Hello everyone, thank you for joining us and welcome to the DPC Holdings Reports second quarter 2026 results. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. If you have logged in via the webcast, please submit your questions using the Q&A button. I will now hand the conference over to Lucy Sharma, Head of Investor Relations. Please go ahead.

Thank you, Alexandra. Good morning and welcome to DPC Holdings' second quarter 2026 results conference call. I'm Lucy Sharma, responsible for Investor Relations, and I'm joined by Mike Quinn, Chief Executive Officer, and David Egan, Chief Financial Officer. Mike and David will run through a short presentation outlining our results, strategic updates, and outlook. We will then open the call for questions. Before I hand over, I'd like to note that today's discussion will include forward-looking statements regarding our future performance, plans, and expectations. Information about factors that could cause actual results to differ materially from these statements can be found in today's presentation, our earnings release, and our SEC filings. During the presentation, we refer to certain non-GAAP financial measures, with reconciliations to the most comparable gap measures available in the earnings release issue today, as well as in the appendix to the presentation. Unless otherwise indicated, all performance comparisons are on a year-over-year basis, and all numbers will be in US dollars. With that, I'd like to hand the call over to Mike and slide three.

Great. Thanks, Lucy, and good morning, everyone. Welcome to DPC Holdings' second quarter 2026 earnings call. I'm delighted to be reporting our first set of results as a listed company and to welcome many new shareholders alongside our existing ones who are as cited as we are for the growth opportunities and potential to generate significant further value. The listing was a major achievement in Doncaster's history but our priorities remain the same and as our second quarter results show we're continuing to deliver record profitable growth. Let's move on to the operational and strategic highlights of the second quarter ended June 28th, 2026 on slide four. We have delivered record revenue and adjusted EBITDA. Revenue grew 34% year-on-year to $269 million. Engine products increased 39%, growing 49% in Europe and 29% in North America. Adjusted EBITDA grew 33% to $48 million. Revenue and adjusted EBITDA in the quarter were ahead of expectations. Adjusted EBITDA margin was 17.8% in the quarter, broadly in line with last year, but well ahead from quarter one. As you can see, we're flagging a 60 basis point dilution to the adjusted EBITDA margin due to metal inflation in the quarter. Metal elements as traded commodities see price fluctuations and so our commercial contracts are structured for metal pass-through protection this is a normal practice for us and we've always passed through inflation recently we've seen some metals especially halfnium experience elevated cost increases which have been more pronounced than normal resulting in a higher than expected pass-through quantum halfnium is used largely within our IGT business passing this through to our customers meant there was no impact on our EBITDA but it did slightly dilute the reported margin EBITDA for our engine product segments both Europe and North America grew 53% with the margin increasing 210 basis points to 23.5% including the impact of metal cost inflation. We ended the quarter with a transaction adjusted net cash position of 118 million dollars reflecting the net proceeds from the IPO and private placements. During the quarter we signed our four strategic customer partnership partnership with an aerospace OEM which underpins the building of a new Greenfield superalloy site in Alabama. Lastly, we are initiating guidance for the 20 to 26 full year. We are on track to deliver significant long-term value creation. Onto slide 5. For those of you who don't know us, Doncaster is a specialist manufacturer of precision castings and superalloys that are highly engineered, used in mission-critical applications within the hot zone of aerospace engines and industrial gas turbines. We operate in substantial and growing markets of aerospace and IGT that are benefiting from long-term structural unprecedented demand. We have deep technical capabilities and proprietary metallurgy experience. We're vertically reintegrating, making our own super alloys, providing us with the supply, shorter lead times and internalizing margin. On the customer front, we are a trusted supplier of major aero and IGTOEMs and have us develop differentiated strategic customer partnerships we shall expand on in a minute. We are one of a small number of scale suppliers capable of meeting the technical qualification and capacity requirements of major aerospace and IGTOEMs. Those requirements create significant barriers to entry and high switching costs. And now post the IPO we have a strong balance sheet which will support our investment in organic and inorganic growth and operational improvements we have a long track record working with some of the leading names in both aerospace and IGTN markets and you will recognize a lot of the customer logos on our slide to summarize we are well positioned for future growth supported by strong OEM relationships but don't just listen to me look at our customer support for our strategic partnerships moving to slide six these are long-term agreements that provide customers with dedicated production capacity while giving Doncaster's enhanced commercial terms such as longer dated LTAs, committed volumes, accreted margins and sometimes customer contributions towards capacity investments. In return these partnerships enable us to secure larger portfolio level awards and strengthen long-term revenue visibility. These provide OEMs with access to their own capacity which we believe is differentiated within the industry. During the second quarter we signed our fourth partnership with an Aero OEM which included long-dated multi-agreement LTAs of existing castings and superalloys and volume commitments that underpin the building of a new superalloy greenfield facility in Alabama. This is exciting news for the group and for the wider industry as this brings superalloy capacity into the casting supply chain. Today we have four customer partnerships with two Aero and two IGT OEMs ranging in duration from 5 to 15 years in terms of LTA length and each of these partnerships are margin accretive to our group. Each partnership is bespoke in nature and has resulted in contributions from the OEMs, whether that be capital contributions or capacity reservation contributions. In total, we estimate these four partnerships represent in excess of $200 million of annual revenue with full rate revenue beginning being delivered in 2029. This is $200 million plus in additional revenue and accretive to our base business. Continue to have an active pipeline of potential additional partnerships. We're building stronger relationships with our customers and I believe that these strategic partnerships illustrate the confidence and support we have from our Aero and IGT OEMs. Moving on to slide 7, we expect to deliver material value creation through organic growth, operational improvements, long-term cash generation and investment. This is our long-term value creation model. We have many drivers of top-line growth, market demand, aftermarket, our LTAs and order backlog, the revenue generated from growing our capacity and value-based pricing. Moving on to margin, expansion is expected to come from volume, which drives operating leverage, value-based pricing and operational efficiencies. We expect to generate cash through profitable growth, capacity utilization and working capital efficiency. And lastly, we continue to invest in our capacity and our capital equipment. We expect to complement this with potential bolt-on acquisitions. Underpinning all of these drivers are our strategic customer partnerships, as we've talked about, which provide larger portfolio awards, a margin accretive, sometimes have cash or capital contributions, and support our capacity investment through volume commitments. This is our long-term value creation model. We are passionate about this across Doncasters. It is ingrained within our business model, in every site, in every function, and every day. It is alive in our company and has become part of our DNA over the last six years. I'd like to pass you over to David now.

Thank you, Mike, and good morning, everyone. Moving to slide eight. This was a record quarter for Doncasters. Revenue grew 34% year-on-year to $269 million, with strong growth in aerospace and IGT. The second quarter revenue growth included approximately four percentage points of growth from metal cost inflation passed through year-on-year. Metal cost inflation, as Mike mentioned, is the normal course of our industry. Sarah, LTAs include metal cost inflation passed through clauses and our purchase order or spot business uses spot metal prices. The metal cost inflation is passed through to our customers. In the second quarter, this led to four percentage points of sales benefit and the dollar increase was passed through to cost of goods sold. There is no impact on adjusted EBITDA, but it did dilute the EBITDA margin by 60 basis points in the second quarter. Adjusted EBITDA grew 33% to $48 million. Revenue and adjusted EBITDA in the quarter were ahead of expectations. Adjusted EBITDA margin in the quarter was 17.8%, broadly in line with last year, but well ahead from quarter one. Engine products, both Europe and North America, grew revenue by 39% and EBITDA by 53%, a 210 basis point improvement in margin to 23.5%, and this was due to higher volumes and value-based pricing. adjusted net income moved into profit with 5.6 million during the second quarter against the 10.8 million loss in the prior year second quarter giving adjusted eps of five cents we ended the quarter with a transaction adjusted net cash position of 118 million due to the ipo and private placement proceeds working capital increased in the quarter due to growth investment to support demand and the higher metal cost inflation pass through that I mentioned just previously and we continued to invest in expanding our capacity and capabilities through capital expenditure programs moving to slide nine to look at our end market growth in the second quarter aerospace grew by 47% due to demand from engine structural castings and components from global passenger travel growth aircraft backlogs aging global fleet driving aftermarket revenue IGT grew 42% reflecting global electricity demand growth with gas turbines critical for supporting energy needs and ensuring grid reliability for the integration of renewables the transportation end market was flat moving on to our divisions slide 10 reports our engine products business in Europe gross segment revenue grew 49% driven by strong growth in the IGT end market, which accounts for approximately 75% of the division's revenue, including OEM build rates. EBITDA increased by 54%, with the margin improving 80 basis points to 24.2%, reflecting a drop through rate of nearly 26%. We are continuing to invest across both our UK and German sites in support of our capacity expansion to accommodate increased customer demand this includes the delivery of two strategic IGT customer partnerships as a result we expect capex to remain at elevated levels during this investment phase on to slide 11 and our engine products north america division gross segment revenue grew by 29 to 97 million with strong growth in the aerospace end market which accounts for 88 percent of the divisional revenue. This reflects increased output following capacity investments. The EBITDA margin grew 340 basis points to 22.6 percent, reflecting the operational leverage impact of the revenue increase, delivering a drop-through rate of 28 percent. We are continuing to invest across our sites in North America and Mexico in support of our capacity expansion to accommodate increased customer demand this includes the delivery of two strategic aerospace customer partnerships as a result we expect capex to remain at an elevated level during the invest this investment phase which includes the building of the new greenfield super alloy facility in Alabama moving on to slide 12 our turbo wheels business which accounts for 19% of revenue and 3% of either dark the division was negatively affected by poor performance from evo start our business marketed for sale gross segment revenue increased by 2% but excluding evo start increased by 8% due to market share gains in a flat market and favorable mix. Adjusted EBITDA fell to $2 million largely due to EVOSTUD. Excluding EVOSTUD, EBITDA fell 0.6 million with an EBITDA margin of 8%. And with that, I'll now hand you back to Mike to cover guidance.

Great. Thanks, David. Moving to slide 13. So looking forward, we expect ongoing in-market growth given the strong structural long-term demand drivers and significant supply backlogs in the two major end markets we serve in the aerospace end market global air travel is forecast to rise between three to four percent per annum for the next two decades fuel efficiency prioritization and record airline backlogs with boeing and airbus sitting in over 15 000 aircraft orders there's an aging global fleet which is driving multi-year demand for replacement engine components and engine programs that last between 20 and 30 years on the IGT side electricity demand is growing globally with which the current grid infrastructure cannot accommodate it's enhancing the demand for gas turbines to support power needs and is also critical for providing 24 7 baseload power generation for the integration of renewables looking at aftermarket demand there's over two terawatts of industrial gas turbines installed globally that require maintenance and service. These are long-term structural growth drivers. Our growth assumptions are based on the fundamental increase in energy demand globally, together with the move away from oil and coal power generation. AI-driven demand is incremental. Moving to the outlook. Within this backdrop and looking at our growth and margin drivers, we are initiating guidance for our full year 2026 as follows. Revenue between 1 billion and 1.04 billion and adjusted EBITDA in the range of 182 and 187. Our guidance includes the impact of metal cost inflation pass-through on revenue. There is no impact on EBITDA, but as discussed, it does dilute the EBITDA margin. Stripping out year-on-year metal cost inflation pass-through would deliver an adjusted EBITDA margin of around 19% for both the lower and upper end of our adjusted EBITDA guidance. We have provided some key assumptions on the bottom of the slide to help with financial In summary, our growth rate continues to exceed the wider market driven by our specialist manufacturing capabilities and strong customer focus driving larger portfolio level awards extended contracts with improved commercial terms and our strategic customer partnerships we're delivering margin improvements through operating leverage and higher volumes of value based pricing these strengths position dpc holdings to deliver profitable growth expand margins significant long-term value creation we have a long growth runway ahead of us and we are very excited about the opportunities in front of us. Our second quarter results show that we're on track to deliver our aspirations as we continue to ramp up capacity and drive growth supported by our customers. Thank you for your interest in Doncaster's. We will now turn the meeting over to questions.

We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. If you have logged in via the webcast, please submit your questions using the Q&A button. Please stand by while we compile the Q&A roster. Your first question comes from the line of Ken Herbert with RBC Capital Markets. Your line is now open. Please go ahead.

Yes. Hi. Good morning, Mike, David, and Lucy. Congratulations on the nice results in this successful IPO. Maybe just to start, Mike or David, as we look at the incremental margins between the two respective segments, North America and Europe, can you just walk through the differences there? Better drop through, obviously, in North America, I'm guessing better aerospace exposure there, but maybe just help with the nuances between the respective segments on the drop-through and how we think about the drop-through and incrementals in the second half of this year on a segment basis, if possible.

Sure, Ken. David here. So, as we've said in the past, Europe is more predominantly IGT. The Americas is more predominantly aerospace. We have seen in Europe a number of our LTA agreements in terms of pricing, they were renegotiated. We've got several aerospace ones that will be renegotiated over the coming number of months and into next year. We see both segments having fairly equal opportunity, both in terms of volume and also pricing and also efficiency gains, which will then continue to drive the margin improvement going forward. So there isn't really anything fundamentally different between the two segments. Both of them have equal opportunity for margin growth.

Thanks, David. Maybe just as a follow up, you talked through the process about adding incremental partnership agreements.

Can you just give us an update on when the fifth or other agreements could potentially get announced or get put into place? yeah sure ken look um you know we as we we did the road shows we talked about this engine this this strategic partnership engine or gate process that we put in place if you can recall the three steps so that first six to twelve months were um in relation to negotiating the contract then we had a sort of two-year time frame to to build and operationalize it and then you go into your ramp phase after that um our goal was as each one of our strategic projects moves from one gate to the next we would add one into the preceding gate so we've just signed our fourth um you know which is driving this super alloy facility um you know we're very active on other other strategic project discussions uh we've got a strong pipeline when you guys monitor what's happened in the recent earnings from both the aerospace and the igt guys there's no slowdown in demand um you know we'd be pretty confident that um you know we'll continue to progress our strategic projects and the drum beat we want to move to is as we've talked about in the road shows if we could do one of these every year and that's about the rate at which we can ingest them because of the scale of them right so you know i i see a bright future on the strategic project side thanks mike i'll pass it back there

Thanks, Ken.

Your next question comes from the line of Christine Liuang with Morgan Stanley. Your line is now open. Please go ahead.

Good morning, everyone. And echoing what Ken said, congrats on the successful IPO. I guess I wanted to ask you guys about long-term agreements. In the past few years, yourself and I think also your competitors have been getting pretty good pricing increases as some of these LTAs expire. I was wondering, can you give some color regarding the magnitude of the pricing increase if you've been able to get the past few years? And then also looking forward, can you give us a sense of the size of LTAs that are expiring this year and the next few years and how we should think about that in terms of the potential growth?

Yeah, thanks. Thanks, Christine. This is Mike. Look, we, you know, we talked about this a little bit again on the roadshow. So obviously, when we signed our LTAs back in sort of 2021, you know, very different backdrop. You know, Doncaster's was starting the journey that we're on at the moment. You know, our pricing power was pretty poor. You know, you fast forward that to when these LTAs are rolling off 25, 26, 27. And, you know, the world has changed for us. You know, we've got these two segments that are have long term structural demand. It's a very constrained supply chain. You know, we're able to command market pricing now from our LTAs. So, you know, we've been we've been pretty successful. We've we've you know, we've got double digit price increases on all our LTAs. You know, as I said before, I'm not going to say which double digit between 10 and 99, but we've been pretty successful. You know, the next round of LTAs, David mentioned it in the last conversation. You know, we've completed all of our IGT ones, two of our larger aerospace ones. we'll come up for renewal in the next sort of 12 to 18 months. And again, you know, I don't see anything changing with the supply constraint scenario at the moment. So we'd be pretty hopeful that we will continue on that trend.

And just to follow up, you know, about 70% of our business is LTA, 30% is through spot pricing. So again, the 30% gives us opportunities on a regular basis to make sure that we can continue to move things forward where appropriate.

Super helpful. And then can you quantify the size of LTAs that are expiring in the next few years annually, if possible?

So, as we've said, the majority of the IGT LTAs have been renewed over the last little while. We've got aerospace coming through a couple sort of in the latter half of the next 12 months or so. and you know that will continue to you know drive opportunities we don't we don't quantify the the opportunity because again we are in active discussions and negotiation as we go through those um and you know as as we can update you we'll update you accordingly i think christine is mike again just to be you know just to be clear on this right we we have contracts that renew all the time every year right so you know our contracts we've given a range of durations on our contracts five six seven years in duration um i think david talks about this cliff edge there are no cliff

edges in our lta renewals um you know there'll be a constant stream of one or two of the these large ltas coming up for renewal um every year going forward we just happen to have completed our our IGT ones, the way they fell in 25 and in Q126. And it just turns out that our aerospace long ones were a little bit longer and they'll be in 27 and 28. And then the cycle just repeats.

Great. Super helpful. Thank you.

Your next question comes from the line of Maggie Schooley with Rothschild. Your line is now open. Please go ahead. Thank you.

I think one for me. David, it's probably for you and Mike. The IPO proceeds were quite a bit more than what the group was originally seeking. Can you review for us how you're planning to deploy that further capital, particularly in organic investment or other project work that we can be thinking about over the next 12 to 18 months that could potentially move margins on quicker?

Sure. So from a capital allocation, we're very focused on growth. As Mike called out in the presentation, we have that growth cycle, which also includes margin expansion, cash generation and investment. So we'll continue to invest organically into the business. That'll be through CapEx capacity and working capital to build that growth cycle. Equally, you know, we see inorganic or digestibly sized bolt on acquisition opportunities as part of our path for further growth as well. So they will be sort of the key levers of the capital deployment as we go forward.

Yeah, I think Maggie just add to that, you know, in terms of inorganic growth our focus would be on these and we you know these token acquisitions um you know 50 to 100 million dollar revenue size and then you know anything that will strengthen our supply chain um you know we have a we have very strong vertical integration on our super alloys but there are other areas um that we'd like to strengthen and we'll they're the two buckets that we'll evaluate so and again you know not back to the old doncasters which which manufactured everything it's very much in our sweet spot of castings and superalloy in terms of buying businesses and then anything that strengthens the supply chain after that excellent and if i can just one more um also

you know during the ipo process you talked a lot about you know the focus for this business was on execution and you do have a lot of capacity coming on board in particular um the aerospace blades and veins capacity in oxford can you explain to us or help us understand how you're de-risking that move into aftermarket aerospace blades and veins either by you know who you hired or what are you doing what should we be expecting over you know through 2027 as you put that equipment in to help us understand how that process is going and and de-risking that whole entry yeah so there's really two parts of that um that question maggie right so the first one is the

actual construction of the facility and the installation of the equipment so our Doncaster's model is to separate out the capital projects away from the sort of what I call the operating engine of the business so we don't really involve you know apart from the initial startup and process design we don't involve the operating teams the construction of this new capacity or the installation of this equipment we have what's called a PMO office project management office which is headed up by one of my executives Steve Pistono so that that organization has project managers engineers facilities folks uh you know professional procurement guys who negotiate for the purchase of the capex and also the contracts um you know and their role that PMO organization their role is to complete a factory extension and build a new factory once the process has been designed by the operating guys take that process buy the equipment negotiate the contracts install the contract or sorry install the equipment and commission the equipment and then only when it's finished it's handed back to the to the operating teams to uh to start you know qualifying the parts and that's that's been a hugely successful model for us over the last couple of years and all of the things we talk about the super alloy facility the expansions in our IGT business this particular expansion that's happened in oxford is is led by steve's team um and that's a that's a great operating model for us so that's the first thing the second thing on the on the team for the blades and veins you know we've gone out into the industry 18 months ago and we've hired sort of two industry leaders who've been doing sort of blades and veins manufacturing for aerospace pretty much all their careers they've been training up other engineers that we've hired to be able to do this so that those engineers have come in even before the equipment arrived in the factory um you know i've been training and doing the i'm not doing the development work so um you know we've de-risked it as i said before we probably overpaid for them at the time but these are a players in the industry so we have them on board we've had them on board for 18 months now our team is ready um you know and as equipment's getting installed we've got a head start on the Equiac side of that already with because we're able to do that on our existing equipment in Oxford so we've been we've been developing this capability for the last 18 months and I think you know we said this got some of the revenue starts to ramp the equipment insulation will be finished in 2027 you'll see some of it in 27 more of it in 28 and then full full rate from 2029.

Thank you that's really helpful appreciate it.

Thanks Maggie.

Your next question comes from the line of Sheila Kayaolu with Jeffries. Your line is now open. Please go ahead.

Good morning, guys, and thank you so much for the time, and congratulations on the IPO. A few questions, if that's okay. Maybe I'll start off with just the guidance. You know, first half growth was pretty strong, up 30%. Second half implies the decel to 15.

But, you know, how do we think about margins uh high 18 implied versus the 17.4 in h1 you know i guess how are you thinking about the puts and takes on the volume incremental um what drives upside to both the top line and profit as we think about the short and medium term yeah sure so um you know our guidance is um as as stipulated on the margin you know we said uh stripping out the year-on-year impact of what we see as metal, then around the 19% mark on the EBITDA, we would see that that margin progression in the second half is going to be delivered through a combination of volume and capacity, further price being delivered on an analysed basis, and then a little bit more coming through on the operational efficiency. So we don't see any change. It's more just a continuation of the path that we've laid out is really going to drive that going forward. And then as we move into beyond, again, it's those three buckets that will continue to drive the margin expansion further to the right-hand side.

Great. And then if I could ask on aerospace versus IGT, if you think about aerospace growing 46% in the first half, 35% for IGT, I guess two parts. First, how do you think about, you know, some of that included the metal passengers, so I understand that. But how do you think about the outperformance of aerospace in the short term? Maybe if you could just give us an update on what drove that timing of your facilities ramping, improving yields. And then second, how do you think about the medium term trajectories of both these end markets?

Yeah, so look, aerospace, definitely we've got, we're starting to see the benefit of some of the capital we invested. I know Sheila you've been to our Groton facility you saw the new shell line that went in that's now running at it's actually running better than the pace we'd expected so we're getting better better throughput from the Groton facility we've got other capex that we put into Oxford that again is coming on stream now you know and we did have we did have some as David said some some contracts that kicked in on in sort of q2 and again into q3 on the aerospace side where we're going to get some price um so again we see more capacity coming on stream more equipment um coming on stream in both of those factories and we feel pretty comfortable with the ramp on the aerospace side on an ongoing basis um on the igt side you know we've got we've got two strategic projects there if you were to visit our site in germany it's uh you know cranes diggers you know it's a it's a fully fledged construction site at the moment because we're doubling the size of that facility um you know no slowdown at all in demand if you if you looked at the you know our customers in the last quarter the gigawatts that they've added the backlog that they've added um is incredible right so again i think there's more to come on the in the igt sector um you know the demand is accelerating we we are seeing you know forecast change regularly now no and none of it downwards so every time we talk to these igt oems they're looking to for us to ramp up produce more um you know and i've said this before sheila we're we're in what i call allocation mode at the moment until this capacity comes on stream so we we don't have enough in-store capacity today to satisfy the market demand on IGT but it's coming right so again a bit like the aerospace one in Oxford you'll see more capacity coming on stream for you know for a second half for next year and then you'll see a fairly significant increase in 28 and then full production in 29 on this you know we announced this doubling of the facility there so all of that will be at full rate in 2029 you know and I think I think there's more to come on IGT um I think there's more opportunity uh for further growth you know across all our facilities David talked about an expansion in the UK you know we're we're going to be building some new uh some new buildings there to take more capacity so I think you know over the next two or three years I feel really strong about IGT. I think it's an equal opportunity to the aerospace side.

Great thank you.

Thanks Sheila.

A reminder if you would like to ask a question please press star one to raise your hand. To withdraw your question press star one again. If you have logged in via the webcast please submit your questions using the Q&A button. Your next question comes again from Christine Lewag with Morgan Stanley. Your line is now open. Please go ahead.

Thank you for the additional question. I wanted to ask, Mike, you had talked a lot about metal pass-through costs, and it was pretty impressive to see that you were able to expand margin in the quarter despite the pass-through pressures, which dilute margins. Can you give us any information on how we should think about metal pastors what you've seen in the quarter is that similar to other environments and then when we look at you know um what you're expecting for the year uh are there a potential like how do we think about margin movements as these things go through i mean pastors should not be affecting EBITDA but just want to understand a little bit better to put some takes and how you see this yeah i think i'll tag team with david on this one christine but uh look the big the big material pass-through movement for us at the moment is is hafnium rush so if any of you folks on on the call follow what's happened with hafnium um there's been just a you know an unprecedented ramp in

the cost per kg of hafnium uh you know it was sort of you know trading at around say five thousand dollars back in november last year whereas today it's somewhere between twelve and a half and thirteen thousand dollars per kilogram so you know unprecedented ramps we're we're not as an industry used to that right and that's that's primarily that use for hafnium is driven by you know uh demand for ai uh advanced chips it's it's obviously turbine castings for aerospace and um and igt it's used in nuclear um you know high temperature applications and and the problem with hafnium is it's a byproduct of zirconium right so it's not manufactured as a primary element um so it's not as if it's not as if we can just switch on more refining capacity so it's it's readily available it's just that the price has gone through the roof right um so all of our contracts have material pasture clauses it's a very well-defined process in our industry um you know so it's a timing thing so yeah we we buy half new we manufacture it into our super alloy we then ship that super alloy to our factory it then goes through a lead time of somewhere between 18 and 24 weeks where we make the parts and then obviously we have to recover them what we call a material surcharge then so that's the payment terms that are in the contract so you can see the working capital cycle is actually quite quite long right um you know But that's that's an industry standard. It applies to nickel. It applies to every element we use in our process. So just, you know, what's in the number for the for the second half of the year? I mean, I'll hand over to David for that.

Yeah. So, Christine, we had 60 basis points of impact on the margin in Q2 for the full year. You know, our guidance is that, you know, stripping that out the year on year impact is going to deliver a margin of around that 19 percent. So, you know, slightly elevated above the 60 in the second half, but, you know, still confident of delivering that 19%.

Great. Thank you very much.

Your next question comes from the line of Sheila Kayaolu with Jefferies. Your line is now open. Please go ahead.

Thanks, guys. I'm sorry for double dipping on the questions here. I guess two quick ones. Mike, you commented on proceeds potentially for inorganic opportunities. I guess, you know, can you comment on the health of the supply chain and what you're seeing in terms of vertical integration opportunities?

Yeah. So, I mean, I mean, Sheila, look, if you look at our vertical integration, we have pretty much all of the processes in house. We do outsource some processes today. I won't go into the specifics, but we want to be in control of our own destiny. right so we want to be able to go from the manufacturer of that super alloy all the way to putting the casting into the box and shipping out the back door without having third-party dependencies um you know and while we don't have any dependencies today 100 we definitely have shared dependencies and we just want to remove that so and that can that's that's a as i said that's across our entire production process so i think um you know one there one that's one of the two buckets that i mentioned earlier on so i think it's you know for example tooling we don't we don't manufacture our own tooling today that's definitely something we would look at in the future um you know i think you all know tooling lead times have gone out considerably to what they were 18 months ago so again that would be a great um capability to have within our portfolio as an example understood um and then maybe in your prepared remarks you talked about you know uh two industry leaders coming over 18 months ago on the blades and veins side if you could provide an update on you know what you're doing in aerospace blades and veins versus igt thank you yeah look we we you know igt we talked about a little bit about this before the the two strategic partnerships we have strategic partnerships uh two and three on that slide are for large blade manufacturing um you know we've been caught we've become really good at that went through a very painful MPI process from sort of 2017 to 2022. You know, and we've developed, you know, a core capability now of manufacturing very large blades, you know, and because of that capability and our delivery performance, we've been able to work with our OEMs to expand that capability. So I think we're in a really good place on the IGT side. And look, on the airfoils discussion, the blades and veins on aerospace our primary business at the moment and has been for for a long time has been structural castings um we've targeted blades and veins we've talked about it since i joined about getting into that and the opportunity came up several years ago to partner with an oem to kick start that that process um that strategic partnership number one um you know you guys follow the sector right there's a structural demand shortfall in airfoil supply right now um you know and that presents a a great opportunity for doncasters to enter into that segment um and start to produce a volume right because i think most of the oems you know don't have you know don't have a supply chain that can deliver what their forecasts are going forward and it's you know there i think there's a more than enough growth in the sector to satisfy everybody's growth outlook and I think this could become a major segment for Doncasters.

Great, thank you.

I will now turn it back to the management team to address any webcast questions.

Thank you Alexandra. We have a few from investors so let me just start. First one was can you expand on the latest strategic partnership?

Taking together how do we think about all of the partnerships contributing revenue EBITDA 27 28 sorry 2027 2028 um and also the fact that you've talked about 200 million dollars of revenue in 2029 basically trying to understand the phasing of the partnerships please yeah great great question um so partnership number four is with a with a large aerospace oem um it's expanding our existing casting relationship um so we've we've it's been a great contract for us it gives us a significant volume increase we've added some new part numbers um you know and that's locked in now for the next five years um you know so so that that goes into one of our existing facilities uh the second part of that contract or that discussion is another long-term agreement um for super alloy nickel based super alloy supply at a quite significant volume um that volume will underpin the new greenfield facility uh in alabama um so and that's a 10-year contract with volume commitments so you know we felt comfortable as a company when we signed that contract because of the commitment element uh to to go ahead with that greenfield um expansion david can comment on the

revenue split for 27 28 29 yeah so from a from an overall perspective full run rate uh as we've indicated is loss of revenue that's incremental to uh our current uh position uh we'd see a small element of that flowing through in 27 a larger element in 28 and then full run rate you know from the second half of 2029. Margin accretion across the four from the group perspective and a combination of contributions from the OEMs depending on whether it's capital or capacity reservation. So each of the four are very bespoke in nature but overall you know very very uh much margin and value enhancing for Doncaster's over the medium term someone has just asked to clarify is that current group margins that's creative to or future expected margins in 2028 uh it's it's a combination of both but overall they are accretive to the margin and take continue uh to permit us to move the margin further to the right hand side uh based on those three categories of volume price and operational efficiencies with with with the partnerships contributing in all three of those categories thank you there's a question about net cash which

i think you've already covered david so i'll move on to to the next one actually there's two questions on the defense um sector um but is there any update on the opportunity within that sector And then also potentially with the turbo wheel sector, given the fact, or segment, given the fact that we've got excess available capacity within that segment. Two questions in one place.

Yeah, and actually the two of those are tied together, right? So the whole drone UAV sector is on fire at the moment. um we've been sort of looking at the sector for around 12 months since an initial approach by one of the uav manufacturers and that has really taken off in terms of approaches and uh pipeline build over the last six months um it's a new segment or a new potential segment for doncasters it's very early days um for those of you who are on the road show um you know i've indicated it'll take to the end of the year to see if this comes to pass or not it is however a perfect fit for our turbo wheel business right so our current casting plants are not geared to make this type of product and volume um they're they're small these are from micro turbine engines that are used in the uavs We're targeting sort of, there's five categories within that UAV sector. We're in categories groups one through three, which are these micro turbines. They're large volume, you know, and of similar size and scale to what we make in the turbo wheel factories today. So for a limited capital investment, we have open capacity with the market conditions today in the turbo wheel sector. we make 14 million turbo wheels. So we're used to the rigor of high volume manufacturing on these nickel-based super alloy castings. So really they're a dream fit for our turbo wheel factories. We can convert over at a relatively fast pace. Speed appears to be everything in the sector. We're used to turning prototypes in two to four weeks, which is obviously much, much faster than in our traditional casting business uh and we've got a heavy prototype um activity going on right now so it seems to be an amazing sector you know every it seems like every week we get a new approach from someone to see if we're interested in manufacturing these uh these turbine wheels and um you know i'll keep you posted as things progress but as i said before it's probably going to be the end of the year to see if we can we can ramp this as a business segment um another question is really sort of expanding more on the margins and the longer term expectations engine products currently earning the low mid 20% margins do you

think there's scope for further expansion there should margins for the business overall I agree converge towards exceed those levels over the medium term yeah look it comes back to there are certainly margin drivers in the slide that Mike presented margin is is a critical element in terms of the medium and long-term value creation for the group the margin opportunities will come through volume price and operational efficiencies and we'll continue to move the margin to the right-hand side we would expect it to come from each of our three segments as we go forward but more pronounced in engine products can you provide an update on Mexicali and how that transition is going please

yeah look we started this journey probably 24 months ago now maybe a little bit longer Mexicali when we did the Unipol acquisition we'd always targeted Mexicali as a conversion to an aerospace plant I'm pleased to say we've made very significant progress on that that journey the transformation of that site into an aerospace plant was always to be done in three phases phase one and two is complete uh phase three uh requires the installation of uh heat treat capability and nadcap certification um that that will happen start that qualification installation qualification will start in october this year and that's a very important milestone for the facility so for those of you that have spoke to mexicali is doing postcast operations which is the labor intensive piece of our our aerospace casting business so um everything after the foundry so we've been qualified by all of the aerospace oems um we've we've had to transfer parts back over into the us for for heat treat because we weren't able to find a an ad cap certified heat treat facility in in mexico we'll have our own one now shortly and that will allow us to continue to transfer post-cast work from our U.S. operations to Mexicali and then ship that directly from Mexicali to the OEMs rather than shipping it back to the U.S. sites. So the final phase and the final piece of the jigsaw to allow it. So we'll do all of the precast up to the foundry operations in the U.S., then ship it to Mexicali for finishing and then ship from Mexicali to the OEMs. So, you know, a two, two and a half year journey, but that facility will, you know, in 2027, that'll be a fully fledged aerospace business.

Alexander, do you want to take the other question we have on audio?

Yes. Turning back to our audio Q&A, your question comes from Ken Herbert from the line of RBC Capital Markets. Ken, your line is now open. Please go ahead.

Yeah, hi. Good morning. Thanks for the follow up. Maybe just wanted to see, you've talked about for the business seeing, you know, historically a seasonal or a sequential step up in cash generation or cash use from first half to second half. I wondered if you can put a finer point on how we should think about free cash flow in 2026, and then maybe just use this opportunity out now to talk about sort of more normalized free cash to the extent you can as it relates maybe to adjusted EBITDA. you know, obviously with the consideration that you're continuing to invest pretty substantially over the next several years. But just any commentary on how we think about cash flow on a more normal basis for the business would be helpful. Thank you.

Yeah, sure. So in terms of 2026, you know, we have seen, you know, cash being utilized for demand. We've also seen cash being utilised for working capital build and for capacity expansion and growth. And we've also seen cash being utilised off the back of the metal side of things. So as we're in this growth phase and also have the heightened metal, which takes time to pass through and then be recovered from the customers, we'll see a heightened effect of cash flow through the course of 2026. As we look forward and more medium term, we're in a growth phase. There is a fair amount going into capital expenditure and growth and capacity expansion. We have suggested that CapEx will be stronger as we go through 27 versus 2026 to build out those partnerships. And then as we get through the more normalized phase of life, then there's certainly going to be strong opportunity for strong cash generation within Don'taster's group. We are in the growth phase. We are a growth company and certainly looking to drive that capacity, working capital growth, and then convert that into stronger earnings.

We have reached the end of the Q&A session. I will now turn the call back to Mike Quinn, Chief Executive Officer, for closing remarks.

Thank you everyone for taking time out of your day today to attend our earnings call. I said the team are pretty excited. This was our first earnings call. Hopefully you got what you needed from it. There's some great things to come in Doncasters and I really appreciate the support that everyone has given us to this date. so thank you very much and we'll leave it there for today thank you this concludes today's call thank you for attending you may now disconnect