Select Harvests Limited · ASX:SHV
Select Harvests — Investor Presentation (June 2016)
54 slides from Select Harvests's investor presentation, May 30, 2016
Slide 1: Overseas Investor Presentation
For personal use only Select Harvests Limited (“ASX:SHV”) Overseas Investor Presentation Michael Iwaniw – Chairman Paul Thompson - Managing Director June 2016
Slide 2: Disclaimer & Basis of Preparation
Disclaimer & Basis of Preparation For personal use only 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 ta
Slide 3: Business Overview – Growing Together
Business Overview – Growing Together For personal use only Almond Division 14,303 acres of Australian almond orchards – Victoria, South Australia & New South Wales 80% in cash generative mature phase – very low capex required Improve orchard productivity through high performance farming progra
Slide 4: Macro Trends Driving Strategy
Macro Trends Driving Strategy For personal use only Demand Drivers Supply Drivers Health Land Availability Weight Loss Infrastructure Heart Disease Capital Lactose Intolerance Environment Gluten Free Climate Coeliacs Water availability Diabetes Sustainability Wealth C
Slide 5: Strategy - Planning for excellence and growth
Strategy - Planning for excellence and growth For personal use only 1. CONTROL CRITICAL MASS Secure the critical mass of nuts needed to maximize OF ALMONDS profitability and leverage the global almond opportunity. 2. IMPROVE YIELD & CROP Improve yield and overall crop value by perfecting on-farm VAL
Slide 6: Food Division
For personal use only Food Division • Market leading consumer and industrial brands plus outstanding customer service 6
Slide 7: Consumer Brands & Markets
Consumer Brands & Markets For personal use only • Major supermarkets • Independent supermarkets • Route trade Cooking & Snacking Health • Health food stores • Food manufacturers & wholesalers • Confectionery manufacturers Health Breakfast • Distributors • Export Retail Markets • Export food manufact
Slide 8: Retail Categories
Retail Categories For personal use only • Dried Fruit & Nut • Snack Food • Muesli • Health Food • Fresh Produce (loose, bulk) & Pre Pack • Private Label 8
Slide 9: Industrial Categories & Customers
Industrial Categories & Customers For personal use only • Whole, Blanched, Sliced, Slivered, Meal • Pastes • Roast Diced • Natural Meal • Blends 9
Slide 10: Almond Division
For personal use only Almond Division • Across three distinct geographic regions with the majority in the economic “sweet spot” 10
Slide 11: Almond Orchards – Our productive foundation
Almond Orchards – Our productive foundation For personal use only Geographic diversity Secure access to diverse limits exposure to: water sources: − Weather − River Water − Disease spread − Aquifers − Insect infestation Positions the company to maximise harvest volume & reduce variance. Enables sequ
Slide 12: Select Harvests – Orchard Age Profile
Select Harvests – Orchard Age Profile For personal use only Significant growth & improvement occurred in SHV orchard portfolio in recent years - acquisition, replants, greenfields 12
Slide 13: Significant Organic Volume Growth
Significant Organic Volume Growth For personal use only +46% +39 +22% +3% 80% of current planted acres are cash generative By 2024, almond volumes will increase by 46% 2018: +3%, 2020: +22%, 2022: +39%, 2024: +46% (Pink & Blue Sections only – basis capital already sunk) 13
Slide 14: Select Harvests – Horticultural costs
Select Harvests – Horticultural costs For personal use only 14
Slide 15: Almonds competitively priced against other tree nuts
Almonds competitively priced against other tree nuts For personal use only Tree Nut Spot Pricing March 2010 vs March 2015 vs March 2016 (USD/lb) Averaged March 2016 Averaged March 2015 Averaged March 2010 $2.50 Almond $4.55 $2.42 $3.65 Hazelnut $6.80 $2.80 $4.75 Roasted & Salted $5.35 Pistachio $3.9
Slide 16: Almond Pricing over a year crop period (AUD)
Almond Pricing over a 10 year crop period (AUD) For personal use only Almond Price Nonpareil SUP 23/25 (AUD/kg) (AUD/kg) - LHS Historical Rolling Average AUD/kg - LHS 5 Year Rolling Average AUD/kg - LHS Rollng Average USD vs AUD - RHS Linear ((AUD/kg) - LHS) $14.00 $1.00 $0.90 $12.00 $0.80 $10.00 $0
Slide 17: Processing
For personal use only Processing • SHV processes over 15,000mt of quality almonds and 12,000mt of high quality nuts and healthy products 17
Slide 18: Almond Processing
Almond Processing For personal use only • The site occupies 100 hectares of land • 48,000 MT hull storage area • Commissioned in 2008 at a cost of $40 million • ALMADS customised stock control & traceability system • Hulling and Shelling capacity is 30,000MT • Almond Pasteuriser (5 log - Steam) • 36
Slide 19: Food Division Processing
Food Division Processing For personal use only This site has 11 processing lines which include: Packaging formats include: • Electronic sorters • Pillow packs • Dry roasters o Size range from 25g – 1kg • Oil roaster o Edge seals & Block bottoms • Almond blanching, slicing and grinding lines • Do
Slide 20: Operations - Project H2E – Hull to Energy
Operations - Project H2E – Hull to Energy For personal use only Project Overview: Biomass boiler and steam turbine, fuelled by almond hull and shell converting it to heat and power. Abating 24000 tonnes* of greenhouse gas. • Internal estimate Reduces energy cost by 20%, enhancing Carina West’s posit
Slide 21: Increasing Value-added & Export Businesses
Increasing Value-added & Export Businesses For personal use only Industrial Products Healthy grains, pulses & Nuts Export Focus Value-added snacks & breakfast Moving from grower commodity bagger to value-adding 21
Slide 22: Project Parboil – Almond Value-Add
Project Parboil – Almond Value-Add For personal use only Current Future Blending Frying Sorting Blanching Blending Frying Sorting TT TT Roasting Conching Packing Grinding Roasting Conching Packing Bulk Slicing Packing Packing New Blanching Grinding Slicing with Roasting CW Sorting Retail CW Processi
Slide 23: Project Parboil – Almond Value-Add
Project Parboil – Almond Value-Add For personal use only Projective Objective: To install an Added Value Almond Processing & Packing Facility at Carina West Infrastructure designed using and complying to: WQA Manufactured Food Standard Version8 & Coles Food Manufacturing Supplier Requirements (CFMSR
Slide 24: US (California) Update
US (California) Update For personal use only US Crop Update (2015/16) – mixed start to season Industry experienced good chill hours and bloom conditions Largest US grower removed 10,000 acres (25% of almond portfolio) – indications of 35,000 acres pulled across industry and talk of 70,000 acre
Slide 25: Rationale - Why Select Harvests?
Rationale - Why Select Harvests? For personal use only 1. Excellent Industry Fundamentals Supply/Demand Counter-cyclical to USA 2. Integrated Business Model Orchards Processing & Packaged goods Large nut, seed and dry fruit trader 3. Culture for Improvement Refreshed Leadership One Sel
Slide 26: Strategy Execution
Strategy Execution For personal use only Business Growth Orchard Growth Orchard Productivity Growing Brands & New Product Portfolio New Geographies Risk Mitigation Almond Crop Dryer Water Policy Bee Policy Strong Balance Sheet Cost Out Project H2E – Biomass Electricity Cogene
Slide 27: Select Harvests - Summary
Select Harvests - Summary For personal use only What we are building A company of passionate people A strong and trustworthy company that looks after stakeholder interests A well run integrated company that is well positioned to benefit from the indisputable global almond industry fundamentals
Slide 28: Market Outlook
Market Outlook For personal use only Category Overview: Demand remains strong, current prices expected to generate growth Consumers continue to see the benefits of all super foods with new product development remaining buoyant Buying patterns had changed due to instability in pricing, little
Slide 29: 2016 SHV Crop Update
2016 SHV Crop Update For personal use only Harvest Progress Update – Ahead of previous years Complete Volume Update – Increased volume All stock has been delivered to processing centre Volume estimate increased from 13,700 to 14,000 tonnes estimate Processing Update – On Plan: 40% of est
Slide 30: SHV 2016/7 Business Objectives
SHV 2016/7 Business Objectives For personal use only 1. Zero Harm OH&S strategy 2. Improve average mature tree yield 3. Acquire orchards at the right price 4. Grow and strengthen Food Business 5. Implement Greenfield program 6. Implement Biomass/Cogen plant 7. Implement Parboil 8. Implement 1Select
Slide 31: Thank you
For personal use only Thank you Please direct any queries to: Paul Thompson Paul Chambers Andrew Angus Managing Director Chief Financial Officer Investor Relations +61 3 9474 3544 +61 3 9474 3544 +61 402 823 757 Please note that background material/data regarding the global almond industry can be fo
Slide 32: Select Harvests - Financial History
Select Harvests - Financial History For personal use only Source: Company Data 32
Slide 33: Select Harvests – Orchard Profile
Select Harvests – Orchard Profile For personal use only Select Harvests Planted Under development Total Almond orchard portfolio Acres Hectares Acres Hectares Acres Hectares Central region Company Owned 4,169 1,688 - - 4,169 1,688 Leased 1,481 600 1,400 567 2,881 1,166 Total 5,650 2,287 1,400 567 7,
Slide 34: Select Harvests - Brands - Lucky
Select Harvests - Brands - Lucky For personal use only Lucky is Australia’s leading cooking nut brand – record 43.6% market share vs. 39.0% YOY (MAT) 34
Slide 35: Select Harvests - Brands - Soland
Select Harvests - Brands - Soland For personal use only 35
Slide 36: Select Harvests - Brands – NuVitality
Select Harvests - Brands – NuVitality For personal use only 36
Slide 37: Australian Almond Industry Snapshot
Australian Almond Industry Snapshot For personal use only Company Orchards Processing Sales & Marketing Select Harvests 14,303 acres (5,389 ha) –20%* Primary Processing 30KT Robinvale Consumer, Foodservice & market share Vic Industrial businesses Global Nut Trader SA, Vic & NSW Value Added Processin
Slide 38: Growing Australian Influence
Growing Australian Influence For personal use only Australia has undergone phenomenal growth in almond production & export over the last decade 38
Slide 39: Demand - Drivers & Facts
Demand - Drivers & Facts For personal use only What is Driving Demand? Developed Economies - Healthy eating & the movement to proteins. Developing Economies - Increased wealth & the movement to proteins based Westernize diet Australian & Californian Almond Boards - Opening new markets and su
Slide 40: Sustainable Positive Fundamentals
Sustainable Positive Fundamentals For personal use only Tight Supply Long lead time to mature production (7 years) 18-21 years of subsequent mature production Strong Demand Developed Economies - healthy eating & product innovation Developing Economies - affluence shift from carbohydrate
Slide 41: Growing Australian Influence
Growing Australian Influence For personal use only Australia has undergone phenomenal growth in almond production & export over the last decade 41
Slide 42: Almond Supply – Concentrated Globally
Almond Supply – Concentrated Globally For personal use only The USA dominates the global almond production industry with 83% of the market, followed by Australia with 7% Concentrated Global Supply Chain - USA produce 83% of the world’s Almonds Australia (counter cyclical to USA) became the 2nd lar
Slide 43: Almonds Demand - Diverse & High Growth
Almonds Demand - Diverse & High Growth For personal use only Almonds have held the No.1 position in global tree nut innovations since 2006. Almonds had 35% share of global tree nut innovations in 2013. 43
Slide 44: Both Dominate & Versatile
Both Dominate & Versatile For personal use only Source: International Nut & Dried Fruit Council Foundation (INC) Global Statistical Review 2014-15 Almonds are the most versatile and highest volume nut - substitution is difficult 44
Slide 45: Health & Economic Benefits
Health & Economic Benefits For personal use only Source: Nutrient Content - Global Statistical Review 2006-2011, International Nut & Dried Fruit Council Foundation (INC). Pricing based on company survey (on-line Australian retail pricing, May 2016). Almonds are the highest protein, highest fibre & a
Slide 46: US Almond Production by County
US Almond Production by County For personal use only 46
Slide 47: Global Supply - US Almond Production & Drought
Global Supply - US Almond Production & Drought For personal use only 14% - North Counties % of US Almond Prod’n Orange States = Severe Drought 86% - South Counties % of US Almond Prod’n Red States = Extreme Drought Dark Brown States – Exceptional Drought Drought situation is much improved on 2015 47
Slide 48: Global Supply - US Almond Production & Drought
Global Supply - US Almond Production & Drought For personal use only Snow Pack is well below average - melting faster than average - Surface Water much improved 48
Slide 49: US Almond Production - Ageing
US Almond Production - Ageing For personal use only Source: USDA NASS, 2016 California Almond Forecast Report, 10 May 2016 38% of California’s total Almond Orchard Acreage is more than 21 years old 6% of Select Harvests total Almond Orchard portfolio is over 21 years old 49
Slide 50: US Groundwater depletion
US Groundwater depletion For personal use only Purple Shading = Critically Overdrafted Groundwater Basins Groundwater - Some of the biggest counties are reliant on critically overdrafted groundwater basins Dept of Water Resources has a well defined timeline to groundwater legislation and management
Slide 51: Concentrated US Supply – with water issues
Concentrated US Supply – with water issues For personal use only Concentrated Supply – 5 Counties account for 77% of US Almond Production Groundwater Reliance – 72% of US Almond Production is from critically overdrafted groundwater basins 51
Slide 52: Almond Tree Life/Production Lead Time
Almond Tree Life/Production Lead Time For personal use only Almond trees take 8 years to mature, then produce at that level for approx. 18 more years before tapering Almond Tree Life Cycle & Yield 1.60 1.50 1.40 1.30 1.20 1.10 Yield (Tonnes/Acre) 1.00 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0
Slide 53: Annual Almond Cycle
Annual Almond Cycle For personal use only Adverse weather is biggest threat Dormancy Nuts Mature Almond Trees are Formation of dormant between Fruit/Kernel, Hull, Pollination – Wet weather & Wind impacts May-July Leaves Blossom Hull Split Petal fall to early nutlet development – Frost impacts Be
Slide 54: Useful websites for almond industry information
Useful websites for almond industry information For personal use only Industry Associations ─ Californian Almond Board www.almondboard.com ─ United States Drought Monitor http://droughtmonitor.unl.edu/Home/StateDroughtMonitor.aspx?CA ─ Dept. of Water Resources (DWR) – Reservoir Levels http://cdec.