Thank you for standing by, welcome to the Bega Cheese Limited half year 2023 results conference call. 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 will need to press the star key followed by one on your telephone keypad. I would now like to hand the conference over to Mr. Barry Irvin, Executive Chairman. Please go ahead. Thank you, and welcome everyone, and thank you for joining us. For those that are following on the presentation, I will guide you to which page that we're on. I suppose in saying that the opening slide or the introduction slide for myself is clearly one that emphasizes that wonderful portfolio of brands that we have. While the first half of the year certainly had its challenges and one of those was indeed dealing with the significant step change in the farmgate milk pricing and other inflationary costs and getting those reflected in the Australian market. As we said at the full year results and at our AGM, that lag did cause us a reasonable amount of challenge in the first few months of this year. You know, pleasingly, which the team will talk about a little later, the brands, you know, brands that are much loved by the Australian consumer have stood up well to the fact we've had to increase the prices significantly. We're really pleased with the foundations that the brands offer us as we look forward to FY 2024, despite the fact that our first half was reasonably challenging. When I go into the next slide, which is the key messages slide, I would note that we had reflecting that rather large increase in pricing that we needed to push through into the marketplace, particularly in Australia, and strong commodity prices. We had an increase in net revenue to AUD 1.68 billion, up 11% compared to the prior year. As I said, the pleasing thing is that those price increases have not materially impacted on our brand share or indeed they've actually seen consumers remain loyal, and we've actually seen volume growth in our brand. Extraordinarily pleasing there. Obviously, as previously announced, in terms of things that we would draw your attention to in the first half, we have exited the Vitasoy joint venture, that transition's been done smoothly. We did receive AUD 51 million on the 13th of February, and we will continue to be involved in the plant-based sector, and we are already making good progress on how that involvement will manifest itself as we move forward. A statutory EBITDA of AUD 71.6 million, and a normalized EBITDA of AUD 74.6 million was of course, lower than the first half, and I think it's well understand what drove that. It was largely that timing of price increases in the market, which lagged significant cost increases. I think on the more positive side, really good to see a strong performance from our spreads business, Peanut Butter and Vegemite, performing really well, continuing to grow. Of course, we, as always, were able to demonstrate the value of the diversity of this company and the infrastructure that we have in the fact that we were able to take advantage of, you know, strong global dairy commodity prices in the first half, with our bulk dairy ingredients division performing well, which the team will talk about a little bit more. I think it is, it has been a subject in the dairy industry for a while around the opportunities for consolidation and how those consolidations may occur. I think what I would observe is that we are seeing companies such as ourselves and some of the other major dairy companies look more strongly at our infrastructure and see where we can consolidate. I think what we're seeing at the moment is obviously we announced yesterday that we are closing down our manufacturing capacity in Canberra and transferring that to Penrith. We do think that there is still more opportunities for further consolidation internally to our business. We recognize that other dairy companies are also doing the same thing. I would probably say there's still further opportunity for industry consolidation as well. It's good to see some of that, if you like, infrastructure that is, that is surplus to requirement given the level of milk production in Australia today. That statement still being consolidated out of the industry is helpful in the longer term. We did see an increase in leverage ratio. I think it's really important to emphasize that we had a very large value increase of inventory on the back of those very, very strong commodity markets and indeed the significant increase in farmgate milk pricing. Of course, as is always the case this time of year, the cows do tend to want to give you more milk in the spring. It is a very natural product. At the end of the day, we build inventory in the first half, which we look to realize the value for in the second half. We will expect that will diminish in the second half. There remains as is well documented, strong competition for milk at the farmgate. That's been elevated further by a reduction in supply this year. It is fair to comment that obviously we've had, there's been some challenges around farmgate milk production for a number of years. The prices are very strong this year, but our farmers have found it very difficult to access labor, which has seen them not be able to respond necessarily to those increases. We're also seeing the impacts of flooding, indeed the longer term impact of higher land prices at the moment and alternatives such as beef, perhaps seeing retirements happen a little bit more quickly than what have otherwise been the case. We are expecting the decline to slow as the next year unfolds. Just moving to the next slide, I will leave it to Gunther and Pete to talk about the financial in more detail. I think I've really probably hit on the high points to that. We were pleased to be able to announce a only a small reduction in our dividend at AUD 0.045 per share, which I think reflects the fact that we remain very confident of an improved performance rolling into FY 2024, as the full year benefit of the price increases that we had to move through last year is felt and we take advantage of some more opportunities to strengthen the business internally as well. Moving to the next slide, I will not dwell on either. I mean, I always do think that this is a company that has a great history and heritage, and indeed a great future. It is always important that we take in our thinking, our business, we take a very careful long-term view as a short-term view on the values that we create, the brands that we create, the customers and markets that we create, all link back to this core purpose of creating great food for a better future. We think we're really well progressed in being a business that people are proud to work for and being a business that builds loyalty with their customers, which I think was shown really well in this first half as indeed without continuing to dwell on as we push those prices through, but saw loyalty to our brands. I think we obviously continue to focus on ensuring that we get our ESG right, and ensuring that we are indeed, running a business sustainably, both from a financial point of view, and an environmental point of view. The next slide 6, is one that you will have all seen before. Again, this has been about how we put a business together that can, quite frankly, in times like the ones we've just experienced, which, you know, when we think about the challenges over the last two years, where we had, you know, significant disruption associated with COVID, and then significant changes around cost inputs, this business was able to be flexible enough to be able to take advantage of commodity markets, diverse enough to see businesses like our spreads businesses perform really well, and nimble enough to be able to move price rises through, albeit with a lag that will see the foundation set very well for the following year. Really the transformational activity that we've done, where we now see ourselves predominantly with strong brands in what is now a stable domestic market and a somewhat volatile international market, is the key to the foundations that we have been looking to build over a number of years. I guess that's a slightly long way of saying the strategy that has been in play is a strategy that we continue to have great confidence in as we look forward and move forward. I won't dwell too much on the next slide, which is our sustainability and circular economy slide. I think there's perhaps two things to mention, obviously reinforcing the fact that we align all our activities to the UN Sustainable Development Goals. We've obviously already talked about the targets that we're undertaking in terms of 2030 and 2050 goals around emissions. We continue to be the very strong driver, if you like, behind the circularity project in the Bega Valley, which has the ambition to not only see fast proof of concept and really solid learnings in some of the subject areas that people talk about a lot around things like emissions, but it's also about how we deal with waste, how we deal with water, how we improve biodiversity. That project's got tremendous support, both from government and the local community and indeed much of corporate Australia and a number of universities. Very pleased with the progress of the circularity project. I am obviously internally very much focused on how we make sure we meet our stated goals, whether it be in the areas of packaging and emissions, but we continue to have a very good team working on that. I think that's probably enough from me as far as opening comments are concerned. Great to have Peter and Gunther here with us today. Obviously, this is Peter's first announcement as CEO and the first for Gunther as CFO as well. I would say that I'm very pleased to introduce what I'm very comfortable with is an exceptional team and certainly the right people to make sure that we deal well with the challenges we face this year and move forward with confidence into FY 2024. Pete and Gunther, that said, I'll hand over to you. Terrific, Barry. Thank you for that. I think we talked to the market about the significant price increases that we had at the end of last year, and I think the year is actually playing out pretty much as we thought, which has been good in a way because we've been able to test a number of elements of our business, and we feel that they've stood up pretty well. If we turn to the next slide, we'll just look at the innovation and growth in our consumer brands. I think the journey that Barry talked about, sort of evolving to a brand of business has actually stood us in very good stead. When you think about the significant price, those prices that we put up, we're very happy with the way our brands and our categories have actually performed. In fact, our branded business volume actually grew by 4% for the half, which we're very pleased with. It really speaks to the strength of our brands within the categories and the way we're positioned within those categories. You know, the different price points and different sizes and product offerings we have, we feel has protected us really well. We did front-weight or up-weighted a lot of our marketing investment to support that significant price increase. We put through nearly 10% price increase before Christmas, we focused very heavily on making sure that we spoke about loyalty to our customers, value to our customers. We spent a lot of time in activating our marketing on shelf, we feel that that really helped us in that transition to an increase in price and maintaining our volume. A lot of work was done around the Dare brand. We did work around Farmers Union yogurt and Dairy Farmers white milk and Vegemite and increasing the occasions for Vegemite and, you know, trying to sort of grow the use of that product. We're extremely pleased with the fact that Vegemite increased value year-on-year, but also volume, which for the first time in some time. A really strong performance by that brand in particular. We also had accelerated growth in food service. You know, we talk about our strategy, and we've got this very strong distribution network and great brands. There was a focus on increasing our brand awareness in food service and increasing the doing some work around some key lines in food service to enable growth in that area. The dairy drinks business actually grew by 31% in food service year-on-year for the half, and the Bega Foods business grew by 21% half-on-half. We see that as a really good opportunity for us moving forward. We're obviously incredibly strong in grocery, but that food service area we think is an area we can do well in in the future. Pleased to say that we did some really good sustainability activity around our brands. We've obviously had some work with our packaging, with our Juice Brothers brand, going to a fully recyclable packaging content. Our Vegemite packaging is now 100% recyclable. Did a lot of work around Dare and having a Rainforest Alliance with our coffee in our Dare product, which also helps increase our coffee credentials. That brand continues to be incredibly strong for us and maintains our number one position in milk based beverages moving forward. We also did a lot of work around Dare and yogurt and our flavored milk ranges. We introduced lactose-free and reduced sugar, which went down extremely well with the market and we'll continue to roll out that capability across our business. We added probiotics and high protein into our yogurts and some of our white milks, which has also been incredibly successful. I alluded to sort of development of some products around food service, and we've evolved cooking cream, which is going very well in its early stages in helping drive that food service growth. We also think that can dovetail into our grocery offering, which we're excited about. Something that we're starting to test, we export, you know, between 25,000 and 30,000 tons of cream cheese throughout Asia and have a very good reputation for our high quality of cream cheese, particularly discerning markets like Japan. It seemed only natural that we would launch a cream cheese into the domestic market under the Bega brand. That's been in store live for about six weeks now. We think it's a really good test of that brand equity and expansion into another strong retail offering within Australia. Early signs are that that's progressing well. You know, once again, coming back to the strength of that Vegemite brand I spoke about before, we've been able to get some terrific leverage out of increasing licensing opportunities. We've done work with Le Snak, McCain, the Australian Mint and Arnott's, that provides us with really good credentials, great coverage and also quite a successful commercial licensing setup. Really excited about some of the work we've done around our brands in a tougher environment. We just move on to the next page. That highlights where we sit from a grocery perspective here. Really pleased with our market positions. We've maintained number one or number two position across most of the categories. We're actually really pleased with our fresh white milk performance in grocery. It's been particularly strong over the last six months, and we're seeing some real rejuvenation in our Dairy Farmers and Pura brands. Also yogurt. If you look back, yogurt has actually slipped to the market number two position with, like, Lactalis' acquisition of Jalna, that our volumes are actually up and our performance in that category has really lifted over the last six months. We're particularly excited about some of the innovation we've got happening there. Really strong. We've come out of a very tough retail environment with a really strong position on our brands. We'll just go to the next slide, which is our manufacturing network, and this is something that you will have all seen before. This is a source of great strength to us in a period where we look to try and optimize our position with our location close to our customers and our suppliers. This gives us lots of optionality. It's also an area of opportunity for us, and Barry talked about our execution of the closure of the Canberra site yesterday, which ultimately plays into a far better cost base, but also allows us to extend our product capability in the Penrith site and volume and efficiencies there. You know, we now have developed through that change a full lactose-free offering out of Penrith, which we'll look to push into the New South Wales market. That positions us for a period of growth. We think there's probably, or we think there's definitely further opportunity with our network, both at a physical location, but also the capability within location. We think that we can continue to realize benefits by looking at that network over the next couple of years. It's been really interesting, the dynamic milk market, to see where milk's heading, but we think that we have a really good handle on that now, after two years of ownership of the full network, and we look to continue to optimize that in the future. If we just move on to the next slide. This is really interesting. This slide, we've used this before, but it basically shows... the red line shows the trending in the global commodity market. The green line shows our southern farmgate milk trend, and then the blue line we've linked to the major grocers' private label milk index. What you'll see there that is really since September 2021, there's been significant movement in all three lines here. Certainly during 2022, the commodity prices really led away strongly and probably created quite a gap between farmgate prices and the white milk pricing index, RBW white milk price index. Our farmgate prices followed. What you'll see there is if you just look at the end of the chart, the global commodity prices have fallen quite steeply over the last couple of months, which is something that we've had to manage with our commodity markets through the remainder of the year. You'll see there that the white milk RB index now is outstripping the commodity price fall quite significantly. What we think is now with our really strong connection with retail pricing and branded offerings on shelf in Australia, and also our ability to flex in and out of different commodity markets, that we're extremely well-placed to compete for farm gate milk over the next three or four months. In fact, we see it as a real opportunity to compete strongly there against our competitors. If we move on to the next slide, just some major initiatives before I hand over to Gunther. Just go through some major initiatives that we've worked through. Unprecedented price changes in the Australian domestic market. We've put through about AUD 260 million annualized price increase across 3 waves since August last year. A huge amount of work was done by the team. That's work across about 1,000 SKUs, and that's done with an eye to our competitors and our different channels. An amazing amount of work there, and as I said, extremely pleased that we've, during that process, we've actually seen an uplift in our volumes. We think that places us in extremely good stead for FY 2024. It's interesting to note that as those commodity prices have fallen away, which we talked about in the graph, and I think it's about 33% since the start of the year, there's actually been a number of movements within that. What we saw with the slow openings around Japan and China, we actually had some volume pressure on cream cheese, which has traditionally been a very strong export market for us in the commodity part of our business. We were able to pivot out of that quite quickly, and through our different facilities, we were able to increase our weight into mozzarella and Parmesan and cheddar, which was actually able to soften that blow. A lot of work was done within our commodity business to maintain pretty strong commodity earnings for the first half, which we're very happy about. I think just reflects our flexibility now and the strong manufacturing capability we have across a number of different channels. I think also places us in good stead next year as we evaluate what's happening with some of those food service markets, albeit we're seeing a slight opening of China and Japan next year. Even if that doesn't occur, I think we're still well placed to play into strong commodity markets. We continue to have capacity rationalization and processing optimization across our different footprints. That was reflected by Canberra, the closing of Canberra, also the ability to shift milk into different markets as we saw different growth. You know, we did see really strong growth in our domestic white milk business. We were able to flex with that, with milk out of our commodity business throughout the year, and adapt to that. Also just with optimization, with the ability to screen proteins and fats out of our domestic business back into our commodity business. We're starting to see some real wins there. Protein optimization at places like Chelsea have provided us with additional earnings opportunities. During all of that, during all of that change and significant cost increase, but also breakdowns in our supply chain network, we're being really happy with our capital program, which we think will start to really kick in and give us some advantage in FY 2024. In particular, I call out, you know, our blow molding capability that we've put into Wetherill Park, which is on time and on budget. We'll kick off next year, which allows us to blow our own bottles at Wetherill Park, saving several cents a bottle in costs. It also allows us to go to a fully recycled packaging option in the near term, which is really exciting. And that's something that changes the cost structure there. Now with putting in a new yogurt pouch line at Morwell, which will also is on budget and on time, and will open at the start of the new financial year. That increases our capacity, yogurt capacity by a little bit over 10%. What it also does is it exposes us to trends around single serve yogurt and different day times, and allows us to really play with our functional enhancements in that space. We're extremely excited about that additional capacity and capability we're putting at Morwell. We've done a lot of work around a new digital sales platform, which should be finished by the end of the first quarter of next financial year. At the moment, we're using a 15-year-old portal to engage with our 40,000 deliveries each week. It's out of spec and out of market, we'll bring ourselves into the 21st century with this new digital platform. It will address about 170 pain points that we currently have with our customers. We've done a lot of work with them around what they wanna see, we think we'll be best in class. It also helps lead into that food service push that we talked about and non-grocery push that we talked about, fits with our cold chain capability that we have. We're really excited about that. We'll continue to assess footprint opportunities, including the Port Melbourne site. We're, we're working hard on that at the moment. We signaled that that facility was for sale. We still feel really strongly about the desire for people to own that facility. And Gunther and I are working busily on that at the moment. If we just turn to the, to the next page, this is a slide that you've seen before and really comes back to, you know, what Barry was talking about. We still think that we, you know, the four key capabilities of being able to engage directly with our farmers, have a very competitive global supply chain with lots of a strong global footprint, have a diversified portfolio of brands, and have an efficient distribution network, we still think that that interfaces with our strategy moving forward and allows us to fulfill our strategic objectives over the next five years and to continue to grow the business. As we think about, you know, growing outside of the grocery chain, growing inside our core brands, utilizing that footprint for a really cost-effective model moving forward, we think that we've got all the tools that we need to play with. I will now allow Gunther to take you through the financial components of the half. Fantastic. Thank you very much, Pete and Barry. You know, on slide 15, we talk to our segments, and I think the results pick up a lot of the themes and initiatives that you heard about from both Barry and Pete. On the branded side, we had just under AUD 1.4 billion of sales, and that's up 13%. Within that, pleasingly, as Pete alluded to, 4% of that growth is actually volume. Even at a time where we're taking substantial pricing, volume continues to rise. I think what also gives me comfort is that within that first half, even though there was a mismatch between the timing of our pricing and the cost inflation, November and December were among the best months of that half. You saw that price feeding through increasingly with multiple waves, you saw volume continuing to get stronger into November and December. That was very good. You know, we did have a decrease, obviously, due to the timing lag and the pricing, so we're down about a little over 40% in normalized EBITDA, so 43.5%. Within that, though, just under a quarter of that change is the higher marketing that Pete referred to. It was a very deliberate strategy to invest ahead of the curve and to make sure that our pricing stuck. I think that strategy was a successful one and an important one, and it was a bet on making sure that the consumers would sort of recognize the strength of our brands and offerings and innovation, you know, within that. On the bulk side of the business, we had just under AUD 440 million of sales. It was up 2% in net sales. Really behind that is a reduced volume of commodities, obviously. The milk pool was down about 7% this year. While we had slightly less volume in our bulk business, the commodity prices, as Barry said, were considerably higher. It really shows the strength and breadth of that business and everything from cream cheeses to skim milk powders to butters, you know, to different sorts of cheeses. I think you know, the opportunity for Bega to move into different streams to optimize its returns is a really excellent opportunity in a challenging environment. We were up over one-third in EBITDA in that bulk business, reflecting those strong commodity prices and that ability to play across a broad portfolio. The final thing I'll point out on this chart is we did have an increase in unallocated overheads, and there's a few factors to call out there. About a third of that is IT. You know, whether it's the portal that Pete talked about, we continue to invest in different IT initiatives, how we procure as a business, and the costs of IT, frankly, have also gone up a bit. You see some inflation in that number as well. There are some consulting costs in there as we look at our footprint, I think you'll see the benefits of those over 12, 18, 24 months as we make footprint moves just like the Canberra one that you heard announced today and yesterday. That's a look at the segments. On the next slide, we have a reconciliation of normalized results. I'm not gonna spend a lot of time on this one. The normalized items are much smaller this year, they really relate predominantly to those IT and digital investments that we're making. Those are important, they set us up really well for FY 2024 in terms of trying to have frictionless, you know, interactions with our customers. That's really where we wanna go with those sorts of investments. The only other call out I'll make on this slide is you do see on the left and the right side, you know, finance costs were about AUD 10 million in the first half. We expect the second half to be broadly similar. Even though there's a Vitasoy sale, you know, the spring milk peaks out, you know, between sort of November and February, interest costs in the second half will be very similar to that first half. If you flip to the next slide on the balance sheet, you know, there's no question here, a couple of call-outs. You know, trade receivables are higher compared to June. It's often interesting to compare them to where they were in December of last year. It's a very seasonal business. There is often a strong Christmas trading season as we've had this year. On that receivables, you know, it looks to compare at June to AUD 275 million, but if you step back to December of 2022, the receivables then were AUD 302 million. You can see that we continue to follow those seasonal trends, but at higher prices, which are also increasing the receivables. Inventories, you know, are well up against June, but again, we've just gone through a bunch of that spring milk receipt. If you, if you cast your mind back to the prior year, our inventory was a little under AUD 370 million at December. There you see that seasonal peak last year as well. Finally, trade payables are also higher. That reflects, you know, the kind of inflation and costs and the larger size of our business. We also have a program with medium to large suppliers extending payment terms, and that's important to generate cash from our working capital. The organization is certainly pulling in the same direction on that. I'm gonna finish off with the next slide, which is really about cash flow. No question, we do have a slightly negative operating cash flow as we fund that big, you know, that increase in farmgate milk and that spring milk receipt season, it's really about the inventory. The second half, as Pete mentioned earlier, that's really about selling now the inventory we've built during that spring season and recognizing value from that at the much higher prices. I'm gonna pause there. I'm gonna hand back to Pete, and he's gonna sort of wrap this together in our outlook for the second half of next year. Terrific. Thanks, Gunther. If we look at the things that we've put in place this year to mitigate that significant cost wave, you know, AUD 260 million worth of pricing initiatives that will have a tail into next year. We've also focused significantly on our, on our site performance around utilization of our lines. There's been a number of costs that have come out around wastage and so forth. I mean, if you look at some of the projects we've got in place with the increased capacity out of our Morwell pouch yogurt line, the packaging line, the new packaging facility that we've got in place at Wetherill Park, and also the potential for further synergies as we bring our businesses together and we continue to restructure and align our overheads, I think there's a really good line of sight to a significant improvement in financial year 2024. We're very comfortable about what 2024 looks like. However, in 2023, we still reiterate our guidance between the AUD 160 million and AUD 190 million EBITDA range. What we would say it's probably gonna be at the lower end of that range due to the 33% drop in commodity prices, which has occurred just post-Christmas. We still think that overall the position, the business is incredibly well positioned for next year. I'm gonna hand back to Barry. Thanks, Pete and Gunther. It's, I think, the team has painted a very good picture about how we are feeling about this business, even though the year has been quite challenging. I guess, you know, I would summarize by going to the last page, and obviously, I'm very happy to take questions when I finish this. You know, I think we have the team have emphasized the things that give us confidence around both the strategy and the medium term, which is, you know, that strong underlying brand revenue and value volume growth. There's been a step change in Australian domestic market dairy pricing, which we believe is a genuine step change which will stay with us as we move forward. Those significant cost increases that we took in late 2022 and in the first half of 2023 are now being appropriately reflected in the Australian market. There are further opportunities in business efficiency and cost out programs. Of course, the team are always looking at that. We think we will endeavor to accelerate a number of them. The integration, which I think I've said enough, so I won't dwell on too much here. The fact that we can move from dairy commodity to strong domestic market brands, it remains important. In fact, you know, I think if we had not have had that this year, we would have found life much more difficult. Ironically enough, next year it is likely to be more the other way, where we see the strength coming from the Australian market, and as I mentioned earlier, we would see that as a more stable avenue, especially given the strength of our brands. We do see continued growth and good performance in that spreads category, so an area of our business that, you know, we can be really confident with each year now, and people that have been with us for a long time would recall that, you know When we first made that acquisition, we were faced with some challenges, but we worked through those challenges and came up with a really what is now a great business. I think that the learnings from the past can perhaps point to the future as we look to get through some challenges that we faced over the last couple of years. The business that we're presenting to you today is, it has got lots of great opportunity. As I said, we continue to execute sustainability and circularity initiatives as our shareholders and indeed the community would expect us to do so. There is still, I would say, further need for rationalization of capacities within the Australian industry. We do, you know, very regularly, particularly me personally, reflect on where we think supply in Australia might go over the medium-term. There is no question that there is still too much stainless steel in this country for the level of supply that we have. Good to see that some of that rationalization is occurring, whether it be us or a number of our competitors that are making decisions that will, I think, make for a more healthier processing sector in the medium-term. People do often ask me whether I think there is more room for industry rationalization. I would say yes. Of course, there are times that it's always very important that when we look at industry rationalization from our perspective, it's about how it creates value. Look, I would probably reiterate what both Pete and Gunther have said around 2024, and we think we're really well positioned for an improved business performance. Indeed, the challenges we had this year, I think are very straightforward to point to. We know what the challenge was. It has stayed with us. We are seeing that shift in commodity prices that we will need to manage in the second half. Overall, we would say that, you know, we're very comfortable with the strategy that we're presenting to you and the business we're presenting to you today. More than happy now to take 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 Michael Peet with Goldman Sachs. Please go ahead. Hi, Barry, Pete, and Gunther. Thanks for taking my questions. Just trying to look into 2024 and think about the mix of sort of production versus where maybe price might go on the farmgate and what's that's gonna sort of mean. Obviously, commodity prices coming off a bit maybe means that there could be a bit of downward pressure, but with, you know, production, yet to sort of show a bounce back, it sort of might keep the market tight. I'm just sort of thinking, what's your expectation on farmgate prices of 2024? With that in mind, what happens with these retail price increases? Do they stick? Is it just a lag as they come back down, or what do you expect to happen there? It is a little early to tell, Michael. Obviously we'll watch that commodity market very carefully, but I suppose we could make some observations that clearly what drove that farmgate milk price up was the very fast ramping up of the global commodity price. It is, of course, not the only factor, but it was the factor that drove it up with an overlay of scarcity of milk. I would say that, you know, it is too early to call on farmgate milk price, but, you know, I think it would be notable that you would not expect that it would be, probably at the very least stable, if not some level of downward pressure on it, which we would then say. Which then leads into your second question, which is what do we think that means in the domestic market? I think as we've always seen, those price increases tend to be much more stable and stick for much longer in the domestic market. I would expect that to be the case. Indeed, we've seen some pricing already announced for milk into the domestic market. Some of those, some of the prices that are announced into domestic retail and what we've got to remember across the profile of supply we collect, in some states, it is very much destined for domestic markets and the farmgate price will remain stable. It's in the southern states where it moves around and reflects more some of the commodity markets. On balance, we would probably say that there is a little bit of downward pressure in some regions. It's probably because of scarcity, be a little more stable than might have otherwise been the case. As I say, I think all players would say there is. You need to reflect the market returns in your price, in your farmgate milk price, and obviously there is a change in those market returns as far as international markets are concerned. Domestic market, we would say, will be more stable. Just another question, final question on margin. Thinking at the sort of EBITDA and EBIT line, cost of goods, looks like you've adjusted with the price rises to get your GP back up to where it was. Is that a fair comment? That's probably gonna go back up to that 24-ish or equivalent, given the timing difference. That's, that looks like it's done. Do you need further price rises to recover your EBIT margin, or will the, either you're attacking those costs? I'm just trying to get a sense of cost of doing business and the inflation that's in those lines. I think a bit of both, Michael. I think we'll continue to... You're right, that margin will continue to climb as we see the timing lag play out next year. Then, you know... Projects like what we did yesterday with Canberra. some of the projects I've talked about earlier before with, with, you know, utilization of our plants, further optimization of our plants, some of the synergy benefits I've talked about before as we go into our, you know, another stage of bringing our businesses together. That will all help the bottom line. Okay, good. Thank you very much. Thank you. Your next question comes from Evan Karatzas with UBS. Please go ahead. Okay, thanks. I'll, on the trade receivables facility, just on my calc, because I'm tracking back the last few years since it started, it looks like you're now right at the upper limit of that AUD 200 million. I take the fact you've extended it with Rabobank to January 2024, but I'm guessing, I'm just interested firstly, if you expect that level to decline for the 2H? Also if there's been any change in the conversation there with Rabobank, whether to increase that facility amount or alternatively even to potentially decrease it? Yeah. I think that's a good question. At the end of the half, we did use the majority of that facility. I would say to take your second question about what do we expect in the second half, that's a half where seasonally we take the inventory that we have, and we sell that down and now at higher prices. I do expect the utilization of that facility to be lower at year-end than it was at December. Right now, we haven't had any specific discussions with Rabobank about varying the size of that facility. I think what you're also seeing with this Canberra announcement yesterday and Pete's discussion on the footprint is we're now looking at, hey, there's so many other places for us to also go for cash. We've talked about, you know, sale and leasebacks at Vegemite Way as a potential. When, you know, do we look at selling, leasing back the Canberra facility? When you start to get into the footprint work, we've got this great asset base, and as we really hone and focus that asset base, it provides us cash opportunities. Final summary there is, you know, end of the financial year, we'll be using less of that facility, and our leverage ratio will improve. We'll be looking to multiple places for sources of cash, including working capital and footprint. I think, Evan, just to add to Gunther's comments. If you think of where that the large inventory balance comes in, it's in the commodity business. A lot of our branded business is daily or weekly. You actually, your inventory levels cycle pretty quickly there. Where you get caught out with your inventory levels is the cost of milk or the cost of inputs. Those inventory levels have risen AUD 70 million or AUD 80 million just in the cost of inputs. This has been a particularly if you consider a record high. Yeah. -farmgate milk cost going into commodity product that lands that inventory. The inventory levels from the volume point of view are reasonably consistent. This is a pretty unusual year. If your commodity-based milk drops, so does the level of your inventory. That'll. We'll see how that plays out. That's the other thing you've got to think about as you think about this facility in future years. Okay. All right. Yep. No, that's good color. Appreciate that. Just, sorry, just final, another one on farmgate milk prices. Can I just get your thoughts just how the recent announcement from Coles, which I'm sure you've all seen, obviously expecting to increase the price they pay quite a lot over the next few years, just how you think that's gonna impact the farmgate milk price discussion coming up in June, if at all? Yeah, just keen to sort of get your thoughts on that Coles announcement, please, too. I guess from my perspective, it's Barry. I think interestingly, it reinforces the stability of that part of the market, which is the white milk market, et cetera, which we obviously participate in heavily. To a certain extent, that price increase and I also emphasize that, you know, if we talked about price, prices to farmer in New South Wales or prices to farmer in Queensland, it's a different price to the price we talk about in Southern New South Wales. I think for all players in the market, you can always quote a very high price from a particular area for product destined to a particular market. My perspective is, look, it demonstrates that I think Coles believes that part of the market is stable and requires a stable stream of milk flow. We would agree with that, and because we're exposed to that, we're actually quite pleased to see that stability. I think elsewhere, it represents one part of the market, would be what I would say. I think elsewhere that it is what I answered earlier. It, you know, the way we ultimately come up with a farmgate milk price, the way our competitors do is a mix of the markets we're exposed to and the products that we produce. I saw it as a reflection of the market that they're looking to service. I think, you know, it's 450 million liters of 7.5 billion. Barry's right, you need to think of it in that context. I think what it indicates, though, is that, you know, the cost of the product on the shelf is sustainable in the consumer's mind. Yeah. and in Coles's mind. Given that we're an 80% branded business, that's I think something that we can be pretty positive about. Okay, great. No, that's good color again. Really appreciate your time, guys. Thanks. Thank you. Your next question comes from Phil Kimber with E&P Capital. Please go ahead. Hey, guys. Just following on the farmgate milk price. A few of your competitors have stepped up late in FY 2023. Is that what you've done as well? I haven't seen any official announcements, but just wanted to check whether you've stepped up late in FY 2023 season. We haven't as yet, Phil. We're, we would probably comment that most of those movements have been, have brought them to our price or around about our price. I think we obviously keep our competitive position under constant review. You know, we're reasonably comfortable with where we sit today. We'll obviously keep it under review for the remainder of the year in terms of wanting to make sure that we're offering a competitive offer to our farmers. You know, some of the enhancements that we have seen when we do the assessment. Again, it's a little like the market we were describing earlier. There are a number of moving parts within an assessment of a farm-gate milk price. When we do our assessment at the moment, we see ourselves as presenting a competitive offer to our farmers. Great. Just on, you might have alluded to this actually on the result with your price rises. It's just trying to get a sense. I think on branded, you're up 13%. You said 4% of that was volume, but that's an average over the half. I mean, I assume the exit run rate price rises are a lot higher than 13% - 4%. Is that correct? Yeah. Is that what you're sort of saying when you're saying AUD 260 million of price rises, that's an annualized number? Yeah, 'cause we're exiting on a monthly run rate in the first half in the very low double digits or a 10% kind of. There's, you know, there's some further pricing that we've taken early in the second half. We wanna get up into that low double digits on an annualized level on the branded business, and that's how you get the AUD 260 million that Pete talked about. Great. Last one, just on the route business, the old line in dairy, Bega Dairy & Drinks business now, skewed heavily, certainly from a, maybe from a profitable point of view, profitability point of view to the route non-grocery trade, then unfortunately, COVID happened. What, you know, are you seeing that part of the business bounce back now? I know you're not gonna give the exact numbers, but just as a general comment, is there, you know, is it back to where it was or there's still a lot more opportunity just getting back to where that business was in the route market? Oh, yeah. I gave you some light on that with the food service numbers, which is only a component of that part of the business, which you're absolutely right, Phil. Yeah, the growth numbers there have been pretty striking. No, we're seeing good recovery there, and so we're really happy with how that's going. What I would say is we think the opportunity in that space, though, is significant. Both, you know, we think we're underrepresented in that space compared to grocery. We think there's significant category growth in that space, so we're white milk heavy. We think that with, you know, that's why we're investing in this new sales platform. We think there's also the ability to get better utilization and better cost efficiencies out of that network. You know, as we think about the next five years, we think there's some really good opportunity in that space, and we're really happy with some of the work that's been done. Also, just some of the focus, you know, as we sort of have a, you know, we really look at our product offering, how we can benefit and how we can play in that space. We think there's some, I wouldn't say easy wins, but we think, you know, we have the right to play harder and better in that space. We're pretty excited about that and pretty excited about some of the things we're seeing in this, some of the, you know, the growth opportunities we're seeing, and that's why I sort of called out those food service numbers. Great. Thank you. Thank you. Your next question comes from David Errington with Bank of America. Please go ahead. Morning, Barry, Pete, and Gunther. Gunther, it's been a long time. I can remember when you were working with Michael Clarke at Treasury Wine. It's funny how the world turns. That's right. It's funny how the world goes around in different circles, Gunther. Here we go, talking from wine to milk. Good, good to hear from you, David. It's wine, it's wine. Different folks. Well, probably, Barry, I'm not being facetious or, you know, trying to be here, but you've forgotten more about the milk industry than what I will ever know. I'm looking at slide 12, and I've got some concerns. I'm worried about that slide where the global commodity price is coming off, which probably impacts your bulk market from a revenue perspective. Correct me if I'm wrong, but the local price, the local milk market, is likely to continue to rise while we've got this situation of a, of a short milk pool and an overcapacity in processing. I'm worried that you're in the perfect pinch system here, where revenues that you receive from... In other words, there's no real correlation between international and domestic, and that the domestic could continue to rise with the international falling. I don't see that being a good outcome for Bega, but I'd love to hear what your views are on that because whilst we've got this situation where we've got excess processing and a shortage of the milk pool, that's not gonna be great. I'd love to hear what your views are on that and whether I'm just being far too simplistic. I can see how you come to that conclusion, but I guess I would say two things. As you say, for better or for worse, I've been doing this for a long time, and we've actually had for much of my time an overcapacity in stainless steel in this country. A falling milk pool. It's not a new phenomena for us, and if you look at the things that ultimately drive how the industry plays, it is all about how you expose yourself to each of those markets, and it's all about your mix. Even within that commodity price fall, if you went deeper into it, you would find that some products in that global commodity market are still performing quite well, and others are not. It is about how we sort of make ourselves competitive from a farmgate milk price. If I was to sort of make the brutal assessment, at the end of the day, the, the strategy for us was to get ourselves more exposed to the Australian domestic market where, you know, 80% of our business is actually done as far as brands are concerned. We sit there going, or as far as the brand business is concerned, I sit there going, that exposure, which is blooming and stable, will see us get some advantage as far as mix is concerned or potential advantage as far as mix is concerned as that farm gate price rights itself. Will it right itself, as dramatically as that graph might indicate? I don't believe that will be the case. Even a stability or a small correction is something that we can manage within our business, and we are actually seeing more capacity come out. I went through a period where we were seeing the milk pool drop and capacity go in. That was what used to worry me more than the circumstance we're in now. I look at my competitors, their exposure, it is different for each competitor, and I see where I think that lands them in terms of. They have to reflect two things. Ultimately, you can't keep paying a price above what you can get a return from a market. I think we're well-positioned to make sure we balance that and I think probably better positioned than most because of the way in which we've evolved the business over time. Mm-hmm. Do you think some of you... Sorry. Sorry, David. It's a really good question. I think, you know, the way we sort of think about the milk pool is 7.5 billion liters, 5 billion liters roughly goes into domestic and 2.5 billion liters goes into the excess, 2.5 billion liters goes into commodities. It's understanding where that sits in relation to particular regions and capacity. It's understanding the farmers that are producing seasonal milk versus flat milk, their cost structures and dealing with them. It's also, as Barry said, aligning yourself with sort of that, one, plenty of options within the commodity market, 'cause even at the moment, within that 33% reduction, there's an AUD 0.30 per liter shift on returns within different commodity streams. Some commodity streams continue to do pretty well. Yeah, have you got exposure to one or two commodity streams, or have you got exposure to several commodity streams? I think we're pretty fortunate through the foresight of previous management, we've got exposure to several commodity streams. Some are very high-end and stable like lactoferrin. We've got exposure to different cheeses, as well as sort of basic commodities like skim and butter. I think you're absolutely right. It's something to keep an eye on, but I think we're still in a strong position to manage that. Yeah. Much- Sorry. Sorry. We just keep building on the answer because I think it is a question that is very appropriate. The reality is, you could see a reversal of what you're seeing this year in terms of what we're reporting to you. A stable milk price with us pushing all those price increases through in the domestic market will see us, you know, feel much more comfortable next year than this year, given that we were chasing a very fast-rising farmgate milk price. There's no suggestion that there's going to be another very fast-rising farmgate milk price, but the question really is, does it stay stable or ease a little? That would say that we would say, on balance, that works in our business, if you like. Can you give us just Barry Irvin, and Pete Findlay, that was great answers. Can you give us a little bit of confidence because you're in a better position to know than us. I mean, we can do our due diligence and whatnot. Can you say a few comments as to what gives you the confidence that you are in a significantly better position than your competitors? I suppose it's your mix in that commodity market. As you say, you've got in lactoferrin exposure and higher quality products. Is that what you're talking about in that regard? You're in a much better position than your competitors at the moment to be really bleeding? Can you give us a bit of, you know, cut a bit more in-depth on, you know, why you have such confidence that you are in such a great position relative to your competitors? Yeah. I'll let Pete build on it, but the funny thing is, I would say in the as long as we are in the capacity to compete in the commodity markets with our competitors, we will see our advantage come from the Australian, our brands in the Australian domestic market. It's not that I would sit there saying, "Oh, it's, we've got the perfect commodity mix as compared to our competitors." We've got flexibility in our commodity mix. We will see some things that work for us and some things that work against us, but we've got capacity to flex that, as Pete said. In that sort of market where you're seeing, I guess, no signals that, you know, for example, farmgate milk price will improve, what we would say, we can compete well in that space while taking advantage of the diversity of the business in the other space, in the domestic market. I've not really anything more to add than that. Yeah, it's, we've got good flex, and we flexed this year quite substantially. We flexed out of cream cheese into cheese, mozzarella and parmesan. You know, we're looking at some work this morning we will flex again next year, as, you know, as we've seen the commodity market take place. If I was to put it in the most basic of terms from my perspective, we need to be able to compete on commodities... Yep. Nobody should be as sort of, for the want of a better way of putting it, arrogant enough to say, "I know all about global commodities, and I know exactly which one to go to." We should be able to compete on commodities and win on brands. I think, you know, in the second half, David, you'll for sure see the branded business moving ahead as that pricing comes through. Sequentially, the bulk business will be lower in the second half in profitability than the first. Yeah. Yeah. Yeah. Well, thank you for your answers. Just to finish, Barry, have you ever seen conditions as tough as this, where costs have risen so fast ahead of, you know, your ability to pass prices on? Have you ever seen it in your career? I mean. No. Tough as. No, that's true. It's. I've seen plenty of things. I've never seen it go at 30% in terms of just. It wasn't. I think I've said this publicly, so I don't mind repeating it. I mean, I was watching very carefully and going, our farm milk prices will move about 20%, and we were sort of set for that. We weren't set for the 30% movement and which is as fast a movement as I've ever seen. It occurred over, you know, a six-week-two -month period, you know. It occurred into this financial year. It wasn't even like we had a gap between the end of last financial year and any space to get ready. It occurred over the June/July period, which I have never experienced. It keeps me on jar. Given the circumstances, you guys have done damn well when you throw all that into the mix. Yeah. Thank you. Thank you so much. Thank you. Thank you. Your next question comes from Mark Topy with Select Equities. Please go ahead. Good morning, gents, or afternoon. I know you don't comment on press speculation. There was an article talking about divestments of brands or Bega's thinking about that. I wonder if you can knock that one on the head, or do you have any comment on that? I'm looking at Pete, Mark, how about I'll help him a little bit. It was an unsourced article. It was kinda- The only thing to say, You might have noted in that article, there was no commentary from the company. It was an unsourced article. Yeah. It was- Sure. Fair enough. Yeah. Yeah, to move on. There's been no conversation at my house. Yeah. At all, Mark. Okay. Just to talk then on supply. I'm just wondering in terms of the global commodity price, can you talk through the supply situation? I'm just wondering about New Zealand, if with their sort of pretty harsh conditions that they're experiencing at the moment, if the milk supply came off a lot in New Zealand. Do you think there's scope that supply might be impacted and perhaps, you know, in terms of how you're seeing that might feed into the global pricing? Mark, I'll make a handful of comments and some of them are up, which are a repeat of what's on the slide. What have we seen in terms of, you know, that old sort of farmer's joke, that nothing picks his high prices like high prices. We have started to see a response to those high prices. What we saw out of Europe was probably a little unexpected, in that we saw supply growth in Europe, largely benefiting from a very mild winter, which I think was pretty well documented around the world. We saw, which is fairly normal, that America's one of the, or the U.S., is one of the first quick responders to high pricing, and we saw a response out of the U.S. market. We saw supply growth in the northern hemisphere through the last year. I would say probably a little bit unexpected in terms of how much it grew because there are a number of headwinds in the northern hemisphere, particularly in Europe for milk supply. We've seen Australasia continue to decrease, although New Zealand, I think in recent weeks to answer your specific question, has actually lifted a little supply, a little bit of supply in terms of year-on-year comparison in terms of the particular month. We would sort of say overall, those supply increases, which you wouldn't necessarily say were overly dramatic, but they were also coupled with the extent of lockdown in China that saw demand suffer a little bit and also some softening of demand in Japan and some price points in Asia that saw. Yes. Saw dairy come off because it just became not affordable. I would not feel overly gloomy about the supply-demand circumstance from a global perspective. I think it will probably move to a reasonable rebalance, you know, over the coming 12 months. That's, you know, that's what we sort of see. Some of that quick drop-off, I think, is driven by a bit of unexpected supply, and some soft demand. The demand will return and supply will probably stutter even a little. You did mention that domestic supply was down 7% to December. You're seeing some improvement, I suppose it's been a bit milder. I'm just wondering, can you give us an idea how you see the milk supply numbers? Like, are we thinking AUD 1.3 billion for the full year? Are you perhaps in a position to comment on where your milk supply is at? We've been down a little less than the total industry. You know, if there was a bright spot, which, you know, obviously we would rather see supply going up, but we haven't seen our supply diminish as much as the overall industry. You know, the industry view, if you like, is that that sort of reduction in supply will slow. There's still some, I guess, trends that cause us to hope for... Well, not hope. That's not the right way of putting it. That would say that we'll make sure we design our business where we're expecting this, that will be still some more contraction of supply, and that contraction of supply is around some of the issues we've talked about. There's some short-term issues around. There is no question that in the last six months, and it's still with us a little bit, the impact in some regions of the significant flooding. The impact of labor issues has hurt the industry. The way I would describe the industry, Mark, is that it's not like all our farmers are decreasing supply. We've got a number of farmers that are making significant investments and growing. It's the retire- they're just not quite growing at a pace that is dealing with the retirement. Some of the things that are driving retirement, one of them is farmers that can't get labor, and are suddenly saying, "Look, I was thinking I might retire in five years' time or whatever. I can actually, you know, I can run beef cattle, and I don't need labor for that, and my farm's worth a lot of money." Those factors, those ones are a little more medium-term, but certainly the return of labor back into the Australian market, will help those that are wanting to grow because of that, you know, when I maneuver around the country, so they talk to me a lot about the fact that, "I'm happy to grow, but I just can't get the people. Okay, just to, I suppose, if we hark back to the Lion acquisition, I'm just wondering. It might be difficult to say, I know it's all merged, but in terms of Lion now reaching its sort of business case and in terms of the business, whether you can give us some insight as to how that's going? Also, I know you produced a great chart for us there, but I notice we don't get the Bega Cheese numbers on that. It would be helpful to have the Bega Cheese. It seems to me that you might have picked up some market share in the cheese space 'cause cheese consumption seems to have gone backwards a little bit and perhaps Bega's picked up market share there. Just wondering if you can talk about Lion and how that business now within business is performing? In terms of the business case, Mark, if we could drop out COVID and drop out, you know. Yeah. you know, surge in pricing that we had to push through the market, we would probably say that all the other activity that we're undertaking is as we would have expected, and we continue to sort of stick to the strategy. I wouldn't the way I would put it is that I wouldn't characterize the last two years as normal or built into the business case that we built for Lion. It doesn't mean that we're not confident that that business case stands up really well if you took out those two exceptions. Okay. On the cheese market share, can you give us some insight whether perhaps you picked up share there or how that segment of the market is going? Which segment market? You know, we obviously process cheese as a Bega brand. Yeah, just I suppose in the block cheese market, the retail segment- Oh, yeah. obviously sort of want to, but yeah. Yeah. The Bega brands continues to grow and continues to be a really strong brand and the number one brand in the cheese piece. What we have seen is a bit of a drift or a bit of an arbitrage be set up between the Australian domestic cheese price and global cheese prices. Cheese, cheddar, mozzarella are experiencing, Australian cheddar and mozzarella are a fair bit above global pricing because retailers are still continuing to wanna sell Australian-made cheese predominantly or some retailers are. That, but yeah, cheese consumption, despite a significant increase in cost remains very strong. That's flowed through to our contract manufacturing business. Right. Okay. All right. Well, thanks for your time there. Thank you. Your next question comes from Jonathan Snape with Bell Potter. Please go ahead. Hey, guys. Can you hear me okay? Again, Jonathan. Go, Jonathan. Look, just a quick question. I hate circling back on this farmgate stuff, but it's obviously, you know, the big question for 2024 and kinda how it all lands. I think you kind of indicated what fresh milk is of a component of the market being kind of relatively small. If I'm looking across the Pacific at New Zealand at the moment, you know, their futures price is probably around NZD 8.50 a kilo kiwi. If you were to, you know, stick all their SMP and SWP and WMP pricing in, it's probably closer to NZD 7.70 would be where the spot is. I think when you put that in an Aussie sense, you're talking AUD 7.00, AUD 7.70 a kilo. I guess my question is: How does an Australian processor compete against a New Zealand processor, where the cost of the milk solid looks like it's gonna be, call it, 15%-20% lower than where we are today if the farm gate stays static? I guess the follow-on to that would be: Why would a rational domestic processor produce cheese in the first place or anything like that? Why wouldn't you just buy it from New Zealand at a materially lower cost? You know, per kilo of milk solid and flip it into the Australian market. I would have thought that if you get deflation on the cost of a milk solid across the Pacific, it will eventually flow into our retail shelf price. Mm-hmm. It can't, you know, it can't kinda stay static. Yeah. I think- Am I reading to that all wrong or? That, they're pretty fair calculations, Jonathan. I think the key word you had there was eventually. I would just make a couple of comments. One is that those calculations are absolutely right, and they're the calculations that I think you and I always do in a falling commodity market. We start thinking about, you know, what does this, what does import look like compared to domestically produced? Of course, those calculations look terrible in a rising commodity market, where suddenly you're trying to service a domestic retail market where price rises might go through more slowly. I think your eventual comment is right, and I would sort of reinforce what I said earlier. You and I have been around long enough where we have to the... When I say we, I mean the industry. We've seen the pain in the past where the industry does not reflect the long-term stable returns for the various products they get, which means you don't necessarily go to the bottom of the dip, and the top of the rise is something that you better make sure you're managing very carefully. The truth is you do need to deliver stable supply. I think the retailers in Australia would say, "What I want is stability in my pricing, and I would like to see that for as long a time as possible. I can't take either a really fast rise or a really fast fall." I think for us, we do absolutely do that calculation all of the time. We make those decisions, which goes back to what mix you make and what product you make and where you send it. It is why, no surprise, the exposure that I've always wanted for this business in fresh dairy was so important and will be so important going forward as we moderate that risk with the fresh dairy presence that we have in Australia. Those calculations. That's why when I'm asked now what do I think farm gate milk price will be, even in a very quick declining market, I say it's still a little bit too early to tell because we will make those calculations on what we're seeing in the market as it unfolds through to December and through to next year. There will be... There's nothing wrong with the calculations that you've presented there. It's just about. You know, what have I spent my life doing? Trying to mitigate the extremes of those. This is one of those years where it was so fast that we couldn't mitigate it the way we would like, but for most years, we would say That's part of what we do. Okay. I should set up a cut and wrap operation and trade cheddar by the sounds of it. You will. Well, yes. I'll. That's a good observation, Jonathan. That's a good observation. Yeah. All right. Great. Thank you. Thanks, mate. Thank you. Your next question comes from Josh Kannourakis with Barrenjoey. Please go ahead. Hi, guys. Thanks for taking my question. Just further to Jon's question before around that. Just to sort of break it down, and I know we're laboring on it a lot, but if we sort of look at, you know, stable, so assume milk prices do remain stable, does the price rises and OpEx, you know, as you sit here today, does that offset the potential commodity drag given the branded sort of off late? Like, what's the sort of end result and sensitivity around that? Sorry, Josh. Could you go again for me? I'm sorry about that. Yeah, sure. Sure. No, that's okay. Just assuming, I guess just trying to think of a few sensitivities into 2024, Barry. If we do assume, just today that commodity prices are where they are and they hold the current level, you know, milk prices don't change, which, you know. Mm-hmm everyone hopes is the case. Mm-hmm. You know, does next year look, I guess, worse, you know, than this year? Do the price rises and OpEx reductions still offset that, you know, in terms of that move? Yeah. No. I think, Our exposure was far more to getting those price rises from the domestic market than it was commodity. I think, you know, it is a scenario we'll watch and a mix that we need to work out. The truth is, we will still be better off, even if we've got a reducing commodity market and a stable farmgate milk price. We have got those substantial increases through the Pete talked about that improve our EBITDA. It's rare that you get it perfect on both sides of the business but, you know, ideally you would like to see a combination of both, where you see, you know, the farm gate milk price reflect more closely that commodity decline or not the entirety of it, but some of it. The fact is that the biggest pain point for our business this year and indeed the fact that they're through and reflect those higher farm gate prices, we'll see our performance improve. Yep. Even, even in light of maybe not a full reflection of the commodity decline. Yeah. No. That's, that's great. Then, and then just with regard to, I guess, the, you know, operating leverage that can come through as the farm gate prices do drop, you know, whether it be, you know, next year, the year after, at some point in time. Within the white, you know, the drinking milk sort of segment, like, what's the incentive by anyone to sort of, I guess, reduce the, you know, retail pricing across the board or whether it be private label pricing? I guess how much, you know, what do you think the operating leverage can, you know, look like in a, obviously in a falling environment? Look, I think Josh, we would say, I think the industry would say there would be industry leaders that would say part of the decline in the Australian dairy industry where it hasn't got, where we've seen farmers leaving the industry was because we didn't have a fresh, white milk price that reflected what was required to keep people growing and in the industry. I think that is reasonably well accepted. Therefore, these price changes are, you could argue they're lagged price changes. They needed to happen, and I think we got to a point, interestingly, driven by commodities, but we got to the point where we finally where a pent-up need for a, for a better return to farmers producing everyday fresh product had to happen. I don't think there's any great wish. You know, again, well demonstrated by the fact that Coles will come out with, you know, a longer term stable price in that area. I don't think there's a great wish to see that price go back to levels where it would see us actually, you know, not or would see farmers saying, "This is not an industry that I wanna be involved in because it's too tough at retail level." I think the reverse is actually now the. Yeah. Now the case. Yeah. as I say- Yeah, absolutely. It's been demonstrated... Exactly. by Coles. Yeah, absolutely. Then just final one. Thanks, Barry. Final one just around the debt positioning. Can you just give us maybe a bit more context of, you know, based on the guidance, how you see that ending up towards the end of the year, and also the CapEx profile, if that's okay? Apologies if I missed it earlier. No, that's all right. I might go to Pete Findlay to. Perfect. Thanks. Yeah. Debt profile, I mean, as I said, I think the key in the second half is you're gonna see that leverage ratio decline as we sort of sell through some of the inventories. As we enter FY 2024, you do get that inventory build as you approach the seasonal, you know, milk peak. There'll be two things that are different. One is that the pricing fully rolls through and annualizes. That's the AUD 260 million that Pete talked about in terms of pricing. Then if you get some sort of stability, as Barry alluded to, in farmgate milk, we can fully take advantage of that and optimize our stream returns. What are we making? Is it cream cheeses? Is it, you know, butters? Is it branded goods? That's how we'll leverage the milk we do take in in the first half of FY 2024. I do expect, at the end of this year, we'll see, you know, a meaningful decline in leverage ratio. The final thing I'd say is, as we look at the footprint, Canberra being a small example, but other ones coming, that's the other way, of course, to make a meaningful intervention over the next two-three years in our debt. Got it. Okay. Just in terms of like this year and last year, like should it sort of, you know, drop down to the sort of, you know, mid AUD 200 million, AUD 250 million, AUD 260 million by the end of the year or? Yeah. We won't call exact figures. I mean, I think the other thing that I'll say is, you know, on the CapEx side. You know, if you look at the second half, we'll decline our investment a little in areas like marketing, because we went above the odds in the first half. You will see, you know, even stronger levels of CapEx investment in the second half of the year. I would expect to see that. Leverage ratios, you know, I mean, I won't call an exact range on that, but better at year-end versus now. Certainly, Josh, you know, we've talked about FY 2024. We think the earnings profile of the business will rebound and that will also, you know, have a significant impact on the leverage ratio. Great. Thanks very much, guys, for taking my questions. Appreciate it. No worries. Thank you, Josh. Thanks, Josh. Thank you. Your next question comes from Kim Berry with Food & Drink Business. Please go ahead. Hi, guys. I've just got a question for you regarding Vitasoy. Can you sort of provide a bit more detail about what the company is going to do in terms of the loss of its alternative milk market share with the sale or the, you know, taken away-ness of Vitasoy? Are you gonna be looking at other alternative milks, or will it be looking into other areas like, plant-based products like, cheeses and yogurts or that sort of thing? We already actually do a plant-based cheese. I think. I think what we would say is that we wanna have a profile that is similar to the profile that we had as we were distributing that Vitasoy product. I think we will work. We obviously can't say too much, but we would expect to have an exposure in plant-based milk, and we're, you know, very actively pursuing that and really pleased with the progress we're making there. We would say that interestingly, we are probably, we've probably got a broader range of activities that we can now think about in plant-based milk, which I think is. Okay. Part of your question. Given that we are now have a greater freedom to operate, for the want of a better way of putting it. Therefore, we will see that as an important component of what we do, and we'll unfold plans around that. They're unfolding fairly rapidly. Okay. The Vitasoy agreement was quite restrictive. Right. What we could do in plant-based. We see plant-based as a, you know, a growing trend. We wanna be highly exposed to it. I think you'll find we've got some good news about plant-based cheese coming up. I can't really talk about it at the moment. We've got some exciting stuff there. You know, we now have the ability to look at yogurt, flavored milks, all sorts of things which we couldn't do previously. We'll look at all of those, you know, extension in other product ranges. We'll also look to partner with some other plant-based brands. All right. Okay. Is there any sort of timeframe for you on sort of very quickly and soon that you can provide? Yeah. I think, look, to be transparent, we obviously, while we're a part of that JV, we could not look at external opportunities. The JV's obviously only ended literally officially over a matter of days and weeks. That's why we're saying. Yeah. Yeah. Yeah. We are very pleased with the inquiries and responses that we've had around plant-based, but we've got nothing to announce or talk about just yet. Okay. To be fair to us, it's about two weeks. Yeah. We were unable to engage with- Chop, chop. Yeah. Unable to engage with anyone within that agreement. Yeah. We obviously, we're very keen to abide by that agreement. It, we're extremely keen to get exposure, and we've got a team working on that as we speak. I think the other thing I'd point out is that our quite significant cold chain network, you know, 40,000 deliveries a week, you know, over 20,000 customers, you know, that's a, that's a great tool to have as we consider plant-based options. Yeah. Yes, absolutely. It's such a dynamic, fast-moving space as well, so. True. We shall all watch with bated breath. Thank you. Thanks, guys. Thank you. Thank you. There are no further questions at this time. I'll now hand back to Mr. Irvin for closing remarks. Thank you, everyone, and particularly thank those that stayed on for the questions. It ended up being quite a long conference call, we're really pleased to be able to provide that detail. I think as I said, in the body of the presentation, we still remain very confident regarding the strategy of the business and the opportunities in front of us. Thank you for taking the call and your interest, and I look forward to chatting again in the future. Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.