CAPRAL LIMITED — Interim / Quarterly Report 2021

Aug 24, 2021

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2021

Half Year Results Presentation and Earnings Guidance

25 August 2021 Capral Limited (ASX:CAA) Level 4, 60 Phillip Street Parramatta NSW 2150

Approved and authorised by Capral’s Board of Directors

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AUSTRALIA’S LEADING SUPPLIER OF ALUMINIUM PRODUCTS AND SOLUTIONS

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6 PLANTS 8 [DISTRIBUTION CENTRES] ANNUAL EXTRUSION
CAPACITY
EXTRUSION
TRADE CENTRES
8 PRESSES¹ 12 65,000 TONNES²
MARKET SHARE MARKETS - OVER
>$500 ~26% & COMMERCIAL RESIDENTIAL 900
CONSTRUCTION, EMPLOYEES³
MILLION
INDUSTRIAL
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ANNUAL TURNOVER >$500 MILLION

¹ Excludes mothballed Press at Bremer Park ² Base capacity excludes mothballed press ³ Inclusive of contract labour

AGENDA

1. 1H21 Highlights

2. 1H21 Financials

3. Strategy

4. Outlook & Guidance

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1H21 HIGHLIGHTS Tony Dragicevich, CEO & Managing Director

“Strong first half driven by momentum in key market segments”

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1H21 PERFORMANCE HIGHLIGHTS

VERY STRONG FIRST HALF RESULT – AHEAD OF GUIDANCE

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Volume up 33% on 1H20 to
~ 36,000 tonnes
Sales Revenue $261m
(1H20: $196m)
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1H21 Trading EBITDA [1]
$15.7m
(1H20: $5.8m)
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1H21 EBITDA¹
$26.2m
(1H20: $17.0m)
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Earnings per share at
93 cents
(1H20: 29 cents)
NPAT $15.7m includes $2.0m DTB
(1H20: $4.8m)
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Interim dividend
20 cps
fully franked
(DRP will be activated)
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Strong balance sheet
with net cash
$33.8m
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Buoyant market, high sales demand,
improved operating leverage, and
restructuring benefits combined to lift
profitability to high levels
(NB: 1H20 impacted by Covid lockdown)
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Strong market conditions in
residential building and key
industrial sectors, assisted by
government stimulus
Increased share against imports
maintained
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Safety
TRIFR²
6.3
(1H20: 10.3)
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Important Note

1 EBITDA is defined as Earnings before Interest, Tax, Depreciation and Amortisation. Trading EBITDA is EBITDA adjusted for significant items that are material items of revenue or expense that are unrelated to the underlying performance of the business. For the current period, these items are LME and FX revaluation ($1.5 million) and including depreciation and interest on Right of Use assets as proxy for rent ($9.0 million). Capral believes that Trading EBITDA provides a better understanding of its financial performance and allows for a more relevant comparison of financial performance between financial periods. The trading EBITDA is presented with reference to the ASIC Regulatory Guide 230 “Disclosing non-IFRS financial information” issued in December 2011.

• ² TRIFR is total reportable lost time and medically treated injuries per million work hours.

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VOLUME BREAKDOWN AND GROWTH

Diverse industry exposure

Channels to market (volume)

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15% 13%
26% 58% 42% 45%
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Volume Seasonality

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Tonnes
(000’s)
40
35
30
25
20
15
10
5
0
1H15 2H15 1H16 2H16 1H17 2H17 1H18 2H18 1H19 2H19 1H20 2H20 1H21
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Source: Capral

Source: Capral DC’s: Capral Distribution Centres

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

Volume split by Product Group

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85% Extrusion
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and 7% above 2H20

Volume growth driven by:

1. Buoyant housing market

2. Market share gain from imports:

3. supply chain disruption & increased shipping costs

4. – positive anti-dumping outcomes

5. growing “Australian Made” sentiment

6. Infrastructure investment

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RESIDENTIAL MARKET CONTINUES TO GROW

2021

Annual Dwelling Commencements ¹ (000’s)

Latest forecast ¹ 211,000 starts in 2021 up 16% on 2020

Residential starts rising strongly, assisted by;

Detached dwellings increasing by

• low interest rates

26%

• HomeBuilder stimulus

• State government first

• homeowner incentives

Multi-res starts on par with 2020

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2022

Market forecast ¹ to soften by 5% during 2022

Detached starts forecast Low rise Multi-Res to grow to decline modestly High rise multi-res recovering

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250
200
150
100
50
0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 (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 greenin graph)

¹Source: BIS Oxford Economics (Jun 2021)

7

RECENT CAPRAL RESIDENTIAL & COMMERCIAL PROJECTS

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Medindie House, SA Schüco windows & doors

Rae Rae House, Melbourne, VIC Capral Futureline windows & Schuco doors

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Coastal Luxury, Lorne, VIC Deco cladding and Capral architectural glazing systems

The Marsden Brewhouse, NSW Capral commercial glazing systems

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INDUSTRIAL SECTOR REBOUNDING

Total Capral Industrial Volumes (Index 2012)

New Truck and Van Builds (000’s)

140 120 100 80

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60

40 20 0

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Source: Capral
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Manufacturing & General Fabrication

Marine

Improving market conditions

Markets improving and share gains against imports

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45
40
35 (¹)
30
25
20
15
10
5
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
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Source: TIC (Truck Industry Council of Australia) ¹ Capral H2 Forecast 2021

Solar

Strong growth (import replacement)

Infrastructure

Strong growth in industrial construction

Resellers

Volume to industrial distributors lifted due to import replacement

Transport

• Increasing with infrastructure investment

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New Truck Builds
increased
9.2% above 1H20
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RECENT CAPRAL INDUSTRIAL PROJECTS

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Catamaran Ferry, Austal Vietnam Capral marine grade plate and extrusion

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Mounted HVAC platform, Con-form Group Capral extrusion

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Ventilation Shafts M5/M8 Tunnel, Sydney Capral extrusion gold anodised

Tipper, Muscat Trailers Capral plate and extrusion

1H21 FINANCIALS

Tertius Campbell, CFO

• “Earnings underpinned by a combination of higher volume and improved operating leverage”

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11
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VERY STRONG FIRST HALF EARNINGS

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• 1H21 volume 33% higher than prior period

• Sales revenue increase driven by volume and higher metal prices

• EBITDA up by 54% on 1H20 (up by 108% excluding JobKeeper 1H20)

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

• Positive cash position led to lower operational finance cost, partially offset by increased LC facility fees for imported products

• $2.0m Deferred Tax Benefit recognised during 1H21 (1H20: nil)

• $4.4m JobKeeper receipts during 1H20

• Includes rent and lease payments for properties, forklifts and vehicles

• Trading EBITDA up by 170% on 1H20 primarily due to higher volume and improved operating leverage

	1H21 1H20
Sales Volume ('000 tonnes) 	35.9 27.0 $m $m 261.2 195.6
Sales Revenue 
EBITDA¹ 	26.2 17.0
Depreciation/Amortisation 	(3.1) (2.9) (6.8) (6.2)
- Owned Assets
- Right of Use Assets
EBIT	16.4 7.9 (0.5) (0.7) (2.2) (2.4)
Finance Cost 
- Operational Funding
- Right of Use Leases
Net Profit before tax	13.7 4.8
Taxation Benefit 	2.0 -
Net Profit after tax	15.7 4.8
EBITDA1 Restructuring and one-off costs JobKeeper  LME & Unrealised FX Revaluation Rent  Trading EBITDA¹ 
	26.2 17.0
	- -
	- (4.4)
	(1.5) 1.5
	(9.0) (8.3)
	15.7 5.8

¹See Important Note (page 5).

ROBUST FINANCIAL POSITION THAT SUPPORTS DIVIDENDS AND REINVESTMENT

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• Inventory (raw material and finished goods) increased due to; activity levels, increased metal prices, and higher goods in transit

• Increased receivables due to increased sales volume and price, excellent collections with DSO at 44.2 days (1H20:44.7)

• $40m debt facility with ANZ Bank, since increased to $45m expiring April 2023

• Liabilities (current and non-current) include lease liabilities of $94.4m, primarily property leases as defined by AASB16, net impact is a reduction in Net Assets of $28.4m due to timing in relation to lease term

• Non-Current Assets include $65.9m “right of use” leased assets as defined by AASB16

• A further $2.0m Deferred Tax Asset was recognised on 30 June to reflect increased utilisation of tax losses in future periods

BALANCE SHEET	JUN 21	DEC 20
Current Assets	$m	$m
Inventory 	116.7	79.1
Trade Receivables 	82.5	66.3
Net Cash and Equivalents 	33.8	49.4
Other	2.6	2.5
	235.9	197.3
Current Liabilities
Trade Payables	(114.5)	(77.2)
Lease Liabilities 	(13.5)	(13.5)
Provisions and Other	(17.9)	(16.6)
	(145.9)	(107.3)
Net Current Assets	90.0	90.0
Non Current Assets 	125.2	115.8
Non Current Liabilities 	(86.4)	(87.6)
Net Assets	128.8	118.2
Net Tangible Asset Value	117.1	112.0
NTA per share	$6.88	$6.76
Franking Credits	14.8	18.0
Accumulated Unrecognised Tax Losses 	243.1	258.1

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STRONG CASH EARNINGS OFFSET BY HIGHER WORKING CAPITAL REQUIREMENTS AND BUSINESS ACQUISTION

• Working Capital increase driven by increased debtors and inventory due to rising sales levels and higher metal cost

• Operational interest charge broadly in line with 1H20

• Maintenance, Environmental and Safety capex is around $4m per annum

• Acquisition of extrusion plant in Smithfield, NSW

• Dividend paid is net of Dividend Reinvestment Plan (DRP)

• Bank Guarantees primarily used in respect of property leases

• 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, undrawn during 1H21 (1H20: maximum usage $7.1m)

• Asset Finance Facility settled 1H21

CASH FLOW	1H21	1H20
	$m	$m
EBITDA	26.2	17.0
Working Capital 	(11.8)	3.4
Finance Cost 	(2.6)	(2.8)
Operating Cash Flow	11.8	17.6
Capex Spend 	(3.7)	(2.2)
Acquisition 	(10.3)	-
Lease Principal payment	(7.9)	(7.2)
Free Cash Flow	(10.1)	8.2
	(5.4)
Dividend Paid 		(1.2)
Increase/(Decrease) in Net Cash	(15.6)	7.0
BANK FACILITY USAGE	JUN 21	JUN 20
	$m	$m
Bank Guarantees 	3.8	6.1
Trade Instruments 	36.2	22.2
Trade / Other loans 	-	-
Asset Finance Facility 	-	2.3

NET CASH POSITION	JUN 21	JUN 20
Cash Balance in funds	33.8	24.9

STRATEGY AND OUTLOOK Tony Dragicevich, CEO & Managing Director

“Drive return on recent investments and keep improving our long-term competitive position“

BUILD

GROW

OPTIMISE

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IMPROVE PRODUCTIVITY AND COMPETIVENESS, RETAIN SHARE GAINS

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Manufacturing
• Deliver benefits of Smithfield plant
acquisition, aim to run at capacity 1Q22
• Continue process improvement
programmes at all extrusion plants
• Maintenance capital spend to ensure on-
going plant reliability and efficiency
• Progressively upgrade shopfloor control
systems to a common platform
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Distribution
• Upgrade Capral’s window & door
product range and systems software
• Increase warehouse capacity in NSW &
VIC to improve customer service
• Long term goal - increase volume and
profitability of Capral’s own direct
distribution channel
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Sales
• On-going technology investment to
improve sales effectiveness including;
interfaces (EDI) with customer systems,
CRM, and digital marketing
• Upgrade website and e-store to provide
more information and ease of interaction
• New sales reporting software implemented
to manage and improve margins
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MARKET DEVELOPMENT

Solar

Anti-dumping outcomes provided the opportunity for local extruders to compete in $60m+ solar rail market

Defence

Approved supplier to major defence contracts

Cladding

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

Import Replacement

Retain market share gains through service differentiation and competitive local pricing

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KEY INDUSTRY INFLUENCING TRENDS

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Anti-Dumping Activities

• Original case won in 2010 with low level duties imposed on Chinese imports

• Reforms to federal legislation and methodology

• Measures imposed against all Vietnam and some Malaysian imports

• Anti-circumvention / trans-shipment investigations finalised and measures implemented

• Measures extended on Chinese imports for further 5 years (until 2025)

• Measures imposed on exempt Malaysian imports, currently under appeal

• Initiate continuation case against Malaysia and Vietnam

• Continue to interact with Government regarding reforms and trends

• Monitor import volumes and exemption applications

• Increased focus by Australian Border Force on trans-shipment and misclassification

• Limited information available on imports from ABS

• Numerous applications from exporters for accelerated reviews

Other

Aluminium Price (LME & MJP)

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A$/kg Metal Cost
3.30
3.10
2.90
2.70

2.50

2.30
2.10
1.90
1.70 Source: London Metals Exchange: Reuters
1.50
2013 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 2020 2020 2021
Q1 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2
LME MJP Premium (Major Japanese Ports)
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• MJP regional premiums were relatively stable since 2015 however in 1H21 MJP increased 67% and continues to rise during 2H21

• As a founding member of Manufacturing Australia, Capral continues to interact with government around strengthening the anti-dumping regime

• LME increased 18% during 1H21 to $A3,134/t (Dec20 $A2,660/t, Jun20 $A2,240/t) with further increases expected during 2H21

• Work with Australian aluminium supply chain partners to promote the benefits of local supply in the wake of the pandemic

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OUTLOOK – EARNINGS GUIDANCE UPGRADED

• Capral continues to operate as an essential business during COVID restrictions and, at this stage, does not expect restrictions to have a significant adverse impact on demand in the second half

• Smithfield extrusion plant will continue to ramp up production levels to reach capacity in 1Q22

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• In the second half; Residential building is forecast[2 ] to grow, Non-Residential construction is forecast[2] to recover, Industrial sector is anticipated to remain strong

• LME is forecast[3] at higher levels in second half, reaching 10-year highs and~30% above Dec 20

• Absent any unforeseen events, FY21 Trading EBITDA¹ is expected to be in the range of $31m-$33m (previous guidance range $25m-$27m) and EBITDA $51m-$53m

• On this basis, Capral would be in a position to continue the payment of a fully franked final dividend

• ¹ See Important Note (page 5)

• ² Source: BIS Oxford Economics June 2021 forecast

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• ³ Source: Harbor Aluminium Intelligence Unit

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

CAPRAL 2021 HALF YEAR RESULTS

QUESTIONS

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

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RDC – Regional Distribution Centre AC – Aluminium Centre

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