Orora Limited (ORA) Earnings Call Transcript

Thank you for standing by, and welcome to the Orora Limited FY '26 Full Year Results Call. [Operator Instructions] I would now like to hand the conference over to Mr. Brian Lowe, Managing Director and Chief Executive Officer. Please go ahead.

Good morning, everyone. Thank you for joining us today for Orora's Full year 2026 Financial Results Presentation. I'm joined by Shaun Hughes, our Chief Financial Officer. Shaun and I will take you through Orora's financial performance for the year ended 30th of June 2026, take you through the operational progress across the portfolio and the actions we're taking as Orora continues to operate as a focused beverage packaging business. I'll start with the key results messages, operational progress, safety and sustainability. Shaun will then cover the financial results in more detail, including the impairment of the glass CGU, cash flow, CapEx, balance sheet and shareholder returns. I'll then return to cover our perspective to FY '27 and the outlook statement. And at the conclusion of the presentation, we'll be happy to take your questions as always. Before I start, please take note that the important information on Slide 2, including the notes on forward-looking statements and non-IFRS financial information. Turning to Slide 3. After I cover the key messages for 2026, I'll then move through the operational progress in cans and glass, the performance priorities for Saverglass and the completion of our cans growth capacity investments. Turning to Slide 4. There are 5 key messages for today's results. First, Orora continues to have a strong balance sheet and cash generation profile supporting shareholder distributions and the recommencement of the on-market buyback. Cans delivered another strong performance, supported by capacity expansion programs, FY '26 volume growth of 6.3% was driven by the continued substrate shift, growth in new categories and customer filling loan investments, particularly in Queensland. Glass remains under pressure. Saverglass delivered volume growth and market share gains, but earnings were impacted by price and mix, including a shift across and within categories towards lower average selling price and lower-margin products. Gawler also continued to face softer beer volumes, although the 2 furnace operating model is now delivering efficiency benefits. Saverglass is executing a set of focused initiatives targeted at more than EUR 30 million of net EBIT run rate improvement by FY '30. This plan is supported by 6 clear priorities across revenue growth, pricing, operational efficiency, SG&A, inventory and NPD time to market. And finally, as part of the FY '26 result, Orora has recognized a noncash impairment of the large CGU of EUR 450 million. This reflects the impacts of recent earnings or the impact to recent earnings by U.S. tariffs, the ongoing Middle East conflict and cost of leading pressures across key markets. As a result, we have revised our view of the timing of recovery in consumer demand and Saverglass earnings. This impairment is a noncash item and does not impact the group's liquidity or the free cash flow available to shareholders in FY '27. Shaun will cover the details of the impairment and the other significant items in his presentation this morning. Turning to Slide 5 and the FY '26 financial highlights. EBITDA was broadly flat at $240 million. This reflects growth in Cans and Gawler being largely offset by lower Saverglass earnings. EBIT was $248 million, down $14 million or 5% with higher D&A also impacting the results. Underlying NPAT was $142 million, down $9 million or 6%. Underlying EPS was flat at $0.114 per share, reflecting the benefit of the on-market buyback programs. Operating cash flow remained strong at $291 million, with cash realization of 98%. Net debt was $481 million with leverage at 1.2x EBITDA and the Board has declared a final unfranked dividend of $0.04 per share. Turning to Slide 6. The operational picture across the portfolio remains divergent with strong Cans performance offset by softer glass markets. Starting with Cans. Revenue increased 13% to $880 million or 11%, excluding the pass-through impact of aluminum prices. Excluding the $5 million of corporate costs allocated to Cans in the first half following the sale of OPS, Cans EBITDA increased 15% and EBIT increased 12%. Cans volume growth was 6% for FY '26. Growth was stronger in the nonalcoholic categories, with energy dominated soft drinks and alternate soft drink products all growing strongly. Beer also continues to demonstrate good growth in Cans. The Rocklea project is nearing completion with commissioning expected by the end of the first quarter of FY '27. This is the final major project in the Cans growth investment cycle and represents a total investment of approximately $140 million. Turning to Saverglass. Spirits and wine industry volumes remain under pressure across most geographies, with cost of living pressures continuing to impact the premiumization trend. Against this backdrop, Saverglass delivered FY '26 volume growth of 6% with second half volume of 9%. For FY '26, the actual spirits category mix was 54%, up 2 percentage points. And for the second half, the spirits category mix was 48%. Although the product mix shift move further towards spirits in the second half of '26 than anticipated in our April 2026 trading update, the positive mix benefit was outweighed by the lower average selling prices and reduced wine volumes in the second half. Saverglass volumes grew 6% with revenue increasing 1% to EUR 617 million. However, a 5% negative price and mix impact constrained revenue growth and contributed to EBITDA declining by 9% to EUR 132 million. The Middle East conflict has had a direct impact on the Rock facility, which is operated in a closed loop mode since April of 2026. The Lahav F4 furnace closure was completed during the second half and that [indiscernible] rebuild that commenced in May is now nearing completion. For Gawler, revenue was broadly flat at $285 million. Volumes were down 2% with wine broadly flat and beer continuing to decline as substrate shifts towards Cans. EBITDA increased 10% to $62 million, and EBIT increased 11% to $28 million, reflecting the efficiency benefits of the successful move from a 3-furnace to a 2-furnace operation. The G3 furnace is performing strongly with a 31% reduction in energy versus the prior furnace. Turning to Slide 7. Glass is focused on key priorities to drive growth, improve margins, optimize cash generation and deliver more than EUR 30 million of net run rate benefit in EBIT by FY '30. The priority is focused on revenue and margin expansion and cost and cash optimization. The third priority is to accelerate the new business pipeline through key accounts, new product market share gains in priority categories and geographies supporting a mid-single-digit volume growth ambition. Secondly, reduce NPD lead times and target a 5-month time to market by redesigning processes from engineering and mold design through to manufacturing, supporting -- and supported by new innovation centers across 3 regions. Thirdly, improve price optimization through disciplined cost recovery and repricing or exiting low-margin SKUs, a critical lever given the current mix pressures. The fourth priority is to drive operational efficiency through digital factory investments, automation and procurement excellence, targeting a 15% reduction in average cost per tonne versus the FY '26 baseline. The fifth priority is to reduce SG&A through standardization, automation and digitization targeting a 20% reduction in SG&A versus the FY '26 baseline. And the last priority is to strengthen inventory management through improved S&OP governance and reporting and lower days of inventory outstanding. These are practical, measurable initiatives with a glass leadership team focused on execution and rebuilding earnings over the medium term despite challenging market conditions. Turning to Slide 8. Saverglass inventory trends showed encouraging progress given higher sales volumes. Sales volume was up 6% in FY '26 versus FY '25, while total inventory was down 13%. Saverglass' owned inventory was down 10% and customer-owned inventory was down 20% at June 2026 compared to the prior year. The reduction in customer-owned inventory indicates that customers' destocking continues to unwind. This supports improved working capital and importantly, provides better visibility for future demand. The key point is that inventory levels have moved in the right direction, and the business is also taking a more structured approach to inventory management. In relation to orders for FY '26, we haven't included the chart that we normally include in this slide. Given the market volatility and dynamic changes in customer orders, the correlation with future sales, including unfulfilled orders continues to distort into order intake metrics. Turning to Slide 9. The canned pro investment cycle is nearing completion, with the new $375 million classic can line at Rocklea expected to be commissioned by the end of the first quarter of FY '27. The canned investment program across Ballarat, Dandenong, [indiscernible] and Rocklea represents a total capacity investment of around $364 million. The program is expected to deliver more than $50 million in annual EBIT by FY '30 in real terms, with a targeted return of more than 15% by the third full year of operation. Rocklea is the final major project in this cycle, Investments to date is $134 million with around $6 million planned for the first quarter of FY '27, bringing the total Rocklea investments of approximately $140 million. Once commissioned and ramped up over time, Rocklea will add around 13% on network capacity. Post Rocklea, the Cans network is expected to be able to support approximately 5% annual volume growth until the end of FY -- sorry, at 2030 without further capacity investments. This is an important transition point for Orora. The business has invested in capacity to support the growing market demand, and we expect the Cans business to continue to deliver strong cash flow and earnings growth. Turning now to safety and sustainability, provide an update on our FY '26 safety performance and the progress we're making against our sustainability commitments. Turning to Slide 11. Before I cover the FY '26 safety performance, I wanted to touch on a vehicle-related incident that resulted in the tragic fatality of a contractor at our Mexican glass facility in July 2026. An investigation into this incident is continuing, and we're offering our support to our local team and our sincere thoughts are with the family and all of those affected. Back in FY '26, we recorded no serious injuries or fatalities with potential SIP incidents down 56% on FY '25. Recordable injuries were broadly stable year-on-year, although the recordable case frequency rate increased to 10.5% due to lower hours worked following reduced production volumes across the glass network. The lost time incident frequency rate increased to 5.7%, with most life time injuries occurring at European glass site and primarily involving lower severity sprains, strains and lacerations. We completed the first year of our FY '26 to FY '28 global health and safety strategy, strengthening governance and risk management through the rollout of the Staysafe rules. Health and safety procedures and the global assurance audit program across our Save glass operations. We also refresh our Switch on Stay Safe program in Australia and New Zealand. We continued the Play Safe behavioral program in glass and all senior leaders completed their FY '26 safety leadership tool commitments. Employee engagement results reflected strong safety awareness with 93% of employees reporting a good understanding of Orora's health and safety rules and procedures. Turning to Slide 12. Orora continues to progress its sustainability goals, aligned with customer expectations and our commitment to responsible operations. For circular economy, glass achieved 65% recycled content in color glass in FY '26, up from 44% in FY '25, progressing towards the FY '35 target of 68%. This reflects a positive pellet sourcing outcomes despite lower production relets. In cans, recycled content was 77% compared with 78% in FY '25, against the FY '30 target of at least 80%. This was a solid performance given aluminum sourcing constraints arising from the Middle East conflict. For climate change, Orora's target is a 41% reduction in scope 1 and scope 2 emissions by FY '35 from the FY '19 baseline. In FY '26, the group achieved a 29% reduction on a location basis and a 20% reduction on a market basis versus FY '19. The Scope 3 emissions with FY '26 being the first year of reporting progress, Orora achieved a 12% reduction since FY '25, working towards the FY '35 target of 31% reduction. We also continue to invest in our people and communities. The FY '26 Global Engagement Survey achieved an engagement score of 73%, slightly above manufacturing benchmarks. Female representation increased to 25%, up 2 percentage points in FY '25. And the first women in leadership program was operated in France and was successfully completed during the year. I'll now hand over to Shaun, who will take you through the group and segment financial details in more detail.

Thanks, Brian, and good morning, everyone. I'm on Slide 14. This slide summarizes the group's underlying and statutory results for continuing operations. I will focus first on the underlying results, which exclude significant items. Revenue increased 6.5% to AUD 2.2 billion, primarily driven by strong growth in Cans. EBITDA increased slightly to $420.3 million. Growth in cans and Gawler up $12.5 million and $5.4 million, respectively, was largely offset by a $16.4 million reduction in Saverglass. D&A increased by $15.4 million to $172.1 million, driven primarily by Cans and some increases in Saverglass and Gawler. EBIT was $248.2 million, down $13.2 million or 5.3%, and this reflects EBIT growth in Cans and Gawler offset by a $24.2 million reduction in Saverglass. Net finance costs decreased to $56.6 million, reflecting the payment -- the repayment of the debt following the receipt of OPS sales proceeds, partially offset by the on-market buyback and Cans growth CapEx. Tax expense increased by $5.7 million to $49.4 million, largely reflecting stronger earnings in higher tax jurisdictions. The FY '27 tax rate is expected to be approximately 26.5% to 27.5%, which is an increase from around 26% in FY '26. I Underlying NPAT was $142.2 million, down 5.9%. Underlying EPS was flat at $0.114 per share, reflecting the benefit of the buyback programs. On the statutory result, NPAT from operations was a loss of $616.6 million. FY '26 significant items after tax was $758.8 million. This includes the noncash impairment of the Glass CGU of $728.2 million after tax. I will cover the significant items on the next slide. Turning to Slide 15. The FY '26 result includes Glass CGU significant items of 782.2 million before tax. There are 3 components to this. The most significant item is the noncash impairment of the glass CGU of $742.8 million or EUR 449.7 million. The noncash impairment reflects a reset of the carrying value of the glass CGU following a reassessment of the pace of recovery in Saverglass earnings. The impairment comprises goodwill together with the write-down of other intangible assets including customer relationships, brand names, molds and other related assets. The second item is the previously announced significant items, namely the Saverglass corporate restructure and LAV closure. The FY '26 EBIT impact for these combined items was $25.5 million or EUR 14.4 million. The third component relates to the RAC plant. Following the commencement of the Middle East conflict, rack transitioned to closed loop or idling mode with no production since April of 2026. The facility is operating with reduced staff on-site and mold sets have been transferred to Mexico and France. The FY '26 impact from rack idling was $13.9 million or EUR 8.2 million. The associated cash cost of significant items in FY '26 was $50.5 million. This is made up of the following: the Saverglass corporate restructure and [indiscernible] F4 closure of $29.9 million, the direct cost of RAC transition to idle mode since post the commencement of the Middle East conflict of $8.9 million and cash payments made in FY '26 related to the G1 closure announced in FY '25 of $11.7 million. For FY '27, the forecast for cash costs relating to significant items announced in FY '26 is EUR 8.5 million. Slide -- moving to Orora Cans on Slide 16. Cans revenue increased 13.3% to $880 million, excluding the pass-through impact of aluminum prices, revenue increased 10.5%. The result reflects volume growth of 6.3% for the year, with the second half volume growth of 1.7%. Increased volumes reflect continued strong demand from customers to support new filling investments in Queensland with demand driven by ongoing substrate shifts and growth of new categories. EBITDA increased 10.5% to $131.2 million. This reflects the benefit of higher revenue, partially offset by ongoing higher interstate transport costs and the allocation of $5 million of corporate costs in the first half following the sale of OPS. On an adjusted basis, excluding those corporate costs, EBITDA increased 14.7%, EBIT increased 7.3% to $111.4 million. D&A increased $4.9 million, reflecting the recent growth capacity investments in plans. Excluding the incremental corporate costs, EBIT increased 12.2%. Cash realization was in line with our internal forecast of 82.6%, reflecting higher inventory levels associated with the planned can inventory build. Total CapEx was $114.3 million, including $86.9 million of growth CapEx primarily related to the Rocklea expansion. Base CapEx was $20.4 million, equivalent to 127% of depreciation. Turning to Saverglass on Slide 17. Saverglass volumes increased 5.9% for FY '26 with second half volume growth of 9%. This drove revenue growth of 0.8% in FY '26 and 4.2% in the second half of '26, largely through tequila and premium sparkling as well as growth in midscale, Bourbon and vodka. Revenue increased 0.8% to EUR 617.2 million and volume growth was partially offset by lower average selling prices across and within categories of around 5%. EBITDA declined EUR 13.4 million or 9.3% to EUR 131.5 million. Second half EBITDA was down eur 14.1 million, reflecting these price impacts. EBIT was EUR 62.8 million, down EUR 16.4 million. Second half EBIT was down EUR 13.2 million and this reflects the lower EBITDA. In FY '26, Saverglass earnings include FX gains on monetary items of around $6 million or EUR 3.5 million. For the second half of '26, the FX gain was EUR 2 million, and these FX gains are expected to decrease and the on-market share buyback progresses in FY '27. D&A increased EUR 3 million primarily -- principally due to an increase in North American property right-of-use lease amortization. Cash realization was strong at 112.1%, and benefiting from inventory reductions and associated working capital improvements. Total CapEx was EUR 38.5 million and major components included molds of [ EUR 12.8 million ] and the glass furnace rebuild, which included EUR 8.2 million of base CapEx and $1 million of [indiscernible] CapEx. Turning to Gawler on Slide 18. Gawler revenue was $284.5 million, a 0.3% decline year-to-year and reflected continued pressure on beer volumes. Contracted price increases almost offset the 2.1% decline in volumes. Lower FY '26 volumes and revenue largely reflect a decline in the seasonally stronger first half volumes versus internal expectations. EBITDA increased 9.5% to $62.3 million, and EBIT increased 10.5% to $28.1 million. This reflects the operational efficiency benefits from the move to a 2 furnace operation, partially offset by lower volumes. Depreciation increased $2.7 million reflecting completion of the G3 furnace rebuild and oxygen plant in FY '25. Cash realization was strong at 107.4% driven by improved working capital efficiency following the transition to the 21st operating model. Total CapEx was $13.7 million and largely comprised base CapEx and base CapEx of $12.2 million was equivalent to 37% of depreciation. Turning to Slide 19. Underlying operating cash flow remained strong at $290.7 million down 12.8% on FY '25. The decline reflects slightly lower cash EBITDA and a reduced one-off working capital benefit relative to FY '25, partially offset by lower base CapEx. Cash EBITDA was $384.7 million, down 1.4% on the prior year. And the movement in working capital was largely flat despite one-off Cans inventory build of $13 million compared with a $62.9 million benefit in FY '25. The benefit in FY '25 relates to the unwind of inventory at Gawler following the completion of the G3 rebuild and higher payables from increased volumes and aluminum purchasing timing and Cans. Base CapEx was $85.9 million, down from $117.9 million in FY '25, and growth CapEx was also lower at $108.4 million, largely relating to the new $375 million Rocklea Cans line. Cash significant items were $50.5 million. I covered the composition of these earlier. Net interest payments were $46.1 million, down $17.3 million, reflecting the reduction in debt following the completion of the OPS sale, partially offset by the share buyback. Cash taxes were $27 million, up $7.4 million, reflecting the recommencement of monthly PAYG and tax installments in FY '26. Free cash flow available to shareholders was $58.7 million, down $38.6 million. This is after growth CapEx of $108.4 million in FY '26. Cash realization of 98.3% demonstrates the continued strength of Orora's cash generation and conversion. Turning to CapEx on Slide 20. FY '26 CapEx was $194.3 million. This comprises base CapEx of $86 million, including a decal CapEx of $1.7 million and growth CapEx of $108.4 million. Base CapEx was 69% of total depreciation, reflecting our continued focus on capital discipline whilst completing the major planned Cans growth capacity investment cycle. For FY '27, total CapEx is forecast to be around $140 million to $145 million. This includes base CapEx of around $85 million to $90 million, CapEx of about $5 million to $10 million and growth CapEx of around $50 million. FY '27 growth CapEx includes roughly $6 million, various other Cans projects of $9 million and glass growth efficiency projects, including glass digital factory initiatives for $8 million and cold end automation for $15 million and new business molds of $4 million. From FY '28 onwards, base and [indiscernible] CapEx is expected to be in line with our long-term guidance of $85 million to $120 million per year. D&A in FY '26 was $172.1 million, up $15.4 million. FY '27 D&A is expected to be in the range of $180 million to $185 million. The increase in FY '27 D&A reflects higher depreciation for Rocklea, Helio and [indiscernible] and lease amortization for Rocklea and Dandenong. Saverglass, FY '27 D&A is expected to be in the low EUR 70 million range, reflecting the [indiscernible] rebuild and malls. The key takeaway message here is that free cash flow available to shareholders is expected to be higher in FY '27 as total CapEx reduces following completion of the Cans capacity growth investment cycle. Turning to Slide 21. I'm pleased to share that we made several changes to the group's debt facilities to strengthen liquidity and extend the maturity profile. Importantly, there is no refinancing of drawn debt until FY 33. We completed 2 transactions on the 30th of June. First, a new U.S. private placement of EUR 210 million across 7- and 10-year notes. That's long-dated fixed euro-denominated debt that naturally matches our European earnings. And second, we amended and extended the syndicated bank facility simplifying the trans structure, reducing total capacity and long pricing across every tranche. The USPP proceeds were applied to repaying existing bank debt around $284 million and that was repaid in July. For the revolving facilities of $757 million now maturing FY '30 to '32 are fully undrawn post that repayment. The weighted average maturity has been extended to around 5.4 years. As set out in the bottom chart and the table on this slide, normalizing for the $284 million repayment in July our cash balance would have been AUD 229 million and committed liquidity from undrawn revolving facilities of $757 million. Given the completion of the Cans capacity investments, we deliberately reduced our committed facilities by approximately $370 million to $757 million compared to the prior year. Turning to Slide 22. The balance sheet remains in a strong position with cash and undrawn facilities available to support ongoing shareholder distributions and organic growth. Net debt at the 30th of June 2026 was $481 million compared with $254 million last year. The increase was largely driven by the $118 million share buyback and Cans growth CapEx. Leverage was 1.2x, which remains below our long-term target range of 1.5 to 2.5x and interest cover was 8.1x. Available liquidity was approximately $986 million, comprising committed undrawn facilities and cash. As noted on the prior slide, the group has also extended and streamlined our debt facilities, including the new EUR 210 million, 7- and 10-year USPP issuance. FY '26 net finance costs were $56.6 million after capitalizing $4 million of interest related to the Rocklea project. For FY '27, net finance costs are forecast to be in the range of $63 million to $68 million. This is before the impact of recommencement of the on-market share buyback announced today. This forecast includes interest on drawn debt at an average cost of around 4.75%, right-of-use lease interest of around $11 million and other items, including commitment fees for undrawn facilities and working capital financing. Turning to Slide 24. The final dividend is $0.04 per share unfranked, representing a gross cash dividend of $49 million. The final dividend payout ratio is 76% towards the top end of the target payout range of 60% to 80% of NPAT. The total FY '26 dividend is $0.09 per share, representing a 78% payout ratio with the reduction driven by the lower impact. The dividend reinvestment plan will be operative for this dividend with shares purchased on market to meet DRP obligations. In relation to the buyback, around 56 million shares were bought back during FY '26 at an average price of $2.10 for a total of $118 million representing around 4.5% of shares outstanding. The 2026 on-market buyback, which was paused on the ninth of April will recommence after the FY '26 results. I will now hand back to Brian.

Thank you, Shaun. Now I cover our perspective to FY '27 and the outlook. So if we turn to Slide 25. For Cans, demand tailwinds remain positive, and we expect the volume growth to be consistent with the long-term growth rate of around 4% to 6%. And the new Rocklea 75 mill plastic can line remain on track for commissioning by the end of the first quarter of FY '27, adding around 13% network capacity following an estimated 12-month ramp-up from commissioning. Importantly, FY '27 will also mark the transition back to 5- and 6-day operations after 5 years of continuous 24/7 production across all sites and all lines. Around $13 million of the planned $30 million of one-off Cans raw material and finished goods inventory build did occur in the second half of FY '26 with the remaining $17 million now expected to occur in FY '27. With Saverglass, spirits and wine industry volumes remain under pressure across most geographies. Cost of living pressures continue to impact premiumization trends and FY '27 volume growth is expected to reflect continued price and mix impact towards lower-priced products, lowering average selling prices and margins. The Glen, wine and champagne production facility rebuild that commenced in May is now nearing completion with ramp-up in production expected from late Q1 FY '27. I'm also pleased to advise that we're planning to recommence production at Rack on a restricted volume basis from October via alternate shipping ports in Oman. The EBIT impact, which is a significant item for FY '27 of approximately EUR 2 million per month prior to the recommencement will reduce thereafter as operations progressively restart. Until the Strait of Hormuz of us fully reopens, our intention is for right to operate at approximately 50% capacity utilizing shipping ports in Oman. The partial restart of RAC allows us to better service our global customers. The economics of operating 2 lines of RAC, which is approximately 50% capacity is largely neutral versus keeping Rack in an idling mode. The Saverglass executive team is focused on executing the 6 key business priorities, targeting net EBIT run rate improvement of more than EUR 30 million by FY '30 with benefits expected to commence from the second half of 2027. With Gawler, the team continues to manage the volume and efficiency challenges associated with the transition from a 3-furnace to a 2-furnace operation. Domestic and export wine demand remains challenging and beer continues to shift to Cans. The 2-furnace operation is now fully utilized. -- and with any surplus volume in demand to be sourced from the Saver Glass network. At a group level, completion of the Cans growth CapEx investment is expected to support stronger cash flow generation in FY '27 and onwards. Turning to Slide 26 and our FY '27 outlook. [indiscernible] EBIT is expected to be higher than FY '26. Volume growth is expected to be consistent with the long-term growth rates of 4% to 6%, supporting EBITDA growth in FY '27. This will be partially offset by higher D&A, including the commissioning of Rocklea by the end of the first quarter of FY '27. The Saverglass, ongoing impacts from U.S. tariffs, the accelerated effects of the Middle East conflict and continued supply chain disruptions have resulted in the adverse price and mix effects in the second half of 2026. These pressures are expected to persist into the first half of '27, with volume growth and cost savings more than offset by these ongoing pricing and mix impacts. As a result, FY '27 EBIT is expected to be lower than FY '26. At Gawler, EBIT is expected to be around $30 million. FY '27 will be the first full year of the 2 furnace operation. The operational benefits are expected to support EBITDA growth versus FY '26. At a group level, EBIT is expected to be lower than FY '26, reflecting higher D&A and the lower Saverglass EBIT. In relation to significant items to FY '27, cash costs from FY '26 significant items will be approximately EUR 8.5 million. In relation to RAC, for FY '27, the monthly idling cost is approximately EUR 2 million per month. This is prior to the recommencement in October on a restricted volume basis. This monthly idling cost will reduce as rough production increases above 50%. As always, this outlook assumes no further changes to U.S. tariffs or the Middle East conflict as of the 13th of August 2026 and remain subject to global and domestic economic conditions and currency fluctuations. Thank you, everyone, for listening. Operator, we'll now hand back to you to open the line for questions.

[Operator Instructions] The first question comes from Samuel Seow with Citi.

Maybe just a quick one on the glass priorities, mid-single-digit percentage revenue growth ambition. Could you please separate that out into what your assumptions are the market reversing or [indiscernible] versus, I guess, the more controllable seen [indiscernible] gains.

Look, I mean there's obviously a lot of play when it comes to that. So it's much going to be a year-by-year proposition. But what we are expecting is volume growth, we certainly targeted and we saw that was attained through FY '26. So there's momentum there and a fairly strong pipeline. The thing that will offset that and obviously impact of revenue ends up being is those effects of mix and on pricing. And we're not seeing that abate yet. But certainly, over the medium term, we expect that kind of a least level out at some point. We're not expecting that to turn around and reverse, and we're going to get net price gain that's not in our assumptions relative to that FY '30 ambition.

Got it. Got it. So just following on maybe in reconciling your second half Saverglass revenue growth, you had pretty good volumes there offset by [indiscernible] reasons. Is that fair to say that that's the new normal you expect over the next few years? Or how long are you planning to aggressively, I guess, go down the curve on that one?

Well, the pricing pace -- well, mix is really going to be more governed by our customers' demand. We unfortunately don't control that they want to buy and therefore, can sell in the marketplace. The pricing piece is really a function of the additional capacity that's available in the broader market and therefore, the competitor set in terms of how aggressive they're pushing as well. We certainly expect that to start to moderate at some point. But at least through FY '27 and particularly through the first half, we see the impact that we had in the second half of '26 continuing at least through the first half. And at this point, we don't have true visibility on the second half, but I wouldn't think it's going to moderate in FY '27.

Your next question comes from John Purtell with Macquarie.

Just a couple of questions, if I can. Just in terms of the Saverglass volume growth expectation for '27. You're expecting that from both spirits and wine and champagne. And just a related question around price and mix appreciate it's sort of hard to call, but you sort of had, I think, an adverse 5% price mix in '26. I mean, would that be a reasonable proxy for your expectations for '27?

Thank Yes. Look, first question on volume. We have quite a good pipeline of opportunities across line, champagne and spirits. So part of it will be a function of the new business execution during the year and part of will be a function of what that underlying demand is for our customers, but we would expect to be gaining some volume growth in both categories. relative to price to mix, again, at least through the first half of '27, we would expect around the magnitude we saw in the second half of '26 to persist. And again, it's hard to call for the second half. But certainly, we would expect to see some continued pressure through that second half, but the magnitude is yet to be determined.

And just last couple, again, on Saverglass. In terms of higher energy costs, you've got good cover, but are you expecting any lag impacts in the second half of '27? And just on the Rack restart there, Brian, just to clarify your earlier comments, so there still will be a cost of $2 million per month post Rack restarting at 50% utilization. So does that cost not sort of reduce until you get obviously utilization at a higher level? And will that cost be taken as an SI.

So look, on energy, the team continue to do a really good job in terms of hedging that. So the -- so the net position for FY '27 is going to be a few percentage points up on '26 in terms of total cost for energy. And what they do then is you utilize that for the resets we have with customers, whether it be in customer contracts where we have the clear pass-through mechanisms of energy, all the other customers where we have an annual reset where energy is one of those components. So at this point, we wouldn't be expecting any exposure in terms of our P&L relative to energy cost for '27. So we're comfortable that squared away. And on RAC, yes, you're correct, the utilization at 50% or less. It's quite expensive to run an underutilized glass plant, which we saw in G1 in Gawler. Once we got close to 50%, you end up in a loss position. So that's going to be a similar situation for RA. Just an add to that, the restriction we have at the moment on getting above 50% is there was a limited amount of containers per week. That we can ship through the port of Oman. So they're working on increasing the availability from a capacity standpoint. So it's not our capacity constrained. It's shipping line capacity. So as that frees up, we should be able to get above 50%. And there's obviously additional costs in that shipping at the moment versus through the Strait of Hormuz. So net [indiscernible] it is about the same impact. And whilst then is, let's say, underutilized and suboptimal, we would expect we'll call that out as an SI until we get to a point where we say, okay, we have freedom to produce what we need to interact and therefore, we're in a more representative mode relative to what the run rate of the business should be.

Your next question comes from Mark Wilson with RBC.

Just looking at the glass improvement initiatives. Just sort of wondering if you can sort of outline the cost to achieve that and when they are likely to fall, I know you mentioned we should see some benefits from the second half of '27. But is that essentially a linear flow through after that?

Yes. I mean there's -- firstly, the cost the cost to achieve, we look at that -- at this point on a net basis relative to the impact on the P&L. So unless we change course to find additional savings opportunities or opportunities to accelerate that will incur some greater upfront costs, we will then address that and call that out separately. But at the moment, those costs are part of that. There is some cost relative to the growth capital that we have in the plan for FY '27. Two of the major items that are in there for Saverglass as Shaun mentioned, the cold end automation and the digital factory projects are key enablers or reducing our operations costs and our cost per tonne. And given pricing is coming down, that's critical for us to reduce the cost base of production. And those 2 projects, we have agreed to approve because we're comfortable that based on our normal expectation of growth CapEx being a 15% return by year 3. Both of these projects, we believe, will be comfortably above the 15% by year 2. So they are -- that capital is part of what's going to help generate that positive return commencing in the second half. And look, it's very difficult to say whether it's linear or not. It's more going to be a function of, I think, the initial momentum behind them once we get that pace coming through, that's helpful. But the offsetting headwinds are going to really be the determining factor of when we break through, let's say, a net positive versus a substantial gain in ground.

Your next question comes from Jacob Gitanes with Jordan.

I just want to get an understanding just sort of the confidence that that Cans business returning back to those long-run growth levels at 4% to 6%, just given when you exited the second half, up very low single digits. How much of the volume increase is expected to come from Rocklea [indiscernible]?

Well, Rocklea will be very full, very quickly once we get it ramped up. And that's because at the moment, we have surplus demand in Queensland versus other states with our customers, 3 major customers all over the last 12 months or so investing in new filling capacity in Queensland. So where we referenced that we're going to take some of the other sites back to 5- and 6-day operation, and they're more in the Sydney and Melbourne locations that we're going to be able to do that. So the balance will have a better balance across the sites. Our second half run rate, we believe, is actually quite strong when we look at the comparative period where we had called out in last year's results, we had an inventory build from our customers who adjust open some new filling lines. So when we look at that on the full year basis, that's a better representation. And in fact, over the last several years, we had a couple of double-digit double-digit numbers. So we say we're probably tracking in the last 2 or 3 years above what we think the norm is. So we are comfortable with that 4% to 6% range, again, being a reasonable expectation based on everything we hear from our customers and seeing in the market.

I know you've never given us this number, but how do we think about additional freight and storage costs falling away as you get a better regional mix from where that volume is?

Yes,Maitwas certainly an impact as we had at the start of FY '26. Look, we finished the year -- and I think most will probably know, we'll finish the year a little ahead from an EBIT standpoint of where we thought we would and part of that was the team has done actually a really good job in getting part of that recovery, where we're incurring a lot to move product around and support our customers' growth, which volume was probably higher in '26 than we had anticipated. So that freight piece and the offset, we're comfortable. We've got a fair bit of that during '26. So there's not as much flowing into FY '27 is what they may have been.

Understood. Just one final one just on the CapEx plan. So $50 million of growth CapEx. It seems like there's quite a lot still orientated towards the glass business. Can you just step us through why that CapEx needs to be done, maybe some of the initiatives more around productivity like the cooling? How do we think about that? And are the returns commensurate with what you guys typically target the growth CapEx given Saverglass, please?

Yes. I think I just covered that with my answer to the [indiscernible] to Mark's question, where I talked about the 2 CapEx projects and returns within 2 years instead of 3 and considerably above what our 15% cut in so I think we covered that one.

Your next question comes from Ramoun Lazar with Jefferies.

Just a follow-up to John's question, just around the Saverglass cost profile into '27. You mentioned a few percentage point increase on energy costs. But maybe just overall, I guess, what sort of cost inflation are you expecting to see through the year in that cost base. And then obviously, you've got the $15 million of cost out that partly offset that inflationary pressure. Can you maybe just help us put that out in a bit more detail.

Yes. I think maybe I'll have a [indiscernible] answering that one, Ramoun. So look, in terms of the cost base, I think we've got pretty good control around the cost base. The bigger challenge, of course, is just this price impact that we've that we've talked about already. And we have good mechanisms in our contracts to make sure that where we do have more moderate inflation, for example, in labor or other items that we can pass those through. Brian's has already spoken to our largest cost bucket, which is energy, and we've got a really good handle around those costs and how we'll pass those through to customers. So I think things are relatively stable from that perspective. It's really just managing the price dimension as that flows through into EBITDA and the EBIT.

Okay. And then assume, I guess, the EUR 15 million of savings that have already been sort of announced that those should run rate into '27 presumably?

Well, effectively, the guidance that we've given for next year includes the benefit of those, but what you're not seeing in terms of the guidance that we're giving is adding because you're actually seeing that price impact impacting at the bottom line. So in the absence of having done that, perhaps a better way of describing this is in the absence of having done those programs, particularly closing the furnace in [indiscernible] and the corporate cost restructures, the result and guidance for '27 would be worse. The fact that it's slightly -- it's down on '27 in terms of our guidance, given the price impact is because we've taken the cost action already.