Net cash of $17.5m flipped to $43.0m net debt as losses widened 19.7%

A net cash position of $17.5m at HY25 has become net debt of $43.0m at HY26, with $50.0m of gross borrowings drawn (a $20.0m trade loan plus a $30.0m revolving advance) and cash down to $7.0m. Management attributes the debt build to funding the Perry galvanizing acquisition and ongoing operations.

Revenue rose 8.1% to $211.9m and reported EBITDA doubled off a low base to $1.2m (normalised $2.8m), but the loss deepened: PBT widened 19.7% to −$17.1m and NPAT widened 19.3% to −$12.4m. Operating cash flow collapsed 75.9% to $5.6m from $23.1m, with trade debtors up 28.9% to $54.2m and receivable days stretching from 39.0 to 46.6.

Distribution remains the dominant segment at 54.9% of revenue with disclosed gross margin of 23.9%, while Processing carries a richer 37.2% margin on 45.1% of revenue.

Sales revenue grew 8.1% with volumes up 11% to 54.2 ktonnes, but the operating loss widened. Management's own framing is that "outperformance from galvanizing acquisition" partially offset "base business margin squeeze." This means the underlying NZ steel distribution and processing business is contracting in profitability faster than revenue suggests, and the comparability of the top-line growth is compromised by the acquisition overlay flagged in both periods.

Cash quality deteriorated sharply. OCF/EBITDA fell from 3,858.0% in HY25 to 464.8% in HY26, and FCF before lease payments dropped from $19.3m to $1.8m. The driver is working-capital absorption of roughly $20.1m, almost entirely in receivables ($12.1m) and inventory ($6.3m). Receivable days rose 7.6 days, which suggests either timing or counterparty stretch — either way, cash earnings have weakened relative to a loss-making P&L.

Leverage now matters. Total liabilities jumped 49.4% to $222.8m and equity fell 8.0% to $170.4m. With EBITDA at $1.2m, conventional leverage ratios are not informative, but the company has moved from balance-sheet resilience (HY25 net cash plus a $100m facility) to a meaningful drawn position while still loss-making at the NPAT line. ROE sits at −7.3% versus −5.6% prior.

The supplied second-half shape context is unhelpful as a forecast: HY25 represented 50.9% of FY25 revenue but 222% of FY25 operating cash flow, and FY25 EBITDA was negative overall. That HY25 cash performance was clearly not repeatable, which makes the HY26 OCF decline less surprising in isolation but does not explain the working-capital build or the margin squeeze.

What the release does support: an acquisition-assisted revenue lift, continued cost discipline ("close working capital and cash controls"), and a deliberate decision to pass on the interim dividend. What it does not support: any read on when base-business margins stabilise or when the balance sheet rebuilds.

Reported EBITDA of $1.2m includes $1.6m of non-trading adjustments, so normalised EBITDA of $2.8m is the cleaner operating reference; even at that level, the business is barely above breakeven before depreciation. The 8.1% revenue growth is not organic — Perry galvanizing is in the current period and not the prior, and management explicitly identifies it as offsetting weakness elsewhere.

On cash, FCF before lease payments of $1.8m at 1.8% of revenue is positive only because capex was held to $3.8m. FCF/NPAT of −14.7% is mechanically distorted by the loss but the dollar gap — $1.8m of FCF against a $12.4m loss — overstates underlying cash quality, since the cash buffer came from working capital that has now reversed direction. Inventory days fell modestly (101.8 to 99.6), but receivables drove the deterioration. The PBT-to-NPAT growth gap is just 0.4 percentage points and effective tax rates are stable at 27.4% versus 27.1%, so PBT is a clean read and confirms operating performance worsened.

This briefing cannot assess the standalone economics of the Perry galvanizing acquisition or the company's covenant position, because neither is disclosed in the supplied materials.