CAPRAL LIMITED — Earnings Release 2023

Feb 23, 2023

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2022 Full Year Results Presentation and Earnings Guidance

24 February 2023 Capral Limited (ASX:CAA) 15 Huntingwood Drive Huntingwood NSW 2148

Approved and authorised by Capral’s Board of Directors

OUR BUSINESS AT A GLANCE

AUSTRALIA’S LEADING SUPPLIER OF ALUMINIUM EXTRUSION AND ROLLED PRODUCTS

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#1 EXTRUSION MANUFACTURER

6 PLANTS

8 EXTRUSION PRESSES 65,000 TONNES OF ANNUAL EXTRUSION CAPACITY

#1 SUPPLIER OF INDUSTRIAL ALUMINIUM EXTRUSION

#1 DISTRIBUTOR OF ROLLED ALUMINIUM PRODUCTS

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#2 DISTRIBUTOR OF COMMERCIAL WINDOW AND DOOR SYSTEMS

8 DISTRIBUTION CENTRES

14 TRADE CENTRES

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ANNUAL TURNOVER
~$690
MILLION
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KEY MARKETS: RESIDENTIAL COMMERCIAL CONSTRUCTION INDUSTRIAL

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TOTAL ASSETS

~$450 MILLION

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MARKET SHARE OVER
~25% 1,000
EMPLOYEES
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2

AGENDA

1. FY22 Highlights

2. FY22 Financials

3. Strategy

4. Outlook & Guidance

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Tony Dragicevich, CEO & Managing Director

• improved sales mix from growth in high

• higher productivity from investments in

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FY22 PERFORMANCE HIGHLIGHTS

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RECORD FULL YEAR RESULT

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Volume lower than FY21 at 6% Sales Revenue 17% Underlying EBITDA [1&2] 10%
(excluding rent)
71,800 $693m
$62.2m
tonnes (FY21: $593m)
(FY21: $56.4m)
(FY21: 76,300t) driven by record high LME
driven by improved sales mix & margin
Underlying EBIT [2] 13% Underlying EPS² 9% Final Dividend
$1.96
$40.8m 50 cps
(FY21: $1.80)
(FY21: $36.2m) fully franked
NPAT $40.8m includes $8.4m ITB
(FY21: 50 cps)
(FY21: $42.7m includes $9.4m ITB)
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Excellent Safety
Strong balance sheet NTA per share 14% Performance
with net cash 31 December TRIFR [3]
$9.14
$24.9m (FY21: $8.03) 4.3
(FY21: 7.7)
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Important Note

1 EBITDA is defined as Earnings before Interest, Tax, Depreciation and Amortisation and, in accordance with AASB16, excludes rent payments $18.9m.

2 Underlying EBITDA, EBIT, and Earnings Per Share (EPS) are adjusted for significant items (LME Revaluation ($2.2m) and Income Tax Benefit $8.4m). 3 TRIFR is total reportable lost time and medically treated injuries per million work hours.

5

SALES CHANNELS AND INDUSTRY EXPOSURE

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Channels to Market (volume)

Diverse Industry Exposure

Volume Seasonality

Tonnes (000s)

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11%
15%
43%
56%
29%
46%
Extruded Aluminium (Direct from Mill) Industrial
Extruded Aluminium (via DCs) Residential Building
Rolled Aluminium (via DCs) Commercial Construction
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Extruded Aluminium (Direct from Mill) Extruded Aluminium (via DCs) Rolled Aluminium (via DCs)

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45
40
35
30
25
20
15
10
5
0
1H15 2H15 1H16 2H16 1H17 2H17 1H18 2H18 1H19 2H19 1H20 2H20 1H21 2H21 1H22 2H22
Source: Capral
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Source: Capral DC’s: Capral Distribution Centres.

Residential building includes additions and alterations Industrial includes transport, marine and other manufacturing sectors.

Volume 6% lower than 2021

Softer volume driven by:

Volume split by Product Group

85% Extrusion

15% 15% Rolled (Sheet & Plate)

• Resellers and Solar rail distributors returning to imports as supply chain problems eased

• Softer housing markets partially offset by ongoing infrastructure investment and commercial projects

6

RESIDENTIAL MARKET SLOWED AND PIPELINE REDUCING

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2022

Annual Dwelling Commencements ¹ (000’s)

Latest estimate ¹ 190,000 starts in 2022, down 18% on 2021

• Residential starts impacted by:

• • Higher interest rates
• • Removal of government incentives

• Detached dwellings down by 20%

• Multi-res down by 14%

2023

Forecasted starts to be on par with 2022

• Starts impacted by rising interest rates

• • Detached dwellings slightly down

• Multi-res showing slight improvement

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250
200
150
100
50
0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
(E) (F)
Detached Housing Multi-Res Low Rise Multi-Res High Rise
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Capral’s volume mainly aligned with Detached and Low-Rise Dwellings (shaded green in graph)

¹Source: BIS Oxford Economics (Dec 2022)

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RECENT CAPRAL RESIDENTIAL & COMMERCIAL PROJECTS

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Concrete House, ACT Fabricator: ViewCo Products: Schuco Windows and Doors

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The Tasman Parliament Square, TAS Fabricator: CWD Custom Windows Products: Capral Commercial Curtain Wall

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The Log Cabin, NSW Fabricator: Arch-System Fabrication Pty Ltd Products: Capral Commercial Windows and Doors

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Annie Hughston Centre, Fintona Girls’ School, VIC Fabricator: BT Windows Products: Capral Commercial Windows

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INDUSTRIAL SECTOR SLOWED IN 2H22 BUT REMAINS STRONG

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Total Capral Industrial Volumes (Index 2012)

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160
140
120
100
80
60
40
20
0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
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Source: Capral

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Marine Manufacturing &
Steady market conditions General Fabrication
Commercial ferry builds slowed
Markets solid and share gains holding
Solar against imports
Wet weather conditions and
increased imports reduced demand Resellers
for local supply Volume to industrial distributors
softened as imports resumed
Industrial Construction
Solid growth in infrastructure investment Transport
Growth in cladding sector as rectification Strong conditions continued
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Solid growth in infrastructure investment
Growth in cladding sector as rectification
activity starts
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Transport sector remains strong

• New truck builds posted record year, up 7% on 2021

• • Government stimulus assisted sector recovery (instant asset write-off)

• Strong grain season and sector optimism supports ongoing high activity levels

New Truck and Van Builds (000’s)

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50
45
40
35
30
25
20
15
10
5
0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
LTM
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Source: Truck Industry Council of Australia

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RECENT CAPRAL INDUSTRIAL PROJECTS

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Les WillPlay, Playground Equipment, Tallebudgera QLD

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HSP, Ute Lids and Canopies VIC

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Vawdrey Australia, Truck Body Builder VIC

Kirby Marine, Recreation Vessel

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FULL YEAR FINANCIALS Tertius Campbell, CFO

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RECORD FULL YEAR EARNINGS

 Volume 6% lower than FY21

• Sales Revenue increased 17% on FY21, driven by high metal prices (LME)

• Underlying EBITDA up by 10% on FY21, primarily due to improved sales mix and margin

• Depreciation on owned assets increased mainly due to acquisition of Smithfield plant

• Operational Finance Cost is higher, driven by line fees and LC costs for imported products, also short-term working capital loans

• $8.4m additional Income Tax Benefit recognised during FY22 (FY21:$9.4)

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	FY22 FY21	FY22 FY21
Sales Volume ('000 tonnes)  Sales Revenue 	71.8 76.3 $m $m 692.6 593.5
Underlying EBITDA¹ 	62.2 56.4
Depreciation/Amortisation  - Owned Assets - Right of Use Assets	(7.5) (6.7) (13.8) (13.5)
Underlying EBIT¹	40.8 36.2
LME and unrealised FX Revaluation EBIT Finance Cost  - Operational Funding - Right of Use Leases Net Profit Before Tax Income Tax Benefit 	(2.2) 2.8 38.7 39.0 (1.9) (1.3)
	(4.4)	(4.4)
	32.4 33.3 8.4 9.4
Net Profit After Tax	40.8 42.7
Property Revaluation Gains	- 3.1
Total Comprehensive Income 	40.8 45.8
Underlying Earnings Per Share ($/share) Statutory Basic Earnings Per Share ($/share)	1.96 1.80 2.31 2.52

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¹ See Important Note (page 5).

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SOUND FINANCIAL POSITION THAT PROVIDES CAPACITY FOR DIVIDENDS AND GROWTH INVESTMENT

BALANCE SHEET	DEC 22	DEC 21
Current Assets	$m	$m
Inventory 	154.9	130.5
Trade Receivables 	91.3	96.3
Cash and Equivalents 	49.0	50.1
Other	0.9	0.7
	296.1	277.7
Current Liabilities
Trade Payables	(112.7)	(139.0)
Lease Liabilities 	(16.2)	(15.8)
Borrowings 	(24.1)	-
Provisions and Other	(18.9)	(19.1)
	(171.9)	(173.9)
Net Current Assets	124.2	103.8
Non Current Assets	150.7	147.6
Non Current Lease Liabilities 	(77.9)	(87.7)
Non Current Provisions	(7.3)	(6.5)
Net Assets	189.7	157.2
Working Capital Ratio	13.1	10.7
Net Tangible Asset Value	162.4	138.0
NTA per share	$9.14	$8.03
Franking Credits	8.1	13.3
Accumulated Unrecognised Tax Losses 	129.6	194.3

• Inventory increased due to rebuild from low levels, high rolled stocks, and record high metal prices (LME)

• Receivables elevated due to sales price (LME). Metrics remain excellent with DSO at 48 days (FY21:50 days)

• $95m debt facility with ANZ Bank, expiring April 2024 with sufficient headroom to fund working capital and trade instruments (LC’s). Short term trade loans of $24.1m outstanding

• Lease Liabilities (current and non-current) of $94.1m, primarily property leases as defined by AASB16, net impact is a reduction in Net Assets of $27.5m due to timing of lease terms

• A further $8.4m Deferred Tax Asset was recognized during FY22 to reflect increased utilisation of tax losses in future periods subject to tax recoupment rules

• Metrics remain strong and well within bank covenants providing flexibility to manage uncertainty

• Leverage ratio¹ increased to 1.9 times Underlying EBITDA (FY21:1.8) due to short-term trade loans to fund increasing working capital

• Gearing² increased from 25.4% to 27.3% driven by debt funded increase in working capital

• EBITDA Interest cover³ maintained at around 20 times

• ¹ Leverage ratio is Net Debt/Underlying EBITDA.

• ² Gearing is Net Bank Debt/Net Bank Debt & Equity.

• ³ The calculation of interest cover used for bank covenant purposes differ from calculations drawn directly from the financial statements.

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STRONG CASH EARNINGS OFFSET BY HIGHER WORKING CAPITAL REQUIREMENTS DUE TO RECORD HIGH METAL COSTS (LME)

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Continued strong focus on cash management. Cash conversion ratio lower due to increase in working capital but will improve as working capital levels normalise

• Working capital increase driven by higher inventory due to high metal costs (LME) and high rolled stock levels

• Operational interest charge increased on prior period due to shortterm trade loan to fund increased working capital requirement

• Maintenance, environmental and safety capex ~$4m pa in line with plan. Major projects; Huntingwood Paintline and Penrith Press rebuild $4.6m

• Acquisition of extrusion plant in Smithfield, NSW in 1H21

• Dividend paid was net of a 30% up take of the Dividend Reinvestment Plan (DRP) for FY21 final dividend

• Trade Instruments mainly letters of credit (drawn and open) in relation to imported product

• Trade/Other loans represent debt facility usage to fund working capital needs, maximum usage during FY22 $31.0m (FY21: 4.3)

CASH FLOW	FY22	FY21
	$m	$m
EBITDA1	60.0	59.2
Working Capital 	(46.5)	(12.2)
Finance Cost 	(6.4)	(5.3)
Operating Cash Flow	7.1	41.7
Capital Expenditure 	(10.0)	(9.5)
Acquisition/Investment 	-	(10.3)
Rent Principal payments	(14.5)	(15.0)
Free Cash Flow		6.9
Proceeds from borrowings 	24.1 (9.6)	-
Other		-
Dividends Paid 		(7.4)
Increase/(Decrease) in Net Cash	(2.4)	(0.6)
BANK FACILITY USAGE	FY22	FY21
	$m	$m
Bank Guarantees	4.4	4.5
Trade Instruments 	25.6	51.6
Trade/Other loans 	24.1	-
NET CASH POSITION	FY22	FY21
Cash Balance in funds	24.9	50.1

¹ See Important Note (page 5).

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STRATEGY AND OUTLOOK Tony Dragicevich, CEO & Managing Director

BUILD on our strengths

OPTIMISE what we do

GROW for the future

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IMPROVE PRODUCTIVITY AND COMPETIVENESS, RETAIN MARKET SHARE GAINS

Distribution

Manufacturing

• Capral’s new window & door product range and systems software released

• Continue process improvement programmes at all extrusion plants

• Range enhanced by purchase of EDGE high thermal performance window systems

• Maintenance capital spend to ensure on-going plant reliability and efficiency

• Progressively upgrade shopfloor control systems to a common platform

• New paintline installed in our NSW distribution centre

• Complete upgrade of Penrith extrusion plant

• Goal is to grow Capral’s direct distribution channel

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Sales

• On-going technology investment to improve sales effectiveness including; customer interfaces (EDI), CRM, and digital marketing (EDM)

• Upgrades to website and e-store are in progress

• Seek opportunities to expand regional footprint. Two trade centres recently acquired

MARKET DEVELOPMENT

Solar

Regain and grow share in the $60m+ solar rail market.

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Defence

Capral is an approved supplier to major defence contracts.

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Cladding

Work with cladding system suppliers to address new fire standards and recladding opportunities.

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Imports and Anti-Dumping

Retain market share gains Continue fight for fair trade Decision to discontinue measures on Malaysia and Vietnam under appeal Variable measures review on Chinese imports underway.

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ON A PATH TO A BETTER TOMORROW

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OUR ROADMAP

• Active sustainability committee.

• Net Zero by 2050 (Scope 1 and 2 emissions)

• Drive sustainability best practice throughout business

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Identify and implement strategies and processes to minimise the use of energy and develop sources of renewable energy

Reduce how much waste is going to landfill by reuse, repurpose, and recycle

• Underpinned by a commitment to the United Nations Sustainability Development Goals

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Identify and introduce ways to minimise the use of paper and ensure any paper used is from sustainable sources

Source from ethical suppliers providing sustainable, nontoxic, biodegradable and recycled products

FY22 HIGHLIGHTS

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• Scrap recycling agreement with Tomago aluminium smelter, an Australian first

• $1.2m investment in solar renewal energy at Campbellfield, VIC ~15% of site energy consumption

• Replaced 400 high bay warehouse lights at Bremer Park, QLD with LED’s reducing lighting energy consumption by around 2,000KwH per day

• Aluminium Stewardship Initiative (ASI) membership, auditing process underway to achieve chain of custody certification in 2023

• Joined MECLA (Materials Embodied Carbon Leader Alliance) to assist in guiding the Built Environment towards using more sustainable aluminium in projects

• Introduced LocAl® Green and LocAl® Super Green as lower-carbon aluminium options across Capral’s locally manufactured extruded products

• Introduced variable speed drives to Penrith manufacturing plant reducing power consumption by ~20%

• Introduced latest generation multi-zone electric billet heating containers at five extrusion presses reducing electricity usage by ~15%

17

METAL COST AT RECORDS HIGHS

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Aluminium Price $A (LME & Premiums)

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5.00 

4.00
1
3.00 2
2.00
1.00
0.00
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
18 18 18 18 19 19 19 19 20 20 20 20 21 21 21 21 22 22 22 22
LME Premiums
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• Average Premiums increased 89% during 2022, due to significant increase in smelter billet premiums

• Average LME increased 22% during FY22 to $A3,900t due to high global demand

The international LME price was impacted by global supply factors, including Russia’s invasion of Ukraine. LME started to lift in mid-2021 post COVID, reached peak levels in Q2 2022, returning to more normal but elevated levels in Q4 2022

18

OUTLOOK AND EARNINGS GUIDANCE

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• Residential building is forecast[1] to remain on par with 2022, but with a reducing pipeline of work

• Other key markets; Commercial and Industrial, are expected to remain at relatively high levels

• Reseller volumes will remain subdued as import supply chains normalise

• LME peaked at record levels in 2Q22, has recently returned to December 2021 levels, and is forecast² to fall moderately during 2023

• Inflationary cost pressures continue to impact, especially; employee, energy, packaging and freight costs

• Absent any unforeseen events, FY23 EBITDA is expected to be in the range of $54m-$58m, and NPAT in the range of $26-$30m (EPS[3 ] $1.46 - $1.69)

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• Working capital forecast to return to more historical levels, increasing free cash flow in 2023

• Capital expenditure to be broadly in line with FY22 at $10m

• On this basis, Capral would be in a position to continue the payment of dividends

• 1 Source: BIS Oxford Economics Dec 2022 forecast.

• 2 Source: Harbor Aluminium Intelligence Unit.

• 3 EPS based on current 17.8m shares on issue

This presentation includes forward-looking estimates that are subject to risks, uncertainties and assumptions outside of Capral's control and should be viewed accordingly.

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QUESTIONS

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STRATEGIC NATIONAL FOOTPRINT CAPRAL HAS A NATIONAL FOOTPRINT WITH A PRESENCE IN EVERY STATE AND CAPRAL HAS A NATIONAL FOOTPRINT WITH A PRESENCE IN EVERY STATE AND EXTRUSION PLANTS NEAR FIVE MAINLAND CAPITAL CITIES EXTRUSION PLANTS NEAR FIVE MAINLAND CAPITAL CITIES

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RDC – Regional Distribution Centre AC – Aluminium Centre

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Distribution Centres 5 Bremer Park Manufacturing Plant
Queensland 22 ► Capacity 30k tonnes
1 ► Cairns AC Darwin ► 4 presses (1 moth balled)
2 ► Townsville RDC / AC 1 ► 1 paint line
3 ► Sunshine Coast (Kunda Park) AC ► Co-located with distribution centre
4 ► Deception Bay AC Townsville 2 ► Recent investments: automated
5 ► Bremer Park RDC product handling and packing
6 ► Brisbane (Springwood) AC 3 ► Site restructure 2019
4
7 ► Gold Coast (Burleigh Heads) AC Brisbane 5
New South Wales 6
8 ► Newcastle AC 19 7 9 Penrith Manufacturing Plant
10 ► Huntingwood RDC 21 ► Capacity 8k tonnes
20
11 ► Rockdale AC 19 Perth 8 ► 1 press
Adelaide
13 ► Wollongong AC 9
Victoria 18 17 Sydney 12 10
14 ► Lynbrook AC 19 Canning Vale Manufacturing Plant Melbourne 11 12 Smithfield Manufacturing Plant
13
15 ► Campbellfield RDC / AC ► Capacity 7k tonnes 16 15 14 ► Capacity 9k tonnes
16 ► Laverton AC ► 1 press ► 1 press
Hobart
South Australia ► 1 paint line
23
18 ► Kilburn RDC ► Recent investments: new paint line, 15 Campbellfield Manufacturing Plant
Western Australia warehouse extension and site consolidation ► Capacity 9k tonnes
19 ► Canning Vale RDC ► Co-located with distribution centre ► 1 industrial press
20 ► Welshpool AC ► 1 paint line (RDC)
21 ► Wangara AC 17 Angaston Manufacturing Plant ► Co-located with distribution centre
Northern Territory ► Capacity 9k tonnes
22 ► Darwin RDC ► 1 press Manufacturing plant Distribution centre
Tasmania ► 1 paint line
23 ► Hobart RDC Manufacturing plant with Corporate head office
distribution centre (Huntingwood, NSW)
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