Release Date: August 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Successfully navigated the economic down cycle, positioning for future growth.
- Strong balance sheet with net cash of $8.7 million and no borrowings.
- Implemented a successful cost-out program, reducing costs by $5 million.
- Maintained market share and improved gross margin dollars per tonne.
- Strategic focus on high-value products and services, enhancing profitability.
Negative Points
- Significant decline in activity across various sectors, leading to a 21% reduction in volumes.
- Revenue down 19% to $479 million due to economic conditions.
- Manufacturing sector remains in contraction, with challenging months ahead.
- Commercial construction weak, with consents down 15% year on year.
- Residential construction market cooled, with consents down 26% to the year ending June.
Q & A Highlights
Q: Can you comment on the pricing behavior of your competitors as the market squeezes and activity finds its bottom?
A: When volume decreases, some competitors behave differently. Some were slow in de-stocking, creating price pressure in certain categories. However, we've managed to maintain strong margins, indicating that competitive pressure hasn't significantly impacted us.
Q: Can you expand on the $5 million cost-out target for FY24 and how it might impact growth as the market rebounds?
A: We're looking at costs across all parts of our business. Major savings come from transportation efficiencies and reducing back-office functions. We're careful not to cut muscle, ensuring we remain well-positioned for economic recovery.
Q: There has been significant cash burn in the second half of the year. Can you comment on the sustainability of dividends going forward?
A: Dividend decisions are made by the Board, and while we've paid above our policy range, we have no plans to stop dividends. The dividend reinvestment plan helps retain capital and provides a low-cost way for shareholders to expand their holdings.
Q: Has activity deteriorated further in July and August compared to the second half of FY24?
A: June and July were tough, but we've seen a pickup in activity and improved sentiment since the August OCR announcement.
Q: What is the variable component of the $6.8 million reduction in OpEx for FY24?
A: Most of the OpEx reduction is not directly related to volumes. The bulk of the $5 million cost-out came from operational expenses rather than variable costs.
Q: Are you expecting a turnaround in the first half of calendar 2025 or later?
A: We anticipate an early calendar 2025 pickup, depending on the pace of OCR reductions and government infrastructure projects. We expect steady improvement rather than a rapid turnaround.
Q: Are the new roading barrier and trucks fulfilling your earnings expectations?
A: The roading barrier project is meeting expectations, and the trucking investment is exceeding expectations, providing cost control and operational efficiency.
Q: Why did you institute a dividend reinvestment plan (DRP) when dividends are above policy range?
A: The DRP is a service to shareholders who wish to reinvest in the company without dilution. It also helps retain a bit more capital.
Q: What caused the increase in receivables from 11.8% to 12.3%?
A: The increase was due to the timing of cash collections around June 30, which fell on a Sunday and a public holiday weekend, delaying collections to the following Monday and Tuesday.
Q: Are the eight companies under active M&A consideration bolt-ons or new product offerings? Will you move on transactions in the current climate?
A: We focus on steel and metals businesses that align with our existing products. We are actively reviewing opportunities and will proceed with transactions that meet our criteria, regardless of the current market environment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
