Cement’s sustainability challenge – Theresa Mlikota, CFO of Adbri | ASX CEO Connect Series

Bryce: [00:00:15] Welcome to another episode of Equity Mates, a podcast that follows our journey of investing, whether you're an absolute beginner or approaching Warren Buffett status. Our aim is to help break down your barriers from beginning to dividend. My name is Bryce and as always, I'm joined by my equity buddy, Ren. How you going? [00:00:30][14.8]

Alec: [00:00:30] I'm very good. Bryce could be in a new studio and good to have our first company later joining us in the studio. [00:00:36][5.6]

Bryce: [00:00:36] Yeah, it's been a while since we've had company execs join us. Very excited for this one and it is all part of the ASX CEO Connect series that we've been doing with them over the last six months or so. It is an absolute pleasure to welcome to the studio. Theresa Milkota. Theresa, welcome. [00:00:53][16.6]

Theresa Mlikota: [00:00:54] Thank you. Pleased to be here. [00:00:55][1.2]

Bryce: [00:00:55] So firstly, just a reminder before we start, we're not experts, we're not financial professionals. We are not licenced. We're here just learning like you. And nothing on this podcast should be taken as advice. Do not take financial advice from a podcast. And a reminder, as I said, this is part of the ASX say Connect series that brings together listed companies and investors throughout the year. And we are bringing you six interviews in 2022 to hear directly from some of these executives and you can find more on their website. But if you haven't come across Theresa before, she is the chief financial officer at Ad Broker, formerly Adelaide Brighton Cement, one who runs favourite companies. And I'm sure we'll find out. Listen that they've been making cement and construction materials in Australia since 1882. Prior to add, bride, Theresa has been the CFO at a number of companies, including Parente Ltd, Fulton Hogan, these times taste test, McMahon Holdings and Barman Co. A lot of tongue twisters in their stories. [00:01:57][61.3]

Theresa Mlikota: [00:01:58] O all great companies know us well. [00:02:00][2.7]

Alec: [00:02:01] Theresa. We always like to start these interviews by having the company later describe their company in their own words. So to kick us off today, what is ad bright. [00:02:09][8.2]

Theresa Milkota: [00:02:10] So advertise I'll describe it as a bulk materials and logistics company. What do we make and what do we distribute? We distribute cement, concrete, lime aggregates and masonry products. They're our primary products. We've been around for a long, long time, 140 years across a range of different, you know, names and brands. We work under what they describe as a house of brands. So a lot of people don't necessarily know at as such. They will know brands like Coburn Cement in Western Australia, high tech across the Eastern Seaboard. We also operate a large part of our business through joint venture relationships with other competitors. So we run a business in Queensland called Sun State and we do that in joint venture with Boral, but was probably a name that more of your listeners might, might know. And we also have other joint ventures with our major, our major shareholder. We are an independent cement in Melbourne and New South Wales with our major shareholder. So we come, you know, we don't mind how we operate, whether it's through joint venture or directly ourselves. The the joint venture model for us has worked really, really well and it's enabled us to tap regions we would not necessarily be strong in. So we have a Mawson's joint venture that is in regional New South Wales and Victoria as well. Our footprint is right across Australia, so we have operations in pretty much every state and territory of of Australia. We are the largest supplier of lime in Australia, our main customers there and in fact our entire customer base is the mining community, mainly out of WA where the second largest, what we call Cementitious product manufacturer and importer. So we supply a reasonable quantity of of cementitious materials, second only to cement Australia who are our competitor. So a fairly big footprint across Australia we have over 200 locations and we operate with about 1500 people. Wow. [00:04:20][130.5]

Bryce: [00:04:20] Well, it's a big business now. You mentioned Boral there. We'll get a plug in. We did speak to the CEOs. Let go. Yes. So if you're listening and want to check out that interview, we'll put a link in the show notes. Very interesting. So, Theresa, many of us are very familiar with cement, but not so much the industry. So can you tell us sort of talk us through the industry as an investor, how we should be thinking about it? What are some of the dynamics at play? Who are the main players in the industry? Yeah, if you show us through it, a. [00:04:50][29.6]

Theresa Milkota: [00:04:50] Bit of concrete and cement 1 to 1. A lot of people think the concrete and cement are the same thing. And just to sort of clarify that cement is an input into concrete. So when you say a concrete mixer, as you all would have seen on the road, the products that go into making concrete include cement, aggregates, sand and water. So cement is essentially. I'll call it the egg in the cake mix. So it binds the other ingredients together. So just to clarify, that's for people to understand. So I think just in terms of further understanding and a bit of an education, cement is a high value product. Concrete tends to be a very low margin product, but it is the retail outlet through which we pools for the high value products. So the high value products are aggregates. So if you've got lots of quarries, quarries tend to be high margin operations. So you're using your retail outlets, which is the concrete plants, to pull through the more valuable items which are cement and aggregates. So that's a little bit of an education. I go on on the difference when we talk about cement, it's not just Portland cement, as we would all probably know if if anyone's ever sort of gone to Bunnings, you'll see big bags of, you know, sort of 25 and up to 40 kilograms bags of cement. It's also cementitious materials that we can put in to supplement traditional cement are cheaper, more environmentally friendly. They also form part of the pool of cementitious materials, and they include slag and fly ash. So we're using renewable products or recycling products to help, I guess, build out the volumes that we need. So who are the players? So the players in our sector in the cement space. So cement requires fairly substantial infrastructure. You need big silos, big terminals, port side positions and at has a really good footprint in that regard. We've essentially got a port side position or a cement terminal position in every major port in Australia, with the exception of Sydney, because there isn't one in Sydney. It's in Port Kembla for most. Most of the players is where they have their port terminals for cement. The competitors in that space are cement. Australia, who are 5050 owned by Hanson and Holcim, which are names you or your listeners will know better rather than cement Australia. The other major competitor is Boral in the cement space. [00:07:18][148.1]

Bryce: [00:07:19] Yeah. [00:07:19][0.0]

Theresa Milkota: [00:07:19] That's part of our business. The other part of our business is concrete. So these are when you say the agitator trucks, the concrete trucks, as opposed to the cement trucks, the concrete trucks out there. We're about number four in concrete and that's behind Boral, Hanson and Holcim behind us. It is a highly fragmented, you know, business, especially in markets like Victoria. You'll have a very a large quantity of very small players in that space. Our major shareholder is a fairly significant player in that space, so they are in the pronto concrete brand in Victoria and they're pretty big in Victoria, but quite fragmented after that. [00:07:59][39.2]

Bryce: [00:07:59] Yeah, right. [00:07:59][0.2]

Alec: [00:08:00] So in in such a fragmented industry, how do you think about at Bri's competitive advantage. [00:08:05][5.3]

Theresa Milkota: [00:08:06] That cement space is not fragmented, the concrete space is the fragmented part of our business. So in the cement space, our competitive advantage is that port side position. So having access to the logistics that enable you to move bulk materials around efficiently, cost efficiently and in a timely and reliable manner. Really critical, especially given what we're going through at the moment, what Australia is going through from a logistics and supply chain point of view. Australia requires about 12 to 13 million tonnes of cement to meet its domestic requirements. About half of that, or maybe 60% of that is manufactured inside of Australia today. The rest of it is imported. Wow. So yeah, a lot of people don't realise, you know, that we, we don't have, we're not in a self supply situation within Australia. So having port side positions is critical to having to receiving imported materials and being able to manage the quantities in constrained silos. It's not fragmented at the at the cement line, much more fragmented at a concrete level in terms of how what your competitive advantage is at that concrete and quarry level. It's really about making sure that your locations are where close to you want your locations close to. Typically your fuel source, your customer, and your raw material. So if you've got a concrete plant, you want the quarry pretty close. You want your customer base pretty close. That's why you have to build out a network. You don't want to be too far away from your customer because a fairly substantial part of your cost base is freight. So every time, every time you want to make a delivery, you don't want to be travelling long distances, that there's a there's a fairly substantial cost in that from a line point of view. Our competitive advantage in WA, which is where we make most of our line, is the fact that our raw material comes from Shell Sands. So we essentially vacuum that up off the seafloor. So it's a very low cost operation. It's a fairly simple process. Process. We have a fairly inexpensive gas source because we have a domestic reservation in WA, so that gives us a competitive advantage compared to, say, offshore manufacturers of law. What our biggest strategic advantage is in Western Australia is our network of road, rail, transport and depot network that allows us to feed the mining sector. So we're putting about Will now about 900,000 tonnes of lime into the mining sector and between WA, S.A. and the into about six or 700,000 tonnes of cement into the mining sector. Well this makes us very different to our competitors. So our competitors tend to be very East Coast base. Their main exposure is to residential and infrastructure. We have that exposure, but we have a countercyclical exposure on the West Coast and through the middle of Australia with that mining position. So when rains are affecting the East Coast, then not necessarily affecting our fading. We've got 24 seven fade into the mining sector. So we've got that kind of cyclical balance, geographical diverse balance as well. [00:11:28][202.4]

Bryce: [00:11:28] Yeah, right. So it's a it's near impossible to open newspapers at the moment and not see commentary around inflation. So how how have you guys been managing this inflationary period? Has it affected the business? You know, higher limestone prices. Coal prices, yeah. Can you shed some light on on inflation? [00:11:47][18.2]

Theresa Milkota: [00:11:47] And I think that's one of the advantages of being a domestic manufacturer. You do have the advantage of being able to at least control the the things you can control. We like everybody else. I mean, we're a substantial logistics company, so we rely on road transport, rail transport that ultimately is linked to fuel cost. And we're all feeling that pain at the petrol pump. We are no different in that regard. So, you know, we've got an enormous number of trucks on the road, we've got materials going on rail, we've got ships at sea that rely on bunker fuel. So they are all linked essentially to, you know, you know, oil and, you know, fuel prices. So we do have that exposure just like everybody else. We don't have alcohol exposure just to sidetrack a little bit. Apart from the cost element, we are the only company in Australia that manufactures cement not using coal. We use gas and RDF or refuse derived fuel, so that's using construction waste to fuel our kiln in Adelaide. Another competitive advantage on your side. [00:12:50][63.3]

Alec: [00:12:51] We will, we will pick up on that. Yeah. [00:12:52][1.4]

Theresa Milkota: [00:12:53] So, so we are less exposed to coal. A number of our competitors manufactured this and cementitious materials fired with coal. So we're not exposed to that. That does not mean we aren't indirectly exposed to that because we do import clinker from offshore, as do others. And they are they are coal fired. So we we are exposed through that channel. [00:13:16][23.0]

Bryce: [00:13:16] Yeah. Right. [00:13:16][0.3]

Theresa Milkota: [00:13:17] So how are we dealing with that to your to answer that question, we are a price is the main lever because these are these are costs. You know, it's not about tweaking your operation in this regard. These are costs largely out of our control, except to the extent that we've got fixed price contracts. And I can talk a little bit about that. But for us, the the cost of diesel is sort of a direct exposure to our bottom line. And the only lever we can really pull there is price. What I'll say about price through this most recent period is that we operate in a competitive space and it's very difficult to just dial up the price lever or turn on the price lever. And our sector has probably lagged other, I'll say, construction materials sector. So you've seen the prices still go up. The price of concrete is one of the the smallest price increases in the last six months, despite the fact that a lot of concrete producers have have experienced that that exposure to not only coal, not us, but others and to diesel. So the good news is that the sector has responded and everybody is now lifting their concrete and cement prices. So the sector has been on a lag. So there's been a lag they've been wearing that cost fall, I'll say, a few months into the start of this year. But what we've seen is most players, whether they're cement or concrete players, lift their prices. So every year everybody's lifted their prices to, you know, to counter those costs. [00:14:51][94.3]

Bryce: [00:14:52] Yeah, right. [00:14:52][0.1]

Theresa Milkota: [00:14:52] Yeah, we do. On a more positive side, we do have a cost out programme that we run year round. We have made some cost savings out of that and because we're still in a blackout period, I won't talk about that in specific numbers, but that is very focussed on our Adelaide facility. You know, we will get the benefits of. Are locked in gas contracts that's delivered some good savings for us and high usage of RDF, which is a lower cost fuel than either coal or or gas. So a really good alternative to temper that cost. But there has there's definitely been a lag on and I'll say the sector has been very reluctant historically to raise prices because it has been competitive, but reality has bitten. Yeah. [00:15:39][46.3]

Alec: [00:15:39] Yeah, yeah. We will put a pin in that RDF conversation because that's how I've had some exposure to add. Brian. We are interested to talk about that. But Theresa, before we get there, Bryce and I are fascinated by this idea of what matters and what doesn't. We both came from retail backgrounds before doing this podcast and there are a number of sort of very industry specific metrics that were really the most important metrics, same store sales, sales per square foot in the retail space. So when we have a company leader in here, we love to ask what matters and what doesn't in your industry. So what are some of the metrics that really matter? [00:16:12][32.7]

Theresa Milkota: [00:16:13] The most important thing from our perspective is safety. So we measure that in a in a range of different ways. But having a safe operation is critical to keeping our people wanting to work with us. So retaining people is a critical element and keeping them safe is part of our core value. So that's number one for us. On anything we do, we will make sure we keep our people safe before we do anything else. If we look at what's critical to the longevity of this business, it is essentially cost per tonne. So making sure that we are the lowest cost producer across our CEMENTITIOUS. You know, whichever way we're producing cement and then the lowest cost producer of lawn, we probably are the lowest cost producer of lawn because our raw material source is relatively inexpensive. We don't have to quarry limestone for that. So we get that relatively cheaply compared to others. And probably the last thing for us is carbon intensity. So if you think about the long term view of this business, getting reducing the carbon intensity of our business relative to our competitors is going to be critical. So, you know, measuring the sort of the carbon output per tonne or per unit or per cubic metre, whichever way you want to look at it, the sector is putting out sort of environmental product disclosures at the moment. You know, it measures how carbon intensive your product is and that's going to be, I guess, the great leveller and comparator for everybody and making sure that yours is the lowest number is going to be critical. Our Birkenhead facility currently produces the lowest carbon cement in Australia today because of that RDF and gas usage compared to everybody else still using coal. That's a great thing to have. And then on the other side of the country, our line facility, it has compared to the imports and what else, everything else. It's manufactured in Australia. I'd be comfortable in saying that we are the lowest carbon footprint online as well, because we fire that we fire our kiln in a way through a mixture of coal and gas. But, you know, it's about 5050 gas and coal. So that gives us a low lower carbon footprint. Yeah, it's that low cost. And you know, when the borders open up and the borders have sort of, I guess shielded our sector a little bit from pesky importers, but we are importers ourselves, but we operate under long term contracts. So anyone that's trying to import under short term contracts would be feeling the full pain of increased shipping costs. We don't feel that. We are feeling it a bit on bunker fuel, but we've got dedicated shipping and our long term arrangements, you know, making sure that, you know, when those borders reopen, that our products can compete very strongly against and continue to compete as they always have against imports is critical. So our focus is cost per tonne. [00:19:08][175.3]

Bryce: [00:19:09] So that's the focus. Are there any metrics that you often see discussed in business media that you just think totally useless? Why they talking about that? Investors don't worry about it. [00:19:18][8.6]

Theresa Milkota: [00:19:18] No, look, I think media tend to get it pretty right. I think they understand our business. We're not an overly complicated, to be honest. One thing that I think media or you know perhaps our analysts don't appreciate fully they they see the nature of our assets and that their major infrastructure assets big terminals big kilns and they think all that that's a big fixed cost base. Therefore we must have really high operational leverage. We actually have a very high variable cost base. When volumes move, it doesn't necessarily translate to, you know, major bottom line movements. You know, it's only sort of at the margins, particularly in the concrete space, because you're buying in all of those ingredients to make a concrete mix. You're exposed to that raw material and hauling, you know, or transportation cost. And also where we don't manufacture our own cement, where we're importing clinker and. Grinding it. A fairly substantial portion of the cost is the raw material cost and the shipping to get it to Australia. So that's, you know, that's entirely variable. There's not a fixed cost element. So a bit of clarification around that. And probably the other point of clarity is just how large a portion of our cost base is logistics. You know, we are transporting some of our goods up to 3000 kilometres from source. So when you're feeding the mining community, you've got a lot of road and rail and you know, we're in the fortunate position of having a different network that we think cannot be replicated again to that competitive advantage. It means a lot of a lot of fuel that's being consumed to to, you know, to get product to customer. Yeah. [00:21:00][101.7]

Bryce: [00:21:01] All right. Well, Teresa, before we move to the sustainability challenge of cement and concrete, we will take a very quick break to hear from our sponsors and then jump back in. [00:21:11][10.1]

Alec: [00:21:13] So Theresa, before the break, we've mentioned sustainability a few times and for people listening who aren't familiar with the context, sustainability in the cement industry is critical because it's a big source of emissions. I think globally it's responsible for about 8% of emissions, which is similar to the global car fleet. So a big challenge and I guess a big opportunity for the companies that can solve it. How do you think about sustainability in the industry and sustainability abroad? [00:21:42][29.0]

Theresa Milkota: [00:21:44] I think probably firstly, sustainability is more than just climate change. For us it's really about, you know, it's about people, it's about our communities. So being able to operate in the communities that we work within is critical. So a large element of what we do is keeping, I guess, close ties and connexions with our community because, you know, we are operating scale industrial facilities. That's a key element of being able to it's our licence to operate in a sense, people being able to engage our people and keep them and retain them highly critical in this labour constrained market. So that's something that we have a very heavy focus on. We are doing some things to, I guess, tap new sources of people. We have a what we're calling a driver academy to try and attract women concrete truck drivers for ourselves. So we've just gone through a period of recruitment through that space, and there's been an element of success there. We're increasing our source of graduates as well because we have a I'll say, a very loyal and dedicated workforce that are getting it, you know, probably at the older end of the scale. So attracting young people into, you know, let's say a carbon intensive business is has its challenges. Let's just say then clearly the response to climate change is the big sustainability challenge for business like ours. There's no doubt about it. If you look at the emissions from cement, about 40% of the emissions that we generate are from the fuels we use. 60% of the emissions out of both cement production and line production are what we call hard to abate or difficult to abate, and they come from the process itself. So you basically taking out your chemistry book, a calcium carbonate and taking the CO2 out of it to make either a lime product or a cementitious material far more complicated than that. I'm just an count, and I'm not trying to pretend to be a chemist, but you're you're basically that the chemical process to make lime or cement is to extract CO2 from a stone or from a sand. So that's hard to abate. So there's no so there's no immediate technical solution for that. And that's what the sector is working on. A lot of the R&D in that space is very focussed on how to capture and store it rather than to eliminate it because it is, you know, we can't change the chemistry. What I will say is that the products that we produce are not necessarily immediately interchangeable with others, particularly lime. These are products that we think are necessary to the future growth of Australia and indeed the mining community mining outputs of Australia. We're doing quite a bit of work with, you know, partnering with other people that have expertise in R&D. We're not, we're not at the bleeding edge of the R&D are there are sector participants who are trialling different carbon capture options and we've partnered up with Calix and we're looking at their technology relating to our line business. Some of our competitors in Europe are using Calyx or trialling Calyx in a cement application. So what we hope that they can work that into a work alignment, you know, and these are trials. So and the technology we're looking at in relation to line has worked not at scale and with a finer product. So it's about developing that over perhaps the next decade. So we are focussed on the 40% that we can look to address more immediately where there are solutions to that exposure. What I will say is that our carbon reduction journey has been going on for nearly two decades. So as I've said, we are the only player in the market not using coal. So we have already transitioned from coal to to gas and from gas we're moving to RDF. And in the West we've gone from gas, you know, to a combination of gas and coal and we've committed to going to zero coal usage in WA by 2024. So it will just be gas and RDF for the products that we manufacture. We are still importing products that are that are using coal as a as a fuel measured as a scope. Three emissions. Our focus in the short term is on scope one and two and that 40%. [00:26:01][256.8]

Alec: [00:26:02] Let's zoom in on RDF a little bit because that's why I was excited to speak to you today because I have had some very incidental exposure to add by when I was working in the sustainability. I met calls and we were trying to find solutions for hard to recycle waste. This RDF this resource derived fuel is what its. [00:26:23][21.9]

Theresa Milkota: [00:26:24] Refused. [00:26:24][0.0]

Alec: [00:26:24] To refuse derived fuel for hard recycled plastics or contaminated plastics and stuff like that. We could send them to Ad Bridge via Resource Co and and use them to power your kilns rather than using. Which was really exciting for us because a lot of the time we didn't have better solutions for this stuff, so at least there was an outlet. Tell us a little bit about that. ADF The opportunity for the industry more broadly to follow in your footsteps and get coal out of their kilns as well. But yeah, for people that probably aren't familiar with what you're doing, can you share a bit of like. [00:27:00][35.8]

Theresa Milkota: [00:27:01] Okay, so no, no, no technical expert on RDF, but again, look, refuse derived fuel can be many things. So refuse is any kind of refuse. So waste. In our case, what we're putting into our Birkenhead kiln in Port Adelaide is mainly construction waste. So any materials that come off a site, including plastics, are collected by Resource CO and I guess mulched into what's described. What I can only described as what you would get out of your vacuum cleaner bag. That's how it looks like when it go. And it actually smells like that when it goes into the kiln. What we're doing there is of there avoiding having that waste go into our waste dump or chip. We're avoiding landfill being consumed and the emissions or the methane that comes from that over the longer term, other refuse derived materials in other cases is just sort of wood chip and some people use that as their RDF fuel, but it's not that prevalent in Australia, more prevalent in Europe where, you know, carbon taxes apply. So great opportunity for us. It's as I said before, much cheaper than than coal and carbon intensity much, much lower. The fuel that we're using is one type we are looking at, perhaps using something that has more plastics in it as well. What we're calling internally is RDF two is something that we're looking into at the moment. So that would but you are constrained by where the source of the waste comes from because that can't move. You know, moving that across states can be quite expensive and it sort of defeats the purpose because you're putting trucks on roads go yeah. So it's got to be it's kind of a localised solution and in the case of Adelaide it's a great solution for us. [00:28:47][106.3]

Alec: [00:28:47] So Teresa, one more question on sustainability. We are obviously saying carbon pricing conversation come up again in Australia, new government and you know, it's in line with conversations in certain parts of the world where carbon pricing is on the agenda or already in place. And then there are other parts of the world where carbon pricing is perhaps not so much on the agenda. So as you think about competing in a global market, how do you think about competing with imports that may not be subject to carbon pricing in the future? [00:29:17][30.0]

Theresa Milkota: [00:29:18] Most of the cement manufacturers of Australia are doing a level of importation anyway and we are the chief importers of the bulk of the materials that come into into our market. We would need to be I mean, we are working with government and I guess the the agencies that support our sector, you know, our general view would be that there would need to be a level playing field not to shield in an in an inappropriate way our sector, just to put it on a level playing field. Wait, wait. We can compete it as long as everybody's run by the same rules. Yeah. And we'd be very comfortable that, you know, our low carbon position would put us ahead of those products if a level playing field applied. So that would be our desired state, you know, we'd have to work with, you know, safeguard mechanisms are the big topic of this week and we'd be working with government to ensure that we were no, you know, we weren't, we were not being penalised against a competing product coming from offshore. [00:30:16][58.4]

Bryce: [00:30:17] So to raise that, we always ask the final three questions to all of our executives when they come on. So to kick it off, what does the next 12 months look like for Ad Briar? Anything in the pipeline that you can share? And if you can't share it, we would still like to share. That's good. [00:30:33][16.0]

Theresa Milkota: [00:30:35] So, look, we we have recently acquired three different businesses, some through JV in some directly. And the next 12 months is really about I mean, we've we've gone through the pain of integration over the last few months. It's really getting them humming and and generating good returns for us because we've made some significant investments. And this is about building out our concrete and aggregate network to pull through more of those high value items, cement and aggregates. We bought in JV with our Mawson's counterpart, the Millbrae business that's in regional New South Wales. Really neat little business. We bought a sand quarry in Melbourne, in Java with our major shareholder that's called Trident under the name of Metro Quarries. And we bought the Xenos business in Queensland, which is there all concrete and aggregate businesses. And let's just say that we want them to pop really hard for us over the balance of the year. That's why we've made an investment we want to return. Another big item on our agenda is we've got about 25% complete on our Kwinana upgrade project in Western Australia. So we had an old cement facility that's essentially been rebuilt at a waterside location in in Kwinana. So we've moved it. We've moved it from our monster position to Kwinana. $200 million investment. So it's a big piece of work, a big, big project for us. And getting that, you know, getting that completed is a big focus. And we're saying it's, you know, it'll be commissioned in the middle of next year. So there's a lot of logistics and labour that we're relying on to get us there. So that's another big focus for us. Clearly managing price and cost and getting ahead of that cost. Inflation is, you know, I'll say a more immediate every day management item and that's really out with our salespeople. That's that's a big focus for them. Another area for us is we continue to develop our footprint in infrastructure. You can say, Rosie, coming off a little bit, we know we see the inflexion point for Rosie being sort of end of 2023. So we think it's going to come off sort of a little bit next year and then pop up again. What we're hoping will fill the gap is infrastructure because there's a big, big pipeline of projects that have kind of been in abatement. WHITING You know, because of skills and material shortages. So governments have sort of pulled back on some of those, which is good in a way, because we'll get a flatter delivery curve that suits all of us. That suits us. It means what we've seen this year is that as we've seen a lot of wet weather, what tends to happen is, you know, you take a you take an order and then you can't deliver it because it's raining. You can't do a concrete pull when it's raining. And then when it's dry, you're using overtime and hire trucks to get it done. Same would happen in the infrastructure. So we expect that to be a long, long source of a volume demand for us over the next sort of three or four years. [00:33:38][182.6]

Bryce: [00:33:38] Big La Nina coming this summer again apparently. [00:33:40][1.7]

Theresa Milkota: [00:33:41] Yeah. Know we recognise that. So it's really about making sure that we've got, you know, people on hand and trucks on hand for the dry and that's, you know, we've been highly responsive to our customer base trying to get volumes delivered. [00:33:54][13.4]

Bryce: [00:33:55] So I didn't think about you. [00:33:56][1.5]

Alec: [00:33:56] Can't mention Australian residential property on an investing podcast without asking you, without us asking a follow up question. You mentioned that you think it'll be slow for the next sort of year and a half and then the inflexion point with the end of 2023. [00:34:08][12.4]

Theresa Milkota: [00:34:09] And no, I'm saying it will slow next year. We we have got a really full order book out to the end of this calendar year and we think it'll sort of slow a bit next year. And then what we expect will happen is that the doors to migration will start to open up. Yeah, we hope. Yeah. You know we all need it. That will be the will get will get it, you know it will take a bit of time to kick, but we hope that infrastructure will fill the void in the interim. So we've made some good headway into infrastructure with we've developed our capability because we've built out that concrete aggregate and cement network at a more localised level. We're bidding into projects where we have where our facilities are close to the projects that allows us to bid those projects cost competitively or price competitively and for us to make a margin because we're delivering a cost competitively. So we've made some, you know, we've had some good traction in in the infrastructure sector. So that'll be an ongoing focus for us over the next six months. [00:35:09][59.4]

Alec: [00:35:09] Yeah, great. You know, so we always like to ask company leaders about risks to their business. So when you think about at Bright today, what would be the biggest risk that keeps you up at night? [00:35:20][11.1]

Theresa Milkota: [00:35:21] Remaining cost competitive is something that we is a risk we manage every day. And so that will just pop that one because we've spoken about that one. But really meeting I guess the climate change challenges, challenges set by society is probably the biggest risk to a sector like ours. So given that we don't have a technology solution for the hard to abate, we didn't. So I didn't really sort of talk about the, the things that we are doing to, you know, to, to address the 40% we have committed to, you know, a 10% reduction in our, our line emissions, 20% reduction in our cement emissions and 100% sort of transfer of electricity usage to renewables by 2030. Well, so there's some of the things so in that cap, you know, that carbon reduction journey. They're in there now. Short term view technology. You know focus on on the 60% or the hard to abate is is where we're investing our R&D dollars and investing in partnerships with people that have more expertise in it than perhaps we have. [00:36:30][68.8]

Alec: [00:36:31] Well, Calix is definitely a company that gets a bit of buzz in the, I guess the Australian investing community. But sounds like for any budding engineers or entrepreneurs out there, the world's going to need concrete and cement. So there's a, there's a big challenge to. [00:36:44][13.2]

Theresa Milkota: [00:36:45] To solve and. Lon Yeah. [00:36:46][1.6]

Alec: [00:36:46] Adeline Never forget lithium batteries or we want to say a massive thank you for joining us today. The final question, we always like to end the interview with, you know, we're long term investors here at Equity Mates. We like to think long term. So if you think about I'd buy in ten years from now, what would success look like? [00:37:04][17.8]

Theresa Milkota: [00:37:06] We would be the lowest cost, lowest carbon footprint, manufacture of materials. We'd have a customer base that sources the the reliable quality producer critical to their operations. Our operations would be running on entirely renewable fuels. Our workforce would see us as the employer of choice, and our shareholders would be receiving double digit returns. [00:37:32][25.8]

Bryce: [00:37:32] The perfect company. [00:37:33][0.5]

Alec: [00:37:35] So you got your work cut out for you then. [00:37:36][1.4]

Theresa Milkota: [00:37:37] Just take ten years. [00:37:38][1.1]

Bryce: [00:37:39] I love that. Teresa, thank you so much for joining us. We always do really appreciate spending time with leaders of of listed companies and getting a bit of insight into how the company runs. And it's certainly valuable for our community. So thank you very much and also thank you further to the ASX say Connect series for making it happen. As I said at the top, the series is all about bringing listed companies and investors together and we've partnered with them throughout 2022. You can hear more of the episodes that we've done with them on our feed or you can head to the ASX website to find out more. Just Search CEO Connect series. They do have webinars that you can tune into as well. If you don't get a chance. We'll be doing some of the follow up with some of the CEOs. So thank you very much, Teresa. It's an absolute pleasure and good luck over the next ten years. [00:38:30][50.4]

Theresa Milkota: [00:38:30] Thank you, guys. [00:38:30][0.3]

Alec: [00:38:31] Thanks for. [00:38:31][0.3]

Bryce: [00:38:33] Hey, thanks for listening to this episode of Equity Mates. We love hearing from you, so drop us a line at Contact@equitymates.com. Or even better go to your podcast player and leave a five star review. Also a reminder that the Equity Mates content train doesn't stop when you've run out of episodes to binge. We've got a brand new website, a Facebook discussion group. We're on Instagram, YouTube and slowly making our way as an influencer on Tik-tok. That's Ren. So come and say hello and join the community. We'd love to welcome you. Until next time. [00:38:33][0.0]

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