Select Harvests Limited · ASX:SHV
Select Harvests — Shareholder Meeting (November 2015)
51 slides from Select Harvests's shareholder meeting presentation, Nov 26, 2015
Slide 1: 2015 Annual General Meeting
\\ SELECT HARVESTS Select Harvests Limited (“SHV”) 2015 Annual General Meeting Healthy Growth Strategic Roots 26 November 2015
Slide 2: Disclaimer & Basis of Preparation
A Disclaimer & Basis of Preparation SELECT HARVESTS This presentation is provided for information purposes only and has been prepared using information provided by the company. The information contained in this presentation is not intended to be relied upon as advice to investors and does not take i
Slide 3: Chairman's Speech
For personal use only SELECT HARVESTS 2015 AGM: Chairman’s Speech Good Morning Ladies and Gentlemen and welcome to the 2015 Annual General Meeting of Select Harvests Limited. Thank you for joining us. My name is Michael Iwaniw and as your Chairman, I will be conducting today’s meeting. Shortly I wil
Slide 4: Introduction of Board and advisors
Accompanying me on stage are Ross Herron, Michael Carroll, Fred Grimwade and Paul Riordan and the Managing Director of Select Harvests, Paul Thompson. Next to Paul Thompson is our Chief Financial Officer and Company Secretary, Paul Chambers. For personal use only I would also like to welcome Bart Ou
Slide 5: FY15 record result
For personal use only FY15 has been an outstanding year for Select Harvests – it was a record result with a crop of 14,500 tonnes, a record average pool price of $11.45/kg and the third consecutive year of stronger financial performance. The company has continued to drive its transformation into a H
Slide 6: ASX200 admission and strategy review
In March this year, Select Harvests achieved the milestone of being admitted to the ASX200 Index. Management has been diligent in executing our 7 point strategy and the outcomes against our original strategic targets have been largely achieved. For personal use only The Board undertook a review of t
Slide 7: Almond orchard growth
For personal use only Two key strategic platforms in recent years have been to control the critical mass of almonds and to increase crop yield. We have significantly grown and improved our almond planted area. We have employed a range of measures to do this - from the acquisition of mature and immat
Slide 8: Orchard yield improvements
more efficient use of water and fertiliser, renovate and upgrade existing orchards and orchard infrastructure. Importantly, we are confident improved yields will be delivered over the next 2 years. For personal use only 5
Slide 9: Risk mitigation, dryer, biomass and water
For personal use only Where we can’t directly control, for example with adverse seasonal conditions, we seek to mitigate and influence in a measured way – the frost fans and almond dryer are two examples. The commissioning of the almond dryer not only mitigated the risk of a wet harvests into the fu
Slide 10: Water strategy and sale and leaseback funding
the developing climate we may seek to increase ownership levels to achieve greater water security. To date this strategy has not only delivered a lower water price to the Select Harvests orchards, but has given greater water supply certainty through a diversified mix of contract and allocation mecha
Slide 11: Global almond environment
For personal use only The global almond environment continues to present some great opportunities for the company. Global consumptions remains firm with all almond production being consumed. The situation in California has been well documented, particularly the adverse impact on the water supply. No
Slide 12: Board governance and safety
The Board has ensured governance and guidance to the business with particular focus on commodity pricing, Occupational Health & Safety, and both horticultural and business processes. OH&S receives the highest priority in our business and is something the Board takes very seriously. For personal use
Slide 13: For personal use only
that can deliver our objectives. We are committed to building on the strong result achieved in 2015 and producing even greater outcomes for our shareholders in future years. For personal use only 7
Slide 14: Closing thanks and awards
For personal use only In closing, I would like to thank the Board, Management and employees for their industry knowledge and skills and their commitment, passion and dedication to the company. I would also like to acknowledge and congratulate the winners of the Select Harvests 2015 Chairman’s Awards
Slide 15: Managing Director overview
For personal use only Thank you Michael. Good morning everyone and thank you for joining us today. As Michael said, I am going to give you an overview of our 2015 performance, our key activities and an update on the market fundamentals. It is important to note that Select Harvests is a very unique a
Slide 16: Agenda
For personal use only Our agenda today is: 1. 2015 Highlights 2. Strategy – Objectives & Activities Overview 3. Food Division 4. Almond Division 5. 2016 Business Objectives & Outlook 10
Slide 17: 2015 highlights
For personal use only Generally we had very favorable conditions with demand for healthy eating in particular plant/tree protein continuing to grow both domestically and internationally. FY15 EBIT of $85.9 million is up 174% on the prior year. FY15 NPAT of $56.8 million, up 168%. Cash flow generatio
Slide 18: Record crop and acquisitions
For personal use only 2015 was a record year. Our record crop was 14,500 tons and a record price of $11.45/kg. 100% of the crop has now been sold or committed. We acquired two additional orchards Amaroo and Mullroo plus a Greenfield development property Mendook in NSW. These properties consisted of
Slide 19: Strategy: critical mass of almonds
For personal use only Three years ago we announced our strategy, outlining 7 strategic platforms. I am pleased to report, led by an excellent management team this strategy continues to be well executed and pleasingly we are ahead of plan. We are seeing the benefit of this strategy with both top and
Slide 20: Yield, supply chain and capital projects
We will continue to benefit from ongoing investment in technology and training as we move to more farm specific programs. As previously advised at the current almond price we are investing more in our Horticultural programs to increase yield. This will take 2 years to provide a return, due to the Ho
Slide 21: Safety, systems and stakeholder engagement
6/ Fix Systems & Process Our safety performance remains better than industry average, but unfortunately it has deteriorated in the last 12 months. For personal use only As Michael highlighted, we have launched a companywide OH& S program with a Zero Harm target. Our strategy is relatively simple bas
Slide 22: Food Division
A SELECT HARVESTS Food Division
Slide 23: Food Division performance
For personal use only The Food Division has continued to improve. The 17% topline growth and 14% bottom line growth has been driven by: product innovation, passing on commodity price increases, controlling costs, entering new markets and aligning with growth customers. The Industrial Division enjoye
Slide 24: Food Division export sales
For personal use only As you can see our Food Division Export sales have increased by over 80% in the last 3 years. The vast majority of these valued added almond products have been sold into the Asian market. These sales now represent 17% of our branded and industrial sales. The commissioning of th
Slide 25: Free trade agreements and Asia
For personal use only The recently negotiated Free Trade Agreements (FTA’s) are a positive for the almond industry and our valued added export products. We do not do a great deal of trade in these 3 countries, today. In the last 12 months our industrial and consumer sales teams have visited all 3 co
Slide 26: New consumer products
For personal use only Here is an example of some of new products from our Consumer Division. Samples are available at the conclusion of the meeting. 18
Slide 27: New processing facility
For personal use only Our current valued almond processing supply chain has inefficiencies, unnecessary complexity and cost, plus both capability and capacity constraints. The state art facility will address all of these plus have the advantage of being powered by our own biomass plant. Upon commiss
Slide 28: Almond Division
Almond Division A SELECT HARVESTS 20
Slide 29: Almond Division performance
For personal use only As I said the Almond Division is the backbone of our business. Growing conditions were generally favorable, but we still experienced some weather challenges. Again, this reinforces our risk mitigation strategies of geographic diversity, frost fans, increased harvest assets and
Slide 30: Planting and EBIT
price per kilo. We replanted 126 Ha (310 acres) and planted 77 Ha (190acres) of Greenfield land on our existing orchards. This financial year we have just completed planting 384 Ha (948 acres) at our Allinga For personal use only Orchard. With 100% of the crop sold or committed 2015 EBIT is up 188.8
Slide 31: Orchard age and planting program
For personal use only This chart shows the average age of our orchards is 10.7 years. We have very few orchards requiring replacement. The vast majority of our portfolio is in the cash generative stage. We now have a pipeline of land to support our aspirations, remember orchards start being commerci
Slide 32: Biomass plant
For personal use only Almond orchards and processing generates a substantial amount of biomass including tree pruning waste, hull and shell. The biomass plant will generate 2.5 MW of electricity per annum plus 17.5 tons of steam per hour. Once running we will be returning 50% of the electricity to t
Slide 33: US almond crop and prices
For personal use only As at October 2015, the United States Department of Agriculture’s National Agricultural Statistical Survey forecast a 1.8 billion pounds almond crop, slightly down on last year’s crop of 1.87 billion pounds. With the crop harvested but still being processed. The US Department o
Slide 34: Substitution
For personal use only I am often asked “what about substitution”? Yes there are other plant alternatives. If you look at direct substitutes other tree nuts they generally take 8 year to mature similar to almonds. Many like pistachios and walnuts grow in similar geographies to almonds and therefore h
Slide 35: Almond protein cost competitiveness
For personal use only The other question - has the recent price increases affected almond’s competitive position? This chart shows the cost of buying 10gms for protein in an Australian Supermarket. The comparison includes well know protein products like: meat, eggs, chickpeas, soya, milk and other t
Slide 36: Water policy
For personal use only Michael touched on our water policy. We own or long term lease a third of our water, a third on 3-5 year leases and a third spot. The strategy is based around the assumption water is a tradable commodity and we can get better returns by growing almonds than by owning water. To
Slide 37: Water market and crop returns
For personal use only As the water market has matured, more financial investors and entitlement holders have become aware of the opportunity to trade their annual entitlement. The laws of supply and demand result in growers of lower value crops trading their annual entitlement when the return on tra
Slide 38: California water and regulation
For personal use only As many of you would be aware, approx. 80% of the world’s almonds are grown in California. The entire crop is grown in the drought impacted region. Not all of the orchards have been affected as some orchards continue to have good access to water. The first thing you need to kno
Slide 39: California drought impact
will mean the water resource will not be available. There are other areas where the soil salinity cannot be reversed without resorting to highly inefficient flood irrigation. The full impact of the drought and the proposed legislative changes is difficult to quantify. We know a significant number of
Slide 40: El Nino and drought recovery
For personal use only Current predictions are that we are about to go into a significant period of El Nino conditions. Firstly I would like to remind you that the Australian experience and a recent study at UCLA Davis University has concluded that almond trees take 3 years of normal weather conditio
Slide 41: Australian aquifer management
For personal use only I have included this slide to show you just how strictly Australian aquifers are managed. The government regulations ensure the aquifers are recharged even in times of drought. 31
Slide 42: 2016 crop estimate
For personal use only We have experienced a good bloom in NSW and SA, Victoria was average. Some NSW orchards in the last couple of weeks have seen unseasonably heavy rain and some hail. If we were in one region these events could have been catastrophic. This again highlights the wisdom of our geogr
Slide 43: Outlook
For personal use only I remain more optimistic about the outlook for Select Harvests. Our strategy is working. We have: • Strong demand for our products and brands locally and from Asia • We forecast high almond prices will continue • Supply will be constrained from the USA • Volume growth will be d
Slide 44: 2016 objectives
For personal use only Our 8 objectives for 2016 are very clear: 1. Zero Harm to our employees 2. Improve yield 3. Acquire orchards at the right price 4. Implement Greenfield orchards and identify new opportunities 5. Implement Project Parboil 6. Implement Project H2E 7. Continue to grow turn around
Slide 45: Thank you
Thank you for taking the time to attend the AGM today. I now hand over to Michael and we will be happy to answer questions during general Q&A. The Board and Executive team and I will be around the foyer along with other members of the management team after this meeting. I encourage you to join us fo
Slide 46: Contact details
A SELECT HARVESTS Please direct any queries to: Paul Thompson Managing Director +613 94743544 Join us on Instagram for Food Business & Products Thank you regular snaps on Orchards, Paul Chambers Andrew Angus Chief Financial Officer Investor Relations +613 94743544 +61 402 823 757 35
Slide 47: Financial history
A Select Harvests Financial history SELECT HARVESTS Total Sales (ASM) 279 2952472486 BA MBS 7513S] BB lear asm) m4 405 i BOGS [EEIT Margin (EBIT/Sales - %) (%) 17 76% 121% 108% HOSKIN 78K ISTH 16 Per (asm, yo 4008888827288 Nar (Asi) 5 71,8737 issued Shares No. of Shares 507-387, 380S SB G2 BBS 580 [
Slide 48: Tree Area by Age
Select Harvests Tree Area by Age A SELECT HARVESTS Tree age (at Feb 2016 Harvest)| Area | Area (Acres) | (Ha) i 048; 384 2 721| 294} 3 61} 247] 4 0 qd 5 0 dj 6 0 dl 7 0 dl 8 1,907] 7) 9 2,804) 1135] 10 1,097| 444] " 889} 360] 12 1,169] 473 13 505] 205) 14 204] 119) 15 455| 184) 16 651| 264] 7 609] 2
Slide 49: Almond Supply - Geographic Diversity & Scale
For personal use only A SELECT HARVESTS Almond Supply- Geographic Diversity & Scale Geographic diversity limits exposure to: - Weather - Disease spread - Insect infestation Amaroo to Robinvale Distance: 225 km Drive Time: 2.5 hours Mullroo to Robinvale Distance: 140 km Drive Time: 1.8 hours Mendook
Slide 50: Horticultural Costs
Horticultural Costs A SELECT HARVESTS SHV FY2015 Horticulture Costs by Percentage Source: Company Dato 39
Slide 51: US Crop History Analysis
US Crop History Analysis A SELECT HARVESTS [crop Year 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 ‘Actual Actual Actual __Actual__Actual__Actual__Actual__Actual___Actual [Bearing Acres 510,000 610,000 640,000 710,000 750,000 770,000 800,000 820,000 850,000 870,004
Select Harvests — Shareholder Meeting (November 2015) on 6ix