SGH Ltd reported a resilient first half of FY26 with stable earnings, improved margins, and a significant boost in operating cash flow, underpinning a 7% rise in its interim dividend.
- EBIT steady at $844 million with 15.6% margin, up 30 basis points
- Operating cash flow jumps 32% to $1.1 billion
- Underlying NPAT grows 2% to $518 million
- Adjusted net debt to EBITDA ratio falls to 1.9x, below target range
- Interim fully franked dividend increased by 7% to 32 cents per share
Robust Financial Performance Amid Market Normalisation
SGH Ltd has delivered a solid half-year result for the six months ending December 2025, maintaining its EBIT at $844 million while expanding its EBIT margin to 15.6%, a 30 basis point improvement on the prior year. Despite a slight 2% dip in revenue to $5.4 billion, the company’s disciplined operational approach, known as the SGH Way, has driven margin expansion and earnings stability across its diversified industrial portfolio.
Underlying net profit after tax (NPAT) rose modestly by 2% to $518 million, reflecting steady earnings growth. This was supported by strong performances from key divisions, notably Boral and Industrial Services, which contributed to margin gains and operational efficiencies.
Cash Flow Strength and Balance Sheet Improvement
One of the standout features of SGH’s HY26 results is the 32% surge in operating cash flow to $1.1 billion, driven by an impressive EBITDA cash conversion rate of 98%. This robust cash generation has enabled the company to reduce its adjusted net debt to EBITDA ratio to 1.9x, comfortably below its target range, providing enhanced financial flexibility for future growth initiatives.
Capital expenditure totalled $430 million, split almost evenly between growth and sustaining investments. Growth capex focused on strategic projects such as the Crux LNG development and new quarry investments at Boral, signalling SGH’s commitment to long-term value creation.
Divisional Highlights and Strategic Progress
WesTrac experienced a revenue decline of 6% to $3.0 billion, reflecting a normalisation after an elevated prior period, but managed to hold EBIT steady at $348 million while expanding margins through cost discipline and increased service revenues. Boral posted a 10% increase in EBIT to $284 million on the back of volume growth and pricing improvements, continuing its trajectory of operational improvement and margin expansion.
Coates showed signs of recovery with improved utilisation and quoting activity, despite revenue and EBIT declines compared to the prior corresponding period. Meanwhile, SGH’s energy segment advanced key projects, including the ramp-up of the Waitsia Gas Plant and progress on the Crux LNG backfill project, positioning the company for future cash flow contributions from these assets.
Safety and Dividend Growth
Safety remains a core focus, with SGH reporting significant reductions in injury rates, including a 36% drop in Lost Time Injury Frequency Rate. This improvement underscores the company’s commitment to operational excellence and workforce wellbeing.
Reflecting confidence in its financial position and outlook, SGH declared a fully franked interim dividend of 32 cents per share, a 7% increase from the previous year, aligning with its strategy of delivering stable and growing returns to shareholders.
Outlook and Strategic Focus
Looking ahead, SGH reiterates its FY26 guidance of low to mid single-digit EBIT growth, supported by operational momentum and a disciplined focus on sales execution, efficiency, and innovation. The company enters the second half of the financial year well-positioned to continue delivering on its strategic priorities.
Bottom Line?
SGH’s HY26 results reflect steady earnings, strong cash flow, and strategic momentum, setting the stage for disciplined growth ahead.
Questions in the middle?
- How will Boral’s CEO succession impact its ongoing performance trajectory?
- What are the key risks and timelines for the Crux LNG project reaching full production?
- Can SGH sustain margin expansion amid evolving market conditions and cost pressures?