where we've got over the last 2 or 3 years and where we need to go to now. So we will move on to say recycling. So is a recycling, I'm just going to do a very brief introduction before Tyler and Mark take over.

SA Recycling has been, frankly, a fabulous investment for SMS and for SIM shareholders. We have a really strong relationship with them and we work incredibly well together, and it is a very complementary portfolio. Here's I think the way to simply really think about the portfolio and the way we think about it, if you draw a line across the middle of the U.S., broadly speaking, there's always out light of it across the middle of the U.S.

We operate north of that particularly on the East Coast and through into Chicago and in Northern California. And is the recycling, broadly speaking, operates south of that, all the way from Southern California right across the bottom of the states and up into to the Southeastern states.

So our portfolio is incredibly complementary. The detail within the portfolio is quite different, though, and we'll talk about that over the next period as tighter in March take us through. But you can see, we've laid out our various operations. And I guess the one that stands out the most is that SA Recycling has significantly more shooters to us, and that provides them some advantages.

But a very, very complementary portfolio. And as shareholders, I believe that's the way you should think about it. We have a portfolio of assets. You're 100% invested in NAM and you're 50% invested in SA recycling. We look at, I guess, a quick summary of those differences. And I'll throw out a couple of points. In Main North America NAM, we operate very large-scale shooters in highly populated areas. We've got them in Chicago and in Jersey, San Francisco.

We've got incisively highly populated areas and very deep and not so much very competitive market from a dealer perspective. In addition, we advise our exclusive Ferrous broker, and we are the nonferrous agent. If I look to SA Recycling, you say recycling, and I used the word dense and Sims and I shouldn't, because SA Recycling has a month much denser network of Strides and a very, very good position of feeder networks feeding into those rates.

For those of you we went to [indiscernible] last year, in fact, Guaneri even takes it 1 step further. When takes nonferrous duty nonferrous from some other mother treaters in the SA Recycling we [indiscernible] processes at be in addition to its own treated. So it's a very very hub and spoke, and they've been incredibly successful at that. But what does this allow us to do when we combine it.

We certainly capture value right across the distinct U.S. structures and various other points have listed there. The 1 I really want to highlight though, which I think going forward is going to be a real feature in Ferrous in particular, is around the -- the way we're positioned to benefit from all the that's growing in the U.S. over there, what's grown in the last couple of years and certainly what's coming through to 2030.

We are well positioned between the 2 entities around all of those or virtually all of those EAFs in a position to really become strategic suppliers and capture that value in the chain from that expansion. I think that's enough talking from me on SA Recycling. I'm going to hand over to Tyler, first of all, to give us a really good run to around the way he thinks about SA Recycling.

All right. Good morning. Thank you, Stephen, and thank you for having me. My name is Tyler Adams. I'm the Chief Operating Officer at SA Recycling. You make sure I understand heart this. All right.

So as many of you know, SA Recycling is a joint venture with Sims, predominantly operating in the Southern United States. Approximately 4,000 employees across our portfolio, operating in 15 states, approximately 150 locations, 22 shredders, 9 copper granulating machines, again, across the United States.

I want to start first, obviously, on the safety side, and this is going to point a little bit back to what Rob was alluding to when they had a blip in their safety is that -- when you experience excessive growth, oftentimes, it's difficult to implement your safety programs, our safety culture. So you can see on the blue line here on the left side, that is the growth trajectory of the number of locations.

We're currently operating at over about 10 million man hours per year. That's adding anywhere from 1 million to 2 million man hours per year. So as our workforce has grown and our portfolio has grown it's been a little bit more challenging to institute that safety culture rapidly. So that's a huge focus of ours.

You can see on the black line, as that slowly trends up, it's really. Those new facilities really contributing a little bit more to the recordable rates. But really, our legacy business, which is an important point, the more mature our operations are and the longer that our employees are part of our safety program and culture, we're really seeing phenomenal safety results throughout, again, our more mature portfolio.

Rob spent a lot of time talking about the U.S. market drivers. So I won't spend too much time on it. But certainly, we're seeing robust dynamics in the U.S. domestic market, everything from copper consumption, aluminum consumption, steel demand, et cetera, very strong dynamics going on in the U.S. domestic market.

Again, multiple administrations now have been supportive of whether it's the 232 tariffs and really creating an environment in the U.S. domestic market that we've been really well positioned to capitalize on. So that's contributed significantly to our performance over the past several years.

And we expect that trend to continue. As Steve alluded to, EAF capacity his slide, we see almost 6 million tons of EAF capacity coming online in the next several years. And I'll get into a slide on really our overlay with much of the EAF consumption. But Again, our portfolio and our growth strategy largely has been centered around developing a platform that can really feed into the U.S. domestic market, both logistically and from a supply perspective.

Want to talk a little bit about just our network, and you can see here, again, Stephen mentioned a little bit about our density. And when I look at our operations, you'll really see -- we have basically 15 operating entities. They're not perfectly aligned with what these circles represent. The circles are really more of our hub-and-spoke type methodology.

The light blue circles being really our feeder yard networks that are sourcing and collecting scrap, really at the base foundation of the supply chain, which is from a lot of small customers. And this whole network strategy allows us to source hopefully, the cheap units possible within the marketplace.

So while we maintain processing capacity at virtually all of these facilities, it's really centered around feeding into our shredders, speeding into our aluminum hub yards and really capitalizing on sourcing, again, the cheapest scrap as possible to maintain the highest margins across the platform.

I'd like to look at all of our 15 operating entities almost as individual entrepreneurial type entities in the sense that they're really fighting and establishing and this goes back to Lee's question on really setting pricing, but it's really a base level decision-making process where they can establish their buy prices and maintain their margins independently.

So really highly effective and again, maintaining the margins and reducing our by price. Similarly, the unprocessed volume that we're able to procure across this platform again because of our peer yards and the facilities that are sourcing that material, again, has allowed us to really maintain a very stable trading margin.

And so also going back to the hub-and-spoke methodology. So you have the hubs and spokes and we really have a much larger hub network. And if I can go back to our network here, again, you guys went to [indiscernible]. We can send in and process all of our ASR from these remote shredders and it allows us to capitalize on the investment.

The investment in our nonferrous recovery technologies are obviously very large. So for example, in Phoenix, Arizona, we also ship and send our other shredder aggregate all the way into Phoenix. We use our logistics network to capitalize and increase our recoveries and really get the last bit of metal yield out of that SR.

So from a geographical standpoint, here's a map of the EAF footprint across the United States overlaid with our facilities. And optionality has been brought up a lot today. And when I look at optionality across SA Recycling's portfolio, we have bulk loading access on the West Coast, we have both loading access on the East Coast.

And we also have both living access in the Gulf. So from a bulk perspective, we have plenty of access to Gulf markets. But when we look at the domestic demand, we're seeing, again, significant demand in EAFs. And from both sides of the country, we can access that domestic market very easily.

We've been increasing our railcar capacity, our railcar fleet is now pushing close to 1,000 railcars. Internally and privately owned railcars. And that allows us now to shift what was historically an export-oriented business, for example, out of Los Angeles where we traditionally were loading we were from 2 to 3 bulk cargoes per month.

We're now down to about one bull cargo a month, right? Most of that volume is now accessible to the domestic market. And we're feeding those tons all the way back east really. So we're going all the way into the Mississippi River from the West Coast. And so the footprint really allows us to shift and shuffle our tons in our volume.

So our commercial strategy has been one that now allows us to really flip and shift tons based on what mill outages we're seeing across the country and really where the demand shifts are happening. Oftentimes, the Southeast market could be very strong or subsequently, we may see strength in, for example, the Midwest market.

And so this picture really allows us to kind of shuffle that our supply to really capitalize on changes in domestic market on a monthly basis. Again, you can see the breakdown just between our domestic volume in the first half, probably the highest percentage of domestic sales volume that we've seen in -- certainly in recent years.

Talk a little bit about logistics. But again, you can see the rail map here on the left-hand side as well as the river system on the right-hand side. Obviously, I mentioned the bulk loading capacity. We're a very large container shipper. We can ship containers export, obviously, across the country.

But more importantly, we have access to rail surf facilities on the NS, the CSX, the UP and the BNSF. And that, again, really gives us the power and the flexibility to shift our volume to whatever region is where we can maximize our sales price on an FOB basis.

We have barge loading capacity in along this river system, so we can strike the Mississippi River from either the Midwest from the Gulf. We're increasing our barge capacity, hopefully in Miami. Again, that will allow us to funnel scrap even from South Florida all the way up into the river system or in the Atlantic.

From a consolidation perspective, strategically, we've been heavily investing and expanding again into this optionality, whether it's acquisitions for bulk capacity in the Southeast or expanding our nonferrous processing capacity, we've invested tremendously on bolting on to this regional framework that we have that really allows us to take much more of a sourcing and own -- captively own much of our feedstock across the portfolio.

So that's been a key strategy of ours over the last decade. And so or hubs has been strengthening over the course of the past several years. And much of that is still coming to fruition, I will say. Oftentimes, we're buying undercapitalized assets -- they're strategic in the sense that their operations that have been in existence for a long time, but they do require capital investments and they require, to some extent, a maturation period before we really see than reaching the point of an ROI where maybe our more mature assets are able to achieve.

So we're seeing significant growth in that area. And I think we have a long runway in terms of opportunities to continue to grow and really expand into the networks that we've created. So if you rewind maybe -- well, really it's about 11 years ago, you wouldn't have seen an operation that SA Recycling operated that would have been east of El Paso, Texas.

And today, when you look at our map, obviously, we're almost more concentrated in the East than we are in the West. And so the size and scope of our business in the East Coast has grown tremendously. And really, we have growth opportunities, almost in 360 degrees of many of our hub and networks throughout our Eastern portfolio.

Again, going on our -- much of our acquisition strategy. You can see we had roughly 52 yards added up until about 2020 and so we're seeing this accelerated growth cycle where we've been able to add 70-yard or 76 yards more or less in the last 5 years alone. So it's been accelerated growth, and we're really trying hard to build upon a platform that allows us to, again, exponentially grow and add into the portfolio that we've been able to establish over the last decade or so.

From a utilization perspective, we estimate our state utilization capacity somewhere to the tune of about 50%. And really, that basis on the idea that we have a lot of shutters, right at 22 shredders operating today. We have several idled shredders across the marketplace.

These are shredders that we've consolidated within a market that really don't make sense because the again, undercapitalized or they're not in a market where it makes sense to operate multiple shredders.

And so we have a tremendous amount of capacity that's available to -- the question is whether or not the supply is available. And so when we think about our utilization, it's really more about scrap availability and whether or not our charts can sustain at healthy margins and then take level to support running at a higher utilization rate.

We've seen instances that being said, where maybe a competing shredder goes down, and we'll see our volumes double overnight. And we have 0 issues handling literally double the volume within a 1-week period. So we believe we have a tremendous amount of capacity and much of our, again, strategically we're looking at trying to source and control that feedstock so that we can increase that utilization rate.

Outside of that, we certainly spending a tremendous amount of CapEx investment just on expanding the opportunities that are existing within the domestic market. So there's a lot of talk today and -- or in the market today about aluminum demand and copper demand.

Again, we've seen a lot of our investments going into high-grading aluminum and copper products, whether that's investing in our shopping lines or increasing our MRP or nonferrous to shred recovery technologies. So we've recently commissioned our lives line, for example, in [indiscernible] specifically targeting high-grading sorbent whether that's Vesper and Ginger and then further segregating Vesper into Shred-it 6x, 5x and 3x.

Similarly to [indiscernible] with our Herman operation being able to create and produce shred 3x and 5x to meet very specific aluminum demand. So much of our growth strategy is not only in expanding operations but improving the operational capacities that exist within our existing locations.

We talk a lot about hub and spoke from a ferrous and shredding capacity, but it's a much different picture when you look at the hub-and-spoke methodology for our nonferrous processing yards. So again, we have a much more complex hub-and-spoke methodology when you look at our nonferrous platform.

But we've seen tremendous growth in the nonferrous retail space. Our ability to procure and secure high-margin nonferrous items have really allowed us to increase our throughput and our capacity from a nonferrous perspective.

Margins have been very healthy on the nonferrous side. And we're seeing really companies with strong balance sheets and strong liquidity, really have been able to, I think, more capitalize on the working capital demands that exist in the non-fair space.

Obviously, copper trading at $6 requires a tremendous amount of more free cash flow than copper at $3. And so we've been able to really capitalize because of our balance sheet and our access to capital to widen and expand our availability to get to gather non-fresh commodities.

Already spoke to our M&A growth and the runway that we have. And so we still think that there's a tremendous amount of opportunities out there. We have a very robust acquisition pipeline. It's really coming down to identifying which ones we want to prioritize and how quickly we want to move.

And so there's a tremendous amount of opportunities and consolidation available out in the marketplace, which we will continue to pursue over the coming years. And on that note, I will hand it to Mark Sweetman and we'll try to leave plenty of questions for or time for questions.

Thanks, Tyler. Good morning, everyone. I just have a couple of slides for you here today. I think we covered a lot of say in back at the in September. So just really a little refresher on a couple of aspects. So SA's balance sheet, I have to say I feel really good about as balance sheet and where we're at.

We built up a $2 billion sort of assets over the last 18 years. What I really love about it is that when you think today with the gearing rates at 0.48 and SA's gearing has basically never exceeded 50% we have completed in excess of $1.5 billion worth of acquisitions since SA was formed. But maybe more importantly, from a gearing perspective is -- but the $1 billion worth of those acquisitions have happened in the last 6 years.

So we've closed on about 41 acquisitions over the last 6 years, where we had 31 in the first 12 years. So to be at that space with less than 50% gearing, I think, is pretty good. A couple of comments that I always feel are worth making about the balance sheet, especially talking to Australian investors, where you guys are used to using international gap.

I think one significant difference to U.S. GAAP is our balance sheet here. We're amortizing away all the goodwill. And so we have -- when you look at that $2 billion worth of an asset base, it's worth noting that all of the acquisitions, basically that we did through pretty much 2020 of the $190 million worth of goodwill or intangibles left on our balance sheet, only about, I think, $8 million. So that relates to acquisitions prior to 2020.

And those assets that existed at 2020, we're running an average of about $140 million worth of EBITDA on an annual basis, and there's just no intangible on the balance sheet associated with them. And then the other issue that -- and Sims, obviously, we're here in Houston have just liquidated some properties that have significant off-balance sheet value.

Well, Similarly, SA has a very large property portfolio. We own over 100 of the $147 million locations that we're running. And of course, a lot of that property is in places like California and Florida. And so as we stand today, I can very conservatively estimate that there's about $350 million worth of value in excess of the book value of our land.

And so then my view on the sustainability of this earnings growth. And in general, how do I feel about where SA is and our potential to keep this going. There's just -- there's a lot to be very positive about for SA. Tyler has talked about and we've talked to you about the defense regional networks that SA operates with.

So when you think about the fact that SA is running 22 fires shredders and 2 aluminum shredders across the country, we're handling. There's 3 or 4 of the major players in the U.S. handle approximately, let's say, 5 million tonnes. But SAs handling those tonnes with 22 shredders. And as we said, with the 50% utilization rate.

So it just -- we have this excess processing capacity. And so for us, adding additional acquisitions and bolt-on feeder yards, we already have the processing capacity so it gives us the ability to adding capacity, if you want, at a lower cost because the processing costs have been already has been spent and the processing capital is already there.

You look at SA's growth on the nonferrous side over the course of the last 15 years, our nonferrous business has grown at a much faster rate than ferrous business, and we're now one of the largest, if not the largest nonferrous player in the United States.

We're handling about 1.6 billion pounds of nonferrous a year. And a huge portion of that is obviously aluminum. And as Tyler mentioned, we've just installed some advanced processing capacity on the East Coast. For the aluminum side, there's a lot of engine around the potential for aluminum in the coming years, which the various speakers have discussed, and we're just really nicely positioned with a high volume of that product for further processing and our ability to earn incremental margins is something to be excited about.

We have -- as I did mention the utilization that we're really at 50%. And so there's great opportunity there. When you think about the fragmented market and our acquisitions were we are probably somewhere in the region of maybe about 8% of the business in the United States. So there's obviously a lot of runway there as they exist in states. And so with a lot of excess capacity.

So there's still just even domestically here in the U.S., there's still really tremendous runway and tremendous opportunity across the United States, even within our own just existing footprint to add bolt-on acquisitions. And a lot of the acquisitions that we've been doing in the last few years have been just all within the existing footprint, adding feeder yards.

And there's been commentary here this morning about the incremental ferrous capacity that's being added in the U.S. And so obviously, we're extremely well positioned there. So I feel certainly very positive about our potential. And maybe the last comment I'd make in terms of the sustainability of us would be -- if you looked at SA and say, 15 years ago, we were a West Coast export ferrous business. And really in the in that last 5 years is the diversity maybe is the most exciting part about SA is just the diversity of the platform that has been built in the last 15 years, where we were, in the past, if the export cars market on the West Coast have gone into toilets, we were in a lot of trouble.

And so today, as Tyler commented, we redirect that material and domestically, even off the West Coast. We're now, I think it's 55%, East Coast, 45% West Coast today. We have a huge diversity in our logistics platform. So if the export market is there, we have 3 docks. If the domestic market is there, we have a big rail and trucking network if the Mississippi River is frozen up, we can put the material in railcars.

There's a lot of diversity built into the business. And of course, the ferrous, nonferrous mix, where we would have been 90% ferrous 15 years ago or 16, 17 years ago. And today, we're almost 50-50 in revenue terms, actually, we're about 55% nonferrous, 45% ferrous. And so that's really it for me. I will turn it over to questions and answers hopefully.

For that Tyler, do you want to talk about the economics of high-grading non-ferrous. Can you give us an idea of what it costs you to upgrade the product and what you get from a sales pricing in response to that?

Sure. So when you think about high-grading nonferrous and really value-add items, it really comes down to which category we're talking about, right, whether that's on the nonferrous to thread side, which obviously is largely going to be mechanically sorted and separated.

You got high volume, high throughput, whether it's lip technology, x-ray technology, et cetera, in terms of taking a would otherwise be a mixed amalgamation, if you will, of nonferrous items and segregating out the copper, the stainless cast aluminum rod aluminum, et cetera.

So from a cost perspective on that side, we don't expect that it's really more than a couple of pennies, right? It certainly is a significant capital investment. But outside of that, the machines are largely mechanically separating those products with relatively minimal amounts of labor, right?

And so you're processing many tons per hour with really a marginal increase in your labor demand. Outside of that, when we look at our nonferrous retail side, and this is really where our retail and our [indiscernible] business, I think, adds a tremendous amount of value is that you're buying across the scales, again, a lot of, let's just call it, #2 copper, right? There's a lot of upgrades that those materials can be cleaned and segregated. You're pulling a lot of nonferrous items out of your in files.

And so by sourcing a lot of your material from the public, we're able to upgrade and hydrate so many of those nonferrous items. And that's a significant contributor to our overall margins. When you look at -- you're paying, say, $0.07 a pound for steel, and out of that, you're recovering, and we track a lot of metrics on really the upgrades from our 10,000 or steel piles. We'll put a lot of our yards against one another in the sense that, let's see, we can upgrade the most material, right?

And by tracking that metric, you're really adding some of your highest margin commodities throughout our platform are coming right out of our steel piles. But again, that's a much more expensive process because it's all manual, right? You're physically pulling and cutting electrical cords and pulling copper out of refrigerators, et cetera.

So I would argue that when you're looking at the cost from that perspective, you're more in 05, $0.06, $0.07 a pound, right? But your upside maybe $2, $4, right? So you have significantly more upside on that. It's a more labor-intensive process and it's going to be more expensive. But there's a lot of value to be added from the manual sortation of nonferrous items.

Excellent. And you have -- in terms of the you talked about the capital spend to do that? Like what's the freight capacity in that part of the network? I mean I take clearly some of it's manual labor, but the equipment that you've installed, is that similar utilization rates to the stated capacity that you have.

So I think in some of this technology, right, and there's been some disruptions in the alumina market, right? The fires that we've seen in Novelis, for example, have really put a lot of turbulence in the aluminum market, especially domestically. So we haven't necessarily seen the demand catch up to the products that we're capable of producing, right?

And so to some extent, I think some of this technology is a little bit ahead of the demand curve. And so Vesper, for example, as [indiscernible] now has coined it, they didn't even establish a name for that commodity up more than less than a year ago, right? It was at [indiscernible] 2025 where they even established what this commodity was going to be called. And so there's a lot of discussion around it. There's a lot of hype around it, but I don't know that the -- really, the aluminum consumption has caught up to the availability of this product in the marketplace.

So there's been several months where we've even taken the line down just for improvements because we haven't seen the demand there yet. So when I think about the utilization there, I think, long term, there's a lot of demand for those products. But we're not really seeing the utilization rate on that equipment yet even to what its current capacity is. But that's really by choice and because of the lack of demand and the premiums that are available for a vest for products or shredded 6x, for example. I think given our shredded aluminum business where we're targeting specific sheet products.

There's been months where we're intentionally reducing our intake and flows because there's just not a demand for the shredded 5x, right, at a price point at which it justifies really running at full capacity.

Okay. That makes sense. And then Rob and Stephen, this morning talked about the journey that they've been on with NAM and optimization. Like where do you see the opportunities in your business to try and push that by sell spread?

There's a maturity level that some of our operations required to get to, right? And so we still have a tremendous amount of investment capabilities in the existing platform, right? And whether that's adding sharing capacity for cut grades or adding bailing capacity for nonferrous items. So again, we're acquiring oftentimes distressed and other capitalized assets. And these aren't assets that we can just deploy an unlimited amount of capital in instantaneously, right?

We want to justify them, Rome wasn't built in a day, right? It requires kind of a maturation in the business. We need to grow the volumes enough to support the capital investment. And so we're seeing -- there's still a tremendous amount of opportunity for us to invest in our existing assets and our newly acquired assets to really expand the processing capacity.

But it's hard to do that until you can justify and prove out the volumes and the intake that you can establish within that business model. So we could probably go out and spend double our CapEx budget on improving our existing business, but we can't necessarily justify it yet.

So that's why I think we see a lot of the opportunity -- it's really more along the lines of can you grow out a network that can support and justify the CapEx investment within that business.

And then you talked in some of the slides just about the number of acquisitions that have been done over the last 5 years. Like what do you think is a sensible number that we should be thinking about the next 5 years?

There's a joke in our company that we've never seen a scrap yard we don't want to buy. And so it's I think that to the extent that the acquisitions that we continue to purchase and acquire can continue to be accretive to our bottom line, which we expect that they can.

And as long as we maintain discipline in our acquisition strategy, and we continue to drive and add EBITDA, I would expect that we're going to see a continued growth trajectory. And I really don't even necessarily see it as linear in the sense that the more acquisitions that you can establish the stronger moat, if you will, that you can build around your platform, then the more exponential you can get from really from a growth trajectory, right?

And so we're very aggressive when it comes to that. Really, my father and my brother, Calvin and I really are negotiating all of these deals really simultaneously. And it almost becomes a challenge as to who can pitch the better deal, right? And then we can go out and really justify which acquisition we want to prioritize over the other one.

I think I'd also comment to that one. I didn't mention it in terms of the balance sheet and the other side of the balance sheet. So we're actually in the process of refinancing our credit facilities at the moment, and that is an update from September.

So we previously had a property revolver and then like a working capital revolver, we're bringing both of those together and hopefully closing maybe towards the end of this week by March 31 and we'll be closing on a $1.25 billion credit facility that will be made up of an $850 million revolver and a $400 million term loan.

And so that facility will add an additional $200 million worth of capacity. And I think it's probably fair to assume that if we've processed $1 billion worth of -- I'm talking more like the enterprise value of it. But let's say, $1 billion worth of acquisitions in the last 6 years that I would expect the pace to be continued at something similar. So somewhere in that region of 100 somewhere between $100 million, $150 million worth of acquisitions.

Annually would seem likely based on our past number of years. Just -- sorry, just one other thing I'll add is that we did also liquidate several facilities, especially up in the Ohio and Pennsylvania area. And really, that was an effort to really reposition ourselves in what we would consider our more core strategic markets. So we sold a shredder to Tenaris, we sold a shredder in Columbus. We sold in multiple transactions we've liquidated and to kind of recapture some of that capital so that we could redeploy it elsewhere.

So we're really trying to, again, maintain some type of structure and diligence around really sticking with our core market areas where we see the most growth opportunities.

And then on the property side, like you've clearly built a pretty enviable property position. How would you think about surplus property, if any, in that network?

Yes. We're pretty aggressive about liquidating excess properties. There's really very little excess. There are a couple of small facilities, but there's nothing of significance unutilized within the portfolio at the moment.

I would say it's relatively insignificant at this point in terms of underutilized properties. We liquidated the [ Mansell ] property, for example, as part of our Cleveland Cliffs acquisition of FPT South Florida, right?

So we're trying to use some of our excess property as leverage in some of these transactions, which we were successful in doing. But for the most part, we really don't have a bunch of excess.

My question is on the pricing of copper and Ali. So when trading between COMEX and LME, how do you approach pricing division across the 2 markets since both the indexes in the exchange can move very differently. So what tools do you use to protect margins and the spread that is attractive on state.

So obviously, the past 18 months, let's say, there's been incredible volatility in arbitrage between the 2. To be honest, there's a lot of months where you really just need to get in the back seat and pause, right? You hit the brakes and really try to understand what's going on. Most of -- and much of our copper is priced generally on [ Comex, ] especially domestically.

And during much of that volatility, we saw a lot of people that no longer wanted to price of [ COMAX, ] right? And so they're shifting their contracts from Comax to LME based. And so you need to manage the spreads, right? The spreads will fade out tremendously. And again, that could change in a moment's notice.

And so oftentimes, when we experienced that extreme volatility, we're really just pausing, right? And we're giving immediate direction to everybody. Look, we're pricing off of the most conservative scenario because we don't want to be in an over exposed position where we're because the markets are moving so fast, right? And many of our customers are very savvy, right?

And they're sitting on several loads of copper and they realize that all of a sudden, they can't position themselves, right? And so whoever is slowest to understand those market dynamics could get stuck with 5 loads of copper that all of a sudden, what you thought you were selling at $0.25 spreads is now $0.75, right?

And so really, our strategy is always over communicate what's going on in the market and always use the most conservative scenario when it comes to the current market dynamics. So we do have long-term position. So we lock in many of those spreads. Except we conserve those spreads for, what I'll call, like naturally natural inbound material.

So we know that we're buying x number of loads per day, and we know that we have a position on those. But I want to wait those positions on getting 1 or 2 whole loads from 1 specific customer. So we really go and take the most conservative approach to those dynamics.

Thank you very much, Tyler, and Mark. Great presentation. Just some concluding remarks from me. The first one is that the Q's gone to 4 Houston so though we will be looking forward to that [indiscernible] So secondly, my second comment is when I sit back and listen to the presentation, the way I think our shareholders should be thinking of you should be thinking of your investment in North America.

As I said, it's very much as a portfolio. The combination of Sims and SA Recycling the way we work together really does deliver rely strong position right across the United States, which is I just think, fantastic. So I can say, internally, we don't really think of it very much as -- we don't think of it as NAM versus SA recycling.

We think of it a portfolio and how do we think we can benefit across that whole portfolio. So I'd like to leave you with that thought. Thank you for the Q&A that was fantastic. Look, with a little bit of luck and fear in we will see each other again on the video tomorrow in Nashville, Plan B would be we'll maybe have to do it by split video conference across Nashville and Houston, but let's see how we go.

We're going to all head to the airport now. Thanks very much.

Thank you for standing by, and welcome to the Sims Limited HY '26 Results Call. [Operator Instructions] Today's presentation has been lodged with the ASX, along with the results release. It may contain forward-looking statements, including statements about financial conditions, results of operations, earnings outlook and prospects for Sims Limited. These forward-looking statements are subject to assumptions and uncertainties. Actual results may differ materially from those experienced or implied by these forward-looking statements. Those risk factors can also be found on the company's website, www.simsltd.com. As a reminder, Sims Limited is domiciled in Australia and all references to currency are in Australian dollars, unless otherwise noted. I would now like to hand the call over to Stephen Mikkelsen, Group CEO and Managing Director of Sims Limited. Please go ahead.

Thank you, and good morning from Sydney. Today, we are here to resume our half year results for HY '26. Presenting with me today is Warrick Ranson, our CFO. We are fortunate today to have all of our business unit leads here with me in Sydney. So we have John Glyde, our ANZ Managing Director; Rob Thompson, our President of North America Metals; and Ingrid Sinclair, our President for SLS. The presentation has been launched with the ASX, along with the results released. First up, I will provide an overview of the results and strategy, Warwick will then take us through the financial results. At the end, I will return to talk about the outlook, after which we will have Q&A.

I will turn straight to Slide 5, which looks at our strategy and strategic priorities. By now, the left-hand part of this slide should look familiar as it has guided us for the last few years. I'm going to focus on some of our recent key strategic achievements. From a customer and supplier perspective, we have made great strides in increasing our unprocessed intake, particularly in NAM, and this is definitely driving increased margin when we process it into higher-value material. We have signed a couple of significant key supply agreements in ANZ with New Zealand Steel and Alter, and SLS is expanding into Ireland. Looking at operational efficiency. NAM has really improved its logistics infrastructure, particularly the ability to deliver domestically through rail, and this has allowed us to take advantage of the domestic shred premium.

Work on Pinkeba continues at pace, including a fines plant and rail infrastructure works at Otahuhu will allow us to effectively service the Glenbrook EAF. From an innovation agile perspective, we are transitioning to an outsourced global shared services model, which will improve our service offering, lower costs and improve our ability to integrate new operations as we grow. We've just about completed relocating the SLS senior management team to Irvine and California and are already seeing the benefits around innovative thinking and ideas from the increased collaboration. We've also added a new position to the senior team with a Chief Digital Officer. Given the strategic importance of deeper integration with hyperscalers, we've appointed a dedicated role to drive closer alignment with their operational workflows. The first 3 bullet points under invest responsibly are linked.

Warrick and I will talk more about Tri-Coastal, the Houston land base and the property strategy lead role in the coming slides. It is also worth noting that we have extended our debt facilities by 12 months as we position our balance sheet for further growth. Moving on to Slide 6. Firstly, safety on the left-hand side. total recordable injury frequency rate for the first half has been maintained at best-in-class historical lows. And just as importantly, we are tracking well on our lead indicators. As a management team, we all continue to focus on making sure our employees can go home each day just as they came to work. On the right-hand side, you can see that we are progressing nicely across governance, systems strategy and risk assessment in support of our climate commitments, including the integration of climate data into financial and operational systems to enhance transparency and decision-making.

Moving on to Slide 7, and I'm conscious that Warwick is going to take us through the financial results in some detail. So I'm only going to highlight a few points from the consolidated result. Metal sales revenue was flat despite sales volumes being down 2%. This is all about the price and contribution of non-ferrous, whether it be copper, aluminum or solver. The market is very strong revenue is up nearly 70% and repurposed units are up close to 18%. SLS has had an incredibly strong first half driven by the demand for DDR4 memory and we will talk about this in subsequent slides. A more subtle point to highlight is the flat metal trading margin percentage despite the significantly higher revenue from non-virus which has a high absolute margin, but lower margin percentage. This means that we have grown our ferrous trading margin percentage through disciplined buying of non-dealer material. I'm very happy with our cost control.

And it is also pleasing to see the growth in return on invested capital. Returns have improved materially over the last 2 years, and we remain focused on closing the gap to our cost of capital. Slide 8 separates the main performance highlights between metal and SLS. The only additional points I would comment on here is the 3.5 percentage point increase in unprocessed scrap in metal, driving higher site capacity utilization and metal and the 7.7 percentage point increase in EBIT margin for SLS. Slides 9 and 10 look at the factors influencing our metal businesses. Let's look at Slide 9. The top 2 slides actually show how tariffs are providing protection for NAM and SAR in North America. You can see on the top left-hand side, the falloff in U.S. construction activity over the last year or so. All things being equal, this would have resulted in quite a depressed steel market in the U.S.

But look at the right-hand top slide, and you can see the falloff in steel imports commencing with the introduction of Section 232 in 2018 and then continuing with the tariffs. U.S. steel manufacturers have benefited more from the fall in U.S. imports than they have suffered from falling construction spend. What these charts indicate for the scrap market is that domestic pricing has been supported by strong demand although softer construction activity continues to constrain intake volumes. The bottom chart explain ANZ's dilemma and depressed ferrous results. Quite simply, global fierce scrap prices have fallen as Chinese exports have risen. Slide 10 shows why non-ferrous is in many ways the hero of the metal results, and it is quite simple. The chart shows the price in Australian dollars that Sims actually realized for its sales of ferrous and nonferrous products.

Ferrous has fallen from a bit under $570 to around $545 Non-ferrous combined has risen from around $4,100 to nearly $5,000 on a blended basis. Focusing on NAM on Slide 11. These 4 charts capture the progress we have made at NAM and explain not only the turnaround of FY '25, but now the continued improvement in HY '26. Firstly, the top left chart shows the benefit of focusing on profitable tons. We have grown trading margin percentage by 5 percentage points over the last 2 years. This has been achieved by focusing on, amongst other things, unprocessed ferrous, which has increased by 12 percentage points over the same period, and this has increased site utilization by the same amount. Those site tonnes are producing more zorba, which like all nonferrous products, has risen nicely in price.

Finally, you can see that we are exporting lease as we have grown our domestic channels to market. This is particularly so for Shred where domestic premiums to export have been growing and currently sit at $50 per tonne. As a point of interest, we sold around 85% of our street domestically from the East Coast. This would have been around 10% just a few years ago. It is important to note we still maintain our export optionality if market dynamics change in the future. Slide 12 summarizes the Tri-Coastal acquisition we announced last week. As I said at the time of the announcement, -- over the last couple of years, we had materially turned the Houston business around, but we needed access to better options, both domestically and internationally to really drive performance. We had a suitable piece of land to achieve this at, but the capital cost to upgrade the port at Mayo Shell and the size of our existing ferrous business did not justify the CapEx.

PCT gives us for deepwater access and therefore, optionality, but it also materially increases our presence in the market in excess of another 350,000 tonnes significantly reduces our operating costs through the infrastructure service agreement contract, and it frees up the sale of all our land in Houston. We estimate in excess of us $100 million, including. From a numbers perspective, we have paid a bit less than 4x EBITDA post synergies. The combined businesses and by that, I mean, our existing ferrous and nonferrous operations plus the acquisition, are expected to have an annual EBITDA of USD 25 million and a return on invested capital of over 20%.

Turning to Slide 13, is recycling. As the chart shows, stay recycling has done a great job in ensuring resilience and its trading margin percentage. They have been pretty consistent at around 30% for the last 5 or 6 years. In the last 2 years, this has been achieved by increased revenue from non-ferrous, including zorba, and this has combated the more depressed ferrous market. say recycling has strategically developed a really strong hub and spoke model in regional markets. It now has a very consistent source of unprocessed material being feed from around 150 feed yards into its 24 shredders. This means more order from shredding and more opportunity to attract retail nonferrous from piles. I expand on this theme a little more on Slide 14.

Firstly, you will note the deliberate acceleration of the hub and spoke model. Since 2021, SA Recycling has acquired 76 yards compared with 52 for the 10 years proceeding 2021. And you can see from the map that it is still a highly fragmented market, so there remains considerable further opportunities, and there is significant headroom in its existing sites. Its strong cash flow and balance sheet strength support the growth. SA Recycling has developed a real expertise in integrating these small bolt-on acquisitions in implementing its operational and commercial practices. What all this means is that the business is underpinned by strong unprocessed inflows and strong nonferrous markets. This provides a very solid earnings base in the current market conditions. And when the first market cycle turns, if the recycling is very nicely positioned to capture the upside.

Moving to Slide 15. There is no doubt that ANZ continues to operate in a subdued global ferrous environment, and it does not have the prediction of the tariffs that NAM and SA recycling enjoy in the U.S. It does have a very strong non-ferrous business. a good hub and spoke network and good domestic access for sales. In many ways, it is a business that is structured very similarly to SA Recycling. It is worth noting that the non-First contribution is even more important to ANZ as the fierce market conditions are considerably worse than North America. However, it will also benefit from an upturn in the ferrous market. With over the next couple of years, this is largely dependent on a meaningful reduction in Chinese exports of steel, which seems unlikely. Beyond 2 years, however, the structure of the ANZ market is likely to change as domestic EAFs come online and this is the focus of Slide 16.

The chart shows that currently about 50% of the scrap generated in Australia is exported. However, by 2027, maybe 2028, this could reduce to under 20% as a result of increased EAF demand and additional charging of scrap and blast furnaces. This local demand is likely to support prices and potentially delink Australia and New Zealand from the full impact of Chinese exports. In our view, our Pinkenba side in Queensland will play the major logistics role in facilitating scrap finding its way to the right location at the most efficient price. This could well include importing scrap from our facilities on the West Coast of the U.S.A. No other participant in Australia or New Zealand has the capability to manage scrap flow between all states New Zealand and the West Coast of the U.S.A.

I now want to turn to SLS on Slide 17. The chart on the right tells the headline story of the dramatic rise in DDR4 chip prices. But what has driven this? There are 4 interrelated points I want to make. One, we still need DDR4 chips as they are the workhorse of many of our devices and the Internet of Things. Two, Manufacturers are switching to making DDR5s with the demand from hyperscalers building AI data centers is almost insatiable. Three, this has created a structural supply-demand imbalance for DDR4. High-quality repurposed DDR4 are a practical solution, but they are also limited. Fourth, a number of suppliers and market commentators are saying that the imbalance is likely to persist beyond 2027. I want to provide an update on our east expansion into Ireland, and this is on Slide 18.

Firstly, the expansion is well underway, and we expect we will open the 120,000 square foot facility in early April. There will be some ramp-up in other costs, so I expect meaningful contribution to EBIT will not happen until sometime in June, maybe July. As the analysis shows, Ireland is an ideal place for expanding our data center infrastructure services. It is a major hyperscaler hub in Europe where we already have a presence. We have a proven track record in these types of facilities, and I expect it to look very similar to our Nashville site, which a number of you have visited. We currently anticipate growing the business over the next 2 years to repurpose approximately 1 million units per annum with a skew towards DDR4. This is an exciting opportunity for us. and is driven by an existing relationship we have with a major hyperscaler. I'll hand over to Warwick now for a more detailed look at the financials.

Many thanks, Steven, and good morning, everyone. Despite mixed construction activity in Australia, continued elevated Chinese steel exports and softer U.S. consumer sentiment impacting prices. Ferrous scrap markets remain supported assisted by the progressive expansion of EAF capacity globally. With export markets exposed to global scrap dynamics, we continue to leverage the arbitrage in our key domestic and international markets. and sold volume proactively between the 2 to maximize margins, reflecting the significant agility and flexibility embedded within both our inbound and outbound logistics chains. In parallel, nonferrous markets delivered a structurally strong performance and provided meaningful earnings stability. With LME copper increasing by approximately 13.5% year-on-year while aluminum prices rose by 9.8%.

The Asian spot price for aluminum reached its highest level since 2022, supporting considerable some price increases, as Stephen mentioned. Not surprisingly, nonferrous trading accounted for over 40% of group revenue in the half, up from around 35% in the comparative period. Concurrently, of course, prices for DDR4 memory continued to increase exponentially, rising by over 450% year-on-year as demand continued to increase against diminished supply with manufacturing shortfalls and a focus on new generation cards continuing to uplift repurposing and resale activities. Across the business, we continue to deliver disciplined cost efficiency initiatives. Current activities such as moving to a global shared services platform and the operational changes now targeted for our Houston operations will continue to provide performance improvements in the business.

We saw our overall cost base remain relatively flat despite increases from higher inflows of unprocessed material and NAM and volume growth in SLS and of course, general inflation across the board. I'll come back and talk about our cost performance shortly. Our statutory result reflects our targeted restructuring initiatives and noncash hedge book mark-to-market adjustments associated with the significant rise in copper and aluminum prices at period end. We continue to work on the recovery of our U.K. metal receivable following collapse of that third-party business in an extremely difficult market, but in line with prudent accounting practice, we updated the potential credit loss on the residual by a further $30 million to reflect current estimates. Although we have effectively reversed our prior accounting position on the sale, we remain pleased with our decision to exit the U.K., the price we got for the business and the way we were able to maximize cash flow particularly given the number of subsequent business failures in the industry there of late.

Moving to Slide 21 now. And I've touched on the principal drivers of most of these already, so I won't dwell on this slide. Positive contributions by both the NAM and SAR businesses absorbed the impact of the current market pressures on ANZ. While the strong performance from our SLS business and a range of cost reduction initiatives, as I've mentioned, contributed further to the uplift in underlying results, reflective of the strength of the geographic and diversification aspects of our business. I'll expand on some of the other factors driving these various movements in subsequent slides. Moving to the metal business, more specifically, and in North America, total material inflows remained consistent with the prior comparative period and converted metal volume moderated by 3% and as we prioritized unprocessed intake in line with our value strategy, improving our overall margin position.

While it's added to comparative costs, the team were able to generate a number of offsets through further site restructuring and productivity initiatives. Period-on-period, we actually experienced around a 5% reduction in average realized ferrous prices, generating a circa $13 million impact on the underlying EBIT for NAM which we mitigated through that margin discipline and our cost-out initiatives. In ANZ, ferrous margins were again impacted by the subdued international market, which also flowed on to domestic prices. Favorable nonferrous prices provided overall revenue support and helped offset shredder downtime at our St. Mary's operation in the first quarter. Notwithstanding elevated consumable input costs, particularly in the areas of waste disposal and electricity charges, net operating costs continue to be well controlled here as well. noting the current result does include an $8.8 million reclassification reduction.

While U.S. steel spreads improved over the course of the half, influenced by tariff-constrained imports, which are reflective of the U.S. domestic market. In December, our Sims-Adams joint venture actually reported its first upmarket for ferrous pricing since April. Despite the comparative headwinds, the joint venture was able to close out the half year strongly, driving the uplift in nonferrous prices as zorba continued its surge. Our global trading platform was able to keep its costs flat. They saw reduced broker revenue following the cessation of trading activities for Union Metals in the U.K. early in the period. Moving to SLS now, and Stephen covered a number of the drivers here already. As we've noted, the business continues to see significant growth in the number of repurposed units as well as benefiting from the dynamics of the market.

Pleasingly, we also expanded our hyperscale service offerings, adding diversification to the business' revenue streams. Increases in operating costs reflect both volume gains and expansion activities and the team continues to look at additional opportunities around automation and robotics to support its cost management program. The results further validates SLS positioning within a structurally expanding hyperscaler ecosystem and its connected drivers. Moving to Slide 24 and touching briefly on central and functional costs now. As previously mentioned, we continue to look for cost out efforts in this area. We recently relocated our corporate office to further reduce costs as well as successfully transitioned our purchase to pay function to our new global shared services hub as part of a more extensive shared services model being progressed over the next 2 years.

Following stabilization of the company's SAP platform implementation, project costs fell by $2.5 million noting that we continue to incur costs in developing our new yard management software, which we hope to take live later this year. As previously advised, we elected to cease work on the development and commercialization of the plasma assisted gasification technology that was being undertaken by Sims Resource renewal during last year. This further reduced the central cost pool by some $10 million to $12 million per year. Moving on then to our overall cost performance for the half, and we continue to look for opportunities to simplify and optimize our organizational structure as well as further rationalize the existing operating portfolio. At a group level, we were once again able to keep total costs relatively flat over the period, limiting the increase to just on 4% of the rebased comparative half.

Included in this was $16 million and additional variable costs related from the increase in unprocessed material and the higher repurpose units at SLS. Labor remains our largest cost element at around 40% of operating costs and ongoing labor efficiency initiatives continue to provide significant benefits in this area and in line with our previous cost-out commitments. The group completed the year with net assets of just on $2.5 billion at balance date, broadly consistent with June, reflecting a stronger comparative Australian dollar at period end dividend payments and the further provisioning of the Metals receivable. Of note, this includes a $200 million expansion on working capital levels from the uplift in nonferrous prices impacting both our inventory and receivable values and a $72 million transfer to broker deposits related to our derivative trading activities following the run-up in copper and aluminum prices. And I'll talk a little bit more about the impact of this on the next slide.

Pleasingly, as a result of our positive trading performance, the Board has determined an interim dividend of $0.14 per share payable in March. So a little bit more on our working capital movements and the group's focus. On Slide 27, we've isolated the overall movement to show the impact of those higher nonferrous prices on the business. which has been quite significant on a number of fronts. The impact of the run-up in the copper price from October in particular is certainly reflected in our numbers. Working capital performance through better managing inventory levels, receivable conversion rates and payment terms continues to be a key focus for us. Moving to Slide 28, and we put up this slide last week as part of our announcement on the Tri-Coastal acquisition. We've highlighted the potential to generate better returns from our property portfolio a couple of times now and I just wanted to reinforce our focus on this area.

We broadly categorized our properties into 4 areas with the third category, the most complicated and the area where we're most likely to spend a fair bit of time working through. As Stephen has previously mentioned, these are the sites where it's becoming obvious that over the next 5 to 10 years, the most valuable use of that land will not be in metal recycling. In most cases, this will require comprehensive planning, permitting and other dependencies to fully capitalize on value. As such, we're committing to a dedicated resource to ensure full management of the opportunity going forward and continuing our approach to disciplined capital recycling and unlocking embedded asset value. All that summarizes into our overall cash movement for the last 6 months. I've talked about most of these already, but just to touch on capital.

The majority of this spend occurred in our North American operations primarily focused on improved metal recovery and incremental throughput initiatives, including the completion of channel dredging at our Claremont operations. In ANZ, investment continues into the redevelopment of our Pinkenba site, including the construction of a new copper recovery plant. We expect to remain within our previous guidance in this area of between $120 million to $140 million of sustaining capital for the full year. We've pulled out the restricted cash allocation on the derivatives to better reflect underlying EBITDA to operating cash conversion, noting these deposits will unwind in the second half. In October, we made our final dividend payment of $25 million in relation to the 2025 financial year. And as previously noted, the board has determined an interim dividend of $0.14 per share fully franked for 2026, in line with our capital management framework after taking into account the restricted cash impact. Back to you, Stephen.

Thanks, Warrick. Let's turn to the outlook on Slide 32. In our view, the outlook for secondary market pricing of DDR4 chips remains very strong, and it is the DDR4 that are materially driving the excellent performance in SLS. This strength comes from the demand for DDR5 chips driven by AI. Global reduction of chips is understandably heavily focused on DDR5 and this is creating a structural imbalance in the supply and demand for DDR4. We also anticipate continued strength in the nonferrous market, underpinned by the substantial copper and aluminum requirements for global renewable energy implementation and product electrification. Tariffs are expected to continue to provide some protection for our North American ferrous businesses and this is likely to result in the continued premium for domestic shred sales in the U.S.

Furthermore, whether be in the United States, Australia or New Zealand, rising EAF capacity provides a strong outlook for our fire scrap products. Finally, we cannot ignore the impact Chinese exports are having on ferrous prices, particularly for our business areas exposed to markets outside the domestic U.S. market. While it appears that prices have been trading at or near floor for a while now, there is little evidence to suggest China will reduce exports from current levels. Importantly, much of our recent improvement in earnings has been self-help driven. As market conditions normalize over time, we believe the business is structurally better positioned to benefit from cyclical recovery. Before we open for Q&A, as always, I want to thank our employees for their drive and commitment in delivering on our purpose and most importantly, doing that safely. Back to you, operator.

[Operator Instructions] Your first question comes from Will Wilson from UBS.

Congrats on what looked like a strong result. Just on ANZ, it looks like conditions picked up post the AGM trading update, you mind talking us through just the moving pieces there and. What happened to the end market?

Sure. We've got John in the room. So John, why don't you take us through that?

A couple of things. Certainly saw improved volumes in the second quarter, particularly in nonferrous and zorba on pricing. We also, as you would remember, we had the outage in the first quarter, and we largely caught that up in the second quarter. as I said, volumes were up a little bit. We managed to take a few -- a bit of volume from our competitors, good cost control. We delivered a little better than expected.

Cool. And then just more broadly across the metals business with non-ferrous just curious about how quickly those price rises result in more benefit, more volume will benefit to the business more broadly conscious that the rising price has been going through a while now, but you really had a step up over the last quarter. say, copper, for example, have you seen a kind of corresponding move in activity in that sense in volume activity?

Let me give sort of a few general comments, and then maybe Rob can talk about NAM and John about ANZ. So I think overall the answer to that would be, yes. I mean, higher prices, by definition, drive more volume out of the market. That relationship has been here for a while now. And you're right. You're right to say that the nonferrous has been very firm for the last 18 months, but particularly for over like the run-up we had in price leading into December was quite extraordinary, and you would expect to see that drive more volume out, and we're well positioned to take that. But maybe, Rob, a little bit on how you see it from NAM's perspective. And John, and by zorba as well, by the way, too. I mean -- we'll talk about that a little bit later, then John, maybe ANZ's perspective.

Yes. The only thing I can add is from a NAM perspective, about 2 years ago, we started to embark on our non-ferrous improvement story, if you will, and fully integrated now with Alumisource fully integrated now with our Northeastern metal trading copper granulation company. those relationships, those consumer relationships dovetailing with the infrastructure of data centers going up in every neighborhood in North America. It's been phenomenal. Stephen mentioned zorba. Utilization of our shredders is up 10% over 2 years, and the capture for that demand is definitely there. So volumes up, margins are absolutely playing a part in our turnaround story.

Yes. What I would add, obviously, zorba, as Steven mentioned, we saw considerable improvement in server pricing late in the half, but over the half. And Eastern remember that zorba really is a byproduct of our shredding activity. and therefore, any gain in that price sort of in some way or another filter through to revenue and quite frankly, EBIT -- so that certainly helped. But from an AN perspective, ferrous markets are incredibly still very, very difficult. Obviously, in very recent times, we've seen the Aussie dollar strengthened, which isn't helping our translation on an FOB basis on export sales. And I think Warwick mentioned even on our translation on domestic sales on an export parity basis. So strengthening dollar certainly isn't helping, but still difficult ferrous, nonferrous is pretty strong.

I mean I think as I said in my commentary, I really would describe nonferrous is the here of this 6 months result from a middle point of view, and we'll just summarize it, it is -- it will get more volume out of the market. It must to its logical for that to happen.

Yes. Okay. I mean it's hard to see what changes there in that regard. But just one last quick one for me on SLS. I'm just curious about the lags between DDR4 pricing and when it flows through to SLS, I'm somewhat a little bit surprised of being honest in terms of you gave your guidance 45-50 back in November, saw another step-up in December in pricing. -- that, that didn't come through. But yes, maybe touch on the -- and then you came into the top end of guidance, I know, but just if you wouldn't mind touching on the lags there.

Yes. I'll get Ingrid to maybe comment more specifically, but my overall thought on that is our contract position is pretty set as we go into December, we know what volumes we're getting, we know what sales we've made. So there is definitely a lag on that. I wouldn't say it's a particularly long lag. Ingrid, any further comment on that?

No, I think that's spot on, Stephen. We're normally a month or 2 months out from what you see in the price increasing. So obviously, we'll start seeing it in this year, this.

Is the second half year. So fair to say that the December price rise and even in the back end of November really had no it was too late to kind of flow through that first half.

Yes. I mean some of it.

A little bit of a got through. You see like we were at the top end of -- I mean I to be frank, I'm getting my head around how we provide this guidance on SLS because we haven't done it before. So we're at the top end of what we provided, which sees that some of it is coming through. But you're right to think that as Ingrid said, it's a month or 2 before it fully comes through.

Okay. Yes. I held back from as came about SLS guidance, but that's really helpful. I'm sure we're going to get that question.

Your next question comes from Peter Steyn from Macquarie.

Yes. So perhaps curious on 2 angles as it relates to SLS. Firstly, is just run rate, it sounds like you would basically say that the run rate for the second half is probably incrementally higher than what so you finished the second quarter at. And then I'm also interested in how one thinks about the Irish facility, you mentioned that you'd be sort of running at full tilt in June, July. But how material would this facility be in the context of the network sort of give me the sense that it is quite material.

Yes, sure. And I'll get in because she's been heavily involved in that development. Maybe I'll cover off the implied question about second half for SLS. So the first lateral comment I'd make you right. The strong pricing that we saw in December is now flowing through into our results. And it's fair to say that the start to the year for SLS has been very, very good. In terms of what does that mean for the full year, I'd make the comment that we're only 1 month in, and I think it's probably best what we've decided is that we will provide some additional guidance next month at the March investor presentation in Nashville.

By that point, we will have a -- we'll have a pretty good idea of where our first quarter is coming in and what pricing is looking like for the balance of the year. So -- but we just asked for some patience on that. We will do that additional guidance in March. But suffice to say that, yes, absolutely, -- the volumes are still good coming out of SLS as -- and it's very, very obvious the prices are still high, and we've got lots of reasons why we believe that those high prices remain. I think there is absolutely a structural imbalance there. So certainly a very good start to the half we'll provide more guidance in additional guidance in March. Ingrid, how are you thinking about Ireland?

Ireland, Yes. So Dublin will be ramping up in the second half of this year, and we expect to deliver full run rate sometime in fiscal year 7. So that's when we'll start seeing the full impact in 2017. It's probably for you to say it is material to Easter lease's result because it's a big facility. I mean it's at ramp-up, we're expecting to repurpose another 1 million units out of there and is oriented towards or skewed towards DDR4.

Very similar to the site in Nashville.

Yes. So it is material, Peter. Let's just see when it's up and running, how things are. But it's -- we've highlighted it because it is important to the future of SLS. And I think it also signals potential further expansion outside the U.S. Our strong growth has been U.S. No doubt about it. Absolutely no doubt about it. But Europe is a market where we have a presence -- but I think with the likes of Island now our presence is going to become much more meaningful. Yes.

Could I ask Ingrid us a quick follow-up. So the 1 million units, is that backed by the existing contract, i.e., so you're on full run rate at some point in will that be your native units repurposed?

So yes, at the start of ramping up, it will be off of an existing contract that we have now in an existing client relationship. So yes, that will be.

Yes, I agree with that, but I wouldn't -- I mean, it's certainly not a capacity. There will be room -- there will be yes, there will be room -- in the later years, they really let's focus very much on servicing a very important customer. But I think in later years, there's further capacity in Ireland for other inflows there.

Got you. So the $1 million is an eventual target for repurposed units and your initial start in your initial contract does not necessarily supply that level of volume.

No, I think it's there. The $1 million is the initial and it's how do we grow beyond $1 million with the with additional activity.

Perfect. Sorry, I'm going to sneak one last one in for Ingrid. I just 1 around the customer relationships, how you think about the pull and pull from a commercial point of view, you're obviously making a lot of money out of out of this activity in grid. Just curious how your customers view that? And if with current prices, they think differently about economic sharing.

Well, we have several relationships -- commercial relationships going on. And there it took us years to get here into this market, right? The quality that we deliver, the loyalty we have built with this particular client. And it's really truly a partnership. We offer services servicing, which is a flat fee. But then on the resale is where we share revenue. And that is an agreement we have negotiated with them and remain so even as pricing changes.

It's Warrick here, Peter. I think it's fair to say that we didn't -- we haven't set up Island with the hope of gaining customers, we actually set up Ireland in response to a customer request. And the -- we've been quite -- well, obviously, have a transparent relationship with that customer. They understand our operating model and our earnings, et cetera. So we're actually responding to the customer need. And I think that really sort of signifies as Ingrid said, the relationship that we've been able to develop. As Stephen said, the millions a starting point. It's a strong growth area we'll be looking to hopefully grow that business that part of the business further.

Right. The $1 million is a burden to hand Fantastic. I'll stop there.

Your next question comes from Lee Power from JPMorgan.

Stephen, I can't get the reticence of not wanting to give 2H guidance nor an SLS given the moving parts. But can you maybe chat a little bit about what you saw on a backward-looking basis? Like what did SLS actually contribute EBIT wise in the second quarter?

Yes. Again, so -- okay, it contributed obviously more in the second quarter than in the first quarter. But I think what I -- probably the most relevant thing I can say is that that, that ramp-up has continued into the first half. That's probably the best way to put it. And that's -- we -- pricing is still strong and volumes are good. And that's -- so the activity that happened in the second quarter has continued and frankly grown as we come into the first quarter, which is into the third quarter -- sorry, the first quarter or the calendar third quarter this year, which is why look, I'm very conscious that we will need to provide some more guidance around that.

I just need to think -- we just need to get that first quarter under our belt. And by the time we speak next month, we will have the actual results for January and February, and we do find it easier to predict that result for March than we might for the metal business. So we'll have a very good understanding of what that March quarter is like. I'm expecting it to be good. And then I think based off that, we'll be able to provide some additional guidance on where we think the year-end is going to come in at.

Okay. So through the back half or the first half, so through the second quarter, like is there much volatility within the quarter? Was that trend continuing and the pricing only really lifted in the back very back end of the calendar year, right?

So let me -- so first of all, it was a strong half. It wasn't just a strong quarter. It was a strong half. And yes, there is some volatility. But in some ways, it's it's the right expression self-induced volatility, maybe that's not the right expression, but it's volatility that we're not particularly worried about because it's just whether or not we it does it suit our customers to ship the forwards at the end of the quarter or the beginning of the next quarter. So there is definitely some volatility, but we get a good understanding of what that volatility is going to be well before it happens, which is why I think we were -- by our standards, we're pretty accurate at the prediction of the SLF result for the full -- for the half.

Okay. And then maybe for Ingrid, it sounds like your comments to Peter just around the commercial rate relationships and revenue sharing that you think the leverage to pricing holds. Like obviously, the battle, I think that everyone is having is that you look at what the pricing has done. I get the lags, but it kind of averaged $8 a unit for the pricing -- the DDR4 pricing that you gave for the first half, and it's tracking at like $67 for the half currently. So it's obviously a very material dollar move half-on-half as well. So just any sort of color you can give us around the revenue sharing piece or that leverage might not come through for the business?

Well, no, as I mentioned the revenue share that we've negotiated stays in and the partnership that we have, in particular with this client is very strong where we're investing back into the business. So the expectation is that we will increase productivity through automation, and use some of this just to improve the business for them. And moving into Ireland really is to meet their capacity needs, and this is what we do throughout. So I don't see that a clawback trying to occur. This is a very solid relationship, and the market fundamentals are strong. We just don't see that.

I agree with that. And the thing I would say that, which I think I said the last time I would add, to that, having now visited a number of these clients is that this is not a core business for them. our front office, their back office. And while it is absolutely meaningful to us and that's clear, is hugely meaningful to us. Their focus is very much on their front office, which is about giving us much of these hyperscale data centers built as they can, getting AI rolled out, putting their resources into that area. So this is nowhere near as material to them as it is to us. And so therefore, what they're valuing is they value that we do it safely.

They value we do it securely. They value that every single SLA that we've put to them we achieve. And that's through -- to me, Frank, from Ingrid's perspective, that's through 5 or 6 years of hard work of building up these relationships. And just to repeat myself, yes, very material to us. I'm not so sure that they would want to switch suppliers to save themselves maybe a few 10 millions of dollars of a year and run the risk that they don't get the same level of service that they do from us. And that's what's hugely important if I can add, what's value to them.

Is getting the repurpose DDR4 right? It's not the money. So we have this client who's starting their decommissioning earlier because they need the parts and the new builds. So it's very much value on getting the tested repurposed DDR4 going back into their data centers. SP-8 So that's really where the value.

Yes. And I mentioned, if we turned up late and we promised that you would have the DDR4 on this state and they're not. I mean that's the risk that they run by going with someone else. And we've now got a really strong track record over the last 5 years to prove that we can do it.

Yes. And then maybe just 1 more if I can see in in. So John, like I feel like you've undersold yourself a little bit given ANZ was breakeven in the first quarter, and you've delivered $22 million of EBIT for the half. Can you just maybe chat a bit about when we think about using that second quarter number going forward around like what the catch-up was or seasonality or something else going on because it's obviously a pretty solid quarter given what the backdrop.

Obviously leave the second quarter was always going to be stronger than the first simply because of that catch-up process, which I got to say we, quite frankly, completed quicker than I thought we would. So we largely got it all done in the second quarter. So what -- I guess, where you're leading to is how should we look at the second half. As I said, ferrous markets haven't improved internationally, I would argue that we're sort of bouncing along or near the bottom in U.S. dollar terms nonferrous markets are strong. There's no doubt about it, both in retail nonferrous and zorba.

But I guess the other headwind aside from Stephen mentioned a lot about China and the amount of semifinished steel making its way into into our markets and our consumers is the Aussie dollar. And that's certainly what have we seen in the last sort of 6-week period, 8-week period, we've seen the dollar go from around $0.67 to $0.71. So that is certainly hurting so I would have said second half at this point, and I will say, Lee, we are 1 month into it. we are in January, but I would say I think our seconds really going to be in line with our first half.

Your next question comes from Brook Campbell-Crawford from Barrenjoey.

I just had one on SLS and trying to kind of understand how it all works like some of the others here on the call, but maybe just for the first half on Slide 23, you talked about sort of 70% of revenue uplift relating to price. So that implies a $90 million increase in sales because of price. And then the total EBIT for the business is of $35 million. Just can you kind of talk to that, why would you have a greater drop-through from revenue to EBIT, given the majority of it is driven by price. It's work here.

Brook. Remember, we don't get -- the revenue is gross, and then we obviously take out the percentage of -- that we retain in terms of the sales, so you don't get the full swing through.

Got you. Okay. That's the revenue share?

Yes.

Great. And then maybe just one on, I guess, on the Dublin side. I mean is the way to think about this 1 million units, we can see what the DDR4 price is are you going to assume, let's say, a 30% revenue share and then an EBIT margin in line with what you just delivered to kind of resulted in only $5 million EBIT from that facility once it ramps up? Is there -- that's obviously very simplified, but would there be any large floors that making those assumptions?

One is that some of the units will go back to be repurposed, not resold and repurpose as a service fee, which is less than lesser than the resale. Just I didn't quite hear on number did you come up, I'm not going to say with a ride wrong. I just want to understand what number you came up with that back of the envelope.

Yes. Listen, I was just using your 1 million unit comments. And we can see that DDR4 price is like USD 70 a unit, I'm pretty sure. And then we could assume a revenue share of 30%, call it, and then just use the EBIT margin for the division of even 15% in the half, which I think gives you around 5 million EBIT from that business. I was just using that framework and were to get some sort of steer if that sense.

I just need to go through your meter because I'll be frank, I think that's a little light. it is frankly a little light. So just let just think about your math on that because I'm just not quite sure that last, but that you're coming into, maybe we can talk a bit about that. But again, maybe part of it will be in March, we'll be able to provide much more color with this additional guidance. But my initial reaction to that is that feels very light.

Your next question comes from Daniel Kang from CLSA.

Just continue with the SLS discussion. Maybe Ingrid, I just wondered if you can talk about the market share position of SLS at the moment. I think the initial plan was to get to round about 10% share of the addressable market. Are you there already? And maybe if you can shed some color on the competitive landscape on what the others are doing, given that you're branching out into Dublin, what are the capacity plans as well?

Well, I don't think we're anywhere near 10%. I think the market share is continuing to grow just as AI is exploding and this adjacent market is exploding accordingly. So I don't think we've captured anywhere near 10%. There's still a lot of upside to go. Our competitors, we talk a lot about Iron Mountain, SK test. But it also is the hyperscalers themselves taking it in-house. We don't see hyperscalers doing it because they're competing with their data centers, and they make more margin in their data centers versus switching to what we do. So we don't see much movement there. Certainly for SK test and Iron Mountain. They are in Ireland already. So the Ireland is the -- basically the nucleus for Europe European data centers. It's all located there. Still plenty of market.

Is it fair to saying our biggest opportunity to grow market share is to -- is the work we're doing around showing to the existing hyperscalers who are not either doing it themselves or not doing at all that there's significant value by using SLS services. I think that's 1 of our main growth levers.

Definitely because this is a way to get material at a cost-effective Price point.

It's a big market, Daniel, to get 10% aspirational that would be fantastic. It's a big market. There's plenty to go.

Stephen maybe a question for John. I think you commented on ferrous scrap markets still being pretty tough out there. What are the things that are you looking for for the markets to improve. So can we see some improvement into the back end of this calendar year?

A couple of things as Steve has talked long and hard around the self-help piece and that doesn't go away ongoing cost discipline, ongoing discipline around buying, trying to direct more unprocessed products for Asides is all sort of internal self-help but I would say the other things that we've got coming on stream is Glenbrook, the New Zealand EAF comes on late Q4. around May, I think, is sort of power on and then there will be a ramp-up here from that. That would be good for us. We're very well positioned with the investment we've made there. in rail infrastructure to service their needs. We've also got 2 fines plants that we're currently -- that are currently under construction now, and they will go through a commissioning late Q3 into Q4, and we'll start seeing some very significant benefits more so in F 27 from those 2 plants.

We've got the MRP upgrade in Auckland, which is again, as Stephen talked about, self-help, metal out of waste. -- very good returns on that sort of investment. So it's a mix of things. As Stephen said, we don't -- and you guys on the call probably as well positioned or better positioned than us around the whole piece around China and when they're going to -- and if they go in to change direction. But ongoing strength in nonferrous markets, strong -- really strong server pricing, driven by the underlying copper and pricing is still tough. What we are seeing, and this leads to a conversation about well positioned. We are seeing that a lot of our competitors are doing it tough. And I think that will present us with some opportunities down the track around industry rationalization and consolidation.

Your next question comes from Chen Jiang from Bank of America.

Stephen Warrick John. Maybe first question to Ingrid big increase of the revenue share from resale, I guess, majority due to higher memory prices. I'm just wondering what is the strategy for SOS to grow your earnings, if it's structured versus one-off sugar hate when the DDR4 prices normalize. I guess the SOS business is not only solely on prices. What are the levers you can pull from here, given the market is still, you mentioned very fragmented and you are less than 10% of the market share.

Yes. Well, that's very true. It's not all just DDR4. So we're also seeing increase in pricing in hard drives and the other elements we sell. So we don't just sell memory. We sell all components that are accessories to the data centers. How we're going to go is through volume. So we're going to see more volume coming through our current contracts and expanding geographically. And don't forget that once DDR4 have run their course, we'll start seeing DDR5s coming out so that this will replicate and just go on to the next technology shift.

One more thing in. Chen, you made an interesting comment about prices normalizing? And look, it's a very valid an interesting point. But the way we're looking at it, and this is a very unusual market structure. But the way we're looking at it is what does normalizing mean? Because you've got 2 really interesting things going on. Firstly, as I said before, DDR4 are the workhorse of the Internet of Things. So the workhorse of our computers DDR4 are not going away anytime soon. So you don't have this falling demand in the next couple of years. You just don't have it. So you've got this demand, which is strong. But what you have is this falling dramatically falling supply, which has been absolutely turbocharged by AI and anyone who can make chips is making DDR5.

So that's what they're turning to. No 1 is setting up new factories to make DDR4 of energy quality because why would you, you might have put all your resources into DDR5. So from an economics point of view, you've got this we does not create the right word, but you've got this unuseful situation where you've got strong demand and supply not there to meet that demand. And normally, you would think it would because it's been completely diverted somewhere else. So I'm not sure to say -- I mean, time will tell on how it plays out. But I'm not sure what normalizing means when you've got that market dynamic.

Sure. I mean, normalizing. I mean, it almost trades like a commodity. So I'm not talking about demand, but more like a price given how the price has been over the last where it doesn't.

Where it doesn't behave like a commodity. And I keep matching we're grappling ourselves with this because this is a new -- this is new for everybody, what AI is doing, where it doesn't behave like a commodity. When demand goes up or demand -- and pricing is going up. You would normally -- a commodity there'd be more supply come on, people would invest in things and more supply would come off on and that would dampen the demand dampen the price and normally, they overinvest. And so down price goes and then they will pull out in the commodity cycle. This doesn't really follow that cycle because you just can't -- you can't bring on more supply.

Right. That's a very good point, Stephen. I appreciate that. And second question, if that's okay, again, focusing on SLS. Are you being able to provide any color on the resale revenue sharing across corporates or hyperscaler? Is that like how the contract work, understand in green your team spent 4 to 5 years over the last 4 or 5 years, built a very strong relationship with hyperscalers and hyperscale revenue has been growing CAGR like 40% or 50%. But if you can give us any color on your existing contract position as well as if any new contract rather than just leverage to the DDR4 prices.

That's -- I don't think we can get into too much detail gets commercially sensitive on our contracts and what we've negotiated but once we do our contracts do run 3 to 5 years long, the percentages are negotiated upfront and just tick through the contract.

Yes, I think I agree with Warrick. There's a lot of commercial sensitivity in that, Sing. But I'll go back and remake the point that why are we successful and why is Ingrid's team success. So it's around we've spent the last 5 or 6 years. building up our proven capability to deliver and delivery, particularly when repurposing, which has the benefits that we get some resell as well. It's really important for these these hyperscalers. But yes, I'm with Ingrid. I just don't want to get into detail on commercial contracts.

Understand understand absolutely, I fully understand. Well, let's put it another way from like contracts or relationships or even how your revenue model work how is that different to your competitor, are Mountain and other small competitors given it's such a very fragmented market. I don't know if that's perfect competition or I think.

But for me, the business model is fundamentally the same across the industry. That's not it's Pretty much. I mean what -- what we are doing, though, as far as repurposing DDR4s, going back into the data center, we are the only ones that are doing that. Were as back testing, reprogramming, and it's going back into data center. So it's competing against virgin material. So that is something very special that we do, and that is in strong demand by the hyperscalers. They need the parts. -- because they can't get it on the market. So that's a big differentiator. The industry structure generally, but it's actually a very good point around that service that we're particularly good at.

Your next question comes from Owen Birrell from RBC.

Just a few questions from me. As with everyone first question on SLS. A couple of angles here from my perspective. The first 1 is just looking at Slide 23, useful revenue by segment splits between resale, service and other. I'm wondering if you can give me a sense of the 5.3 million repurposed units during FY '26 first half what split of those units by volume went to resale versus service?

Just let me -- I mean we -- obviously, we know that number. I'm just thinking just from a commercially thing, does it are, what's your thought?

Let us have a think about that and we'll come back to you.

Okay. Well, then let me ask a subsequent question to that. Is that split likely to change going into the second half? Like do you have forward commitments for more service volumes as opposed to resale or vice versa?

We do have service commitments, but the way it works, Owen, when you get in a rack, there is only a certain percentage that is fit for purpose to go back into a data center. So technically, there's only a certain percentage that can go in. So regardless of the increased need to go back into a hyperscaler, there's still a percentage that is resale and revenue share. So the increased need would be met by a faster decommissioning cycle because they need the part.

So indicatively, the splits between resale and service volume perspective are largely constrained and therefore, don't fundamentally change from period to period. Is that kind of what I'm getting from that comment?

Yes, right. Because in a fully populated rack, there's only a certain percentage that can go back in.

So I guess in the way of looking at it, we would not be expecting second half splits to be materially different to the I would expect the volumes to go up because they need more parts.

Okay. Excellent. And just on NII, I guess, in terms of -- from our perspective, understanding how the business the operating leverage flows through given the lease model that you operate, is it fair to say that it's a very high variable cost business. And are you able to give us a sense of, I guess, what the the fixed to variable speeds in the operating cost basis.

Yes. Well, the way we're attacking that, Owen, is we're automating. So we're going to automate wherever possible so we can bring productivity into the process. and control that variable cost. But yes, normally, as you would scale, you would expect costs to increase, but we're going to attack it with automation.

I mean understanding was a lot of that automation was actually going to be leased anyway, so essentially becomes more of a variable cost.

Some of it is we do have a -- you're dead right. We -- the stuff we showed in Nashville was a on a volume base, yes, that's correct. I think there's -- I think what Ingrid is talking about is we will end up to be charging. I think there's 2 things about SLS going forward. One is we will turbocharge automation because I think there's definitely productivity savings to be had there where we can effectively use our lease facility 24 hours a day through automation. And the other thing I would say -- the other thing I would say is moving forward, expect to see some additional expenditure going into R&D because what what we know for sure is that in 3 or 4 years' time, the DDR5s that are going in now are going to come out. And they present a completely different challenge to DDR4. Some of them are in the good cooling. Some of them are more sensitive. So we we are going to spend some money on R&D to make sure that we've got a business here that has the potential to last for decades because there's constant replenishment cycle with new equipment.

Okay. Just final question for me for Warwick. Free cash flow conversion was quite weak during this period. And I understand there's often seasonal swings and trade swings. Just were there any sales booked very late in the period that you haven't received the cash flow yet?

We always have some sales. I wouldn't say it's a material amount. I'd probably dispute the calls about free cash flow being weak. I mean I think you have to sort of for us, you have to back out the amount, like in our working capital, we have to include the the margin deposits. And we had, as I pointed out, effectively, we had sort of $200 million sort of come through because of nonferrous pricing. We managed to maintain our total working capital balance at around about pretty much the same level. So actually converting activity into cash has actually been quite strong. So like if you take out that $70-odd million that went into those margin deposits EBITDA to operating cash was pretty close to sort of 95%. So it's just timing.

I guess what I'm getting at is just timing and it should have potentially rectify itself.

Correct because yes, those margin deposits, et cetera, will come back down.

One thing and the risk of Rob's got a great expression breaking into jail. The one thing I would add to that, though, is that if nonferrous prices keep rising, we see them keep rising and rising and rising. 2 things will happen. That will be profitability. But it also puts -- I mean, we've always been puts more money into working capital. We've done a huge amount to hold our inventory levels. And I think we -- I think Mark's right, we've done a great job. The team has done a great job in managing that. But rising nonferrous prices boost profitability, but they absolutely increase our working capital requirement. So for the end of this year, at the end of 2026, we have another surge in prices and nonferrous, you will see a similar thing happen.

Sure. Just one final question on SLS. You talked about sort of that pricing, I guess, sort of 1 month in advance. Is there a risk that you get a, I guess, the opposite traject? I mean if prices come back down, is there any exposure that you have to falling pricing environment from an input cost perspective. surely just revenue share?

It's revenue share and service fees. So I don't think so because it would flow through this. So we're not -- we don't take it. I think of what your question is, do we take inventory risk, we -- basically there is a small amount, but it's not massive. You can't be perfect over pretty quick.

Your next question comes from [ Harry Sandoz from A&P ].

I'll start off with NAM for the sake of variety. So came in ahead of guidance. I mean anything you would call out to not sort of use this as a run rate for NAM in the second half given sort of current market conditions, perhaps?

You're right. We've got Rob in the room and for the sake of rig I think Rob selling [ Harry ], no, I think you could safely say that, as John said, we're only 1 month into our third quarter. The domestic market has increased twice in this third quarter for us, $30 in January and another $30 or so depending on the grade. Some markets are good. nonferrous pricing is holding if you recall last year, we had some severe weather where we operate. That is reoccurring this year as well with inbound flows. But I would say margins are going to hold this year and we'll have a better third quarter than last. So probably fair to say, Rob, from an EBIT point of view, the impact of the coal weather has been nothing like it was last year at all here.

Right. So this implies overall reasonable increase year-on-year in 2H EBIT.

I think that's a fair conclusion to draw. But I know Rob's comment, we're 1 month and month in.

Great. And I will go back to SLS now. I'm just wondering if you can outline the percentage of SLS revenue that is resale that was 61% in the first half, like what is memory within that?

DDR4 memory in particular I think that comes back to question. We'll take that offline, [ Harry ], and have a think about. Coming back to you on that. Yes. Well, obviously, the extent we do dispose something we'll disclose it to everybody. But we're just grappling in our minds what is commercially sensitive and and what is sensible to talk to eat, which doesn't impact our business with either our competitors or our customers. But let's keep back on that one, so -- and we'll definitely will.

Okay. Then I'm going to ask this anyway. And I know you probably won't answer, but if the memory price does hold at the current level and based on -- you were saying earlier, the repurpose versus resold or reuse versus resold units don't vary materially in percentage terms. You must have some idea of what the pricing benefit should be in the second half. So I mean, can you talk through the potential benefit there in terms of quantifying, please?

Holding -- I mean you're right, if you hold all those -- if you hold all of those things constant, you would expect the second half to be materially better than the first half because the prices rose into the into the first half. And if they come into the second half, we're clearly going to have increased absolute resale. We will without a doubt, we -- volume is looking good, so we would expect some increase in service fees. So that is -- yes, so if you hold all of that equal, you would expect a materially -- a material improvement in the second half versus the first half. What we'll do in March is try and provide some additional guidance on from what we've actually is happening where we think that number is.

And then maybe just asking Brook's question in a different way. I mean, any reason not to look at Ireland is the 1 million annual units as a ratio of your existing -- or you did 5.3% in the first half, so call it 10 or 11 million annualized looking at that as just an EBIT ratio to unit?

I think the mix is different. So when you're looking at the whole business, and I think this is a correct answer. You're looking at the whole business, which includes much more than just hyperscaler activity. And so it would skew higher than the business as a whole.

Okay. Last question, if I may, on. Just wondering if you get a pricing benefit from customer reuse or if that's kind of a fixed dollar amount. So you're only benefiting on the actual resale percentage? And also just the revenue share I mean, is there anything to stop customers lowering that percentage when the contract is eventually renewed? And are there any major renewals coming up?

There aren't any major renewals coming up shortly. We're still another couple -- 2, 3 years out on our existing contracts. So the service fee is a fixed percent.

These are fixed.

That's correct. And we're -- it's volume.

Yes. But Ingrid made a really interesting and valid point before, is that -- in terms of the service fee of putting it back in, it's -- when a rep comes out, it's not redeploy it back into the unit. There is a substantial amount of those DDR4 that are not suitable to go back in and they find their way to the resell market. So just because we're getting -- if we get more -- well, effective we get more activity around service around the service revenue, we will pick up more resale revenue with that as well.

Okay. I'll sneak one more in. Just are you seeing any new competitors enter the market recently in.

As Stephen has mentioned before, it took us years to get here and to get to the level of qualification with the clients to make their technical specs, the security, data security, so we are not, at this moment, seeing anybody, any new entrants. It takes years -- just to.

Our biggest competitors remain the hyperscalers doing it themselves or not doing it at all. Those are the where that's our next front to you.

Your next question comes from Scott Ryall from Rimor Equity Research.

I'm going to start, if that's okay, on Slide 22. And it's a question, I guess, for Rob and John. Specifically looking at the trading margin, just an observation first. Rob, I hope you're giving John a bit of a needle about beating them for the first time in 5 years, I say based on my my numbers. And I guess my question for both of you. So Rob, is your aspiration to get your trading margin up towards SA recycling over the medium term. And John, is that decline? I mean you've spoken about the top line and the ferrous markets and non-ferrous markets. How much of an impact on the trading margin did the outage has in the first half, please?

I'll go first. As I said, over the half, we actually managed to clear most of the inventory that was accumulated during the outage. So we've got a small amount of overhang that will wash out in H2. So over the half, it was pretty much clear. The other thing I should point out around trading margin is proportionately having higher nonferrous volumes and higher nonferrous pricing. Actually, impacts trading margin in percentage as opposed to dollar per tonne tons. So actually doing more volume at higher pricing in nonferrous has a negative impact on trading margin percentage-wise.

It's fair to say that's the biggest driver then, John sorry. Is that -- is it fair to say that that's the biggest driver the trading margin.

Ferrous is extraordinarily change. Yes.

Yes.

Yes. I guess, Scott, first of all, thank you for noticing that. A lot of work to the team. In terms of SA Recycling, they're a heck of a model to aspire to be. And I think the simple answer I can give you will be that, yes, through examples like TCT, the recent acquisition and some road map activity that is yet to be released to the market. Some of the feeder yard bolt-ons that we've talked about over the last several years. That's where we differentiate with SA largely. They have more than twice as many shredders and more than 2x the feeder yards where they're able to collect material at a much lower level of volume, but also at a higher margin. So NAM in the past has been built on big cities, big populations, we can have something in the middle. So yes, there's more work to be done, and we're going to continue clawing at it.

Right. Okay. And then my second question is predictably for Ingrid, -- but it's a bit different, I think. I guess what I'm wondering, just when you're planning your business in what is the visibility that you actually have on a rolling 6- or 12-month basis? And you mentioned there's about a 2 months late or pricing. So do you -- does that mean whatever the the traded prices now you're getting in 2 months. And therefore, in 3 months, you're not -- you can take an educated guess, but you're not quite sure what the price will be. And then I guess the same for the units, do you have pretty clear line of sight on a rolling 3- to 6-month basis? Or is it longer based on your contract like what you've just done in Ireland. I just be interested to hear how your business settings actually work.

Scott, a tool that we use, which you can also subscribe to is TrendForce.com, and that gives some visibility certainly in this market on the memory market pricing and so forth depending on the client, we do have some visibility because we're in their inventory systems. They're in our inventory system so we can see the decommissioning cycle. So we don't necessarily know what's coming out of there, but we can see when RACs will be decommissioned and come to us. So that does give us some planning visibility.

And, it's probably for you to say that when it's varied from that, it tends to come earlier or not later is what we've found -- so that's been our planning challenge if something is a right earlier than we do. Yes.

But when do you feel most comfortable with making confidence in all as opposed to, say, 80% or something or 75%. When is that -- do you feel really confident on a 3-month basis as opposed to 6, 12, those sorts of things?

I can say from Mike and Ingrid I'll let you think -- by definition, the price is something that 2 months out gives you a lack of confidence in terms of what it's actually going to be, we've got confidence around what we think drives it. So I -- when I look at our results, I feel pretty confident about what grids predicting 2 maybe 3 months out. Beyond that, there is just some very bit of what do you think the price is going to be. Is that probably the main variability. Ingrid can show me what the volumes are. I think 3 months out, we're reasonably confident on volumes and maybe it's going to come in earlier, which is, I guess, why we think we've chosen the March, the March date should give us some degree of confidence around additional guidance for June. I mean whether it's at the 95%. 95% feels a little bit like a utility. We're not there. But it's certainly -- it's a it's a reasonable level of confidence.

Yes. Okay. And so just with that in mind, and I know you've got very good reasons for having followed a customer to Ireland. But -- so how much -- when you go and spend the money and I know what you're saying, Stephen, about R&D and automation and things like that. How do you get there's a business play in the world that's riskless. But how do you get the confidence of at least making a minimum return on capital for that investment decision, please?

Maybe, Warren, you think a lot of that capital maybe.

Well, I think the beauty of the SLS model is it's capital light. So our investment there is in terms of is really around the lease commitment and how we structure that. So we obviously cater for that within the way in which we approach that. But from a capital investment perspective, it's actually -- it's a great model. It doesn't -- there's not a huge amount of capital that goes into it.

Your next question comes from Ramoun Lazar from Jefferies.

Just a couple of questions on and recycling. Just on comments at the AGM for a meaningful step-up into the second half. Could you maybe build on Harry's question around NAM and how to think about the second half given the seasonality that we saw last year. And I guess what you're seeing there with the step-up in nonferrous pricing, what could we expect from NAM in that second half period?

For me, it's around market, I'm going to be question. But to me, it's around market pricing and our operations within that market.

But Rob, you think about this all day every day, second half, how do you feel about second half and what's driving it differently from last year?

Yes. I would say this to you, the way we've structured and I think the presentation that you've been able the pivot over towards domestic consumption, whether it's ferrous or nonferrous and having those customers. It's a self-hedging margin preservation. So I'm buying and selling in the same markets. The international side, we're optimizing when it suits and we're dramatically changing the compositions of our cargoes based on best prices by commodity. So -- and nonferrous resilience is there. I think the scarcity of copper and aluminum, and really the demand pull has been good. In terms of what Warwick mentioned earlier about construction spend, I think we're coming into the season in the next 45 days or so, where we'll start to see some more construction demand. The steel mills are running in the high 70% utilization rates -- their margins are tremendously good, and they're not going to miss a heat. So they're looking for raw materials. We're looking pretty solid in the second half.

Okay. I guess the step up in non first would have given you more confidence around that meaningful step-up versus what you said at the AGM? Is that fair?

I think unlike ANZ, I think in them, you need to be thinking about ferrous as well. So Fridge do have some confidence in well like I mean ANZ, we're fairly confident that China is going to keep depressed and there's nothing going to happen in a -- everything is about nonferrous. NAM, the domestic street premium, what we've done around our logistics to make sure that we can sell domestically. And that number I said before, is quite amazing. -- of our East Coast Street went domestically. 2 years ago, we would have been capable of doing 10%. So the increased demand in there's more APs that have come online. Rob's right around the construction activity. So we are feeling reasonably good about ferrous as well in North America versus first half.

Okay. That's helpful. And then SAR, I guess, a pretty meaningful step up there in the first half versus PCP, and that far off the strong second half '25 result. I guess how are you sort of framing that business into the second half. Anything to think about in terms of headwinds or costs or anything like that, that could.

No, I don't think there is Ramoun. I think SIR is will enjoy the same market structure that AN that NAM is what I would add to it, they can continue to produce a lot of zorba and we don't see or coming off in any meaningful way when things always strong. We don't see copper coming off. We don't see aluminum coming off. They have a good non-retailers. I'm not seeing headwinds in the in the second half versus the first half. But you're right, second half of last year was very, very strong for them. And that would be great if they could replicate that. But we're 1 month in.

Your next question comes from Charles Strong from Jarden.

I was just wondering whether you could quantify the impact of trading margins in percentage terms, there has been from created nonferrous mix, whether at the regional level or across metals. So not specifically, but what I would say is, by definition, greater nonferrous lowers our trading margin percentage because we make greater margin per tonne on a much, much higher. So when you're selling copper, I don't know, $12,000, $13,000 a tonne, your trading margin percentage is always going to be lower because you're making more in absolute -- so if I then say why I think that's been -- when NAM has done particularly well is despite that dynamic, NAM has actually grown its trading margin percentage, which I think goes back to Ramoun's question a little bit, which has come from ferrous. It's grown quite nicely. Just one more, if I might. You had net corporate cost saves. Do you see any further opportunity there with the outsourcing jet services or anything of the like?

There's always opportunity. I think what we've said before, we took a fair amount of cost out of the business sort of a year, 18 months back. We did say that we would start to plateau in terms of those major structural changes to the business. But we're always looking for sort of cost out, but I'd say they're more on the fringe. And it's really about just sort of maintaining our cost levels at sort of current current rates at the moment, Charles?

The only thing I would add on cost, Charles, is if nonferrous the hero of the result when miners costs were a pretty good support act. I mean if you back out the variable costs that came from increased unprocessed and increased activity in SLS. The actual underlying cost base has performed really well and some still pretty inflationary times. I agree with Warrick. It's less it's relentless, the cost program, and we will continue being relentless. But I think probably the major, major cost reduction programs, well, I think with more continuous improvement now or are we.

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

Well, thanks, everyone, for joining the call. Thank you for the interesting questions, very good questions, and I will see a number of you we will all see a number of you over the coming days as we get out the. Thanks very much.

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

Thanks for joining us, everyone. On the call, we have Rob Thompson, our President of North America Metals, and Rob has really been the driving force behind this acquisition. I also have our CFO, Warrick Ranson, here in the room with me in Sydney.

Let's turn to Slide 4. Overnight, we announced the purchase of a Houston-based entity called Tri-Coastal Trading, TCT for short, for USD 66.5 million. We have a presentation to run through today in relation to that acquisition. It will take around 15 minutes or so, and then we'll move into Q&A.

Look, let me firstly provide a high-level overview of the transaction, which Rob will cover in more detail soon. This really does solve a dilemma we've had in Houston. We turned the business around, but we needed access to better options, both domestically and internationally to really drive performance. We have a suitable piece of land to achieve this at Mayo Shell, but the capital cost to upgrade the port at Mayo Shell and I guess, the size of our existing ferrous business just did not justify the CapEx. TCT gives us this deepwater access and therefore, optionality, but it also provides much more than that. It materially increases our presence in the market in excess of another 350,000 tonnes. It significantly reduces our operating costs through the Instructure service agreement contract. And it frees up for sale all our land in Houston. We estimate in excess of USD 100 million, including the Mayo Shell property.

Looking at it from a numbers perspective, we paid a bit less than 4x EBITDA post synergies, the combined businesses and by that, I mean our existing ferrous and nonferrous operations plus the TCT acquisition. So that combined business that's expected to have an annual EBITDA of USD 25 million and a return on invested capital of over 20%.

I want to turn to the next slide now, which is on strategic property management, which is all about optimizing our property holdings to create value for shareholders. You will see that we have commenced the hiring process for property strategy lead. Now this is a global role looking at all of our properties, and we broadly categorize those properties into 4 areas. The first are properties such as Mayo Shell, where we have entered into a contract for sale. The second are properties we are actively marketing or getting ready for sale and will soon begin the marketing process. Obviously, the remaining sites in Houston fit nicely into this category now that we've acquired TCT.

The third category is the most complicated and the area where our new property leaders are likely to spend the most time. These are the sites where it has become obvious over the next, let's say, the next 5 to 10 years that the most valuable use of that land will not be metal recycling. We need to develop a plan off these sites and relocate to alternative sites or even sites without impacting the existing franchise or book of business. Interestingly, a good example here would be the Houston sites 5 years ago. Finally, we have those sites that we would expect to retain well beyond the 10-year time frame. That's all I want to cover.

So I'll hand over to Rob now.

Next slide, please operator. Well, thank you for joining us today. I'm excited to talk to you about this transaction and the opportunity. It wouldn't be possible without the hard work of the NAM leadership team. 18 to 20 months ago, we embarked on a turnaround in this region, extensive cost reductions, the difficult decisions that come with that, margin obsession in ferrous, buy-sell improvements and great growth in our nonferrous areas. A lot of self-help, we call it must-win battles, and we're excited about this opportunity as the next step with consolidation.

This market and to give some context, the Houston area is one of the largest industrial markets supported by energy, but also by the heavy infrastructure and the industrialization that is there to support ports and bridges and warehousing. The Houston area itself is the fourth largest city in the U.S. It's predicted to surpass Chicago for the third spot with 2.3 million people in the city proper. And that actually blows up to about 7.8 million people when you consider the greater Houston area. The state of Texas has over 32 million people. The GDP for Texas is the second largest in the nation at USD 2.5 million -- or USD 1 trillion rather, sorry, only taking a backseat to California.

From a pricing strategy opportunity point of view, the picture on the right depicts the FOB pricing for roughly but the last 12 months. And you can see or view the price premium or arbitrage when you look at the FOB pricing, international price versus domestic price. Important to note, prior to the acquisition, we did not have the ability to access the export market without considerable costs, and that was a competitive disadvantage that we had to endure. But it also affects negotiations domestically and on a larger scale where we ship from for Sims North America metals.

For now, we have better proximity to Mexico and consider short sea access as well as deep sea access, effectively putting us in a competitive advantage for 2.2 million tonnes of imports into that country as well. Not to mention other South American consumers Mediterranean and European markets as well. optionality and optimization with our U.S. East Coast business. Once fully consolidated, we have a priority access to 2 berths and a scheduled access to a third if we should choose to use or load out larger Supramax class vessels.

Domestically, it will allow us to be more efficient with better access to rail up to a 33 car spur served by UP, but with switching rights with the BNO as well, dual served, allowing us also to ship out by ocean-going barge for domestic consumption as well as loading out river barges as we do today in our current asset footprint. It should be noted that the Texas market has 6 steel mills, consuming approximately 7.6 million tonnes a year, while neighboring Arkansas has 6 steel mills as well, consuming around 12.6 million tonnes of scrap and scrap substitutes a year, not to mention considerable demand in Mississippi and soon to be in Louisiana.

Next slide, please. So on the consolidated ferrous operations side, revenue margin perspective, I've already mentioned the optimization of the FOB premium markets. For clarity's sake, having "bullets in our gun, the capability provides us with both domestic and international leverage, sell for the best price, all modes of logistics, something we do very well in other regions." We have an exclusive in terms of recycled metals at the terminal and city dock, where Instructure operates.

The acquisition of the commercial contracts and relationships broadens our supply base and catchment area. That was also very attractive to us. As Stephen said, we are adding 350,000 tonnes of ferrous volume, bringing scale and market share, but also options commercially, i.e., the international and domestic space and not ore, 30,000-tonne handysize vessels plus 20,000 tonnes of domestic shipments would priorly take us 2.5 -- or 1.5 to 2 months to accumulate. Now we can do that in a month.

On the cost synergy side, we will have considerable rationalization of our footprint, targeting the sale of up to 3 additional sites beyond the mentioned Mayo Shell, all in around the Houston area. And I'll try to remind myself to show you the Mayo Shell property in the video coming up next. The Woodhouse terminal exclusively eliminates extra handling costs and transportation to the docks. The consolidation of the additional volume, as you would expect, provides a reduced cost per ton impact. The agreement with Instructure ranges over 18 years remaining, and there are 2 5-year extensions, as mentioned, logistics optionality.

From a capital efficiency point of view, as Stephen mentioned, we currently have Mayo Shell under contract, and we expect a gradual wind down of our existing ferrous operations at Chapot Street as we ramp up the Woodhouse terminal capabilities. Our nonferrous location and maintenance locations, we are actively looking for a proper and suitable relocation. In the wind down, we will redeploy significant assets to facilities -- to facilitate rather the additional volume at the port, but also redistribute redundant equipment throughout the North America Metals group. CapEx avoidance, including a small shredder acquired, which will be -- which is being studied to be utilized in our aluminum shredding area, several cranes, scales, boxes and containers as well.

Internally, we call this the Mayo Shell no regrets strategic acquisition as the cost to develop land geotechnically build out the civil and infrastructure were quite costly and without, obviously, the market share that we just acquired with the consolidation of the TCT business. The proceeds of the lands and mentioned CapEx avoidance can be used elsewhere. You can see and I have heard from Stephen our expectations of ROIC to be greater than 20%, driven by better earnings from margin improvements and cost outs with growth, but also with significant capital release.

If we could go to the next video slide, please. And operator, if you wouldn't mind just pausing right here for a moment. This is drone imagery kudos to our friends at Instructure, and we'll give you a great view of the new site and operations. And before we go forward, if I can take your eyes to the top right-hand corner, where you see the red stacked containers. And if you glance towards the center of the page at the top, you'll see some green space as you go towards the would be water. That is Mayo Shell. So you can see we aren't moving very far in terms of location and haven't given much up in terms of opportunity in the marketplace.

Inside of the gate area and once I go forward here, you're going to see our area of use is approximately 20 acres, consisting of 3 different areas. Two are within the secured area. It is a secured port. And when there is a vessel on the berth, that area is completely secured and all visitors, guess or otherwise, workers need to be properly validated with identification. We have a third site, which I'll point out later that is off-site, which will allow us to have smaller dealers, peddlers and some unprocessed or processing of unprepared material with a separate scale and so on.

So we can proceed now, if you wouldn't mind, bottom or middle of the screen there, a small building with a scale and radiation detector as we come in through the gate. You can see a car passing out through that secure gated area now. Several tracks of rail structure along the left-hand side of the total site, which Instructure will continue to handle some of their steel business as well. On the right-hand side, you can see the scrap piles will continue to exist in those sites. In front of you, you see where the vessel is on berth, that is berth 1. That is no restricted over 12 meters of water.

If you could pause here again, please, operator. So again, where the vessel is, we can load Supramax vessels, no restrictions. Supramax vessels allow us to go further with 45,000 to 55,000 tonnes of cargo. We have a scheduled right to utilize this berth. Directly in front of us on the left-hand side is berth 2 and the perpendicular dock that ends the waterway is berth 3. These are priority rights to us under our agreement. Berth 2 allows us to load handysize vessels just under -- or yes, just under 11 meters of water and berth 3, we can either utilize for oceangoing barges or river barges stacked along either berth 2 or berth 3.

The property directly in front of the docks is the area that we will be utilizing and staging material. And you can see the railcars in the middle as well. That's all of the rail spur that we will be utilizing for inbound and outbound. And directly in front of us on the left-hand corner is a processing area that we will be utilizing as well. And if you want to go forward again, operator, you can see some of the equipment there, 7 or 8 cranes already on site, and we intend to add to that with shears and other cranes from our existing site.

I will hand this back to our operator, Harmony now.

[Operator Instructions] Your first question comes from Peter Steyn from Macquarie.

I was just curious around Instructure and the novation of the service agreement. Who is the counterparty to that? And could you perhaps just give us a bit of a sense of how Instructure fits into the context of TCT post acquisition?

Yes. Sure. Thanks, Peter. Rob, maybe it's best for you to take Peter through how that Instructure transaction works and their relationship with the port and our relationship with them and maybe talk a little bit about the existing relationship we have with Instructure.

Yes, sure. We currently have existing relationship and a very similar agreement with Instructure in 2 other sites additional to this. This is quite a larger version of that. We have one in Connecticut, one in Fairless, Pennsylvania as well. This particular agreement Instructure has a right and an agreement with the Port of Houston to operate on this site for Stevedoring reasons. And they have extended that to ourselves now under an agreement to ship out material or ship in material as well as process scrap metal on the site.

Got you. So they're an existing roll player that is effectively contracted for that 18-year period plus the [ 2 5 ] options.

Yes, that's correct.

Got you. If I may sneak one other one quickly. Could you comment on the base profitability of your business in Houston, how much EBITDA it generates at present?

Maybe Warrick, you're happy to take that one, I guess we disclosed the total.

Yes. I mean, Peter, we don't sort of disclose our regional earnings. I think we've provided enough sort of information that you can sort of work backwards a little bit in terms of what we've provided. I think for modeling purposes, et cetera, that's probably sufficient in terms of what you would need. But yes, for commercial reasons, we don't disclose regional earnings.

Your next question comes from Brook Campbell-Crawford from Barrenjoey.

Just first one on, I guess, the business itself, obviously, a trading business, which would seem that some of the key assets you're buying really are people, kind of know-how relationships and sort of trading capability, I would have thought, correct me if I'm wrong. So can you kind of talk about what you're doing to ensure you hold on to people who are in the business that you're acquiring, if there's any earnouts, things like that would be helpful.

Yes. I'll let Rob answer that in a bit more detail. But my view is it's -- we're buying much more than a trading business. We're buying access to an incredible facility that will provide us with competitive advantage not only for the scrap that we're buying here, the heavy melt we're buying, but also our existing business. It really reduces our operating costs significantly. It provides us much more optionality domestically and internationally, I think. So in that sense, it's much more than a trading operation. But Rob, I'll hand over you to how you've been thinking about, I guess, the people aspects of it and how we're going to take the business going forward.

Yes. This operation from a white collar perspective, and it's very largely commercial. As you can see, Instructure operates at the facility. So commercially, we have retained those key talents that we feel are necessary additional to the folks that we already have in this region. So we've -- in our opinion, we've combined to create a bit of a powerhouse team. In terms of retention and agreements, those are in place.

I think pointing out there are no earnouts on the deal.

No.

Great. And just 2 other quick ones. Firstly, just can you provide a bit of color, and you might have done this already, but just a little bit of information around where the scrap is sourced from currently? I guess how much is very local from the Houston market versus further afield? And then just a quick follow-up on what sort of depreciation and amortization should we assume that comes along with the deal just to help a little bit with our EPS accretion calc?

Rob, if I get you to cover off the issue around scrap collection in the Houston market, and then I'll get Warrick to talk about the depreciation and amortization.

Yes. The vast majority of it is fairly local. I would say, without getting into, again, commercially sensitive information, it's greater Houston areas. We're just talking about before we became live here. There are some opportunities whereby Tri-Coastal has used their logistics prowess to return barges with material. So there is some brokerage in the volume. However, in the modeling that we've done and the physical tons that will go across the dock, we've only used proprietary tonnes. So we've been fairly conservative in the volume. But I would suffice it to say majority of it is local.

Yes. And I think just on the amortization question, we still got to go through our PPA review and formalize that. But I think our expectation at this stage is that most of the price will be attributable to the service contract. And so we'll amortize that over the 18-year period to start with.

Your next question comes from Harry Saunders from E&P.

Just following on firstly from the D&A. So I just want to clarify, I think the implied incremental EBITDA versus your sort of existing business from that 4x implies about USD 17 million, including the synergies. So just wondering is that figure you were talking to, is that the incremental D&A we should assume on top of the base business? And then I'll follow on.

Yes, if you amortize the purchase price, that would be the incremental. Yes.

Got it. And then just in terms of that sort of implied USD 17 million, can you break out or give a broad sense of the split between the existing EBITDA acquired versus the synergies assumed?

No. That's sort of along the lines of Peter's question. Yes, that's not something that we would disclose commercially.

Okay. And also just following on, can you give an idea of the time frame for the acquisition to complete and then the time frame to achieve that full implied run rate of USD 17 million. Would you hit that from day 1, say, if it completed 1st of July? Or is there a ramp-up period?

I might ask Rob to sort of respond to that in more detail. But obviously, there is a ramp-up period. The acquisition has been completed. Completed today. So that's done. So the team will start moving forward. But yes, it will take some time to transition from existing sites, et cetera. So I guess Rob, when would you expect -- I mean, '27 is going to be materially there. But when would you expect like full, I guess, fully fledged synergies in place year of operation?

Yes. Our expectation, gentlemen, is by the end of this third quarter, we'll see an appreciable ramp-up and a ramp down of our existing sites. So going into our last quarter of the year, we're expecting to be almost at full throttle. 90 to 120 days maximum.

Right. So based on that, you would see '27 as -- first full year of operation, 2027 is materially if not entirely at the run rate.

Correct, yes.

Your next question comes from Lee Power from JPMorgan.

Maybe just on the rest of the property, like can you talk about what you need to do in terms of rehab, if anything, to prepare that sale?

Not a lot, Lee. So we've got to get off the site, which, as Rob said, we're off the sites entirely, let's say, by the end of June. Rob talks about the fourth quarter, there will be some residual stuff. Our nonferrous site will stay for a little bit longer as we look for an alternative leasing for that, not -- and that's not a significant cost to site.

The rest of it is then really about marketing. And I guess what we've learned in Mayo Shell that it will take around 12 to 18 months of marketing, getting people in, then doing due diligence, getting bids organized. We expect there will be quite a lot of interest in this, but it will come -- all of that interest will come with complexity, some of this, some of that. So that's why we -- I guess that's why we've said it will be 12 to 18 months. But most -- the majority of that, frankly, will be getting off the site and then marketing it. We're not expecting significant environmental issues.

Excellent. And then just following on from Harry's question. So it seems like the bulk of the synergies are from the service agreement around the dock facility. Is that the right way to think about it? And that's why the synergies come relatively quickly because you implement a service agreement and you've got decent line of sight into a bulk of the synergies from that. Is that kind of the point we should be taking...

I believe so, Rob, what's your take on that, but I feel that feels correct to me.

That is the bulk of it. There's some minor executive salaries that are obviously gone as of today from the existing TCT company. But you're hitting the nail on the head. It's -- the majority is from the facility here and the cost out.

Your next question comes from Chen Jiang from Bank of America.

Congrats on the deal. Firstly, just a follow-up on that USD 25 million incremental EBITDA contribution. As you mentioned, it's more like a synergy from infrastructure, trading brokerage, et cetera. But how should we think about the incremental volume from here because TCT still has in your release 350,000 tonne per annum process scrap. So shall we assume you will have that incremental volume of sales of scrap from here?

I think, first of all, it's the USD 25 million is consolidated. It's not incremental. So it's taking all of our existing ferrous and nonferrous, combining it with TCT. And based on current prices, our estimate is USD 25 million. So it's very much consolidated. The 350,000 tonnes is absolutely incremental tonnes. And maybe, Rob, any commentary on that around your thoughts on maintaining, growing those existing tonnes, the assumptions we made around it. Sorry, those incremental tonnes extra 350,000.

Yes, it's definitely incremental. The 350,000. I would say without getting too over my skis that it is fairly conservative. So we did factor in some shrinkage, but I would say to achieve the 350,000 it won't be heroic.

Right. So you've got incremental 350,000 tonnes per annum of scrap and you have synergies plus access to the deepwater dock, which you can probably sell -- have more access to domestic as well as international market. So I'm wondering, is that USD 25 million incremental EBITDA will be conservative? Does that mean either your Houston business at the moment is not making money or it is because the TCT, they are struggling -- I mean, financially struggling, so they sell to you. What's the rationale like they are willing to sell below 4x?

We just need to make it clear, it's not USD 25 million of incremental EBITDA. It's USD 25 million of EBITDA for the new consolidated business. So you shouldn't be thinking there's an additional USD 25 million. Is it conservative or otherwise, it's our best estimate based on current pricing of what we think the business is going to produce. And I would also say it wasn't -- I mean, it wasn't a stress seller. This was a willing buyer, willing seller transaction where the synergies that we could extract for ourselves were significant as a result of combining the businesses and particularly how the Instructure contract is going to work across the combined volumes of the business.

Sure, sure. Can I squeeze last question just on the land sale. Just if you can remind us what's the remaining land sale options from here? Is that all you have from U.S.? Because from the memory, last February or last August, you mentioned, I think there's a big number of land sales.

Yes. I think we've mentioned that from my memory USD 1 million to USD 150 million, USD 100 million to USD 150 million. So what we're saying now is that this is in excess of USD 100 million. I mean we don't want -- we haven't put out very specific numbers. Commercially, we don't want to hamper ourselves as to expectations. We want to -- we will get the best price we can get. So what we're saying is this is in excess of USD 100 million.

We last talked about USD 100 million to USD 150 million. So clearly, the largest proportion of what we had for sale with the Houston -- what we potentially have to sell with these Houston properties. We also have a number of smaller properties. We've got, I think, 1 or 2 in Chicago that we're looking at. None of this magnitude, but you put them all together and they add up to some tens of millions. And so those will fit into the category, I would say, our category 2, where we are either actively marketing them or getting them ready for actively marketing. Hopefully, that answers that.

Sure. So which means the remaining land property value is kind of -- you have the majority of your property in U.S.

Yes. In that category 2, that's probably fair to say. I'm still comfortable with our USD 100 million to USD 150 million number that we put out, including all of this land that we put out, was it a year or so ago, I think we said it was about.

Yes. I'd say, Chen, within the boundary of the USD 100 million to USD 150 million as this is primarily it. I think though that as Stephen said, bringing on our property lead role is about seeing where additional value can be created from the land portfolio and over what period, et cetera. So that's work in front of us. But -- so it's not the end of the U.S. sales. It's just where we are today in terms of what we know.

Your next question comes from Paul Young from Goldman Sachs.

And it seems like a pretty smart bolt-on acquisition, which wasn't competitive, which is great. And I think it is your largest acquisition since I think you bought Baltimore in '23. So -- and it does appear on strategy because I know Stephen and Warrick, you've been talking about bolt-ons, additional bolt-ons or potential for the last 12 months. So that's actually the question I have just on the landscape for M&A at the moment. The U.S. steel industry at the moment, demand is strong, utilization rates are high. So are you continuing to look out for additional deals? And what's the high-level sort of landscape for further possible further transactions?

Yes. The short answer is yes, we are because we also talked about in that strategy, and Rob, I'll get you to jump in a second. But we did talk about in that strategy that we're looking for maybe some smaller bolt-ons around our shredders to buy us more unprocessed scrap and give us a stronger network around our shredders. That work continues and nothing has changed there. Rob, any thoughts on that? Because I think it is right that it's a very dynamic market in the U.S. at the moment.

Yes. No, very much along the line, Stephen. I think, Paul, we're always on the lookout for the right opportunity. I think we have 2 or 3 conversations with small, very regional feeder yard networking, spoken hub type of arrangements, more logistics and some catchment areas, nonferrous retail. And as Stephen says, I think it takes 2 to tango, the right moment for an entrepreneur to exit. And if it's in our catchment area and/or SA recycling, we always will take a look at it. Yes.

Yes, this is not the end. We still continue with these bolt-on acquisitions and any other -- I mean, I think larger opportunities come up less frequently and we're not looking at those either.

Yes. Understood. And then as far as the export markets, is it just the traditional markets guys? Like are we talking about the scrap here is being exported into mostly Turkey, Middle East?

Rob?

It's got a little more nuance to it. It's because of the proximity in the Gulf. It tends to be a bit of a draw to Mexico as well. The nice thing there, you don't have to accumulate 30,000 tonnes. It's very, very economical and competitive to go into Mexico. As I said earlier, Mexico is a scrap deficit region, in particular, for the long products mills that need obsolete scrap. But definitely, proximity to South America and also Turkey, Greece, Italy, all who have significant long products demands for this type of scrap.

Got it. And just last one, just any -- Stephen, any tax implications on the land sale in excess of USD 100 million? Any capital gains tax or anything we should be considering?

No, we've got -- the answer is no. We've held that land for a number of years, et cetera. So -- and yes, we'll hopefully be able to book quite a good profit over the current book value.

Your next question comes from Will Wilson from UBS.

My question just got asked and answered.

Your next question comes from Ramoun Lazar from Jefferies.

Just a couple of quick ones from me. Stephen, does this broadly, I guess, signal a bit of a shift in your strategy of being a more northern coastal operator now moving further south? And should we expect more sort of transactions to bulk up the southern footprint of the business?

In short, I don't believe so. This -- we've always operated in Houston. We just never -- and we were never quite able to unlock the full value of it, and this is what that transaction does. So no, it's not a signaling of that. the southern states are largely recycling, and that will remain. This just -- there's a set of circumstances here, Ramoun, where this just worked. It was we had an existing significant business that we weren't able to really optimize. This transaction has allowed us to fully optimize it. So not much more than that really.

Okay. Got it. And just having a look at the Tri-Coastal website, it looks like they handle about 800,000 tonnes of product against the 350,000 that you were talking about. But it looks like that includes other materials like plastic and cardboard. Are you looking to exit those kind of products? And then does that 800,000 tonnes highlight the potential capacity of that facility that you could potentially switch to ferrous and nonferrous products?

I think a couple of things on that 100,000. We're not exactly sure what flies to because I agree we saw that as well. I'm not 100% sure that applies to, but it certainly would include a lot of brokerage. And we may or may not do brokerage. If it works, we'll do it, as Rob talked about. But the proprietary tonnes were less than that. And I guess we're comfortable with that 350,000 estimate. Does it signal the growth potential? I mean we do think there's growth potential there, but it's -- I mean just really it's actually got nothing to do with the gap between 800,000 and 350,000 most of that gap would be, Rob, I presume them bringing -- as you said, bringing in particularly maybe some other items.

Yes. First, I think I'll clarify to you. I believe the 800,000 is probably an old number. Two, the owner had stopped handling the plastic and the paper and cardboard long ago and largely nonexistent in nonferrous. Our existing Sims North American metal nonferrous business is very alive and well in this region. So I'm comfortable with the 350,000. Again, it's not ultra conservative, but it's not heroic either. So as Stephen says, there's some brokerage that we've modeled into retention, but it will have to work for us. I'm not going to trade 2 nickels for a dime as they say.

Your next question comes from Owen Birrell from RBC.

I guess a bit further to Ramoun's question. TCT Instructure are effectively the Stephen on the facility. Is that correct?

Instructure.

Sorry. Yes, that's correct.

Yes, Instructure, yes.

Yes. Now I saw that they were previously moving a lot of steel products, coil, structural steels and the like. Do they still have access to move other products from that site? Or your exclusive access basically means that they are exclusively stevedoring for Sims and Sims only. Is that the way I should think about this?

Rob?

No. Instructure will operate the entire dock facility for their purposes. We have a right or a use of space on site of the dock and Instructure will handle, receive, pile, process our material on the dock in addition to the other products. We have an exclusive for metal scrap recycling on the dock space. So they can handle finished products, they can handle Belgian block, they can handle anything else. Anything coming in or out of there that's related to raw materials for the metal side of the business is exclusive to us.

And so have you acquired the land holding and therefore, an exclusive use of a piece of that land? And can you give us a sense how big that piece of land is?

It's Warrick here. No, this is a services contract. So we're not acquiring any land. We're acquiring -- we've basically novated the services contract. So we don't manage the wharf -- that's Instructure. And what -- as part of that service arrangement, they provide the land and the facility and the obligation to undertake the services. So which is -- so it's not a lease per se, it's a services contract that we for into.

Right. And so can I ask about things like equipment like shredders and processing equipment. Are you going to be putting processing equipment on the site? Or do you still need another site somewhere within that region to undertake all your processing activities?

I'll let Rob answer, but it's a different material. So it's not a shredding facility. So Rob?

Yes. This is predominantly a cut grade obsolete scrap, too heavy to go through a shredder. This will be the only site for processing ferrous scrap for us. So everything will be either mobile or stationary over the 18 to 28 years of existence on this site. There will be no other site in the foreseeable future that we have imagined anyways.

And Houston that undertake, I guess, shredding capabilities or nonferrous processing? Or is this market so different from all of your other parts of your broader portfolio?

I missed the very beginning of the question, I'm sorry.

Are there other parts of the Houston hub that undertake shredding and processing activities or nonferrous processing that you will retain as part of your consolidation?

Certainly. We have -- as Stephen mentioned, we have another facility only for nonferrous, and we're currently looking to relocate that location as well, which would allow us to sell that property, and we would enter into a lease. So we have a substantial nonferrous business that we expect to continue and grow. There are other competitive shredders in this region. It just wasn't something that Sims had in the past and probably not the moment for us to enter into in this region.

Okay. And just one final question, I think, for Warrick. Fair to say you're going to make a profit on the sale of that Mayo Shell property. Can we just assume that's going to be treated as a one-off in the second half? Are you able to give us a sense of the magnitude of that profit on sale and more importantly, the potential tax impact that's going to come through the books?

No. I'm answering no to a lot of questions today, but no, that's -- I mean we're working through that. We have entered into a binding sale agreement subject to DD on that property. We'll wait until we finalize that.

Your next question comes from Scott Ryall from Rimor Equity Research.

My question is a bit more high level because I guess I share Rob's view that it very much looks like a no regrets transaction if you're selling a piece of land to fund this acquisition and you're avoiding potential CapEx going forward. That seems like a really easy equation for everyone to get around. So -- and allows your site consolidation as you've set out.

So previously, I don't know who answer this, Stephen or Rob, but previously, you've set out what you were intending to do across the broader North American business, which was improve the source of volumes, improve the destination or optionality around destination and improve the composition of your intake. Could you just give me a sense, is this just a really good acquisition for Houston? Or does it actually go towards solving some of those more strategic issues that you've been working on over the last 2 or 3 years, please?

Rob, I'll let you deal with that one as part of our NAM road map. But I mean there is an element before, Rob, I'll do my overall. There is definitely an element that this transaction really does suit what we have in Houston and solved a significant dilemma. So therefore, it's very additive to shareholders. It does -- I believe it does fit in with potentially with the rest of our business. But maybe Rob, I'll let you answer a little bit more detail on that.

Yes. I think the way I would try to describe, there's a lot to unpack in your question. In the United States, somebody mentioned it earlier, operating rates are tremendous. Steel mills are very healthy. Margins are there. They're running full. Second part I will answer is basically there are 2 types of steelmaking companies around the world, those that make flat-rolled steel and those that make long steel.

Flat-rolled steel is largely coil or plate requires a different metallurgical content for raw materials. sometimes even scrap substitutes like pig iron or DRI. The long steel side of the business around the world is wide flange beams, piling, merchant bar, rebar requires practically 100% scrap. And in this region, in all of the regions I just mentioned internationally, Turkey, Greece, Italy and Mexico, the majority of the customers in this region are long products mills. They want a long or a cut grade package. The reason is the price in North America for shredded has a premium to that of cut grades. And they can't afford to pay for that nor do they want to. Their mantra is to have the lowest billet or the lowest slab cost after their furnace cost.

So this play here was really an opportunistic moment where somebody wanted to sell a business. It was a perfect fit for Sims. We were going to do something and develop land. We're very good at processing scrap. You are right, we wanted to diversify. The diversification that we've undertaken over the years has not only been to buy more unprocessed shreddable material to utilize our capacity in our shredders, but it's also for examples like this where we had sheer capacity or we weren't getting the most competitive pricing because we had some kind of an uncompetitive disadvantage, i.e., the bulk opportunity that we didn't have before without considerable costs, still without going to the city dock. So this really continues that. We're going to continue to buy more unprocessed material and utilize what we think is a competitive advantage here, partnering with Instructure in this wonderful facility here.

Your next question comes from Harry Saunders from E&P.

Just wanted to get more of a sense of the ballpark of the run rate to assume for the rest of this year and the first part of next year, I guess, before you hit that full sort of USD 17 million that indicated from probably Q4 calendar year, please?

Yes. So my view is our intention is to ramp it up to at or close to where we -- the run rate by the end of the year. I'm not sure if I put too much into that, though, because you've got to assume there's been some cost of doing that and there could be some delays. But I would -- I believe that we'll be ready from the 1st of July for pretty close to that, if not that number for FY '27. So I think -- my view is you should assume a full run rate from 1st of July, but not put too much into the balance of this year because it will take us a while to move off our sites and get everything ready.

Got it. I think there was some confusion around calendar year quarters. So effectively very little this FY '26 and then 1st of July full run rate.

I think that [indiscernible].

Great. And can you just give a sense of the -- I appreciate you can't provide a number for commerciality, but the proceeds from Mayo Shell, are we talking the majority, I suppose, of the acquisition consideration?

Yes. Yes, we are.

Okay. And just final one. I know we talked a lot about the optionality around export and everything else. Would you view this also similar to that SAR playbook of consolidating share in each market, market power type discussion there?

Rob, I mean, I don't -- I wouldn't use the word market power. Houston is a big market with lots of competitors. There's no doubt about that. But from my perspective, this is definitely a consolidation. I mean we had a significant cut grade business there. We've now combined it with another very significant cut grade business there. So I think we've consolidated. I still think from a competitive point of view, there's still plenty of competition. Rob, what's your view on that?

Very similar, Stephen, I concur with your comments.

Your next question comes from Owen Birrell from RBC.

I just wanted to look at the D&A for this acquisition, USD 66.5 million. You essentially acquired the assets of Tri-Coastal Trading, but have you actually bought any physical assets yet to be depreciated? Or is this 100% access agreement, so 100% amortized over, call it, 18 years?

Yes. Warrick here again. So as I said, we still have to go through a PPA allocation process, which we'll do, which we started. I think -- correct me if I'm wrong, Rob, but there's about sort of [ USD 7 million ] of fixed assets that come in with the deal, as Rob said, mobile equipment, et cetera. And -- but we believe that the majority of the purchase price, take off that [ USD 7 million ], let's say, and that there may be a small amount that's allocated to customer goodwill and then the rest will amortize over the -- we'll apply against the services contract and amortize that over the life of the contract.

Should we think 18 years? Or should we be thinking 28 years given the 2 5-year extensions?

They're options, so we would start on 18.

There are no further questions at this time. I'll now hand back to Stephen Mikkelsen for closing remarks.

Well, thanks for the interest, everyone. Lots of good questions. A couple of final points for me. You'll see we've got the Investor Day in March. So you'll get the opportunity to see Houston live. We're going to have a really nice tour of that facility. And we're also planning on having maybe a bit of an update from SA Recycling.

We'll bundle that all into one big metal update in Houston, followed by a site tour, and then we'll be off to Nashville the following day to look around that facility and talk about SLS some more. So I'd encourage anyone who wants to go to come to that tickets are selling fast. For those of you who can't make it, we will see you next week at the results -- the half year results presentation. Thanks for joining us.

Good morning, everyone, and a warm welcome to everyone listening remotely. My name is Ana Metelo, and I run the Investor Relations function here at Sims. It's very good to see so many people here in person today. I will cover the agenda for today, which you can see on the screen. We will start today with Stephen going through the SLS business. We will then move on to ANZ Metal. We'll hear from John Glyde and Graeme Cameron on to ANZ Metal just before we break for lunch, and lunch will be served outside.

I would like just to go through a few practical points. We set up a PPE station just at the back of the room. And when we finish lunch, we should all get back here into the room and get into our safety gear. Just a reminder that you should leave a few things here in the room. Everything will be locked. And then when we are back from the tour, you should leave all the PPE here, not in the bus, not in the site, just here, so our team can collect it.

A few other things, group structure. So you've noticed that we've divided the group into 2, Group 1 and Group 2. And that's so everyone gets the chance to hear the tour and get more exposure. You should have received an e-mail with your group allocation. If you have not or if you're not -- if you're unsure, please find a way from my team, and they will clarify that for you. The part of time, so that's a request I want to make there is for us to finish lunch by 11:40 so we can get back here and have plenty of time to get into our safety gear and then go outside, gather outside and get on the bus and be on time.

Q&A, that's my last point here. I would ask everyone to ask the questions at the end of the presentation, so not interrupt the presenters. John and Graeme presentation, it's a joint presentation, so you should wait until the end. And that's all from me. Enjoy the presentations and the tour, and I look forward to hear the feedback at the end.

And I'll hand over to Stephen to kick off the day.

Thank you very much, Ana. I will be allowing plenty of time at the end of my presentation for questions on SLS because I'm sure there will be a few. So I'll add my welcome. I think we've got a really good day lined up for everybody today. I'm looking forward to the interactions, but let's get through the presentation.

The first point, I've got a couple of slides first, which really maybe talk about a little bit the Sims Group as a whole before I will dive into a fair bit of detail on SLS. I guess the first point I'd make is that we've spent the last 2 or 3 years really honing down to what I believe is now the Sims business that we want to take forward. So if you think a few years ago, we had SRR, we had SMR, which is the municipal recycling business based out of New York. We had SRS, which was very much a small domestic appliance, small electronics type business. We thought long and hard about what businesses do we want to take forward. And we really have got 2 key segments now. That's clearly the metal segments, which John and Graeme will talk more about ANZ on that. And then there's the SLS segment.

So we believe those are the 2 segments we want to take forward. We've really simplified the business down to that. There's some common themes between the 2, things like being quality-led and technology-led operations that applies in different ways, but that same theme applies both across the Metal business and the SLS business. And we are really focusing on disciplined investment for long-term value. So there's a big focus internally about capital allocation, making sure we're spending the money in the right place to deliver the returns we want. And I think already, you'll see the last point there, I think we've created a more resilient business with higher quality earnings than we had several years ago. And that was always an achievement we wanted to get to. I'm not saying we finished that journey, but I think we've made a very good start. So that's the way I see Sims going forward.

How do we create value? We've shown this slide quite a lot, so I'm not going to go through it in detail. But our purpose does always remain the same to create a world without waste to preserve our planet. And we simply do that by repurposing and recycling. We've then got the pillars there of customers, suppliers, operational efficiency, innovative and agile and invest responsibly, all underpinned by our culture. There's just 2 I want to highlight that I think are particularly pertinent to SLS. All of them apply, by the way, all pillars apply. But I think there's 2 I want to call out, and I think that will help frame the deeper discussion we're going to have on SLS. One is operational efficiency. And the first point there is safe operations. Now from our customers' perspective, that's safe in its broadest possible context. So it's not just physical safety, which is, of course, extremely important, whether you're at SLS or the Metal business, but it's safety around the security of the product that we deal with, the quality of what we produce from that product.

Our customers view that as what a safe operation. When we take and decommission a data center, they are comfortable in the knowledge that it is safe to be doing that. Aligned end-to-end supply chain, hugely important in the SLS business. And in many ways, SLS business is a logistics business and an inventory management business as well. And SLS provides that end-to-end supply chain from the time the from the time the rack leaves the data center to maybe ultimately the steel component of the rack is sent off to one of our metal recycling facilities to be shredded. So right across that supply chain, SLS operates everywhere, and that is a key part of its value proposition.

And the last one is around scalable and replicable capacity. SLS is growing rapidly. And so to be able to grow rapidly and scale is hugely important. And that is -- that's one of the things that we deliver to our customers. The second one around innovative and agile, I think maybe in some ways, self-explanatory for SLS, but we have responded rapidly to shifts in the market. And those shifts are happening rapidly and probably at a greater speed than any of us envisaged a couple of years ago. So a very, very important part of the value chain for SLS.

The use of data to drive performance. SLS is a data-driven business. The amount of data it collects, the amount of -- and the amount it uses that data to drive the business is, as you would expect, quite extraordinary and will continue to be a big part of the business. And lastly, simplified structures. We deal in SLS with a complex part of the market. We've simplified the business down to a few key propositions that we have for customers and customers have got a very clear understanding of where they interact with us, how they should interact with us and what part of the business is dealing with what part of their value chain. So I just wanted to highlight those 2. The rest of them absolutely apply. But in the interest of time, let's move on to SLS or Sims Lifecycle Services.

So a couple of points I want to make on this chart or the 2 charts. So the first one is there's around about a 4-year refresh cycle in data centers. So you can see there in 2021, that is the equipment we are now dealing with in 2025. So the dotted arrow going from the growth in data center investment and you're seeing how that investment manifests itself in the growth in SLS revenue. What we're showing there on the orange line is investment per annum, and this is particularly focusing on the U.S. market. And let's be really clear. Right now, the U.S. market is our most important market by a long way, and I'll talk about that. So you're seeing the investment in the U.S. market and how the revenue -- how our revenue profile follows that, but it gets lagged by about 4 years.

So you can see the investment in 2025 right now, you can see quite a steep rise up. We would fully expect to see that commensurate rise up in 2029 when that equipment comes out. I want to now briefly talk about uncountable numbers. So how much investment is going into data centers? Well, the McKinsey study from April 2028 estimates that between now and 2030 -- well, sorry, from a couple of years ago in 2030, there's $7 trillion of investment going into data centers. I've been thinking about this, whether it's $7 trillion, $5 trillion, $4 trillion, $6.5 trillion, they're all quite uncountable numbers. And the point being there is huge, huge investment going into data centers and committed to going into data centers.

Now in a data center, obviously, the entire $7 trillion is not data center equipment. It's buildings, it's air conditioning, it's data center equipment, it's concrete. The estimates are depending on the type of data center, about anywhere between 30% and 50% of the investment is actually on the data center equipment, which we deal with, whether it be GPUs, racks, DIMMs, all of those types of things. So you can see the investment is very, very strong.

I want to go to the right-hand chart. This is the DDR4 chip price. DDR4s in terms of our hyperscaler repurposing and reselling are the absolute core of what we do. You can see the extraordinary growth in price that has happened in a DDR4. And I want to explain really briefly what has driven that. And it's all about -- and I'm going to -- I'm only going to use the word once, hopefully, it's all about AI. I've got the word in. It is actually about AI. So what's happened is that AI uses a chip called a DDR5. It's just such a high-power chip, absolutely purpose-built and suitable for AI. World manufacturers have switched from producing DDR4s and they are now, by and large, producing DDR5s.

What does that mean? We still need DDR4s. DDR4s drive everything from your home computer to Alexa to the computer controls in your cars. So that demand is not going away, but there's no new production to meet it. So that is what's driving these DDR4 prices up. It's just the rest of the world outside AI needs these chips. And that is what -- that is the service that we provide by taking them out of the data centers. So you can see there's a strong correlation between growth in AI chips and the growth in demand for DDR4 chips.

Looking at the competitive landscape of SLS, a gross simplification here, but I think the principle is right. Around about 95 -- let me make actually the first point. Probably one of our largest competitors is data centers actually doing it themselves. So let's not forget that. We have to compete against data centers doing their own repurposing, reselling. But of our competitors, our genuine external competitors, around 95% of them, we would describe as like independently owned local operators that maybe do some very specific things maybe for the OEMs or maybe for some enterprise customers that we have, probably not for the hyperscalers.

If you come back from that 95%, about 5% of them -- less than 5% actually, well less than 5% look a little bit more like SLS large enterprises, multiple geographic sites servicing hyperscalers. And I would argue of that less than 5%, Sims is #1. And we've got a few data points for that. But we do provide a genuine global service in a very secure, very structured, very highly governed way, and our customers are really after that. So that's the competitive environment.

So why in particular, SLS? I made the first point that we are global where our customers have asked us to be. So currently, we've got 9 sites in North America. We've got 1 in Brazil, 5 in U.K., a couple in Europe, 1 in Eindhoven in the Netherlands, the other in Frankfurt in Germany, a couple of very small sites in India, very small site in Singapore and a very, very small site in Australia. The bulk of our business, the bulk of what's driving this growth in profit in SLS right now is North America, in particular, the United States. We are seeing growth elsewhere, though. We definitely see growth in Europe.

We are currently constructing a large facility in Dublin, in Ireland to service one of our hyperscaler customers out of Ireland. It will be a similar size to the one in Nashville for those of you who saw Nashville, and it will be a very, very similar type of facility doing the same kind -- having the same kind of technology performing the same kind of activity. So we are global, which is important. The first point I'll make on there is we are deeply embedded in the hyperscalers. So it is not a commodity type service that we provide. There's a lot of information flows back and forth. There's a lot of systems integration going on. There's a lot of daily contact. There's a lot of discussions around logistics, where they're going to be bringing the chips in from, where they need them to go, how long they need them to be held in inventory. There's a huge amount of interconnectivity there that you just can't replicate. Well, let me come in and do that for you.

It's taken us 4 or 5 years to get to the position we are now, and it's a very, very strong position within our customers. We're a full service provider. We do everything. We actually -- we're the only participant that does everything. We do everything from the initial receipt of the racks, the dismantling of the racks, the harvesting of the parts for repurposing or resale. And then we perform the final function, which is the recycling. So also within the stream we receive, there's non-ferrous, there's copper, there's steel in the racks. So we talk to our customers from the time the rack leaves their facility to eventually part of the rack is shredded and finds its way into a steel mill. Right through that shredding process, we are completely across that we know exactly where that equipment is. And that's very, very important.

Innovation and integration. We've spent a lot of time. I talked about being integrated within the business. The amount of time and effort we've spent on making sure that our systems are fully able to be integrated with the innovation that we're looking at around automation. Again, for those who visited Nashville, you saw a couple of the robotics using AI to determine positioning and restamp DIMMs, and that's all about inventory management. We've -- since you've been there, there's another 3 or 4 have been installed, and that type of innovation is growth for the future.

And that also relates to the other point I make there around scale capacity. We need to scale, and we have scaled dramatically over the last few years, and we will need to continue to scale. We've proven to our customers that we can do it. I talked about the Ireland facility. We first got the request to build the Ireland facility back in September. It will be up and running by March. So we've got a 6 month from go to in terms of meeting their needs. And the last thing, let's not underestimate this is governance. There is so much governance around data security, so much governance around making sure data does not get out into the public sphere. We have a governance structure, which we've proven over 4 or 5 years now, a governance structure with our customers where they are extraordinarily comfortable that we will handle their material safely, securely and in a high-quality way.

So that's why SLS. How does SLS generate its revenue? 3 streams, and I'll talk a little bit more about these. First of all, resale revenue. So that is exactly what it sounds like. That is very good quality equipment that we're harvesting. DDR4s that we're harvesting from the hyperscaler or harvesting from networks or harvesting from wherever we receive IT equipment, we sell that into the market and we do a revenue split. That's a pretty simple revenue stream. With the growth in the price of DDR4s, a very significant revenue stream. The second one is service fees. This is where DDR4s can also be useful in the rebuilding of a new data center. They handle memory capacity overload. They're very, very good at doing that. So the service revenue is where we will take a DDR4, DDR4 DIMM, we will wipe it. We'll reprepare it for repurposing back into the data center. We will manage the inventory and then that equipment eventually goes back into the new data center, and we charge a service fee for that.

The third revenue stream is just straight the commodity, as I talked about. At the end of the process, there's some copper, there's steel, there's ferrous, non-ferrous, we recycle that. There's some precious metals, so we recycle and that's a per ounce pound tonne type of revenue stream. So if you look at what is the significance of each one of those revenue streams to the business. So what I've taken here is the FY '25 financial year, and we're looking at sales revenue. So you can see there, 75% of our revenue comes from either resale or service in FY '25 and 22% came from the commodities part of the business, the ferrous and the non-ferrous.

So significantly, it's biased towards resale and service revenue with only 22% coming from recycling, even less in terms of EBIT from recycling. And I do a slide on that in a couple of slides on. Revenue by client type, which I think is also important. Hyperscalers in FY '25 were 47% of our revenue, the enterprise type operations, 41% and the original equipment manufacturers, 12%.

Let's spend a little bit more detail on that because this chart for me is quite telling. If you look at what has been the growth in our revenue over the last couple of years, let's just focus on hyperscaler. So in 2023, hyperscalers represented around about $100 million of our revenue. In 2025, $200 million of our revenue. If you look at the other markets, they have stayed pretty static. What have we got? OEMs, $49 million, $50 million in 2025. Enterprise, $175 million in '23, $177 million in '25. The growth in SLS businesses has come from hyperscalers. It's as simple as that.

It is profitable growth, though, and I'll get on to the half year shortly. It is very profitable growth and it's very cash growth. So here's -- you can see the growth in revenue from FY '23 to FY '25. I've already shown that the majority of that came from hyperscalers. The return on invested capital, FY '25, probably 52%. The return on invested capital is very strong in this business. It is a capital-light business relative to its income.

On the right-hand side there, we're showing cash flow generation versus EBITDA. Look, there was an extra growth in FY '24, distorted by the sale of our precious metals business, and there was some working capital went along with that. But what you can actually see, the point I'm trying to make here is that the EBITDA to cash conversion is very strong. So this is a business which is about cash, which I guess is logical, but highlighted in this chart. And that profit is accelerating.

We obviously put out a trading update on Friday last week at the AGM. And what we're forecasting for the first half of FY '26 is somewhere between $45 million and $50 million of EBIT. You can see that the exponential growth that has come off the back of what we all thought was already pretty good growth between FY '24 and FY '25. In the same vein, that's also cash growth. It's that same type of high-quality growth that we've been having the cash conversion cycle is pretty quick.

The other thing I would say about SLS, particularly as we head into the year into the half year-end, it is easier to predict the outcome for SLS. What is in place for December, we've already agreed. So we have a reasonably high level of confidence in that prediction, makes it different from the metal market, which can obviously be a little bit more volatile around shipping, around weather, those types of things if you're doing a point forecast.

The point I want to make on this slide is -- and I think shareholders need to appreciate this is that the SLS business is completely different from a recycling business. If you look at the right-hand chart, and I said I'd talk about this earlier. I've already spoken that the sales revenue was, let's call it, a 20-80 split between recycling and what we call the data center infrastructure services. We think that's a much better description of what we do. I mean some people call it ITAD. I think IT asset disposal just doesn't even begin to represent what we do. We call it data center infrastructure services. So there's that 80-20 split. But by the time we get to EBIT, it's a 90-10 split. So 90% of the EBIT is coming from non-recycling services.

So my point here is that recycling is not what we should be compared to when we're looking at the SLS business. And what are the key attributes that make a data center infrastructure service differently? Firstly, it's services led. It is very much services led. It's not a commodity. We have a number of enterprise contracts. Now those contracts aren't for volumes, but they are very well defined around what is the relationship between us and our customer/supplier and the period of that relationship and how the transactions will work. There's a massive focus around compliance and data security. It's got to be extremely scalable and it's low capital intensity. Again, I think a very -- it's a very different business to the recycling business. Our key customers are data centers and hyperscalers, enterprise IT departments and OEMs. What's driving our business right now, though, is the hyperscalers. So I wanted to allow at least 15 minutes for questions. So we are heading towards that point, which is good.

On this very brief update on SLS, what are the key messages that I want to get across. Firstly, there are structural tailwinds in place now. These are not tailwinds which are arriving. And those structural tailwinds are all around the amount of resources that are going globally to build data centers to cope with AI and the need for DDR5s. And the world's production is switched to DDR5s and the rest of the world needs to have secondhand DDR4s, perfectly good, but it's a structural tailwind, which is in place now. And I see that tailwind being in place for a significant period of time. We are uniquely positioned. I think when you go compare us to all of our competitors, why do you only end up with Sims?

We're global. We already provide high-quality service. We've been proving that for the last 4 to 5 years. And the last thing is we can see it right the way through to the recycling. So we are go to. The volume coming out of the market is supported by the refresh cycles. There is this 4-year cycle that is happening and happening and happening for the foreseeable future, and that is what's providing the volume for SLS. Profitable. It's not a business where we're kind of building the stadium and they will come. It is a business that has been profitable from the get-go. And as it scaled, that profit has increased. It's got high returns. It's a capital-light business. It still means we have to be disciplined around capital.

As we invest more and more in automation, we need to be very certain and sure that, that type of automation is what we want to invest in. But the strong cash flow and high returns are a feature of the SLS business. We've had proven successful execution. The success of SLS, and I know the announcement we made last week proves it is a successful business. It just didn't happen overnight. We started the SLS business in 2020 with around about $200,000 of EBITDA. And we've spent the last 5 years really proving ourselves to our customers and suppliers that we can execute and we can execute very, very well. We're at that point now, and I think that's what's going to help our growth going forward. And I think there's a valuation uplift for SLS. I don't think the market values it properly. I think the market is using -- the market is still bundling it into the recycling bucket. That's easy. But that's not what SLS -- that is not what SLS is about.

So on that note, which I wanted to finish by 9:30, which is good, I wanted at least 15 minutes of questions, judging by the questions I had over dinner last night, which was a very pleasant dinner, and thank you for the questions. So let's open up the floor for questions.

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

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

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

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

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

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

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

No, the contract defines the revenue share upfront.

And that's multiyear generally?

They typically are 3- to 5-year contracts.

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

So we win in 2 aspects. First of all, the growth of customers that we currently have and the Ireland one is a great example of that. That's an example where an existing customer has come to us and said, we want you to be in Ireland. We have significant need. We know that you can put up a data center in that period of time. So that growth happens as a result of the relationship.

I guess the other growth we see is for those hyperscalers who are performing or largely performing themselves is we think there's a great opportunity to grow in there because we've proven that we can do it more cost effectively with higher security standards and really remove what is a back-office function from them because -- and that's our front office function. So 2 areas. One is there is a number of large hyperscalers who we don't have that type of relationship with. And secondly, the ones which we do, which are significantly large, it's growing as they are growing.

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

Yes. So DDR4s have many, many, many, many years to run because the DDR5 chip is not -- I mean, you're not going to find a DDR5 chip in your laptop. It's just not what it's designed for at all. So DDR4s have many, many years to run.

The question on DDR5 is a really good one because we figured out very efficient ways of repurposing and reselling and reusing DDR4s. DDR5s, we're going to have to spend some R&D on that in the coming years because DDR5s will need to be repurposed/resold into new data centers. But you've got -- you're dealing with everything from some of them are sitting in liquid cooling through to other technical complexities on how you would repurpose them. They do need to do it, though. I see us well positioned for that. It's still -- like it's still 4 years away before they start coming out again. So we've got some time to develop the processes to do that. But I actually see that potentially in 4 years plus as quite an exciting opportunity.

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

Well, we have days like this where we talk to you about it. I think for me, there's 2 aspects to that question. First is how do we make sure that SLS maintains its business culture, which is different from our recycling business. There are certain things that go across our company no matter what, we're nonnegotiable on safety. And our safety is -- our safety policy is a global policy, and we wouldn't tolerate anything around safety in SLS that we wouldn't tolerate in metals. So there's those processes.

But SLS does have its own finance, its own commercial, its own HR, its own ops, its own leadership structure that ultimately reports to me through Ingrid. So we've deliberately set it up that it is -- that the culture that it needs is unique to SLS, and we don't try and mix the metals cultures and the SLS culture. So that would be the first point I'd make. The second point, I think, which is going to be around delivery, Lee, is that we will -- I think the market will be forced into thinking about SLS differently as the results come through.

And I think already the result that we're talking about at the half year has raised the interest and it's raised the level of investigation, it's raised the level of research. And I know everyone here is thinking about, well, who should I be comparing this to? What are the multiples of company that I should be comparing this to. So I think that will drive it via results. And I think we're on step 1, and that is the significant improvement -- exponential improvement in the first half year result.

Stephen, this is Chen from Bank of America. You mentioned earlier, you think the market underappreciate your SLS business. Well, for us to value this business properly from earnings visibility and sustainability perspective. If you can share what is SLS edge versus other players in this space. I guess you mentioned a couple of times, it's not a commodity type services. It's not easy to replicate -- if you can elaborate on that for us to understand why scale matters, why you can keep winning contracts from a volume perspective?

I guess price is more like a market-driven, AI-driven. You do what you can or you win contracts, not lose contracts. So just trying to understand how sustain -- if the earnings provided from last half is sustainable and will grow and how much visibility you have for that? I have a follow-up after this.

So a few things in there. The first comment I'll make around visibility, I agree. And we have been disclosing more around SLS. I mean, even today's presentation, we're disclosing much more around SLS to help you on that. And we will think about further disclosure in the future. There's always the trade-off between what's commercially sensitive and what's sensible to disclose.

So the second point is what -- why do we -- why are we confident that we have a proposition that is difficult to replicate. Why we're confident around that is it's taken us 5 years to get to this point. It's very difficult to just -- it's very difficult just to say, well, I'm going to start up a business, and I'm going to go to the hyperscalers and I'm going to get their business from them because you don't have a relationship with the hyperscalers.

You don't -- they've got no idea whether or not you have the capability to do it in a safe and secure and well-governed manner. They've got no idea where their chips are going to end up. They've got no idea whether or not you can manage their inventory so that when you -- when they need those DDR4s back in the data center that we will guarantee that they will be there at the time. So those things take years to develop that type of relationship.

And the point I'd make with that is this is not the data centers' core business. This is not where they make their money. They want this to be done in an efficient, safe, secure way. That's their outcome. So my argument would be why -- if Sims is performing the service very, very well, and I believe we do. We do this very well. If we do -- and we're doing this really well, why would you risk going to somebody else to maybe to save a little bit of money. It doesn't feel -- it doesn't feel that, that's a sensible decision to make. So that would be my main arguments as to why we -- I mean, we're not -- don't get me wrong, we're not complacent. We're far from complacent. But I just think as long as we continue to deliver what we have, it puts us in a very, very good position.

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

Yes, that's correct.

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

It's a really interesting question, isn't it? I think what's fundamentally driving the price is volume, though. And so it's not driven by -- it's not scarcity driven by a short-term cycle. It's scarcity driven by the long-term need for DDR4s. And the only source of DDR4s in a material way is by repurposing and reselling. So I do have confidence, but it's driven by the confidence that the investment in AI will continue to happen.

Now whether or not there's -- actually, to be honest, whether or not there's a bubble in AI, it doesn't really impact us because the bubble in AI is whether or not people are paying too much money for companies that are putting AI behind their name. Our growth is driven by the genuine need -- the genuine volume need for DDR4s into the market. And that's been driven by the fact that manufacturers are completely pivoting and doing DDR5s. So as long as you believe those -- as long as you believe those 2 things are going to happen, you do get confidence that the price is more stable and higher.

Is there -- would there be periodic volatility in price? Maybe, but it would -- I don't think it's a short-term market, Owen. I don't think it's today, a steel mill is producing, they've got some inventory tomorrow, they're not. I don't think it's that type of classic commodities volatility.

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

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

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

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

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

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

Yes. I don't think the operations are mutually exclusive. I think we've got lots of opportunity in metal. We've got -- John and Graeme will take us through what has been a tough time in ANZ at the moment, but just the power of the non-ferrous side of the business. I don't think we're at that point yet.

I think we've got at least 2 or 3 years before we would need to think about SLS in that context. And I don't think it would be just getting rid of the metals business. I think we've got the -- and we'll talk -- I mean there's tailwinds in the metal business coming up as well. The non-ferrous is performing fantastically well. There's still -- I mean the world is going to be short of scrap. EAFs are growing. So I think we can handle both, Owen, I think, is the short answer to that question and the long answer to that question.

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

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

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

So it's a difficult question to answer specifically because we don't -- I mean, it's not public information for us either as to what exactly is the global DDR4 refurbishment program. What I -- but I will make 2 comments. We know that for at least a couple of the hyperscalers, we get a significant portion of their business. They tell us that. I mean they don't -- I mean, we've got a very trusting relationship. They tell us that, I believe them. So we get a significant portion of their business.

The other thing I would say around that growth, which is we want to get more from them and we want to get other customers is we currently have about 50% capacity availability just in North America alone. We would just have to take our facilities, put another -- put shift 2 and shift 3 on, and we can deal with that extra capacity very, very quickly. Beyond that, we then have to start building new facilities, leasing new facilities, Ireland is an example of that. So -- I mean, I guess my answer to your question is we are very significant to a number of the hyperscalers, and we've got a good relationship that's driven that. But we also have additional capacity right now without significant investment.

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

We -- I guess the first thing which we completely differentiate on is we are end-to-end full service. So I made the point earlier, from the time a rack leaves a data center to the time it goes through one of our shredders and everything in between, we are in control of that. No one else does that in the market because no one is -- no one else has a metal division internally. That's a point of differentiation.

I think the second point of differentiation, what our customers are telling us is our ability to innovate and pivot quickly. We -- over the last 5 years, there's been a couple of moments which were real test points for us, and we proved ourselves. And the first one of that where we really proved our ability to act quickly and innovate was the setting up of the Heil Quaker facility in Nashville. We got set an incredibly quick time line, incredibly exacting standards, and we surpassed the expectation of the customer in that point.

And when I look back, that was probably one of the pivot points, one of the -- well, I can't remember where I'm looking for, the inflection points when I look at our growth was when that we proved we could innovate and do something that quickly. No one else has been able to do that.

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

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

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

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

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

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

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

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

Thank you, Stephen. Good morning, everyone. Really looking forward to getting you out to our Auckland facility later today, and you're going to see some investment we're making on that site, and Graeme is going to obviously talk about some of that investment, particularly around Auckland, Pinkenba and some of the stuff we're doing with a software package at our [ coal face ] amongst weighbridge systems, inventory and production management. But what I thought I'd do is I'd give you an overview of the Australian metals business, an overview of the Australian market, talk to some of the challenges and opportunities in that and certainly lay out our plan for ANZ Metals around growth over the next medium to longer term.

The focus of the presentation will be around -- sorry, let me that will be around the change, the structural change in steel manufacturing and the decarbonization of that steel manufacturing and quite frankly, how Sims can participate in that. Also touch on the strength of our non-ferrous business. Stephen mentioned, across our entire metals portfolio, whether it be ANZ Metals, SAR, North American Metals. Non-ferrous is certainly underpinning all our results as we speak.

As I mentioned, Graeme will give you a little bit of an overview of some of the infrastructure projects that we've got and the sort of returns that we expect on them around fines plants, improving our pathways to market with what we're doing with Auckland and the delivery of scrap to Glenbrook and what we're obviously doing at Pinkenba. We'll walk through the slides. I'll hand over to Graeme partway through, and then we're happy to take your collective questions.

So the Australian market. What can I say? It's a mature, it's a stable, it's a well-established market, very diverse supply channels. Obviously, in states like Queensland, Northwest, Western Australia, huge dominant mining and resource volumes, very heavy generators of ferrous scrap in states like New South Wales and Victoria, very population-centric in terms of the volumes of scrap that get generated there. Housing construction and construction generally are big generators of scrap. South Australia and Northern Territory seeing increased spending around defense, which will invariably give us more volumes from that industry.

Overall, the Australian market generates about 4.5 million tonnes of what I would call collected ferrous scrap, unshrunk. Obviously, there is a waste component attached to that and about 0.5 million tonnes of non-ferrous scrap. When I say non-ferrous scrap, I mean things like copper, aluminum, brass, bronze, stainless steel, lead, batteries, et cetera. There is very little consumption of non-ferrous scrap in Australia. In fact, it's aside from lead acid batteries and a couple of small consumers of aluminum, most non-ferrous scrap in Australia gets exported. Australia is also a net exporter of ferrous scrap with the majority going to places like Bangladesh, India, Vietnam and Indonesia.

Now that is very different in terms of the country, the destinations to where we were maybe 5 years ago. Countries like Korea, Malaysia, Thailand, were certainly very dominant consumers of scrap going back in time. And that has certainly changed with what's happening with China and the export of semi-finished product, particularly in that Southeast Asian region and the impact that, that has had on our traditional buyers of scrap that now they're simply buying billet and rolling billet rather than melting scrap. New South Wales and Victoria are domestic-facing states, supplying the incumbent steelmakers of BlueScope in Port Kembla, the blast furnace BOF there. And we've got 2 AFs operating, one in Sydney and one in Melbourne, owned by InfraBuild.

What I will say, given our geographic coverage and our presence, we're very well positioned to meet any demand growth. Moving to the operating environment and the competitive landscape. As you can see, we have a very significant market share. We sit at about 30%, but that does vary pretty significantly across regions and between ferrous and non-ferrous across regions. It is a very fragmented market. Mostly -- most of the participants that you see on that list are family-owned businesses.

And then beyond that, you've obviously got a raft of smaller -- a long tail of what I would call smaller family-owned businesses. There is a couple of exceptions. We have one corporate player or a couple of corporate players, but the obvious one is InfraBuild and their InfraBuild recycling assets. What I would say is the opportunities around consolidating and rationalizing this market certainly exists. The difficult and tough market conditions that we are facing and certainly all our competitors are facing are presenting that opportunity, whether it simply because in family-owned businesses, succession planning plays a role. Sometimes there's not another generation to take on the business. That presents opportunity as some of the family members get to an age that they want to exit, certainly seeing that in a few cases.

And quite frankly, the tough market conditions right at the moment is presenting some opportunities with people approaching us. We have a clear leadership position, again, supported by our national presence and our strong outsource volumes. And we certainly have an abundant processing capacity. I think I mentioned it before. We have -- in most of our Australias, we could double the volumes through them and not really need to spend any more capital on that infrastructure.

Talking about the ferrous market in terms of where the scrap goes to. So as I mentioned, Australia is a net exporter of scrap, but about 50% does stay domestically. And as I mentioned, the domestic consumers tend to be BlueScope in Port Kembla, InfraBuild in Rooty Hill and Laverton in Melbourne. A small amount also goes to Whyalla.

Every one of those current consumers has a project at foot to increase the amount of scrap that they consume. And that, in most cases, is driven by their needs around decarbonization and reducing emissions. In other cases, it's a combination of that and also trying to achieve some productivity gains. I can tell you, all 3, Port Kembla, Laverton and Rooty Hill are looking at significant upgrades and therefore, significant increases in scrap demand over the next 6 months. In addition to that, we've got 4 EAFs that have been proposed for the Australian market. We have in Southeast Queensland, starting with Alter Steel at Pinkenba. We then go out to Ipswich with Future Forgeworks and then Toowoomba GM Holdings. Do I expect 3 EAFs to get built in Southeast Queensland? I can't see that, that makes sense. So our expectation is one. And then, of course, you've got the steel mill that's proposed for Collie Western Australia.

And what I would say about that is that it is getting a lot of support from the Western Australian government, a lot of support around not just sovereign capacity, but state-based steel-based capacity with the premier certainly getting behind that project. So our assumptions up there are that if 2 steel mills get built and what we see with the incumbents increasing their scrap charge, we'll see a shift of about 1.2 million tonnes going from export markets back into domestic markets on the assumption that 2 EAFs get built. Obviously, if more get built, that number changes even more. What does that mean? We will see regional deficits. There is no doubt because at the moment, we actually pull some scrap out of places like Queensland and South Australia to feed the needs of the New South Wales mills.

And if we end up with a mill in Southeast Queensland, that will obviously change that, and we will see deficits there, and we will see deficits potentially in Western Australia, just depending on how much scrap we can move intrastate back into Collie. That creates some opportunities for us, commercial opportunities. The opportunity to move scrap intrastate, interstate and quite frankly, potentially even import scrap to meet the needs of these mills is a real option for us.

And I got to say our assets, not only in ANZ, but our assets on the West Coast of North America, whether they be SAR or NAM, are well positioned given that they're very export focused to supply some of that demand. In fact, even Glenbrook. At this point in time, Glenbrook, they're talking about 300,000 tonnes of scrap use. There's already some suggestion that, that may increase. We will have to get creative if that does increase and potentially look at import options into Glenbrook. And as I said, because of our presence, our participation globally, our coverage nationally across New Zealand and Australia, we are very well positioned to meet that demand should it happen.

So turning to New Zealand. New Zealand is obviously a much smaller market than the Australian market. It generates around 0.75 million tonnes of ferrous scrap and about 90,000 tonnes of non-ferrous scrap. Almost all the ferrous scrap and most of the non-ferrous scrap is exported currently. Bangalore (sic) [ Bangladesh ] and India, a lot like Australia, are major destinations for the scrap that comes out of New Zealand. The other name on there, you'll see is Australia. We occasionally move scrap out of New Zealand currently back into Port Kembla to meet the needs of BlueScope and subsequently the needs of InfraBuild in Rooty Hill. So obviously, if we end up with a mill in Glenbrook consuming all our scrap on the North Island, the opportunity for that to go that way is probably not going to exist.

Scrap generation in New Zealand is largely population-based. We obviously don't have the same sort of mining resource industrial generators that you do -- that you see in Australia. Obviously, a big focus here on agriculture and tourism does generate some scrap, but not a lot of scrap. So as I said, it's mainly population based. And on that basis, most of the scrap that gets generated in New Zealand is actually on the North Island.

This is all going to change the fact that we're pretty much 100% export in ferrous scrap out of New Zealand. Come -- I think the power on date is you guys probably find on your tour tomorrow, but we're certainly talking late Q3, maybe early Q4 as a power on, and I expect there will be a ramp-up. But at some point in time when Glenbrook comes on stream, the dynamics around scrap in this country are going to change. And we are very well positioned to fill that need. We've signed a supply agreement with New Zealand Steel for a minimum of 200,000 tonnes. That makes us the largest supplier of scrap into that mill, and it will certainly consume a lot of North Island scrap. And potentially, we need to consider how we can find an efficient pathway to market from the South Island back into the North Island to meet that need if that need grows some more.

So market conditions. Look, the market is -- ferrous market is really, really tough. China is exporting eye-watering amounts of semi-finished and finished steel, and that's certainly impacting both our domestic consumers and also our traditional markets, as I mentioned, in Southeast Asia. Non-ferrous, on the other hand, the demand is phenomenal, both in terms of the actual demand for the metal, but also pricing attached to it. If you look at copper today, I haven't looked exactly, but it's probably sitting somewhere between $10,500 and $11,000 a tonne. Aluminum is closing in on $3,000 a tonne. And quite frankly, with all the disruptions around tariff, the demand for ANZ scrap, I can say, non-ferrous scrap is really, really strong.

Why is this demand as it is? The electrification of the world is certainly driving some of it, data centers, AI, green metal agendas, recycled content, all these things serve really, really well. Everything that we're seeing in the decarbonization and emission reduction space in the ferrous market, we're also seeing in non-ferrous and our expectation that, that will continue and perhaps even grow.

The New Zealand economy, it has been exceptionally weak. If you look at growth, it's stagnant at best, population is stagnant at best, lots of businesses doing it really, really tough. So it's, I got to say, a challenge. The dynamics here, as I said, will change once Glenbrook comes on stream, and Graeme is going to talk to you about a couple of investments that we will make in New Zealand that will certainly add some revenue and EBIT to the bottom line here around MRP upgrades. I think Graeme is going to give you some detail around that and down the track of fines plant.

The Australian economy has certainly fared much better and certainly, construction activity. There is an expectation that it will expand and grow. Overall, there's no doubt volatility exists. Your guess is as good as mine around what happens in China. Certainly seeing production cuts there. There's still a lot of discussion around the migration from integrated steelmaking to EAF production. I guess on the flip side of that, whilst we've seen production cuts, we've also seen domestic demand and in-country demand diminish more, which has meant that exports are sitting at levels that we haven't seen since still about -- go back to about 2015, 2016. So certainly a challenge for us. But on the flip side, non-ferrous is really, really strong, and it is certainly underpinning the earnings that we have in both non-ferrous retail and obviously, in our NFSR business, as zorba, twitch, zurik business, the byproduct of our shredding operation.

So just a quick overview of ANZ Metal. We employ around 970 people. In F '25, we sold 1.6 million tonnes of scrap. Obviously, Australia is the very dominant contributor with the majority of intake and revenue. A couple of subtle differences. Our market share in New Zealand is stronger than the average in ferrous, but weaker than the average in non-ferrous. And I think there's a real opportunity with some of the investments that we're making in Auckland and also some of our growth strategy around growing our non-ferrous retail business here will serve us well. New Zealand is obviously smaller, but it is strategically important to us, especially as domestic demand grows and the advent of Glenbrook coming on stream. Overall, our revenue across the group was -- in F '25 was $1.6 billion. And as I mentioned, very much supported by very strong non-ferrous performance and quite stable intake volumes.

Three things I'd like to highlight on this graph. Firstly, the periods where we see elevated Chinese steel exports, semi-finished steel exports, you can see the very predictable pressure that is putting on pricing and on our trading margin. Two points I would highlight to you from that is if you look at the period F '23 to F '25, you can see the divergence in lines, and that is absolutely driven by the strength in non-ferrous business, whether it be non-ferrous retail or zorba, zurik, our NFSR business, and that's caused that divergence, which is a good thing. Lastly, the other thing I'd highlight, if you look at F '16, when we hit the bottom, when circumstances changed and conditions improve, we bounced back very, very quickly. Immediately, trading margins recovered, and that will be the same as we go into the future.

So this slide pretty much summarizes the fundamentals as to why our ANZ Metals' business is so structurally sound. We obviously operate in a well-developed, diverse market. We are the largest player in both markets, Australia and New Zealand. We have a fantastic global -- sorry, national footprint in both countries, albeit we've identified some gaps, and we are going to pursue some opportunities to fill some of those gaps. But we certainly have a very dominant position given that we are national. And quite frankly, that does appeal to some of the big corporate accounts, the Rio Tintos, the BHPs, the [ Telstra ], to name a few, because we do have that national presence, we operate at scale. We've got good corporate governance. They like doing business with us.

The other thing I should mention is the ANZ business has had a long history of participating in the non-ferrous business. We have a very strong non-ferrous retail business. And quite frankly, that is serving us very, very well as we speak. We do operate quality assets. And as I mentioned, we have an abundance of capacity within those assets. So if any growth opportunities come along, any market rationalization or consolidation comes along, and we do have a few vulnerable parties out there at the moment. If that comes up, we will be keenly interested. The obvious benefit is whilst we've got capacity in those assets, we can direct those volumes into it without any more capital and obviously lower our fixed costs, improve our market positioning and improve our logistics.

Our investment in downstream technology continues. And as I said, Graeme will talk you through some of the things that we're doing in Auckland, and we've got the fines plants that we're building in both Pinkeba and Broadmeadows, and they will serve us well in that they increase our overall yields of metal that we extract from our waste fraction, which is a double benefit. Obviously, if you're bearing metal by sending it to a landfill, that comes at a cost. And obviously, when we're talking about metals such as copper and that, there's an enormous amount of revenue sitting in that metal. So we've made a lot of investment in that space, and we will continue to make more investment in that space.

The other thing that I'd highlight is that we have invested in making premium products and at a differentiated price. Both in ferrous, where we now sell what I would call a premium shred product and we're also looking at upgrading some of our cut grade outputs, again, to meet the demand around not only increased scrap, but the demand around increased quality scrap. Our domestic and export optionality absolutely gives us flexibility regardless of regional market conditions. And we do have very well-established pathways to markets and consumers in those markets. We've been doing this an awful long time.

Turning to non-ferrous. As I said, the tailwinds for non-ferrous are incredibly strong, and it is the core pillar of our earnings in ANZ as we speak. Non-ferrous represents about half our revenue, and that's a combination of both non-ferrous retail and our NFSR, zorba, zurik business. And we do -- the fact that we've got this collection footprint, we do get a lot of scrap outsource. And we add value through either shredding it, baling it, granulating it in the case of cable. We hold a very, very big corporate account at the moment that we're granulating a vast amount of cable for them. Copper at $11,000 a tonne or close to, it's very good business.

And of course, we've -- as I mentioned, we're investing money in fines plants and beneficiation plants and advanced alloy separation, which again will allow us to differentiate our products. The ability to sell straight 6,000 series aluminum that we extract from our zorba, the ability to extract 3,000 series aluminum that we can extract from our zorba are obvious opportunities for us.

We do hold a large number of large non-ferrous industrial accounts. And I got to say, we've managed to secure a few more in recent times with InfraBuild's vulnerability, and we continue to target building that base volume of industrial accounts. Having said that, dealers do represent a sizable proportion of our intake, and we use dealers as a natural extension to our own footprint. We don't have a scrap yard in every town and every city in Australia. And therefore, we do rely on dealers to give us that market coverage. So they are a natural extension to us.

Our non-ferrous, as I said, is largely exported from both Australia and New Zealand. Our trading office in Singapore manages that. We export to most parts of the world. In fact, I don't think there's a place that we don't export. And right at the moment, with everything that's happening around tariffs and that, we've even got the dynamic at the moment, we actually push some Australian scrap into North America and do that and pay the tariff and still be a very good business for us. So the world is changing.

Just a bit of an overview of our physical operations. We do operate 47 yards across Australia and New Zealand. We have a shredder in each mainland state in Australia and a shredder in both islands of New Zealand. We actively export from 20 ports, and that's important, particularly because those ports don't necessarily just serve export demand. We also use some of those ports to feed in back into domestic mills. As I said, we move scrap from Queensland and South Australia and on the old occasion, Western Australia and New Zealand back into Port Kembla to meet the needs of BlueScope and/or InfraBuild.

We have 6 other idle ports and a good example of an idle port would be Newcastle. We have the ability to export out of there. At the moment, that scrap makes its way into the domestic market, but another good example would be there is a large power station, Liddell that's coming down, and there will be a vast quantity of scrap that comes out of that. And therefore, the opportunity to do something different with that scrap out through Newcastle presents itself.

Our collection footprint provides good market coverage and penetration. As I said, albeit we have identified some gaps and we intend to pursue those gaps. Our processing facilities are very well placed to service the needs. You can see on the map there where the steel mills are currently and the new ones proposed. Our processing facilities are very well placed to fulfill their needs of both the incumbents and any new proponents that get built.

So decarbonization driving scrap demand, not a new story. There's no doubt Australia is transitioning to lower emissions steelmaking. Safeguard mechanisms, recycled content mandates, things like that are certainly driving steelmakers to consider using more scrap. Even your traditional BOF, blast furnace combination, they can use -- BlueScope actually leads this. They consume about 30% scrap in each of their charges. I think -- sorry, I think they're sitting in the high 20s as we speak, but very close to 30%, and the ambition is to go into the low 30s and consume more scrap. Obviously, an EAF can consume up to 100% of scrap depending on the product that they're pushing out and the chemistry attached to that product. But steel that's made in EAF produces 83% less carbon dioxide than anything that's made in an integrated furnace.

There's also not just the demand for scrap is increasing, but the demand for high-quality scrap. The needs around chemistry to make things like flat products, particularly if you're trying to make it in an EAF needs clean scrap with very low residuals such as copper and nickel and chrome and other things. The other benefit that density brings is the ability to charge more scrap at a time. So in the case of BlueScope, I think they charge about 85 tonnes at a time in their shoot. They'd really like to lift that to 100 tonnes. So increasing density facilitates that. If you're thinking about an EAF that uses basket charges, simply fitting more scrap in the basket and then getting that scrap into the furnace also gives them some productivity benefits.

And we're certainly seeing that with Rooty Hill. I mean they're traditionally pushing 22 to 25 melts a day. I think at the moment, with some high-density scrap, they're getting up into the 30. So it gives an enormous productive benefit, too, by increasing the density. It also reduces explosion risk. The more dense the product, the less chance you've got of that, reduces nonmetallic content, so it has environmental implications. Lots of reasons to improve the quality of scrap. And quite frankly, there's a premium price attached to it that we hope to and are capitalizing on.

So I'm sure most people are familiar with the various types of steelmaking. As I mentioned before, every steelmaker in one form or another are looking to increase scrap into their charge. Obviously, in the EAF, it's a little dependent on whether they're a long product producer or a flat product producer, depending on the chemistry they need. Flat product producers obviously need very clean forms of scrap, in the form of busheling and very clean grades of cut scrap. And the other obvious opportunity there is low copper shred, I'm sorry.

How do we make low copper shred? It certainly starts with source separation. So as the scrap comes into our yards, identifying problem items. A good example of that would be tinplate cans, baked bean cans, are a contaminant in the steelmaking process and the tolerance of them is pretty limited. So identifying them and extracting them if we get straight loads of them and taking them to a different market is obviously an opportunity. As I mentioned, increasing the density does a couple of things. It certainly improves charge rates, which all steelmakers want to do. But by increasing the density, you also give the opportunity to liberate any contaminants, whether the contaminants be in the form of other metals, non-ferrous metals or nonmetallics. So the more dense your scrap is, the more of those contaminants you liberate. And then you need the technology on the back end, obviously, to, quite frankly, extract those contaminants.

And there's value in that. If we think about our shredded steel scrap, the biggest contaminant we have is copper. And anything we can do to extract the copper is -- obviously adds value, but then also gives us the opportunity to sell a low copper shred. There's a couple of photographs there on the screen that we can in commercial quantities, make sub-0.1 and sub-0.2 copper shred, which has great appeal, particularly the 0.1, for flat product producers. But I got to say, even the domestic consumers in Australia and Glenbrook, sub-0.2 is certainly appealing to them.

So we are a supplier of choice. We do have a long-standing relationship with both the incumbents, both BlueScope and InfraBuild. We have a mix of what I would say, exclusive and preferred supply status. As I said, we -- with Glenbrook, we've signed an MOU supplying up to 200,000 -- actually a minimum of 200,000 tonnes of scrap, and that is on a preferred supplier status. We are the largest supplier into the mill and the investment that we're making at Auckland that you'll see later today, there is actually some shared investment.

We intend to put rail infrastructure into our site and then use that rail infrastructure to dispatch scrap to Glenbrook, which is a good thing. A, it takes trucks off road, but it makes it a very efficient pathway to market. So we are going to co-invest in some rail infrastructure in the form of containers with BlueScope to move that scrap. And it actually is pretty clever. They move billet back to Pacific Steel, which is our neighbor that you'll see later today. They move that on a daily basis back to Pacific Steel. So then the opportunity is then to reload those wagons with scrap with containers containing scrap. So we'll have a daily run of billet coming back to Pacific Steel and scrap going back to Glenbrook, a very efficient means to move it.

We also -- a few months back now, signed that MOU with Alter Steel for the proposed steel mill in Pinkenba. That is an exclusive arrangement. Up 550,000 tonnes is what they're looking for. Again, we will do our best to secure as much scrap as possible locally. But quite frankly, if we need to pull scrap in from intrastate and interstate and even imported on occasions, our Pinkenba facility obviously serves us well to do that. The arrangement that we do have with Alter not only sees us supplying scrap, but also managing their scrap on site on a just-in-time basis. It's a pretty close relationship.

The other mill in Western Australia, Collie, Green Steel WA, we are actively engaged with them. We're still negotiating. We have a very significant market presence in Western Australia. So they absolutely need us. And we're just working through the details as to how logistically, we get scrap to Collie. And given that a large proportion of the scrap gets generated in the Pilbara from the various mines up there, whether it be BHP, Rio, Fortescue, Gina Rinehart, it's a bloody long way to transport scrap on road if that's the only means to get it into Collie. So the opportunity to use our port infrastructure and move it that way is something that we're seriously considering.

What I would say, the price basis, traditionally, Australia has been based around -- and New Zealand, if we go back in time, has been based around an export parity price basis. With the changing dynamics and the obvious regional deficits that I think will emerge with Glenbrook and potentially 2 other steel mills, I think we'll end up with a mix of export parity and import parity to meet their needs. And as I said, that's where I believe there is some commercial opportunity for Sims to fulfill that need.

Hand over to Graeme. Thanks.

Thank you, John. Got that wrong, but we go -- good morning, and thanks again for coming to visit us in Auckland today. I'm particularly excited to show up our Otahuhu operations shortly. For those of you that I didn't meet last night, my name is Graeme Cameron, and I'm responsible for our operations in both Australia and New Zealand. Today, I'll give a short update on our infrastructure enhancements and new growth opportunities in both Australia and New Zealand.

We're investing ahead of demand with strategic EAF aligned infrastructure in both Australia and New Zealand with Pinkenba and Otahuhu, as John has mentioned in his presentation. These sites give us capacity, logistical strength and proximity to mills, positioning us to support rising domestic scrap demand, a strong shift to high-grade, reliable domestic scrap.

Along with our investment in physical assets, we're rolling out a single global digital platform that delivers real-time visibility of logistics, inventory and cost of sales for the first time. This replaces a 25-year-old legacy inventory system, along with integrating logistics planning and management systems. Currently, for Sims Australia, we have 6 individual instances of the legacy [ SAI ] system that we'll be replacing. This old system is obsolete and will be unsupported after we go live with AMCS in North American Metals.

AMCS starts with the customer, enhancing the customer or as you'd probably refer to as the suppliers' experience. For example, the new system will provide us with real-time tracking of bins that are placed in our suppliers' operations, providing a smooth experience in our yards with faster reception at the weighbridge kiosk and at unloading points with digital inspection tools eradicating paper tickets. A faster response -- sorry, faster responses, clearer weights and grading, digital portals and greater transparency across the whole transaction. It strengthens margin disciplines and lowers our cost to serve through faster and more consistent automated processes. The new AMCS system will not only capture key operational data points, but also provide intelligence that will differentiate us from our competitors. AMCS will be delivered under a SaaS or Software-as-a-Service model. And as you can see up there, New Zealand goes live in May 2026, followed by Australia later that same year and North America in 2027.

Think about it. This truly is a unique opportunity. With this asset, Sims Metal is the only processor of scrap metal with operations at a deep-sea wharf in Australia, rapidly improving ship loading and discharge rates while reducing truck movements. Pinkenba is an existing heavy industrial site that has usable infrastructure, including concrete, storm water, buildings, deepwater wharf and rail, allowing for the development of a truly integrated metal processing and logistics hub.

Total investment is expected to be circa $215 million and has begun with an initial Board-approved $40 million site upgrade through FY '26 and '27. The initial investment includes, but is not limited to updating the site's existing infrastructure, including recladding sheds, redeveloping amenity blocks, upgrading the wharf and importantly, the installation of copper refines recovery plants that John referred to earlier. Additionally, 1 of the 2 incumbent Southeast Queensland steel mills is flagged to be developed just 1 kilometer down the road from Sims Pinkenba. This mill will be known as Alter Steel. Alter, as John mentioned earlier, has signed an MOU to exclusively source 550,000 tonnes of ferrous scrap from Sims per annum.

Traditionally, Sims has moved unprocessed scrap from regional feeder yards to shredder sites by road, for example, from Cairns to Brisbane. Road freight is increasingly expensive and periodically inaccessible. We have traditionally loaded Handymax vessels with our processed ferrous scrap at the often congested Fisherman Island wharf at the mouth of the Brisbane River. This illustration shows the strategic value of Pinkenba in connecting our regional scrap sources to domestic mills and export markets. It enhances our competitiveness and value proposition to Australian and New Zealand steelmakers.

Adding Pinkenba to our existing network of locations means that we can now ship unprocessed and processed scrap from our far north Queensland feeder yards directly to the Brisbane shredder at considerably lower cost than by truck. We can both export processed scrap to our overseas customers, including New Zealand Steel and import process scrap from our U.S. and New Zealand operations to meet domestic Australian customer needs. Pinkeba's rail connection brings further supply chain resilience and cost savings.

As you'll see today, we're in the process of upgrading our core New Zealand processing hub in Otahuhu. You'll see our recently commissioned non-ferrous baller along with the civil works that will see the installation of a new rail spare. The site upgrades also include an MRP enhancement in FY '27 and an additional copper recovery plan, which will follow in FY '28, uplifting quality, yield and margin. We're upgrading Auckland into a modern rail connected hub, giving us faster, lower cost delivery into New Zealand Steel's Glenbrook EAF.

The new rail siding and train loading capability significantly improves logistics efficiencies and reliability with circa 480 metric tonnes of processed scrap in train movement direct to Glenbrook. 480 tonnes, typically, we would load 20 tonnes in 1 truck. So it's taking significant vehicles off the road. We're co-investing with New Zealand Steel to move scrap via rail and strengthening our role as their primary long-term supplier. Overall, this creates a fit for future Auckland facility aligned with rising domestic demand.

The EAF shift changes everything. Domestic demand steps up sharply as New Zealand Steel, Alter, Green Steel Western Australia and others move to lower emission steelmaking and that immediately reduces our export exposure. That's in addition to the plant production improvements in the existing hot mills in New South Wales and Victoria, as John mentioned earlier, i.e., Rooty Hill, Port Kembla and Laverton. The markets flipped from volume-driven export to quality-led domestic supply with these supply-demand gaps creating fulfillment opportunities, including imports.

Commercially, we get a better revenue mix, more domestic sales, more price stability and stronger margins driven by quality differentiation. Shorter, tighter supply chain improves reliability, lower volatility and releases working capital. Operationally, this is a full model shift. Our network, technology and logistics align directly with regional steel producers, underpinned by data, automation and real-time integration. Sims moves from exporter to critical enabler of domestic decarbonized steelmaking, strengthening long-term mill partnerships and locking in multi-decade relationships.

Capturing new opportunities. Operational growth. John has mentioned in his presentation, I touched on it a little bit in my slides, we're lifting our core performance in New Zealand with our MRP upgrades. So this will see a dramatic improvement in our recoveries of non-ferrous metals from our waste. And as we're walking through Otahuhu today, I encourage you to have a look at that waste and see if you can see those non-ferrous metals that will be recovering. In addition to that investment in Otahuhu across the group, there are plans over the next 2 financial years to install 3 new fines plants to unlock additional yield and deliver a high-quality product that commands a better margin. These fines plants are similar to what we've already installed in America and are an enhancement on that technology. We're refreshing our branding, marketing and supply side engagement to strengthen our position with our key suppliers. And underperforming feeder yards have been targeted with turnaround plans to restore productivity. These initiatives return -- deliver strong returns.

Strategic expansion. We're actively pursuing bolt-on acquisitions. A 5-year program identifies a number of new feeder yards to strengthen supply resilience and meet growing EAF demand. As volumes scale, we unlock significant leverage with our existing asset base, lowering fixed cost per tonne. We're engaging closely with industry and government to reshape regulation enforcement incentives that support quality scrap, green metal uptake and domestic decarbonization. This ensures Sims is positioned as a policy leader and a key partner in the national circular economy. Thanks a lot.

Just the key messages, I guess, just in summary, before we take your questions. Ferrous markets are difficult, and this continues to weigh on pricing and margins. Having said that, non-ferrous remains a strong and growing earnings contributor and certainly adding resilience to our earnings stream in ANZ. The tough market conditions does present us with some opportunities. And as Graeme mentioned, we do -- we have found gaps in our collection footprint, even though it is a very sizable footprint. And our belief is that there will be opportunities to acquire smaller businesses and potentially even larger businesses. The tough market conditions are not something that we're just facing, the entire industry is facing. And there is some vulnerable players out there that I believe that we can participate in.

The investments we're making around fines plants, MRP upgrades, quite frankly, it's a no-brainer, taking metal out of waste and not bearing metal is -- you saw the sort of returns ranging from 20% up to 30% and 40%. It's very easy, particularly when you saw the Auckland MRP, a 60% increase in non-ferrous yields. We're talking about literally moving from a 3.5% yield to 5%, 5.5% yield. So very -- something that provides a very quick payback. We are well positioned. We have a very strong market presence in most regions. But as I mentioned, our market share varies a bit from region to region, particularly ferrous and non-ferrous, and there is some opportunities there for us.

Having said that, happy to take any questions.

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

Yes. So a couple of things on that front. As Stephen mentioned, our cost group is something that we target across our entire business, obviously, within the ANZ Metals business, but also at a group and corporate level. We're always endeavoring to chisel out costs, but some very significant cost factors in the metals business are things like waste disposal. That's a big -- a very big number for us in both Australia and New Zealand. And it's not going to get any cheaper.

You've got a lot of labor state governments at the moment. They're talking about harmonization of waste levies as an example. The challenge there when anyone says harmonization means, it probably means that we're going to go to the highest jurisdiction. So in all likelihood, we're going to see our landfill costs increase. So anything we can do to get metal out of waste and get moisture out of waste and anything out of our waste stream to lower those costs is certainly something we're pursuing.

On the technology front, as I mentioned, we are upgrading these plants and quite frankly, looking to replace some of our technology with some of the AI machine learning sort of devices, put robotics in, take labor out. At the moment, we have guys picking on conveyors. I can see in the very near future that they won't be humans, they'll be robots in some form. I think the biggest opportunity for us is around fixed cost dilution. And any volume we can add through our shredders and through our MRPs with any of this market rationalization consolidation, simply taking that volume and jamming it through our existing cost base gives a massive dilution in unit costs, fixed unit costs.

The other place that Graeme alluded to is with Pinkeba. As you said, road transports with COR regulations, anybody that's participating in the road transport field is doing it tough, trying to find trucks, let alone drivers to carry product is becoming increasingly difficult. And that's why we're really, really keen on this opportunity around moving scrap potentially on barges from places like Darwin, Cairns, Townsville, MacKay, Gladstone, maybe even Bell Bay into Pinkeba and processing that scrap in Pinkeba and not moving it on truck, enormous cost saving, enormous.

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

Certainly, InfraBuild published their F '25 accounts a couple of weeks ago, and they were pretty sad and sorry tale. So something we believe will shake out there are obviously not for sale today. We would have keen interest in the recycling assets if they did become available. In most cases, those assets are probably nearing the end of the life, but there is some opportunity with a couple of their shredders. But for the most part, the value in that business in particularly sits around their feeder yard network and quite frankly, their book of business, not so much their assets.

So yes, we would have interest. And in terms of the smaller players, whether they be single yard operations or we've got a couple of larger family-owned businesses, as I mentioned, for 2 reasons, tough times may actually force a few people to sell. In a couple of other places, a lack of succession planning may also force the sale of those businesses, and we'd be very keen to participate in that.

I had a quick question on the detail you're giving on EAFs. And particularly, if you look at that, I think it was a 10-year chart, if my eyes don't deceive me on the prices of Chinese -- at various times when China ramps up exports versus when they don't. With EAFs coming into the market, if I'm not incorrect, most of -- as you're saying, most of the pricing will be export-import parity, which presumably is caught by the weaker conditions at the moment.

So I guess as we go to a world where we're getting more EAF capacity in New Zealand, potentially more in Australia, is there a way out of the pricing side where you're being hit by regional conditions? And is there an opportunity at all to look at? Is there a more favorable domestic price that's able to be accessed in the event that we don't see the reversal of Chinese activity on finished and semi-finished products?

It's a really good question. Look, any demand, even the growing EAF demand, you would like to believe will underpin and escalate pricing over time, both domestically and globally. And we're certainly seeing that demand change. What we're trying to do and have been successful is, quite frankly, upselling our products into the domestic mills. They want high-grade, high-quality scrap. And quite frankly, we're going to charge them a premium to do that. So that's certainly an opportunity for us.

And the other opportunity sits around improving our logistics and pathways to market to get some cost out of either road freight, rail freight and as we talked about, even barge and ocean-going vessels to try and lower that cost of delivery from the point where we pick up the scrap and buy it, process it and then deliver it to the customer. There's plenty of opportunities across that spectrum to try and wedge out extra margin.

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

Look, 2 things I'd say on it. I know that because I've sort of participated in some of the meetings through a couple of different industry groups. The domestic steelmakers, both the incumbents and some of the new proponents are actively lobbying government around antidumping and tariff protections for the domestic steel, sovereign steelmaking. We're seeing lots of countries going down that path. Vietnam are doing it. India doing it. Obviously, we're seeing what's happening in Europe, talks of carbon border adjustment mechanisms and stuff like that. And of course, in Australia, you've got the safeguard mechanism, which invariably that will flip on its head, and that will -- people like BlueScope will be challenging the government around how they protect the domestic industry around that. So there's all that happening.

The Chinese question, I'd say is probably you guys might be better positioned than me to comment on that. The only thing I would say is for a long, long time and obviously, in a decarbonizing world, the talk of Chinese taking some of their most polluting integrating steelmaking and closing it, taking it out and closing it down. I got to believe that's still part of the longer-term agenda. We do know that China do play the long game. So when that actually happens, but they are cutting production, and they are generating more scrap internally. And eventually, you got to believe that, that scrap will migrate into EAF production there, too, maybe at a lower overall production, but certainly a shift from integrated steelmaking to electric arc.

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

Look, in terms of the rail infrastructure, using that back freight, that's an opportunity. That's -- I think the saving there is in the order of $5 a tonne, on every tonne by taking the product into Glenbrook on rail. I think that's something that we've shared with BlueScope, but it's about $5 a tonne. As you said, as you saw on some of those IRRs and ROI, sorry, on some of those projects. If you think about that 60% uplift in metal extraction from waste, the product that we're talking about there is zorba and zurik, which currently trading for around about $2,300 a tonne in the case of zorba and in the case of zurik, about $1,200 or $1,300 a tonne. So you haven't got to get too many percentage points, and you saw on the IRR, it's massive. In terms of fines plants, I think the figure up there was 3% or 4%.

But again, when you're dealing with a product that's $11,000 a tonne, even a few percentage points in extracting that. And quite frankly, the fraction that we're talking about here is sub-30 million. And in that sub-$30 million, there's also precious metals. We also hit gold and silver thresholds on occasions, too. So that will also add some benefit to us. But the sort of payback on those sort of projects is very quick.

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

So what I would say, the first quarter was obviously a very disappointing period. We had 2 scheduled shredder outages, one that was out for an 8-week period. It was basically out for the entire month of July and August. And then we had another shredder that was out for about a 3-week period. And then unfortunately, we had an unscheduled outage with our Brooklyn shredder in Victoria. So 3 shredders out in the quarter certainly impacted our earnings in that first quarter. We are still clearing the backlog of scrap as a result of that, and some of that will play out in Q2.

And then actually, there will be a portion of it that will play out in the second half. We just won't get it all processed between now and Christmas. So the scheduled outages were well planned. They went to time. They went to budget. In the case of the [ Samer ] shredder that was out for 8 weeks. This is -- we replaced key components of that shredder. This was a 20-year sort of -- we pretty much replaced the entire shredder. We've only got one major component that we need to replace at some point. But basically, we've got a brand-new shredder. There's never a convenient time to do it.

And obviously, with things around fire risk and stuff like that and accumulating stockpiles, a lot of planning goes into it. And when you set a date to get on with it, there's -- you charge forward. And yes, unfortunately, Q1 results were pretty disappointing in the backdrop of a very tough ferrous market. But what I will say in Q2, you've seen an obvious improvement in earnings. Non-ferrous is definitely underwriting those earnings. And with what we're talking about with -- starting with Glenbrook and elsewhere, second half, a few green shoots. And we've got some of these fine plants coming on stream, too. So a few green shoots on the second half.

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

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

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

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

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

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

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

We expect the price spread to increase over time. But I can tell you, low copper shred in the U.S. is now trading for around -- when I say low copper less than 0.2, is trading for around USD 30 premium over regular shred. If we want to talk about things like busheling and stuff like that, it sits above low copper shred. So probably maybe another $10 or $20, but this moves. Market dynamics move depending on availability in any one moment in time.

So that spread tends to move in and out. But in rough terms, that's what we're talking about. That sort of difference between what I would call a regular spread and a premium grade spread. And the ultimate cap on that price is busheling price, is the ultimate cap. If we want to talk about cut grades, if we look at places like Turkey to sell what we would call a bonus grade or a HM1 grade into Turkey, they're paying a $20 premium over regular HMS today. So the spread is certainly widening -- widen.

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

Yes.

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

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

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

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

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

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

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

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

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

Simple answer is yes. Because I've been involved in some meetings recently in Canberra and suddenly, we seem to have some traction with a couple of government ministers and a couple of local members. Things like cash for scrap in New South Wales and Victoria, there is a ban on paying cash for scrap and yet people do it. There was an article in the paper 2 weeks ago about copper and wire and piping and hot water services getting knocked off in Sydney and getting sold to the metal recycling industry. No one is going to sell it where you get paid a check and you have to take down details. It's going to the illicit trade.

But I'd have to say that we are getting traction with the government. And some of that, quite frankly, is we have got the steelmakers on site. We've got this ridiculous scenario that we're seeing the scrap. If you think about a car getting baled holus-bolus, seats, upholstery, wiring, engine, everything, just put in a bail, shoved in a container and shipped to an offshore destination that probably doesn't have the environmental rigs that we have.

So we've got that happening, product going out through Port Botany. And yet you saw in our chart there, I'm bringing scrap in from Queensland, South Australia, New Zealand and even West Coast of America. So the steelmakers who are obviously big employers are saying security of supply, if you want us to migrate down this green metal agenda, we need security of supply. So let's stop this illegal trader product going out through our ports.

What minister or department federally is in charge of that?

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

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

About 400,000 tonnes. So -- and it's 3 things. I can tell you that Laverton is looking to increase their ladle furnaces, which allows them to drain more molten metal out of their EAFs, and that's a project they're actually undertaking at Christmas. It's been well telegraphed. They're taking their mill down for a few weeks. They're also looking at a combination of something similar in Rooty Hill, but they're also, I think, playing around with, I'll say, their electrons that gives them more efficient melting and also increasing the load side, which is about another 100,000 tonnes.

And BlueScope are also looking at one particular project that involves preserving heat in the transfer of liquid metal from the blast furnace to the BOF. At the moment, they use these things called torpedoes, which moves liquid metal from one furnace to another. And in the process, they lose a lot of energy. So they're actually looking at means or a method by which they can preserve that energy in the movement, which if they add a couple of hundred degrees over here, it means they can melt more scrap. There's a point in time where if you add too much scrap, you basically chill off the furnace and then you're in trouble. But if they can preserve the heat, they can charge more scrap. So there's a couple of hundred thousand tonnes there, I think.

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

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

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

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

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

Good morning, ladies and gentlemen. My name is Philip Bainbridge, and I'm Chair in Sims Limited. It's my real pleasure to welcome you to the 34th Annual General Meeting of your company.

Today, we are hosting a hybrid annual general meeting with the options of in-person and virtual attendance. I'm very pleased to be here, and I would like to thank you for showing your support and joining the meeting today. I'd like to begin by acknowledging the traditional custodians on the land of which we are today, the Gadigal people of the Eora Nation. We acknowledge the traditional custodians of the lands from which each of you is joining us online as well. We recognize and respect the deep connection stewardship of the land and waters, we pay my respects to the elders past and present.

Just a very quick safety moment. If the alarm does go off today, there's no drill planned. So if it does go off, we're out of that door and either down on to Sussex Street or on to Kent Street. But if the alarm does go off, it is for real.

Before going any further, let me introduce my colleagues who are with us today. From the Board, we have Vicky Binns; we have Shinichiro Omachi; have Russ Rinn; and our Group Managing Director, Stephen Mikkelsen. Also online, we have Grant Dempsey and Kathy Hirschfeld, who are attending virtually. I'd like to introduce Gretchen Johanns, our General Counsel and Company Secretary. And our moderator for today for questions, Michelle Pole, General Counsel and Company Secretary for ANZ Metals.

I'd also like to introduce Warrick Ranson, our CFO, who is online today. I would like to thank our everyone attending, but also our friends from Mitsui, who joined us today from Tokyo. So thank you very much for coming today. And our joint venture partner, George Adams, who has been to, I think, every single AGM is not here today and we'll be attending virtually. The reason George is not here today is the Sims Board actually was in California last week, and we had a fantastic time, both socially and business with George, his family and his management team, and I'd like to thank George very much for his hospitality then.

I declare this Annual General Meeting open and confirm that a quorum is present. The notice of meeting was duly given, and I'll take the notice of meeting as read. One other person I'd like to welcome is Sam Vorwerg, who represents Deloitte, the company's auditors and he will be available to answer questions. So welcome, Sam, thank you very much for everything you do with Sim's as much appreciated.

I'd also like to advise that the minutes of the Annual General Meeting held on 13th of November 2024 are signed as a correct record of the proceedings of that meeting. The process for today, each resolution to be put to the meeting will be decided by a poll, and I will explain those procedures after I give just a short Chairman's address.

So with that, the Annual General Meeting is a really important event, allowing us to engage directly with you, our shareholders. We appreciate your time, feedback support and we value the opportunity to update you on the group's business. Thank you for joining us in person and virtually.

Our company performed well during FY '25 despite a challenging environment. Sims executed on the strategic initiatives announced during the prior year for the metals business, including enhanced domestic sales optionality, a focus on higher margins for unpressed materials and disciplined cost control. The Sims Lifecycle Services, SLS business, continued to grow its operations and service offering to support increased demand from hyperscaler data centers for repurpose material.

The operational gains and strong underlying earnings in FY '25, demonstrate the strength of Sims strategy and business model. In terms of sustainability, it's at the core of Sims purpose, which is to create a world without waste to preserve our planet it remains integral to our long-term value creation. What we do as a company is inherently good for the planet and our products lead to significant avoided emissions.

In addition to what we do, how we do it is also important. And in this context, FY '25 was a milestone year where we achieved our 2025 climate targets. We delivered a 49% reduction in Scope 1 and Scope 2 emissions against our FY '20 baseline, significantly exceeding our 23% reduction target, and we also achieved 100% renewable electricity across our operated business. Sims Lifecycle Services also reach carbon neutrality make an important step in our decarbonization journey.

Although we have achieved significant reductions in our emissions and have tried many technologies and approaches to further reduce emissions further in different jurisdictions, achieving our 2030 targets is going to be challenging. As part of our commitment to transparency and accountability, shareholders are today being asked to consider Resolution 6, an advisory say on climate vote on our climate strategy and our progress to date. While the vote is nonbinding, the Board welcomes this engagement, and we will use feedback to inform ongoing refinement of our climate strategy and reporting.

Our commitment to sustainability performance also guides our focus on people. The Board values diversity of background, gender, ethnicity and experience and firmly believes that a diverse workforce where everyone is included makes for a better company. We continue to work to improve diversity across all layers of the company. And on safety, we are proud of our performance, and Stephen will cover this more in his address.

Our capital management framework is focused on sustaining a strong balance sheet, funding strategic growth and returning value to shareholders. In line with this framework, the company declared a final dividend of $0.13 per share fully franked, resulting in a total full year dividend of $0.23 per share. We will continue to recycle capital from noncore assets to support strategic growth opportunities across our footprint.

During FY '25, we continue to refresh the Board's membership to ensure deep industry knowledge and strong strategic leadership. To that end, I'm really pleased to introduce Shini Omachi and Russ Rinn, who appointed to the Board since the last AGM and are up for reelection at this meeting. They have both added significant industry knowledge and executive experience to our Board. Please welcome -- please join me in welcoming them to the Board.

Use of recycled materials is key to supporting our customers' efforts in carbon reduction, circularity and supply chain resilience. Specifically, our metals business is well positioned in Australia and New Zealand and North America to capitalize on the anticipated growth in electric arc furnaces and the increasing need for secondary aluminum and copper.

Similarly, our Sims Lifecycle Services business is strategically placed to profit from the growth in artificial intelligence and rapid expanding data centers in North America and other jurisdictions. Sims will continue to be the preferred supplier to our customer, providing the sustainable materials they need to support their growth. Thank you very much for your continued support as shareholders in this company.

And I'd now like to ask Stephen, our MD, to make his address.

Thank you, Phil. Good morning, and thank you for joining us today. I am very proud of what the team has accomplished this year. Fiscal year 2025 was a year of delivery against our turnaround plan. and the results reflect the progress we've made. We simplified our portfolio with the divestment of U.K. metal, maintained strict cost discipline and focused on metal margins growth in Sims Lifecycle Services and a strong contribution from SA Recycling.

Together, these actions lifted underlying EBIT nearly 200% to $174.9 million. In North America, we delivered a $93 million EBIT improvement through disciplined buying, higher intake of unprocessed material and a sharper focus on domestic sales channels. In Australia and New Zealand, resilience and nonferrous helps offset ferrous headwinds from record Chinese steel exports. SA Recycling again performed strongly, increasing its EBIT contribution by 17% and completing several bolt-on acquisitions that expanded its presence in key U.S. growth regions.

Sims Lifecycle Services delivered another strong year with EBIT up 84%. The team continues to innovate, capturing opportunities from the exponential growth in hyperscale data centers and the expanding influence of artificial intelligence. This reflects the strength of our strategy, the quality of our partnerships and our ability to lead in a high-growth, technology-driven sector. On the safety front, our commitment to predicting our people remained a top priority. We achieved a record low lost time injury frequency rate of 0.11, a clear sign of proactive risk management and the dedication of our teams.

Our employee engagement score remained at 82% and consistent with record levels since fiscal year 2021, showing that even through transformation, our purpose and values remain deeply embedded in the culture of Sims. Financially, we delivered strong results and maintain balance sheet strength with underlying free cash flow increasing to $107 million. We also continued to invest in our operating network, we completed [ Schrider ] and downstream upgrades, expanded our railcar and barge logistics and progressed the redevelopment of Pinkenba into a strategic hub to meet growing domestic demand. These investments enhance margin capture strengthen our operational flexibility and support the long-term sustainability of value creation.

Let's turn to how the business is performing as we approach the halfway point of FY '26. Despite ongoing ferrous headwinds, the group's underlying EBIT performance for the first half of FY '26 is expected to reflect a meaningful improvement over the first half of FY '25 and broadly in line with the second 6 months of the FY '25 financial year. At a net profit level, the group expects to take a further write-down on its residual receivable from the sale of U.K. metal assets.

North America Metals' underlying EBIT is expected to be broadly in line with the first half of FY '25 with a meaningful improvement on the second half of FY '25. Intake volumes remain resilient with margins underpinned by firm nonferrous prices and disciplined management of the buy-sell spread despite softer ferrous markets. The team continues to strengthen its leverage to unprocessed various intake and strong streaming output increasing zorba sales in a rising market and demonstrating solid execution and commercial agility.

SA Recycling is expected to deliver a meaningful improvement in underlying EBIT in first half FY '26 compared to first half FY '25, supported by the broad strength it carries across its non-ferrous streams. Although the result is expected to be softer than the second half of FY '25, strong zorba contributions driven by mix and scale continue to support the business. Its footprint also expanded further through 4 additional small size acquisitions.

Australia and New Zealand Metal continues to face strong headwinds from elevated Chinese steel exports affecting both export and domestic ferrous markets. The strength of its non-firstreams has provided some offset, although planned and unplanned shut maintenance weighed on performance early in the half, resulting in a breakeven first quarter. Underlying EBIT for first half FY '26 and is expected to be between $10 million and $15 million.

Export markets are expected to remain challenging, particularly across Asia and the subcontinent where buyer activity remains subdued. This is keeping steel and scrap prices under pressure even with recent signs of lower production from some Chinese producers. Sims Lifecycle Services has continued to deliver exceptional growth with an expected underlying EBIT for the first half of between $45 million and $50 million. It is worth noting that this already exceeds the full year result for FY '25.

This acceleration reflects significant price increases from strong demand for memory and for the recovery and reuse of critical components as state needs increase. The business continues to scale efficiently through automation and strengthen its long-term customer relationships through deeper supply chain integration. Expansion in Europe remains on track.

Looking ahead, various markets remain challenged by elevated Chinese steel export and global oversupply. However, structural tailwinds continue to build, expanding electric arc furnace capacity is driving sustained demand for scrap. U.S. tariffs are supporting domestic margins and accelerating adoption of artificial intelligence is fueling continued growth in nonferrous recycling and repurposed units.

Our strategic focus remains clear. margin discipline, capital efficiency and portfolio simplification. These priorities, together with our purpose to create a world without waste to preserve our planet position us to capture opportunities emerging from decarbonization and [ the circular ] economy.

In closing, I want to thank our people for their dedication and resilience through a year of significant progress. our Board for their guidance and our shareholders for their continued support.

Thank you, Stephen. And now to the formal proceedings of the meeting. Before moving to the various resolutions, I'd like to draw your attention to the voting process. For those that are attending in person and eligible to vote and speak at the meeting, you should be issued with a yellow voting card. If you're holding a blue card, you may speak at the meeting but not entitled to vote, if you're holding a red card, you're a visitor not entitled to speak or vote at the meeting. If you do need any assistance with voting cards, please see the representatives from share registry MUFG corporate markets at the registration desk. I think we have a an issue. And so maybe we can try and solve that as we go through the voting process, if it is solvable.

So for those who are attending virtually in order to vote or ask a question during the meeting, you will have to register. You may vote by clicking on the get a voting card box at the bottom of the site. You will need to enter your shareholder number and post code or proxy number. Please note that only shareholders, proxy holders or shareholder company representatives may vote.

Eligible shareholders will be able to cast a vote for, against or abstain for each resolution during the meeting. Once you finalize voting on all resolutions, you must submit your vote by clicking the cast vote or cast partial vote button at the bottom of the page. You'll be able to edit your votes by clicking the edit card until voting is closed at the end of the meeting. You'll be given 5 minutes at the end of the meeting to finalize [ your ] -- [ how ] much left to cast your vote.

Once you have registered, you'll be able to ask a question during the meeting through the Ask Question box at the top and bottom of the page. You may submit a written question or ask a question over the phone line. You must select a submit question box to lodge your written question or press the green call button for an audio question. If you're asking multiple written questions, please submit each question separately. I encourage shareholders who have written questions to send -- who have written questions to send their questions through as soon as possible. If we ask your [ requestion ] during the meeting and you want to apply, please do so by asking a new question.

We'll now pause for a few minutes to allow shareholders time to submit questions online. Please note that we'll also pause briefly during each resolution for questions from the room and online. We will address general questions after the pause and any specific questions on the resolution during consideration of the relevant resolution, sorry, tripped over those words.

Right, hopefully, that process in Personal online is all good, and we'll move on to the matters for formal consideration. So first, the financial statements. And the first item of business on the agenda is to receive and consider the financial statements of the company and its controlled entities for the year ending 30th of June 2025, and the related directors' report and auditor's report. Are there any questions or comments on the accounts?

I'll just reiterate that Sam from Deloitte's is here with us as well. So if there's questions of the auditors, I'm sure Sam will be happy to take those. Michelle, any questions online?

No questions online.

Any questions from the room? Okay.

Thank you. As I know, would like to a minute to record that the accounts and reports were received and considered. We're now moving on to Resolution 1, but because it concerns me, I'm going to ask Vicky Binns to come up and take over here.

Thank you, Chair. The next item of business is ordinary resolution 1, which is the reelection of Philip Bainbridge as a Director of Sims Limited. On behalf of the Board, I would like to offer our views on Mr. Bainbridge, who has served as Chair since March 2024. And during this time, has provided strong leadership and guidance to the Board and management.

Mr. Bainbridge brings to the role extensive senior executive experience and knowledge working in a variety of jurisdictions. Mr. Bainbridge is the Chairman of the Global Carbon Capture and Storage Institute, Sino Gas and Energy and Tilt Renewables Proprietary Limited. And he was previously Chair of the Papua New Guinea sustainable development program.

The resolution is that Mr. Bainbridge, who retires by rotation at the Annual General Meeting in accordance with the company's constitution and ASX listing rules and having offered himself for reelection and being eligible be reelected as a Director of the company.

Are there any comments or questions on Resolution 1. Nothing from the floor? Michelle, anything online? Okay. Thank you very much, and I'll pass back to the Chair. Please look at the proxy results as shown on the screen.

Thank you, Vicky. Moving to Resolution 2, the reelection of Shini Omachi. Mr. Omachi started his business career with the Minerals & Metals Resources Group in Mitsui Group. He's [ held has seen his ] strategy position to Mitsui during his Mitsui during his tenure, including Executive Vice President and Chief Strategy Officer.

In June 2020, Mr. Omachi took a position of counselor to Mitsui. He brings deep industry knowledge and strategic thinking to the role. And in this year on the Board has made many very good contributions, and we're just delighted to have him on the board with us. So the resolution that we have here is that Mr. Shini Omachi who retires by rotation at this Annual General Meeting, accordance with the company's constitution and listing rules have offered himself for reelection and being elected, be reelected as a Director of the company.

Are there any questions or comments about Omachi-san? So we show the proxies that we've received with very strong positive boat congratulations.

Moving to -- sorry, and again, just -- if you are here or online and voating, then either vote for, against or abstain for resolution 2.

Resolution 3 is the reelection of Russ Rinn. Russ brings deep industry experience to the board. He's got more than 40 years of experience in steel fabrication, metal recycling industries. Most recently, Russ served as the Executive Vice President of Steel Dynamics and the President and Chief Operating Officer of OmniSource, is metal recycling subsidiary. He previously served as an Executive Vice President of Commercial Metals Company, a Texas-based metals recycling producer reband related products. And like Omachi-san, Russ brings this huge depth of knowledge in the recycling business, particularly in the U.S. and is really sort of grad holder being a director and really met the team and spend a lot of time getting to know the assets and the people.

The resolution is that Mr. Russ Rinn, who retires by rotation at the Annual General Meeting in accordance with the company's constitution and the ASX listing rules and having offered himself for reelection and being elected be reelected as a Director of the company. Any questions or comments about Russ? And the proxies for Russ are up on the screen with a 98.49. Well done, Russ.

The remuneration report, Resolution 4. It's a nonbinding ordinary resolution for respect to the adoption of the remuneration report for the year ending 30th of June 2025 as set out in the directors' report. For process, the company will disregard any votes cast on this resolution by key management personnel of the company and any of their close related parties in accordance with the voting exclusion statements continuing the notice of meeting.

The resolution is that the remuneration report for the year ending 30th of June 2025, as set out in the directors' report is adopted. I wonder if you could share the proxies?

One thing is certain besides death and taxes that every day, your shares show a red fall. Why is your remuneration to increase?

First off, thank you very much for that question. And as always, we appreciate shareholders taking time to raise this matter. If I can just respond the role of the Board and management is really to provide shareholders with a return on their investment. And for Board to do this, we need to attract and retain a high-quality management team. I and we, the Board, believe we have a high-quality team who has grown shareholder value over the last couple of years. We acknowledge that there is still much to do and remain committed to further improvement.

Our remuneration structure, both the LTI and STI and LTI level is strongly aligned with financial performance. We believe that this remuneration outcome is appropriate for the improvements that are being made. It was not a full payment because we recognize there is still much more to do. But thank you for the question.

Any other comments on Resolution 4 comments or questions? Thank you.

Resolution 5 is participation in the Sims Limited long-term incentive plan by our Managing Director, Mr. Mikkelsen. The LTI plan provides, among other things, for the grant of performance rights. If approved today, Mr. Mikkelsen will receive a grant of performance rights with a relative total shareholder return performance hurdle compared to a peer group of ASX-listed companies in the ASX 200 metals and energy sector. Second, a grant with achievement measured against a scorecard of 3-year metrics tied to productivity improvements, underlying improved margins and earnings; and third, a grant with vesting based on the company's performance against a return on invested capital metric. With all vesting conditions based on continued service.

Full details of the plan of how the plan will operate in respect to the proposed issue of 189,504 performance rights to Mr. Mikkelsen are fully described in the explanatory memorandum to the Notice of Meeting. The Board believes it's appropriate that Mr. Mikkelsen is entitled to this issue, subject to the criteria described in the plan. And process wise, the company will discard any votes on this resolution by any director of the company and any of their closely related parties in accordance with the voting exclusion statements contained in the notice of meeting.

So the resolution is that the approval is given for the company to issue Mr. Stephen Mikkelsen, the Chief Executive Officer and Managing Director of the company 189,504 performance rights under the terms of the company's long-term incentive plan as described in the explanatory memorandum accompanying the notice of meeting. Are there any questions from the room or online questions or comments? And again, very strong proxy vote in favor of the issuance.

Resolution 6, is an ordinary resolution 6, which is the advisory vote on our climate strategy, which is set out in our FY 2025 sustainability report on Pages 34 to 49. As I sort of mentioned in my opening address, promoting secular economy practices and principles is the core of our business and the use of recycled materials is key to supporting our customers' efforts in carbon reduction, circularity and supply chain resilience.

As a result, our role is dual enabling broader decarbonization through our circuit services and progressively reducing our own operational emissions. The vote on the adoption of the climate strategy resolution is advisory only and does not buying the directors or the company's shareholders that are being asked to determine -- since climate strategy. This environment revote serves as an opportunity for shareholders to engage with and provide feedback on the climate strategy.

And we have had prior to this meeting, a large number of very good conversations with nearly all of our major shareholders, and we thank them very much for that time. So the resolution that we put to the meeting is that the climate strategy set out in the sustainability report for the year ending 30th of June 2025, is adopted and take any questions from the floor or online.

Michelle has put the proxies up there within 90.38% vote in favor. I think we've actually broke a record in all of the AGMs that Sims ever had for the number of resolutions that we brought to this meeting. So there's 2 more to go. So resi...

One question has just come through on the climate strategy, both. The question is, I see that Sims is still 1 of only 2 Australian companies in the Global 100 list, well done. However, we have dropped from #1 to #2, what would it take to get back to #1?

So we have a view in Sims that actually sustainability. We look at it in its very broader sense. Our Scope 1, Scope 2 emissions is 1 part of it. It's how we do business and it's what business we do. And sustainability goes across all of our products and how those products are used. It goes across how we employ people, how we motivate people, how we remunerate people. It goes across how our safety performance. It goes across all of our emissions, be they CO2 emissions, be they particle emissions, be it water management and water stewardship and all of our plants.

Sustainability is very, very broad. It's a super competitive field to get from #2 to number one. I'm a super competitive kind of person. So being #1 is always really good. We've also got to balance all of that with delivering a return to shareholders. And that's the balance that we spend a lot of time actually working through how do we balance the -- what we do, how we do it and the return that we provide to shareholders.

That's actually the balance that we're striking every single day. And I think it's -- so we will keep working that. But again, we will be managing that balance as we go forward.

There is one other question on the climate strategy. The question is the climate report is welcome. Thank you it would have been easier to find if it was linked directly from the sustainability report. What is Sims doing to reduce Scope 3 emissions? Is it learning from other companies that are doing so such as [ Ansell ]?

Okay. If you look in our report, our Scope 3 emissions, we've got basically in 2 buckets. Our Scope 3 is what we would call the Scope 3 that are associated with predominantly shipping transport. We have been working as part of a broader industry group.

Sadly, that broader industry group ran into some very strong headwinds recently from the U.S. administration. So we have to rethink about how we're going to tackle that one. Our other Scope 3 emissions, which are much, much larger relate to our products that we give to steelmaking customers and our products that we give to hyperscaler customers. I actually call those good scope 3 because every time we do that, we are reducing their emissions and huge avoided emissions for the alternative ways that they could get those products.

So most of our Scope 3, nearly all of our Scope 3, I would actually characterize it as good scope 3 because we are big picture, reducing emissions on the planet.

There's 2 questions from added to general business, so we can address those at the end. .

We move to Resolution 7, the reinstatement of the proportional takeover provision in the company's constitution. The company's constitution currently contains proportional takeover provisions in clause 13. If a takeover bid is made for some, but not all of each shareholder shares, the proportional takeover provision will enable shareholders as a whole to vote on whether the proportional bid should be allowed to proceed independently from their individual decisions whether or not to accept the bid. Provision is designed to assist shareholders in receiving proper value for their shares if a proportional takeover bid is made for the company.

Resolution 7 is proposed as a special resolution and to be passed, must be approved by at least 75% of the vote cast by shareholders entitled to vote on the resolution. So the resolution that we put forward is that the proportional takeover provision in the form of clause 13 of the constitution of the company be reinserted in the constitution for a period of 3 years from the date of this meeting.

Are there any questions or comments around Resolution 7?

Who would be -- who would be in charge for a takeover.

I'm going to answer that -- sorry, there's a microphone there. Sorry -- I'm going to answer that in this a very broader sense, actually. I mean sort of every company is -- there are all sorts of different people, either other companies, private equity whatever who are always looking around that may come there. So it could come from any sector. Our job is to actually do the very best we can. And if we do receive something, we will consider it appropriately. So...

I like to be able to take over other companies....

Sorry?

In Australia, anyway, we would be more likely to be taking over other companies?

We always keep a very strong eye on opportunities out there as well, both in Australia and in other jurisdictions that we work. So...

[ Overrun ] that article so the business?

We actually went through quite a long process on the U.K. Metals business to understand the recycling environment in the U.K., the steelmaking business in the U.K. and looked at what it would take to make a viable, profitable business actually work in the U.K. and how much capital we would have to put into that.

And then we ran a process as to what somebody else would pay for that business. And the value that we saw from the sale was significantly in advance of the value that we saw retaining the business. So we actually did the very logical commercial thing. And actually, that business in the business environment in the U.K. did not improve since we did that business. So on -- so we got that one.

So we're on to Resolution 8. And Resolution 8 is a new clause 2.1A to be inserted in the company's constitution. The company is proposing an amendment to its constitution to give shareholders the opportunity to vote on certain proposals involving a material equity issuance by the company other than in certain circumstances expressly contemplated and subject to the express conditions under ASX listing rules.

If adopted, the proposed amendment would effectively on, require the company to seek shareholder approval for certain equity issuances in connection with an Australian takeover bid or an Australian scheme of arrangement and also restrict the company from seeking a waiver of the ASX listing rules to bypass shareholder approval requirements for certain equity issuance, EG in respect of equity issuance under foreign transactions comparable to an Australian takeover bid or an Australian scheme of arrangement.

Resolution 8 is proposed as a special resolution to be passed and must be approved by at least 75% of the votes cast by shareholders entitled to vote. So the resolution that we're putting to the Board, the Board unanimously recommends that shareholders vote in favor the special resolution to approve the proposed amendment. Are there any questions from the room? I think we can see from that vote that our shareholders were very supportive of that resolution.

We do have one comment received online, Chair. The shareholders asked when disclosing the outcome of voting on all resolutions today, including the constitutional amendment, please advise the ASX how many shareholders have voted for and against each item similar to with the scheme of arrangement.

This will provide a better gauge of retail shareholder sentiment on all resolutions and insight into the chronologically low retail shareholder participation rate, the likes of [ Qantas ], ASX Suncorp, Tabcorp, Myer, Flight Centre and Stockland, all does.

We will be releasing to the ASX, the results of the voting. At the end of the call and the end of today, but I might close the market today. And I believe we cover that in what we proposed I have a forest.

I have one more question. Which of your institutional shareholders pressure you to do this? Who else apart from Aurora has done this?

I would actually like to say we were not pressured to do this. It was clearly a very topical issue. When we consider this as a Board, we actually -- look, we have a very clear strategy. We know what we want to do to grow this company. We know all the areas that we want to explore to actually grow this company.

We did not see that this would restrict us in any way to grow the company. We are firmly of the opinion that shareholders actually are the owners of the company. And we thought it quite appropriate that if we were to do something that would be potentially dilutive to shareholders, at scale that we would seek their approval. So there was not the pressure there. It was some very good conversations with our shareholders and a lot of support. We also had a view that this is a very common practice in many jurisdictions around the world and that the ASX is already starting to move in this direction anyway, which is why we've only put this in place for 2 years or 3 years because we sort of believe that the rules will change anyway.

So -- you have 2 general questions?

Yes. So the first one is how many full-time equivalent staff do we currently have? And is this likely to fall over the coming 12 months with the rapid rollout of AI which parts of our business and the operations are the most prospective for AI productivity gains and how energetically are we embracing those opportunities.

I'm actually going to ask Stephen to comment on that.

Yes. So we have close to around about 4,000 FTE, it moves around. In terms of AI, I break AI into 2 broad categories for us. One is pure operational efficiency in the sense of administrative type work. I'll give you a very good example of that. Quite recently, in our health and safety, we combined it was something like 18 or 20, I can't remember exactly what the numbers health and safety policies and menu across the globe. We looked -- we used AI to look for consistency what the best practice was and combine it into one single health and safety document for the company.

That would have taken an individual would have been mindlessly boring, but it would have taken an individual maybe 3 months. AI did it in around about 30 minutes, an hour. And then the -- obviously, we use people to check the work that it's done, but it was really, really efficient. And I see that as good operational efficiency, which we are absolutely pursuing.

The second thing -- the second part of AI for us will be in actually how we run the business, and I'll give a good example of that. I see AI as being very useful for detecting fires in our facilities using videos and AI interpretation 24 hours a day at 7 days a week consistently. I see it as it's going to be very useful in a ceasing material that comes into our plant, looking for items that shouldn't be in there and we'll be able to do that much better than a human can do.

So I see those 2 broad categories. I don't necessarily see it having a it's really hard. So I don't see it having a massive impact because I think it will open up other job opportunities for us. I think it will expand our business. So I think it's just one of those technology changes that we'll deal with. We're dealing with them enthusiastically. I do think it's something we, as an executive team, we're spending more time on.

I might add the -- we're very, very keen because we have a large part of our business in the U.S. that we have -- we have a couple of directors who are U.S. based and with the retirement of Tom Gorman last year, and we caught up with Tom and thank him last night by the way. So thank you, Tom, that we are in the process of recruiting another U.S.-based director, and we're very keen that, that person comes on with the skills around hyperscaler with SLS, around AI and robotics, which are all part of the future, and we're beefing up the skills of the Board to watch this space on that one.

We have one final question online. Well done for running a hybrid AGM today and following the agenda at this meeting, calling for questions on each item. At next year's AGM, could you please include the proxies in the formal addresses lodged with the ASX to allow for a more fully informed debate and provide a more timely disclosure to the market?

Yes. We will look into that and see how we can do that given the timing of the audited proxies and the releases under ASX. But we'll take that on notice and have a look at that.

No more questions online. We do have a question over the phone.

Just in response to your comments on AI, I'm not a [ adit ] and technology has 1 as a lot of favors over many centuries. But we do hear a lot about AI making mistakes. And it often relying upon existing information, sort of, if you like, extracting what's already there rather than creating new information.

I confess I don't know much about it, but I suppose what concerns me is its propensity for era. You did mention that some individuals did check this exercise that you did. How extensive is that checking without most defeating the object of using AI, I suppose, if you understand my concern here.

In that particular instance, it's like -- it's a classic sanity check. The AI came up with the consolidated health and safety manual, our global health and safety person then read right through it to check that it made logical sense.

I agree with you. We are -- we will approach it cautiously, but we can't ignore it. It's not like it's not going away. So we will approach it cautiously. I think on some of the business aspects, in particular, I'm very excited about it. And I'll give you another example in SLS first from a business perspective, just using the visual aspect of AI to really speed up and ensure the quality of when we dismantle data centers is really quite brief taking to watch.

It's something that a human actually couldn't do. So we'll use it appropriately cautiously, but it's not going away.

Yes. Well, computers have been doing that for a long time. We've been getting better and faster. I often wonder whether people now use the term AI when they are still -- when actually, what's happening is it's just a good old existing computer program, but is to know.

It's a pretty broad term. I agree.

Just in closing, we'll now conduct the formal poll on all the motions put forward today. As we said before, persons entitled to vote on these are the shareholders, representatives and attorneys of shareholders, proxy holders who hold yellow emissions and admission cards. On the reverse of your yellow admission card is your voting paper and instructions. So just some process. Shareholders' proxies and corporate representatives with a yellow voting card need to mark a box beside the motion to indicate how they wish to cast their boat.

When you have finished filling in the voting paper, please lodge it in the ballot box, which will be coming around to ensure that your votes are counted. Shareholders also need to mark a box beside the motion to indicate how they wish to cast their boats. When you have finished filling in the voting paper, please lodge in the ballot box to ensure you. That's a repetition, -- sorry about that.

If you require any assistance, please raise your hand. If you need a pen to complete your voting card, please raise your hand. And please raise your hand if you want more time to complete your voting papers. So for those that are online, there'll be another 5 minutes until 5 minutes, it will -- the voting online will go on for 5 minutes after the meeting close. And as we said before, the results of the poll will be announced to the ASX later today.

So with that, are there any other questions or comments before I close the meeting?

Yes. Thank you. Manorama, Individual Shareholder. It's a 2-part question. personally, has the company done some crystal ball gazing? We're looking at the area of future deterioration of a lot of the equipment is now in the burgeoning renewable energy industry in Australia, for example, wind turbine blades and solar sales. That's the first part of the question. Have you just canvas that general issue?

And the second part of my question is whatever the case, if I may, if there are any technical executives here interested in that area. If I may have a chat with them in more detail, boring technical detail after the formal meeting?

We actually have over in our Mascot office. We've got this the innovation group, which is just a delight to go and talk to them and be part of what they're doing. So yes, we do keep a very close eye on all sorts of innovations that are going on and other areas of recycling and other sources of recycling material, much broader than just that.

We also keep an eye on what other companies are doing in that space as well because there's quite a lot of movement. So yes, we do keep an eye on it. Yes, we do have the innovation people, but I'm afraid they're not here today. They're over in the Mascot office.

So it's no great loss because I haven't done sufficient to work being old fashion to just now learning how to years of computer and Internet to obtain up-to-date information that we make for more productive discussion that...

Okay. Shout when you're ready.

Hopefully, next year, [indiscernible].

Very good. Thank you. Okay. With that, on behalf of the Board, I would like to thank you for your support and for your attendance and participation in the meeting and declare the meeting closed. Thank you very much.

Perfect. Okay. Thanks. Welcome, everybody to Nashville. I thought the tour yesterday to Atlanta was fantastic. It was great to see you guys there. And I thought the SA Recycling team gave us a really good understanding of SA and its strategy. But we're here in Nashville today.

Let me go through a couple of safety things first. The -- if an alarm does sound, the muster point for us is out on that hill over there. At the top of the hill, there's a sign. There is just a notice, we gather there. I would say, again, as of yesterday, there are no planned drills today so that if an alarm does sound, it's genuine. If we're in here, we'll just quietly make our way out of the door at the top. If we're out in the -- on the floor, follow your Sims person and we'll make sure you get to a safe place quickly. Bathrooms are just out of the store here, ladies and gents outside there. I think that's all we need to do from a safety point of view.

So today, we're going to have presentation firstly, from Ingrid Sinclair. Ingrid is the President of SLS and reports directly to me; and Lynn Jacobs. And Lynn Jacobs is the Chief Financial and Sustainability Officer here at SLS.

On that, I'm going to hand over straight to Ingrid -- actually I will run through. I probably think we'll do it similar to yesterday. So we'll run through the presentations, Q&A. We'll then go out onto the floor, have a good look around. I suspect that may sort of spark some more questions, so we'll come back in here for a bit more Q&A, and then we'll get you on your way. Thanks very much.

Great. Thank you, Stephen. Good morning. So welcome to Nashville. Out of curiosity, who's here for the first time to Nashville? Okay. So some have gone through. Any chance that you were here 2 years ago when we had Investor Day? Anybody? No. Its first time -- well, very pleased to have you and pleased to have the opportunity to present the business to you and give you some more insight into why we're so excited about this.

So my team. SLS, as you know, is a wholly owned subsidiary of Sims, which means we have our own executive team. We're based in Irvine, California, which means we get to spend half the year with Stephen when he's over, which is quite nice. But we run independently. So what does that mean? So we have our own HR, our own IT, finance, ops -- actually you know -- and they all report to me.

We have global responsibility. We have sites throughout the world in EMEA, APAC and in North America. In the Americas, we have a site in Mexico as well. So we're every -- coverage everywhere. And the reason we have this autonomous team is so we can have very quick decision-making processes, be able to move quickly and agile because that's the business we're in. It's a very quick paced business.

The one thing that does go up to group is capital resource allotment. So we all compete for the same capital funds, and that goes up to group. So what is nice about this that if in the future, there are any plans to change ownership structure, it would be very easy to do, right? Very easy to pivot. But -- I'm sorry, I went backwards.

So I'm going to introduce a little bit of the team. You've Stephen presented Lynn. So she also has IT under her as well as sustainability and finance. Chris has all the operations globally, and Marie has HR globally as well.

So who has heard of AI, right? It is everywhere, right? And it's really the addressable market for SLS. We have at in entertainment, shopping, at work, everywhere. And I know that some of you are integrating AI in your businesses. So you're all very well aware of its power and its expense. I mean it's just -- it's everywhere.

And I just pull out some of the headlines that have been out in the press lately. And just the pace of change is incredible, and the amount of investment that's going on. $80 billion, Microsoft; Amazon, $100 billion; Google, $75 billion; Meta up to $65 million, all on AI building capacity. It's just amazing boom and the amount of money that's being spent in this sector. So if you take a -- think of the pace of change, took 75 years for people to adopt the telephone, right, to get to 50 million users. The internet, it took 4 years. ChatGPT had 10 million users in 40 days and 100 million users in 2 months. I mean it's just amazing, the pace of change of AI, it's everywhere. And that's $1 trillion that's coming being spent in this sector. And just this week, NVIDIA announced another $150 billion in partnership with OpenAI. So [indiscernible] looks, we have a couple of more people coming. Sorry, we have a couple more folks joining from back there. So to bring an analogy to you, it's like the gold rush, right? Those who won't dug for gold weren't necessarily making the money, but the ones who are selling, the shovels and the [ pickets ] were. So it's sort of analogous to what we do. We're adjacent. We provide tech services. We're not building AI data centers or working, maintaining it, but we are adjacent. We're providing tech services to them.

So as a shareholder of Sims, you probably never thought that by holding Sims' shares, you would have the exposure to the AI sector, but here we are. So what we did, we wanted to kind of show what this is -- the yellow line is the total investment that's going into the AI data center hyperscaler. And we plotted the blue line as SLS revenues. I'd like you to kind of look at the comparison of the slopes. It's quite interesting that there is some direct correlation between the AI sector investment and the performance of SLS. But what you have to note here is that what is installed today will come to us in 4 years because the decommissioning cycle is normally 3 to 5 years, so 4 years on average, which means that here we have a rack and all the servers in it. Every 4 years, it gets refreshed, right. And it -- you might think, okay, but is it slowing down over here where the slope is going? That's still $300 billion -- between $350 billion, $400 billion of investment. So it's still huge. And that doesn't take into account all the recent announcements of the $150 billion that went in with OpenAI and all these things are coming. So I would suspect that, that curve will keep on going up. Also to note here, so since it's a 4-year cycle, it -- what gets installed in 2020, we would see at the end of '23. But throughout that, we're also giving -- providing services -- the life cycle of it.

Okay. So because of this, of course, it's a very exciting industry, the growth and it's appealing to others. So what's the competitive landscape look like? We estimate about 95% are local regionally held providers. So they're looking at market sectors that we're not interested in. So it would be your universities, your hospital groups and that type of thing, small regional business. The middle part, the 5% is what Stephen often talks about, the global competitors that we run into, Iron Mountain and SK Tes. Those are our main competitors in that sector. But also, the hyperscalers could be a competitor themselves, right? They either pull it in, do it themselves or they don't do it at all, right?

So I'm going to be bold and say that there's only one company that's strategically placed to take advantage of this growing aggressive market, and that's us. So let me kind of break through -- go through why I state that. So we have strategic market positioning. We're aligned with the growth of AI growth, infrastructure. And so we go to where our clients are, where they need the capacity. We're a full service provider, a one-stop shop. So we do from the forward upfront logistics all the way to the decommissioning, all the way through the life cycle. We innovate with our clients. We have strategic partnerships. So we're always coming up with new ideas on how to do things better as the technology changes, we have to change with it. So it's very quick. And we integrate with them. So we get into their data systems and they're in ours. And then we -- scalable capacity is what is very important in this sector because you have to be able to move quickly. And we estimate we have an additional 50% to 60% of extra capacity available in the U.S. because we've been investing in that growth over the last 2 years. We've spent 13 years, the previous CapEx year, over 50% of that was for growth capacity. So it's just being ready and tacked in anticipation of the growth and to position ourselves so we can be ready for it.

And as I mentioned before, what is super important in this sector is to be able to keep pace with our clients, it grows so fast. It's very quick moving. So we have to move quickly with it and just to have that scalable capacity. So if I give you a concrete example of what we did successfully to validate what we do and what we can do as far as moving quickly and being able to pivot. In June of '21, we were presented with an opportunity to bring in a new service offering, which is a redeployment of DIMMs. So in 5 months, we stood up a site, and it's not a regular site. This is to hyperscaler standards, which means the floor is [ epoxy's ]. You have the environmental controls, temperature, humidity, antistatic controls, high security throughout the site. It's not just a regular asset management site. It is a higher manufacturing like site, which you'll see in about an hour when we go out on the floor. But we did that in 5 months, which is incredible. And then within a year, we had reprogrammed 1 million DIMMs. So Lynn, put this out, [ the DIMMs ]. So this is when I -- they're memory, memory sticks DIMMs. And I kind of get a little bit technical with you here, there is a group called OCP, which was founded in 2011. It's the open compute project. It was founded by the hyperscalers like Google, Microsoft, Meta. Intel is also in there. And it was -- they came together to try to agree on a generic form of the hardware. So this is OCP hardware, which means it could be used anywhere. You're not with proprietary DIMMs proprietary hard drives, it's all open compute. So they did that so they could be more scalable, efficient, sustainable and cost effective. In 2019, Intel introduced CXL which is Compute Express Link. And this is ideally what these reprogram DIMMs are used for. It's older tech that can go into new tech. And what they do is they build pooling. So it's pooling for memory, storage and compute power because you can imagine, with all these AI with the language learning modules, that you need -- you have these peak periods of compute demand. So CXL is an opportunity. It's a pooling. It's -- so you can meet those peaks, instead of designing for a peak, you can go use the pool. It's a much more cost-effective way. You're not using the new technology. You don't have to have a DDR4. You can 5, you can use the 4, which is right here. So more sustainable, more cost effective and helps data centers meet their challenges with memory constraints, the performance bottlenecks and hardware inoperability. So the old technology can be used in newer technology for pooling effects. And that's the main use for redeployment of DIMMs. And when we go down the floor, you'll meet Isaac Martinez, and he's the expert on this. So if you have any extra questions on it, he's the guy to talk to.

So the markets we serve in. I talked a lot about the hyperscalers, the data centers. We have most of them under contract, long-term contracts, 3 to 7 years. Enterprises -- these are global enterprises, so your large banks, your like SAP, Bank of America, all those type of clients and then the OEMs. So the folks that make the equipment, your Ciscos, your Dells, your Oracles, those types. So all into contract. And they all -- in one way or the other, touch the hyperscaler space. And to note here, no single customer contributes more than 20% of our total revenue base. So we try to keep it very diverse.

So this is looking inside a data center. I mentioned the 4-year cycle, but we're in all aspects of it from the beginning to the end, not just at the end of the decommissioning the 4 years but we're also upfront. So we do the upfront supply in their supply chain. We have some of our employees that are sitting in data centers now and doing services in a live data center. We do the wiping of hard drives. We do the shredding of hard drives, that is all ongoing throughout the 4-year cycle. So just in a way and to make sure that we're there throughout, not just at the end of the 4-years. What's super important here is to be sticky with the clients. And these are the methodologies that we use to be sticky, right? Sticky, so it's hard to change the high switching costs. So just -- we don't -- we want to make it hard for them to leave us, right? So integrating their data is a big part. We're in their data systems, and they're in ours with the APIs, reporting and so forth.

We have our employees sitting in their site. So currently, we have 15 SLS employees sitting in 15 data centers in the U.S. We have some hyperscaler employees that are sitting in our site. So we have clients, hyperscaler clients there -- have their employees sitting in an SLS site. And then we also offer custom programs throughout, be it the backup battery supply in the forward chain or so forth. All of this makes us unique to this market.

So I know yesterday, you went through metal yard, scrap yards. So I wanted to bring into focus a little bit of what you saw out on the floor or out on the yard. Yes. So Lynn has my 3 DIMMs. So my 3 DIMS here, new DIMMs are the same revenue value as 1 ton of ferrous scrap. So the size doesn't matter in this case.

So with that, I will switch it over to Lynn, and she'll do a deeper dive into financials.

All right. Thank you, Ingrid. Ingrid spoke about how fast pace this industry is. And so I have a tendency to speak at the same rate at which the industry is growing. So I'm going to slow it down. But if I get going too fast, just let me know. So they say the success of a recipe is in the proof is in the pudding, and I'm lucky enough to show you the pudding today. So if we go to our financials, you'll see we are presenting '23 to '25. We've eliminated '21 and '22 as they were COVID years, and so we're going to focus on '23 to '25. Your eyes will automatically be drawn to the underlying EBIT earnings, which have increased 78% from '23 to '25, moving from $8 million to $32 million. How is this possible? Well, this is built on a really robust revenue stream, which outpaces the rate at which costs have increased. So looking at revenue, we started at $325 million and we ended at $427 million and revenue can be looked in different ways. The growth in the revenue here is definitely as a result of the growth in our hyperscaler revenue, which has moved $100 million in the 2-year period. So as hyperscalers have grown, SLS has captured that market and grown with them. If you cast your eyes further down, you will see trading margin or gross margin as we refer to it. That has really increased substantially. And one thing that makes our margins robust and sustainable is the diversification of revenue streams. We have different revenue streams, and we'll get into that in the slides that follow. If you go further down, you'll see our operating costs. They have only increased 15% over the period, which is a lot less than the increase in the revenue. But interesting to note that as a percentage of the overall revenue, our operating costs have fallen 7%. The increase between '24 and '25 is $25 million, of which $17 million is directly related to new revenue streams, which indicate growth.

Just like in the metals yard, they have tonnes and they have pounds, we have repurposed units. So these are not a financial metric. It's a metric to indicate market growth. So it's -- sorry, this thing keeps pinging -- anyway. So it's to indicate market growth. So what's really exciting to see here is our repurposed units have doubled. So our revenue is not just price related, it is volume and price, which makes it really robust and sustainable. So I think that is it on the slide. It is really exciting, and now you can see the proof. But I'm going to take you further so you can understand a little bit more about how we generate revenue and how it shows up in our P&L.

Right. So SLS has 3 main streams of revenue. We break it down into resale revenue, service fees and commodity. So we'll start with resale. At the end of an asset when we get an assets, for example, a laptop, and we've performed services to it. We've cleaned out the data. We've done data's destruction. We get to resell that asset into the market. This is a revenue share for us, and that line will show up as a cost of sales in our P&L.

The second type of revenue is a service revenue. This is an area where we see growing and expanding as we go further and further into the hyperscaler market. Each of these is a service fee per unit. So we have several different types of services. We have decommissioning, we have data destruction. There is a whole range of services. And as we become more and more integrated with the hyperscalers, we're seeing different types of service revenues being generated.

And then the last one you'll be pretty familiar with, that's commodity recovery, very similar to metals. So as Ingrid pointed out over there, we have a real life server. And if you have a look at the server, the outside casing is still, that will land up in one of our SA recycling or Sims Limited yards, whichever yard is strategically close to us. And so it goes right back into the Sims family.

Every asset comes to an end of its life. So it can no longer be repurposed. And so we actually have to recycle it. So at this point, we have the ability to provide that service, and you'll see a whole lot of hard drives, we will shred. And that shredded hard drive is sold as commodity and so we have some smelter activity and commodity recovery.

Pretty sure you're going to ask me what is the percentage of each of these revenue breakouts. So we're going to go to the next slide so that we can go through that. So we've taken the $427 million, which is our revenue, and we've split it into the 2 areas or the 2 ways in which we would look at revenue at SLS. You can look at it by the type of revenue or the client. So if we look at type, you can see a really healthy mix between commodity, resale and services. This makes our margins very robust and very sustainable. If we look at it per client type, you can see these are the 3 types that Ingrid spoke to earlier about, OEMs, enterprise and hyperscalers. Hyperscalers are 47% of our current revenue mix, and that is up from 31% in '23. So you can see the expanding growth in the hyperscaler segment.

All right. So strong revenue growth, very much led by the hyperscaler demand. So if you have a look at the pie chart, the dark blue is a representative of the hyperscaler growth. It moved from $100 million to $200 million in 2 years. So really robust growth. An exciting thing about hyperscaler growth is that it touches all 3 types of revenue. So we get service revenue, commodity revenue and we get resale revenue. So as we grow in the hyperscaler space, we will give further strengthening and the diversification of revenue streams. But to take note here is also the really strong enterprise base on which we stand. This is a strong foundation which allows SLS to continue, and it helps us when we have peaks and troughs in decommissioning schedules. So going on to how does it look? So you'll see the 40% revenue growth over the 2 years, but interesting to see or exciting to see is a robust growth in our return on invested capital. So that allows you to see how we scale profitably and also that we have a very controlled and disciplined capital deployment program in SLS, right?

If you go to the chart on the left or right, I'm not sure which one now because I'm confused, you'll see we have underlying EBITDA and operating cash flow. There's a strong correlation between the 2, showing that once again that we take high profits and convert them into cash. I'm going to call out the peak in '24. It's -- just because it's really noticeable. In 2024, SLS had a small refinery business, which was called Franklin Park, and was moved under the Sims Metal umbrella as Sims Precious Metals as it was better suited in the metals umbrella than ours. And so that increase just shows the release of the working capital and the inventory in that period.

So now you've seen the pudding, I'm going to take -- let Ingrid take your way. Thank you.

Thank you, Lynn. So how are we going to continue taking advantage of this aggressive growth in the sector. We're going to continue being capital light. And I know Stephen likes to say that quite a bit about us. We will continue that way where the last 2 years, we had $13 million last year and the year before, $4 million in capital. So we'll remain that way. Automation, we will automate where it makes sense so we can scale up quickly and again, gain efficiencies. And we'll continue with our geographic expansion. So adding more sites and also growing organically with our clients.

So we are excited for the future prospects of SLS. The market is huge, which I showed you, just the investment is incredible that's going on in the sector. We're going to continue with our scalable model to take advantage of this and to continue capturing a meaningful share of the market. So we'll continue taking advantage of the tailwinds that we see in AI in the hyperscaler space. We are uniquely positioned to serve hyperscalers globally. We are where they need us to be. We have diversified revenue across the sectors of resale service and commodity recovery, ultimately at the end when they meet their end of life.

We'll remain profitable and take advantage of the accelerated growth and the earnings momentum. We have high returns with our cash conversion supported by capital discipline and effective cost management. And we have proven to be successful in the execution of our strategy. So the hyperscaler relationships that we have and the automation that we've put at scale.

So with that, we'll open it up to questions.

Thanks, Ingrid. I think it's the same as you say with the microphone, so that everyone on the call can hear it. So we've got plenty of time for Q&A. We don't have the 4:30 bus problem as yesterday, and so let's get into it.

Listen, just a quick one on the growth in hyperscalers. How should we think about how that might influence margins as that grows faster than the other 2 segments?

Well, the chart -- let me pull up the chart. So I think certainly, the growth is there and we parallel this growth with the margins, with our cost control, efficiency, automation, margin should increase. So we do expect growth, but we're not going to give you any outlook today on '26 or '27.

I think [indiscernible] margin mix.

Do you want the margin mix, sorry?

Margin mix [indiscernible].

Okay. So hang on, you got to slow -- ask the question again.

[indiscernible] a lot of the growth you're saying is coming from hyperscalers as has been the case. But -- and just as that part of your business and that customer grows faster than the others, how should we think about the margin profile? Is it a higher-margin customer?

So I think in the hyperscaler growth, it touches all 3 revenues. So as you grow the hyperscaler, you're actually going to touch all 3 components, but we do see growth in the service revenue as we're going to perform more and more services within that service revenue line item. So that component will definitely increase.