Good morning everyone, and welcome to Synlait's half year results conference call. I'm Hannah Lynch, Synlait's Corporate Affairs Manager, and today on our call we are joined by our Chair, John Penno, our new CEO, Grant Watson, and our CFO, Rob Stowell. There will be an opportunity to ask questions at the end of the presentation. We ask that you keep your questions to two per person. If you have any follow-up questions, please feel free to reach out to me directly. I'll now hand over to John for opening remarks. All right. Thank you everyone for joining the call today. Look, it's my pleasure to be joining this call as the Chairman of the company. It's an equal pleasure to be introducing Grant, which I'll get to in a moment. Look, firstly, I wanna acknowledge again the very challenging environment that we have come through in the last couple of years. As we've talked about, part of it coming about because of the big changes that have happened through a COVID environment in terms of our demand profile, but also that leading to us discovering changes that we needed to make inside the business and have worked hard on. Look, I'm pleased to be presenting an interim result, which I think demonstrates that we're well on our way to doing what we said we would, and that is we're turning the company to robust profitability and making some pretty important improvements to our balance sheet strength. Now look, in a few moments, the team will talk to the things that we've been working our way through and the results. Of course, very important has been finding the right leader for the business. It's my absolute pleasure to introduce Grant to you. At our last results call, we announced that we were appointing Grant Watson. He started with the business on the 24th of January, and he's made a great start. We've brought in Grant because he's someone who we believe takes a very data and sort of a thorough approach to evaluating and developing strategy with us in the team. Also he's someone who has a track record and relentless focus on execution. We're already seeing that in the business after his short time with us, and I'm sure you're going to see it in the next over the course of this call, but also in the next few days, as many of you have the opportunity to have some one-on-one time with Grant and with Rob. Look, we're pleased with this result. I'll hand to Grant at this point, and we'll be on the call available for questions later. I have no question that Grant and Rob will be able to handle all of your questions about the business. Thanks for joining, and let me hand over to Grant. Great. Thank you, John. It's great to be a part of the business and to be on this call today. Shortly, I'll hand over to Rob Stowell, our CFO, who will take you through the numbers. I'll then touch on my first impressions of Synlait after two and a half months. I'll take you through, at a very high level, business performance by business unit, talk through our priorities for the balance of the year, and then just speak to guidance for FY 2022. I'll hand over to Rob. Thank you, Grant. Good morning to all those online. Look, if you're in the room with us today, you'd see us smiling. It's fantastic to see our 6 monthly results showing a strong bounce back. However, while this is a positive milestone, we remain grounded as there's still lots of unfinished work and opportunities to chase down over the next 18 months and beyond. If I can get everyone to turn to page 3, key financial metrics. This is a comparison to the last 6 months with the first 6 months of FY 2021. Revenue is up 19% to NZD 790.6 million. That's a new record for us at Synlait. NPAT is up 338% to NZD 27.9 million. Last year, we made NZD 6.4 million for H1. That's a really solid bounce back for us. Now, we were assisted by a one-off sale of Richard Pearse Drive in Auckland, which contributed NZD 13.4 million if you include the tax adjustment. Normalized, we get to NZD 14.5 million NPAT. Obviously, we're still happy with that increase, which is 128%. EBITDA is up 45% to NZD 68.4 million. Operating cash is up 269% to NZD 117.3 million. A great result and one that we were looking for 6 months ago. CapEx tracked down 37% to NZD 46 million as we continue to constrain our capital expenditure to critical or high returning projects. Net debt is down 19% to NZD 391.8 million. Again, we're happy with the progress here. That's an important metric for us. The base milk price is forecasted at NZD 9.60, which will be another record for us this year. Previous highest base milk price was in 2014 at NZD 8.27. While this was confirmed in September, clearly it's gonna be another stellar year for milk suppliers. If we can turn to page 4. We've got a slide on our business review actions. We had several actions that came out of our business review last year. What we've done is plotted them on a matrix showing a traffic light system on how much they financially impacted the H1 results. There's a range of progress between green, amber, and red. I'm not gonna go through the slide on details, but I just wanna give you a few takeaways. You can see there's several key work streams underway in the business. We've made really solid progress on our cost structuring, working capital management, and ingredient business turnaround. We've got several work streams that have a lot of potential and which will give a lot more value to us over the next 18 months. That's Nutritionals, capital projects management, consumer foods, beverages and cream, and operational performance. We've had challenges. If you look through here within our capital projects, we've had an ERP project which has gone over budget and was expected to go live in December, and it's now planned for August 2022. Under operations, our key metrics that we wanted to increase has been slow to improve due to the reorganization we completed, the advent of COVID continuing to impact us and supply chain challenges, you know, being our key focus. We also failed to launch the UHT cream product within beverages and cream. However, we are confident we will work through these challenges over the next six months and have a clearer view on the size of the opportunities and how fast we can progress them. If we turn to page 5, I'll talk to revenues and sales volumes. Look, overall revenue is up 19% or NZD 126 million, which is a great result. The slide gives visibility by business unit. The increase is mainly driven by ingredients. We shipped and invoiced another 15,000 metric tons of ingredients this year at slightly higher commodity prices. This was down to good planning and great work by our sales and operations team. It was also a record volume for us in a challenging supply chain environment. If we look to Nutritionals, our volume and revenue, as expected, we're down a little bit, so down NZD 49 million, roughly 5,900 metric tons in volume. As we see a2 showing modest signs of recovery from H2 FY 2021. As a reminder, our multinational customer will come online with sales volumes mid-FY 2023. Both the beverages and cream and consumer foods business units were relatively flat, half on half. The key factor to note here is that we have delays in our UHT cream launch due to formulation refinements. While disappointing, it's expected later this year. If you turn to page 6, I'll just talk a little bit about production and inventory volumes. Look, this is a mixed result. Overall production reduced by 9% or roughly 10,400 metric tons. This was mainly seen in ingredients production being down and was driven by our milk supply being adversely affected by weather, both in the North Island and South Island. We also sold milk to commission our Pōkeno site for our new multinational customer. This was planned, but it is a difference compared to last year. We sold cream for good returns as we maximize skim milk powder to take advantage of large price differentials which have opened up between the skim milk powder basket and the whole milk powder baskets. If we look at Nutritionals, not a lot of change there. We continue to rebalance our infant base powder inventories and look after our working capital positions as planned. Production was slightly down. Not a lot of change on beverages and cream volumes. They're relatively flat. The decrease in production you'll see in consumer foods or our Dairyworks unit is due to the temporary closure of Talbot Forest Cheese to mitigate losses while we solve operational issues on that site. Look, the good news here is we've made fantastic progress with our finished goods inventory reductions, which reduced 29% due to strong sell down of ingredients products, reduction in our infant base powder production, and strong reductions of our cheese inventories. If you turn to page 7. This slide unpacks by business unit where the gross margin was made in the half. In total we made NZD 68.1 million gross margin. It's up 16% or NZD 9.4 million. Ingredients were outproducing NZD 34.7 million versus NZD 19 million for the same period last year. This was down to more volume, better sales phasing and optimizing of our product mix, reduced cost structures through operations, and a good FX position. We're really happy to see that business unit turn around quite significantly in the half. Nutritionals is down, producing NZD 25.6 million versus NZD 31.7 million for the same period last year. This is still a solid return as our IFC sales for the a2 Milk Company recover. Consistent results within the lactoferrin business has also been pleasing with slightly less volume, but slightly better pricing. Again, this business unit improved due to the work that we've done on cost structures and savings through operations. Beverages and Cream, look, the H1 result there was a NZD 300,000 margin loss versus a NZD 1.7 million margin loss for the same period last year. While better than last year, we still have a lot of work to do in this business unit. The key driver for improvement was the reduced cost structure. I've noted the delays in our UHT cream launch. Consumer Foods is also down in H1, NZD 8.1 million versus NZD 10.1 million last year. This was down to the strong butter margins that we enjoyed last year due to recent oversupply in the New Zealand market. The teams have also been working through some higher cost of cheese inventories, and they only had a partial period of cost savings. While disappointing first half for Consumer Foods, we expect some of the profit drag that they've encountered in H1 won't be there in H2. If we turn to page 8 when we talk about operating cost performance. As mentioned earlier, we've made good progress on cost reductions across the whole group despite the trading environment. Firstly, our organizational reset has made savings of NZD 5.2 million compared to a full-year target of NZD 7 million. This has been both helpful from a simplifying the organization point of view and also reducing costs. Now, most of these savings sit above gross margin, so are not seen on the SG&A bridge offset. However, we have seen NZD 1.5 million of cost increases in SG&A overall due to extra contract labor that we brought in as we're reshaping the business in the first part of the half in a tighter labor market. Extra IT costs, mainly ERP-related, but also some cloud accounting costs have come in there as well. We've had some increases in distribution costs. Now, most of these increases have been offset by our project we ran for DS4 and rail. Look, costs continue to be a focus for us as the trading environment continues to be challenging and inflation comes into the frame. If we turn to page 8. It's my final slide on cash flows and net debt. We've made fantastic progress in this space. I'm really pleased about this. As we continue to stay well within our extended banking arrangements set up last July. The key points on this slide are operating cash flows are up NZD 187 million half on half due to selling record numbers of products in H1, making better margins on what we're selling, careful management of our working capital. We've continued to reduce our capital expenditure, so our two major projects that we have in flight at the moment are our ERP or SAP project and the Synlait Pōkeno project set up for the multinational customer. We executed the sale and leaseback of RPD in October, which reduced debt by NZD 30.1 million. Net debt is down NZD 88 million since last July. Obviously, this has also helped reduce significantly our interest costs. Don't expect us to continue to reduce debt the same rate in H2. While it will continue to be a key focus, we see a more challenging trading environment in H2. You'll also see there has been a continuing of our target total debt-to-EBITDA ratio of between 3.5x and 4x for H1 FY 2022, and we expect further improvement back to normal metrics in FY 2023. Look, that's a wrap on the financials. I'll hand back to Grant to take us through the business performance. Thank you, Rob. Two and a half months in for me, and still a great deal to learn about this business. My initial impressions are that Synlait has fantastic DNA. It's got a culture that's disruptive, it's innovative, it's entrepreneurial, and it's extremely well-positioned in terms of its or our sustainability credentials. The second observation for me is that we are building very, very strong momentum within the business off the back of the recovery plan. To be clear, we are 6 months in to a 2-year recovery plan. What we do need to do is we need to increase our level of focus across the business. What I mean by that is that we need to do less but do it better. We also need to ensure that there's the right level of accountability across the business. We need to increase accountability, and that starts literally at the top from leadership team right throughout the business. The other area that we will focus on to drive greater performance is the need to improve systems, tools and processes so that we really can execute well. The last observation for me is that Synlait has a wonderful group of loyal farmer suppliers. We have really strong relationships with our key customers, and we have a very committed and loyal base of staff within the business. Those are some of my initial impressions after two and a half months. Just going through onto page 12 now, a brief overview of each of the business units. The Ingredients business has really increased their focus on delivering against their strategy with a high degree of discipline. Right throughout the value chain, we're looking for greater efficiencies, and we have very strong engagement with our key multinational customers. Moving on to page number 13, the Nutritionals business. A key focus there under our a2 Milk Company relationship is to ensure that we get re-registration for our license into China. We've submitted the initial information, and that's currently subject to technical review, so that's effectively the new recipe. We are expecting an audit by MPI in the next couple of months and we should get notification around re-registration towards the end of the year. A very important and critical project. In terms of nutritional base powders, we're currently working with several multinational and China domestic players in terms of future business growth in this space. From an innovation perspective, [audio distortion]. Before we move through to a more expanded trial, it's important that we take the learnings, review these against the business case and then proceed on the basis that there are very good returns to be had from that initiative. In terms of UHT cream, as Rob mentioned, we're not in market yet. It's really important that we get the formulation right. That is taking longer than expected. We think we're nearly there and certainly plans are to have product into the market in the short term. Moving on to page 15, our Consumer Foods business, Dairyworks. Two very successful launches in the first half. One has been around milk and cream into the food service channel in the South Island and in Wellington. The second has been the launch of a yogurt, Protein [FIT]. We now have a new distribution center up and running to support the Dairyworks business, which will deliver strong financial benefit. We're exploring market opportunities in Australia and China. Just to be clear, we already have a position in Australia, so it's looking to grow our position in Australia. Ongoing focus throughout the business on cost structure and working capital. Briefly touching on sustainability. Again, a very important part of who we are as Synlait. There's been great progress to transition our power generation on our South Island manufacturing site here in Dunsandel to a source that's more sustainable. We've seen really good improvements in terms of reducing our greenhouse emissions both on farm and in processing. We're working with a number of existing and potential customers around our Made With Better Milk branded product. There's a clear demand globally for more sustainable, sustainably produced dairy products, both at customer and at consumer levels. Moving on to page 17, again, for us to be very focused on what we need to deliver against in the second half. I mentioned the license re-registration for China, certainly a top priority for us. Rob mentioned the delivery of our ERP or SAP system, planned for the 1st of August. Again, ensuring that we are ready towards the end of this calendar year to produce volume for our new multinational customer at commercialized volumes. Clearly, there are still challenges with Omicron throughout the business. Looks as though we've experienced a peak for our North Island manufacturing facilities. We're not there yet in the South Island, so we need to manage our way through Omicron. It's really important that we look to rebuild and strengthen the culture of our teams within Synlait. It's been a very, very challenging period of time for a number of reasons. Driving a stronger culture is really important as a platform for all that we do. Lastly, we've commenced a review of our strategies across the 4 business units. Look again, the clear focus there being each strategy needs to be focused. We need to ensure that we know what our competitive advantages are in the market and that we're clear on what great execution looks like. Finally, if we just move on to page 18, in terms of guidance, we expect that net profit after tax will return to robust profitability for FY 2022. As Rob has mentioned, we don't expect the profitability will grow at the same rate in the second half as it has in the first half. We do have a number of challenges to contend with. Stating the obvious, Omicron, global supply chain, and there's also a lagged effect to our margins when we have a significant upshift in milk price and the delay in passing those costs on to our customers. Look, just reinforcing the position that was communicated late last year, it is very much our intention that by the end of FY 2023, the recovery plan will have Synlait return to similar levels of profitability as we saw leading into FY 2021. Look, on that note, we can now open the line up to any questions that you may have. Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speaker phone, please pick up the handset to ask your question. Your first question comes from Matt Montgomerie from Forsyth Barr. Please go ahead. Hey, guys. Just checking you can hear me. We can, Matt. Great. Thank you. Maybe firstly on the balance sheet, clearly debt's been quite volatile historically, but just interested in any comments you can provide for the direction of travel in the second half, and then I guess the key drivers of change. Secondly, you make reference to a return to normal metrics. Are you able to remind us of what you view as the optimal capital structure or gearing in the business? Look, thanks, Matt. I'll answer that. First of all, look to the balance sheet and our debt. We're making really good progress in the first half. I expect we'll continue to make progress here in the second half, but just not by the same rate. The reason I say that is the trading conditions in the second half, as we see milk prices rise and we've got risks around shipping, et cetera, will potentially impact us. We'll continue to reduce debt in the second half and obviously in FY 2023. With regards to the metrics, this is difficult to forecast just with the trading environment at the moment. Ideally, we would get to this year as a kind of a, you know, around 3.5 x total debt to EBITDA. That's what we're targeting. If we can do slightly better than that, great. The following year, I'd like to see us earn around 2.5 x, and then that'll track down for 2x and 1.5x. It's really just hard for me to predict how some of those supply chain issues and COVID impacts are gonna impact us over the next, you know, few months. That's great. Thank you. Maybe then secondly, on return on invested capital. At the last result, I recall you, I guess, retaining guidance of an expectation of around 20% over the medium term. Just interested in any comments you can make on that, if it's still current, and if so, what gives you the confidence to deliver on that target? Look, we are still confident that we're gonna get back to that sort of rate of return, however it's going to take time. We've got a number of really good opportunities in front of us, especially across you know areas like Nutritionals, and we just need to keep working at those opportunities and make sure that as we spend any further capital, it's on high returning projects. It might take, you know, it might take a couple of years. Awesome. Thank you. That's all from me. Thank you. Your next question comes from Nick Mar from Macquarie. Please go ahead. Morning, guys. Just, sort of expanding on the second half commentary, can you just provide some context around the comment that it won't grow at the same rate in the second half? As, you know, which line item are you talking about, and is it percentage-wise, dollar-wise, and is it sequential or on PCP? It's just a little bit vague. Yeah, I appreciate that, Nick. Look, the best way I can explain this is if you take the, you know, the 27.9%, we're not gonna grow at the same rate as that in the second half. So, if you are thinking about the business on a normalized basis, i.e., taking out the effect of the Richard Pearse Drive sale, then we will be growing at or above that rate that we had in the first half. Does that make sense? Yeah. That was up sort of 130%. But you're obviously this, the second half 2021 was a loss at the NPAT line. How do you sort of line that commentary up? I'm comparing. Or you've got- Yeah, sequentially. Probably just to give you some more insight, a lot of our nutritional and, you know, lactoferrin volumes and stuff are weighted towards the H2 in this financial year. You will see some good gross margin coming through in the second half. If you look at the top line number, NZD 27.9 million, you know, we won't be doubling that or anything like that. Okay. Then sort of just, I guess trying to put it in context. You know, you still expect net debt reduction over the second half, you know, all things going well. If you were in the 3.5x EBITDA range, you know, that would suggest that the second half EBITDA is flat to down on the first half. I'm just trying to marry up those comments. Yeah. Look, there's a number of scenarios that could play out, and I guess when I comment on net debt, I'm actually taking into account some of the headwinds or challenges that we may encounter in the second half. You know, the big one for us, Nick, is getting our shipping volumes out, as you know, with the Ukraine crisis and et cetera, things have actually got more difficult in the second half. We're just being cautious here on debt. If we have a clean run and everything goes, we don't have any of those challenges impact us, we will be below 3.5 x. No, that makes sense. Just on the ingredients margins, just trying to understand what the driver was there. Was any of it sort of I guess, uncontracted excess inventory, you know, that you benefited from a run up in commodity prices over the period? Is this sort of true margin gains from, you know, genuine improvements across the business? Yeah. Okay. It's relatively straightforward. We, as we noted last, at our year-end last year, we had that product that we had on hand. I indicated it was about 13,000 metric tons. Okay? We've got that extra volume coming through in the first half this year. We've done a really good job of getting that all invoiced and out on ships. There's some really good work that's been done within our sales team and the way they've managed to get the product mix right. We've maximized skim milk powder. There's been some really big product differentials open up there compared to the whole milk powder basket. Our sales phase has been good and we've also had a strong FX position and a lower cost structure in the first half as well. All those things are combining to get, you know, really bumping up our margin in H1. Great. Thanks, guys. We'll chat later on. Thanks. Thank you. Your next question comes from Adrian Allbon from Jarden. Please go ahead. Oh, good morning, team. Can you hear me okay? Yeah. Good morning. Just wondering if you could ask if there's any more sort of detail or context to sort of provide around, like, the SAMR renewal delay. I think last time when we heard from you at the last result, I think you were expecting. Well, you're flagging an outcome kind of by August. Is there anything sort of specific to the delay or is it more a general delay across the international brands? Thanks, Adrian. Look, we are following the process. It is taking a little longer than expected. To be really clear, we've submitted our information around the new recipe. We're waiting to hear back in terms of the technical review that's being completed. We're not expecting any issues there. Once that technical review has been completed, then an audit will be planned, and it will be completed by MPI as an agent for SAMR. We would expect that audit to take place sometime in the middle of this calendar year. It's very hard to say exactly when at this point, but June, July, August, somewhere through there. There'll be a period of time that we need to wait until we get final confirmation from SAMR. Hence, the indication from our perspective is, we should get that towards the end of the year. Okay. That's helpful. And maybe this is probably a question more for Rob. If you come back to slide or to page 4, and in the center there, the capital projects management. Are you sort of flagging that the ERP stuff is NZD 20 million over budget and there's more CapEx than you previously flagged on the Pōkeno customer? 'Cause I think later in the pack, you don't sort of signal there's more CapEx for the Pōkeno customer. Yep. No. Thanks, Adrian. I can clarify that. Look, so capital management's been, it's mixed there. It's been relatively good, but we've had a couple of things which We've gone a little bit over. Synlait P ōkeno customer, yes, we had an increase there, but to be honest, it was relatively small. It was NZD 6 million-NZD 7 million, and it was just to add a little bit more in for that project, more capability. The ERP project is the bigger increase, and that's NZD 20 million above what we originally budgeted and we forecasted last year. That's relatively significant. We were trying to hold the project to that, and we're going live with it in 4 months' time. Hopefully we do that. Is that clear enough? Yeah. Like, well, but yes, I guess like, so in terms of like if we're thinking about like you've done NZD 46 million of CapEx in the first half, I mean, should we be thinking about NZD 60 million in the second half? And then probably another NZD 20 million flowing on those two projects in the first half 2023? Yeah. Look, we've given guidance on this before. We expected to spend around NZD 90 million this year. We're gonna be probably just over NZD 100 million. Obviously, some projects are a little bit delayed and some are a little bit over budget. It's in that sort of region of numbers. NZD 105 million versus NZD 90 million target. Flowing into first half 2023 would be, should we put in another NZD 20 million? Like, I guess there's a bit of flow on from ERP, and there's a bit more on Pōkeno potentially. No. I'm probably accounting NZD 15 million of that in FY 2022 and NZD 5 million in FY 2023. We'll have another look at FY 2023. I mean, obviously our capital expenditure will be still tracking down in FY 2023 from, you know, roughly NZD 100 million this year. Okay. Are you able just to give, like, so just as we track the second half for the new multinational customer, as you sort of get into the commissioning phase, what are the kind of key milestones you are trying to hit there? Yeah. The first milestone is really making sure that the products that we're making are, you know, in spec and going through shelf life testing. Once we've done that, we'll be commercializing end of this calendar year and exporting probably in around January, you know, 2023. Okay. Are those shelf life studies at the moment, have you completed any of that stuff or is that still to be done? No, they are underway at the moment. All that sort of stuff is going to plan. Okay. Oh, that's good. Thank you, guys. Thank you. Your next question comes from Richard Barwick from CLSA. Please go ahead. Thanks, guys. I was gonna ask as a bit of a follow on from that last one. You, when you referenced opportunities in front of you, I assume you're talking about potential new customers. If there's any color you can give there in terms of how far away would you expect, you know, anything material in terms of a new customer coming on board? Yeah, Richard. We're working with customers across a number of the divisions. We're working with several multinationals and China domestic customers on infant nutrition base powders. We're obviously working with a key customer against foodservice cream opportunity, and it's targeting the China market. From a Dairyworks perspective, we're also looking to build our customer base out in Australia and look for new opportunities up into China. Any sense on timing for where we might see anything that moves the dial? No material updates at this point. Okay. Thank you. Thank you. Your next question comes from Stephen Ridgewell from Craigs Investment Partners. Please go ahead. Hey, good morning, guys. I just wanted to follow up on the response to Adrian's question on the SAMR registration delay. I'm just curious, was that. Looks to be a 3-4 month delay. I'm just curious, was that mainly due to Synlait submitting the dossier behind schedule, which I think had been earmarked for January, February? Or is it a delay in SAMR's review in response to the dossier? Certainly, the delays haven't been caused by Synlait. The process is just taking longer. As you'd appreciate, this is a new registration process for all parties involved. Look, it is taking longer. We expect that if notification of re-registration takes longer, there will be an extension to our current registration with our current product into the market. From a timing perspective, that doesn't create any material risk. Right. I mean, has SAMR indicated that, you know, in terms of the time frame you've indicated today for an April response to that dossier, has SAMR indicated April is when they plan to respond, or is that just an estimate from management? That is the indication we've received from SAMR. Okay, great. Thank you for that. Okay, and then just maybe moving on a little bit, just with the a2 volumes, which is, as you noted, there's some rebalancing of inventories and volumes were off about 30%. I guess I'm just curious, do you think that's all inventory rebalancing, or was there a little bit of substitution potentially starting to happen for, you know, Mataura Valley? And I guess if we look forward to FY 2023, you know, does the guidance statement that you've put out for return to profitability, you know, to kind of pre FY 2021 level, does that allow for, you know, some erosion of Mataura Valley volumes into next year? Yeah. Hi, Steve. It's Rob here. Look, yeah, with the a2 volumes, you know, we do see that recovering. Your question around, so FY 2023, yes, we are assuming some of your erosion of our volumes going down to Mataura Valley, and we're still confident on our outlook. The reason for that is, you know, some of the other customer volume that we have coming in to the business, which is a good news story from our diversification strategy. No, thanks for that. I guess just on that story, I mean, you mentioned a couple of new opportunities. Would you sort of see as well in that mix? I don't think you mentioned your Chinese domestic infant formula, you know, customers potentially offsetting, you know, any kind of volume loss to Mataura Valley Milk. Yeah. That's one of the opportunities. There's also other opportunities there as well that we're working on. Look, we're very comfortable with the way our volumes are shaping up for FY 2023. That's great. Just on inventories, 'cause that like it was a you know good half as you noted in the prepared remarks in terms of working capital reduction and cash flow, so well done. I guess I'm just interested in the outlook. Some of the analysts have been on the outlook. Just noting the stress in supply chains, and I think you've even called out potential shortages of raw materials in some parts of the business, continued shipping challenges, et cetera. I guess my question is, you know, is the reduction in inventory that we've seen in the first half actually sustainable in a very volatile environment or, you know, you're sort of happy with the level of inventories you've got? Is it just specific areas where you see inventory reduction potentially or inventories to reduce and maybe some other areas you might need to add a bit more? Yeah, no, great question. Look, you know, I didn't really cover raw materials a lot in the presentation, but actually our raw materials, we actually increased a little bit on last year, and we've done that just to insulate ourselves from some of those supply chain disruptions. On the finished good side as it's sustainable. Look, we're still operating so that we've got, you know, sufficient amounts of safety stock both for ourselves and also our key customers. Over time, as you see our demand recover, you will see us increasing some of those inventories a little bit, but not by much. We're really focused on making sure we keep those inventories at a level that unlocks that working capital. It was fair to say probably towards the end of FY 2021 we had got a little bit bloated on our inventory levels. Got it. Just one last one from me. Just the comment you've made about the headwind from rising dairy prices in the second half. I mean, you know, just where milk prices stand at the moment, are you able to give us some broad idea of the quantum of that headwind in terms of your gross margin? Look, I guess the comment there was made in relation to if commodity prices kept on increasing, you know, kind of from where they are today. They've kind of stabilized a little bit at the moment. We may see some further headwinds. You know, obviously we do have you know, lag contracts across our business units and so, it would have just meant that we had to continue to pay it compared to milk price and our revenue line wasn't probably going up by the same extent. Look, it's a factor, but it's probably less of an effect than the Omicron risk and the supply chain risk that we've noted in the guidance statement. Cool. Thanks very much. That's all from me. Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Marcus Curley from UBS. Please go ahead. Good morning, guys. Yeah, a few from me. You mentioned, yeah, that you're expecting stronger Nutritional sales in the second half. I just wondered if you can provide any sort of color on where you think Nutritional volumes will end up for the year, you know, up, down, sideways. Good day, Marcus. It's Rob here. Look, what I would say is, you know, we do see some positive signs on our nutritional volumes, you know, obviously, and for this year, you know, it really depends on a couple of things. I see the COVID, you know, the supply chain risks, you know, could be a factor. If they don't really play out, we could see ourselves at a similar sort of level as last year for the total year's result. Okay, thank you. When you look at your first half result, yeah, within the nutritional division, and I suppose you break that down between, I suppose the 3 key products being, you know, base infant formula, canned infant formula, and lactoferrin. You know, how would you typify the gross margins at the product level? Yeah, would you say that what you're achieving at the moment is, yeah, is pretty consistent with what you would expect medium term? No, I mean, I think we'll probably expect to be a little bit better going forward, Marcus. You know, across those three things, we'll see recovery in both IOC and infant base powder, and lactoferrin continues to be a strong performer for us as well. I'd see growth across all 3 of those areas. What's the driver of the improvement? Is that manufacturing efficiency? Or is it pricing or other components? Yeah, [audio distortion]. The big one for me, obviously, you know, putting aside volume, it's our manufacturing efficiencies. As I mentioned on page 4 on our review actions, we've done some good work within our cost structures, but there's a lot of other opportunities within our efficiencies, as we improve, you know, reliability of our plants and quality right first time and other areas like yield, and increase the volumes that are going through those plants, including milk supply. Okay, thank you. Finally, you know, a2's announced their intention to launch a new English label product, you know, next year. Yeah, my understanding is that's gonna be produced by yourselves. You know, have you come to a separate agreement, you know, on that product or will it be just bolted into, you know, the existing agreement? Marcus, in short, that'll be bolted into the existing agreement. Probably gives you a reasonable amount of confidence, you know, in terms of, you know, an offset to the internalization? What do you mean by the internalization? Oh, no, yes. The Yeah. Yeah. Yeah, correct. Yeah. Look, you know, as mentioned. Yeah, look, it does give us some confidence, yeah. You know, the internalization of manufacture by a2, that'll happen over time. We've already built that into our plans. Thank you. Thank you. Your next question comes from Jonathan Snape from Bell Potter. Please go ahead. Yeah. Hey, guys. Can you hear me okay? Yep. Good. Look, can I just circle back to, I think, some of the questions that Ben was asking earlier around the second half guidance and the debt and all that sort of stuff. Look, if I look historically, you seem to do somewhere between about NZD 70 million or NZD 80 million operating cash flow, you know, after leases and financing in the second half, and it's probably not unreasonable to expect everything being normal, you kinda do that again. CapEx sounds like it's gonna be up closer to NZD 60 million in the second half. So we're kinda talking, you know, NZD 10 million, NZD 20 million of the free cash in the second half. Does that sound too far out of whack? Just considering where you're thinking? Hi, Jon, it's Rob here. Look, in normal trading terms, I'll say, yeah, you're not far off of those sorts of numbers. The big unknown for me is just what we're gonna have to navigate across the next 4 months. It's really around not so much manufacturing. We seem to be doing reasonably good with our plants and keeping up production. It's more to do with you know the volume of products that we'll be able to invoice and ship. That could swing us around quite a bit on those numbers. Then obviously there'd be a timing difference, so that those sales would come into the start of next financial year. Yeah, you're not far off the money on your. on a normal trading terms basis. Yeah. If that kind of happened and you said, "Okay, we just finish it. We'll land at 3.5 x EBITDA," then you're kinda getting to, I guess, a 105, 110 type number, which is at EBITDA anyway. Which kind of implies in the second half you're doing, I don't know, sort of NZD 35 million, NZD 40-odd million bucks. Which is actually quite a big jump from the loss of NZD 10.5 million last year. What I'm trying to reconcile is the comment in the outlook statement that says, "We don't anticipate second half profitability growing at the same rate as first half," when if you look at the first half, you grew, like, 20%, and in the second half, that would seem to imply you're growing at double that rate in a nominal sense. I guess the confusion, I think maybe what Ben was getting at earlier, is how do you reconcile your target EBITDA, or net debt to EBITDA ratio with what it kind of implies is the growth rate in the second half with the comment that you actually don't expect to grow that much? Look, I think there has been a wee bit of confusion around that. Dunno, look, we, in the second half, you know, we don't get disrupted by any of those challenges, and those challenges are real, we will perform, you know, on a normalized basis. I'm taking out this effect of the one-off sale of our Auckland property. Yeah. We will be doing better in the second half than we did first half. Yep. Okay. Our ratios will be a little bit better than 3.5 as well. Again, I mean. We've got time. Sorry. Time for one more question. Okay. I'll take this one offline. That's all right. Okay. Thank you. There are no further questions at this time. Thanks, Jon. I'll hand back to Mr. Watson for closing remarks. Thank you very much for your time today, and thank you for your questions. We very much look forward to engaging with you over the following week to have further in-depth discussions.