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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Thank you for standing by, and welcome to the Capral Limited First Half 2023 Results Investor Webinar. [Operator Instructions] I would now like to hand the conference over to Mr. Tony Dragicevich, Chief Executive Officer and Managing Director. Please go ahead, sir.
Good morning, everyone, and welcome to Capral's first half 2023 results presentation. I'm Tony Dragicevich, the CEO of Capral and joining me this morning is Tertius Campbell, our CFO. So after the devastating result last night in the soccer, hopefully this set of results, maybe cheer you up this morning, presenting a decent set of financials for the first half for Capral for 2023. So before we head into the full presentation, I'll just run you through the agenda on the next slide. So first of all, I'm going to do a business overview and I've got some interesting things to talk to you about this morning, some changes from our previous presentations, then I'll run through the first half highlights. Tertius will run through the financials, and then back to me for the strategy, and then the outlook and guidance at the end and any questions we will be open for. Okay. Turning to the next page. So Capral is Australia's leading supplier of aluminum extrusion and rolled products. Aluminum is a very important metal. It is strong and lightweight, making it the preferred construction material in many building and transport and industrial applications. As a result, aluminum will play an increasingly important role in global decarbonization. Aluminum is also very important to the Australian economy with both alumina and aluminum smelting representing one of the largest export earners for the country. So back to Capral. So within our operation within Australia that we operate in, we are Australia's largest extrusion manufacturer. We are the largest supplier of industrial aluminum extrusions, and we're the #1 supplier of rolled product, rolled aluminum, which is sheet and plate, which is all important to Australia. We are the #2 player and #2 distributor of commercial window and door systems in Australia. So turning to the next slide, just looking at our business at a glance. 6 manufacturing plants, 8 extrusion presses, 65,000 tonne of annual extrusion capacity, 20 distribution and trade centers. Our key markets are residential and commercial construction and a wide variety of industrial applications. Our market share has risen over the last couple of years, representing around 27% of the total market. Annual turnover for the last 12 months, $680 million. Total assets of $430 million and in excess of 1,000 employees. So a decent sized business and one that's performed very well over the last few years. So turning to the next slide. I want to talk about what we've done within the business over the last 5 or 6 years. Our big focus has been on derisking the business and increasing our capability for the future. I want to share with you some of the milestones in the venture we've been through during that period. So starting in 2018, we undertook the automation of the Bremer Park packing line with a large capital expenditure there with relatively short payback. We also invested $3 million into paint line into our Western Australian facility in Canning Vale. We also -- at that time, also consolidated our distribution sites onto our manufacturing site in Western Australia. We started the upgrade of our building systems range. So we'll design and innovation of new window systems -- window and door systems started in 2018. In 2019, which is probably the biggest year we had at Capral in terms of things that we had to do or things that we did, we undertook the restructure of our Bremer Park plant, our largest manufacturing facility. We spent $6 million on restructuring that site, including making over 70 people retrench, nearly 70 heads. But that produced in excess of $10 million a year of permanent cost savings to the business, significantly derisking Capral during that period or post that successful restructure. During that year, we also established for the first time our stand-alone building systems division within Capral to allow us to compete in the residential and commercial window and door market on the same basis as our competitors do. This has been a key initiative for the business over the last 5 years and it will continue to be so. 2020, how can we forget COVID impacting the first half of the year significantly on everyone's lives and operations, but we did see post the lockdowns as the market rebounded quite quickly in the second half of the year. We saw a significant growth in Australian Made sentiment. And we -- during that period, we're also able to get the dumping duties on China. Chinese extrusion extended for a further 5 years. Volume started to turn and in 2021 and to 2022. In 2021, we acquired the Smithfield plant in New South Wales from G James to give us additional extrusion capacity in one of our largest markets. We achieved industry-leading factory performance that year and continue to do so over the last couple of years. We relocated at the end of 2021, our New South Wales distribution business, and our corporate office to Huntingwood where we are talking to you from today and we began our sustainability journey to net 0. Last year, we encountered record high LME. We've never been this high, driven by increased global demand, but most particularly -- more particularly the Russian and Beijing or Ukraine, sent metal prices skyrocketing, so quite hard to deal with biggest impact on us -- biggest impact on Capral was a significant increase in our working capital levels as a result of the very high metal prices. We started the upgrade to our Penrith plant at the end of 2022, and that will continue through the next year or 2. We installed late '22 and commissioned earlier this year a new paint line in our Huntingwood facility. And we've also added to our trade center network with North Brisbane and more recently in the Wollongong. In 2022, late 2022, we introduced LocAl into the market, which is a low-carbon alternative offer for our customers to meet those increasing requirements for building materials that have a lower carbon footprint. And we finally released last -- released our new building systems range and the software -- software to support it. So that's some of the key milestones over the last 5 years and setting ourselves up for future success. So turning to our strategic footprint on the next page. You can see that I won't go through this in detail, but that map of Australia highlights all of our facilities. So we have a national footprint. We're the only one in Australia with the national manufacturing and distribution footprint. The presence in every state and our extrusion plants near the 5 mainland capital cities. One of our key marketing initiatives this year has been to promote our capability or Capral's capability to differentiate ourselves from our local competitors and importers into the market. So we've produced a series of short videos, 5 to 10 minutes long that showcase the capability of each of our key operating facilities. We call these the Capral Can Do videos. And I just want to share with you now a cut down, a 90-second video of our facility in Canning Vale in Perth, WA, which would just give you a good example of what we do within our business. If we can run that video, that would be great. [Presentation]
Now we turn to the half year highlights and then talk about the financial performance of the business at a high level. And we can just move to the next slide, please. Okay. So we produced a stronger-than-expected first half result, driven by continued high volumes, supported by residential pipeline work and our diversified industry exposure. We're able to maintain our margins through careful cost management and recovery through price increases. Okay. So performance highlights, next slide. So volume -- staying off of the volume, our market demand held up stronger than we had anticipated, which helped deliver an earnings result above where we thought we would be at this point of the year. Our volumes were slightly down on the first half of last year, but held up very well. Our sales revenue was down 5%, and that was really driven by the lower metal prices that prevailed in the first half of the year, which continue to fall. Our earnings were on par with last year, which was a record performance for Capral, a record half year for Capral. So we're very pleased to be able to produce a result that was in line with our record first half last year, despite the weakening economic conditions. Underlying earnings per share at $0.96 per share, we have declared an interim dividend fully franked $0.20 per share and announced early August, our share buyback program, which over the next -- till the end of December this year, which is equivalent to around $0.15 per share. In terms of net cash, we saw a big turnaround in our net cash position. We're sitting on net cash of $41.2 million as at the end of June, compared to $24.5 million -- $24.9 million at the same time last year and up from the $25 million in December. So that is after the payment of a $9 million dividend during the first half. Net tangible assets per share improved to $9.44, up 10%, and our safety performance continues to be excellent and will -- and much better than the peer average, which is greater than 9%. So a really strong first half and very pleasing to be able to produce the traded results. So turning to the next slide, which is our sales channels. So just to remind everyone for all the new callers on the call this morning, that Capral's business, first of all, we sell our products, both direct from our manufacturing plants to our large customers. That's our extruded aluminum, which represents around 56% of our total volume. The balance of our extrusion volume, which is 30% goes through our own distribution network to our small- to medium-sized customers, and we also had 14% of our volume is represented by rolled product, which is sheet and plate that we import from overseas. So that's how our products get to market. In terms of our industry exposure, the largest single market that drives our volume is residential housing market, 42% of our total volume. Commercial buildings and industrial buildings make up around 12% of our volume with a wide variety of industrial segments making up to 46%. So that includes transport, manufacturing and marine, a number of other manufacturing centers. Our volume for the first half, as we said was 2% lower than last year, and that was mainly driven by some of our -- some resellers that we sell to returning to imports, returning some of their buying to imports as the import supply chains normalized. And also, we saw quite a soft marine market in the first half of the year. The other sectors held up very strongly. You can see there on the right-hand side, the graph of our half yearly sales by year and was the 2023 half year volume on par was where it has been in the last 3 half years, but down from the regularized of the second half of 2021. So strong results in terms of volume. So turning to the key markets in which we operate. The first one being the detatched housing. The detatched housing commitments have slowed, and the backlog of work has reduced. However, we did see continuing strong demand from the segment in the first half of the year, and we're expecting that pipeline of work, while at lower levels, to continue through most of the second half of this year and possibly into 2024. You can see that from the graph on the right-hand side there, the housing market peaked in 2021, came off a bit in 2022, but still at strong levels. And this year, forecast to be down overall 16%, which is no surprise to anyone I'm sure, with housing stats -- forecast to be 174,000 this year as a result of the higher interest rates, obviously impacting and the removal of government and -- post COVID government initiatives to stimulate the housing market. What does the future look like? Well, the forecasters are telling us that we're going to see some slight improvement in housing, dwelling commencements in '24 and '25. However, with the announcement yesterday of the government backed new housing program and also with immigration hitting record levels. We expect that it will be upside into these forecasts, but possibly not early in 2024, but certainly late '24 and into '25 with the demand and requirement for housing, both stand-alone and multi-res that this market will come back after a bit of a lull, certainly by 2025, but not before. So now turning to some recent projects that Capral has complete or been involved in. Just to show you where our products end up. These 3 projects are residential homes, 1 in South Australia, middle one in New South Wales and the 1 on the right-hand side in Victoria. All of these products feature Capral's design and owned proprietary window and door systems, together with an example of Schuco, which is where the New Zealand -- the Australian and New Zealand agent for the Schuco brand and that enables us to sell their products on behalf of the world's leading with our systems designers based out of Germany. So that's right at the top end of the market. So there are some examples of residential projects. Turning to the next slide. We've got some very nice examples of where our commercial systems end up. Also, all these projects use Capral's designed and owned proprietary window and door systems. In Tasmania, the UTAS in Tasmania and Hobart and ANZAC House in Western Australia and a commercial building in Victoria. So it's a good example of where our aluminum is used. So now turning on the next slide to the industrial sector, which is a very, very important sector for us. So that sector has remained strong despite the slowdown in some segments. The key one for us in the last couple of years has been in transport, which is really for us truck building, so strong consistent conditions have persisted. And in the middle of that graph there, you see new truck and van builds for the last 10 years or so. And for 2022 and 2023 being consecutive record years. That is expected to continue through to 2024. The demand for freight and -- is continuing to increase and the truck building industry is buoyed and projecting continued strength in that sector for some time. We have experienced slower conditions in the marine market. There has been a slowdown in commercial ferry builds. Most of these commercial ferry builds have been -- traditionally been for offshore ferries particularly in Europe and in the Middle East, where our largest -- the largest customers in this area being also shipyards in Western Australia and the Incat in Tasmania. Those conditions have slowed. However, there are things that are picking up. Incat secured the contract to build 8 new river cats for the Paramatta River Service and they will be starting on those projects in the next few months. We are the major supplier of aluminum into both of those 2 organizations. Solar market is continuing to grow. This market is dominated by imported aluminum extrusion. There is a slightly, but surely increasing demand for local supply and it is becoming a more important segment for us as time goes on. Industrial construction investments are steady, but there is starting to be a sign of a bit of a pullback after a couple of very strong years. The cladding sector continues to grow as rectification activity comes online. So those will be aware that there are -- there have been issues with certain building materials on the facades of buildings in terms of their flammability and those uncompliant or noncompliant facades are being replaced with compliant systems, most of which include an aluminum component. Volume to other aluminum resellers or distributors in Australia has softened over the last year or 2 as the imports have resumed, but has typically been at the lower end of our margin customers because they're too reselling into the market and also was makeup -- have always make up fair share of their requirements. In terms of manufacturing and general fabrication, those markets have remained solid, and we've held share this year that we've gained against imports in this area over the last couple of years, despite the fact that the supply chain, simple supply chain to normalized. Okay. So maybe turning to the next slide showcasing some key customers that we deal with and various products that they build and the industrial segment. So firstly, we have here Volgren, Australia's largest bus body manufacturer with operations in Victoria, New South Wales, Queensland and WA, a strong large industrial customers -- customer. Louvreclad specializes in commercial building facade solutions. They are actually located just up the road from our Bremer Park facility in Queensland. And on the right-hand side, last but not least, Sloanebuilt one of Australia's largest truck body building companies based here in New South Wales. As part of our customer partnership program, we introduced another key marketing initiatives last year, and that has been the development of our Crafted with Capral series of 5 detainment of videos together with company print media. These videos showcase our key industrial customers and their businesses, and they used by us and our customers in digital and print marketing. So I'd just like to show you -- these videos are normally last 5 to 10 minutes, we will show you a condensed version, 90 second version of the Sloanebuilt, one which was completed last month. [Presentation]
Thank you. So what we're trying to do with these initiatives around the Crafted with Capral program and also our Can Do capability videos, we're trying to differentiate ourselves. We are differentiating ourselves from our -- both our local competitors and import competition by providing more than just aluminum to customers. We provide a high degree of value-add offer in terms of being able to semi fabricate, drill, punch and cut aluminum, and also roll aluminum plate in addition to our manufacturing capabilities and service capabilities through our distribution network and design and innovation around our own systems. So what we're trying to do with these videos is to promote and differentiate Capral from our -- like the domestic competitors, who tend to be regionally based and also the importers, who are -- and offer a level of services that we do. So hope you enjoy that. I'll now hand over to Tertius Campbell, our CFO, to talk about the financials.
Thank you, Tony, and good morning to everybody. Amidst inflationary pressures and slightly reduced volume, Capral has demonstrated yet another strong performance. Our fully integrated value chain as repeated -- has reaped the benefits of solid volume levels, good asset utilization, tight cost control and prudent capital expenditure practices. In summary, the key financial highlights for the half year encompasses robust earnings, strong balance sheet and a healthy cash position. Moving on to Page 16, the profit and loss. Capral's earnings for the first half exceeded our expectations, with underlying EBITDA amounting to $32 million, aligning closely with the previous year's performance. The decrease in the LME price of aluminum and lower volume contributors to a 5% decline in revenue, whilst the 2% drop in volume -- in sales volumes had a minor adverse effect on earnings, enhanced margins and a more favorable product mix culminated in a noteworthy bottom line. On par with the record first half of last year. Continued strong demand ensured efficient utilization of our production and our warehouse facilities, thereby maintaining favorable operational leverage. However, the impact of inflation on nonmetal costs surpassing 6% dampened our earnings. Nonetheless, price increases, cost-saving initiatives and efficiency projects provided a measure of mitigation. The release of a prior period claim provided -- provision provided a nonoccurring benefits. Underlying EBIT at $20.7 million met our last year's performance. Therefore, no additional deferred tax assets recognized -- recognition required this half. Our underlying net profit after tax of $17.2 million was marginally lagged the previous year, primarily attributable to the heightened finance costs, driven by increased interest rates and the higher average debt. The underlying earnings per share of $0.96 supports the declaration of an interim dividend of $0.20 per share. Moving to Page 17, the balance sheet. Capral's financial position remains strong with a net cash position of $41 million at balance date. Noting that all working capital trade loans were settled during this first half. The cash position allows Capral to not only declare an interim dividend, but also commence the share buyback that we announced earlier in August. The debtor days outstanding improved to 44 days, a very good result. And as anticipated, inventory levels have begun to normalize, resulting in the release of cash, a trend that is projected to continue during the second half. The aggregated working capital requirement fell by approximately $9 million year-on-year and $20 million since December 2022. Further moderation is anticipated over the next 6 to 12 months contingent upon sales levels and aluminum input costs. Capral currently holds approximately $4 million in franking credits available for distribution, of which around $1.5 million will be dispersed along with the upcoming dividends. Additionally, there are $120 million of accumulated tax losses eligible for recognition as deferred tax assets in future periods. Turning to Page 18, the cash flow. Our cash generation showed a significant improvement in comparison to the corresponding periods, facilitated by the release of working capital as explained earlier. The contributed -- this contributed to a free operating cash flow of $25 million after the planned $4 million expenditure on outlined capital expenditure program. An additional $9 million was returned to shareholders through dividends earlier this year. In conclusion, the interim dividend of $0.20 per share will be distributed in September, but due to the impending buyback initiative, the dividend reinvestment plan will remain inactive for this distribution. The share buyback program will commence shortly after the record date. Thank you, and Tony, back to you.
Thank you, Tertius. I'll now turn to -- talk about the strategy. [indiscernible] want to do the distribution one, Tertius?
Sorry, I missed this slide. We've included a slide this year just to show the history since we started paying dividends back in 2016, showing that we maintained our interim dividend with an additional potential of $0.15 per share -- equivalent to $0.15 per share in the anticipated buyback during the remainder of this year, bringing the first -- up to $0.35 with the final dividend to be declared. Hopefully, if everything is according to forecast and plans at the end of the year at full year results. You can see that there has been a good progress or increase in our dividend payment since the 2019 restructuring that happened in Prima and Capral's Board is of the opinion or we want to focus on returning more benefits to the shareholders and the distribution to our shareholders to improve with this buyback of shares as well. Sorry, I missed this slide.
Okay. So we now turn to the strategy and outlook. Our overriding objective is to drive the return on the investments that we've made and continue to improve our long-term competitive position. Our strategy has remained -- if we turn to the next slide, has remained consistent over the period, building on our strength, which is our range, our capability, our national footprint and our innovation. And our people continue to optimize what we do. We have a strong focus, particularly in our manufacturing and distribution of operations are focusing on the key service metrics and the key productivity metrics around all of our manufacturing facilities. And we continue to invest significantly in new technology, not only at the front end of our sales operations, but also in the manufacturing and supply chain operations as well. And then that enables us to grow for the future. So leveraging these capabilities, our knowledge, our national presence, quality and service, we've discussed to develop new products and channels to market new customers, bring them on board. The key things is the volumes that we've secured from imports over the last 3 years. The focus is on retaining those through high levels of customer service and value add. So turning to the next slide. Just talking around our 3 key or parts of our business. First of all, manufacturing. The key initiatives around that over the next couple of years if we continue our process improvement programs that we have at all of our plants to ensure that we continue to be more efficient and are able to continually to drive out costs -- cost inflation out of our business. That's proving a bit harder to do as seems inflation is running at a rate we haven't seen before for many, many years, but that -- those programs that will be designed to do. We continue to spend maintenance capital in our plants to ensure their reliability and we've progressively upgrading all of our shop floor control systems to the latest technology to help improve our efficiencies. We're still going to complete the upgrade of the Penrith extrusion plant. The first stage was done over the Christmas period with the new press. We have lock heaters and billet stores to be next year -- early next year and then some downstream equipment in the year or 2 after that. So that's the manufacturing operations. Turning to our distribution business. The key thing here has been the release of our new window or door product range and the systems software, the fabrication software to support that, that was released late last year. And we continue to focus on increasing our customer base, utilizing those systems. That range was enhanced by the purchase of the EDGE high thermal performance window systems in the middle of last year, and that's going to become really important as the changes to the national construction code come into place and the coal limits of Australia come into play -- coming to a place on a state-by-state basis over the next 12 to 18 months. The impact on windows and doors will be primarily in the cold climates of Australia, which will require higher firmly performing window systems to meet the new construction code, and we're well placed to be -- to take advantage of service that market. We installed a new paint line in New South Wales late last June, commissioned it earlier this year. The first time we've had finishing capability, powder coating capability in New South Wales and that's a good value to us, one of our largest markets. Our overall goal is to grow Capral's direct distribution channels, both through our mill direct business, but also focusing on growing our distribution customer base as well. In terms of sales and marketing, we continue to invest in technology to improve our sales effectiveness. The big things in front of us at the moment are upgrades to both our website and our e-store. We hope to have those released within the next quarter. We have very exciting developments for us going forward. We already spoken about the partnership program with the Crafted with Capral marketing initiatives and also more recently in the release of our -- promoting our capabilities and differentiating Capral with our Capral Can Do videos. We will continue to look for opportunities to expand our regional footprint where it makes sense. So those are the key things -- key initiatives in terms of our high-level manufacturing and distribution and sales. So turning to the next slide, just continuing on a couple of key areas to talk about quickly solar. I spoke about growing demand for local product in the sector. Clearly solar panels are becoming or will continue to grow in Australia over the years ahead. The panel sit on aluminum solar rails to support them both on roof structures and stand-alone facilities. And most, as I said earlier, the vast majority has historically been imported, and we're looking and us together with other local players that they're looking carve out a growing segment here for local supply. Defence, there's a lot of activity around frigates, submarines, et cetera. Capral is approved supplier, it has been slow burn as these projects take a lot of time, but we are approved supplier into those Defence contracts. Cladding, we've spoken about working with the cladding system suppliers to address the new fire standards or recladding opportunities. That's something that we're working closely with our key customers in that segment. And as we have done for the last decade or more, really focused on managing and ensuring that we have an even playing field and continue to fight for fair trade in the Australian aluminum extrusion market. So the 2 big cases that we've taken in the last 12 months have we appealed the removal of measures on Malaysia and Vietnam. And we applied for a Variable Measures Review on the Chinese imports that really is looking for higher duty levels and higher minimum export price out of China for aluminum extrudes into this market. Both those reviews, the draft reports were released recently, and those are not final, but those outcomes of the draft reports are looking very positive. So watch the space, that will all be concluded by October. If we turn to the next slide, talking about sustainability, and we will go into a lot more detail of this in our sustainability report for the full year. I just want to highlight a couple of key initiatives that we undertook in the first half of this year. First of those was very importantly, we became the first aluminum extrusion and supply company in Australasia to be to be awarded the ASI Aluminum Stewardship Initiative certification and which allows us to provide to the performance standards of the materials we supply and chain of cost into the materials we supply. It becomes very important when we're looking at low-carbon aluminum offering to market. So that certification took us 12 months to achieve, a great initiative and a lot of work done by the team to get us there, but it's going to set us up and set Capral at the forefront of low-carbon aluminum supply into the Australian market or lower carbon supply in the Australian market. Internally, we're focusing on reducing our Scope 1 direct emissions, which is gas primarily from our operations and Scope 2 emissions from our electricity consumption, obviously, which we have line grid. Apart from the solar panels, we're installing on the roofs of our buildings. We're looking to embrace the circularity of aluminum. Aluminum is continuously recyclable. And currently, we're certainly open to very recently, the vast majority of aluminum is shipped offshore for recycling, so we are working with the local smelters to increase the level of local recyclability of aluminum and that will certainly also lead to a lower carbon footprint for both the smelters and for us as downstream uses. A couple of other key initiatives for the -- is to talk on for the half year. We established diversity targets within our business. We're starting to roll out the lower carbon options to our customers, which has been -- which is -- the demand is slightly but surely increasing. And we have -- we're on track to achieve our emission reduction targets through initiatives in the last 6 months of installation -- installations of LED lighting and solar panels, optimizing the heating and cooling power use and supporting green energy, being able to take green energy that we can out of the grid. So we're right -- at the stage we're on track, but a long journey to go in terms of meeting a grid and gas emission reduction targets. Next slide, talking about the all-important metal costs, which fell as you can see there, from a record highs in 2022. The average aluminum decreased on average 10% compared to the same period last year in the first half, and it is continuing to fall into the second half of this year. Still relatively elevated, where it has been historically, as you can see, they're going back into pre-COVID times. During pre-COVID 2018 right through to 2021 at around the $3 mark, including premiums. Our metal cost Australian, but currently sitting at a bit up to the well over $5 at the peak, down to $4 and slightly but surely reducing and we think throughout the second half of this year. So now we turn to the final slide from me, which is the outlook, the all-important outlook. So we have -- as I said, the headline there is we have lifted our earnings guidance to the top end of the range. Just talking that through. We do expect the residential building just markets have softened and for our demand form this sector to start to soften, it has been held up very strong to date. That demand will start to ease off from the second half of this year and into 2024, before lifting again as that cycle turns due to demand. Our other key markets, commercial and industrial are expected to remain at relatively high levels and to be relatively strong and hopefully underpin our volumes for the next year or so. LME peaked at record levels, as we spoke about 2022, but then forecasted to fall moderately during the balance of this year. We are seeing inflationary cost pressures that we've never seen before, especially in energy. Energy costs in some of our operations have gone up 2 or threefold. Big costs, we have -- we're getting increasing as our EBAs come up for a renewal, we're getting increasing pressure to lift those above where they've been historically. And freight costs and packaging costs still remain high. I haven't seen any drop in any alleviation in the packaging and freight costs are now increasing because it's a lack or a shortage of labor in that market in certain trucking routes. So absent any percent of each, we expect our -- we looked the earnings guidance to the top end of the range, with the underlying EBITDA at around $58 million and the underlying NPAT of around $30 million, which [indiscernible] earnings per share of around $1.66 for the full year. Our working capital levels have reduced, and we expect that to continue in the second half to increase our free cash flow this year. Our capital expenditure will be broadly in line with where it was last year, which is $10 million, which is the last couple of years have been high for us as we've invested in growth opportunities. And new equipment that will return to normal levels probably in 2024 and beyond 2025. On this basis, we would be in a position to continue to return to shareholders in the form of dividends and share buybacks in accordance with our published capital allocation policy. So thank you very much for listening this morning. Hopefully, you found that informative, and we're now ready to take any questions that you may have.
[Operator Instructions] And the first question will come from Andrew Johnston with MST.
Congratulations on a very solid result. Just 2 questions. The first one is around inventory and good to see that cash starting to come out. You made a comment that inventory volumes have fallen. Are they back to normal levels? Or is there more -- is there more to come out on where those inventory volumes are sitting at the moment?
They've returned close to normal levels, there is a little bit more to come out in terms of -- in terms of the volume and in terms of the tonnes of material we carry, but that's pretty much back -- will be back in balance by the end of August or later this month. So it's a moderately lower level than where it was at the end of June. But the big fall out or big reduction it will be in dollar terms as the lower metal prices flow through our inventory because we carry up to 4 months' worth of inventory in our distribution business, both in extrusion and rolled products and security systems. That inventory has been sitting at the high metal cost, and that will wind its way up over the next half of the year. So the biggest -- the volume drop in terms of tonnes as we've seen that in the first half. And in the second half of the year, we expect to see the -- more of the lower metal prices flowing through as a reduction in dollar value of inventory coming down in the second half of the year.
Okay. Yes, because if you look at the aluminum price from March to May, it was $3,450 and we're sitting down at $3,200 now. So assuming they stay around that same level, it looks like there's a little bit more cash to be released from inventory?
True.
Just moving on to the CapEx. You mentioned that CapEx returned to more normal levels in '24 and '25 versus $10 million in '22. What are more normal levels?
Around the $5 million to $6 million mark.
Okay. And just the final question, it escapes me. So it can't be important.
[Operator Instructions] And I would like to turn the call over for any webcast questions.
Yes. Thank you. We've received a question from Simon Mawhinney from Allan Gray. Says, would you mind making some comments regarding the competition in your markets from incumbents, both local manufacturers of extrusions and importers, especially in light of forecast falls and activity levels and its impact on margin?
Good question, Simon. Let me deal with import first, and I'll talk about local competition. So imports returning to normal in terms of supply chain. So the supply chain disruption that we saw post COVID has dissipated, and those lines -- to those import supply chain lines are back down to the normal 3 months, 3 to 4 months delivery requirements or periods. And we've also seen international freight costs reduced as well. So imports have always been a large part of the market. The market share got up to close to 38% pre-COVID and probably down to sort of 33%, 34% of the total market that we've secured back. They will always be part of our market. We believe that as long as we stay in front, and we have a strong antidumping regime in Australia that the worst of the dump imports will be kept out and we'll be able to compete against imports on our service delivery and our capability, which we've spoken quite a bit about this morning, and we'll continue -- we will be continuing to market and differentiate ourselves from importers in terms of our short lead times, the credit terms that we could -- we offer locally and the capability that we have locally. And it's pleasing to note that all of the direct end-user customers or the fabrication and manufacturing customers that we secured back from imports during that supply chain dislocation, we have been able to retain. So we've got good relationships and good partnerships for those customers. In terms of local competition, all of the local competitors -- our local competitors are made up pretty much those competitors that we can -- that are standalone, and we compete with in their regional areas. And those extruders, distribution manufacturer here, those extruders that are owned by or associated with an aluminum distribution business, or our window fabrication business. So for example, G James, which is the second largest extruder in Australia, the majority of their volume goes to the downstream window fabrication operations, both residential and commercial. INEX, which would be the third largest in Australia, is owned Alspec and AWS. So the majority of all of their volume goes to their downstream or the downstream owners. And then what we're left with 3 or 4 other independent regionally based extruders, one of which was recently acquired Victoria by a major windows fabricators to brand names have acquired with those competitors -- sorry, a lot of our competitors which will -- which safe all to secure their supply going forward. So we see the market has been -- as a result of things that have happened over the last 3 years, probably been a bit less competitive, that it's always competitive, but a little bit less competitive than what it was to be pre-COVID as those changes have taken place. We've acquired 1 of the G James presses. The business is extruder Victoria being sold to a window fabricator, has taken a little bit of -- a little bit out of that segment. So look, I think that our biggest challenge over the next 18 months will be the inevitable downturn in softening the demand in the residential sector. But given the demand for housing, we expect that to be relatively short limit. So hopefully, that answers the question, Simon. Well, I think that might be the end of the questions. Well, thank you very much for your attendance this morning on the webinar, and we're very pleased to be able to present what we believe are a solid set of financial results for the business and our prospects going forward. So thank you, and we will talk again soon.
Thank you very much.