Dyno Nobel Limited (DNL) Earnings Call Transcript

Good morning, and welcome to Dyno Nobel Limited's 2026 Full Year Results Briefing. This is Tom Dixon speaking, and I'm joined this morning by our CEO and Managing Director, Mauro de Moraes; and our Group CFO, Nitesh Naidoo. The materials we will be covering today have been lodged with the Australian Securities Exchange and are available on the ASX and Dyno Nobel websites. At the end of the presentation, we'll have time for questions, and an audio recording will also be made available on the company's website. I'll draw your attention to the disclaimer on Slide 2 and Slide 3 of the presentation. And before we move into the main presentation, I'd like to begin with an acknowledgment of country. I acknowledge the first peoples of the land, sea and waters across the various locations that we are living and working from today. I pay my respect to elders past and present. Thank you. I'll now hand over to Mauro.

Thank you, Tom. Good morning, everyone, and welcome. Nitesh and I are pleased to present Dyno Nobel's 2026 full year results. I'll start with our 2026 highlights and the outlook for fiscal year '27. Then I'll cover our progress on safety, our transformation and the next drivers of growth, new markets, premium technology and energetics. Nitesh will then take you through our financial performance, capital investments, balance sheet and shareholder returns. I'll return with our closing remarks on why we believe in Dyno Nobel's future, then we'll take your questions. Let me begin with the results and how we are building a stronger base for growth. Fiscal year '26 was a strong year for Dyno Nobel. Our explosives business delivered a record result with underlying EBIT of $485 million, up 12% year-on-year. We delivered on our financial year '26 commitments. Our transformation program generated $51 million in net benefits. At year-end, our exit run rate stood at 70% of our $300 million EBIT uplift ambition. We completed our move to a pure-play explosives company. The sale of Fossil fuel marked the final step in separating our fertilizer business. Safety and reliable delivery remain our foundation. In the second half, we recorded 0 process safety incidents and saw a clear improvement in TRIFR. In our growth markets, we won new customer projects in Ghana, Tanzania, Brazil, Canada and Western Australia. Our privileged assets and vertical integration continue to create advantage. The Moranbah debottlenecking project is complete and Cheyenne remains on track for completion in the first quarter of financial year '27. We also made tangible progress in Energetics with approximately USD 1 billion of U.S. government funded TNT and IMAX projects now progressing at Graham, Kentucky. Such results keeps us on track for a $600 million EBIT ambition in financial year '28. By the end of financial year '27, we expect our exit run rate to reach about 85% to 95% of our uplift ambition. Safety comes first today and always. Our full year TRIFR was 1.01 compared with 0.95 in financial year '25. That's not where we want to be, but it does not tell the full story of our progress throughout the year. TRIFR fell from 125 in the first half to 0.77 in the second half. Strong leadership in the field, early identification of hazards and a sharper focus on high-risk work began to deliver results. Process safety also improved. Incidents fell by 81%, and we recorded 0 process safety incidents in the second half. No incidents were classified as serious harm in financial year '26. At 80% of our sites, there were no recordable injuries. Injury severity fell by 41%. We also recorded no major environmental incidents. We welcome this progress, but the work is not done. Our TRIFR target remains 0.76. We will keep building the leadership, systems and behaviors required to achieve zero harm for everyone everywhere. Now to the financial results. Group revenue was $3.941 billion. EBIT was $504 million, excluding individually material items. Our statutory profit after tax, including IMIs, was $66 million. That compares with a loss of $53 million in the previous period. Group revenue and earnings reduced year-on-year as we reshaped our portfolio through the sale of the fertilizers. The keyest measure of the ongoing business is the Dyno Nobel explosives results. Explosives revenue rose 10% to $3.406 billion. EBITDA rose 8% to $759 million. Underlying EBIT increased 12% to a record $485 million. ROIC, excluding fertilizers, rose from 5.2% to 6.7%. This reflects a strong explosives business and the impact of turnarounds in financial year '25. We returned $574.4 million through our buyback program at an average price of $3.01 per share. We have announced a final dividend of $0.05 per share, bringing total financial year '26 dividends to $0.09 per share, $0.096 per share. At year-end, net debt-to-EBITDA was 2.1x within our policy range. For financial year '27, we expect underlying EBIT of about $515 million to $555 million, subject to the assumptions and risks set out in this presentation. The transformation program delivered $51 million in net benefits during financial year '26. Commercial actions made the largest contribution. New customer wins, repricing and wider use of our premium technology delivered $51 million. Priority growth markets added $19 million. Change to how we operate, buy and manufacture also delivered gains across our cost base. These gains were partially offset by $55 million in temporary headwinds and other impacts. This included about $40 million from foreign exchange and $11 million in added depreciation. Inflation also had an impact. Unplanned downtime at Cheyenne and supply limits from the Walla turnaround accounted for about $6 million. The core drivers of our transformation remain intact, better contracts, firm pricing discipline, stronger manufacturing and growth in markets where we can win are delivering results. In financial year '27, we expect another $30 million to $70 million in net transformation benefits. Priority growth markets offer the largest opportunity. New contracts will start in Africa and Latin America with further growth in Canada, Asia and WA. We expect a further $20 million to $30 million from our commercial actions. These include commercial customer wins, repricing, better product bundling and wider use of premium technology. Manufacturing, supply chain and procurement actions are expected to add up to $15 million. We will unlock more production capacity through debottlenecking and improved efficiency. About $25 million in offsets will reduce those gains. This includes the scheduled maintenance at Moranbah and our foreign exchange assumptions. In this table, you can see our progress since financial year '23. From financial year '24 to '26, we delivered $185 million in net transformation benefits. Commercial benefits totaled $154 million gross. Operations added $83 million and growth markets added $59 million. Against those gains, we had $111 million in offsets. Depreciation, stranded costs, inflation and temporary operating impacts are examples of such offsets. Underlying explosives EBIT rose from $300 million in financial year '23 to $485 million in financial year '26. We exit financial year '26 with a run rate of $510 million. That puts us at 70% of our $300 million uplift ambition. By the end of financial year '27, we expect that the run rate -- that run rate to reach about 85% to 95%. We remain on track for the $600 million ambition in financial year '28. This is not the result of any single action. It comes from stronger commercial delivery, lasting changes to our operations, disciplined growth and a more focused business. As we showed in our recent Investor Day, we see 5 powerful megatrends supporting long-term growth across our markets. Electrification and the energy transition are driving critical minerals demand with copper material moved expected to grow by around 50% from 2021 to 2031. Supply chain security is also driving investment with around $30 billion mobilized for critical minerals reshoring in the United States. At the same time, more than $1 trillion of AI-related infrastructure investment is projected over the next 3 to 5 years, supporting demand for commodities, material and energy. Declining ore grades down an estimated 6% to 8% are increasing the need for productivity, technology and technical expertise. And in Defense energetics, the market is expected to double by 2035, creating a compelling adjacent growth opportunity. Importantly, each of these trends aligns closely with our capabilities and competitive strengths we have, giving us confidence in the long-term outlook for our business. Our growth is gaining traction through customer wins in metals and in the priority regions we shared at our Investor Day. Metals rose 70% in '26 measured by revenue. The share of explosives revenue grew by 4 percentage points. In North America, metals revenues rose 29% as we brought in new customers. Canada delivered revenue growth of more than 40%, new operations, including Agnico Eagle's Hope Bay and Skeena's Eskay Creek. In Australia, we won more than 10 new hard rock sites over the past 12 months. We continue to grow our presence in WA. In Asia, the capital-light model is now operating in Malaysia. We see further opportunities in PNG, the Philippines and India. Across Africa and Latin America, we won 4 new sites, including projects in Ghana, Tanzania and Brazil. These wins show that we can achieve when we bring together global customer ties, strong local delivery and technology that sets us apart. In Africa and Latin America, we are moving from winning contracts to setting up operations and delivering services. In Ghana, services began in September at Anglo Global Santis, Obuasi and the Iduapriem operations. Local emotion production in Iduapreim'ss planned for the first quarter of financial year '27. In Tanzania, services at Geita are expected to begin as the on-site unit is brought into service this quarter. In Peru, we aim to bring the Ilo emotion plant into service also in the first quarter of financial year '27. In Brazil, operation at Vale's Fabrica site are also expected to begin before the end of calendar year. These leading global customers give us a firm base for growth in these regions. Our approach is disciplined and makes careful use of capital. Premium technology helps us deliver more value to customers, better quality revenue and stronger earnings. Electronic initiation system volumes increased 11% in financial year '26 as customers continue to convert from legacy systems and new customer wins supported further adoption. Our premium products earned margins about 1.2x those of standard products. They help customers improve productivity, rock fragmentation and operating performance. Use of Nobel Fire rose 19%. Customers are making greater use of digital tools to plan, carry out and improve their blasting. The aim is not simply sell more product. It's to deliver more value to customers and build earnings that are stronger and more resilient. The autonomous bench shows technology strategy in action, solving real problems for customers. The solution is designed to automate dipping, priming, loading and stemming while allowing operations to be supervised from a control room. This keeps people away from high-risk areas, supports continuous operations and uses data to deliver more consistent blasting results. The autonomous equipment has now been built. With our partner, Mariana Minerals, we plan the first site trial by mid-2027. This solution is a key part of a fully autonomous mining operation. Other customers are already showing early interest in the technology. This is a practical demonstration of how our proprietary technology, digital capability and customer partnerships can create a meaningful competitive advantage. Energetics opens a new path for growth alongside our core business. Our assets, expertise and operating systems gives a strong base to compete. At Graham, Kentucky, 2 U.S. government-funded projects are building that new growth platform. The TNT project is worth USD 435 million. The IMS project is worth USD 581 million. Together, they represent about $1 billion in government-funded investment at Graham. The IMX project is being delivered through Nitradyn, our 50-50 joint venture with Paligen, combining Dyno Nobel's manufacturing capability with Paligen's defense contracting expertise. The value goes beyond the new source of earnings. The TNT and IMX facilities will strengthen U.S. security of supply, increase vertical integration and reduce our reliance on imported critical raw materials. The model is designed to deliver recurring earnings through product margins on offtake or tolling fees on government demand. The TNT project is moving through detailed engineering, permits and site preparation. First production is expected in late 2028. First IMX production is expected by 2030. Our financial year '21 group ambition of $800 million EBIT includes about $30 million to $40 million from North American Energetics. At Graham, the IMX project takes us into Advanced Energetics material. The project includes 5 smaller plants, making materials such as RDX and HMX. These can be used on their own or as components of IMX-104. This gives us more ways to serve governments, defense contractors. It also allows us to supply raw materials for our own commercial use or for sale. In Europe, Von gives us an established base with a long history in energetics and deep technical expertise. European demand for energetics is expected to roughly double between 2026 and 2035. More manufacturing capacity will be needed. We are exploring a new energetics facility at Vonges. Offtake talks are moving forward with potential customers in Europe and NATO aligned customers. Process and engineering options remain under evaluation and the next stage will define the preferred concept, development pathway and commercial approach. We will remain disciplined and progress opportunities where our capabilities create a clear advantage and where the returns justify the investments. I will now hand over to Nitesh, who will cover the financials.

Thank you, Mauro, and good morning, everyone. In this section, I'll take you through the FY '26 financial performance, investing activities and the balance sheet. I'll finish with the FY '27 Dyno Nobel outlook. On Slide 22, FY '26 was a strong year for the Dyno Nobel business, and we exit the year on track to deliver the $600 million EBIT ambition in FY '28. We spoke to you about the next horizon of growth to FY '31 and our $800 million ambition, but recognize the first step is $600 million by FY '28. Underlying explosives EBIT increased 12% to $485 million, driven by record performances in DNA and DNAP. Our strategic joint ventures also performed strongly. JV income increased 16% year-on-year to $93 million and JV tax adjusted EBIT across the explosives business reached $518 million. I'll talk more about JV tax effect later in the section. The transformation program delivered $51 million of net benefits in FY '26, taking the exit run rate to 70% of the $300 million uplift ambition. Explosives revenue increased 10%, supported by long-term customer relationships and a forward contract order book of around 2x FY '26 revenue. That forward coverage does not include Energetics and provides a strong visibility over the underlying revenue base. Moving to '23. The business has built strong momentum since FY '23. Underlying EBIT has increased from $300 million to $485 million, representing compound annual growth of around 17%. ROIC has improved by approximately 90 basis points over the same period with FY '26 explosives ROIC at 6.7% -- underlying EPS for the explosives business has increased from around $0.07 in FY '23 to $0.18 in FY '26, supported by earnings growth and the share buyback program. Our forward contract value is an important metric for us. It reflects the trust our customers place in us and the resilience of our earnings through committed contracts. This stands at approximately 2x FY '26 revenue. Together, these indicators show the combination of transformation-led earnings growth, disciplined capital allocation, improving returns and strong revenue stability. Moving to Slide 24. At a group level, revenue was $3.9 billion, down 26%, reflecting the sale of Phosphate Hill in FY '26 and the IPF distribution business in FY '25. Explosives revenue was $3.4 billion, which grew 6% year-on-year with operating increasing -- operating margin increasing 3% to just over $1 billion. Group EBITDA, excluding individually material items, was $778 million and EBIT was $504 million. Within that result, Explosives EBIT increased 17% to $485 million, reflecting the underlying momentum of the transformation program and the impacts of the FY '25 turnaround in the comparator. NPAT, excluding individually material items, was $331 million. Individually material items were $265 million after tax, mainly relating to the sale of Phosphate Hill, fertilizer exit costs and the impairment of loans associated with the receivership of QPM, a gas supplier to DNAP. I want to reiterate that through comprehensive security arrangements, gas supply to Moranbah is secure, and we are working with the receiver to maintain a sustainable supply to Moranbah. After those items, statutory net profit was $66 million, up from a $53 million loss in FY '25. Moving to Slide 25. Now moving on to the underlying Explosives business. No adjustments have been made for FY '26 reported ex-IMI numbers. We have normalized for turnarounds in FY '25, which is why headline EBIT growth was 17%. Underlying Explosives EBIT increased 12% to $485 million with record performances from our 2 largest business units. Excluding foreign exchange impacts, Explosives revenue increased 14% and EBIT increased 16%. D&AP revenue increased 11% to $1.3 billion and EBIT increased 10% to $281 million. The Metals segment was the primary driver of growth contributing approximately 66% of the total revenue increase, supported by strategic customer wins and successful renewal of key contracts. DNA revenue increased 13% to $1.9 billion and EBIT increased 19% to $224 million. FX has impacted the translated results for D&A. In local currency, the performance is better reflected with revenue growth of 21%, operating margin growth of 8% and EBIT growth of 28%. The standout growth was supported by sales of surplus ammonium nitrate during a period of tight supply, the resumption of booster sales following T&T shortages in FY '25 and continued demand across key customer segments. Demand was also higher as several major customers entered periods of increased pre-stripping activities. The operating margin was impacted by tight AN markets in half 2 with higher third-party purchased AN to meet customer demand in the U.S. DNEL experienced a more challenging trading environment. Revenue reduced 12% to $287 million. This is mainly driven by the European performance, which was impacted by disruption to key shipping routes arising from the Middle East conflict, which constrained international exports as well as economic conditions in France and Turkey. LatAm declined 2% due to severe weather conditions in Chile. DEL EBIT reduced to $18 million, reflecting the revenue impacts mentioned, together with investments in market entry. This remains a strategic focus for Dyno Nobel with new customer mobilizations expected to recover this result. Across the group, transformation initiatives in pricing, procurement and operations delivered structural cost reductions and efficiency gains. JV income increased 16%, reflecting strong performance from our North American partners and record earnings from QNP for its financial year ended 30th June. JVs remain a vital part of our strategy, and it's important to note that the post-tax impact to our earnings diminish our EBIT and has a material impact due to the strategic choice of operations through JVs. This impact is $33 million in FY '26 due to the growth in this channel since FY '23 and into the future with our defense JV, Nitrodi. This needs to be considered for valuation purposes. We have included a slide in the appendix to illustrate this. On a tax-adjusted basis, total Exlusives EBIT was $518 million, up 12% from $464 million in FY '25. Moving to Slide 26. FY '26 capital expenditure was $282 million within our guidance range of $265 million to $285 million. The program included $124 million of sustenance CapEx, $60 million of digital and technology and $86 million of CapEx supporting customer growth. For FY '27, capital expenditure is expected to increase to approximately $370 million to $420 million. The range reflects scheduled turnaround expenditure, customer growth, technology investment and the next phase of our Energetics program. This includes approximately USD 40 million for the Cheyenne turnaround and approximately USD 20 million for defense and energetics investments. The FY '27 range also allows for potential customer wins and growth initiatives with capital continuing to be deployed selectively against expected returns and strategic priorities. These investments are consistent with the capital allocation framework we discussed at our Investor Day in September. Moving to Slide 27. Overall, the balance sheet remains solid with both ratings agencies acknowledging the improved credit quality post the completion of separation. We retain investment-grade credit ratings of BBB from S&P and Baa2 from Moody's, with both increased leverage headroom to 2.75x in the year. Trade working capital was 19.2% of revenue, broadly stable against 19.5% in FY '25, while cash conversion at 36% has been impacted by fertilizer separation and higher inventories to manage the volatility in the year. Going forward, we expect the long-term cash conversion post interest and tax to be in the range of 60% to 75%. Explosives earnings per share, excluding IMIs, increased 56% to $0.18, reflecting the transformation, non-turnaround year and the successful buyback program. This is clearly visible in the explosives ROIC, which improved to 6.7% from 5.2% in the prior year. Net debt was $1.5 billion and net debt-to-EBITDA was 2.1x within our 1.75 to 2.25 policy range. On-market buybacks returned $574 million through the program, purchasing 191 million shares at an attractive average price of $3. We have announced a final dividend of $0.05 per share, 50% franked, taking the total FY '26 dividends to $0.096 per share. Now turning to the outlook for FY '27 on Slide 28. We currently expect underlying EBIT in the range of approximately $515 million to $555 million. We expect underlying results to be weighted approximately 40% to the first half and 60% to the second half. The outlook assumes borrowing costs of approximately $105 million to $120 million, an effective tax rate of approximately 20% to 25% and capital expenditure, as mentioned, approximately $370 million to $420 million. It also assumes AUD to U.S. dollar exchange rate of $0.70, corporate costs of approximately $45 million to $50 million and an FY '27 transformation exit run rate of approximately 85% to 95% -- in Asia Pacific, we expect the benefit of higher Moranbah production volumes following debottlenecking, partly offset by the QMP turnaround in the first half. In North America, the Cheyenne turnaround is scheduled for the second half with debottlenecking projects at Cheyenne and LOMO expected to complete during FY '27. In EMEA and Latin America, we expect operations to scale in Ghana, Tanzania and Brazil. Net debt-to-EBITDA is expected to remain at the top end of our guided range of 1.75 to 2.25x. I'll now hand over to Mauro to close.

Thanks, Nitesh. Let me close with a clear message. These results show why we have confidence in Dyno Nobel's future. We are now a focused pure-play explosives business. We have resilient growth, strong contractual protections and leading positions in attractive markets. Safety and reliability comes first. They earn our customers' trust, support our performance and give us the foundation to grow. Long-term demand is working in our favor. The world needs critical resources, infrastructure and smarter mining solutions. We are building growth across multiple pathways, which include our established North America and Asia Pacific businesses, priority markets in Canada, Western Australia, Asia, Africa and Latin America. Our strength lies in what we bring together, premium technology, a network of privileged assets, deep customer ties and experienced people who can deliver. Our transformation is building stronger earnings, better margins and better ways of working. At every step, disciplined capital allocation guides our growth decisions. 2026 was a strong year. We completed our move to a pure-play explosives company and enter financial year '27 with clear momentum. The ambition is clear, $600 million in EBIT by financial year '28. We remain on track, and we are laying the foundations for the next phase of growth beyond financial year '28. Thank you for your time and your continued interest in Dyno Nobel. I'll now hand back to the operator. Operator, can you please remind callers how to ask a question in the Q&A?

[Operator Instructions] And your first question is from the line of Ramoun Lazar from Jefferies.

A couple of questions for me. Just maybe starting with the '27 guidance. If you could just talk through some of the end markets, some of the moving parts. I know corporate costs are higher than I think what the Street was expecting, perhaps there's some temporary factors in there as well. And then also your first half, second half split is more skewed to the second half than normal. Maybe just talk through that as well, please.

Yes. Thanks, Ramoun. Good to talk to you. Look, the second half, first half has to do with the turnaround on Cheyenne. Other than that, all the usual weather-related events in the first half remain. So we guided to that with and without the turnaround for people's reference. In terms of end markets, look, we still see strength in our core markets of Australia and U.S. So if I start with the U.S., we still see tight markets for ammonium nitrate. That hasn't changed, and we hope that we can see continued growth in that market. In Australia, we have seen, again, strength on the domestic markets. The market is very well balanced, probably as balanced as I've seen. And we see still spot trading when you look at the import parity at around $1,000 landed in Moranbah. So those are the fundamental basis of our forecast for financial year '26 where -- '27, where we see that $30 million to $70 million opportunity to keep growing our earnings year-on-year. I'll let Nitesh answer on corporate costs. And much of that has to do with some sticky stranded costs year-on-year to do with the divestment of fertilizers. But Nitesh will give you a bit more detail on the corporate costs.

Thanks, Mauro. Thanks, Ramoun, for the questions. Just to touch on your first half, second half split. As you know, we do have lots of weather impacts in our business. So we've used the basis of our long-term average. So that's an estimate from our side at this point in time. As far as corporate costs, we updated some of the offsets in our '26 results to demonstrate that we had approximately $5 billion impact this year. Next year, we also have the challenge of stranded costs as we've completed the fertilizer separation work. We are working through the IGNITE program or transformation program to ensure that some of our operational initiatives work hard to offset that. But largely, it's to do with stranded costs.

Okay. And any other, I guess, temporary factors that you've assumed for '27 that you expect to impact the results?

Yes. So Ramoun, on Slide 25, I think the 2 key ones to note is we've got a little bit of FX working against us, about $5 million. We have an average of $0.69 this year. And next year, we're planning for $0.70. We've also called out that included in our FY '27 transformation offsets $10 million related to scheduled maintenance at Moranbah. So that is separate to the turnarounds that we've called out specifically that impact our underlying result. That scheduled maintenance of $10 million in Moranbah, we've not taken it to underlying. We've just assumed that, that is part of the course of operations. It's scheduled and it's not a normal factor that we would experience every year. So that's 2 offsets to our program this year.

Okay. Got it. And while I've got you, maybe just on your leverage guide as well, that's also expected to come in at the top end of your range. Maybe just if you could talk through some of those factors. I guess, what's driving that higher CapEx number relative to expectations? And do your assumptions also make any allowance for contribution from Perdaman and the Geelong proceeds?

Yes. Thanks, Ramoun. So I think the main difference in terms of leverage being at a higher level is the -- to do with F separation. One major cash outflow in FY '27 is the Aero payment that we expect to make in FY '27. So that is -- the timing of that is obviously relevant versus some of the other proceeds that we expect from the F separation. So it's really the timing of some of the payments we're making in First separation, one on the Aero for Phosphate Hill. And second, some of the remediation work that we're doing in GI and Geelong and the timing of the expenses versus some of the proceeds that we're getting from the F separation is driving that temporary heightened level of leverage. We also need to note that this is a turnaround year for Cheyenne and some of our Energetics expenses are also proving to increase our capital expenditure and that leverage.

Your next question is from the line of Mark Wilson of RBC.

Just interested in some of the new contract wins that you've actually spoken to. Just sort of wondering if you could elaborate upon those and how material they are likely to be as we progress. And I also had a question about contract value being double that of fiscal '26. What does that actually mean? And how are you quantifying that?

Mark, thanks for the question. Look, the contract wins are really exciting because they play to many of our strategic directions, one being tying up with customers that already have business with us in other parts of the world. So case in point, AGA, who is a traditional customer of ours in Western Australia and also Vale, who has been doing business with us in Canada for some years and now giving us the opportunity to serve them in Brazil. It's all predicated on our Delta differential energy technology with electronic detonators. So proves the point of we win when we generate additional value through technology to our customers. Those are -- the site in Brazil is smallish. The sites in Africa are very large and provide us a good opportunity for earnings growth. They set operations in countries that have traditional mining operations, especially in Brazil, Ghana and Tanzania. So I would expect that once you have set up shop and establish an operation that would create pathway for further growth from there. In terms of the overall -- can you ask again the second question? Sorry, I lost my train of thought.

No, that's okay. Now just in relation to contract value, you've sort of put in there that it is fiscal '27, it's double that of fiscal '26. Just trying to understand how you are quantifying that. What does it all mean? And I'll add another one there. Where was that figure 12 months ago and 2 years ago?

This is something that we disclosed for the first time in our recent Investor Day, Mark. This is the size of our forward contract book. So the way we measure that is what is the revenue that we have contracted if you look the full business forward, divided by the revenues of our previous financial year. So essentially gives you a sense of the amount of forward revenue that's precontracted the business. Obviously, it varies from market to market, varies from customer to customer. So you have contracts ranging from 5 years in your metals mining customers typically to more like 1-year renewals in your car and construction in U.S. and you have everything in between. So with the 2 years, we try to give you a sense of the quality of our forward contract book. This is a new statistics that we provided for the first time in Investor Day, and that's something that we expect to keep informing the market as we're moving forward to keep a track of the quality of our ongoing contract book.

Your next question is from the line of Jakob Cakarnis of Jarden Australia.

I just wanted to pick up just on Mark's question there on Slide 23. Just on that forward contract value, can you break down maybe for us how much is price and mix versus volume just contributing to that, please?

Maybe I'll take this one, Jakob. So it's a combination of both. But the intention of this is less on the proportion of price and volume and more so the fact that this is the contract value that we have in our -- in commitments from our customers that is not reflected in our past earnings. So this is -- will come through as revenues, as contracted revenues into the future. It's a combination of, one, the commitment in the contract and the volume and price that we've already signed with those committed contracts. So it's bringing back Mauro's point around the quality of the investment proposition here at Dyno because we have a high quality of earnings, which is the contracted commitment that we have from our customers.

Okay. That was worth a shot. Just on the cash conversion. Obviously, there's some temporary issues in there, particularly around inventory builds and the like. And you've given us a sense of what it should look like next year. I mean when do we get to steady state on the working capital side of things and then cash conversion? Is that now from FY '27 and that's kind of the right 60% to 75% to think about moving forward, please?

Yes. And that's the intention. I know we've had lots of feedback from analysts and investors around the volatility around cash conversion. So going forward this year, we don't utilize working capital facilities, which have an impact on cash conversion historically as we had the fertilizers business. So going forward, we have a far more stable perspective on cash conversion, and it's consistent with the guidance I provided, which is in the 60% to 75% range from FY '27 onwards.

Okay. And then just the difference, Mauro, just in the growth assumed in the guidance range, it doubles the EBIT growth year-on-year between the low end and the high end. I think Ramoun kind of hinted on this. But what are the key moving parts for the differences in the assumed growth? Is it a matter of the turnarounds falling in that $25 million expectation? Or are there other items outside of that, please?

Well, look, it's just -- we're getting used to the idea of having earnings guidance, and we want to provide for a budget that has different levels of risk on the implementation. So those that we're calling out that are starting now, they are all in the base. So they are the contract wins that are already booked, and you should expect them to be cash flowing now in the first quarter of financial year. And in the other extreme on the high end, you have those where we have started commercial activity. The teams are confident. But again, you have a range of confidence levels. So as we do our budget, we try to have a center point where we look at those things that have decent likelihood. And then obviously, we allow for risks to the upside and downside. So there's nothing other than the natural success factor of our tender processes.

The next question is from the line of Lee Power of JPMorgan.

Just following on from Ramoun's question around the HQ and the outlook. I hear what you're saying, and it seems like your story is pretty consistent and you got the contract book commentary there. Like what are your customers actually telling you about the backdrop post the midterms, particularly in the U.S.

A great question, Lee. And look, we haven't seen -- it's probably too recent to tell, but we haven't seen any sign of change on the megatrends or any indication that the fundamentals that were driving them would change, whether it's in the defense energetics, whether it's in the AI investments. All indications, even pre the elections suggest that those things were in a way by pat, and you wouldn't see those fundamental changes about reshoring critical minerals or reestablishing sovereign capacity in ammunition. We don't see those things fundamentally change by either side of the aisle. But obviously, we'll keep an eye on that and report back as we see the progress.But so far, our bigger customers, many of which were represented on Investor Day, remain quite positive about the long-term outlook.

Okay. That's useful. And then just on launches, the energetic side, are there any differences in offtake contracting in Europe versus the U.S.? Like I'm thinking about things like are they take-or-pay commitments. Like how do you actually -- how do you think about the certainty of an offtake in Europe versus what you have in the U.S.?

It's a great question, Lee. We typically -- it will be a different model from the U.S. The U.S. model is what we call the GoCo where the government has invested in the facility and they naturally take all the needs they desire for their own capacity. Whilst in the Europe market where, first, you have multiple countries relying on capacity and they tend to not have the same scale as the U.S. comparatively. What typically happens is we would make the investment and then we would rely on offtake arrangements typically with the primes, the people that will be dealing with the different governments on their ammunition plans. So you would expect us to, in time, come with a number of offtake agreements with prime companies in Europe that would underline our investment in Vonges. So yes, it's difficult to say exactly the nature of that offtake if they would take the form of some joint venture arrangements, some partnership, some take-or-pay as you described, it's early to tell. But yes, it will be through the primes in Europe.

Your next question comes from Harry Saunders of E&P.

Firstly, just wondering with the weaker DNEL results, can you talk through your expectations for the business baked into the FY '27 guidance and contribution maybe to the $600 million target now, please?

Thanks, Harry. Look, I would say -- I'll start by saying '26 has been a disappointing year on DNEL, and we were very direct that we would expect for '26, a bigger contribution coming from the asset. There's probably 3 things that, as Nitesh pointed in his presentation, underline why we had somewhat disappointing results. The weakness on the French and Turkish infrastructure domestic market, much like the story of other European countries that saw infrastructure investment declining. We also had some difficulties exporting products out of Vonges into other markets in Europe, much driven by shortage of shipping given the trad of onus crisis. We would hope that those things reverse throughout this year, and we have a more normal base European business. And other than that, really, the growth that I outlined, whether it's from the new build Ilo plant in Peru, the start-up of Geita, Obuasi and Indoprien in Africa and the business in Brazil growing now with the first announced contract with Fabrica. So all those things give us confidence that financial year '27 should be a better year for DNEL, but we accept that the financial year '26 results were not what we expect.

Can you give us any more would we get back up to, say, '25 levels there or too early to tell?

We don't guide, Harry, by end market, but you should expect us to be reversing the reduction from this year. Okay. And just wondering on CapEx, how we should perhaps think about more normalized CapEx in '28 when delivering that $600 million of targeted EBIT.