SELECT HARVESTS LIMITED — Investor Presentation 2015

Apr 27, 2015

Select Harvests Limited (“SHV”) Paul Thompson, Managing Director 12th PAC Partners Agribusiness & Food Conference (Melbourne) 28 April 2015

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.

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Agenda

• SHV- Review

• SHV- Key Drivers & Assets

• SHV - Strategy & Activities Update

• SHV - 2015 Crop Update

• Almond Market Global Trends

• SHV – Business Focus

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SHV - Review

• Select Harvests has undergone significant transformation in last 5 years

• Undertook a deliberate move to more directly expose shareholders to the compelling fundamentals of almonds & healthy eating

• Select Harvests has transition from predominantly a manager of 3[rd] Party orchards to integrated agribusiness by:

• Prioritising Risk Mitigation & Productivity

• Increasing scale & leverage growth

• Building Brands in Business to Business and Consumer segments

• Exiting lower profit segments

• Growing customer base

Select Harvests is an integrated growing agribusiness

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SHV - Key Drivers

• Existing portfolio – 18,000 acres

• Circa 13,000 acres almond trees

• 60% owned, 40% leased

• Average age 11 years old

• Unplanted land bank of 5,000 acres

• Orchard

• Investment in risk mitigation and capex relate productivity is near complete

• 15,600 MT p.a. crop potential from existing portfolio at maturity: (current maturity profile base: 10-12,000 tonnes)

• 6,000 MT p.a. crop potential from land bank at maturity

• 25,000 MT processing capacity at Carina West plant: capex largely sunk to support future capacity

• Food

• Brands starting to show growth – 14% sales are from products launched in last 18 months

• Agents appointed – Thailand & Malaysia

• Business 2 Business growth has got to the point where capacity is the bottleneck not demand

The business is set to deliver sustainable cash flows

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SHV - Food Division - Brands

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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 36.8% as at 20/7/14. Source Aztec National Chains Scan data)

• 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, wholefoods, nuts and snacks.

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

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

• Bulk pack.

• Products sold to local and overseas food manufacturers, wholesalers, distributors and re-packers.

Source: Company Data and Aztec National Chains Scan data

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SHV- Latest new products

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SHV -Geographic Diversity & Scale

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Geographic diversity limits exposure to:

• Weather

• Disease spread

• Insect infestation

Amaroo to Robinvale

Distance: 225 km Drive Time: 2.5 hours

Grewal to Robinvale Distance: 140 km Drive Time: 1.8 hours

Mendook to Robinvale Distance: 40km Drive Time: 0.5 hours

Australia’s 2[nd] largest and most geographically diverse almond producer

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SHV Orchard Profile – Young Orchards PLUS Longevity

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0%

Note: Anticipated Plantings Source: Company Data Unplanted… Planting… Planting… Planting… Planting… 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 31 Tree Age (Years) Planted acreage age profile 25% Planted orchards are 67% Planted orchards in economic sweet spot - low capex & high cash generation 8% Planted orchards post economic maturity Replants New Plants Land bank (% of total land holding)*

Select Harvests almond orchards have an average age of 10.9 years. On track to double acreage by 2018.

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Strategic - Objectives & Activities

					FY13 INITIATIVES	FY14 INITIATIVES	FY14 INITIATIVES	FY15 INITIATIVES
	1. CONTROL CRITICAL MASS OF ALMONDS	Secure the critical mass of nuts needed to maximize profitability and leverage the global almond opportunity.			• Acquired 1,286 acres almond orchard • Ceased WA investment	• Acquired 680 acres planted orchard • Acquired 1,000 acres unplanted • Replanted 512 acres @ higher densities		• Acquired 2,481 acres planted orchard • Acquired 4,465 acres unplanted • Acquired 6,215 ML high security water • Planting 948 acres Allinga
	2. IMPROVE YIELD & CROP VALUE	Improve yield and overall crop value by perfecting on-farm and farm to factory practices.			• Restructured Horticulture Division • Investments in Benchmarking/Tech. • Improve efficiency/protect yield • $500K frost fans	15% ROCE • Total review of Horticultural assets • Further $500K frost fans • Additional harvest equipment		• Additional harvest equipment • Bio stimulants trial • Trial catch & shake harvest technology
	3. BE BEST IN CLASS SUPPLY CHAIN	Continuously improve our supply chain, achieving high quality, low cost and optimum capital utilisation.			• Restructured Operations Division	• Evaluate operational improvements & refine proposals • New Optical Sorter at Thomastown		• Biomass Electricity Cogen. Plant • Carina West Dryer
	4. INVEST IN INDUSTRIAL & TRADING DIVISION	. Allocate resources to leverage our trading skills and grow sales in the industrial channel			• Grew Industrial Division 40%	• Grew Industrial Division 24% through local and SE Asia customer base • Innovations assisted growth		• Expanding business with food processors in local and SE Asian markets
			. w nnel			•
	5. TURN AROUND PACKAGED FOOD BUSINESS	Develop a new model for the packaged food category that will deliver sustainable returns above the cost of capital.			• Exited unprofitable Retail Brand business • Product Research/Collect Insights	~~EPS~~ 7-10% pa • Product Development - Innovation/Renovation/Reformulation/ Repackaging • Brand relaunch - Sunsol & Lucky Smart Snax		• Multiple relaunches & new products • Range rationalisation • New distributors - Thailand & Malaysia
	6. FIX OUR SYSTEMS & PROCESSES	Develop the business systems and processes required to be a global industry leader.			• OHS improvement - LTI’s dropped 60%	• OHS improvement - LTI’s dropped 73% • New risk management framework • New OHS policies/procedures		• IT upgrade
	7. ENGAGE WITH OUR PEOPLE & OUR STAKEHOLDERS	Engage with investors and our industry while developing the team required to be a global industry leader.			• Investor engagement – conferences, site tours and road shows	10% EBIT pa • Hort 3 training for Farm Management • Refreshed company website • Introduction of employee newsletters/intranet		• Further development of Performance Review process • Diversity Committee

Significant progress on implementation of company’s 7 strategic platforms & transition to a fully integrated agribusiness

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Productivity – Controllable Improvements

• People/OHS/Safety – Right people, right training, right systems, right resources

• Intangible impact – difficult to measure entire specific impact – collectively reveals itself in improved productivity & results

• Orchard Productivity – investing incrementally more in crop production & yield initiatives to capture significantly more crop value

• Every 0.1 MT/acre productivity gain delivers additional yield of 1,800 tonnes p.a. - EBIT $13 million p.a. (A$7.50/kg almond price)

• Harvest Productivity – ensure harvest is safe, quick, efficient & value enhancing

• Increase equipment matrix/night harvest operations – reduces time required for harvest

• Installation of Dryer increases proportion of crop available to the lucrative in-shell market

• Cogeneration/Processing Productivity – produce sustainable power from waste stream & permanently lower energy cost base  Will save circa $2m p.a. in energy costs and deliver lowest quartile costs/kg

• Quality Productivity – produce a greater proportion of higher quality & higher value nuts

• 15-18% price differential between grades (Supreme grade vs manufacturing grade)

• Food Productivity

• Greater proportion of branded product sales.

• Supply Chain Productivity – ensure we have the optimal supply chain to service our customers & efficiently market our products  Supply chain is under review

• Finance Productivity – ensure that we have the optimal funding model to support & grow the business

• Funding model is under review

Investments are generally capital light – productivity is now more about execution

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2015 Crop Update

• Harvest Progress Update

• 95% of crop harvested (this time last year 83%)

• Volume Update

• 13,400 tonnes ( In line with previous guidance)

• Processing Update

  • 30% of est. crop has been processed

  • Quality is good as expected

  • Level of insect damage is lower than 2014

  • Higher in-shell yields than 2014, export shipments have commenced

• Price Update

  • A$11.00/kg (previous guidance A$10.20/kg)

  • 55% of crop sold

  • Price negotiations with local retailers ongoing

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Global Trends

• Demand has been Nuts growing for the last 5 years and :

• continues to grow

• Almonds offer a unique matrix of nutrients, and have been clearly linked with improved heart health.

• Significant promotion by Industry

  • Programs focused on promoting the nutritional benefits of nuts and almonds have helped to drive this increased awareness, eg. Almond Board of California, Almond Board of Australia and Australia’s Nuts for Life campaign.

• Supply until recently has been keeping pace with demand  Better varieties

• Higher yields.

• Top 5 US marketable crops have been in the last 6 years. ( 2013/4 Equal 2[nd] )

Consumers are seeking more protein in their diets in the developed and developing world

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Global Supply & Demand

• Worldwide demand for almonds has doubled over the past ten years

• Global almond production has increased from 900 million pounds in 2000 to 2.4 million pounds in 2015

• The increase in global supply represents an averaged increase of 100 million lbs per year over 15 years.

• International almond consumption has grown at an average of 11% per annum over the past five years, and 8% over the past decade.

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Country g per capita Aust 1013 Germany 854 USA 700 Middle E 272 China 91 India 53

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Demand – Developing World Remains a Massive Opportunity

Population Growth and Demand from Developing Markets

• Global demand for almonds is being driven by population growth in destinations such as India, Middle East and China.

• Increasing affluence in developing markets has dramatically increased consumption of all tree nuts, including almonds.

• Continued growth is expected as these populations continue to expand and trend towards a more health conscious diet.

• Traditional markets such as Western Europe have also continued to grow.

• Growth opportunities: Asia, Central/Eastern Europe & Africa

• CAGR (2008/09-2013/14) – 5 Years – 6.9%  Americas 9.2%  Asia Pacific 9.1%  Western Europe 3.5%  Central Europe 9.5%  Middle East/Africa 4.0%

US Almond Sales by Destination

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800
717 (million lbs)
700 616661 2010 Population Distribution
600 556 Asia 61%
532
517
505
500 462 470 470475468 Americas 14%
448 449434 449438
414
400 400 373379 Africa 15%
342
328 Europe 11%
280
300
230
205 189 197
200 174 162158 172
126
100
100 22 28 37 35 40 52 60 66 55 51 70
0
Americas (inc USA) - Total Asia-Pacific - Total Western Europe - Total Central/Eastern Europe - Total Middle East/Africa - Total
2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14
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Source: 2013 California Almond Acreage Report, CDFA. Almond Insights 2013/14, ABA.

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Demand - Asia has only Just Started

	2005/06	2005/06	2009/10	2009/10	2013/14	2013/14		Increase 2005/06 - 2009/10	Increase 2005/06 - 2009/10		Increase 2005/06 - 20013/14	Increase 2005/06 - 20013/14
USA Export Shipments	Million lbs	% of Total Shipments	Million lbs	% of Total Shipments	Million lbs	% of Total Shipments		Million lbs	%		Million lbs	%
China India Middle East/Africa Combined Total	17 40 43 99	2% 4% 5% 11%	133 84 137 354	9% 6% 9% 24%	145 102 178 425	7% 5% 9% 21%		116 44 94 255	696% 110% 219% 258%		128 62 135 326	768% 155% 314% 329%
TOTAL SHIPMENTS	914	100%	1,471		1,937			557	61%		1,023	112%

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Source: 2013 California Almond Acreage Report, CDFA. Almond Insights 2013/14, ABA.

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Difficult to substitute Supply –

Global Tree Nut Production 2006-2012

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1,200,000
Almond Share of Global Tree Nut Production
2006 2012 Increase
1,000,000 Volume - Tree Nuts 2.77MT 3.41MT 0.64MT
Volume - Almonds 0.67MT 1.06MT 0.39MT
% of Global Tree Nut Production - Almonds 24% 31%
800,000
600,000
400,000
200,000
-
Almonds Cashews Pistachios (In Walnuts Hazelnuts Pecans Pine Nuts Macadamias Brazil Nuts
Shell)
2006 2007 2008 2009 2010 2011 2012
Tonnes
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Source: Global Statistical Review 2007-2012, International Nut & Dried Fruit Council Foundation (INC), 2013

Almonds are the most versatile and highest volume nut, substitution is difficult

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Supply Future

Annual Almond Planting (USA & Australia) - acres

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80,000
70,000
60,000
55,712
50,000
38,300
40,000
30,000
20,887
20,000
10,000
0
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Annual Planting Area (acres)
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55,712 38,300

20,887

US Australia 5 Year Average (2004-08) 10 Year Average (2004-13) 5 Year Average (2009-13)

Source: 2013 California Almond Acreage Report, CDFA. Almond Insights 2013/14, ABA.

California .

• Nearly half of California’s almond orchard is 15 years old or older – (45.2% - 24.5% are 15-19 years old, 20.7% are 20 years or older)

• “In spite of ongoing water concerns and high land costs, Rabobank expects California almond growers will continue to increase –

• plantings and total production leading to a rise of about 2% and 3.5% per annum, respectively, over the next decade” Rabobank April 2015.

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Price – Affordability - 2015

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Source: Protein Data - Australian Institute of Sport (AIS) . Pricing based on company survey (on-line Australian retail pricing, April 2015).

Almonds are one of the most affordable protein sources across all food types

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Global Supply - US Almond Production & Drought

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14% - North Counties % of US Almond Prod’n
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86% 86%
Orange States = Severe Drought
South Counties South Counties
Red States = Extreme Drought
% of US % of US
Almond Prod’n Dark Brown States – Exceptional Drought Almond Prod’n
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Too early to understand long term impact

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US Update

• Californian Almond Board – March 2015 Position Report

• http://www.almonds.com/sites/default/files/content/newsletters/attachments/2015.03posrptmarch.pdf

• US Shipments

  • March US shipments - 190 million lbs - a record and 26% higher than March 2014

    • US Export shipments - 133 million lbs - 42% higher than March 2014

    • US Domestic shipments - 56 million lbs - 1% lower than March 2014

• Inventory Impact

  • Carry-in 1 Aug 2014 - 351 million lbs

  • Carry-out est. 30 July 2015 - 350-400 million lbs (Ref: Hilltop Ranch Newsletter, 10 April 2015)

    • Based on shipping 3yr monthly averages (or current YTD crop adjusted shipments (-8%) for next 4 months)

• 2015 US Crop Forecasts

• This crop will be affected by drought

  • NASS Subjective Forecast - 6 May 2015

  • NASS Objective Forecast - 1 July 2015

Early indicators are next year will be similar to last year at best, new plantings impact unknown

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SHV- Business Focus

1. Acquire mature cash generating almond orchards

2. Develop green field almond orchards

3. Invest in orchard productivity

4. Invest in energy savings and sustainability: Cogen

5. Invest in new products (Food business)

6. Invest in manufacturing and supply chain footprint

7. Invest in business systems : One Select program

Business has a solid base and several controllable productivity opportunities

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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

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SHV - Almond Division - Risk Mitigation

	Area	Action
	Farming Practices	• Empowered farm management • Introduced Harvest guidelines to reduce weather exposure
	Management Tools	• Great on-farm KPI’s & reporting • Introduction of Leaf Bomb Pressure Test technology
	Processing Standards	• Re-introduction of LEAN manufacturing processes • Higher quality standards & testing across the business • Pasteuriser commissioned and operational
	Labour Skill & Management	• Improved training of harvest contractors • Quality & productivity based remuneration for labour
	Capex	• Investment in pasteuriser & freefall metal detectors • Investment in frost mitigation technology
	Orchard Development	• Total review of existing orchard potential • Long term development plan inc. plant density & variety
	Water	• Water purchase for NSW orchards • New water policy - exposure over 3 years (1/3 long term lease, 1/3 annual, 1/3 spot)
	Frost mitigation	• Installed frost fans on more highly exposed orchards in NSW and VIC
	Bees	• Long term Bee Supply Agreement - 3 years (Victorian orchards)
	Maximise: Yield, Price and Quality

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Select Harvests - Financial History

SHV Historical Summary Units 2006 2007 2008 2009 2010 2011 2012 2013 2014	SHV Historical Summary Units 2006 2007 2008 2009 2010 2011 2012 2013 2014
Total Sales (A$M) 217.9 229.5 224.7 248.6 238.4 248.3 251.3 191.1 EBIT (A$M) 38.4 40.5 27.1 26.8 26.0 22.6 19.6 37.7 EBIT Margin (EBIT/Sales - %) (%) 17.6% 17.6% 12.1% 10.8% 10.9% 9.1% 7.8% 19.7% PBT (A$M) 37.9 40.0 25.4 23.0 23.6 18.5 13.4 32.7 Underlying NPAT (A$M) 26.5 28.1 18.1 16.7 17.3 17.7 9.5 22.9 Issued Shares No. of Shares 39.7 38.7 39.0 39.5 39.8 56.2 56.8 57.5 Earnings Per Share (AUD Cents per Share) 67.1 71.0 46.7 42.6 43.3 33.7 16.8 40.1 Dividend per Share (AUD Cents per Share) 53.0 57.0 45.0 12.0 21.0 13.0 8.0 12.0 Payout Ratio (%) 80.0% 80.0% 96.7% 28.2% 48.5% 38.6% 47.6% 29.9% Net Tangible Assets per Share (A$/Share) 1.83 1.57 1.41 1.56 1.87 2.17 2.19 2.14 Net Interest Cover (times) 82.3 75.8 15.6 7.1 10.7 6.7 3.2 7.5 Net Debt (A$M) 1.3 1.6 46.8 52.4 45.0 73.1 66.8 79.3 Shareholder Equity (A$M) 101.5 95.5 94.1 100.9 113.6 168.8 160.3 159.5 Net Debt to Equity Ratio (%) 1.3% 1.7% 49.7% 51.9% 39.6% 43.3% 41.7% 49.7% Share Price (A$/Share) 13.02 11.60 6.00 2.16 3.46 1.84 2.40 3.9 Market Capitalisation (A$M) 517.0 449.4 234.1 85.4 137.6 103.5 120.0 224.3 P/E Ratio 19.5 16.0 12.9 5.1 8.0 5.8 12.6 9.8	188.3
	41.8
	22.2%
	37.4
	29.0
	58.0
	50.2
	20.0
	39.8%
	2.47
	9.3
	94.8
	182.8
	51.9%
	5.14
	298.12
	10.2

Source: Company Data

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