SELECT HARVESTS LIMITED — Investor Presentation 2012

Sep 24, 2012

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Select Harvests Limited (“SHV”)

Octa Phillip Agricultural Land Round Table Paul Thompson, Managing Director 26 September 2012

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Disclaimer

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Disclaimer & Basis of Preparation

This presentation is provided for information purposes only. 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.

Underlying EBIT and Underlying NPAT are non-IFRS measures that reflect, in the opinion of the Directors, the ongoing operating activities of Select Harvests Ltd in a way that appropriately presents its underlying performance. The non-IFRS underlying profit measures exclude restructuring expenses, asset impairments and asset write-downs

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Select Harvests & The Almond Industry Value Chain

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Summary of Capability

Farming & Farm Management

17,151 acres (6,940 hectares “ha”)

Processing

Primary Processing 30KT Robinvale Vic

Sales & Marketing

Consumer, Foodservice & Industrial businesses

Diversified across Vic, NSW & WA

Key Attributes

Ownership

8,232 acres (3,331 ha) owned 4,498 acres (1,820 ha) leased 4,421 acres (1,789 ha) managed

Geographic Diversity

8,674 acres (3,510 ha) VIC 4,528 acres (1,832 ha) NSW 3,949 acres (1,598ha) WA

Global nut trader

Value Added Processing Robinvale & Thomastown

Brands

Primary Hulling & Shelling Inshell bagging

Lucky: No 1 Cooking Soland: No1 Health Food Sunsol: Snacking Renshaw: Industrial

Value Added Blanching Slicing Customers Dicing Coles Meal Woolworths Pastes Mars Roasting Unilever Blending Export

Select Harvests is integrated from “paddock to consumer packet”

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Ke Drivers to Value Creation y

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	Industry	Select Harvests
Demand	Global demand growing 10%+ Local demand 8% +	SHV supplying both markets
Supply	Last 2 years demand greater than supply, despite record US crops	Last 3 years Australia has had very poor seasons, off up to 30%
Price	US D price continues to increase. Aust price - USD plus freight	A$ has largely offset increased prices, poor quality has adverse price affect
Long Supply Lag	7 years before a tree reaches full maturity and full yield potential	Only significant new planting SHV WA
Tree Economic Life	18 years from maturity	69% of trees yet to mature
Primary Capacity	Australian primary processing capacity equals demand in a normal year	Post Olam, SHV actively seeking to fill capacity
Value Add Capacity	Lower barriers to entry greatest protection is brands and relationships	Brands strong ,but huge potential remains
Trading	Aust market only market with fresh product for 6 months of the year	SHV has all the contacts
Geography	Closest to booming Middle East and Asian markets	Strong relationship in India and developing relationships in Asia
Weather	Need dry weather for best yield	Diversity protects SHV from crop wipe out
Currency	All product traded in USD	50% business in A$

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Key Drivers - Global Supply & Demand

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• Global market worth an estimated US$4.5B

• Demand grew at 8% p.a. over last 10 years

• Slow-down in recent planting activity means historical supply growth won’t be maintained

• Annual consumption has exceeded production over past two years

• Post GFC carry-over stock has softened upward price pressure so far

• USA produces 86% of global almond supply, followed by the EU with 9% (the major contributor being Spain)

• Australia is currently the 3[rd] largest almond producing nation globally and is on target to become the 2[nd] largest by 2015

• The EU & USA account for the majority of existing demand with over 62% of global consumption – health and nutritional benefits are fuelling the growth in these markets

Australian Almond Statistics 2011, Almond Board of Australia

• Asia/India and the Middle East are the global consumption growth markets, being fuelled by rapid urbanisation and growing affluence

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Key Drivers - Long Supply Response Time & Substantial Cash Generatin Ca acit g p y

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

• Almond trees take 7 years to mature, but can then produce at that level for approx. 18 more years before tapering off

Almond Tree Life Cycle & Yield

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1.50
1.40
1.30
1.20
1.10
1.00
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Poor Yield - Tonnes /acre Average Yield - Tonnes /acre Top Quartile Yield - Tonnes /acre
Yield (Tonnes/Acre)
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18 years of
substantial free
cash flow
generation once
maturity attained
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Key Drivers - Tree Maturity - Orchard Age Profile

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• Australia will be the 2nd largest almond producing nation globally by 2015

• Select Harvests is Australia’s 2nd largest almond producer

• Growth - 69% (8,816 acres / 3,568 ha) of Select Harvests’ Company Orchards are yet to reach maturity

SHV Company Owned Orchards - Age Profile (Years) - %

69% of SHV Company Orchards 31% of SHV Company Orchards have matured (i.e. 7 y.o. or older) are 6 y.o. or less and yet to reach 69% f SHV C O h d 6 l d tt h t it maturity

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21%
16%
15%
13%
12%
6%
5%
4%
3%
1% 1% 1%
1%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17+
Tree Age (Years)
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Key Drivers - Weather - Annual Almond Cycle

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Adverse weather is biggest threat

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Dormancy Nuts Mature
Almond Trees are dormant between Fruit/Kernel, Hull, Formation of •Pollination – Wet weather & Wind impacts
May-July Leaves •Petal fall to early nutlet development – Frost impacts
Blossom Hull Split
Bees used for Hull opens & Nut •Harvest – Wet weather impacts
pollination in Aug splits from stem
Can impact Volume & Quality
May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
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FY2011
FY2012
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FY2013 Harvest shakers drop nuts to ground, Sweepers pick up nuts, Truck nuts to Processing Facility

Primary Processing – removal of hull (In-shell) or hull & shell (kernel), prior to Value Added Processing

Value Added Processing – blanching, slicing, slivering, meal, pastes, roasting, blending

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Almond Sales Program
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What we are building:

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• A strong and trustworthy company

• A business that can manage the dynamic agricultural cycle and can mitigate the inherent risks

• A company that responds to the challenges and learns from the experience

• A cash generating company that will be positioned to invest in growth in a growth industry

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SHV Strategy

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Consolidation	Business Improvement	Growth Leverage core competencies Orchard Industry top quartile Innovate & grow brands Explore new categories Expand exports Expand and grow
	One Select
Restore the Basics	Build foundations
Exit Olam Improve farm practices Improve asset utilisation Reduce costs Food Business Performance Improvement (“PI”) Program	Improve returns in Food Div Acquire almond orchards at attractive values Bring in new investment Leverage investment in WA orchard assets Realign org. structure & culture	Leverage core competencies Orchard Industry top quartile Innovate & grow brands Explore new categories Expand exports

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Key Steps to Cash Generation

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• Global Supply & Demand - strong, long term, global consumption growth

• Demand is now outpacing supply

• Long lag for supply has positive implications for price and cash flow

 Tree Maturity – 69% of Select Harvests’ Company Orchards are yet to mature

• Impact is two-fold – volume positively impacts earnings and trees become long term cash generators

• Weather – Return to long term average conditions will assist return to normal orchard yields

• Two-fold positive effect on earnings – Volume and Price (Quality improvement)

• Improved Horticultural – will take average yields to top quartile yields

• Independent Experts recently engaged to benchmark Select Harvests orchard operations against international best practice, to ensure top quartile horticultural and management practices.

• Capture Additional Processing volume

• Straight through impact on bottom line as capital and business already exists, no capex required

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Key Steps to Cash Generation

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 Integrated Business Model

  - Allows SHV to capture margin along the entire value chain in a short supply market

• Improvements in Food Business

• Some of these initiatives are already well advanced, business now break even

• Additional opportunities exist in all parts of this business both Go to Market and supply chain

• Outstanding foundation for expansion in the Health space.

• Capital Management – structuring capital to create base for growth

• Purchase distressed assets (e.g. Belvedere)

• Sell non-core assets (e.g. water)

• Look to lease rather than buy, where feasible

• Recycle capital into increasingly efficient assets

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Why Select?

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 Select Harvests is a fully integrated business operating across the entire almond value chain

• Largest developer of almond orchards in Australia

• driving force behind Aust. almond industry growth from 10KT in 2003 to 90KT (est.) in 2017

• 2[nd] largest producer of Australian almonds

• Currently the largest almond primary processing facility in Australia

• Significant brand presence at retail level (inc. Lucky brand)

• 35% domestic market share

• 80% market share of In-shell exports from Australia

• Offers consumers a complete end to end solution (production to consumer packaged product)

• Australian competitors do some, but not all, of what Select Harvests do.

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Summary

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• Good industry – healthy product with strong, historical & forecast long term growth prospects (8% p.a.)

• Good position in industry

• Australia will be 2[nd] largest almond producer by 2015

• Countercyclical to Californian Northern Hemisphere production

• Good business – integrated, geographically diversified, strong market shares across the business

• Good assets – relatively new, globally competitive processing facility. Upside from maturing orchards

• Good opportunities – increase volumes by leveraging advantages of integrated business model i.e. utilising production, processing and marketing capabilities and knowledge

• Significant upside as maturity profile evolves and yields & quality return to long term average

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Appendix

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Thank you

Please direct any queries to: Paul Thompson, Managing Director, +61 3 9474 3544 Paul Chambers, Chief Financial Officer, +61 3 9474 3544 Andrew Angus, Investor Relations, +61 402 823 757

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Why Almonds?

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 Compelling Long-Term Supply & Demand (“S & D”) Fundamentals

• Fast growth - Global almond demand grew at a Compound Annual Growth Rate of 8% p.a. over the last decade

• Tight S & D - delicately balanced in a long-term high growth market

• Demand increasingly driven by rapid urbanisation and growing affluence in Asia

• Long lead time to mature production (7 years)

 Health Benefits

• Almonds are becoming increasingly recognised for their health benefits

• Contain sterols & polyphenols - improves blood cholesterol

• Contain Vitamin E – fat soluble vitamin & anti-oxidant that assists in maintaining heart health

• Arginine (Protein) – leads to relaxed/elastic blood vessels. Hard arteries can lead to heart disease

• Improve blood glucose control – can reduce the Glycaemic Index (“GI”) of a meal - assist with weight loss

• Contain Calcium – 20 nuts gives 7% daily requirement – important source for those who can’t/don’t eat dairy

• Reduces oxidative stress & has anti-inflammatory effects

• Benefit digestive health – natural source of dietary fibre

 Agronomics

• Almonds are an efficient economic converter of water compared to other potential agricultural land uses

• Almonds are a logical choice in an increasingly water constrained environment

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Australian Almond Industry

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• Australian Almond production has undergone significant growth since 2003, increasing by approx. 45,000 tonnes to 55,000 tonnes in 2012

Australian Almond Production

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100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Series1 10237.5 11742.7 16431.2 16001 26881.8 26005.9 36403 39081 37626.2 55000 76261.3 82425 86425.2 88347.7 89432.4
Tonnes
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• The Australian Almond Industry will continue to enjoy significant volume growth over the next few years as existing orchard mature and yields return to more normalised levels.

• By 2015, Australia is on target to become the 2[nd] largest producer of almonds globally

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Long-term almond price dynamics

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Key Markets (Production & Consumption)

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Global Almond Consumption 2011/12
Global Almond Production 2011/12
EU-27
27%
United States
United States India
9% 7%
3% EU-27 United Arab Emirates
5%
2% Australia Vietnam
1%
4%
0% Turkey Turkey
Chile 3% Canada
86% 35%
3%
Other Japan
3%
China
9% 2%
2% Hong Kong
Source: USDA PSD Online Source:USDA PSD Online
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• The USA dominates the global almond production industry with 86% of the market, followed by the EU with 9% (the major contributor being Spain)

• The EU & USA account for the majority of existing demand with over 62% of global consumption – health and nutritional benefits are fuelling the growth in these markets

• Australia is currently the 3rd largest Almond producing nation globally and is on target to become the 2nd largest by 2015

• Asia/India and the Middle East are the global consumption growth markets, being fuelled by rapid urbanisation and growing affluence

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Key Drivers – Domestic Market Premiums captured by Integrated Businesses

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• With the strong growth in Australian almond production in recent years, exports now account for nearly 59% of current production.

• As Australian production continues to increase with tree maturity & a return to normal yields, an increasing proportion of Australian almond producers will be exposed to world prices.

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 Note: 2011/12 Marketing Year
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Australian Almond Production Destination Markets
(Tonnes & %)
16,820
41% Export
24,459
Domestic
59%
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• One of the key benefits of Select being an integrated business with Australia’s No.1 Brands (Retail & Industrial) is that Select can direct its own almonds to higher returning domestic markets

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Select Harvests Food Products - Brand Summary

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• Market leader in the cooking nut category.

• Cooking Nut product range: almonds, walnuts, cashews, hazelnuts, brazil nuts, pine nuts, pistachios, macadamias, sunflower seeds and pepitas (value share 37% in the MAT to 22.07.12)

• Snacking product range: portion control packs, Lucky Smart Snax and Lucky Snack Tubs.

• Distribution: major supermarkets and export markets including the Middle East, Indonesia and Papua New Guinea.

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• Product range: nuts, dried fruit, legumes and pulses, cereals, grains, seeds, flour, muesli and organic foods.

• Bulk and convenient packs.

• Distribution: health food stores and pharmacies nationally.

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• Product range: muesli, dried fruit, nuts and snacks.

• Distribution: major supermarkets (muesli) and export markets including Hong Kong, Singapore, Malaysia , Indonesia and the Pacific Rim.

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• Product range: muesli, dried fruit, nuts and snacks.

• Distribution: Health aisle of major supermarkets and export markets including Hong Kong, Singapore, Malaysia , Indonesia and the Pacific Rim.

• Product range: almonds and other nuts, dried fruit, seeds, nut pastes and pralines.

• • Bulk pack.

• Products are sold to local and overseas food manufacturers, wholesalers, distributors and repackers.

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Financial Results Summary

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Financial Result ($m)	FY11	FY12		FY12 Underlying EBIT of $19.6m (up 27%
	($m)	($m)		on prior year ) Underlying EBIT includes a fair value
Reported Result				adjustment of $2.5m (FY11 $2.3m)
EBIT - Reported	21.9	(2.5)		Good year on year performance from both
Interest	(3.4)	(6.2)		Almond and Food Divisions
NPBT/(Net Loss before Tax)	18.5	(8.7)		Food division Performance Improvement
(Tax Expense)/Benefit	(0.8)	4.2		(“PI”) Program has started to take effect
NPAT/(Net Loss after Tax) - Reported	17.7	(4.5)		Almond Division
				 Managed Orchards have performed
Pre-Tax Adjustments *	(6.5)	22.1		well
				 Processing business has benefitted
Underlying Result				from additional volumes
EBIT - Underlying	15.4	19.6		 Company Orchards have been
Interest	(3.4)	(6.2)		adversely affected by 3rd year of uncontrollable events
NPBT/(Net Loss before Tax) (Tax Expense)/Benefit	12.0 (3.1)	13.4 (3.9)		Reported EBIT of ($2.5m) is after $22.1m o net adjustments.
NPAT/(Net Loss after Tax) - Underlying	8.9	9.5

• Reported EBIT of ($2.5m) is after $22.1m of net adjustments.

• see dedicated slide for detailed breakdown

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Balance sheet

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($m) Year ending 30/06/2011 30/06/2012	($m) Year ending 30/06/2011 30/06/2012	($m) Year ending 30/06/2011 30/06/2012	($m) Year ending 30/06/2011 30/06/2012
Current Assets excl. Cash		83.9	75.9
Cash		7.4	1.0
Non Current Assets		214.3	202.4
Total Assets		305.6	279.3
Current Liabilities (excl. Borrowings)		30.0	28.8
Borrowings		80.5	68.0
Non Current Liabilities (excl. Borrowings)		26.3	22.1
Total Liabilities		136.8	118.9
Total Equity		168.8	160.4
Net Debt		73.1	67.0
Net Debt /Equity		43.3%	41.8%
NTA Per Share		$2.17	$2.19

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