Select Harvests Limited

Good morning from me as well. And as Andrew said, welcome to the Select Harvest 2025 half-year results presentation. So my name is David Servo. I'm the Managing Director and CEO of Select Harvest. Joining me delivering this presentation is our Chief Financial Officer, Liam Nolan. Next slide, please. The 2025 full-year results presentation will be delivered by webcast on the link displayed as advised for the ASX. After Liam and I have delivered the presentation, there will be time for questions before we commence our investor roadshow. To ask a question, simply raise your hand by the button on the screen. We'll progress you through the queue and you'll be given the opportunity to ask your question. In the event we have outstanding questions at the end of the allotted time, please contact Andrew Angus via the email on the screen and we'll deal with them subsequently. Next slide, please. This slide simply outlines the disclaimer and basis of preparation of the information contained in the presentation. Next slide again. And so in terms of the agenda, I'll start by providing a business update before handing over to Liam, who will discuss the financial results in detail. And then following Liam, I'll discuss strategy in the forward outlook before we both take questions. Next slide, please. And again. To set the scene on today's presentation, there are three observations we would make. The first is that over the last couple of years, we've consistently spoken about the Arm and Mac growth heading into positive space and this supporting price. We think this is now increasingly apparent to everyone and remains our forward prognosis. Secondly, the company's self-help activities delivered for our PMO are making a difference. type cost management, better farming practice, step change in processing and increasing price capture. And thirdly, in terms of financial discipline, our focus has been on driving the base business. Profit is increasing and despite a lower crop, it's a turnaround approaching $150 million over the last three years of results. We have a drive on cash and net debt reduced by half and no big capital spends that stretch the balance sheet. Rather, our spends are smaller continual increments for gain. Next slide, please. So if you move to talk about safety, people are critical to select harvests. We continue our focus on safety improvement. Our TRIFA as at the full year was a record 5.5. Now, I think it's reasonable to say that at three years of high performance, we have demonstrated step change in safety. We're driving a clear sense of deep and felt safety leadership to our people. We're training our people. We're raising the visibility of safety across the organisation. We're reducing workplace incidents and hazards and ensuring compliance. Now, just as with running a business, you never get to perfection on safety. and so we're not satisfied. We still have much to do to achieve our sustainability goal of zero harm. The Bradley curve shown on the right hand side is a framework to measure the maturity of an organisation's safety culture and we still have a long way to go. Our position on the curve evaluates how deeply safety is embedded in behaviours and attitudes across the workforce. As our safety culture matures, injuries and accidents decline dramatically, and operational efficiencies increase. We're now starting to see safety become self-sustaining with energy from the shop floor and farmhouse. If we go to the next slide, please. In terms of the almond macro, the global demand and supply dynamic is in great shape, and this slide provides a sense of key data and key drivers. On the demand side, prices have been increasing as the long-term global almond economic macro has improved, noting there was a mid-year dip when talk of a £3 billion California crop surfaced, and we'll talk about that more later in the presentation. Total global demand continues to go with CAGR 5-7%. Food megatrends continue to favour healthy foods and convenience foods, both of which are almond-positive. As a further comment, we're seeing positive global sentiment towards Australian supply, and select is recognised by customers as being more connected to the market and more physically present than others. We also note that ultra-processed foods are getting negative press, especially around snack eating. This makes almonds even more attractive. In terms of unit production costs shown on the bottom left of the slide, Australia has a significant relative competitive advantage to the US. this being a function of operational costs and yield performance. We've used data from UC Davis in this analysis, but we've taken a conservative approach to the size of the differential, and note others have assigned higher unit cost disadvantage to U.S. growers. On the supply side, California represents approximately 80% of global supply, and almond acres appear to have peaked at 1.4 million bearing acres. of which approximately 20,000 acres may be abandoned and plantings have reduced over time. The 2025 planting number is not yet released, but anecdotally it's being reported as continuing to reduce with an estimate of only perhaps 3,000 new acres being planted. Australia is about 10% of global supply and forward volumes are also reasonably flat. The time to maturity for trees is six to seven years. So the supply side cannot quickly respond to an uptick in demand. So we have a very positive urban macro that is sustainable over at least the seven-year horizon and relative competitive advantage where select harvest is well placed to benefit with very good medium-term pricing. We can go to the next slide and we'll talk about our financial results. The company has delivered a meaningful improvement in net profit after tax to $31.8 million with a return on capital of 6.8%. Now this number includes a profit of $5.8 million on our water rebalancing strategy. The board has determined there is no dividend to be paid this year and this reflects the company's focus on continuing to reduce its debt levels. The company is conscious of the need to balance debt production with paying dividends, and once we get debt down, then dividends will resume. It's worth noting that the company has made $31.8 million in a year when the Australian crop size was smaller, and so the results reflect the broad improvements being made in select harvests. The average price for the 2025 crop was $10.18 per kilogramme. and we recovered a couple of extra tonnes in the final few weeks to finish at 24,903 metric tonnes. It was a year that included some price volatility, and we saw this when the US objective forecast was released in July, when prices dropped by 20% and then recovered as the real crop size has become apparent. Operating cash flow was $118.6 million as we accelerated sales and bettered down our logistics capability. This is the prize we struggled to deliver in our first attempt at logistics, and the obviousness of the opportunity should now be apparent to all. We think there is further opportunity in this space to drive on a lower working capital position and increase cash generation. Net debt has halved and sits at $79.1 million. This year also saw the company repo-announce banking facilities with new terms moving to three- and five-year money to reduce our risk and also lower our costs. Now, what I'd like to do next is provide some more detail on each of our key results drivers, the volume, price and cost. And if we could go to the next slide, please. I think it's difficult to escape the fact that 2025 crop is disappointing for the entire Australian almond industry. A lower crackout rate from thicker holes and some frost damage did not help. This year we once again operated an earlier harvest, 10 to 14 days varying by farm, to optimise hygiene and reduce insect damage. We've continued our work on shaker oscillation frequencies and trialled new shakers for increased efficacy of removing nuts from trees. This was successful and we have ordered 24 new machines. I think the company did an exceptional job in getting harvest complete and looking after the quality of the crop. Now, the positive, however, of a small crop is that it helps drive innovation in approach. Operationally, we ran a pilot program to see if we could extract further kernel yield from our whole products. The answer is we can, and I will talk about this more fully later in the presentation. Next slide, please. As I've already noted, the company delivered an average price over its full crop of $10.18 per kilogramme. Now, earlier in the year, we started to give the first sense of Select's work in getting a price premium for our products. We've continued to refine our work and measurement in this space. The top chart shows our performance against strata markets based on price at the time of signing a contract, the FX rate of the day, and an adjustment for tariffs. Now, the maths for this requires some assumptions. So to the extent it's inaccurate, however, it's consistently inaccurate, and so it does not give variation by individual transaction. And the work says that over the years, Select Harvest has taken a global commodity and delivered a price premium over the global markets of some $8 million, or 2% to 2.4%, with some of this value benefit going to external growers. Now, I'd caution, this is... One year of data only, and it's happening in an upside, although we also saw the premium gain remain true in the mid-year price correction. Now, I'm keen to continue building our data because as we prove the sustainability of our approach, it means we now bring extra profit leverage to every horticulture and processing improvement that we make. The bottom chart shows global armament pricing increasing from the start of the season and peaking in May, June 2025. As I previously noted, we experienced a July price correction of 20% following the USDA objective forecast of £3 billion and prices have since recovered. Now, the most recent October 2025 California Armament Position Report shows a reduction in receipts of 7.97% compared to 2024. A direct extrapolation would imply a 2.5 billion pound US crop, which we think does not capture some delayed receipts as the wet weather likely slowed delivery to processing plants. So therefore, we think a 2.6 to 2.7 billion pound US crop is likely. And the next California crop report will give further insight. The net result in our view is a further solidifying and increasing of price. And I'll give a sense of SLIC's harvest outlook position later in the presentation. If we move to the next slide, please. Total production costs, which is the cost of growing, harvesting and processing, was successfully held flat in 2025 on a normalised 29,000 tonne basis at $6.71. Now, I specifically note comments by Dr Brittany Goodrich on work done for UC Davis, saying that between 2019 and 2024, grower costs in the US have increased by between 47% to 53%. Now, whilst the time periods are not perfectly compatible, It's a stark contrast to select harvest ability to control its cost base over the last three years. This year, there were some notable improvements in the cost of labour efficiency, fertiliser costs, harvest costs and processing costs, with some offsetting cost increases in water sprays and electricity. Now, let me hand over to Liam for a detailed discussion on our fun actions. Next slide.

Thank you, David. Select harvest net profit after tax is $31.8 million, up from $900,000 in 2024. The key drivers of the result are a $10.18 select harvest achieved almond price up 32.4% from 2024. This is offset by a lower crop size, as David previously mentioned, down 15.7% to 24,903 metric tonnes. Despite the rising costs in areas such as water, bees and electricity, the company has managed to keep the cost per kilogram consistent with 2024, normalised to a 29,000 tonne crop. Our lower finance costs are due largely as a result of lower debt and the part-year benefit of lower costs from the refinance of the company debt facilities. As announced at the half-year, the company has refinanced our debt facility in 2025. We refinanced the syndicated debt facility to three and five years and we're very well supported by our banks, NAB, Bravo, and Welcoming Commonwealth Bank to the syndicate. By extending the tenure and adding a third bank, we've reduced our future refinancing risk. Our total committed facility of $240 million has a $150 million limit for three years and $90 million for five years. This structure provides flexibility for both short-term liquidity and longer-term funding needs. We've also been able to lower our financing costs, which include a 61 basis point reduction compared with 2024 and an over 200 basis reduction on our overdraft facility. We currently have $170 million in undrawn committed facilities, providing strong liquidity to support operations and any future growth. Next slide. 2025 EBITDA growth of 37 million or 81% is essentially driven by the impact of the crop profit, up 26.4 million from 27 million in 2024. And in the current year, we've benefited from 5.8 million from the water rebalancing, which completed in 2024. The company balance sheet has improved significantly during 2025. Through a combination of improved earnings and strong cash flows, the gearing ratio has reduced from 34% in 2024 to 15.1% in 2025. The strength of our balance sheet can be seen through lower working capital, lower lease flow liabilities, and most pleasingly, lower debt. 2025 operating cash flows are up $109.1 million to $118.6 million. The cash flow generation included the carryover of 2024 working capital of around $21 million, meaning the underlying operating cash flow generation was almost $100 million before lease payments. The strong cash conversion from the $82.4 million EBITDA is attributable to strong earnings excellent sales velocity and a steady change in our logistics performance in 2024. We also had a very strong focus on our cash collections as we ended the financial year. Our investing cash flows were impacted by investments in the pre-cleaner and dryer, new shakers, Optimus and the water rebalancing. Our financing cash flows benefited from the $17.4 million relating to the 2024 equity retail race. All these strong cash flows and management of the order of the cash are the key drivers to improve net debt to $79.1 billion. Next slide. Throughout 2025, management and the board have developed a capital allocation model. Today we wanted to introduce a framework on how we deploy capital. In doing so, we've developed a framework that aligns with our strategic goals and objectives, and the model is designed to be attractive for existing and future investors. The first element of our capital allocation is around strengthening our core. With our first priority, as David's mentioned earlier, is on gearing and our intent to see our gearing continue to lower. It's very much the first priority and it enables the company to operate freely. Our base capital expenditure is targeted to be around 80% of depreciation and this is very much focused on replacement capex. However, we are eager to invest in the business and specifically growth capex, which we broadly define as capex in higher returning initiatives. And this could include or this includes investments like our new harvest shakers and project optimists. A future action which is not in any immediate plans involves how we look to fund major investments. And in this instance, we would look to fund these through a combination of debt and equity. Our allocation model is also focused on returning excess cash to our shareholders through a combination of dividends and buybacks based on their intrinsic value relative to the market. As a company, we are focused on deploying capital in a disciplined and structured manner to ensure the best outcome. Next slide. In this slide, it was brought up at the first half results, and I don't propose going through this in detail, but I'll have to answer any questions later on. David?

Thank you. Next slide, please. All right, thanks, Len. And next slide again. Okay, so this slide shows our strategy coming to fruition. The historic view of Select Harvest has been based on profit in growing. This is the first time the company has decided to show profitability along our value chain. The company strategy is generating returns by broadening value creation beyond horticulture to encompass processing and sales. The investments we have made are low cost and fight returning. This slide gives you more of a segmented view of where Select Harvest makes money. Our strategy is about, firstly, having substantially greater almond volume, secondly, leadership in processing scale and efficiency, and thirdly, maximising the return from the crop. And you can see value is created through not only almond horticulture, and in fact in a year where we've had lesser almond supply, the profit results have been supported by our ability to process with excellence and maximise the value from the market. Most importantly, the three streams, when leveraged collectively, create the opportunity for superior returns. We continue to innovate and have new opportunities, which we will run through our project management office, and they position the company well to take advantage of the armament macro. Now, I'll talk about progress on strategy execution over the next slides and then connect it to the PMO and the value created. Next slide, please. The traffic light shows performance. The first strategic priority is substantially greater almond volumes. And whilst there is less green in 2025 than 2024, it's the result of the lower crop. The 2026 crop will be the first full year of our improved horticulture approach. As we benchmark our farms against others, we are confident we'll get more yield over time as we optimise fertiliser, feed density for reduced flight distances and water. There's a meaningful price for improvement and extra 1,000 tonnes comes with limited incremental costs. Controllable costs are being kept tight as we improve on-farm efficiency for sprays, seasonal labour and organisational design. However, we are seeing increases in water, feed and fertiliser costs going forward. A smaller Australian crops are a lower external growable. So we've added an external grow liaison resource and expect to see some incremental supply growth in 2026. We have this year continued our investment at Pyangle to improve water drainage with phase one complete and we will likely undertake a phase two drainage project and start to plan for the replant of some of the Monterey trees at Pyangle. We've also invested in mountain drainage dam improvements, along with a 12 hectare replant of an area previously lost to the 2022 floods. We're restoring productive land capacity. In effect, what you're seeing us doing is improving the defensive capacity of the farms to weather events. The second priority is leadership in processing, and as with the farms, processing cost down initiatives continue with less line stops, packaging line efficiencies, and labour, et cetera. Having increased the capacity of Carina West to 40,000 farms, the investment in Optimus Phase 2 is nearing completion, and I'll talk about this project and some new initiatives on the following slides. The third priority is maximising returns from the crop. We have on earlier slides seen the results of our price optimisation stream at $8 million. Customer optimisation has seen an increase in direct supply, which is now approximately 50% of our business. From a selling perspective, it has also allowed us to build new quality grades specific to customer needs. So by way of example, Historically, mixed variety almonds were sold as manufacturing or standard 5 grade. But by dealing directly with customers that use mixed nut and fruit combinations in bars and packages, we can sell mixed variety almonds at a lower price supreme grade as a lower price supreme grade almond. So instead of selling at, say, $10 a kg, we're achieving $10.90 a kg, and for the customer, they win with a discount on their sourcing of Supremes because they are a mixed variety armament. Terra-enabling pillar. Logistics has been turned into its strength. We have data and analytics starting to roll out, and I think worthy of quick comment is our culture. with our employee alignment and engagement scores sitting in the top quartile of all Australian businesses. Now, I mentioned continuing innovation being run through our project management office, so the next three slides will give you a flavour of those activities. Next slide, please. So let's start with Project Optimus. So if you'll recall, we announced Project Optimus Phase 2, which was a 10,000-tonne capacity expansion at the end of last year. And there are, in essence, two stages to this piece of work. Stage one is complete. We've automated the roller speed of our shear rolls to match their rate of wear, and then balanced each of these shear rolls across decks to get the optimal throughput and not overload any one deck. We've also upgraded our hulling and shelling colour sorter, so we take our lower-quality product earlier and, in the process, ensure we do not overload the decks when running faster speeds. The second stage is being installed as we speak. Increasing the capacity of what was deck 7 through 9, so we can further balance flow volumes and get optimal throughput. And then finally, increasing the conveyancing capacity to utilise our downstream sorting assets. This 10,000 tonnes will be operational for 2026, and we will have a total capacity of 50,000 tonnes. Next slide, please. Let's talk about kernel recovery. During the year, we started to consider the possibility of extracting further kernel from our hull pipes. In the picture, you can see us pilot testing a new approach to reprocess hull and recover any saleable product. No other processor in Australia is doing this, and we have proven it's possible and expect to see a yield gain of approximately 3%. This will immediately drive increased profitability for our own crop, and that of our external growers. It delivers an outstanding payback and again will be operational in 2026. Next slide please. We trialled six new harvest shakers in 2025 and have decided to back this up with another 24 shakers for the coming harvest. The new technology has improved efficacy for getting nuts off trees. and may lead to lower cost if we can reduce the number of blocks of land that require reshakes. The new machines will increase our ability to capture in-shell and ensure higher quality nuts as they are more quickly collected and removed from farms to minimise the risk of insect damage and mould. This investment also has a quick payback with the money recovered in less than two years. A number of the new shakers are already on water and they are steaming towards us. Next slide, please. The Project Management Office. We continue to use the PMO to drive outcomes within the business. It's becoming part of our DNA. The PMO in 2025 has net of inflation delivered $16.7 million of value, and 2026 will see a continuation of the PMO with each initiative individually tracked and monthly bullet reported. Next slide, please. As we talked about the outlook, and one more again, Now, I have in previous presentations made comment that crop forecasting is a fool's error, and so I'm not intending to repeat this approach. And we note the US, based on this year's crop forecast accuracy, is as equally challenged as Australia in this regard. This year's bloom was good, but it was relatively quick. We've not experienced the frost damage that we saw in the prior year. And the single biggest challenge South Australia. The company mobilised and secured sufficient bees across all farms to allow a successful breed, including sourcing bees from Western Australia. Based on a slow start to summer and cooler weather, we expect this year's harvest to commence approximately two weeks later than normal. Now our view on the California crop remains consistent. We think they've reached peak acres And ultimately, we will see the crop size reducing given the limited replanting. The California crop receipts at the end of October, as I noted, are 7.97% behind prior year. There may be some catch-up to this number, but a 2.6 to 2.7 billion pound crop seems likely. Quality is expected to be affected by insect damage and rain during harvest. And we see an implied carryout of 300 and something million pounds at the end of the California crop year. Let's move to talk about margins. We're seeing strong demand in India and China in the segments that we've played. This combined with a lower than expected US crop is positive for prices. In fact, prices are increasing now, and our prognosis is supply and demand dynamics will see prices continue an upward trajectory. To provide some price direction, if you had a normal crop profile and the entire crop available to sell today, we would expect to see an average price of about $10.30 per kilogram. I note this is higher than the current market consensus of $10.07. Our long-term view remains there's continued global growth and demand at 5% to 7% CAGR. Going forward, however, we do see some headwinds in our uncontrollable costs for bees, water, fertiliser and energy. We'll endeavour to offset these through the investments in capacity, yield recovery, shakers and our PMI. Select Harvest has already commenced selling its 2026 crop. as we continue our approach to price optimisation and sales velocity and expect to continue to outperform the pricing benchmark. We have approximately 55% of the 2026 crop hedged at 64.85 cents. Next slide, please. So I think to bring it all together, the company profitability is increasing. with an almost $150 million recovery from 2023, and our business model has evolved. The balance sheet is strong, and the company's looking to further reduce debt. The gains from our PMO are coming through, and we have more to deliver. The macro environment for almonds is positive, and we expect it to remain this way for future years. The company remains focused on maximising yields, processing and expanding our midstream capabilities. capturing as much price as we can and staying tight on costs. So thank you. I'll now hand back to Andrew Angus to manage just through the questions.