Cobram Estate Olives Ltd. · ASX:CBO
Cobram Estate Olives — Boundary Bend — Shareholder Meeting (October 2019)
64 slides from Cobram Estate Olives's shareholder meeting presentation, Oct 25, 2019
Slide 1: Boundary Bend Limited AGM
Boundary Bend Limited AGM 25 October 2019 1
Slide 2: Our Extra Virgin Olive Oil Brands
OUR EXTRA VIRGIN OLIVE OIL BRANDS AUSTRALIA USA 2
Slide 3: Our Wellness Brands
OUR WELLNESS BRANDS AUSTRALIA USA 3
Slide 4: Our Integrated Business
OUR INTEGRATED BUSINESS NURSERY » GROVE OPERATIONS HARVESTING TECHNOLOGY ee PROCESSING / STORAGE a +. EXTRA VIRGIN OLIVE OILS ada INNOVATION AND VALUE-ADD ote
Slide 5: Highlights Cont. – Strong Branded Sales Growth
HIGHLIGHTS CONT. – STRONG BRANDED SALES GROWTH Oil Sales Evolution $ (AUD) sales evolution by product/brand $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 $0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Cobram Estate Red Island Private Label Bulk Source: Company
Slide 6: Highlights Cont. – Price Premium Australia
HIGHLIGHTS CONT. – PRICE PREMIUM AUSTRALIA Cobram Estate premium over imported olive oil & gross sales growth Historical retail selling price per litre in Woolworths and Coles (AUD $/ltr) 16.00 80,000 Cobram Estate EVOO Gross sales Cobram Estate EVOO Imported Olive Oil 70,000 14.00 60,000 12.00 Roll
Slide 7: Highlights Cont. – USA Packaged Goods Sales
HIGHLIGHTS CONT. – USA PACKAGED GOODS SALES Key Points (all figures $USD) USA Packaged Goods growth • Packaged Goods sales for FY16 – FY19, 14,000,000 plus FY20 YTD and FY20 Budget FY20 BUDGET • FY20 YTD Sales of $3.0M at 30 Sept vs. 12,000,000 FY19 full year of $4.3M. Cobram Estate Private label 10
Slide 8: Highlights Cont. – Wellgrove Launch
HIGHLIGHTS CONT. – WELLGROVE LAUNCH Immune Support Heart Health 500ml & 250mL – natural, berry, apple 500mL - natural, mint 60 capsules 8
Slide 9: Highlights Cont. – Frost Fans
HIGHLIGHTS CONT. – FROST FANS 9
Slide 10: Highlights Cont. – New Generation Harvester
HIGHLIGHTS CONT. – NEW GENERATION HARVESTER 10
Slide 11: Key Challenges – Water Market
KEY CHALLENGES – WATER MARKET Water usage Volume (ML) Cost ($’000) $/ML • Expected usage of 35,351ML in FY20; and FY14 41,059 3,146 77 • Significant increase in cost due to increase in FY15 38,172 4,677 123 water price over period. FY16 39,927 9,881 247 • Current price FY17 32,995 2,603 79 – ~$950 o
Slide 12: Water Storage vs. Allocation Price
Water Storage vs. Allocation Price 120% oS S$ & pero epee ss 92) mam % of Total Active MBDA Storage (Last Week of the Month) (LHS) *Sep-19 represents the month to date average price. Sep-19 storage not yet available FS eK SX A SSF SK eK gw MK a Trading Zone: 7 VIC Murray - Barmah to SA (Median Month
Slide 13: Key Challenges – Water Market Cont.
KEY CHALLENGES – WATER MARKET CONT. UNDERSTANDING WATER AND BOUNDARY BEND’S PARTICIPATION IN THIS MARKET Tradable Water rights usually exist in two different forms: • Permanent Entitlement Water (Permanent Water) - which can be thought of as a “right” to an ongoing share of water in the Murray Darli
Slide 14: Key Challenges – Water Market Cont.
KEY CHALLENGES – WATER MARKET CONT. UNDERSTANDING WATER AND BOUNDARY BEND’S PARTICIPATION IN THIS MARKET (cont.) Unbundling – Water from Land • To be clear, both Permanent Water and Temporary Water is not tied to land. Subject to delivery rules, Irrigators can and do purchase Temporary Water from ot
Slide 15: Key Challenges – Water Market Cont.
KEY CHALLENGES – WATER MARKET CONT. THE PROBLEM While it can be expected that temporary water will be more expensive during drought, irrigators have two key concerns: • That the temp water price is being amplified by the presence of water traders in the market, and the commercial behaviour of some o
Slide 16: Key Challenges – Water Market Cont.
KEY CHALLENGES – WATER MARKET CONT. THE PROBLEM (cont.) As an example, of what is happening, one water investor purchased 140GL of Temporary Allocation Water in FY19. The put this volume in context: • 140GL is approximately 40% of South Australia’s entire annual irrigation water use • All Lower Murr
Slide 17: Key Challenges – Water Market Cont.
KEY CHALLENGES – WATER MARKET CONT. IRRIGATORS - PROPOSED SHORT TERM SOLUTION Currently, irrigators are lobbying all levels of Government for interim solutions to free up the temp allocation market. These include: • Only irrigators can purchase temporary water allocations – anyone who is not an irri
Slide 18: Key Challenges - Water Implications
KEY CHALLENGES - WATER IMPLICATIONS Boundary Bend continues to source all water on temporary ‘spot’ market. • Cumulative (six year) average water price to FY19 was $184/ML • Current water price is ~$950/ML on Zone 7 (Murray) and ~$560/ML on Zone 1A (Goulburn) • Boundary Bend have a budgeted weighted
Slide 19: Key Challenges – Water Implications Cont.
KEY CHALLENGES – WATER IMPLICATIONS CONT. SUSPEND DIVIDEND Given the current water price and volatility, it would be irresponsible to declare a dividend at this time and unfortunately it is not our intention to pay a dividend in the FY20 year. As an aside Boundary Bend are however in a very fortunat
Slide 20: Reported Profit and Loss
REPORTED PROFIT AND LOSS FY18 FY19 Year ending 30 June ($‘000) ($‘000) Profit / (loss) before tax (13,132) 16,648 Income tax expense (144) (7,889) Profit / (loss) after income tax expense (13,276) 8,759 • Profit primarily driven by significant higher crop – 13.1m litres, compared to 5.4m litres in F
Slide 21: Underlying EBITDA
UNDERLYING EBITDA Over the last four years, we have incurred significant expense from investing in our core growth strategies FY16 FY17 FY18 FY19 ($‘000) ($’000) ($’000) ($’000) Reported EBITDA 13,555 35,190 1,699 33,249 Investment in USA and BB Wellness 9,000 11,300 10,371 9,317 Core Australian bus
Slide 22: Operating Cash Flow and Underlying Operating Cash Flow
OPERATING CASH FLOW and UNDERLYING OPERATING CASH FLOW We have invested significantly in core growth strategies FY16 FY17 FY18 FY19 ($‘000) ($’000) ($’000) ($’000) Operating Cash Flow (reported) 16,470 15,821 18,801 121 add-back impact of new business units Operating cash outflow (Value-add & by-pro
Slide 23: Operating Cash Flow & Use of Funds
OPERATING CASH FLOW & USE OF FUNDS We have invested significantly in core growth strategies Cash from operating, borrowing Use of cash (3yr average) and new equity (3yr average) Dividends paid (p.a.), Operating Equity raised $5.7m Interest cashflow before (options & costs (p.a.), Other (p.a.), inter
Slide 24: Australian Business - Operational Update
AUSTRALIAN BUSINESS - OPERATIONAL UPDATE Unaudited trading update • To 30 September 2019 our trading profit is in-line with budget • Australian packaged good sales for the 3 months to 30 September: • Sales approximately 13% ahead of budget • Solid performance through our main retail accounts • USA p
Slide 25: Future Earnings
FUTURE EARNINGS • Due to the biennial bearing nature of the olive tree, and the current water situation, we feel that providing a one-year profit forecast would likely provide a misleading picture of future performance. • Providing a forecast over a longer period is much more reliable considering th
Slide 26: Organic Growth
ORGANIC GROWTH Total planted hectares & yield profile 1,600 (Total hectares 6,591 – all freehold) 16 1,400 14 1,200 12 Ton/hectare produced 1,000 10 Not yet producing = 19.5% of grove Hectares 800 8 Hectare age profile 600 6 Typical yield evolution (t/ha) 400 4 200 2 - - 1 2 3 4 5 6 7 8 9 10 11 12 1
Slide 27: Independent Valuations
INDEPENDENT VALUATIONS Carrying Value Valuation Carrying before Valuation Increase/ Value valuation Independent Increase/ (decrease) after Account increase Valuation (decrease) recognised Valuation Treatme $'000 $'000 $'000 $'000 $'000 Australian groves - land & buildings 40,997 63,168 22,171 22,171
Slide 28: Bank Debt
BANK DEBT At 30 June 2019 FACILITY UNUSED Core Debt Facility AUD 58.0m - Working Capital Facility AUD 55.0m AUD 9.0m Foreign Currency Facility USD 10.5m - • Facilities provided by Commonwealth Bank of Australia (‘CBA’) Gearing 30 June 2018 30 June 2019 Net Debt / Tangible Assets 30.1% 34.2% CBA have
Slide 29: Total Tangible Assets vs. Facility Limit
TOTAL TANGIBLE ASSETS vs. FACILITY LIMIT Key Points (all figures $’000 AUD) Total Tangible Assets vs. • Total Tangible Asset values per audited 450,000 Bank Facility Limit Financial report Total Tangible Assets CBA Facility Limit • Due to accounting standards, we don’t 400,000 revalue Irrigation ass
Slide 30: Current Assets vs. Drawn Debt
CURRENT ASSETS vs. DRAWN DEBT Key Points: Current Assets vs. Term Debt • Current Assets excludes biological At 30 June 2019 (AUD$'000) assets (trees). 140,000 • Term debt excludes Asset Finance. 90.0% 120,000 • Current assets (cash, debtors and oil) covers 90% of Term Debt. 100,000 80,000 60,000 40,
Slide 31: Balance Sheet Summary
BALANCE SHEET SUMMARY Shares: 61.06m shares on issue Assets of $402.5m Cash, inventory, oil and receivables of $106.9m Land & buildings, trees and irrigation $230.0m Plant and equipment $46.6m Intangibles $6.7m (mostly Cobram Estate and Red island trademarks) Other $12.3m Note: management estimate t
Slide 32: Growth Strategies
GROWTH STRATEGIES FOUR CORE OPPORTUNITIES TO DRIVE FUTURE GROWTH Increasing yields from maturing existing orchards, together with incremental production from new plantings Our trees are still maturing, and in addition we are still planting. Increasing the farm-gate return for our Extra Virgin olive
Slide 33: Boort Redevelopment
BOORT REDEVELOPMENT 1,660 HECTARES PLANTED IN LAST FOUR YEARS Since Autumn 2016, 1,660 hectares or 53% BOORT ESTATE of Boort Estate has been redeveloped: • Autumn 2016 – 399 hectares • Autumn 2017 – 331 hectares • Autumn 2018 – 332 hectares • Autumn 2019 – 598 hectares We recently cleared ~450 hecta
Slide 34: Boort Redevelopment
BOORT REDEVELOPMENT 1,660 HECTARES PLANTED IN LAST FOUR YEARS Planted Autumn 2019 Planted Autumn 2018 Planted Autumn 2017 Planted Autumn 2016 34
Slide 35: Harvesting R&D
HARVESTING R&D We are currently undertaking significant R&D in respect to harvesting methods: • Working with the manufacturers of the Colossus harvester to develop a new harvester, which may lead to: • Shorter harvest; • Increased fruit yield (i.e. less loss); and • Overall reduced cost; • Durabilit
Slide 36: Frost Mitigation
FROST MITIGATION RECAP ON LAST AGM • A frost map was generated showing the areas most at risk from frost • We now know: 1. Where the coldest areas are 2. Why they are the coldest areas 3. How to target specific areas for frost mitigation Frost mapping initially conducted on an area known as TC3 (dia
Slide 37: Frost Mitigation - Where We Measured
FROST MITIGATION - WHERE WE MEASURED Following the assessment of TC3, the entire Boundary Bend Estate was mapped, several frost prone areas were identified, and we have currently installed the following: • Blue circle: 47 fans - March 2019; TC3 • Green circle: 40 fans - August 2019; and • Orange cir
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Slide 39: Marketing Australia
MARKETING AUSTRALIA Growth Drivers Continue to build a premium brand Increase usage occasions Grow the user base • Focus the conversation on • Lift current user purchase • Increase household value, rather than price frequency penetration by attracting How. • Engaging story telling around • Win great
Slide 40: Retail Sales Australia
RETAIL SALES AUSTRALIA Australian Retail - Extra Virgin Olive Oil Woolworths and Coles Brand Share of EVOO - Last 12 months 70,000 33.7% 60,000 Dollars (000s) Litres (000s) Units (000s) 50,000 40,000 AUD $('000) 30,000 8.6% 20,000 10,000 - Cobram Moro La Espanola WOW Private Label Red Island Squeaky
Slide 41: USA Expansion
USA EXPANSION RECAP – WHY GO TO THE USA Significant opportunity; USA consumption currently 350 million litres with only 10 million litres sourced from domestically grown fruit. Timing right to enter market regarding consumer awareness of EVOO, health and provenance movement. Ability to leverage Aust
Slide 42: USA Expansion
USA EXPANSION UPDATE ON VERTICALLY INTEGRATED USA BUSINESS Boundary Bend USA operates as a fully vertically integrated olive business with the following sites/functions: • Fruit processing and oil storage at our Woodland facility has progressively expanded to cope with increasing fruit volumes and h
Slide 43: USA Expansion
USA EXPANSION UPDATE ON VERTICALLY INTEGRATED USA BUSINESS (cont.) • Grove ownership – currently own/lease 542 acres, with contracts executed on another 500 acres of land for further plantings. The key difference between Australia and the USA is that we are and will continue to be reliant on fruit s
Slide 44: USA Sales
USA SALES Key Points (all figures $USD) US Sales Evolution • Packaged Goods sales increased 30,000,000 following the Cobram Estate Essentials Bulk Private label Cobram Estate range launch (more detail on following 25,000,000 slide). • Budgeting 12% sales increase primarily 20,000,000 driven by packa
Slide 45: USA Packaged Goods Sales
USA PACKAGED GOODS SALES Key Points (all figures $USD) Packaged Goods growth • Packaged Goods sales for FY16 – FY19, 14,000,000 plus YTD and FY20 Budget FY20 BUDGET • Sales of $3.0M at 30 Sept vs. FY19 full 12,000,000 year of $4.3M. Cobram Estate Private label 10,000,000 • Strong packaged goods sale
Slide 46: Marketing USA
MARKETING USA Growth Drivers Grow brand trust and drive trial Leverage digital to drive retail Win at shelf • Drive trial on new Essentials • Own the search bar across • Detailed account planning product line search engines and retail sites How.by retailer • Continue to build consumer • Create digit
Slide 47: Value-Added Products Recap
VALUE-ADDED PRODUCTS RECAP Capturing ‘Olive Goodness’ • Our value-adding journey started in 2016. Holistic use of our olive products 100% grown on Boundary Bend’s olive groves • We have spent the last few years researching, developing and testing some unique, high Fresh quality ‘olive wellness’ prod
Slide 48: Commercial Strategy
COMMERCIAL STRATEGY Wellgrove Stone & Grove Specialty ingredients ‘Olive Wellness’ products Olive leaf teas Sales of branded ‘Olive Sales of branded B2B sales of olive Wellness’ products in premium olive leaf teas ingredients to the USA and Australia in Australia, Malaysia pharmaceutical, initially.
Slide 49: Introducing Wellgrove
BOUNDARY BEND INTRODUCING WELLGROVE . ABOUT WELLGROVE Wellgrove is the wellness arm of Australia's largest olive grower, Boundary Bend Limited. We are holistic farmers caring for over 2.5 million olive trees II e through every step of their lifecycle journey, from nursery VV Ss TO V e and planting t
Slide 50: Wellgrove Australian Launch Range – Olive Leaf Extract
WELLGROVE AUSTRALIAN LAUNCH RANGE – OLIVE LEAF EXTRACT • Launched in April / May 2019. • Made from fresh leaves from our Cobram Estate groves. • Wellgrove Immune Support: Traditionally used in western herbal medicine to help support a healthy immune system and relieve symptoms of common colds and fl
Slide 51: Wellgrove Launch Customers / Channels
WELLGROVE LAUNCH CUSTOMERS / CHANNELS Pharmacy other • Launched in May 2019. • Launched in May 2019. • Launched in May 2019. • Available in 400+ stores. • Available in 800+ stores. • Ranged nationally in key distributor warehouses – API, Symbion, Sigma and CH2.
Slide 52: Australian Marketing Launch
AUSTRALIAN MARKETING LAUNCH Investing in our brand and olive wellness category education Advertising, digital & PR campaign + Healthcare Professional Engagement 52
Slide 53: Wellgrove USA Launch Range – Olive Leaf Extract
WELLGROVE USA LAUNCH RANGE – OLIVE LEAF EXTRACT • Launched in June 2019. • Made from fresh leaves at our Boundary Bend grove. • Wellgrove Super Immunity. • Wellgrove Super Immunity plus Heart Health. Super Immunity Super Immunity + Heart Health 500ml & 250mL 500mL & 120ct 53
Slide 54: Wellgrove USA Launch Sales Channels
WELLGROVE USA LAUNCH SALES CHANNELS 1. Direct to Consumer Website 2. Amazon.com Direct to consumer website Wellgrovehealth.com
Slide 55: Stone and Grove Olive Leaf Teas
STONE AND GROVE OLIVE LEAF TEAS • A craft brand of premium teas. • Created from leftover olive leaves, collected fresh and packed in simple, stylish, recyclable packaging, pyramid tea bags. • Released in November 2018, initially sold through speciality olive oil and vinegar stores in the USA. • Dist
Slide 56: Introducing Our Teas to the World
INTRODUCING OUR TEAS TO THE WORLD 56
Slide 57: New Non-Executive Director Appointment
NEW NON-EXECUTIVE DIRECTOR APPOINTMENT ALAN HILBURG Communications and branding consultant. Alan has also worked in various industries including transportation, hospitality, environmental industries, chemical, healthcare and education sectors. Alan has over 30 years of experience as a communications
Slide 58: Thanks > To Formal Proceedings
THANKS > TO FORMAL PROCEEDINGS 58
Slide 59: Resolution 1 Approve the financial statements and the reports
Resolution 1 Approve the financial statements and the reports Direct / Proxy % of total Votes share on issue For 17,046,355 27.9% Against - - Abstain - - Resolution approved 59
Slide 60: Resolution 2(a) Re-election of Mr Leandro Ravetti
Resolution 2(a) Re-election of Mr Leandro Ravetti Direct / Proxy % of total Votes share on issue For 17,046,355 27.9% Against - - Abstain - - Resolution approved 60
Slide 61: Resolution 2(b) Re-election of Mr Tim Jonas
Resolution 2(b) Re-election of Mr Tim Jonas Direct / Proxy % of total Votes share on issue For 17,046,355 27.9% Against - - Abstain - - Resolution approved 61
Slide 62: Resolution 3 Adopt the Remuneration Report
Resolution 3 Adopt the Remuneration Report Direct / Proxy % of total Votes * share on issue For 1,553,538 2.54% Against - - Abstain 3,305 0.0% * This excludes any proxy votes from Executive Directors or senior management referred to in the Remuneration Report Resolution approved 62
Slide 63: Resolution 4 Approving the non-executive Director fees cap
Resolution 4 Approving the non-executive Director fees cap Direct / Proxy % of total Votes * share on issue For 16,699,936 27.4% Against 2,216 0.0% Abstain 10,000 0.0% * This excludes any proxy votes from non-Executive Directors Resolution approved 63
Slide 64: Thanks
THANKS 64