RIDYF (RIDYF) Q4 2026 Earnings Report, Transcript and Summary

Thank you for standing by, and welcome to the Ridley Corporation Limited Full Year '26 Results Presentation. [Operator Instructions] I would now like to hand the conference over to Mr. Quinton Hildebrand, Managing Director and CEO. Please go ahead.

Thank you. Good morning to you all, and thanks for your attendance today. Chris Opperman and I will be pleased to provide you with our financial performance for the 2026 financial year and the progress that we have made on the strategic front. We'll be talking to the slides that were uploaded on the ASX website this morning, starting at Page 2. FY '26 was a year of growth for Ridley. We purchased the Incitec Pivot Fertilisers business, successfully acquiring just the distribution business and getting it for a good price. Today, Ridley is a truly diversified agricultural business, providing more resilience and significant opportunity. Importantly, we operate at scale with the #1 position in the markets in which we operate. With the acquisition has come a step change in our earnings, almost doubling our earnings base, and we're achieving this with a purposely optimized capital structure of debt and equity. As we grow Ridley, the Board is attuned to the need for us to have the people to make a success of it, and we are deliberately enhancing our leadership capability and have established a PMO to execute on the integration and resetting of IPF. All this is with the purpose of delivering for you, our shareholders, through EPS growth and the payment of a progressive dividend. And for this high earnings-accretive acquisition, we conducted a capital raise through an ANREO, providing all shareholders with the opportunity to participate. With the scaling of Ridley, the capability we have developed and support of shareholders, we have a platform for future growth. Moving to Slide 3, our FY '26 financial highlights. Our underlying EBITDA lifted 61.8% to $157.8 million on the back of 9 months earnings contribution from fertilizers at the high end of expectations and earnings growth in Bulk Stockfeeds as well as the Packaged Feeds business units. It was just our Ingredients business that underperformed as we spoke of at the half. Pleasingly, our cash generation was strong, which resulted in a headline leverage of 0.85x, which, post acquisition, was well down on the anticipated 1.3 to 1.4x. The underlying NPAT ROFE was down at 8%, which reflects the inclusion of the fertilizer ownership for just 9 months. A final dividend of $0.0535 per share fully franked reflects a payout ratio of 64% of underlying NPAT. These financial results include a number of ISIs associated with the acquisition, uniquely a gain on bargain purchase, which was offset by acquisition costs, integration and restructuring costs, but I'll leave that for Chris to take you through in detail. As we have also -- and we have also taken a noncash impairment on NovaqPro. With the growth of Ridley, NovaqPro is a diminished focus for the business. We'll continue to operate NovaqPro and seek strategic partners, but a write-down to 0 is considered the right course of action. Moving to Slide 4 to run through each of the business units. The Fertilizer business unit achieved an EBITDA of $72.2 million in the first 9 months since acquisition. This was a pleasing result, and the IPF team have done a particular job -- a particularly good job in sourcing urea supply on the global market to replace the supply contracts that we had with Middle East producers. We benefited from higher margins as global fertilizer prices rose, but this was partially offset by lower volumes as high prices led farmers to reduce demand. In the first 9 months of ownership, we have restructured the business into a regional distribution model and reduced the number of roles in this business unit by 65. I will cover off in more detail on the other integration progress later in this presentation. For the avoidance of doubt, there was no earnings impact from the fuel and fertilizer security facility in FY '26, and I'll cover this off on the next slide, Page 5. The fuel and fertilizer security facility was established by the federal government in response to the concern that Australian farmers would be short of fertilizer for the upcoming season with the closure of the Strait of Hormuz, through which Australia was reliant for 60% of its urea. As reflected in the graph, global urea prices reacted after the start of the conflict on the 28th of February. And it became very risky for us and other importers to continue buying very expensive urea for the upcoming season. The questions at the time were when will the war end? When will the price drop? What demand destruction would there be for farmers as they make alternative decisions with the high prices? All of this leading to corporate conservatism when making import decisions. The government intervention was necessary. We were invited to participate, along with others, some of whom took it up and others who chose not to. And we entered into contracts for different CFDs on 4 urea shipments. And under this arrangement, we got protection in a falling market and gave up gains in a rising market. These CFDs all settled in June and July, but none of the product from these 4 shipments was sold in FY '26. Moving to Slide 6. The Bulk Stockfeeds segment delivered an EBITDA of $50.3 million, up 5% year-on-year, which is also a pleasing result when you consider the $3.5 million in earnings from the Wasleys feed mill, which was sold on the 30th of June 2025. The drivers for this growth were increasing volumes, 7% in monogastric sales and 4% in ruminant sales, as we continue to support the growth of our customers and win over new customers. Our procurement team also did a good job navigating the volatile markets, supporting good margins over the full year. All in all, another very sound performance in Bulk Stockfeeds. Moving to Slide 7. The Packaged and Ingredients segment delivered an EBITDA of $51.6 million. This was down $11.4 million year-on-year after being $10.1 million down at the first half. As described in February, we had operational challenges at Maroota with process dam inoperable for the full year up until the last week of June. And at [indiscernible] at Timaru, where the design issues have hampered the commissioning of the greenfield plant, and we've been steadily resolving these over the financial year. We also had ovine constraints as lamb slaughter numbers have been down across the industry, impacting OMP. The bright spot in this segment was the Packaged Feeds business unit, which grew year-on-year with the biggest contributor to this growth coming from the packaged dogfood, where we have grown 33% on the supply of existing and new private-label contracts and the improved throughput rates of the plant. I'll now hand over to Chris, who will take you through the financial results in more detail.

Thank you, Quinton, and good morning. I'm beginning on Slide 9, the profit and loss. The group's earnings before interest, tax, depreciation and amortization, EBITDA and significant one-off items for the financial year 2026 were $157.8 million, up $60.3 million from the prior corresponding period. Quinton already covered the performance of our 3 business units, so I'll just go through the rest of the profit and loss, starting with corporate costs of $16.3 million that were up $3.1 million for the period. This increase was mainly due to the combination of incentive payments across a larger employee base and a step-up in governance-related spend for the enlarged business following the acquisition of Incitec Pivot Fertilisers during the first half of 2026. Depreciation and amortization of $43.4 million increased $13.1 million due to the fertilizer take on balances, in particular the larger leased asset base relative to the released assets. Net finance costs of $32.2 million increased $22.5 million, driven by the combination of funding for the fertilizers acquisition as well as the noncash interest relating to finance leases for fertilizers. Cash interest paid for the year was $22.8 million. Income tax underlying was $21.4 million for the year with an effective tax rate of 25.8%, and that was primarily driven by temporary differences relating to the fertilizer acquisition. The statutory effective tax rate was 33% for the year. The impact from individually significant items after tax was a charge of $33.5 million to the profit and loss for the period. I'll cover these in a bit more detail on the next slide. And lastly, earnings per share for the financial year 2026 was $0.163 per share, up 18% from the prior corresponding period. Turning to Slide 10. I will highlight some of the key individually significant items that impacted the group's 2026 financial results, starting with the gain on bargain purchase on the acquisition of Incitec Pivot Fertilisers of $37.5 million. This number is lower than the provisional estimate of $55.9 million that we spoke about at the half year and was revised following the completion of independent external valuations on the fertilizer assets and liabilities during the period. Acquisition and integration costs relating to the fertilizer acquisition of $33.8 million after tax includes stamp duties, advisory fees and IT integration costs. The group spent $13.3 million on IT integration during the period and remains on track to deliver the integration -- during the financial year 2027 and at a cost of $30 million in line with our previous guidance. The total one-off impact on the group's 2026 financial results from the fertilizer acquisition was a net expense of $4.8 million after tax. And finally, on the ISI, during the period, the group recognized a noncash after-tax write-off of $28.7 million relating to NovaqPro's assets. As Quinton mentioned, the commercialization of this business has been slower than previously expected, especially in light of geopolitical disruption that further impacted the end market for the products of this business. The group will continue to consider the strategic alternatives for the business and to determine if there's any value that can be realized over a period of time. Turning now to Slide 11. The group's net debt at 30 June 2026 amounted to $296 million, which is an increase from the net cash position of $64 million in the prior corresponding period. That number included the cash of $125 million that was from the capital raise to fund or partially fund the fertilizers acquisition. The completion of the fertilizers acquisition at the end of September 2025 was the primary driver behind the increase in net debt during the period. The group's headline leverage at the reporting date was 0.85x. This number is calculated as net debt adjusted for inventory financing facilities divided by 12 months EBITDA and is consistent with the basis we used for the calculation at the half year. Our leverage at 30 June was below our target range of 1 to 2x and reflects the sales pattern in the second half, which resulted in earlier cash generation. Our typical leverage levels for June would be closer to the midpoint of our target range. We have a well-staggered debt maturity profile out to 2028 and 2030 for our 3- and 5-year term debt facilities, and we had $444 million of liquidity headroom at the reporting date. This provides us the balance sheet flexibility and sufficient capacity to fund our ongoing working capital requirements of the business. Now turning to Slide 12. The group's working capital levels stepped up following the acquisition of the fertilizers business, which has a longer working capital cycle, reflecting import lead times and the need to procure bulk shipments ahead of the seasonal demand. For context, you can see on the bottom left, there's a graph that shows the typical capital cycle for the fertilizer business with the seasonal stock building to a high point during the third quarter of our financial year, followed by an unwind through subsequent first and second quarters. Our working capital position at 30 June was better than the historical trend as we benefited from strong cash conversion that was driven by early seasonal demand, pulling cash receipts forward at good margins. Turning to Slide 13 on capital expenditure. Our capital expenditure increased to $67 million in the financial year 2026, up approximately $31 million on the prior corresponding period. The step-up in maintenance and ESG capital was due to the combination of the acquisition the fertilizer business as well as the spend on capital projects that were completed in the Ingredient Recovery business during the period. We expect that the spend on maintenance and ESG capital will moderate from the 2026 levels and will remain within our capital allocation framework target range. We spent $23 million on growth projects during the financial period, which is an increase of $3 million on the prior corresponding period. Projects included the completion of the Timaru plant in New Zealand, our expansion of the Lara feed mill in Victoria and investment in fertilizer value-added capacity in several areas. We assess our growth projects against strict internal return hurdles and only proceed with those if they align to our strategy and meet those strict hurdle rates. Turning now to capital allocation on Slide 14. Our capital allocation framework remains unchanged. However, we did reset the maintenance and ESG capital target to 80% to 100% of depreciation. This was previously 60% to 80%, but had to be revised to reflect the impacts of the acquisition accounting on the fertilizers assets. Importantly, our target spend level remained unchanged. The group's operating cash flow was $122 million for the financial year, which included one-off spend of $40 million on the fertilizers acquisition, integration and restructuring costs during the period. Adjusting for these one-off items, we converted our EBITDA into cash during the year. And finally, the group's TSR was lower for the financial year '26 with the share price closing at $2.65 per share at 30 June. However, we continued to exceed our greater than 50% target over the long term. Thank you. And I'll now hand back to Quinton to go over the rest of the presentation.

Thanks, Chris. I'm now going to talk to the progress on the FY '26 to FY '28 growth plan. And those of you who were able to attend our Investor Strategy Day on the 10th of March in Geelong will be familiar with all of this. If we look at Page 16, this is really just a summary of that strategy on one page. And if we move to Slide 17, you'll recall this is the indicative graph reflecting our anticipated financial outlook. And I'm pleased to say that at the end of the first year of the plan, we're on track with the green dot on the graph denoting where we have landed. To the right of the slide is the list of the efficiency and growth initiatives that we called out in our plan with the ticks indicating that we have completed 2 of these initiatives and the green lights indicating where we have started delivering value from this initiative, and there is more to come. It's really just the international sales of NovaqPro that are behind where we would have expected and expect for the plan period. Moving through each of the business units from Page 18. As far as the reset of the network is concerned in fertilizers, the new 3P PDC in Brisbane is now operational, significantly improving on the service to customers from what was the former Gibson Island PDC. In Townsville, we are finalizing the lease of a facility adjacent to our Townsville PDC, which will operate our storage -- which will increase our storage capacity and consolidate our volumes into a single operation. The new regional model, which we announced in February, is delivering more customer responsiveness and cost savings. One of the initiatives in our value-added product stream was to scale the UAN offering to the East Coast market. And with the Middle East conflict, UAN provides a useful alternative source of nitrogen. So we brought this initiative forward and over the past 5 months, have spent capital to repurpose tanks in 2 of our primary distribution centers in Adelaide and Portland, and we'll bring in a full UAN cargo next month. The ERP migration onto Ridley's system is on track for the financial year with -- and the benefits of Perdaman are expected on schedule next financial year. Moving to Slide 19. The flywheel strategy in Bulk Stockfeeds will get a push along with the Lara feed mill debottlenecking product -- project, which we have now completed. We've commenced another at Terang in the Western Districts of Victoria to support our growth in dairy, and there are other expansion options in the pipeline subject to customer offtake commitments. On the efficiency side, the raw material segregation is underway at the Pakenham mill using our NIR to optimize ingredient usage. And finally, in Packaged and Ingredients segment, we've made progress on various initiatives to climb the wall of value, including the execution of long-term private-label dogfood contracts in Packaged Feeds, the completion of the OMP facility in Timaru, the sales of owned and agency products through Oceania Petfood Solutions, our one-stop shop in Australia, and the establishment of a direct supply chain into Thailand to get our ingredients into this Asian petfood manufacturing hub. As mentioned previously, the NovaqPro commercialization is the one that is yet to meet our expectations. And to our last slide, Page 22, the FY '27 outlook statement. Ridley's diversified business provides the group with opportunities and resilience in weather extremes, biosecurity threats and commodity cycles. In FY '27, Ridley expects group earnings growth in each segment, driven by the transition and integration benefits in fertilizers with a full year earnings contribution, volume growth and capacity utilization in Bulk Stockfeeds and the operational performance recovery and improved commodity outlook in Packaged and Ingredients. Ridley intends to continue its existing capital allocation framework, targeting a dividend payout ratio of between 50% and 70% of NPAT. I'll now hand back to the moderator who can facilitate the questions. Thanks.

[Operator Instructions] Your first question comes from James Ferrier from Canaccord Genuity.

Congratulations on the results. Can I, first of all, ask you about the operational issues at Maroota and also with the commissioning at Timaru? Can you just give us some more color around where you're at in that process to complete those works and get them up to the sort of level of operating efficiency that you're targeting?

So just starting with Maroota, the slip on the dam wall took place on the 6th of May 2025. And in the last week of June 2026, we completed and returned to use that dam. So it required a full reconstruction and lining of that dam through -- under Environmental Protection Agency surveillance to return it to use. And so at the end of FY '26, we've returned Maroota back to full force. Moving to Timaru. We commissioned -- we shifted from the previous facility to the greenfield facility in October '25. And there have been a number of design shortcomings in that process. So we've battled and have continued to redesign and spend some incremental capital to get that facility to meet our expectations. And we've progressively been improving on that. And by the end of the financial year FY '26, we had got it to an acceptable level. There's still some optimization still to go at that site. But I think the significant setbacks that we incurred in FY '26 are behind us.

That's pleasing to hear. And perhaps to the extent that you can, can you quantify what sort of earnings benefit you would expect in FY '27 on both the Maroota and Timaru front given the works are completed. And understandable if there's probably still more benefit you would be targeting at Timaru, but just where you're at today, what sort of earnings benefit that gives you in '27?

So obviously, the impact in '26 was $11 million down on the prior year. There are a few other moving parts within that as we do call out the availability of ovine meals -- ovine raw materials and the like. But I would expect that we'll see a recovery of -- to the extent that would take us back up to -- closer to FY '25 levels.

Yes. Yes, absolutely. Makes sense. Second question I wanted to ask about was the bulk business, which I mean it was a very good result, and it came off the back of an exceptionally strong first half. So we saw probably a more pronounced first half skew within the FY '26 results. So I'm interested in a bit more color around what drove that?

Yes. As you summarized, exactly, we came off a strong first half, and we were also cycling a strong second half in FY '25. The main difference can be attributed because as we call out, the volumes were booked in the second half. The main difference is just the opportunity to make some margin around the commodity positions. So the markets have been volatile in the last 6 months, a little less opportunity in this last 6 months than we had in the prior 2 halves actually from a raw material procurement perspective.

Understood. Okay. That's helpful. And then third and last topic I wanted to ask about was on the fertilizer front, and there's sort of really 2 parts to this question. It's been an abnormal selling season for various reasons. Keen to hear your thoughts around what activity levels are like to start this new financial year? And then secondly, what's the status of the Phosphate Hill offtake? And what does that mean for Ridley's position on the supply of phosphates into first half '27?

Good questions. Thank you. So the growing conditions have been promising. Notwithstanding anticipation around El Niño, most of the growing areas, particularly in the south, have had good growing conditions. And there is fertilizer top dressing going into the winter crop. The first start of July and through to today, a little measured in terms of demand. There has -- there was some anticipation of shortages of product, and so some buying took place earlier. And so we've started what is typically a busy period, a little lower in terms of demand, but there's a long way to play through as we go forward. So that's how I would describe the start of the fertilizer season in FY '27. And then regards to Phosphate Hill, as you know from when we acquired the business, we have the offtake contract for both domestic and to perform the exports out of Phosphate Hill through to March '27. And we're in discussions with Mayfair regarding the extension of that, Mayfair being the new owner of the facility. But at this point, we haven't formally extended that. As regards to supply of phosphates into next season, we are taking a conservative position and making sure that we're holding on to MAP and DAP to the extent that we can to make sure that we have physical availability for domestic requirements.

Right. So relative to historical norms, you're probably holding more of that Phosphate Hill offtake domestically in anticipation of selling domestically, whereas in the past, you might have skewed more to offshore distribution?

That's right. The key demand period would be sort of February, March. And so typically, we would be exporting out of Phosphate Hill through this period. And then we would buy in to augment the Phosphate Hill supply from sort of December through to February, whereas as we sit today, we're being a little more conservative on exporting to keep physical availability.

Your next question comes from Apoorv Sehgal from Jarden.

First question -- first topic on the fertilizer business. $72 million of 9-month EBITDA. What would a 12-month pro forma number have been? And the reason I ask is, I think like mid-cycle for fertilizer is probably like $85 million, $86 million is based on history. But this year, there's obviously been like a one-off margin gain from the urea prices. So I just want to make sure going into FY '27, we're working off the right baseline rather than like extrapolating what's been a uniquely strong period. So what would like a 12-month number have been pro forma?

We're not going to make a projection on that. But what I would say to you is that the business we bought had a sort of longer-term or recent maintainable earnings of the $86 million that you talk of. And I think that we are looking to drive some cost reductions and the like. So I think in FY '26, there are a number of moving parts, price movements, some purchases that might have been brought forward. So amongst all of that, I would say that the sales and the performance in FY '26 was pleasing and good. I would hope that from a FY '27 perspective, if we go back to what the recent maintainable earnings are that we could build on that with the other initiatives we have.

Understood. Okay. So let's just assume for now we sort of grow into '27 off of more of a historical baseline just to be conservative. Can I just run through a few kind of initiatives that you talked about before, just to see if they're still kind of correct. So if we start with sort of the IT synergies, is it still the -- you have the $7 million in calendar year '27 that you get 6 months of fiscal '27 like $3.5 million from the IT synergies to start with?

Yes, that's fair. We said the $7 million would come in over the first 2 years, which we hold to, yes.

Correct. And then you get the full $8 million of headcount cost reductions in '27?

That is the plan. We will bank those savings.

Okay. Good. And then the procurement cost savings, that was something you discussed at the Investor Day. You had like $5 million to $10 million of group-wide procurement cost savings. Presumably a few million dollars of that would relate to the fertilizer segment as well that will come through in '27?

That's right. We said that we would make the $5 million to $10 million over the plan period, which is through to FY '28. And we've been able to execute some of those. So in FY '27, we'll see the commencement of some of those procurement benefits.

Okay. And then the final piece of that puzzle just on the DC upgrades. I think you're spending, I forgot the number, a certain amount of CapEx for 5 or some sort of payback on DC upgrades in the fertilizer business. But I'm presuming there's something that will roll in for fertilizer as well in '27 from that?

Yes. I think the benefits out of those will be longer term. So I've called out today the Brisbane Fisherman Island, which was already commenced under Dyno's ownership, and that's come online as planned. So yes, we hope to recover some market share in that region because we have -- market share had been lost under the previous inefficient PDC. So that's a build over time. And then the other one that we've called out in Townsville requires us to do a bit of a fit out and the benefits will only come in the following -- in the next season. So in Townsville, it's mostly in the sugar season, which would start be through this time next year. So I think in terms of the network, those are longer-term benefits, and I would not expect benefits in FY '27 to a large degree.

Okay. But it all sounds like the initiatives are further on track. Okay. I wanted to then just switch to a bit of a follow-up to James' questions on the package business. Just to clarify, if you go back to the first half result and what sort of has ended up being for the full year, there were kind of 4 issues, Maroota dam, the Timaru commissioning delays, I think it was the lower protein meal and oil prices and the OMP supply issues. Now you said that the Maroota dam and the Timaru delays, they seem like they've all been fully fixed, which is good. But the other 2 issues I just wanted to clarify, the lower protein meal prices that had impacted you before and also the O&P supply issues, are they kind of fully fixed on a run rate basis as of kind of 1 July?

Yes. That's observed in the first half, we called out the lower meal prices, and we didn't call it out for the full year. And the reason for that is that was offset to some degree by stronger tallow prices in the second half as we've seen a bit of an uptick. So we haven't called out the commodity position because by the full year, that was a meaningful contributor to the numbers. So it really came down to the operational issues that we've spoken of. And then the OMP raw material supply has been something that we've dealt with for most of the year. And we've been able to get some additional -- an additional supplier, which has assisted with that, but it's a pretty competitive market at this stage as lamb slaughter numbers are lower than the long-term average, and there's a fair bit of competition for that. So that's still an active management for us to ensure we get the supply that we need.

Okay. And something you said on the previous questions as well was you said that into FY '27, it sounds like you think you can get back to FY '25 EBITDA in that package business, which is about $63 million. The only thing is on '25, both halves are quite different. Like the first half of '25 was $35.7 million. Second half was $27.2 million. I mean that first half '25 number of $35.7 million, if the issues that impacted you this year have basically resolved and you've got the benefit of tallow prices going higher as well, that helps and also the volume gains of private label and the stuff you're talking about. Could that first half '25 outcome of $35.7 million be achievable in first half '27 or second half '27?

I would just need to have a look at where the commodity prices were trading at that time. So my inclination and based on what our forecasts are is to say that it's unlikely that we would bounce to that strength of the first half '25. I mean it does depend on meal prices and tallow prices. But based on where they are trading today, we would fall short of that.

Your next question comes from Richard Barwick from CLSA.

I think I've been left with the sort of the final line item, corporate costs. Look, the question is $16 million the new base here because obviously, you talked about why that lifted. Is that the right number the way we should be thinking about '27? Or is there some sort of annualization that we also need to take into account and so therefore, '27 will be a bit higher?

Yes, there's really a slight step up, only slight, from that $16 million number on an annualized basis. As I talked to you on the presentation, 3 things like additional audit fees you have for a larger group and the like. That's the governance I was referring to. But then depending on how the results play out next year on the larger employee base, if you have a similar or good outcome than what we had this year, and you have similar sort of payout levels, you probably had a similar type of corporate costs for next year. That was the big driver.

Okay. All right. And then the other one I was just going to ask around was -- this is more of a clarification. Just talking about the -- it seems like a bit of a change in the way you're thinking about -- this is the CapEx target, 80% to 100% of depreciation. And the depreciation, what we had in for the year was $43 million. Again, it's a bit of an annualization we need to think about there and then sort of calibrate our CapEx off that number.

Yes. I think it is -- you're correct, you need to annualize. The 80% to 100% from the 60% to 80%, that's purely a mathematical adjustment that we've made there. So as I said, the level of cash spend that we have in our forecast has unchanged. And what I mean by mathematical change, when we took the fertilizer business on, part of that required adjustments to the carrying value of some of those assets, meaning that where we've had a reduction in those reduced the depreciation number. So if you have a lower depreciation and you've got product by...

Your next question comes from Belinda Moore from Morgans.

Maybe one for you, Chris. You've obviously had some cash flow benefits. How we should think about '27 cash flow conversion? And then secondly, where are you expecting that tax rate to sort of normalize in '27. Quinton, maybe for you, just talking a bit more about fertilizer supply given sort of the volatility in the war and sort of how long will the government sort of underpin this price volatility. And then maybe if you can just talk about sort of the company's strategy in regards to bird flu and if it hit some of your farmers, how we should think about sort of feed demand, meal prices, et cetera?

Thanks, Belinda. So we continue to focus on strong cash conversion, Belinda, out to '27. We have had a pretty strong performance for 2026, as I mentioned. So that resulted in working capital levels probably being slightly lower than where we would typically sit this time of year. So if you assume a more normal type of flow of fertilizers, then that will pick up slightly at the end of next year. But we'll continue to focus on strong working capital and always have our target to try and be something close to our EBITDA generation. But at 30 June is smack bang in the middle of the fertilizer season, and that could always either pull forward or push out a bit of your cash position and your working capital at the time. In relation to the tax question, we were, on an underlying basis, at 25.8%. This acquisition of the fertilizer business has had an impact on the number being that low. So going forward for the next few years, we'll probably sit at something between that 26% and 30%.

Belinda, regarding the questions on fertilizer and the war. So the -- at this point, we've been sourcing urea from other markets, as you'd be aware, with the arrangements established in Indonesia and drawing from other Southeast Asian suppliers. And as the graph that we had on Page 5 shows the urea price has dropped quite significantly, global urea prices, which is quite an anomaly when you think that we've lost 30% of the world's urea production. To some degree, that's timing, and we'll see how it plays out from here. The government has suspended the CFD arrangement, given that global prices are back to pre-war levels. And so that's not on offer at this point, but it is suspended. And I think should we, in the future, find a similar kind of circumstance, we would hope that, that gets considered again. As per the question earlier from James, phosphates becomes the next factor globally. Sulfur production and supply for phosphate manufacturing and other parts is impacted by the closure of the Strait of Hormuz. And so I think globally, there could be phosphate limitations going into the start of calendar '27. And that's -- and hence, why we're managing as we are. So yes, I think there will be a lot to play out as the -- there's no resolution to the war. The other impacts on the farming community, as I indicated, there are some areas where they still have dry conditions and have had below normal rainfall, but those are pretty isolated and the bulk of the grain production is looking promising for this season. And there's a fair amount of domestic stocks as at times during this year, exports weren't competitive internationally due to various factors. So there's a fair amount of grain in country, and there appears to be a promising crop on the way. So as far as feed supply for this year, we see it as a period of plentiful supply. And we watch the longer-term forecast with El Niño to see whether that has any impact towards the back end of the season. I hope that general overview is of some benefit.

No, that's a great overview. And just maybe just a bit of an update on your company strategy regarding bird flu and worst case, if it did hit Australian agriculture, just how we should think about implications for Ridley.

Yes, we're obviously monitoring this very closely and the increasing incidence in wild birds is of concern. We, together with our major customers have ratcheted up our biosecurity controls. And we're as prepared as we can be at this point and just waiting to manage it. As far as implications and if I go to the most recent avian influenza experience we had in 2024 when a handful of layer businesses were impacted. We had 2 impacts to the Ridley business. One, we lost some feed supply to those of the layer businesses that we supplied. So there was some impact on feed sales. And then the other impact was the export of poultry meal out of Australia is to some Asian markets is -- gets suspended because of avian influenza in commercial production. So that was the experience we had last time. And combined for that incident, we had about a $1 million to $2 million EBITDA impact. So hard to extrapolate and hard to anticipate how or where and when this would impact our business, but that's the sort of a data point from our previous experience. And I would say that within our Bulk Stockfeeds business, we've got quite a lot of diversity in terms of geographical customer spread, the species that we supply. And then now as you aggregate that to a group level, Bulk Stockfeeds and then on the ingredient recovery, the meal exports are part of what is an increasingly diversified portfolio. So I think practically, we're ready to deal with avian influenza and financially, I think we're a pretty robust business for the various challenges that could come our way.

That was very helpful. Maybe if I could just ask one last one. Just where about are you seeing tallow and meal prices currently?

Yes. So tallow prices are around $1,800, and that's in the -- that's as of current today. In the last half, we were sort of averaging around the $1,500 level. And so it's a little further now, which is encouraging. Meal prices and our biggest meal price being -- component being poultry is around about the $1,100 level. And then meat and bone meal, around about the $600. Both of those have been fairly flat for the last 18 months. So those are not -- those are less encouraging at the level they're at, at the moment.

Your next question comes from Paul Jensz from PAC Partners.

Just a question on allocating capital to, I suppose, the trading across your 3 divisions there, Quinton and Chris. Have you got to a sort of a steady-state type arrangement with allocating, I suppose, your value at risk across the, I suppose the 2 or 3 buckets there? Or is there still another sort of 6 months to go on sort of the cash flow side of trading?

So if you're talking about the working capital side, is that where you're going to, Paul?

I suppose inside that, yes, I'm just -- because you are now essentially allocating capital across the feed, fertilizer and other buckets. And there's been a lot of volatility going through. You've done a really good operating cash flow number. I'm just trying to see, do we spring off that number and then diving into that a bit as to are we in a sort of a steady state with allocating capital across your buckets there?

Okay. Thanks. Good. So I'll just kick off and then hand it to Chris. But as far as how we're looking at the business, the fertilizer business has got much longer supply chains and therefore, is -- requires a higher allocation of working capital. The working capital allocations within Bulk and Packaged and Ingredients, there's no real change there, but there is a significant difference with the working capital requirements of the fertilizer business. As far as other capital allocations and in CapEx, I think we continue to keep our maintenance CapEx program in the Bulk and Packaged and Ingredients ongoing. We haven't adjusted those post the fertilizer acquisition. And the fertilizer run rate that we took on was -- we're probably spending money in slightly different places to where it was before. But I think the slide that Chris covered on CapEx gives you the indication on that. So I would say we're in a steady state on that. And I'll hand to Chris just to talk about the nuances of this year's fertilizer cash flows, which obviously will need to be unwound to some degree in FY '27.

Thanks. So as I mentioned, on that Slide 12 of ours, you could -- so we laid there in the graph our typical working capital cycle and costs, to carry that over a period of 3 years. And it is slightly, I'll say, at least $50 million higher than where we were at June this year. And it's really, as I was saying, a result of where your season land. But I'll say, if you have to model it forward for the June months, I'll probably run with a number that's slightly higher at $50 million and that's a pretty stable number. December should be similar type of numbers because then you build for your -- you're sitting on some of your summer crop. But that is a different. You're sitting then on phosphate rather than urea that we have at June. So I'll say a steady state is slightly higher than what we landed this year.

I'm just trying to reconcile, Chris, maybe I misheard it a bit, but I thought you were saying you were slightly lower on fertilizer in some cases than higher. So I was just trying to tease that out a bit because I think you said you would -- you've obviously kept extra DAP and things, so we can sort of put that in place. But I thought you was -- at one stage, you were saying you had slightly lower fertilizer inventory, but maybe I misheard. So you're saying it's $50 million of extra fertilizer.

Yes, Paul, I said our overall working capital numbers, that includes inventory, receivables and payables. And that number for the fertilizer business is lower at June than what it would typically be at June.

Yes.

As I said, it should be about $50 million higher if you take history over the last 3 years.

Okay. Okay. So that's the $50 million, right? Sorry. Okay. So going forward, extra $50 million. And then allocating capital across your -- I suppose, your trading side because you do trade a little bit of grain, as I think we mentioned before, the volatility has come up a little bit. So can we see extra capital going into trading grain in the next periods or not?

I don't think we will make the right commercial decisions based on our position -- based on our market outlook. But in our Bulk Stockfeeds business, it is predominantly a back-to-back business. And we -- only at the margin will we go a little longer based on physical positions that we think would suit our book. But it really is at the margin. And I would say it's probably insignificant in terms of capital allocations relative to working capital in the fertilizer business.

Your next question comes from Apoorv Sehgal from Jarden.

I just want to ask a couple of more ones, if I can. The net finance cost was a fair bit higher than sort of what people had. And sorry, there's a few -- just juggling a few things today, but it's sort of $30-odd million, a little bit higher. Chris, maybe to quickly step us through that. It looks like it's lease interest related. But just into '27, any comments on the outlook there for the total net interest bill?

Yes. Thanks. So yes, in our pack on Slide 25, we did give a bit of a breakup to the market with that. So you'll see it starts with funding costs, which we had a $23 million for the year. So I think if you extrapolate that to a full 12 months, that gets you close to $30 million. We'll probably land slightly better than that on next year, assuming interest rates and the like stays where they are. And then for the lease component, that's a number which I think the market probably didn't have all the detail on. And that's still a moving bit as we were finalizing the acquisition of the fertilizer business. As a result of those fair value adjustments I was talking about before, some of our leases were uplifted in the lease liabilities and that's got a noncash unwind, which finds its way through both the interest and the depreciation line. So that's really that additional step up to what we have on our typical leases. So that number is probably going to sit somewhere between $8 million to $10 million on a go-forward basis. But as I said, that's noncash.

Okay. And then just, Quinton, maybe on Novaq a quick question. I just noted the noncash impairment you guys have put through. Was that some sort of a major drag on EBITDA in the second half at all? Are you able to quantify anything?

Not major. We've been running it relatively leanly. So I think -- and we're going to continue operating it on that basis. But it's under $1 million there.

Of profit and loss?

Yes.

[Operator Instructions] There are no further phone questions at this time. I will now hand back to Mr. Hildebrand for closing remarks.

Thank you, Ryan, and thank you to everybody for your attendance today. I appreciate your interest in Ridley, and we look forward to meeting those who we will on the forthcoming road show. Have a good day. Thank you.

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