SELECT HARVESTS LIMITED — Annual Report 2019

Nov 28, 2019

Select Harvests Limited (ASX:SHV)

FY2019 Full Year Results Presentation to 30 September 2019

29 November 2019

Disclaimer & Basis of Preparation

This presentation is provided for information purposes only and has been prepared using information provided by the company. The information contained in this presentation is not intended to be relied upon as advice to investors and does not take into account the investment objectives, financial situation or needs of any particular investor. Investors should consider their own individual investment and financial circumstances in relation to any investment decision.

Certain statements contained in this presentation may constitute forward-looking statements or statements about future matters that are based upon information known and assumptions made as of the date of this presentation. These statements are subject to risks and uncertainties. Actual results may differ materially from any future results or performance expressed, predicted or implied by the statements contained in this presentation.

The Select Harvests Limited financial statements are prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001. This includes application of AASB 141 Agriculture in accounting for the current year almond crop, which is classified as a biological asset. In applying this standard to determine the value of the current year crop, the Company makes various assumptions at the balance date as the selling price of the crop can only be estimated and the actual crop yield will not be known until it is completely processed and sold. The resulting accounting estimates will, by definition, seldom equal the related actual results, and have a risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Note*: All financial comparatives are based against the last 12 month audited financial period being the Financial Year ended 30 June 2018.

2

FY2019 Financial Overview

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NPAT EBITDA [1]
$53.0m $95.2m
↑ $32.6m ↑ $43.5 m
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EPS
55.5 cps
↑ 139.7%
-
Final dividend of 20 cps fully
franked
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Net Debt/Equity Annualized ROCE 0perating Cashflow
6.6%
-
$27.4m Finance Leases 16.5% $80.3m
-
$0 Bank Debt
- Net $7.9m Cash on Hand ↑ 9.2 ppts ↑ $62.0m
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1 - Non-IFRS measure used by the company are relevant because they are consistent with measures used internally by management and by some in the investment community to assess the operating performance of the business. The non-IFRS measures have not been subject to audit or review.

Financial metrics across all areas have improved significantly

3

FY2019 Business Overview

Almond Volume

Almond Price

Almond Division EBIT

22,690 MT ↑ 44.5%

• Better than industry standard yields across all tree age cohorts and geographies

• • Increased bearing hectares

$8.60/kg ↑ 6.8%

• Continued global demand

• • AUD/USD exchange rate hedged below 71c

• $82.2m

• ↑ $46.8m

• Increased almond volumes

• • Improved almond pricing
• • Improved cost per kg

Food Division EBIT

$5.0m - FLAT

• Strong demand for value added product in Asian markets

• Challenging domestic retail environment with homebrands impacting the cooking nuts segment

People, Culture and Sustainability

• Lost Time Injuries Down 61.1%

• H2E producing consistent results including the production of compost

• First culture survey complete

• Over $150,000 donated to local community projects

Corporate

• Prepared for AASB Lease Accounting transition

• • JDE implemented into the Food Division

• Focus on cashflow – bank debt fully paid

Select Harvests now has a solid base to grow

4

Income Statement

Income Statement

Strong FY2019 Profit Result Delivered

		Strong FY2019 Profit Result Delivered	Strong FY2019 Profit Result Delivered
$ Millions	FY 2018 FY 2019 Variance % 15,700 22,690 6,990 44.5% 8.05 8.60 0.55 6.8% 210.2 298.5 88.3 42.0% 51.7 95.2 43.5 84.1% 16.8 15.1 1.7 10.1% 35.4 82.2 46.8 132.2% 5.0 5.0 - 0.0% (5.5) (7.1) (1.6) (29.1%) 34.9 80.1 45.2 129.5% (5.4) (4.0) 1.4 26.7% (9.1) (23.1) (14.0) (153.7%) 20.4 53.0 32.6 159.8%* 25% 32% 7% 29.7% 17% 27% 10% 61.4% 23.2 55.5 32.3 139.2%	trong rot esut e
Almond Volumes MT Almond Price Per KG Total Revenue EBITDA Depreciation and Amortisation Almond Division EBIT Food Division EBIT Corporate Total EBIT Net Financing Costs Tax Expense NPAT EBITDA Margin (%) EBIT Margin (%) Earnings Per Share (cents) *Financial Year Ended 30 June 2018
		Increased revenue reflects higher 2019 crop valu FY 2019 EBITDA1 $95.2m (FY 2018 $51.7m) - high driven by larger crop and firm $A pricing Almond Division EBIT1 $82.2m (FY2018 $35.4m) - Prior year crop valuation adjustment of ($2.6 downward grading and re-pricing of crop - Total net 2019 crop costs (excl. tree depn.)/kg 14.7% Food Division EBIT1 stable at $5.0m (FY2018 $5.0 - Improved Industrial product margin and volu exports - Lower Retail product margin – private label im - Retail export growth delayed Corporate costs higher due to JDE Food Division implementation Improved NPAT of $53.0m (FY2018 $20.4m)	e er result M) – down by m) mes – China pact

• Increased revenue reflects higher 2019 crop value

• FY 2019 EBITDA[1] $95.2m (FY 2018 $51.7m) - higher result driven by larger crop and firm $A pricing

• Prior year crop valuation adjustment of ($2.6M) – downward grading and re-pricing of crop

• Total net 2019 crop costs (excl. tree depn.)/kg down by 14.7%

• Food Division EBIT[1 ] stable at $5.0m (FY2018 $5.0m)

• Improved Industrial product margin and volumes – China exports

• Lower Retail product margin – private label impact

Strong financial result platformed by the Almond Division

5

Movement in SHV Group EBIT ($M)

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Minimised through
acquisition and ownership
strategy
Investment in new
technology and a clean crop
Productivity improvement
through targeting higher
Re-grading of prior yields
year crops – now all
Plant based food macro and
processed
increased China demand
34.9
Improved yields achieved,
17.0 investment in frost fans,
new high yielding acres in
production
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*Financial Year Ended 30 June 2018

Increased volumes, higher pricing and improved efficiency have led to an improved result

6

Balance Sheet

Year Ending Balance Sheet
$ millions	FY 2018 FY 2019*
Current Assets excl. Cash Cash Non-Current Assets Total Assets Current Liabilities (exc. Borrowings) Borrowings Non-Current Liabilities (excl. Borrowings) Total Liabilities Total Equity Net Debt (Including Finance Leases) Net Debt/Equity ROCE	152.0 162.1 6.9 11.6 363.8 379.2
	522.7 552.9
	44.6 55.4 65.8 39.0 41.6 42.5
	152.0 136.9
	370.6 416.0
	58.9 27.4 15.9% 6.6% 7.3% 16.5%

Solid Balance Sheet In Place

• Increased current assets – working capital of $129.7m is higher due to value of 2020 growing crop (inventory) – as immature trees develop

• Increased non-current assets due to ongoing investment in the development of immature orchards

• Net debt including finance leases $27.4m (FY2018 $58.9m) – additionally there is net $7.9m cash on hand ($0 bank debt) reflecting positive cashflows

• Gearing (net debt/equity) is 6.6% (FY2018 15.9%)

• Return On Capital Employed (ROCE) improved as orchards mature and start yielding and improved efficiency

* Balances as at 30 September 2018

Balance sheet is strong – bank debt paid down to $0 as communicated

7

Cash Flow

Cash Flow
$ millions	FY 2018*	FY 2019
EBITDA	51.7	95.2
Change in Working Capital	(19.8)	(14.0)
Tax Paid	(8.5)	3.1
Net Interest	(5.1)	(4.0)
Cash Flow From Operations	18.3	80.3
Investing Cash Flows	(25.9)	(33.9)
Proceeds from share issue	86.5	-
Increase/(decrease) in debt	(75.9)	(30.2)
Dividendspaid	(3.8)	(14.9)

Cashflows Driven By Performance

• Improved EBITDA[1] of $95.2m - operational performance

• Cash generated used to pay down debt and invest in equipment – processing improvement, frost fans and farm matrix increase

• FY2019 Investing cash flows of $33.9m driven by:

• Tree & Orchard Development $15.9m

• • Property Plant & Equipment $19.1m
• • Water Rights $ 1.2m
• • Grant Income ($ 2.3m)

Net (Decrease)/Increase in Cash/Cash
Equivalents	(0.8)	1.3

*Financial Year Ended 30 June 2018

Improved cash position lays a solid foundation for the future

8

AlmAlmond Divisionnd D vision

9

Carina Farm Blossom 2018

FY2019 Almond Division Overview

Almond EBIT

Almond Volume

Almond Price

$82.2m ↑ $46.8m

• Volume, price and production cost per Kg

22,690 MT ↑ 44.5%

• Good Conditions

• Improved Horticultural programs

• Frost rebound

• Increased bearing hectares

$8.60/kg ↑ 6.8%

• AUD/USD hedged below 71c

• • Strong demand globally

• Higher in-shell mix

• • 100% of crop committed

Production Cost Per KG

Water

Developments/Acquisitions

Cost per Kg down 14.7%

• Horticultural costs per kg (excl. water) reduced by 21.4%

• Processing cost per kg reduced by 16.6%

• Water costs per kg increased by 52.0%

Impact kept to a minimum

• Ownership and management strategy mitigated full cost increase impact

• Further increases in entitlement value

• Increases in annual allocation value

Kydnalyn Park Final stage completed 142 HA

Investment in growth & productivity delivering - higher volume, improved quality and improved cost profile

10

2019 Yield Performance

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Industry Standard Yield Target Yield

Outperformance vs. Industry Standard across all mature and immature age cohorts and regions

11

Volume Growth

Select Harvests is now consistently yielding over 1.35 tonnes per acre – this adds considerable value in future years

The almond crop is biannual in nature with +/- 10% per annum variation in tonnage possible

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Our investment in almond orchards ensures underlying organic earnings growth

12

What Select Harvests is doing to manage water

• SHV policy is to have a portfolio of water sources to minimize exposure to seasonal pricing including:

• Entitlement ownership

• Long and short term lease

• Forward contract

• Spot purchases of annual allocations

• Executive dedicated to water purchasing liasing to Water Committee and Board

• Executive dedicated to managing efficiency of water infrastructure and on orchard staff

• CAPEX program to ensure best transport and distribution of water (e.g. intensive fertigation systems)

• A/B irrigation infrastructure to allow varietal irrigation

• Phytec irrigation technology to manage water timing and application rates

• Recycle excess water where feasible

• 72 staff trained by SuniTafe: Including irrigation management plus leadership and management

Through improvements in productivity we are targeting 7% reduction in water usage without impacting yields

13

Almond Division Outlook

Crop Volume

Sales

Horticulture

• Good pollination and growing conditions to date

• Immaturity profile and risk mitigation will continue to provide benefits

• Global almond macro is increasingly strong

• Continued growing demand in key export markets

• Minimal carry-over inventory in the industry

• Increased investment in risk mitigation - further frost fan installation will be reviewed before next season

• Increased expenditure on orchard hygiene to improve quality

Processing

Water

Expansion

• Upgrading In-shell sorters

• • Doubling Sorting and Packing capacity

• Leveraging H2E

• Challenging and a key focus of orchard management

• • 2020 water purchases largely complete

• ACCC submission supported

• No new developments planned

• • No acquisition currently being assessed

Too early in the horticultural cycle to be able to confidently forecast 2020 crop.

14

Food Division

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15

FY2019 Food Division and Corporate Overview

Food Division EBIT

Industrial Sales

Consumer Sales

$5.0m FLAT

• China market has continued to expand for value-add products ex Parboil & Thomastown

• • Plant based ingredients growth is strong in all segments

• Lucky branded cooking nuts market share stabilised following the introduction of Coles house brand

• Sunsol sales continue to increase

• Export sales channels continue to be developed

Processing Cost

Growth

Awards

• Commodity prices remain strong impacting raw material costs

• Weakened AUD impacting cost

• • Thomastown and Parboil have kept conversion cost flat

• Sunsol Pro-Biotics

• PepsiCo China channel

• Industrial sales

• Governor of Victoria Export Award- Agribusiness Food and Beverage Category

• Product of the Year 2020 (Winner Health Food Cereal Category)Consumer Survey

• Healthy Food Guide Awards 2019 (Best Packaged Savoury Snack category)

Solid performance in challenging environment

16

‘Project Shaker’

Project Shaker’s aim is to significantly improve the operational efficiency and profitability of the Food Division

■ Sales & Marketing

• Re-launch Lucky brand, including packaging upgrades, advertising and new product innovation

• Develop the Sunsol brand - use data and consumer insight and innovation

• Achieve improved overhead recovery through selected private label contracts

• Continue to aggressively expand into export markets

■ Operations, Logistics & Warehousing

• CAPEX investment to enhance plant efficiency to deliver lowest conversion cost per kg

• CAPEX investment to deliver alternative packaging formats

• Invest in people and planning to increase Thomastown OEE

• Improve purchasing, warehousing and logistics cost/efficiency

■ M&A

• Pursue value accretive acquisitions to enhance SHV’s capabilities, reach and market penetration

Project Governance in place – initiatives underway

17

Awards

Governor of Victoria’s Export award for 2019 in the Agribusiness Food and Beverages Category

• In judging the award, the following areas were highlighted: the recent success of both the Industrial and Consumer Divisions in South East Asia and China, the commitment to innovation, sustainability and community, plus our investment in Horticulture and Value adding technology.

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• Select Harvests is a national finalist in the 57th Australian Export Awards

Product of the Year 2020 Award for Sunsol PRO-biotic Toasted muesli range

• Sunsol PRO-biotic Almond & Manuka Honey AND Almond, Cashew & Chia Toasted muesli won the consumer survey based Product Innovation 2020 award.

• Both products are winners in the Health Food Cereal category. Survey of 10,000 people by Nielsen. Product of the Year surveys 35 categories in total.

Healthy Food Guide Award 2019 for Lucky Smart Snax Protein

• The 2019 Healthy Food Guide Awards are a credible guide to the most nutritious food products in supermarkets, judged by a panel of dietitians and nutritionists.

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• Lucky Smart Snax Protein was the winner of the award in the Best Packaged Savoury Snack Category.

18

FY2020 Food Division & Corporate Outlook

Industrial Sales

Lucky

Sunsol

• Continued strong demand in Export Market

• Strong relationships developed in China

• Increased demand for paste related product

• • Tightening in local market

• New packaging and marketing program to re-engage consumers

• Continue with China/PepsiCo license

• New Product Development pipeline exciting

• Continue growth through export

• Further New Product Development opportunities centered around Probiotics

Processing Cost

People, Culture & Sustainability

Corporate

• Increase focus on OEE & quality

• Strategic and replacement CAPEX investment to reduce cost

• Zero harm

• Invest in leadership capabilities

• • Step change on sustainability reporting

• Modern Slavery requirements imbedded

• Standardise JDE processes across the group

• • Focused capital and cash management disciplines in place

• Assess commercially attractive growth options

Growth in the Food Division remains a key focus

19

Almond Crop Update

Almond Board of California October 2019 Position Report:

• USDA Subjective Estimate - 10 May 2019 = 2.20 billion pounds (1 million MT)

• • Industry forecasting 2.3 to 2.4 billion pounds

• Oct YTD Receipts 1.60 billion vs 1.55 billion pounds LY up 2.36%

• Shipments 609m vs 570m pounds LY up 6.89%

• Commitments 693m vs 586m pounds LY up 18.31%

Almond Board of Australia 2019 September Position Report

• 2019 Crop – 100,000MT

• Domestic annual consumption approx. 25,000MT

• YTD Export shipments 62,445MT vs 47,002MT LY up 32.8%

• 2018 Full Year Export 60,894MT

Market pricing is dependant on future US crop

20

Strategy and 2020 Priorities

Bunargool Orchard Blossom 2018

21

Photo Carina Farm Blossom 2018

Select Harvests – in control of our destiny

Vision

To be a Leader in the Supply of Better for You Plant Based Foods

Values

Strategic Priorities

The pathway to achieving our vision

Operational Focus

What we do everyday

Goal

Trust & Respect Integrity & Diversity Sustainability Performance Innovation Treat all stakeholders with All decisions and transactions Our focus is on the long-term Exceed expectations on a daily Constantly challenge ourselves trust and respect will not compromise the sustainability of our basis to improve everything integrity of the organisation or environment, business and individual community Optimise the Almond Base Grow our Brands Expand Strategically Increase productivity and achieve sustainably high Grow our consumer and industrial brands, aligned to Pursue value accretive acquisitions that align with our yields from our growing almond orchard base the increasing consumption of plant based foods core competencies in the plant based agrifoods sector Customers Supply Chain People Capital Exceed our current customer’s Optimise our end-to-end supply chain Focus on a safe working environment, Target capital discipline, balance sheet expectations and grow our customer to achieve maximum value for the well-being, company culture, strength, superior shareholder returns base, focused on the Asian marketplace business as a whole leadership development and staff and long term growth training, attraction and retention

Sustainable Shareholder Value Creation

22

Vertically Integrated from ‘Paddock to Plate’

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Orchards → Production →
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Primary
Processing
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• 7,677 planted hectares of almond orchards

• Combination of owned orchards (3,522) and long term lease (4,155)

• Australia’s second largest almond orchard portfolio

• Responsible for farm management across all our orchards, both owned and leased

• Annual production cycle, with harvest between February and April

• Single site facility responsible for the primary processing of our annual almond crop

• Almond hulling, cracking, sorting & packing, with product sent directly to port or Secondary Processing

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Secondary Industrial
→ →
Processing Brands
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Retail
Brands
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• Bulk product, including inshell almonds, to both established and emerging markets

• Value added almond processing, from blanching to pastes

• Processing and packing of our snacking nuts, cereals, nut based ■ Worldwide industrial sales to ingredients, health foods and major bakeries, manufacturers dried fruits and wholesalers

• Market leading Lucky, Sunsol and NuVitaility retail brands

• Domestic and overseas distribution across supermarkets, independent retailers and health food stores

Vertically Integrated across the entire supply chain from almond orchards to consumer and industrial brands

23

FY2020 Top 10 Priorities

1. Continue 2020 Crop Horticultural Program – Ensure optimal tree health and production

2. Implement New Technology – Capital investment in new sorting technology (improved quality)

3. Cost Reductions - Continue to reduce cost per kg across all production stages

4. Mitigate Water Cost - With increasingly dry conditions, water management is critical

5. Manage Cash Position - Improve working capital and cash conversion rate

6. Growth – Assess organic and inorganic options to deliver additional growth

7. Consumer Foods – Deliver process improvement project to improve efficiencies

8. Capital Investment – Prioritise investment to deliver improved quality outcomes

9. Execute Export Growth Strategy - Opportunities in Industrial and Consumer

10. Corporate – Standardise and improve processes seamlessly across all Divisions

Fundamentals remain positive and clear opportunities to improve exist

24

Thank you

Please direct any queries to:

Paul Thompson Brad Crump Managing Director Chief Financial Officer +61 3 9474 3544 +61 3 9474 3544

Andrew Angus Investor Relations +61 402 823 757

Please note that background material/data regarding the global almond industry can be found on the Select Harvests website.

www.selectharvests.com.au

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25

Select Harvests - Financial History

SELECT HARVESTS CONSOLIDATED	2009 2010 2011 2012 2013 2014* 2015 2016 2017 2018 3 months transition+ 2018 2019**	2009 2010 2011 2012 2013 2014* 2015 2016 2017 2018 3 months transition+ 2018 2019**
RESULTS FOR YEARS ENDED30 SEPTEMBER/ JUNE	30-June	30-September
Total sales Earnings before interest and tax Operating profit before tax Net profit after tax Earnings per share (Basic) (cents) Return on shareholders' equity (%) Dividend per ordinary share (cents) Dividend franking (%) Dividendpayout ratio (%)	248,581 238,376 248,316 246,766 190,918 188,088 223,474 285,917 242,142 210,238 67,581 298,474 26,827 26,032 22,612 (2,495) 5,241 31,288 85,845 49,785 16,979 34,869 (1,052) 80,065 23,047 23,603 18,473 (8,743) 198 26,833 80,514 44,290 11,978 29,464 (2,089) 76,108 16,712 17,253 17,674 (4,469) 2,872 21,643 56,766 33,796 9,249 20,371 (1,536) 53,022 42.6 43.3 33.7 (7.9) 5.0 37.5 82.9 46.7 12.6 23.2 (1.6) 55.5 16.6 15.2 10.5 (2.8) 1.8 12.3 19.8 11.6 3.3 5.4 (0.4) 12.7 12 21 13 8 12 20 50 46 10 12 0 32 100 100 100 100 100 55 - 54 100 100 N/A 100 28.2 48.5 38.6 (101.3) 239.8 53.5 62.8 99.1 79.4 51.7 N/A 57.7
Financial ratios Net tangible assets per share ($) Net interest cover (times) Net debt/equity ratio (%) Current asset ratio (times)	1.56 1.87 2.17 2.19 2.14 2.38 3.35 3.22 2.95 3.34 3.21 3.60 7.10 10.70 6.70 (0.4) 1.0 6.9 15.9 9.0 3.4 6.4 (1.0) 20.2 51.9 39.6 43.3 41.7 49.6 54.0 38.2 23.1 52.5 18.7 15.9 6.6 0.79 1.44 1.96 1.42 1.61 4.02 3.36 1.90 1.05 4.49 3.21 2.74
Balance sheet data as at 30 June Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets	81,075 83,993 91,228 76,936 123,303 136,639 207,782 155,521 136,610 162,118 158,855 173,666 133,884 145,612 214,352 202,371 180,542 194,080 280,130 294,251 343,081 354,435 363,766 379,190 214,959 229,605 305,580 279,307 303,845 330,719 487,912 449,772 479,691 516,553 522,621 552,856 102,348 58,469 46,454 54,369 76,800 33,988 61,893 81,783 130,371 36,104 49,412 63,455 11,735 57,515 90,311 64,608 67,540 121,325 138,632 77,088 71,701 101,809 102,570 73,398 114,083 115,984 136,765 118,977 144,340 155,313 200,525 158,871 202,072 137,913 151,982 136,853 100,876 113,621 168,815 160,330 159,505 175,406 287,387 290,901 277,619 378,640 370,639 416,003
Shareholders' equity Share capital Reserves Retained profits Total shareholders' equity	46,433 47,470 95,066 95,957 97,007 99,750 170,198 178,553 181,164 268,567 268,567 271,750 12,949 11,327 11,201 10,472 9,144 12,190 12,818 11,168 11,602 9,601 9,802 10,417 41,494 54,824 62,548 53,901 53,354 63,466 104,371 101,180 84,853 100,472 92,270 133,836 100,576 113,621 168,815 160,330 159,505 175,406 287,387 290,901 277,619 378,640 370,639 416,003
Other data as at 30 June Fully paid shares (000) Number of shareholders	39,519 39,779 56,227 56,813 57,463 57,999 71,436 72,919 73,607 95,226 95,226 95,737 3,296 3,039 3,227 3,359 3,065 3,779 4,328 8,908 11,461 11,943 11,884 10,331
Select Harvests' share price - close ($)	2.16 3.46 1.84 1.30 3.27 5.14 11.00 6.74 4.90 6.90 5.32 7.69
Market capitalisation	85,361 137,635 103,458 73,857 187,904 298,115 785,796 491,474 360,674 657,059 506,602 736,218

$'000 (except where indicated)

• The 2014 result has been restated due to the early adoption of changes to Accounting Standards, AASB 116 Property, Plant and Equipment, and AASB 141 Agriculture, impacting 'bearer plants'.

Source: Company Data

26

Almond Orchards – Our productive foundation

• Geographic diversity limits exposure to: − Weather

• − Disease spread

• − Insect infestation

Enables sequential progression of harvest period across regions: − Better farm equipment utilisation − Better processing utilisation − Better labour utilisation

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Secure access to diverse water sources:

• River Water

• − Aquifers

Positions the company to maximise harvest volume & reduce variance.

Building world class properties and a globally competitive low cost business.

Select Harvests has a global scale - planted almond orchard portfolio of 7,696 hectares

27

Select Harvests – Orchard Profile

Select Harvests Almond orchard portfolio	Total Planted (as at 30 September 2019)
	Acres Hectares
Central Region Company Owned Leased	4,183 1,693 3,422 1,385
Total	7,605 3,078
Northern Region Company Owned Leased	1,797 727 3,017 1,221
Total	4,814 1,948
Southern Region Company Owned Leased	2,769 1,121 3,828 1,549
Total	6,597 2,670
Total Company Owned Leased	8,749 3,541 10,267 4,155
Total	19,016 7,696

Select Harvests is 19% of Australia’s almond acreage

28

Optimise Almond Base - Orchard Age Profile

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Growth and improvement occurred in SHV orchard portfolio in recent years - acquisition, replants, greenfields

29

Targeting an Above Average Yield Per Acre @ Maturity

Year	Harvest Volume (tonnes) per acre based on 1.2 Tonnes per Acre @ Maturity	Harvest Volume (tonnes) per acre based on 1.35 Tonnes per Acre at Maturity & Immature Yields at 2019 Levels
1 2 3 4 5 6	0.0 0.0 0.3 0.5 0.8 1.0	0.0 0.0 0.45 0.92 1.16 1.28
7+	1.2	1.35

Note:

Biennial Nature of Crop

• The almond crop is biannual in nature with +/- 10% per annum variation in tonnage possible

Variation between Regions and Farms

• Yields are not uniform and vary across both farms and growing regions

Post Economic Maturity Yield

• The yield for post economic maturity farms deteriorates as tree age increases

Significant tonnage upside available with a higher yield per acre at maturity

30

Tree Nut Pricing

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A$/Kg
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Almonds are currently the best value in the basket - driving consumption

31

Cost of production

2019 Crop - Cost Per KG – Excluding Tree Depreciation (A$/KG)

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Horticultural Costs Water Costs Harvest Costs Rental Costs Processing Costs Total Crop Costs (Excl. Water)

2018 Crop 2019 Crop

Achieving increased yields has led to improved productivity

32

Water Market Pricing

■ Water prices have decoupled from supply and demand fundamentals

• The drought is having a major impact on water prices, but is not the only factor underpinning higher water prices

• Influence of increased permanent cropping on demand and deliverability

• Governments policies and intervention: buybacks, water efficiency grants, trade restrictions between zones (IVT) inter valley trading, inconsistent carry-over policies, and extraction licenses above sustainable resource availability

• Environmental flow obligations and timing

• Sophisticated financial investors in both entitlement and annual allocation markets

• Global commodity prices remaining buoyant

Water Storage vs. Annual Allocation Prices

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. The drought is having a major impact, but is not the only factor underpinning higher prices Our water strategy protects us from the full impact of the recent price increase

33

The ownership of water has changed

■ The share of permanent entitlements owned by non-water users and the environment has increased significantly

Changing ownership of high-reliability water shares in northern Victoria

Source: Victorian Water Register

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Murray-Darling Basin water market inquiry

■ SHV will participate in the ACCC’s Murray-Darling Basin water markets inquiry

• SHV supports the Murray-Darling Basin (MDB) system. Clearly defined water property rights and tradable markets supported by robust price mechanisms have significantly improved water use efficiency and agricultural output across the MDB.

• The water markets have evolved significantly since the MDB Plan was set up in 2012. The ACCC inquiry is a good opportunity to address the current issues impacting water markets, take advantage of new technology and re-align water markets to community expectations.

■ Our submission to the ACCC inquiry will highlight five key issues:

1. The growth and entry of non-irrigator sophisticated financial investors.

2. The lack of accurate, comprehensive and timely data on water market activity.

3. The need for transparent and robust market rules similar to ASX.

4. The requirement for water brokers to be regulated similar to ASX stock brokers.

5. Increase collaboration between Federal and State governments to harmonise environmental flows, carryover and inter valley trading.

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Almond Market Outlook – US Shipments October 2019

US Octobe	r 2019 Position Report	r 2019 Position Report	r 2019 Position Report	r 2019 Position Report	r 2019 Position Report	r 2019 Position Report	r 2019 Position Report	r 2019 Position Report	r 2019 Position Report	r 2019 Position Report	r 2019 Position Report	r 2019 Position Report
	US Export Shipments				US Domestic Shipments				US Total Shipments
	Last Year	This Year	Growth	Growth	Last Year	This Year	Growth	Growth	Last Year	This Year	Growth	Growth
			(million lbs)	(%)			(million lbs)	(%)	(million lbs)	(million lbs)	(million lbs)	(%)
October Last 3mth Last 6mth Last 9mth Last 12mth Season	178.9 384.9 655.2 1,025.4 1,477.6 384.9	203.0 430.1 742.0 1,104.1 1,568.1 430.1	24.0 45.2 86.8 78.7 90.4 45.2	13.4% 11.8% 13.2% 7.7% 6.1% 11.8%	68.2 185.3 373.8 564.2 738.4 185.3	62.6 179.4 365.5 552.3 735.2 179.4	(5.6) (6.0) (8.3) (11.8) (3.2) (6.0)	(8.3%) (3.2%) (2.2%) (2.1%) (0.4%) (3.2%)	247.1 570.2 1,029.1 1,589.6 2,216.1 570.2	265.5 609.5 1,107.6 1,656.5 2,303.3 609.5	18.4 39.3 78.5 66.9 87.2 39.3	7.4% 6.9% 7.6% 4.2% 3.9% 6.9%

Source: Almond Board of California October 2019 Position Report

US Shipments remain resilient – export shipments continue to grow

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AASB 16 – Leases – Impact from 1 October 2019

Initial impact on adoption as follows:

Balance sheet $'000 Total Current Assets Total Non Current Assets ROU - AASB16 Total Assets Total Liabilities Lease Liabilities - AASB 16 Total Liabilities Contributed equity Reserves Retained profits Total Equity Net debt Cash and Cash equivalents Lease Liabilities Lease Liabilities - AASB 16 Net debt Gearing ratio	30 September 2019 AASB 16 Transition 1 October 2019 173,666 173,666 379,190 379,190 0 209,760 209,760
	552,856 209,760 762,616
	136,853 136,853 0 237,773 237,773
	136,853 237,773 374,626
	271,750 271,750 10,417 10,417 133,836 (28,012) 105,824
	416,003 (28,012) 387,991
	7,945 0 7,945 (35,371) 0 (35,371) 0 (237,773) (237,773)
	(27,426) (237,773) (265,199)
	6.6% 68.4%

Financial Impact

• Major leases relate to long term orchard leases

• Impacts net Gearing Ratio

• No impact on cash earnings

• Will be some minor impacts to NPAT – still be determined based on capitalisation/growing costs etc.

• Interest cover ratios still well within covenants

SHV to transition to new standard from 1 October 2019 – major Balance Sheet impact

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Useful Almond Industry websites

Industry Associations

• Californian Almond Board

www.almondboard.com

• Almond Board of Australia

www.australianalmonds.com.au

Industry Reports

• US Crop Forecasts (Subjective, Objective)

• Monthly Almond Position Reports

• Almond Almanac

• UC Davis Almond Development Costings

http://www.almonds.com/growers/resources/crop-forecasts/tc-NASS-Crop-and-Acreage-Reports http://newsroom.almonds.com/position-reports

http://www.almonds.com/sites/default/files/2017%20Almanac%20Final%20-%20updated%207.5.18.pdf https://coststudies.ucdavis.edu/en/current/commodity/almonds/

Almond Companies

• Blue Diamond Growers

www.bluediamond.com

• Blue Diamond Ingredients

• Almond Insights

• Derco Foods

• RPAC Almonds

• Wonderful Pistachios & Almonds

www.bdingredients.com/category/almond-market-analysis www.almondinsights.com

www.dercofoods.com/en/english-reports/english-almond-reports www.rpacalmonds.com/marketnews www.wonderfulpistachiosandalmonds.com/#ourdifference

Definitions & Explanations

1 – EBITDA & EBIT are Non-IFRS measures used by the company are relevant because they are consistent with measures used

internally by management and by some in the investment community to assess the operating performance of the business. The non-IFRS measures have not been subject to audit or review.

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