Select Harvests Limited

Morning everyone and welcome to the Select Harvest half year 2026 result. My name is Andrew Angus and I look after investor relations for the company. Joining me today is Select Harvest Manager Director and CEO David Zervaia and Select Harvest CFO Liam Nolan. David, over to you.

Good morning and welcome to our first half 2026 results presentation. I'm David Surveyor, the Chief Executive Officer and Managing Director of Select Harvests and I'm joined today by Liam Nolan, our City Authority. The first half 2026 results presentation will be delivered by a quick cast on the link displayed as advised to 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 via the button on your screen. We'll progress you through the queue and you will be given the opportunity to ask your question. In the event that we have questions outstanding at the end of the allotted time, please contact Andrew Angus via the email on the screen and we'll deal with them subsequently. This next slide simply outlines the disclaimer and basis of preparation of the information contained in this presentation. Next slide. In terms of the agenda, I'll start with a business update before handing over to Liam who will discuss the financial results in detail. Following Liam, I'll close on strategy, transformation and the key takeaways before we try to take questions. Next slide. One more. So let's start with the results. Profit is increasing. Over the last three full-year results cycles, Select Harvests has delivered a significant turnaround in profit performance. With a first-half 2026 NPAT of $26.6 million, and more importantly, an underlying NPAT of $29.1 million, this is a 33% increase in profit. I note the underlying NPAT is a preferred internal metric of true performance, with the definition provided in the appendix to the presentation. With the benefits of the second half still to come, we expect the full year underlying and reported NBAT will be another substantial increase in profit for select harvests. The company is increasing profitability whilst absorbing inflationary input cost pressures confronting every Australian business, as well as cost pressures unique to almonds. We'll talk more about these costs and our response during the presentation. The revenue graph shows our growth and together the two charts on this page tell the story clearly. We are now a different business and at a different scale. And we've operated with financial discipline. That is capital investments that generate strong returns on investment and a continued focus on cost and debt. The company is delivering performance across every key dimension of its operational metrics. Record safety performance, a high performing crop, possibly a record crop driven by better farming practice, record capacity with step changes in processing scale and efficiency, record price capture flowing directly to profit and record external growing volumes. Importantly today marks a return to rewarding shareholders. This reflects the board's strategy and confidence. The company, through the CFO, presented the market with its capital allocation model, whereby we intend to pay between 25% to 50% of NPAT to shareholders each year in dividends. Select Harvests will pay an interim fully franked dividend of $0.035 per share, and a decision on the size of the full-year dividend will be made at the completion of the financial period. The company is also announcing share buyback of up to 10% of issued capital of 142 million shares. The board's view is the company is well undervalued and so this is an effective allocation of capital. The company will on any given day make an assessment of the buying opportunity relative to our assessment of intrinsic value, conservatively determined considering our future prospects. Now, if we move on to safety, people are critical to the success of select harvests. Our tripha for the first half was its lowest ever at 3.7 injuries per million hours worked. We've demonstrated a sustained step change in safety performance, and this connects directly to the improvements we've seen in operating performance. You cannot get great operating outcomes without great safety outcomes. And we're achieving this by driving a clear sense of deep and felt safety leadership. We're training people, we're strengthening safety accountability and behavioural ownership and ensuring compliance. The Bradley curve shown on the right-hand side of this slide measures the maturity of the organisation's safety culture and we still have opportunity. 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 will continue to decline and safety outcomes improve. Let's move to talk about the almond macro. The global demand and supply dynamic remains positive, with tailwinds in place. I think this is now well understood by the market, so I won't drain every point on this slide. On the demand side, the total global almond demand growth continues with a CAGR of 5% to 7%. Prices have been increasing as the long-term global almond economic macro has improved. and we continue to see this as recently as Wednesday this week, and Australian markets reported another increase in price. It's worth noting that this is also supported by industry expert Dr. Abe Padilla from Spectrum Data Analytics, using his price elasticity model to forecast yet another 2.8% increase in price, or in other words, another $0.30 per kilogram. Unit costs are shown on the bottom left of the slide. Australia has significant relative competitive advantage. for the U.S. are slightly more than 30%, this being a function of both operational costs and yield performance. The key point being we have structural and durable cost advantage. On the supply side, the U.S. 2025 crop is 2.69 billion pounds with in-shell effectively complete and limited high-grade kernel available to sell. California represents approximately 80% of global supply. Bearing the Almonacres had reduced by 15,000 acres, and this is the first drop in 31 years in California, while the total farming area has reduced for four consecutive years and declined this year by some 47,000 acres. It should also not be missed, California now has an ageing tree bus. Australia is about 10% of global supply, and forward volumes appear reasonably flat. and likely naturally constrained by water access. There are varying estimates, but it's worth noting that 30 to 40% of Australian almonds will require replacing from 2030 onwards. Select is about 1,000 to 1,500 acres of this over the next four to five years. The times of maturity for trees is six to seven years, so the supply side cannot quickly respond to an uptick in demand. U.S. new tree plantings are low and there are no indications that would suggest a change in this direction of travel. So in our view, despite inevitable fluctuations in price, we have a very positive almond macro. We think that's sustainable over at least a seven year horizon. We have relative competitive advantage in cost and Select is very well placed to benefit with good to medium term pricing. Moving to financial results, as previously mentioned, the company has delivered a first half underlying net profit after tax of $29.1 million based on recognition of 75% of the crop. The result is an improvement of 33% on the previous corresponding period. The transformation of Select Harvest has seen the earnings profile of the company both change shape and become more robust. The second half of the year will see the benefits of external grower volumes, wholesales and value-added sales contribute gains to P&L. This year is also seeing the company's strategy and execution overcome industry cost pressures, and we expect profitability will meaningfully increase year on year. Total production costs have been impacted by both uncontrollable cost increases and one-off costs, and we'll cover these later in the presentation. The crop size this year is positive as our horticultural strategy starts to pay off, with a forecast crop of some 29,500 tons and a crop range of 28,000 to 31,000 tons, despite the inevitable crop losses from the weather. We have 46% of the 2026 crop contracted, and the forecast price for the 2026 crop is $10.21. The pricing outlook remains positive and I'll provide more detail later in the presentation. Net debt for the first half of 2026 was broadly in line with our normal working capital cycle at $183 million and we have continued to invest and allocate capital where there are strong returns. Cash flows in the second half will be stronger. And you will recall me saying at the 2025 results announcement that there was still considerable upside for cash generation and the gains resided within inventories and receivables. This view remains, noting the delayed harvest this year. For the purpose of reinforcement, the company has confidence in performance and a fully frank first half dividend of 3.5 cents per share will be paid with a final dividend to be considered at the end of the year. This being supported with a share buyback of up to 10% of our issued capital of 142 million shares. Importantly, following our most recent strategy workshop, the Select Harvest Board has set a growth ambition of 65,000 tons and $700 million of revenue for the company. This is the next step forward in the transformation of Select Harvest and we'll talk about it further in the strategy section of this presentation. What I'd like to do now is to provide some more detail on each of our key results drivers, specifically volume, price and production costs. So let's start with volume. The 2026 crop was grown with generally good growing conditions, although the heat to finish the crop did rise somewhat later than normal. The big challenge for the Australian crop was the massive amount of rain we experienced during harvest, with our wettest area being a vulnerable farm that received some 200 mils during The weather has notionally put a month's delay in processing and sales. We are, however, thus far seeing outstanding yield results with a crop forecast of 29,500 tons, which is remarkable given the inevitable loss of some of the crop from the rain. It's almost certain our program would have delivered and still might deliver a record crop, but for the weather. For several years, the company's talked about its new horticultural strategy and the goal of increasing yield. We said it would take several full crop years for the yield gains to appear and it looks like the strategy is delivering results ahead of schedule. We're currently processing our non-ferral crop and have not yet commenced processing our pollinator varieties. In terms of determining crop size, the process this year is no different to prior years. Whilst it's a large crop there is always some uncertainty around total crop size at the first half results and hence we provide a range. Liam can talk to the detail of that. There has naturally been speculation about the quality of the crop given the wet weather. Thus far we are seeing excellent levels of in-shell when almond quality is high. To date an 8% increase. This reflects the work we have done at the Carina West processing facility with Optimus for age 3. This level of in-shell is positive for both price. It delivers an extra $1 per kilo for in-shell versus kernel at current prices, and it's also positive for catch velocity. We do, however, expect to see a wider range of quality this year as a result of the wet crop. It should, however, not be missed the company accelerated harvest to effectively a 24-7 operation, albeit at a cost, to protect the crop quality. and the company also had the foresight to invest to manage for these types of events and we are using our new $14 million prop dryer. We have the biggest drying capacity in Australia and this will limit damage and give us some quality advantage. The expected lower quality mix profile is already reflected in our forecast market price. Now as submitted, we have delivered a major increase in external grower volume. Our expanded capacity is being filled with these increased volumes that deliver substantive profit value at about $1 per kilogram. Our proposition is compelling as growers recognise our ability to get them better market prices, better yields for their crop and better operational capabilities. That is, they get their crop off the farm and onto our stockpets fast and, if necessary, dry their crop to protect their earnings and we get them faster cash. The 15,400 tonnes of contracted external grower volume is currently sitting on Select Harvest's stock pad, and as it's processed in the second half, it will contribute to revenue and earnings. We continue to attract and add new external growers through Select Harvest. Next slide, please. So moving on to market price. Last year, we gave the first glimpse of Select's work in getting a price premium for our product. The top chart shows our invoice price performance against data markets, which is our industry-recognized published price index. The data is based on price at the time of signing a contract, the FX rate of the day, and an adjustment for tariffs. So far this year on invoice sales, Select has taken a global commodity and delivered a price premium over the global market price of 6%. From a business perspective, the critical issue is the direction of travel and what gives me great heart is the premium has grown from the 2.4% the last time I shared this chart at the end of 2025. I think there's now enough evidence to say state harvest uniquely brings leverage to every horticultural and processing improvement and the leverage flows directly to the bottom line. Now the California crop receipts for 2025 at 2.69 billion pounds were within our forecast range and we see an implied carryout of some 480 to 520 million pounds at the end of the California crop year. The most recent Californian bloom has some trying conditions with wet and cold weather. We think the current 2026 crop size estimates as released by Terranova is the ag-wise for most a wonderful forecast, the blue diamond forecast, and of course the US subjective forecast, the range of crops these is from 2.64 to 2.7 billion pounds, and we think this seems like a reasonable number. With these crop volume forecasts, we have seen prices increase through April and May, and in its selects view, there will be more prices to come. Demand growth is being driven by China, India and Southeast Asia, underpinned by by increasing self-awareness. With China and India expected to double consumption by 2030, we see long-term demand and core organic growth for select harvests. Select has 77% of the 2026 crop hedged at 65.83 cents, and it remains our prognosis while prices may show fluctuations, we will see prices continue an upward trajectory over time, subject, of course, to effects. Next slide, please. So let's talk about production costs. Total production cost is the cost of growing, harvesting and processing. Now as we have done for the last several years, we normalise our cost per kilo to a 29,000 tonne crop, so you have effective comparative data. After three years of flat costs, this year you can see an increase in both inflationary and uncontrollable costs to $7.33 per kilogramme. We had previously signalled to shareholders at the November annual results and the February AGM that there is a shift in our cost base of up to $20 million from items such as water, feed, power and labour. Now that number has been compounded by one-off costs from the Middle East and wet weather. To manage this, we committed two actions. The first being to remain tight on the costs that we can control. and these have reduced by 14 cents per kilogram and are already contained within the $7.33 shown on the chart. They are not standing still on costs and have already identified the next $10 million of cost savings to be delivered over a couple of years. These savings have come from a program of work that's been driven from the ground up with our people identifying waste and costs that can be reduced. Each initiative, as per normal, is to be mapped to a project with profit and cash impacts and timelines, all managed in our project management office, with the same executional cadence that has been delivered over the last three years. The second commitment recognises the non-compressibility of some costs, and hence we've committed to deliver on other actions that expand margin, two examples being our investment in kernel recovery and investment in shakers, and these are captured in our PMO. So having covered off on the key drivers, I think I'll now hand over to Liam to discuss the financial results in detail, and you will give him some forgiveness, and he has an unfortunate thought.

Thank you, David. I'll set through the following areas. First, the drivers of earnings. Second, capital management and shareholder returns. And finally, cash flow and the balance sheet. As you'll see, the first half reflects strong underlying operating performance. with a full year of earnings to benefit in the second half from external growth volumes and an uplift in value-add margins. Earnings growth in the first half has been driven by recognition of 75% of the estimated crop profit. In determining the crop size estimate, we have captured data points from all regions to form a view of the most likely outcome. And as David mentioned, management has formed an estimated range of 28,000 to 31,000 metric tonnes. Crop profit has increased substantially, reflecting improved yields, stronger orchard performance, and our sales team achieving a market price premium. These results are all linked to strong strategy execution, specifically investments we've made in the horticulture program, investment in processing, specifically kernel recovery and Optimus III, which are now delivering tangible results in terms of both volume and quality. Our sales premium is coming from being in market, understanding our customers and delivering measurable outcomes. Against that, we've seen high production costs. As David mentioned, these are largely in line with what we've previously guided, namely across water, fertiliser, pollination, plus the impacts of wet harvest. The wet harvest alone contributed approximately $6.9 million of additional costs in the half. primarily in labour as we sought to expedite harvest and also the additional cost of drying. The important point is the shape of earnings for the full year. The earnings profile has now materially shifted with a much stronger weighting to the second half and this reflects the timing and scale of external grower volumes going from 7,329 metric tonnes in 2025 to 15,400 metric tonnes in 2026. The uplift in contribution from value-add sales, where we see full-year benefit of pricing and operational margin enhancements. And finally, the seasonality of wholesale. So while we've got a really strong first-half result, it should be noted that we expect to see a significant increase in second-half earnings compared to 2025. Turning now to capital management. Over the last three years, our focus has been very deliberate, strengthening the balance sheet and maintaining capital discipline. We've largely achieved that, and as a result, we're moving to the next phase of capital management, which is balancing three priorities, maintaining the strong balance sheet, continuing to invest in growth, and returning capital to shareholders. Importantly, these are not competing priorities. The business is now in a position where it can do all three. And you'll see that reflected in both the dividend and the buyback we've announced. Starting with dividends. We're reinstating dividends for the first time since February 2023. Our policies are distributed between 25% to 50% of net profit after tax. And for the half, we've declared a fully franked interim dividend of $0.35 per share. with approximately $18 million of franking credits available, which supports franking distribution through to 2028. We've also announced an on-market share buyback of up to 10% of issued capital. The rationale is straightforward. We believe the current share price does not reflect the intrinsic value of the business and we have the capacity to return capital to shareholders. The buyback gives us a flexible mechanism to return capital where we see value while still maintaining optionality. It will be conducted over a 12-month period. It will be opportunistic and it will sit alongside investment in the business. And this is a balanced capital management approach, supporting shareholder return without compromising growth or balance sheet strength. Turning now to our balance sheet, and the headline here is Select Harvest is in a strong financial position to support both growth and shareholder returns. Net debt at the half sits at $182.6 million, which reflects the normal seasonal working capital cycle as you'd expect at this point of the year. The cross-sales bills come through. Importantly, we expect this to reduce materially through the second half as sales cash flows come through. April and May are already tracking towards record sales volumes, so we're confident in that trajectory.

So on the point of debt, first rate remains well within our facility limits.

We have total facilities of $300 million. Second, it's also important to note that the seasonal peak is now behind us and we expect debt to reduce in the second half as inventory is converted to cash. And third, our balance sheet remains strong and flexible, supporting both growth, investment and capital returns. It's worth noting that further, due to the crop and delay in harvest, we anticipate having a higher carryover in 2027. This means that along with finishing 2026 with a strong debt profile, we'll also benefit from 2026 crop sales into 2027. This has supported sustained lower debt through 2027 and another reason we have confidence in our balance sheet. All debt covenants were comfortably met at 31st of March and we forecast continued compliance over the next 12 months. So when you consider the underlying asset banks of the business, the balance sheet is not just solvent. It provides a strong foundation for capital returns. which is why the board has declared a fully frank interim dividend and an on-market buyback. Subsequent to the half, we've also secured an additional $60 million of committed debt capacity on favourable pricing terms and a five-year tenner. This increases total debt facilities to $300 million and delivers three key benefits. First, it reduces refinancing risk by increasing available headroom and extending our debt maturity profile. Second, it reduces the overall cost of debt, reflecting improved pricing achieved in the current environment. And third, it enhances flexibility, ensuring we have capacity to manage potential volatility and also growth. The additional facility increases the average tenor of the debt portfolio from 2.7 to 3.3 years, which is a meaningful improvement in the maturity profile. This is a proactive step to further strengthen balance sheets, providing certainty and flexibility as we execute on our growth strategy. Looking now at cash flow. The first half cash flow is broadly in line with our expectations, but impacted by higher wet harvest costs and lower crop carryover from the prior year. The success of our faster-to-cash initiatives implemented during 2025 are expected to again deliver in 2026, with the company focused on further optimising our sales and operations planning. On the investing side, cash flow flows are higher, but this is deliberate. We've invested in Optimus Phase 3, kernel recovery, crop drying capability and new harvest equipment. These are all high-return, product-enhancing investments. We're looking forward to the, we expect, stronger operating cash flow in the second half, driven by the higher sales volumes, improved planning and execution, and the contribution from the non-crop earnings. So similar to earnings, cash flow is also weighted to the second half. David, I'll move to you to talk about strategy in front of Simone.

Thanks, Liam. Next slide, please. The company transformation continues to translate into tangible operating results. We started with a reset in 2023, moving through stabilisation, capacity build and now being growth ready. The benefits are evident across profitability, operational metrics and customer experience. The historic view of Sleek has been based on profit in horticulture, specifically this year's crop size times this year's sale price, less cost. This framing of select harvest is now too narrow and numerically incomplete. The company's strategy is now generating returns by broadening value creation across its core functional streams. And this slide gives you a segmented view of where select makes money across horticulture, processing and service. So certainly value is created through growing almonds, however it's also being leveraged by the rest of our business model, such that revenue has more than doubled profit is growing and row seat is increasing. As we move the conversation to executing strategy for our strategic pillars, the company now has a demonstrated track record of delivery. So with respect to our pillar for sustainably greater armaments, the horticulture strategy for select farms are delivering volume and quality with a possible record prop to be recorded for 2026. We have better fertiliser, water and hygiene practices and the relative health of the trees is obvious as you drive the highways. The next crop year is the first full complete year of the horticultural program. With excellent tree health we create the capacity for bigger crops. So we're excited about the future and specifically the 2027 crop size. Harvest practices are improved. We have time in harvest to maximise nut growth and minimise the impact of insects. We are running faster and shifting our harvest towards 24-7 operation to optimise the quality. We've also invested in new kit to maximise the yield and minimise the number of nuts left on the tree. In terms of portfolio management, it's also worth noting the pending sale of various Australian almond assets. The market should not assume The Select Harvest Board views all existing leases as being something we would extend past current dates. And you've seen this in action with Select doing an early handback of 300 hectares of the Yilga farm. As we've already covered, our external growers proposition is compelling. We have record external supply and we are growing rapidly. From a processing perspective, you have seen a shift scale. Optimus I is completed. It added 10,000 tonnes, taking us from 30,000 to 40,000 tonnes of capacity. Optimus II is complete. It added a further 10,000 tonnes, taking us from 40,000 to 50,000 tonnes of capacity. We discovered Optimus III during Optimus II, and that has added another 5,000 tonnes to create a total of 55,000 tonnes of capacity. And just as importantly, it has allowed us to step change and increase in-shell by what looks to be approximately 8% on high-quality crop. In terms of maximising returns from the crop, the gains around sales and logistics velocity are apparent and directly support our cash flow. We said there was more to gain from inventory and receivables, and we're now going after this price. From a margin perspective, we continue to gain for our pricing disciplines, as you saw on the earlier slide, and our ability to tailor quality grades directly to customer requirements. Now, I'll cover step-out growth on a different slide, but I'd like to talk about our enabling pillar. The people capability build continues, having top-graded skills across finance, HR and IT, Our procurement capability is building with the function centralised. We've commenced the automation of processes such as connecting our Inpex export documentation to our core ERP. We have data and analytics rolling out with Power BI and selective use of AI. By way of example, we're recreating our price premium management tool. It's called the Upside Tracking Tool and that's moving into our BI system to further enhance capability. Next slide, please. Now the purpose of this slide is really to try and bring to light the shifts we've made across the company. And so the page lists four key projects. It shows you how our investment aligns to our strategic pillars and in many cases touches several of them at once. We're consciously investing to synchronise the business across arm and supply, processing capacity and sales to maximise the company return. The shaker investments drive horticultural yields to substantially increase almond supply, but they also lower cost to operate. The crop dryer maximises quality so we maximise price and returns from the crop, but the crop dryer is also attractive to external growers to substantially increase almond supply and processing margins. Optimus One to infringe your leadership in processing scale and efficiency. They provide low cost production but also high quality, being low chip and low scratch farmers. But it increases capacity to process both our own yield improvements and attracts external growers and maximise the return. Tuner recovery increases our yield and substantially increases our supply. In doing this, it also increases the attraction of select harvests to external growers and opens up new returns. The point is We're using our capital allocation to generate growth aligned to our strategic pillars. In terms of step-out growth, the company has effectively doubled in size over the last three years. So the Select Harvest Board has now set the next series of targets with the aim of increasing select harvests to 65,000 tonnes and $700 million of revenue by 2030, from today's base of being approximately a 45,000-tonne business. The program takes the existing strategy and benefits for shareholders and moves them to the next logical scale. So the substantially greater armaments will come from, firstly, the first or another crank on the wheel on the horticultural strategy to drive yields much higher on a per acre basis, Secondly, we think there's the opportunity to improve the productive capacity of our existing assets, and to this end, Sleek Harvests has appointed a capital projects manager to lead this part of our portfolio. And thirdly, through the continued acceleration of external grower volumes. We think our value propositions can peddle. We'll be at least 20,000 tonnes next year. In fact, we would have to slow down to achieve that target. from a leadership in processing. There are two key activities. The first is we have identified a path to further increase plant capacity from 55,000 to 65,000 tons. The second is to speed up or de-bottlement sorting and packing so that it runs at the same speed as our 55,000 ton and then 65,000 ton primary processing front end. This will dramatically reduce working capital. It will further improve the customer experience and it will increase our cash position. Both of these improvements repeat the themes of low-cost capital spends and fast paybacks. From the perspective of maximising returns from the crop, we think our model is scalable and leverages higher upside margins. It will give more capability to maximise price. The increased volume will also unlock a faster supply chain and speed towards the cash. Critically, the program of work delivers margin growth. The achievement of 65,000 tonnes will be a combination of select harvest volumes and external grower volumes, and is well within our capability with only targeted investment. So whilst this slide notes select has some M&A capacity, you should explicitly not assume this means the company is about to undertake any acquisitions. The Select Harvest Board is clear. Financial discipline is not negotiable. We move now to our PMO. We continue to use the project management office to drive outcomes within the business. The PMO has in many respects never been more important. You can see on the slide some $18 million on the right-hand side of inflationary costs and another $6.9 million of one-off costs that we expect will not be repeated. Without our various business initiatives, the starting point for Select's profit would have been back by $25 million this year. You can see the H1 gains do not completely recover the issues, and we're still at a negative $3 million. There's high certainty in the second half gains, but the reality is it takes until the second half for the ship to right itself. And as I previously noted, the company has found another $10 million of cost savings to be delivered over the next couple of years, and these will be added to our PMR. So I think as you look at Select Harvest, what you see is a company that is now a safer company. The company's in good shape with underlying profitability increasing. The company's keen to reward shareholders through both a fully franked dividend and a share buyback. You can see the capacity to fund this as our working capital turns to cash. The board has set a new ambition for growth that logically leverages the strategy. It's deliverable and will increase profitability significantly. The transformation strategies created for select harvests are wider earnings profile from horticulture, processing and sales that is more robust and this will flow through second half outcomes. All of the company's key operating metrics are performing and capable of managing the pressures of inflation and wet weather. Select's approach to financial discipline of capital, cost and debt is supporting the balance sheet. So on that note, thank you and I'll hand back to Andrew to coordinate any questions.

David, we've got a bunch of questions here, so I'll head to that. So first up we have Apuv Sehgal from Jarden. Apuv, can you hear me?

Hey, good day. Andrew and Tim, can you hear me?

Perfectly.

Okay. Awesome, awesome. Okay, thanks. First question, just on the 28,000 to 31,000 metric ton crop production range or midpoint of 29.5, A couple of questions. The wet harvest recently, can you quantify the tonnage impact that may have had, if any? And then secondly, it's a reasonably wide range. Can you just talk to, like, the low case and the upside case scenario there? Like, what needs to happen for either 28,000 or 31,000 being realised? And do you see that upper end being more probable than the lower end?

So let me have a go at this. In terms of the wet harvest... You know, it is difficult to quantify exactly how much we've lost at this point in time, but we do know, you know, there was absolutely loss that's come through from, you know, some of the rain events, particularly we talked about Bunnigal, where, you know, the rain was so intense it really, you know, had nuts been, you know, destroyed and flow onto the roads. So we know that we've experienced some weight loss during that, kernel loss during that. In terms of the range, what would we need to believe to be... We need to see for the top range, we hope to see continued numbers coming through like they're coming through. So that's probably the best we can sort of talk to in that. But it is uncertain. You know, we do the same process each year in terms of how we estimate the crop. And at this point, we don't have pollinators. So we haven't processed any pollinators. And so our assumptions are that we're going to continue to see strong results from the pollinators. And if they were to outperform, then we'd see the top A range. And if they were to outperform, we'd see at the lower range.

Okay. And the 2% to 3% yield improvement from the kernel recovery line – is that benefit already reflected in the midpoint of that volume guidance?

Yes, that's reflected in those numbers, yes, at the midpoint, yeah.

Yeah, okay, cool. And just on costs, so if I look at 26, the army production costs around $220 million. Can you just talk to the FY27 cost outlook as well? Just because the water, fertiliser, freight costs have all moved a fair bit higher in recent months. So assuming... Current rates kind of hold. I presume there's an annualization kind of impact there that flows through in FY27. But then I guess on the flip side, I'm just thinking you've got 7 mil of wet harvest costs as well this year, which theoretically unwind in FY27. So net-net, if normally for select harvest, we'd assume like a low single-digit percentage sort of cost increase in most years. FY27, though, how should we think about that in the context of the annualisation of some of the recent cost headwinds coming through, but they're also the unwind of the wet harvest costs.

So let me just spot on in terms of the wet harvest costs. All things being equal, we wouldn't expect those to occur, but it's all obviously subject to the weather in 2027. In terms of the annualisation, I wouldn't expect any further incremental increase based on an annualisation. It's not necessarily first half, second half weighted. So all our crop growing costs are essentially incurred in that first half. So it would be just a normal CPI adjustment is where I'd expect it to go. So nothing abnormal at this point.

So effectively, you grow your 26 costs by CPI, but you take off your $7 million for the wet harvest, one-off impact.

Yeah, and then we've got some cost initiatives, cost-out initiatives as well that we're working through.

Okay. Okay, now that sounds reasonably positive. And there's one final one, again, for probably for you, Liam. Just on the almond price of $10.21 a kilo that you've indicated, I may have misheard on the call. Did you say 77% is hedged at 65.83? Is that right?

Yes, I did say that, yes.

Yeah, and so the remaining 23% is unhedged. At what rate are you assuming that's going to be in your model?

So we have a very clear policy for the way that we go about managing FX, and that is based on taking the lowest possible risk position that we can. So we're an arm and groin and selling company. We don't try and be an FX trading company. And so we lock in a rate of a proportion of our crop increasingly as we have certainly about the crop size. So we're absolutely sitting within policy for doing that. And we'll take up the next balance over the coming period. And, you know, if you lock in today, you'll be at the sort of 71 to 72 cents range on the stuff that you'd lock in now. And that would probably give you an average that'll be around the 67s over the course of the over the course of the summer.

Which is around 10.21. Hmm.

Okay, awesome. Thanks, guys. Appreciate it.

Okay, next question that we've got is Josh Tanerakis from Barranjali.

Good morning, Josh.

Hi, David. Thanks for taking my call, Sir Andrew. A question. So just a couple from me. Just firstly, just understanding around first half, second half, because it is a bit different from what has historically been the case. So just so I understand, all the almond crop is clear. As you mentioned, the third party is sitting on the pad, so that all comes through, and you mentioned the dollar per kilo rate. But in terms of hull, if we look back a year or two with similar levels, hull was $50,000 to $200 or so per tonne. How should we think about hull into the second half and also some of the value added because I imagine you get a pretty big delta on that as well.

Yeah, it's a good point. We don't, as you know, we don't specifically break out the various bits of our promise room and that level of detail, but to try and give you sums there, clearly our hull volume will be increased because our processing volume is increased and the value of hull continues to trade at pretty high levels over the last few years. and a quick Google search would probably give you a good sense of what that number is.

Yeah, got it. Okay, cool. Yeah, so I think a couple of years ago it was $10 million or something. So, yep, okay, that's good. And then second point, just around the value-added stuff, obviously you had some headwinds, I guess, in previous years because of the timing of the cost because obviously the cost reflects... where you are. Because of some of those things, you've probably got a more favourable backdrop there as well. I'm just trying to reconcile. You obviously got a slight loss in the first half there from that component. But, you know, obviously the net of that would unwind into the second half. Is there anything else you can say on that? And also just in terms of maybe some of the other initiatives you're doing around the value-added side of things on sales elements as well? Yeah, sure. The non-crop loss, yes, for the first half was roughly about $4 million. We expect that to turn around. And that's driven by the three elements that really we touched on. First, we talked about wholesale. That's really largely timing. We achieve all those in the second half and volume as well. It's a high number. We've also, you talked about the value add. So we had, you know, this year we'll see the full year benefit price coming through. So we had some contracts that, you know, they had a lag into the second half. So we'll see an uplift in the second half. We've also had some operational improvements in our value-added facility, which has really driven some substantial loss reduction and yield improvements in that part of our line. So that's been really encouraging, and we expect to see the benefits of that in the second half.

That's great.

And then just in terms of some of the longer-term guidance you mentioned around the 65,000 tonnes, I imagine in a year like this where people have been... You know, going through a lot of issues and reductions in quality and volume because of the wet harvest. I imagine the dryers getting a lot of attention. I mean, can you fulfill the capacity? Can you sort of fulfill, I guess, the demand side of that equation as well, moving to next year? And I think, David, you said north of 20,000 tonnes is likely. Like, just remind us the capacity and then some of the additional unlocks you've got planned. We should think about that scaling into 27 and beyond.

Well, certainly, as it relates to the processing capacity, specifically in drying, we can dry about 1,200 tonnes a day through our dryer. And if we top down that capacity, we actually have some other mechanisms that we run, A-frames and things on the ground that allow us to actually increase our drying capacity. So we've got some flexibility in being able to manage for an increase in supply. But 1,200 tonnes, you can do them as quickly as you can through, you know, 20,000 tonnes if the exhumer grower takes 10 days or so. and that reflects the rate of things that are coming through obviously when various farmers are dropping off products. So we're pretty comfortable around ability and capacity for drying capacity. The unlocks that get you from $55,000 to $65,000, it's not one issue but it's a series of projects and a lot of them come to things that relate to how do we change the exit speeds of things out of our main processing parts of the plant. So I'll give you an example of the speed at which we exit hull and shell to a hull and shell pile so that we can sell that to cattle feed and other applications. If we can speed that up, that allows us to speed up the front end of the processing part of the plant. So we've got a series of those sorts of small, deep bottlenecking pieces that we need to do that allows to actually change the pace of the plant and get to 65,000.

Okay, that's great. Thanks, guys. I'll pass it on to someone else. Appreciate it. Josh. David, next one we've got is Ron Shamgar from Tamim Asset Management. Ron, over to you.

Hey, hi guys. Good result. Just a couple of questions. In terms of the external grower harvesting and processing, sort of how much, what's the margin there?

The margin on that's about $1 per kilogram. Okay.

And net debt is around $180 at the moment. What do you expect sort of ballpark on June 30th?

So we don't do it June 30, we've got a 10 AM, 30 September. Look, I think we're broadly in line with 2025. So it's where we're tracking. Just as a reminder, we are tracking roughly a month behind in terms of the late and wet harvest. So that's one thing just to note around that. The second thing is we've made a decision to bring forward into 2026 some expenditure relating to the 2027 crop. We've been able to secure fertiliser, which is really important in this environment. There's a shortage of that. But to do that, we've had to pre-buy that. So that's impacting our 2026 cash flow of roughly about $12 or $13 million. And this year will also be impacted by dividend and buyback, which is probably just a bridge to why it isn't... Well, it's not going down further.

It's not going down further, yeah. Otherwise, we would have expected a lower full-year debt position than the sort of similar numbers of last year, which ended up at $79.80. The fertiliser one, just to put one more line of colour on that, we had all of our fertiliser booked and organised, and then, of course, the Middle East War came along, and we received a series of forced majeure issues that came towards us. clearly having fertilizer is critical to ensuring the forward-facing yields of the company and continuing our horticultural program. So we found a solution to that problem, but it has meant that we have to part with the cash earlier than we otherwise would have, and hence that puts a little bit of drag on our four-year cash position.

Yeah, okay. So similar to FY25, September 30th, but you're also including some buyback and dividend. Correct. Yeah, okay. And then last question is, Obviously, you come up with a 2030 sort of target. The business seems to be doing well. You've got industry tailwinds. Why are you leaving now?

Sorry, what?

Why have you resigned? Why not stay for the good years?

Yes, well, look, I think the answer to that is clearly it's my view that Select is a great company. I think it's got some great opportunities ahead of it, and the company's trying to lay those out for that growth path. I also, by the way, I think the company's got a very good board. I'm supportive of what they're doing and where they're going and I've got strong relationships with them. So there are no issues related to select harvest as to why I would be departing. My departure really relates to a specific opportunity that sits in front of me and things that are good for the future of my family.

Okay.

Thank you. Thanks, Ron. Next question we've got is from Paul Jens of FactPartners. Paul? First quick one.

Yeah, I'm here. First quick one is just on the percentage of the almond crop to be sold from here. Maybe Liam would be the one to answer that. It looks as though it's 25% from what David said, but I just want that confirmed.

I think we're 46% contracted at the moment. Sorry, Liam.

Yeah, 46% contracted all at this stage. So, yeah, that's... The map is we've got 54 to go.

All right, good, good. So when we do our first half, second half split, we're putting 54% into the second half number, correct? Correct.

in terms of what? No. No.

That's the number I'm after, right? Because it looks as though you were trying to point us to saying 25% in the second half.

There's a couple of things. There's two answers to this question. From a profit perspective, you've got 75% of the crop profit in the first half, 25% in the back half. Yep. But in the second half, profit-wise, you need to add the profitability of the external processing, the profitability of value add and the profitability of all of our wholesalers. So the profit spread, that's the way that it works. At a cash split, the majority of the cash will come in and you know we've got this sort of seasonal profile that has our debt profile increase in the first half as we're investing to grow the crop and in the second half you'll see that come down substantially. and similar to that last question, we'll get down to close to the last year sort of number, that $79 to $80 million number. And that's because with the physical selling and invoicing and then cash collection is happening in the second half of the year.

Okay. So just inside that then, the cost base for that 75% that we're saying is sold in the first half, with your guidance, we've got to, I suppose, make an assessment of lowering that or raising that margin, or lowering that margin a bit because we haven't got the benefit of the whole and all of the extra benefits that lower your cost of that $7.57, correct?

That's not in the first half result. Paul, if I just take you through just the accounting rules, essentially what we do for the first half is we create an estimate about crop profits which is our estimated sale price our estimated cost to produce the crop and then by the size of the crop which gives us an estimated crop profit which is I think it's on the financial summary slide and we take 75% of that number and book it to profit that does not include so we book that in the first half 25% in the second half in the second half we expect to get all the gains from the third party processing which has been booked in the second half along with the wholesale which are all timing phased in that second half and also we flagged an uplift in our value added margins in that second half as well.

Alright. Can you hazard an estimate for your full year guidance then?

We don't put out a specific number for the four-year guidance.

Okay. You're tipping us in a job. That's good. Second is on just the cost base versus the Californian cost base, which is pointing to the medium term. So your confidence as a team of that being a sustainable difference going forward?

Yeah, very confident about it. I think... that there's no reason, we don't see any evidence that would support an increase in yield. So, you know, I was really saying that the cost, the difference is a function of both yield and actual operation. So if I start with the yield piece, there's no evidence to suggest that yields are going to increase out of California. In fact, one of the challenges that they still have and there is variability that you've got. Some farmers putting on a full fertilizer and water and hygiene practice model and some doing a granted discount of one because they have not been making money for a period of time. So you've got that overlay on yield and the other overlay that you have on yield which is very unquantifiable is that they talk in California about as their trees tend to age they tend to see a drop off in the yield of those trees. We don't see that when we look at select harvests, by the way, when we look at our tree profiles. We've got some trees that are old and still yield very, very well. So anyway, we've got a yield issue. And then when you look at the cost-based drivers, we don't see anything that would immediately drive a shift in that. And in fact, again, the pressures for things like water in the U.S. continue. So there's nothing that would lead me to think that there's going to be a change in the cost relativity at a dollar operational cost level.

And then the replanting cost, just a final question for you maybe, David or Liam, is what replant cost estimate does Select have for both Select and California? Because that would be in addition, I would imagine, to those numbers.

Well, I think we don't have for California, we don't have a particular view on the amount that's going to be replanted. In fact, we expect...

So to maintain that acreage of the 1.3 million acres or so, so not increasing, but as the trees mature, have you got that factored into the 9.69 or do you think that's in addition as I think it is?

So what's your 9.69, sir?

So in your slide 7, you're saying 9.69 costs per kilogram.

Oh, sorry, sorry, yeah, yeah, sorry, yeah.

And if California wants to maintain, and as the trees mature and they need more trees to replace the existing ones, what do you say is the cost base for that?

So that 9.69 is based on what the operational cost of farming is. It is not really a consideration that goes through the cost of a replant or otherwise. It's direct operational comparison.

Okay, good. Thank you. We'll see you later in the week.

Thanks, Paul. David, we are right on time for our next meeting, so we're going to have to wind up.

I'll hand over to you to do that and thank everyone for participating.

All right, well, thank you all. We greatly appreciate you listening to the Select Harvest story. We hope there's some good news in there and that you're as excited about the future as the company is. And so thank you very much for attending and we'll look forward to speaking to several of you later on in the week. Thank you. Bye.