SELECT HARVESTS LIMITED — Interim / Quarterly Report 2016

Feb 24, 2016

Select Harvests Limited (“SHV”) Half Year ending 31 December 2015 - Results Presentation

25 February 2016

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.

2

2

Agenda

Overview

Financial Results & Analysis

Business Update

Outlook

Appendices

3

3

Overview

• 1H16 Reported Net Profit after Tax (“NPAT”) of $23.9m, compared to Restated 1H15 NPAT of $17.0m - up 41%

• 1H16 Underlying NPAT of $21.1m (excluding the impact of non-recurring items), compared to 1H15 NPAT of $19.6m - up 8%

• Operating cash flow of $80.8m, compared to 1H15 cash flow of $18.4m - up 339%

• Gearing (Net Debt to Equity) is 17.8% - down from 37.6%

• Underlying 1H16 Earnings per Share (“EPS”) 29.5 cents per share (“cps”), compared to 1H15 EPS of 31.6 cps - down 7%

• Interim Dividend declared of 21 cps (Record Date: 4 March 2016, Payment Date: 15 April 2016) - up 40%

Strong cash generation, low debt and gearing, healthy dividends

4

4

Financial Results - Income Statement

Financial Result ($m)	1H15	1H16	Underlying EBIT $28.8m (1H15 $30.6m
	($m)	($m)	Almond Div. $25.0m (1H15 $29.
			down 16%
Revenue EBITDA - Underlying	100.6 36.6	166.4 33.7	Food Div. $6.7m (1H15 $4.1m)
Depreciation	(6.0)	(4.9)	up 64%
EBIT - Underlying	30.6	28.8
Interest	(2.6)	(2.6)	Underlying NPAT $21.1m (1H15 $19.6m
PBT - Underlying	27.9	26.2	Includes $2.8m tax benefit
(Tax Expense)	(8.4)	(5.1)	Non recurring items $2.8m post
NPAT - Underlying	19.6	21.1	asset sales in 1H16, and post tax
Non recurring items(post tax)	(2.6)	2.8	acquisition transaction costs in 1
NPAT - Reported	17.0	23.9
			Underlying EPS of 29.5cps – down 7%
EPS (underlying) - cents per share	31.6	29.5
Interim Dividend - cents per share	15.0	21.0	Dividend of 21 cps unfranked - up 40%

• Underlying EBIT $28.8m (1H15 $30.6m) - down 6%

• Almond Div. $25.0m (1H15 $29.7m)

• Underlying NPAT $21.1m (1H15 $19.6m) - up 8%

• Non recurring items $2.8m post tax gain on asset sales in 1H16, and post tax impact of acquisition transaction costs in 1H15

Half year result impacted by crop value estimates developed at this time of the growing cycle

5

5

Financial Results - Balance Sheet

($m) Period ending 31/12/2014 31/12/2015	($m) Period ending 31/12/2014 31/12/2015	($m) Period ending 31/12/2014 31/12/2015	($m) Period ending 31/12/2014 31/12/2015
Current Assets excl. Cash		144.0	163.2
Cash		3.3	12.7
Non Current Assets		279.5	276.3
Total Assets		426.8	452.2
Current Liabilities (excl. Borrowings)		23.9	49.6
Borrowings (incl. lease liabilities)		102.0	65.3
Non Current Liabilities (excl. Borrowings)		38.8	42.1
Total Liabilities		164.7	157.0
Total Equity		262.1	295.2
Net Debt (incl. lease liabilities)		98.7	52.6
Net Debt/Equity		37.6%	17.8%
NTA/Share ($/share)		$3.02	$3.39

• Net Debt (inc. lease liabilities) $52.6m

• Excluding lease liabilities $15.6m

• Gearing (Net Debt to Equity) of 17.8%

• Excluding lease liabilities 5.3%

• Funding

• 3 bank facility renegotiated with NAB, RABO and CBA

• Facility limit of $115m

• 3 Year term & seasonal WC facilities

• Additional acquisition line

• Sufficient capacity to fund the growing SHV operations, acquisitions & replants

Balance sheet is strong, Gearing is low.

6

6

Financial Results - Cash Flow

($m)	1H15	1H16	Operating cash flow $80.8m – up 339%
			Working capital decrease of $54.2m
EBITDA	36.6	28.8	Proceeds from 2015 crop in 1H16
Change in Working Capital	(15.9)	54.2	More than funding higher input hort. program
Net Interest	(2.3)	(2.2)	Investing cash flows of $31.0m
			Orchard and land acquisitions $5.0m
Cash flow from operating activities	18.4	80.8	Water acquisitions $5.0m
Investing cash flows	(83.3)	(31.0)	Irrigation upgrades, plant and equipment $12.0m
Proceeds from equity raising/asset sales	64.0	63.3	Tree development $3.2m Project H2E $3.9m
Increase/(Decrease) in Debt	0.2	(81.8)	Project Parboil $1.9m
Dividends Paid	(3.0)	(17.8)	Proceeds from Sale & Leaseback - $63.3m
Net Increase/(Decrease) in Cash and Cash Equivalents	(3.7)	13.5	Positive operating cash flow allowed Investment on our base business
			Orchard replanting program
			Orchard acquisitions
			Dividend payments

Our asset base can now generate strong and sustainable operating cash flows

7

7

Business Status

Almond Division

• Focussed on delivering low cost position by delivering improved yield, lower cost and improve quality

• Funded orchard expansion plan in place to increase production to 20,000MT by 2022/3

Food Division

• Business now well positioned in growth categories domestically

• Looking to generate non organic growth

Balance Sheet

• Strong position to handle highs and lows of commodity pricing with sufficient capacity to grow

Funding

• Secure off and on balance sheet alternatives have been established

Last few years have been used to transform business to establish a sound base for growth.

8

8

Global Market Update

Demand

• Higher prices, softening demand, increased supply and credit squeeze have had an impact

• Demand is re-emerging in some markets as credit/stock begins to move through the system

• US Domestic consumption is down 7.9% vs last year

Supply

• US 2015 Crop - Up 1.8% vs last year

• Market estimate of USA 2015/16 Almond crop - now 1.9 billion pounds (Ref: CAB Position Report – 11 Feb 2016)

• Record plantings as US farmers transition to more reliable water sources

• Sales and commitments 58% vs. 7 year average of 66%

• Spanish Crop

• Spanish crop estimate not available, but crop adversely affected by drought and unsynchronized bloom

• Australian crop

• Slightly down on last year

Supply remains constrained: pricing retracting from record levels

9

9

Summary – US (California) Status

Californian Drought (Ref: Californian Government Department of Water Resources)

• Snowpack - Below Average

• Snowpack 96% of normal - as at 19 Feb

• Water Storage - Below Average

• Storage at 63% of average and 43% of capacity

• Californian Temperature - Second hottest year on record

• 2015 was the second hottest year (following 2014), placing additional stress on trees and limited water supplies

• Outlook is for another hot season

US 2016 Crop

• Bloom & Chilling hours – Good - Some of the best conditions in recent years

• Outlook - Challenging

• State water allocations 15% vs 20% last year increasing reliance on aquifers

• Long range forecast for another hot year

California continues to be affected by serious drought

10

10

Select Harvests 2016 Crop Estimate

Harvest has commenced in all states

• Good harvest conditions experienced to date

• Weather outlook for harvest period is clear at this stage

2016 Crop estimate 13,700 tonnes

• 2015 crop 14,500: this year impacted by tree removal and biannual nature of pollinators

• Quality appears better than 2015

• Nut size larger than 2015

2016 Price estimate A$9.00/kg

• Last year’s pool price was $11.45/kg

• Calculation based on sales commitments, current market price and internal price forecast

Select Harvests expects to deliver its 2[nd] largest crop ever

11

11

Almond Division

Almond Division
	Underlying
EBIT ($m)	1H15	1H16	Variance
Almond Division	29.7	25.1	-16%

FY15

• Fully processed, largely sold and contracted

• $4m positive impact on the 1H16 EBIT due to improved mix

Activities

• Sale & Leaseback completed with First State Super.

• Greenfield developments to plant out 2,500 acres during the winters of 2016 and 2017 commenced

• Company orchard plantings 948 acres in SA – completed Winter 2016

• Continuing to rollout the high input hort. program that is delivering yield improvements in top quartile target

• Acquired 200 acres of planted almonds and 170 acres of land suitable for planting, along with water entitlements

• Continuing to steadily build the company’s water portfolio - purchased $5m of permanent water entitlements

• Increased on farm drying capability

• WA sale ($9.5m) settles April 2016

• Continue to target both mature orchard and greenfield acquisition opportunities

• All capex within budget and on plan

Currently announced investments in trees will deliver 20,000 tonnes of almonds by 2022/23

12

12

Food Division

	Reported	Reported
EBIT ($m)	1H15	1H16	Variance
Food Division	4.1	6.7	64%

FY15

• Revenue of A$91.7m was up 30.0 % (A$70.6 million 1H15)

• Strong industrial and Branded sales (Domestic & Export)

• Lucky Market share remains strong

Activities

• Difficult market due to customer and commodity price pressures.

• Processing cost is marginally below last year

• Investing in brands including relaunch of Nu-Vit to Nuvitality

• Executing plans in the export market, next market China

• Sunsol muesli now available in 6 countries

• New products represent 14% of branded sales

• Continuing to grow industrial business in SE Asia & China

Food Division on track to deliver long term target EBIT of $10m

13

13

NuVitality Brand Relaunch

==> picture [219 x 340] intentionally omitted <==

==> picture [204 x 296] intentionally omitted <==

Brand reinvestment continuing

14

14

SHV - Strategy towards 2018

1. CONTROL CRITICAL MASS OF ALMONDS

Secure the critical mass of nuts needed to maximize profitability and leverage the global almond opportunity.

2. IMPROVE YIELD & CROP VALUE

Improve yield and overall crop value by perfecting on-farm and farm to factory practices .

3. BE BEST IN CLASS SUPPLY CHAIN

Continuously improve our supply chain, achieving high quality, low cost and optimum capital utilisation.

4. INVEST IN INDUSTRIAL & TRADING DIVISION

Allocate resources to leverage our trading skills and grow sales in the industrial channel .

5. STRENGTHEN PACKAGED FOOD BUSINESS

Commit funds and develop structure to generate domestic and export growth for the packaged food business delivering sustainable returns above the cost of capital .

6. FIX OUR SYSTEMS & PROCESSES

Develop the business systems and processes required to be a global industry leader .

7. NON ORGANIC GROWTH

Acquire businesses in related categories leveraging existing capabilities that are EPS accretive and deliver sustainable returns above our cost of capital.

8. ENGAGE WITH OUR PEOPLE & OUR STAKEHOLDERS

Engage with investors and our industry while developing the team required to be a global industry leader.

Select Harvests 2018 Strategy delivery is ahead of target – continue to refine and execute

15

15

Key Projects Status

Parboil - Value Added Almond Production

• Initial foundations have been laid and machinery in factory. November commissioning and budget track

H2E - Biomass Electricity Cogeneration Plant

• Equipment is being manufactured. November commissioning and budget track

2016 Greenfield – Orchard Development

• Irrigation infrastructure being installed July plant out and budget on track

Non Organic Growth - Diversification

• Targets have been identified and some engagement has been undertaken. Current price expectations make transactions difficult

• Priority export markets have been scoped, leveraging new FTAs

1Select – Business Systems Upgrade

• Scoping of “as is” analysis complete, gap analysis close to competition- Sept roll out on track

OH&S – Performance Improving

• LTIFR and Hazard ID’s have approved on a MAT (moving annual total basis)

• LTIFR 30 VS 32

Busy year across the business, still plenty of opportunities in the pipeline

16

16

Almond Growth

==> picture [534 x 350] intentionally omitted <==

Mid term growth is assured

17

17

SHV 2016 Business Objectives

1. Roll out Zero Harm OH&S strategy

1. Improve average mature tree yield equal to or greater than 3.2 tonnes/ha (1.3 tonnes/acre)

2. Select Harvests FY15 average yield over 3.0 tonnes/ha (1.2 tonnes/acre)

3. Acquire orchards at the right price

4. Implement greenfield program

5. Implement Biomass/Cogen plant

6. Implement Parboil

7. Grow and strengthen Food Business

8. Implement consolidation of One Select ERP platform

Playing the long game - continuing to execute our successful cash generative growth strategy

18

18

Thank you

Please direct any queries to:

Paul Thompson	Paul Chambers	Andrew Angus
Managing Director	Chief Financial Officer	Investor Relations
+61 3 9474 3544	+61 3 9474 3544	+61 402 823 757
Please note that background material/data regarding the global almond industry can be found on the		Select Harvests website - www.selectharvests.com.au

==> picture [243 x 152] intentionally omitted <==

==> picture [248 x 152] intentionally omitted <==

==> picture [231 x 152] intentionally omitted <==

19

19

Appendix

20

20

Select Harvests - Financial History

==> picture [700 x 212] intentionally omitted <==

Source: Company Data

21

21

Select Harvests – Orchard Summary

Select Harvests Almond orchard portfolio	Planted	Under development	Total
	Acres Hectares	Acres **Hectares **	Acres Hectares
Central region Company Owned Leased	4,169 1,688 1,481 600	- - 1,400 567	4,169 1,688 2,881 1,166
Total	5,650 **2,287 **	1,400 **567 **	7,050 **2,854 **
Northern Region Company Owned Leased	1,657 671 3,017 1,221	- - - -	1,657 671 3,017 1,221
Total	4,674 **1,892 **	- -	4,674 **1,892 **
Southern Region Company Owned Leased	1,574 637 2,405 974	- - 1,009 409	1,574 637 3,414 1,382
Total	3,979 1,611	1,009 409	4,988 2,019
Total Company Owned Leased	7,400 2,996 6,903 2,795	- - 2,409 975	7,400 2,996 9,312 3,770
Total	14,303 **5,791 **	2,409 975	16,712 6,766

22

22