Thank you for standing by, and welcome to the Bega Group Trading Update. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you'll need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Barry Irvin, Executive Chairman. Please go ahead. Oh, hi, everyone, thank you for taking the time to join us. We thought that it was appropriate to hold an investor call following the announcement we made this morning. I will fairly quickly hand over to Pete Findlay, our CEO, Pete Findlay, to discuss the detail of the announcement. In broad terms, really the announcement is I guess, reflective of the two segments of our business, with obviously a strong cash flow coming from the sale of our Port Melbourne site, allowing us to restructure and focus more on the branded side of the business and the branded segment of the business, which we've obviously been very pleased with the performance of that, particularly since the acquisition of Lion Dairy and Drinks. Indeed, that restructure also allows us to address costs in the bulk area of our business, which, as outlined by the announcement, is obviously dealing with a large drop in global commodity prices, which is not then being reflected in what we expect new season pricing to be in the Australian farm gate. I'll talk a little about milk procurement a little later on. I'm in fact coming to you from Gippsland, where I am out with the field service team, talking to farmers and endeavoring to make sure that we do hold and recruit milk. I'll talk to you about that a little later. I might hand to Pete, who will talk to you, about the Port Melbourne side and indeed, the organizational restructure and business simplification that we announced this morning. Pete, I'll hand to you. Thanks for that, Barry. I'll address the sale and leaseback at the Port Melbourne site, first of all. We have had that site or that asset held for sale since late last calendar year, and that was in our accounts, our half-year accounts, and we're really pleased to say that we've got the transaction away for just under AUD 115 million. We've had a couple of starts at that, but we're very pleased that we've done the deal with Charter Hall. That will be for a period of 15 years. It does reinforce our commitment to that site. We've got the optionality of another 10 years beyond that. That's a really important site. It's a mature site for us. It executes very well on producing spreads, which are obviously a strong margin and very much part of our branded strategy moving forward. We will potentially look after that period to relocate the site, but that'll see out the life of those assets and ensure that we optimize the cost of those assets across their useful lives. We think it just fits really nicely with where we're heading. It also frees up our balance sheet and puts us in a strong position with, you know, gearing estimated to be around 2 times or a little bit below 2 times at year-end. Gunther's been working very hard on that. We feel that we're just in a, in a strong position, and also potentially gives us the opportunity to start to allocate capital now into other areas of our business where we can seek improvement. I'll now talk about the organizational restructure. We've had three sort of business units sitting within our branded segment since we bought the Lion Dairy and Drinks business. What we're doing now is merging those into two, and they'll focus on different channels. There'll be a focus on our non-grocery channel, where we think there's real opportunity to grow through food service and use our distribution network to grow sort of in our unstructured part of the business, and also to go forward with the full offering of Bega products, which is something that we haven't been doing. Then also have a focus on our grocery side, which we're traditionally very strong in. It'll be coming from very much a channel perspective and not across three different businesses. What that does is free up the ability to consolidate a number of functions. You know, consolidate our sales functions, our marketing functions, our logistics functions, customer service, R&D, et cetera, and means that we can go to the market in a more focused way, but also a more. A lot of that really stems from the synergies that were created ultimately with the Lion Dairy Drinks acquisition. To support that, we've invested in technology, so we'll be bringing together our front-end ERP. We won't be doing a full consolidation of our ERP system, but the front end, that enables us to have one view of the customer and deal with the customer directly. We've also, as I alluded to in our half-year accounts, invested in our digital facing, which means we'll now be able to put all of our business on that digital portal and sell all of our product through the one platform. That will mean that we'll be looking to take out about AUD 20 million of cost savings across our non-manufacturing overheads. It'll be a similar cost to that to initiate that, which we'll put into our 2023 accounts. It'll create about a AUD 12 million benefit next year. We'll also look to make some savings around our bulk commodity business. I'll let Barry talk to what's been happening with milk prices. We do need to respond to that, and we'll be looking to make some consolidations in our operations around our Lagoon Street site. We will change our shift structure and potentially our Tatura site, where we've got various drives and assets that will look to compress their operations, which will also create some people savings. We actually think that this helps give us a more focused view of our branded business. It helps create, simplify our business and free up resource for growth, but it also gives us a better cost benefit moving forward. Barry, I'll throw you back on milk procurement and the ramifications of that as we're seeing it. Thanks, Pete. Yes. As I mentioned earlier, we are currently in the time of the year where we are recruiting milk for the coming year. It is fair to say that we've got almost the opposite circumstances that we had last year, where if we look at farm gate milk pricing, it generally mirrors global commodity pricing for dairy. For dairy commodities, generally a little better in over the long term, but mirrors those inevitable fluctuations in global commodity trading. The circumstances last year was that we were seeing a very rapid rise in global commodity pricing, which was mirrored by a very rapid rise in farm gate milk pricing, and as we've spoken about a number of times, saw a delay in passing on of those prices in the Australian domestic market in our branded business, but we were always confident that we would get that pricing through in the Australian domestic market. The circumstances we see this year is the global commodity prices have come off a lot. The scarcity of milk and the competition for milk has not seen farm gate milk pricing ease or only ease very slightly, despite the fact that we've seen, you know, in recent months, quite large drops in global commodity pricing. The circumstances of last year, where we said there may be a timing challenge here, are a little different this year because, obviously, the influence that we have over global commodity pricing is very, very little. That means that as we look at our commodity infrastructure, whilst it is very good quality and whilst there are streams within that infrastructure that will continue to make an important contribution to the business, there are some global commodity prices at the current farm gate prices that mean that an impairment is necessary. It is fair to say that we would expect that, as it always does, this commodity market will move around. Given that we are now, I guess, in this continuing scarcity of milk environment, we see that disconnection, to particularly the international market, may be with us for some time. Therefore, it's appropriate to make some structural changes, as Pete mentioned, and also, have a look at the carrying value of those assets. We would expect that, you know, this circumstance, you know, will change as the international supply and demand changes. As I said, it's appropriate in this environment. I think while we look at scarcity of milk and, you know, not... Only minimal rationalization of infrastructure, the competition for milk will remain very strong and may create these disconnections more regularly than it has in the past. You know, while we may expect that there will be some changes in the international market and some changes in the competitive circumstance, when those occur is a little unpredictable. As I said, appropriate that we flag to the market, although our milk procurement strategy is incomplete. At the moment, we are still in the midst of pricing milk and competitively pricing milk, and also understanding what volumes we've been successful in recruiting. Even though we are incomplete, we felt that it was appropriate to update the market because we know that the current pricing will impact both FY2024 and trigger a need to look at the carrying value of those assets, which causes us to give the range around impairment. I'm going to throw my hand to you to perhaps talk about the approach that we're taking around the impairment of those assets. Fantastic. Thank you very much, Barry. As Barry mentioned, you know, there is that disconnect caused by the scarcity of milk between the milk cost and commodity prices. What we're doing is we look at great facilities like Koroit and Tatura. You know, within those, we have some very high margin businesses, high-end bionutrient powders, for example, bulk cheeses that we export that continue to do very well in all environments. It's fair to say that at the current milk prices, things like skim milk powder, bulk butter, they're all underwater right now. What we're doing with both the organizational restructuring that Pete mentioned, as well as the impairment that Barry mentioned, is we're looking through those units and saying: Are there operations within facilities like Koroit and Tatura that we won't need over the next while, or we can switch on and off as commodities move? We're addressing and simplifying those sites. ... that's a real opportunity for us. What we'll end up with at the end of this impairment, we've looked at that sort of milk versus commodities price. What we'll end up with is the ability that in years where commodities are high, as they were in the first half of this year, we can make good money on the commodity business. When we see, you know, the opposite situation that we're seeing now, that milk is very high relative to low commodities, you know, we've right-sized and focused those operations. The impairment is modeled on that. It enables us to continue supporting the best units within our Bulk and Nutritionals business, but also right-size the asset base, that's the approach that we've taken. The final thing I'll mention is that, we're also taking the opportunity to move into a consolidated tax group, and in this announcement, we've called out AUD 10 million-AUD 15 million of costs. Again, to Pete's message of focus, simplicity, you know, achieving that consolidated tax group ensures that we're able to do that on an ongoing basis and to become more efficient. Back to you, Pete. Yeah, thanks, Gunther. If I just look at our a bit of a trading update, whilst, you know, the commodity business is it is undergoing pressure with farm gate milk price going into FY2024, we're still very, very happy with our branded business. We've had to take significant price during this year to counter, you know, large cost increases, not just across milk, but across all inputs. It'd be fair to say that whilst that's been happening, we've been very, very happy with our volume uplift and our market share. We're very pleased with the way our brands have stood up in that very difficult trading situation. We also think that over the next sort of 12-18 months, we can continue to refine and improve our brand of business. We still think there's lots of opportunity to leverage our market position, lots of opportunity to leverage our footprint, our supply chain footprint, and our distribution network to continue to not only make efficiency benefits and step changes within our branded business, but also to keep growing that volume and taking market share. However, just with the, with this year's result, we call out that we're still comfortable that we will make the low end of our normalized EBITDA guidance of between AUD 160 million-AUD 190 million. Obviously, the sale of the Port Melbourne property puts us in a, you know, our balance sheet's in a strong position. With that concluded, I'd like to open up to questions. Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Phillip Kimber, from E&P Capital. Please go ahead. Hey, guys. Just a question, I don't know how many I can ask, but my first one will be just on the, you know, the outlook in FY2024, given farm gate milk prices and the relativity to commodity prices. Should we assume broadly that, you know, at your latest milk price, I think it's AUD 9.20 for southern region, you know, that will help your domestic business because it's at the moment anyway, a little bit less than what you've been paying in the FY2023 season. On the flip side, your export business, you know, you're gonna be wearing, you know, prices that are probably higher than they really should be, based on commodity prices. Do the two of them basically offset one another? Should we think about it that actually, any benefit you get from lower milk prices in your domestic business, more than that is gonna be offset in your commodity business? Phil, I might give an overview and then let the number crunchers do their stuff. I think the bottom line here, and this is always, when we talk about our farm gate milk price, we do talk about, as you say, that southern region price of AUD 9.20, which is largely the manufacturing hub of the business, if you like, where the biggest volume of milk is, that is actually, you know, manufactured and destined for international markets or longer lifestyle products. The truth is, across the country, when we think about our brand business, obviously, those prices vary enormously as you move up the coast and into Queensland and across to South Australia, et cetera. Most of the milk destined for our branded market outside the state of Victoria, is either stable or has actually even gone up a little. Therefore, the market, the branded market is appropriately reflecting the milk costs, because it's been relatively stable or only moved up a little. In Victoria itself, it tends to be a little mixed because, of course, we do look to secure a volume of milk that makes sure we can supply those brands that need that everyday supply, and that can be priced a little differently, whether that's because it's more of a flat curve of milk supply or volume. That's a long way of saying, the branded business will perform and be stable, and there may be a small benefit around the Victorian farm gate milk price, which, by the way, is still not yet finished. We're not sure where that finishes. ... it will not offset the impact of bulk commodity in Aussie either way. It'll offset it a little bit, I, you know, it's certainly not a an even gain, for want of a better way of putting it, good to what Pete might wanna add a little bit more color to that's the, that's the broad picture, if you like. Phil, we've got what we have done with the, you remember we talked about the price realization that we took three or four months to get through the market last year. That, that's all worked nicely, and, you know, we'll have a full year of that benefit. We were hurt pretty badly in the branded side of our business as we, you know, with the rapid acceleration of milk at the back end of last year and the start of this year, 'cause milk prices were still going up in July. We've been able to push all that price through successfully. We've been able to actually increase volume and in some places take market share doing that. That hit that we took during the 1st quarter of this financial year, it is normalized out next year. That's a AUD 9.20 is a minimum price. Sometimes we do, as Barry said, we have to secure flat milk to go into that branded business. Barry's right, there will be some small upside. You'll get a natural lift in our branded business because the timing, and then there'll be some small upside. With commodity prices being down sort of up to 30% in the back half of this financial year, over, well, over the last 3 or 4 months, they are miles off, a, you know, being equal with a AUD 9.20 minimum price at the moment in Victoria. Okay. I can't give you too much more detail than that. No, no, no, that definitely helps. I can sort of getting. Yep. Yeah, fill in the missing pieces. The, just also just to remind myself, you know, by the end of early July, you'll have locked in that price for the farmgate, which as you say, varies by region. For the rest of the year, it can only go up, Jan, you know, in 99% of cases. What's the sort of timing risk around global commodity prices? 'Cause they don't stay still for a year before the next round of, farmgate milk prices are set. Is it, I mean, I'm not, I don't know if you take some hedging or, you know, are you at risk sort of for six months or for the whole 12 months, either up or down, depending on what commodity, prices do in Aussie dollars? We tend to sell out about 3 months. If you sell out longer than 3 months, you tend to lose too much value. We tend to be locked in for about 3 months. What we're finding is that demand is all over the shop, particularly in Asia. China's been slow to crank up again after COVID. Japan, economically is a little bit shaky, although we're just starting to see recovery in Japan. Volumes, it's really hard to get any volume into your forward book at the moment because the whole world's sort of waiting. I mean, Barry might want to talk about what's been happening with global supply and demand to have dropped commodities so rapidly, but certainly where we can, where we don't lose too much value, we'll take about three months of cover. At the moment, you know, demand is just all over the shop. Barry, I don't know if you wanna add more? Sure. Sure, sure. So I guess, Phil, what I'd say is that, yeah, in terms of why they've come down so quickly, what we saw throughout that last financial year is, you know, very high prices on farmgate around the world because of those like, those high commodity prices. Saw increased production out of Europe, particularly out of Ireland, saw increased production out of the US. Obviously not out of Australia, reasonably stable out of New Zealand. Overall increased supply onto the international markets, even in places like China and Japan, a little bit of increased supply. We saw a suppressed demand, and we certainly saw it through the lockdowns in China, and we saw it even in Asia, around price points getting too high for the consumers in some markets. You know, in short, we all know how commodities work. It doesn't take much to tweak that curve, so a little bit of increased supply, a little suppression of demand, and we've seen that rapid fall in global commodities. From my perspective, you know, we're seeing China open up. We're seeing. This is interesting, around the world at the moment, we're seeing a lot of complaints from a lot of farmers, particularly in places like Ireland, because their pricing has already begun to drop because they are a regulated milk pricing system that just reflects the market. I would be expecting that, ironically enough, we'll see the inevitable change that comes from changes in pricing, and you'll see some of those supply increases that we saw last year ease, and we would probably expect, depending on a lot of economic factors, that the demand will either return or stabilize. I think one of the challenges that, you know, I've been around a long time in these markets, obviously in a dropping market, the buyers, you know, keep a pretty short book because they don't wanna see if they can pick the bottom, and as soon as that starts to improve, ironically enough, they then wanna talk to you about going long. I think we will see the inevitable. change and recovery, the timing is the key, but I guess it's why we thought that we should make this announcement today to point out what we're managing. We've been relatively conservative in the way in which we've thought that market might improve in the second half and beyond, which is normally typical, that the global commodity market tends to operate more on a calendar year than a financial year. We've been conservative, but I think appropriately so, given that there is, as Pete said, at the moment, it's fairly lumpy. All the signals are that you'll see the supply response around the world. Demand is stabilizing, you'll see that commodity cycle do what it almost always does. Great! Thanks, guys. I'll jump into the back of the queue and give someone else a go. Thank you. Thank you. Your next question comes from David Errington from Bank of America. Please go ahead. Morning, Barry, Pete, Gunther. A quick question, I've got a couple, but a quick one: Is bulk profitable at the moment? The bulk business obviously had a very strong first half, and the second half is not strong. You know, I think we have a combination of soft demand and soft pricing. What we're really forecasting as we enter FY2024, is that the size of these sort of skim milk powder and bulk butter businesses, they're underwater, and they make up a reasonably high percentage of sales. I wouldn't expect a ton of profit at all from commodities at current prices and at current milk prices for FY2024. As Barry said, you never know what happens in the second half of next year. Yeah, We haven't finished milk prices yet, David. Yeah. Commodities swing around, but let's call it, at best, break even at the moment. Yeah. So, where we're standing today, Pete, is what you're highlighting is branded's going okay. You got your prices back, so you've had a pretty satisfactory FY2023 in branded. As we go forward, branded is stabilizing at those good levels, but there's gonna be a hole punched through you in bulk unless commodity prices improve or something happens, but you're gonna have a huge hole punched in you, and so you have to really do some heavy lifting here and cutting costs pretty dramatically. Otherwise, your earnings are gonna fall away pretty dramatically. That's pretty much the message to take away from today, is it not? Yes. I'm not putting words into your mouth, but that's- No. That's the message that I've taken. As usual, David, you're very, very, very close to it all. Earnings, I don't think will fall away because I think the branded business will outrun the impact on the bulk business in the short term. Yeah. It's going well, but yeah, we wouldn't have got the uplift that we would have got if bulk was where it has been this year, at this stage. Yeah. Yeah. Barry, this might be a question for you. This might sound a really dumb question, and I apologize upfront if it is, but it just seems that this situation in Australia where we're short milk, long processing, you know, we're waiting for rationalization in processing to happen, but it's not happening. Have you thought about, as a business, becoming more vertically integrated? I mean, we're seeing the major retailers investing in downstream assets. Have you thought about doing this, that could alleviate this risk that you're exposed heavily, or is that just off the plantation at the moment? We think about it constantly, David. I think, yeah, you know, at the end of the day, you've got to accept that we're in an ever-evolving and ever-changing sort of, industry environment, if you like. I guess the two ways we think about this is that we need to just add to what Pete and Gunther were saying there earlier, in our bulk facilities, we need to make them more flexible, more able to be turned, wound up and wound down, and, you know, and not leave us with an exposure when the market is as it is today, but be able to take advantage on the upside. In terms of the reason why we've actually not looked to be more vertically integrated and own farms is because, of course, that represents a huge capital allocation. Yeah. We've literally always traditionally said, you know, our farmers are good at farming, you know, we should be good at processing and brand marketing, et cetera. You know, I would increasingly say that I think where the model will start to emerge for us, is that we may well be happy to join a fund, for example, that's making some equity investment. We're a partner in that with an offtake agreement that gives security to that investment, which would not see us allocating enormous amounts of capital, but would see us de-risking. There are, you know, I think that's an opportunity that we will increasingly look to pursue as we look to shore up supply. Given that we're not seeing a change in the trend in Australia, in terms of milk supply, despite the fact that we've seen very good pricing and very good and pretty good seasons. I think if I was to add to that a little bit, yet seeing I am on the road, it's interesting talking to farmers and even our big farmers, sometimes prices that are high and, you know, in the competitive environment they're working at the moment, the number of farmers that are sort of saying to me, "Look, I used to milk 700 cows, I've decided to milk 500 because I'm finding it so difficult to find labor, and I can actually do quite well on the current pricing." The funny thing is, the high pricing is doesn't always encourage a lift in volume of milk. You know, if I was to report on what I'm hearing most, it's actually. ... Yeah, even surprised me a little, how farmers talking about the scarcity of labor and how that's impacting their ability to grow or decisions to actually even decline a little, is one of the factors that, you know, may well address itself. I think, you know, we need to probably think of a multipronged strategy around how we secure milk in the longer term. Yeah. Just a very quick follow-up, Pete, can you just give in a snapshot, 30-second snapshot, the AUD 12 million cost savings and the AUD 21 million cost savings, what buckets they're in? If you could just give us a bit of an overview, what, where the cost savings are coming from, that'd be great, if you could categorize. Yeah. it'll be AUD 20 million annualized, AUD 12 million- Yeah ... next year by the time we implement. We've made the announcement today following the ASX release, and we've got that structure in place. We start that restructure today with various people. It'll be probably 70%, it'll be across the branded business, where we've brought the two branded business or the three branded businesses together, business segments together, and so the final sort of synergistic play between the Mondelez business, the Lion D&D, the Lion business, and the original Bega branded business. The other sort of 30% will be, 20%, 30% will be across the bulk business. Yeah, that's mainly people taking out, et cetera, more efficiency. Yeah. Yeah. Yeah. Okay. Thank you so much. Excellent. Thank you. Thank you. Your next question comes from Mark Topy from Select Equities. Please go ahead. Well, hello, gents. Afternoon. Just first question, just on the scope for optimization of the milk. Given the backdrop to the export, just, what scope have you got to move perhaps more milk into the retail environment where the margins might be better? Yeah, that's. Thanks, Mark. Good to hear from you. We've actually seen pretty good volume growth in our retail business over the last 12 months, and we're continuing to see good growth as we transition into the next financial year. You know, we've picked up some good contracts just recently. We are actually, you know, seeing some genuine growth there and some shift there. I haven't got the exact numbers on me now, but as that sort of solidifies, there's no doubt that we'll continue to push that. We've just won a contract for 13 million liters of milk yesterday that will transition out of our bulk business, out of our bulk pool into our retail pool. It's something we're always looking to do, and we are excited about that volume growth. We're getting volume growth across white milk, flavored milk, yogurt, culinary cream. We are, you know, we are genuinely pleased with that. As the milk pool shrinks, we will continue to push milk into that higher stream business. In fact, it's something we look at every month. Oh, thanks. Then, obviously, the Koroit's mentioned as a plant where you probably will be doing less volume or indeed maybe shut the plant down at various times. I'm just wondering. It's certainly not, I don't think, shut the plant down, Mark. We still wanna sort of send a message to our Western Victorian suppliers that, you know, we see that as a, as a key area for cooling milk. We would certainly look to change the way we use that facility, but I just wanna reiterate that we. Sure are committed to the area of Western Victoria, which is a very strong dairy region. Of course. What I'm wondering is in terms of the cost overhead, how much of that is impacting the results and how do we think about that? Obviously, with perhaps lower milk going through there, how does that impact lactoferrin, which, you know, the big production of lactoferrin down at Koroit? Yeah, absolutely. look, Mark, we have a number of tolling arrangements, and we do quite a bit of work through there. We'll look to make some immediate savings, but it's probably a slightly longer-term plan when you look at the cost structures of a big plant like Koroit, and something we'll look at over the next six months. Are you saying you can maintain lactoferrin volumes or? Yep, yep. Certainly, for the next 6-12 months, we can, and then we'll just assess it. We might decide to use. That's the beauty of having sort of a multi-pronged sort of sites at your, at your disposal, Mark. We might decide to use Koroit as a collection facility and still pump milk through there for lactoferrin, but then we can use it either into our, you know, parts of our retail branded network or Tatura. You know, we have the ability to still use that, you know, milk receivable and lactoferrin facility. It's whether we will then to use it for further processing is sort of the optionality we have, and we'll look at that. Yeah, great. Then just lastly, as we look across the ditch to New Zealand, too, in terms of their farm gate, I'm just wondering, and obviously, their pricing of commodity products gives them more competitive power from their point of view, but is there any benefits that you can see in terms of sourcing product from New Zealand, or how do you see the competition now between Australia and New Zealand, given the differences in farm gate? Yes, we're seeing a lot of, we're starting to see foreign imported product increase in coming into Australia. Where a lot of our branded business sits is in what I would call very fresh products, so flavored milk, white milk, yogurt. Culinary cream, which sort of has to come from Australia. We obviously have a, you know, we manufacture cheese here in Australia and have a long history of doing that. Certainly, we would potentially, you know, look at options for importing foreign solids where it makes sense. I guess the beauty of our business is we do have a really strong and effective distribution network and processing capability that would mean that, you know, that's an alternative for us. And probably whilst there's an arbitrage in prices, you know, a very viable option for us. We will be looking at that very closely. Barry, I'm not sure if you have anything to add? Yeah. I think the only thing I'd add, Mark, is that it is a question of agility, you know. We have got the capacity. I guess there's two sides to this coin. There's, what do we think will happen in the retail market, if you like, against an Australian-manufactured product versus an imported one, if that disparity remained for a longer period of time? That's obviously something that we watch carefully. As Pete said, most of our branded products are actually in more the fresh category. In terms of what we do around cheese manufacture and cut, pack, and processing for others, we do have a global sourcing capability that we always are using to make sure that we are sourcing solids from both Australia and around the world according to what's happening in those commodity markets. The reason why I say that we need to be agile is that, interestingly enough, if we looked at solids out of New Zealand, 12 months ago, we would've been saying, "They're too expensive," you know? It is very much related to that commodity market, and it's about us having a capability to do that, and we do have that capability. You know, obviously, you can always do a fine and manage, but it is part of what we do, as is the fact that, you know, we've got planners working every day within our business in Australia, working out what the best return for products are, where there's flexibility to send milk to various other products. Sure. Does that take a little pressure off, maybe chasing milk in Australia at excessive prices, if you like? It can, you know, I think what we're really flagging today is what we're thinking about for FY2024. As we think beyond that, it is about, you know, some of that infrastructure utilization options being explored, where you can wind it up and down. As we've explained, it'll take a little longer than just a few months to get that designed properly. That in itself will take some pressure off, and solid procurement can take some additional pressure off as well. Great. Okay, thanks for your time there. Thank you. Your next question comes from Evan Karatzas, from UBS. Please go ahead. Thanks, all. The leverage of 2 times or gearing of 2 times you talked about, can you just confirm, does that include the Port Melbourne sale? Yeah, we're sort of figuring it'll be a range somewhere between AUD 1.8 and AUD 2.1. Yes, that would include the Port Melbourne sale. Okay. I mean, that sort of assumes around using that AUD 160 million EBITDA, sort of around the AUD 300 million-AUD 320 million of net debt, which is sort of where it was at the half. I thought there was sort of an expectation that, like, maybe that working capital build would unwind, or at least debt or leverage would be lower. Can you just maybe help me connect the dots to what I guess I'm missing regarding that cash collection, or why maybe even net debt ex the Port Melbourne sale was, has increased? Yeah. I think it's fair to say, Evan, you know, one of the things that Barry and Pete mentioned earlier is, I would say that the inventories in the commodity business are probably a little higher than we thought they might be in February. That's just a combination of soft demand in some of the powders and some of the bulk butters. So inventory is a little bit longer, but Port Melbourne brings us sort of at or below that 2 times leverage, which we think is pretty good. Remember, the cost of the inventory this year, it's not so much about quantities being a ton higher. It's about the fact that the cost of milk is 30% higher this year. That's obviously fed through to our inventories as well. Okay. Okay, sorry, maybe just a quick follow-up: Are you, like, writing that inventory off that you haven't sold? No. No, okay. No. No, no. I mean, every month, of course, we review our inventory values against market prices and adjust anything that we need to, but this isn't about an inventory write-off. What I think it is about is that there is some softness in some commodity areas in terms of demand. You see that coming through the GDT reports as well. Of course, our planning systems adjust on a regular basis in terms of what they intake, and then we offset any softness there. I think that theme of reallocating milk into branded, where the demand is more robust, that's the important theme that Pete talked about. Yeah. Okay. Okay, that makes sense. Maybe just a final one. Sort of asking this a bit more directly, but just assuming no change in your farm gate milk price, the price you're offering, are we expecting, you know, EBITDA growth in FY2024 on the AUD 160 million? I know you've sort of given a range of... I'll start just a bit more directly, is there expectation for growth in 2024 at the EBITDA level? Evan, I think it's too early to say because we haven't finished acquiring milk yet. I sort of, we're sort of loathe to give guidance at this stage until we've finalized those sorts of numbers, because I'd be misleading you. you know, that picture will start to come together over the next sort of month or so. As I said, we're really pleased with the uplift we think we'll get next year in our branded business, which will be quite significant. Obviously, you know, the drag is the commodity business, which I'd be loathe to give you a number just yet because we're right in the middle of trying to acquire milk. I don't know if Colin or Barry have got anything further to say? Look, I think the only thing I'd say, Evan, is that it's price and volume in terms of that commodity game. I think, you know, while the guys hesitate, it's not, you know, do we think the price has got much more to run? You know, I probably think that everybody's pushed very, very hard. The issue then is, what volume do you recruit? That obviously has an impact for us as well. It just gets difficult. As Pete said, we'll be really happy that branded business will grow because it's got the full 12 months of benefit of those price increases and it's got some volume and value growth as well. That, we just, we always like to be conservative and accurate, and it's not just price, it's also volume. Yep. Yep. No, that's completely fair enough. Thanks for your time. Thank you. Your next question comes from Richard Amland from CLSA. Please go ahead. Hi, good morning, guys. A couple quick questions. In reference to the impairment charge, can you break out what how that falls against plant and equipment versus goodwill? Yeah, I think I won't. Well, I won't give exact numbers, because Richard, we've given a range. You know, the goodwill that we've got in our accounts, and we show that in our external accounts at year-end, is, you know, for, you know, that's a little over AUD 100 million. The range is really a really, a review of our operations in Koroit and two of these other sites going where, you know, which assets will continue to be sustainably profitable and which ones do we need to switch on and off. So a little over AUD 100 million of goodwill. The range is about the fixed assets and the plant assets, and which of those we choose to continue operating consistently, and which of those we choose to switch on and off as needed. Between 80 and 180 on the asset side, on the plant equipment side is the range? Yeah, that's right. Can I ask, based upon what has, you know, the farm gate price discussion to date, have you had any feeling back from the supermarkets in terms of what they're thinking about on the retail side of pricing? I'd be loathe to speak for the supermarkets. I, they probably don't need me as a supplier, speaking for them. You know. Okay. I think, though, there'll be continual pressure on pricing. You know, Coles are out in the market. You know, they've been public about that. Yeah. They're paying quite for milk. So, yeah, well, in fact, they're paying more for milk, I think, than they were last year, and they're signing up three-year contracts. My view would be that the value of the dairy, of the dairy cabinet continues to remain strong. I think we've left dollar milk, dollar per liter milk days a long, long way behind us, which I think is very, very good for the industry. Ultimately provides people with good branded product, the opportunity to extract a reasonable value for it. Yeah. Look, I think all I would add is that, and Pete touched on it in his answer, they are in the same procurement market as we're in, so we don't have to spend too much time describing to the retailers what's happening in milk procurement, because they're very aware of it themselves, which obviously, to a certain extent, makes those conversations, more straightforward and transparent. Okay, thank you. I've not been involved with the company as long as some of the other chaps on the call, can you please remind me, I think last year there were references in the presentations around AUD 40 million of cost outs from the, you know, acquisitions or something to that extent. Can you just talk us through what those were again and sort of how those have fleshed out? There was just over AUD 40 million of benefits, which were achieved post-acquisition. That's, half of that was synergies around people. And then there was another component of milk solids optimization and then general procurement. I guess, you know, when we made it public in our half-year result, whilst we took AUD 40 million of cost out, we had about a AUD 400 million increase in inputs in about two or three months last year. A lot of that benefit sort of got, I guess, we certainly banked it, but it certainly got dwarfed by the large input increase. We've successfully passed that on in costs, a lot of that on in cost, over this year, which is why we're feeling comfortable about our branded business moving forward. Just back to the summary, though, there's now significant dislocation between commodity prices and the farm gate milk price. Certainly our branded business, which absorbed a large amount of that point million AUD cost with a cost increase, has successfully passed that on and maintained volume growth at the same time. Okay. Thank you. That's all from me. Terrific. Thank you. Your next question comes from Glenn Rissom, private investor. Please go ahead. Gentlemen, on a completely different subject, my question relates around what's happening in the soy milk field since we've been forced to exit that earlier this year. Thanks for that, Glenn. We reached an arrangement with Vitasoy, where they bought us out of the joint venture, which was their right to do. I'm pleased to say that we've just announced a distribution partnership with Noumi, who own the MILKLAB brand, and that we've just started distributing that. They have a soy, almond, and oat milk offering. They are the biggest plant-based Australian milk company. That's going very well, and we continue to look at other opportunities in that space. You might have noted that we've launched a Bega plant-based cheese, which is doing well. look, we see plant-based milk as a good opportunity moving forward, particularly with our distribution capability and sales capability, we'll continue to look at opportunities as they arise. Okay, thank you. Thank you. Your next question comes from Jonathan Snape of Bell Potter. Please go ahead. Sorry, can you hear me okay now, guys? Got you, Jonathan. Thank you. All right. A quick one. Can you step me through the balance sheet? I'm a little confused here. Your first half net debt was AUD 320 million. You sold Vitasoy, which was what? I can't remember. The number was AUD 40 million-AUD 50 million was gonna come in. You got AUD 115 million coming in from Port Melbourne, the sale, and your net debt's still gonna be AUD 320 million. How do you consume AUD 150 million-AUD 160 million of cash flow in what's meant to be seasonally the weaker half milk collections? Or is there something in there? Have you got the leases included in the total number or something? Sorry, I think, just the one thing I want to correct, I don't expect net debt to remain all the way up at AUD 320. We do expect it to come down into 200-something range, right? You know, that benefit of the Vegemite Way sale is gonna be there and Vitasoy, and that'll bring us down, whether it's AUD 220-AUD 250, and that will result in a leverage that's closer to that 1.8-2.1 range that we called. You will see a reduction in net debt from where we were at the half year, and it will be enabled by those asset sales. What we did acknowledge earlier in the call is, due to the softness of demand in commodities, inventory is running a little longer than it normally seasonally would in the second half. Yeah, your guidance is AUD 160, EBITDA, right? Yeah. 160, if you're talking 220 divided by 160, that's more like 1.4, isn't it? Well, one. Yeah. Let's say high one is where we're sort of guiding here. High 1. Okay, I thought you were talking 1.8 to 2.1 a second ago. I'm probably under-promising and tend to overdeliver a bit, but that kind of high ones range is be about where we're at. I think the other thing that I'll do to round that up, Jonathan, is June was a big month for us. Yep. To have a good month, and we had a very good month in the branded business in June, your receivables end high, right? They all get paid back in July, August. I'd say Yeah. inventory higher, receivables a little higher, and that's the two factors that sort of cause that sort of high ones kind of indication. Okay. Look, Barry, I mean, you've been going around talking to the farmers. I mean, I guess a little confused, you know, what are we going to go 7 billion liters of milk and maybe 1 billion of it ends up in the bottle, the rest of it either ends up in a shelf-stable commodity or ends up in a commodity that's going overseas. As you say, milk sold in New Zealand is 20% cheaper than it is here. Milk sold in the U.S. is 30% cheaper than it is here. Milk sold in Europe is between 20% and 30% cheaper than it is here. I mean, how do we not just see a fairly material inflow of products like cheese, mozzarella, that finds its way into food service channels, finds its way into retail channels, and just undercuts, you know, probably one of the few profitable arms for all these processors outside of fresh milk? The farmers kind of understand that that's what would happen if there continued to be this arbitrage. Yeah. I think your last sentence is probably the thing. It's how long this arbitrage is this for, because what's really happened, as you say, is that elsewhere, this rapid drop is being reflected in farm gate milk pricing, and it's not being reflected here. How long it takes for that to correct, so there is a more, there is a more parallel, sort of solids cost, I guess is the question. I think from my perspective, the farmers understand it. We are seeing... I think, Jonathan, the thing that I am trying to get my mind around, even though I've been doing this for a very long time, is that my supply meetings this time around are a bit unique. ... you know, normally I go to supplier meetings and the farmers say, "You know, you have to pay me more," and that's the first subject matter. You know, and there's always that push and pull between what the farmer might expect and what, on what we require. They're very calm meetings because the farmers do, in fact, realize that, you know, their price is very good. As I mentioned earlier, one of the ironies of that good price is that it's not necessarily stimulating growth and supply in Australia, because the farmers are finding that they can be quite comfortable at a lower volume of production. I, you know, quite frankly, the farmers do realize that we are out of step, and they are very aware of it, so they're That's, I think, why they're not arguing about price. I think the only additional commentary I would make is that it's notable when I look at those areas that you've mentioned. You've got farmers there actually protesting and complaining about their price, and they're actually complaining that they can't produce milk at that price, et cetera. I would be more concerned if I wasn't seeing that, because what you will see is that inevitable adjustment in the price in the global commodities. I think unlike what used to be the traditional approach in the milk procurement game, which was you had a base price, and then you did a series of step ups throughout the year. I think the farmers in Australia recognize that if that commodity market doesn't improve, it's already been given to them here. Okay. Look, maybe just one last one. I know you call yourself the Great Australian Food Company, you know, do you think there's a point where you're kind of, if you're gonna start continuing to invest in dairy, the returns here are so skinny now, when we look at the return on invested capital. Do you need to look at alternative procurement, like maybe owning processing capacity in New Zealand or somewhere else that allows you to arbitrage what's now becoming fairly common, these global differences in farm gate price? Yeah. Potentially, Jonathan, would be the answer. It's not something that we would take off the table. I think as we think about what that might be and how that might look, obviously, you know, we've, it's across the ditch, but it also can be across the Pacific, you know, to use the numbers that you talked about. We just need to be comfortable that they do rapidly change those solids and we need to be very certain that. I think that the first thing is what I mentioned earlier. We need to be very agile about how we recognize and procure ingredients and have strategic partnerships with processors in other regions. I think that's the real first step in that. Then, you know, I think you would see how that would unfold, which could ultimately see investment. I think we start with just making sure that we've got the partnerships that allow us that flexibility. All right, great. Thank you. Thank you. Your next question comes from Taylor Guyot, from Barrenjoey. Please go ahead. Hey, guys. I'm just wondering, with the ongoing lease costs for Vegemite Way, could you just talk about the amount and the duration of these, please? Yeah. I mean, obviously, what we've got here is we had this year a forecast that we shared at the half year, that our depreciation and amortization would be a little over AUD 100 million. I think we said AUD 104 million for the full year. What you can expect now, obviously, is that there's another several million of depreciation and amortization costs that come with the 15-year lease back. You're gonna have some number that's in that sort of AUD 110-AUD 113 range, is what you should be modeling for the upcoming year. Okay, great. Thank you. Just on that AUD 114 million cash from the Vegemite Way, is that pre or post-tax? Can you just talk about what you're planning on doing with it, and the capital allocation of that, and then just to maybe quantify the impact to P&L balance sheet and cash flow for FY2023, please? Yeah. I mean, obviously, you get a pretty large impact. We received the cash, so in the balance sheet, you're obviously going to see a draw, you know, a decrease in our, in our facilities as a result of having received the cash. What we're going to do with the funds is the important discussion, really there's two things. There is going to be some capital gains tax, you're probably in just, let's call, for a nice round number, AUD 20 million there. More importantly, Pete talked about the restructuring plan, we've got AUD 21 million cost of that restructuring plan. As Pete said earlier, we get AUD 12 million of in-year benefit from that plan next year, and then it accumulates or annualizes to AUD 21 million of annualized benefits by the following year. It's basically a 1-year payback. AUD 20 million capital gains, AUD 21 million, you know, being invested in organizational restructuring, and then the remainder is going, obviously, into improving our balance sheet and our leverage ratios. Okay, perfect. Thank you. Just my last question, please, just the... I guess it's a couple questions. The, what's the cost of debt, and... Actually, yeah, I'll just ask that one. Thank you. Sorry, what was that? Could you please repeat that again? Just what's the cost of debt, and can we just quantify? We've talked a bit, but just to be clear, like, what we should be thinking for net debt at the end of FY2023 and FY2024, please? Yeah. We had, when we came out of the half year this year, we had about AUD 10 million of interest costs at the half year, and we saw the forecast we shared with the market when we came out with our H1 results, is that for this year's full year, they could roughly double that. We were talking about an interest cost of a little over AUD 20 million. Rates have sort of been going up in steps throughout the course of this year. The good thing is that the, you know, the sale and leaseback of Vegemite Way means that we won't see the same kind of percentage rise in our interest costs next year as we saw this year. It was a very big step up this year to reach AUD 20 million. You might model something in the range of AUD 23 million-AUD 25 million of interest costs next year, would be a good assumption. Okay, thanks very much. Thank you. Your next question comes from Phillip Kimber, from E&P. Please go ahead. Hi, guys. Just two follow-ups. One, just on the AUD 114 odd million acquisition, sorry, disposal of sale and leaseback, you really are gonna keep sort of, I don't know, AUD 90 million after tax? Just to confirm that. Then I'm just sort of thinking, you just said the lease cost is AUD 10. Basically, you're gonna spend from a P&L perspective, and I know that's not the only reason. No, I just said AUD several million that we said there. Yeah. Sorry, AUD several million for the lease? Yeah, something like AUD 8 million a year in the depreciation and amortization line. Yeah. Right. Okay. That, you know, slightly less than the interest. Sorry, slightly more than the interest saving, but we're sort of talking rats and mice in terms of numbers now. Yeah. Okay, got it. Sorry. That clarifies that. Then I'm just a little bit confused with the result, and I just wanna make sure I've got this right in my mind. That there's AUD 21 million cash costs that relates to these restructuring, which, as you say, you know, it's effectively a one-year payback on an annualized way of looking at it. Is that, Look, is there a P&L cost, and does that come through in FY2024, or does it- Twenty-three. Take a provision in 2023? Because we've announced this publicly and to the employees this morning, we'll recognize, in fact, everything that we've talked about, whether it's the impairment of bulk assets, it's the AUD 21 million of restructuring. We're gonna recognize all of these things in the FY2023 accounts, because they're all publicly known now, and the expectation's been set. You'll see the final numbers on those once we have the audited accounts at the end of August. We'll recognize everything in this year's accounts. Right. That's separate, that AUD 21 million, which I assume is a pre-tax number- Yeah ... is separate to, I think, the AUD 10 million-AUD 15 million, which will be taken as a one-off this year, that's after tax. That relates to these tax consolidations. They're two separate things. Sorry, the reason I was confused. Yeah ... is because 21 times 1 minus the tax rate, isn't far off that other number. I wonder. Oh, yeah. one and the same thing, or two separate items. Yeah, you're completely right. They're different. I think, you know, probably one of the last remaining unconsolidated tax groups in the country. The fact that we'll move to a consolidated tax group just makes us much more efficient, much more simplified internally. There is a one-time cost to do that, but it makes an absolute sense to do that right now. That's a separate item, and that AUD 10 million-AUD 15 million, you see that in our, in the income tax breakouts we'll give in our end-of-year statements. Right. Okay. Thank you. Thank you. There are no further questions at this time. I'll now hand back to Mr. Irvin for closing remarks. Well, thank you, everyone. Thanks for the detailed questions, and response to the answers and the announcements. Obviously, our objective in terms of making the announcement and updating the market is really to demonstrate a response to the market circumstances, both the opportunities and the challenges, and indeed, many of the decisions we've made today are positioning the company very well for the future. That's obviously our objective, to respond to the changes in markets and the opportunities that we've identified in the business, and indeed, right-sizing the business for those opportunities. Thank you all for your attendance and attention, and look forward to speaking to you at full year results. Thank you. Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.