All right. Well, morning, ladies and gentlemen. Sincere thanks for joining us today. Welcome to all of you, and I hope you enjoy our half year results presentation. I'm Rob McGavin, the current chairman of your company, and I'm joined today by co-CEOs Leandro Ravetti and Sam Beaton, who you'll hear from soon. Also online is CFO and Company Secretary Russell Dmytrenko. Before you hear from Sam first, I want to highlight one key point that is pretty important to, I suppose, understand, or I'd like to just explain why our half year results is often a loss. I get asked this a lot, the answer is pretty simple. Under accounting standards, there's two ways. We've got two choices on how we value the crop that's hanging on the trees.
Bearing in mind we're halfway through the season now, so the fruit's on the trees, and we can either value it at cost or we can value it at market value. The choice, if we decide to value at market value, we deliver a very material half year profit, but we choose to value the fruit at cost. We do this to be conservative and because the crop's actually not completely known, it's still hanging in the groves. The oil accumulation in that fruit is unknown, and it's not so secure either. Because our production year and our financial year line up perfectly, we finish harvest around the end of June. All of our costs and all of our, I suppose, production line up perfectly for the financial year, we value the fruit at end of year.
This means that the I suppose the profitability driver or the main profitability driver of our business comes to fruition at 30 June when that crop's valued. It also means that this approach results in our half year profit being largely irrelevant to or unrelated to the full year result. I'll hand over now to Sam, and he'll speak for a little while, the other co-CEO, Leandro Ravetti, will talk. I'll say a couple more things, and then we'll get into our Q&A session. Over to you, Sam.
Thank you very much, Rob, and thanks everyone for joining us. I'm gonna take you through the financial overview. I'll also give you a commercial update, and then I'll hand to my co-CEO, Leandro, who'll take you through an operational update. I think that point Rob made is really critical before I go through the financial results. Just to reemphasize, none of the profit relating to our 2023 crop is recorded at this, in this half. In addition to that, the oil that we've been selling over the last six months, the profit relating to that was recorded in prior periods. In terms of the highlights of our results, our EBITDA for the six months was recorded at AUD 700,000 profit, which was down from AUD 4.8 million in the corresponding period.
Our NPAT loss was AUD 9.9 million from an AUD 5.2 million loss in the corresponding period. In the next slide, I'll talk you through the drivers of this profitability change. Pleasingly, our operating cash flow was positive for the six months of AUD 10.8 million before interest and tax, down from AUD 18.2 million prior period. Our revenue and other income actually rose from AUD 71.6 million up to AUD 75.9 million. Across the group, both in Australia and the USA, our packaged goods sales increased. In Australia, we increased packaged goods sales by 6.3% and 6.2% in the USA. In terms of our debt, our debt increased from AUD 135 million - AUD 170 million.
The reason behind this, in December 2021, we raised equity to fund growth CapEx projects. We initially applied that against debt, with the plan of redrawing on that debt as we fund our CapEx program. This increase in debt is certainly known and was planned. Our gearing is still only at 30% at 31 December, and of course that increased from 30 June with the increased debt levels. In terms of our profitability by segment, we report our results in three segments, the Australian olive oil segment, the USA olive oil segment, and our innovation and value add. Our Australian EBITDA dropped from AUD 5.8 million down to AUD 2.5 million. A couple of reasons for that. The first being we've returned to normal marketing activities following the COVID period.
Secondly, we're seeing a change in product mix towards Red Island. Red Island actually grew 25% during the period. Of course that, because of the price point, that's meant a slightly lower margin across our product mix. In terms of what we've done about that, we've actually implemented a price rise across our whole Red Island range and a AUD 0.10 Price rise on our Cobram Estate 3 L tins. That price rise is effective on the 1st of February 2023. For the last five months of the financial year, certainly that will restore our margin.
In terms of the U.S. operations, our loss of AUD 200,000 EBITDA increased to AUD 400,000 EBITDA. We did see, as we flagged in our previous presentations, we saw margin pressure in the USA in the first part of last calendar year. We implemented around a 20% price rise across all our packaged goods range. But because of the lag into the supermarkets and retailers, this wasn't effective until mid-October. In November and December 2022, we certainly saw an increase or restoring of our gross profit margins, and we expect that to continue into the next six months. Innovation and value add, loss of AUD 800,000 EBITDA, that increased to AUD 1.4 million EBITDA.
The big driver of that was an AUD 1.5 million provision against slow m-moving Wellgrove stock. As the company continues to transition that division into biomass and ingredient products. Moving on to our cash flow. As I said on previous slides, we reported a positive operating cash flow from operations of AUD 10.8 million. It was actually down on the period. There's two reasons for that. One, the cash impact of the profit variation and also around AUD 3.4 million of increased working capital compared to the prior period. On operating cash flow, we're expecting a material increase in operating cash flow in the second six months of the full financial year.
In terms of investing, we invested just over AUD 26 million in permanently growth CapEx projects, which is up from AUD 18.5 million. Growth projects around growth developments in both Australia and in the USA, and an expansion of our processing plant at Boort. Leandro will cover off more around the details of those projects. During the period, we paid AUD 11.7 million dividend, which is net of our dividend reinvestment. Moving on to our balance sheet. The company's got a very strong balance sheet. Our assets increased by AUD 17.9 million, up to AUD 568 million.
We'll remind everyone that we record our trees and irrigation infrastructure at cost, and there's a bit over AUD 120 million in value that sits outside our balance sheet when you compare our book value to our sworn valuations we had done at 30 June 2022. In terms of our brands, our brands sit on our balance sheet at cost, Cobram Estate and Red Island. We purchased them for just over, around AUD 6.7 million. Under accounting standards, you can't revalue brands. In terms of liabilities, just quickly to point out, there's a AUD 70.8 million non-current tax liability. Of that, just under AUD 65 million relates to an historical asset write up.
It's a deferred tax liability, and would only ever be payable if we sell the assets outside of our group. Our total equity dropped by just under AUD 20 million, which was a result of course, our reported loss and the dividend we paid out. I've touched on borrowings, where we saw gearing ratio sitting at 30%. Moving on to sales, this slide just shows the product mix between packaged goods and bulk, and split by country. Around 89% of our total sales goes into packaged goods. As you can see here, the majority is sold in Australia and the growing piece in the USA.
Just around 11% of our total sales are bulk, which is split by low value olive oil and also some high value bulk that we sell to important recurring customers. In terms of looking at packaged goods, packaged goods in Australia, we saw growth of 6.3% sales in packaged goods compared to the comparative period, which is a pleasing result. The growth here was driven by Red Island, where we saw Red Island up by 25.1%. Cobram sales were down slightly. We did deliberately promote less during the period, so our return per liter was higher.
Certainly, the results really shown the benefit of having a multi-brand strategy and being able to capture customers at all different price points. In terms of the USA, again, similar growth in the USA for total packaged goods, up by 6.2%. I think the most pleasing result here was that our Cobram sales have grown significantly and up 70.8% compared to the comparative period. The drivers of this growth really threefold. Increased distribution points, we saw increased turn rates and also the start of the impact of the price rise which came through in the last two months of this six-month period. In terms of where we sit in the USA, we're now the number nine olive oil brand if you exclude private label.
So really, really pleasing growth from the USA division. Moving on to costs. Input costs on our grove are a big portion of our costs, where pleasingly we've seen costs stabilize, if not lower than planned and budget. Certainly costs, you know, including fertilizer, fuel, electricity and freight are less than expected. We've seen a significant decrease in our water cost, which is sitting at 10-year lows, obviously because of the rainfall events over the last 12 months. The storage levels are sitting at record high levels for this time of the year. We believe that the soft water prices will continue beyond this period. The full cost impact will not be recognized until the crop's made at 30 June.
As we said at the start, there's absolutely no profit in this six months recognized in relation to the 2023 crop. In terms of financial outlook, we're still seeing very strong demand for high-quality extra virgin olive oil, both in Australia and in the USA. The Australian crop is gonna be significantly higher than FY 2022, and this will drive a materially higher EBITDA for the full year. As I touched on before, we've had a pleasing operating cash flow for the first six months, but the second six months we're forecasting to be materially higher.
Again, We're pleased with where costs are at, particularly compared to where we were expecting them to go, and they seem to have settled down, and we've had some big wins on one of our major input costs being water. Leandro will touch on our capital projects, but we continue to invest very heavily in our capital projects around increasing supply, both in Australia and in the USA, and of course, processing capacity, which we believe will continue to drive future growth. I'm going to now hand over to Leandro. Leandro will take you through an operational update, and of course, we'll have time for questions at the end. Thank you.
Thank you, Sam. Thank you all for joining us today for this update. You know, fortunately, Sam has already explained all our sales, and I don't need to report on any of the other accounting technicalities. I'm just going, because of that, be able to just answer a few simple questions that I'm sure you probably all have regarding our operations in Australia and California. Considering that supply has been largely constraining our sales in the past, I'll cover how production for 2023 is looking. I'll also summarize the key investments that we're doing right now that will support future growth. I'll tell you how we are performing relative to our obligations to society. Can we go to the next slide? The crop expectations that we adopt, and probably there's a bit of explanation here.
The crop expectations that we adopt in the annual budget, defined back at the beginning of each financial year, are largely based, of course, on the tree conditions at the end of harvest, end of June, and our long-term average yields. During the growing cycle that starts in September, there are three critical times when we conduct a number of measurements to potentially adjust those internal crop estimates. The first one is at full bloom in early November when the white flowers offer a very good visual contrast, as you can see on the top left photo, and consequently is a great opportunity to determine crop potential and any possible impact of negative events that would have occurred during winter, like frost, for example.
The second one is after pit hardening in January, when we can evaluate and estimate the approximate number of fruit actually hanging from the trees. At that stage, or this stage, the fruit looks pretty much like the photo that you have on the bottom left-hand corner of the presentation, and they're approximately around half of their final weight at harvest time. Obviously, ultimately, we can see at harvest time once the oil accumulation period is completed. As we have said, a few times before, flowering levels in November were pleasingly in line with the company's early expectations. We had a cooler and wetter spring than normal in Victoria that determined that the full bloom period took place about 10 days later than historical averages.
Fortunately, we didn't experience any material damage on any of our growers following that uncharacteristic rainfall events and subsequent floodings in different areas of Victoria. The January assessment that we just finished a few weeks ago confirmed that fruit numbers were also pleasingly in line with expectation. However, they were actually slightly smaller than normal in terms of fruit size, and that was observed as a consequence of the delay in the fruit development because of that cooler spring period that we mentioned before. As per our usual practice, you know, over the coming couple of months, we will conduct oil accumulation measurements on a weekly basis, and that will let us better evaluate the potential impact that the initial delay will have on the expected harvest time and also final oil yields.
In any case, it's always important to highlight that all our forecasts, including the oil yields, are based on long-term averages, and the final oil yield content in the fruit can show natural variations of up to ±1 5% from those historical average values, mainly linked to weather conditions during late summer and autumn, which are obviously quite outside our control. One more on this. Due to the biennial nature of olive production, FY 23 will definitely deliver a significantly higher yielding olive crop when compared with financial year 2022. As Sam said, and we previously reported in the AGM in 2022, we are expecting an EBITDA to increase materially in 2023. I think it's also important to remind you of the expected organic growth in our supply over the coming years.
Based on current and future new plantings of some around 650 hectares that we'll be planting at Boort and Wemen. Sorry, Rob, would you mind muting yourself? It's just echoing a little bit. The mature groves in Australia will increase from about 4,000 hectares that we have now to 7,000 hectares over the next nine years, including the new plantings at Boort that I'm going to refer to in the next slide. Less than 60% of our Australian groves are at full production. Just under 30% are productive but still immature, and 13% yet to be harvested. Another aspect related to supply that is sometimes lost in the scale of our production is the new third-party groves coming into production.
Contracted supply from third party groves in Australia will increase materially in the financial year 2023, with more than 6,000 tons of olives expected from those orchards. You know, Cobram Estate Olives will receive total million revenue at market rates from crushing the olives, and we'll receive also a margin on marketing the approximately 1 million L of olive oil produced from that fruit. all this organic growth of fruit supply and oil supply may raise the question regarding the future marketing opportunities for that oil. On this point, I think it's important to remember a few key stats: that the Australian grown extra virgin olive oil currently accounts for less than 50% of the Australian domestic consumption of olive oil, and that less than 5% of the total fats and oils consumed in Australia are actually linked to olive oil.
This is when we consider all retail sales, food service, and food manufacturing sectors. On top of that, the relatively flat levels of olive oil production at global level over the past 10 years would enable us not only to drive further market share growth in the Australian market but also to target key export markets. Move to the next slide. In terms of our growth in California, as Rob's, you know, you know, probably would indicate that we just came back from the U.S. on Tuesday, and it was very pleasing to see our groves over there in very, very good condition. Winter heavy rainfalls provided a welcome relief for water users across the state. Early indications suggest a material water allocation in our district for the year ahead.
Now, this allocation, combined with our underground supply of water, will guarantee full irrigation to all our groves for this coming season. Sorry, will you just go back to the previous slide? Although several areas of California suffered floods from the rainfall that I mentioned before, we didn't experience any material damage. As previously announced in the company 2022, California harvest that we completed in late November, yielded around 1.7 million L of oil, which is a very strong 59% improvement on the previous lower yielding crop year in 2020.
The 2023 California harvest, it is expected to yield a record crop, and that is linked to the increase in age of our own groves, with many hectares coming into production for the first time, additional third-party contracted groves, and the maturing of these groves, which are largely also going to experience an on or high yielding year this season. Looking now at our capital projects, in the next slide, to support our future growth, we can mention that the preparation is well underway for a greenfield 415 hectare olive planting at our Boort Grove in Victoria, and that will be increasing our total olive plantings in this farm from 3,100 hectares to over 3,500 hectares.
The planting will begin in March, so it's quite imminent, and it will take approximately three weeks to complete. I think it sometimes is easy to lose perspective of the scale of these new plantings. I think it's worth highlighting, particularly for our long-term shareholders, that this new grove at Boort is an area larger than the two first joint ventures at Boundary Bend and Cobram Estate combined that started our journey back in 1999 and 2000. Quite a significant planting. The next slide, well, another large and very impressive capital project is our Boort Olive Mill upgrade. As you can see from the photos in this slide, the external building is nearly complete, and the internal installation is also well in progress.
Everything is tracking so that the new mill will be operational in late April for the beginning of our 2023 harvest. You know, this mill upgrade will deliver a crushing capacity growth from 30 tons - 80 tons of olives per hour, matching our future needs. Hopefully this will help to put things into perspective and provide some context to the size of the operation. This mill, when operating at its full capacity, could process the entire current annual olive production of countries like Croatia or Albania or Libya or Israel and even from France or the United States. We're talking about a huge amount of milling capacity there. The next slide.
Well, in terms of the capital projects in California, the first stage of the Dunnigan Hills Ranch development that you can see in the photo on the top left, will commence with planting of 194 hectares this coming April. Also, you know, as a result of this development, our planting area in California will grow by more than 50%. The second stage of this growth is likely to be completed in April next year. At the same time, we're also commencing the expansion of our mill in Woodland, doubling its capacity from 450 tons per day - 900 tons per day to accommodate the sharp growth in fruit supply that will happen in this coming season. The mill will be operational for the beginning of the next harvest in October this year.
Finally, on my last slide, we have had a very busy six-month period on the environmental and social responsibility matters. Key highlights that we have achieved the net zero plus carbon certification for our growing and processing operations. We have completed phase I of our reforestation project with over 160 hectares of Mallee seeding going on at Boundary Bend. We have commenced a partnership with the Victorian Malleefowl Recovery Group to support the protection of this bird. We also have signed the United Nations Global Compact, and now a business member of the network, you know, amongst other initiatives.
Quite recently, the work that we have done in this area has been independently recognized by the Australian Financial Review and the Boston Consulting Group, naming us sustainability leaders in agriculture and environment in 2022, and by Woolworths, you know, making us the winner of the 2022 Woolworths Better Tomorrow Award, as the Sustainability Supplier of the Year. As always, I'd also like to sincerely thank all our staff for their hard work and dedication. That's all for me today. I'm handing back to our chair for some final remarks and questions.
Thanks very much, Leandro. As Leandro said, the board has. You can get your questions ready, because if you click on the hand, which is a symbol in the, probably, I think it should be the bottom of your screen, I'll see your hand. I'll ask you to ask your question individually by name, and your mic will become live, so you can do so. Just while you're getting your questions ready, a couple of comments. One is that, as Leandro said, the whole board went to California for a five-day visit to our... We are really pleased with the progress of the business and more excited than ever about the immense opportunity there in that market as we move towards doubling our supply at the next harvest, which is in October.
This is coming from our own growers maturing and, you know, combined with increasing third-party fruit supply from growers. We're also really impressed with the team that Sam and Leandro have sort of continued to build in the U.S. and what they've achieved. The other point I'd like to reiterate is that I've often asked, "Why don't we sell everything through Cobram?" It's a great question because it's high margin, very recognized brand. The answer is pretty simple, and that is because over history, every retail brand, almost bar none, have ripped off their customers and slowly died and been replaced with something else. Cobram has prides itself on being the best quality in the market and being consistently so and doing anything to ensure we protect the value proposition that's in our olive oil.
We have a, I suppose, an unwritten rule, but it's that our average production, half of our average production, no more than half our production can go into Cobram Estate. That's because the fruit we're producing or the oil we're producing from the fruit is a natural product. It's of all different qualities. You know, we crush every olive within four hours, and the olive oil is the juice of the olive, and how the condition of the olive is, the variety, the patch, and the temperature when you pick it, and all these things make an impact. If we can put the best half of oil into Cobram Estate, it will be absolutely brilliant of what we produce. We just can't keep growing that brand without growing our supply.
In fact, there's an argument to think that, you know, we should make that 30% or 40%. Even if we're charging more, we'd still be giving more value to the consumer because all of those health benefits and consumer value proposition come from the antioxidants and freshness and quality of the extra virgin olive oil. Red Island plays a really important part in that, and we advertise that it's not as high quality as Cobram. It's slightly cheaper because it's not as high quality. And we need all of those to ensure we don't disappoint customers and ever risk milking our brand. The retail sales I would like to comment on for the last period to 31st December, obviously this year, were really, really pleasing.
We sell over 90% of our volume in retail, we don't have, effectively don't have a food service offering of any scale. We were shut down through COVID, and most restaurants were closed or, you know, very limited food service through that comparable period to the 31st December 2021. We were getting a reasonable sugar hit, I would say, or very strong sales in branded because everyone was going to the supermarket to buy. They weren't eating out. To think that we're able to beat branded sales in this period when retail is fully open, is something that I'm, you know, really, really pleased with, and it just goes to show the strength of the brand and consumers understanding that high-quality olive oil is a really important part of the diet.
I suppose the whole market growing or people buying extra virgin and not as much other products. also, you know, I hesitate to say this, but just don't underestimate the inbuilt growth in both Australia and the USA businesses. we've spent hundreds of millions of dollars in investment over the last five years, particularly in groves, and many of them are fully to bear fruit, mind the pun. sincere thanks to Leandro and Sam, who are doing a wonderful job, and their team underneath them. You know, it's never about the business, it's about the people. That's what these two guys are very compassionate and very honest and very modest and likable. Thanks, guys. I would now turn to questions.
I've had a couple of brokers ask why my head is so shiny. I'm going to say it's the olive oil. It makes your skin look really good, but it doesn't make your hair grow by the looks of things. Righto. Questions? I can't see any at the moment. Just click on that hand and it'll come up.
Rob, the first one up is Ian Munro. I can see the hands that are up.
Yep.
You just need to unmute yourself, Ian, and fire away.
Yes. Yep. Good morning, guys. Thanks for taking my questions. Just the first one's just on that first half sales result. Can you give us a sense of whether there's any discounting that is subtracted from that first half revenue and how to think about that heading into the second half? Thank you.
Yeah, certainly. If I talk, sort of both countries, certainly in the USA, no. Of course, I spoke about the margin pressure in the first three months or first four months of the half, which will be rectified, or we're starting to see better margins in the last two months, and we'll continue on next year. In terms of the Australian operations, in terms of discounting, we have a promotional plan with the retailers around discounting program for both Cobram Estate and Red Island. We saw really strong demand for Red Island during the period. As I touched on before, we've actually implemented a price rise on Red Island, and across the whole product range has gone up 10%.
That wasn't effective till the 1st of February, 2023.
Thanks. I guess just looking at the pricing strategy on Cobram at the moment, we've seen many of the peers put their prices up. We've also seen international pricing benchmarks, you know, super strong in the last six months. Is there any reason that you're holding that back? How do we sort of think about that on-shelf price relative to the wholesale price? Thank you.
Yeah, I think. Well, there's a couple of things. We actually have increased the price of our 3 L tins, so that went up at the same time as Red Island. We, you know, we make a really good return for, on Cobram Estate. Our, our net price, so net of discounting, is still significantly higher than our peers. Of course, our imported competitors, as you've seen, have all put up prices, multiple times over the last 12 months -18 months. You know, we think and we hope we can benefit from that comparative position.
It might be also worth adding in that our competitors, although the price might look higher on shelf, which it is, you know, well over 90% of sales are usually on discount, whereas Cobram's way, way lower than that. The average the consumer pays, if you look at each scan and each price the consumer pays when you're taking into account discounts, Cobram's still at a massive premium. We just felt that, you know, we didn't need to.
And, um.
Just.
Yeah.
Sorry.
Sorry. Just one final one. I appreciate your answers. Just on the U.S., you know, harvest completion later this calendar year. How are we thinking about just your comments around volume growth into that channel? I mean, how are we thinking about sort of, you know, breaking through into profitability in that year? Yeah, any comments around that would be welcome. Thank you.
Sam.
In terms of profitability, the harvest volume in this year will be significantly higher than last year in the USA and, you know, more than double. In terms of profitability, you know, as we continue to increase sales and volume, it will have an impact, a positive impact on profitability. You know, we'd expect next full financial year, so FY 2024, to report a positive EBITDA.
Thanks, guys.
Jonathan Snape, can you ask your question, please?
Can you hear me okay?
Yep.
Perfect.
Great. Look, can I just ask around the crop, and thanks for your comments before around the process. If I look at some of your suppliers, I think they're talking yield deviations of anywhere from 6%-13% relative to what they were expecting, say, back in October because of that smaller size fruit. Same issue I think that you're talking about, although they're a bit further south. Is that a reasonable assumption? Say, we had a view back in October that it could be anywhere from that 6%-13% on the southern acreage, and then I don't know how material it was up in the more northern aspects. Is there any reason to think that's not an unreasonable guide at the moment?
I think I touched on this before. I mean, first of all, I just would like to provide a bit of context. Even, even if, even if I could count every single olive in the two groves, three groves that we have, so we're talking about billions of olives. Even if I got that number absolutely right, from now until the end of harvest.
Mm-hmm.
The level of oil accumulation in the fruit could be going up or down 15%, that's based on the historical records over the past 20 years. That is largely based on the temperature conditions and the general weather conditions, fundamentally temperature for the coming, you know, two to three months. Of course, assuming good management and everything else. That variation, obviously we're talking about several million liters of oil up or down, that could happen. That is very difficult to predict, almost impossible, because obviously I don't exactly know what the weather is gonna be like. What we have done is to date, really trying to estimate that number of fruit that is hanging there. That number is very much in line with our previous expectations. You know, however, definitely everything occurred with 10 days delay.
That is something that we're gonna keep an eye on to, you know, see how it evolves over the time, because it could have an impact, but it's hard to know. Other years we had a delayed flowering, perhaps not to this degree and without having an impact on the oil user. Again, it's gonna be strongly influenced by the weather conditions over the next few months.
Okay. Is it like you're waiting in case the harvest, you push it back, say 10 or 14 days, maybe you catch up the growth that you kinda lost?
Yes. We're actually closely looking at the oil accumulation and how it goes. We use a number of points in the curve to define the starting of harvest. It's just essentially because we estimate roughly when the oil accumulation will finish or peak. That allow us to get going. It could definitely be pushed, you know, about a week or 10 days, you know, rather than normal as well.
Okay. Can I ask around the marketing expenditure, obviously it was up in the first half, and I think traditionally it's always been biased to that first half. Is this kind of a new level, we should be thinking going forward, you know, taking into account the normal splits we'd expect?
Yeah, look, I think, depending on the program where our focus lies, but typically it's not skewed to any one half, and it may have been in the past, but yeah, this level of marketing would be similar to what, you know, we're gonna push going forward. As you know, Jono, during that COVID period, we had such strong demand for our product that we really couldn't afford to market at all because we just didn't have the oil, so we actually had to ration oil in the end. Which is why we're returning to marketing the brand.
Okay. All right. Just on selling price, I mean, given the Red Island numbers, in terms of what you've pushed through that 10%, I think you said on the bulk, you're up 10 in Cobram Estate. How are you doing some of that private label packaged product going at the moment? I think as someone alluded to earlier, the inflation that would be coming in from import parity would be pretty material. Do you have any flex on that, you know, that private label type packaged product you do?
We do private label with the main retailers and like any private label, usually comes up for tender from time to time. We put in a price that works for us. We're happy with the price points. We have seen growth in private label as well, but it's a relatively small part of our business in Australia. In the USA it's a much bigger part of our business.
Sam, it's fair to say that we have seen, and it could be just the economic times, we have seen pretty strong growth in Australian private label, stronger than I can remember, even though it's still pretty small. That could be coming from people who are moving from... They used to have imported oil, it's a lot higher. They're buying Australian, which is a great thing long term. I think that'll be a fair comment.
Yeah.
Okay. Look, just one last one from me. Just on the asset values, I know you did the valuations in the independent valuations in the full year, not in the half. If I'm looking at it right, the value per hectare of your U.S. orchards on those independent valuations is higher than the Australian orchards, which intuitively, if you know 60% of them are mature here and single-digit percent over there, doesn't kind of make a great deal of sense. Why is there such a difference or why is there a difference between having an immature orchard in the U.S. worth more than a mature orchard in Australia? I'm just trying to get my head around why that difference exists.
Yeah. Look, the main difference is that, as you know, our Australian assets, we buy water on the temporary market, we don't own the permanent water rights. In the USA, all of our groves either have underground water and channel surface water or both in the case of most of them. You effectively getting... We've got the groves and the access to water in the USA. In Australia it's the groves and we have access to water, but we buy it on the temporary market.
Okay.
That's to be honest, that's the main difference.
Yeah.
When you add.
Right. Yeah.
Sorry, I was just gonna say, when you add the two together, they're very similar, in both countries.
Yeah. The rights come with the land, Jonna. It's like, ye ah, you know.
You know, 2 ft., 2 acre ft or 3 acre ft or whatever it is. It's not like you can't trade it and sell it off. It's not worth anything because it's not tradable at the moment. It's just worth it, that you can use it along with bore. The side i s very different. You're getting two in one when you buy, whereas here you're not.
Yep
As they mature, the value should go up, right?
Yes.
You would get that assessed every two years.
We've typically done it every three years.
Okay. All right. Great. Thank you.
Thank you. Thanks very much, Johnno. Peter Parker, the administrator. I'll just make your mic live, and you should be able to fire away.
Good morning, gentlemen. How are you all?
Good, thanks.
Okay. You want the easy or the hard questions first?
Let's go the hard.
Okay. We saw an actual record low this morning, I think, in the share price, AUD 1.30 or thereabout. I haven't looked since we hopped on this meeting. Does the market know something that I don't know or you don't know, or is it just totally wrong, you know?
That's a very good question. I wouldn't be the first chairman and major shareholder to say the market's wrong, but I'll just say that I personally think the market's wrong. Again, we haven't been listed very long. People, I don't think understand how dominant our position is in the market. They don't probably realize, you know, those key benefits around Oliv.iQ, just how much olive oil we produce of such high quality at such a cheap price, being the upper echelon globally for quality, the lower echelon globally for cost of production. Being able to scale that is a very, very unique sort of position. Again, it's a long-term deal. It's not a, you know, buy now, pay later, you know, finance tech stock sort of thing. It's, it's hard, tangible assets, hard yards.
It takes a while to come, but it's also very hard to lose, if that makes sense. You know, I often say that if we had sold the groves off and leased them, we'd probably still be trading at a similar price, even though we have, I don't know what it is, AUD 600 million worth of tangible assets on our balance sheet. Yeah, I think, you know, with the world moving towards, you know, a carbon neutral future or as close as possible, with us sinking 4 kls of carbon for each liter of olive oil produced, it's again, really unique.
Yeah, I think that just as our yields come through here, as the market's used to our business, and as the USA business continues to grow strongly, I think that there'll be a re-rating. Again, the market's the market and who are we to argue?
Bit of an easier one. Dams. Like, water is your main cost. Over this big rain event you had in Victoria, have you been able to make more dams or increase your actual storage capacity?
No, we haven't. It's not sort of as easy as it sounds, you know, around just the volume of water you need, the evaporation rates, methodologies to reduce evaporation. There's something like a meter of evaporation in northern Victoria, you know, huge capital spend and there's probably. I won't say there's nothing we can do, but, you know, we've been putting quite a lot of work into groundwater and desalination, you know, for. Again, we're getting very close to having an allocation there that we'll be able to announce. At the moment, we haven't got that in writing. One eye on that the whole time, but there's not really an easy fix.
We just know that our business is you know, more revenue per hectare than all the other mainstream crops per megaliter of water used, which puts us in a very good position, you know, to be able to compete. It's always going to be a cost that's reasonably volatile.
Yeah. Fair enough. Now, you did the big MasterChef advertisement last year. Was that successful? Is it something you would repeat again?
Sam?
It was part of our marketing program. It was certainly successful in getting brand awareness. Again, it's really difficult to compare to the prior year because the prior year we were in COVID lockdowns and olive oil was flying off the shelf. It's difficult to know that if you didn't do that program, what sales would have done. Overall, we continue to assess the marketing programs that work, and we'll continue to invest in the right media assets.
The final one from me, the Wellgrove and all that's probably been disappointing. Is it, you know, what's the outlook there and is it just gonna be a assimilated into another division or something, is it?
Leandro?
Oh, I didn't quite get the question. It was about Wellgrove? The one around well division?
It's around the wellness division. Look, Peter just asked if we are going to fold it up or what's the outlook look like, and maybe you can comment on that, but I'm not as pessimistic as Peter. Again.
Sorry. Certainly the prospects are still very, very interesting and the fundamentals. You know, what we have done over the course of the past five or six years was to invest quite heavily on exploring all the different opportunities that could come from that value add revenue stream, including, you know, the development of branded sales. Certainly that has not been a successful approach. That was part of the learning process and what, you know, some refer to about the impairment on some of that slow moving stock has to do with those branded sales. However, certain ingredients that we managed to develop on the biomass and renewable energy side, around the pit and the pomace, are doing extremely well.
We hope that as our production and volume continues to grow, we will see that flow in effect. A similar situation was with the recovery of the oil that was left on the pomace, which is also quite successful, you know, business area at the moment. Definitely has been some learnings and some good and bad things over the past four or five years. Overall, we are still very confident that we will manage to convert this, what used to be a cost center or still is a cost center for the company into a profit center over the coming few years.
Yeah. Thank you very much. Keep up the good work.
Thanks, Peter. David McKenzie.
You're on mute, David. Yep.
I should be unmuted now.
Yep.
Fine. Look, thanks for everyone for your work. I appreciate the longer term, as I guess you'd appreciate. My question was, Peter's partially asked, it was around the by-products business which as Leandro has clarified, has obviously been disappointing to date. What aspects of that if from a strategic point of view or, yeah, economic benefit from the by-products?
Leandro.
It is a very good question, and one that we keep analyzing, you know, all the time. Certainly in the current environment, renewable energies, and that's really something in the form of biomass fundamentally, either through cogeneration or pyrolysis, is offering, again, very good returns and opportunities. The recovery of the oil and some of the by-products directly linked with the oil left in the pomace, is also developing quite strongly. You know, certainly the international context have helped us to develop that area quite strongly. It was fundamentally the branded sales of some of those ingredients that has proven to be a lot more difficult than what we initially envisaged. You know, obviously, it was a very difficult environment.
You know, we have quickly identified that a few years back, and we are seeing sort of kind of like the end of that, period of investment, you know, in the development that we're sort of correcting towards the areas that have shown more profit and promise.
Okay, thank you. That's all for me.
Thank you, David. Michael Scully. Just on mute too, Michael.
Unmuted, yes?
Yep, got you now.
Thanks. Okay, I was curious, can you tell us something about the market share of... You've talked about it a lot. You mentioned that you're number nine in the US. What's the position in Australia?
The market share in Australia. Cobram Estate is the number one olive oil brand, and by a margin, and the number one extra virgin olive oil brand by a big margin. Red Island hovers between third and fourth, but it's the number two Australian extra virgin olive oil brand.
Okay, thank you for that. With the new planting that you're doing, I'm just curious, are they all the same trees or do you have a variety of trees and, are there any sort of risk aspects associated with the monoculture?
Um.
Don't know what olive trees get in terms of diseases and so forth, but I assume that some varieties are more disease resistant than others.
A very good point, Michael. Certainly, all the new plantings that we have been doing, particularly over the past six, seven years, and a bit more, and you can say seven, eight years, we've been consistently capitalizing on the learnings from the introduction of over 25 different varieties back in the late 1990s by Rob and Paul and in the early 2000s when I moved to Australia. Part of those learnings were just not only, you know, yields, you know, in terms of, you know, quantity of fruit, quantity of oil, but also the quality of the oil and the ability of the different varieties to tolerate the most common diseases in particular, you know, pests are a bit easier to manage, but there's certainly diseases.
All these new plantings have been reflecting a range of these, you can call them newer varieties or varieties that we know more of, to make sure that we got a good mix and that we are certainly spreading the horticultural risk from that point of view. Not only from locations, and that's why there's quite a bit of a balanced distribution between the northern grower at Boundary Bend and the southern grower at Boort. Also, of varieties. Within all those groves, not a single variety having more than 30% of our plantings.
Thanks. That's really interesting. You were talking about the size of the olives, I wondered if there was any correlation between the olive size and the oil content. Would larger olives have less oil content or the you were gonna say we have smaller ones this time around. Does that mean we expect lower or similar, or is there any relationship?
It's difficult to know, because part of the size of a fruit, especially in the early stage, is strongly related to the pit, and the pit has no oil content. It could be that the fruit end up developing a relatively small pit and still the fresh development is normal. Again, as I highlighted during the presentation, weather conditions and temperature plays a big role in terms of how easily the trees will accumulate oil, in the fruit will actually make photosynthesis and generate enough sugars to then, you know, produce oil, you know, during that period. That is what really end up determining the best yields.
You know, usually, we have seen it over the past 20 years, it is a bit of a random relationship between fruit size and oil content. Some years the fruit size was smaller on a back of a high oil, high production and still was an above average oil content year. It sometimes happened the opposite. You know, got a larger fruit on an off year, and the oil content was average or below average. So it is so weather-linked that that's why it's actually quite random.
Now, my final question is relating to dividends. In the old days, if you lost money, you couldn't pay a dividend. I know there's ways out of doing that, but what was the rationale of paying a dividend at this time when you're still, you know, losing money and you had to raise capital for these capital expenditures?
Well, of course, you might wanna comment after this, Rob McGavin, but certainly, Michael, in terms of our dividend, we assess the full year profitability and of course, over that two-year cycle, given the off and the on year. We reported a significant two-year EBITDA at June 30. We also assessed the operating cash flow in that and in our ability to pay. We're still investing a reasonable portion of our operating cash flow back into the business, into growth projects, paying a dividend as well.
Thanks. That's all from me.
Thanks very much, Michael. Looks like there's no more questions. Yeah. Thank you very, very much everyone for attending today and for your interest in Cobram. Thanks to Sam and Leandro and Russell for being online, and Sarah, who is running the administration side. Thanks, everyone. Cheers.
Thank you.