Welcome to the thirty-third annual general meeting of Ridley Corporation Limited. My name is Mick McMahon. I'm Chair of Ridley and of this meeting. I declare the meeting open and confirm we have a quorum. I'm delighted to be able to extend a warm welcome to our shareholders and to this virtual meeting, and thank you for joining us. Please note that this meeting is being recorded for the purposes of taking minutes. I'd like to take the opportunity to introduce your directors and company secretary. Managing Director, Quinton Hildebrand. Independent Directors, Patria Mann, Rob van Barneveld, David Lord and Rhys Jones, and Ejnar Knudsen. I also welcome our new company secretary, Kirsty Clarke, as well as Richard Betts, our CFO, and KPMG Partner, Chris Sargent, representing our external auditors. Julie Carey from KPMG is also here today.
Julie Carey will be taking over from Chris Sargent as the audit partner for Ridley following this meeting. This is in line with our practice that our audit partner within KPMG rotates at least every five years. There are no apologies for this meeting. The minutes of the last annual general meeting held on 23 November 2020 have been signed by me as Chair of that meeting. The Company Secretary has a copy of the minutes available for inspection by any member. Copies of the notice of meeting have been made available to all members, and the notice is available on the investor section of the company's website. Covering off on some procedural matters, we will begin the meeting with a short presentation and then go through the formal proceedings, which this year comprise seven resolutions, all of which will be decided by poll in accordance with the company's constitution.
The results of the poll will be released shortly after the meeting on the ASX and on the Ridley website. Voting on the resolutions is now open, and you can vote at any time until I declare the voting closed. You can also manage your vote at any time throughout the proceedings. Change your vote, sorry, at any time throughout the proceedings. I will give you a clear prompt later in the meeting to warn of the close in voting. To vote, click the voting icon in the navigation bar of your screen to display the resolutions. Once you click on this icon, the resolutions will appear on your screen, along with the for, against, and abstain voting options. Simply select one of these options to cast your vote. When voting is closed, your final voting selection will be recorded.
Please note that only shareholders, proxy holders or authorized shareholder representatives may vote. Any directed proxies given to you by a shareholder will automatically be cast as directed when the poll is closed. After introducing each item, I will take questions. I encourage you to submit questions as soon as possible. You may start submitting questions now by clicking the question icon. Please reference your question to the relevant item of business. We will endeavor to address your questions at the time of that item of business or as a general question following the formal proceedings. Questions submitted prior to the meeting will also be addressed and any similar questions summarized. If you have any difficulties voting or submitting questions, please refer to the user guide on the Lumi online meeting platform or within our notice of meeting.
If we do experience technical difficulties during the meeting, we will assess the next steps based on the nature of the problem. In the unlikely event of a complete failure of technology, our share registrar, Computershare, will contact shareholders via email, where an email address has been provided, to advise of a recess or adjournment, and we will also provide an update on the ASX. For the formalities of the meeting, each resolution and the valid proxy details in respect of that resolution will appear on the screen. As chairman, I intend to vote any proxies in my favor in support of all motions put, including any undirected proxies in relation to items two, five, and six, which relate to remuneration issues. I will now hand over to our managing director, Quinton Hildebrand, to provide a brief business update. Quinton.
Good morning, shareholders, and thank you for your attendance today. As the chair has indicated, I'll provide a brief summary on the business and trading update for the first half of FY 2022. The past two years will be remembered in history for the impacts of COVID. At Ridley, we count ourselves fortunate to operate in the food sector, which has generally enjoyed strong ongoing demand. Albeit I recognize that some of our individual customers have endured some significant challenges. I'm proud to say that the Ridley employees have responded well to the COVID challenges.
Establishing protective protocols at all sites, generally performing their tasks in a safe manner, proactively managing the supply chains to ensure the supply of raw materials, and delivering on expected levels of service for our customers. In demonstrating high levels of commitment, our employees have not only kept the wheels turning during COVID, but have pursued greater efficiency to deliver an ERP implementation and are successfully growing the business. The growth strategy put in place in February 2020 has a strong momentum in the business and has delivered an increase in the underlying EBITDA of 13% in financial year 2020, followed by a 16% in financial year 2021.
In the bulk stockfeeds reporting segment, where we are the largest feed miller in the country operating 13 feed mills, we have a competitive advantage in the scale of our operations, leverage in procurement, and a team of highly qualified nutritionists specialized in their respective species. Over the past two years, we've simplified our operations with the closure of three aged mills and the commissioning of the large new Wellsford feed mill, lowering our cost base and making us more competitive. In addition, we've split the bulk stock feeds business into geographic regions, whereby the regional general manager has autonomy to run the four or five feed mills and pursue new business. As we've won additional customers, the increased throughput has lowered our cost base and increased our returns, creating a momentum which is underpinning the growth of our stock feeds business.
Looking forward, we have a number of plans to debottleneck our existing mills, where a relatively small capital investment can unlock additional capacity to sustain our ongoing growth. In our other reporting segment, Packaged and Ingredients, we've also enjoyed a strong earnings growth at the consolidated level. However, there has been varying performance from the individual business units making up this segment. The main contributor to the segment's increase in performance year on year has been the rendering business unit, where the gains can be attributed equally to the ongoing yield improvements and product premiumization initiatives delivered by our operations and the higher market prices for rendered oils and meals driven by the global demand for renewable fuels.
Our branded packaged products business has also grown earnings, augmenting the traditional rural distribution channels with new product lines into the urban pet specialty chains and onto the pet category shelves in our major retail stores. This is an area which we are resourcing as we believe that we have growth potential in pet products on the back of our extrusion capability and integrated supply of raw materials from the rendering business unit. The supplements business has developed a more flexible operating model to adapt to the seasonal demand for blocks and lick products in Northern Australia. While sales are still dependent on pastoral conditions, the supplements business has made a positive contribution despite the good grazing available on farm. The aqua feed business unit has not performed to expectations as we compete in an oversupplied market. We took the opportunity to sell the Westbury facility in Tasmania.
With that transaction completed in August, we will book a profit on the sale at the coming half year. Having already expanded our Queensland extrusion facility, we've been able to consolidate all our aqua volumes into this single facility, providing a more competitive and lower-cost supply chain to service the aqua feed market. The development of our Novacq operation in Thailand has progressed over the last 12 months. The pond productivity yields have tripled, and we recently commissioned the new dewatering and drying plant. Having achieved commercial production in Thailand, we've taken the decision to close the Yamba pilot site before the end of the 2022 financial year. The Yamba lease was established five years ago to develop operational methods capable of commercial Novacq production from the original CSIRO laboratory scale technology, and this phase is now complete.
Novacq is now included in all our early life cycle diets and is being sold to all Ridley prawn customers in Australia. We're progressing the development of nursery diets for export to the international prawn customers. The strategy outlined in February 2020 has been successful in establishing a new operating model for the business, which is sustainably lifting earnings. Many of these initiatives are partway through execution, with the earnings benefits still in front of us. Along the way, we have taken the objective view in assessing the performance of all parts of the business. An outcome of this was the sale of the Westbury plant in Tasmania, which demonstrated that we're focused on delivering the best outcome for our shareholders.
With the balance sheet back in a strong position, in July, the board approved Project Boost, the release of an additional AUD 15 million in capital to be spent over 18 months on projects within the core business that generate a payback within three years. The board and management have been working on evolving the strategy for the business through to FY 2025. The capital allocation framework forms the basis to support a disciplined approach to capital management with the aim of delivering improved shareholder returns while maintaining a strong balance sheet and supporting business growth. By the end of FY 2022, the company aims to develop a comprehensive sustainability strategy that will identify the key ESG risks and opportunities facing the business and provide a reporting framework against which our performance can be assessed by shareholders. Moving to the trading update.
Earnings from operations have continued the strong growth momentum experienced in prior two years. Year to date, both reporting segments have exceeded last year's 16% year-over-year increase in EBITDA before significant items. While the company has demonstrated resilience to the effects of COVID, the immediate business risks associated with the pandemic are being closely monitored, including the potential longer-term secondary impacts such as cost inflation. In closing, I'd like to acknowledge and thank the Chair and the Board for their guidance and support over the past year. Also to the leadership team and all employees who have responded well to the challenges and are delivering good results. Finally, to our shareholders, thank you for your support for Ridley. I'll now hand back to the Chair. Thanks, Mick.
Thank you, Quinton. We'll now move on to the formal items. The first item of business is the consideration of the company's financial reports for the year ended 30 June 2021, copies of which are available on the company's website. There's no requirement for shareholders to vote on, approve, or adopt these reports. Shareholders may ask questions concerning the financial statements of the company, and we have the company's auditors present to answer any questions relating to the conduct of the audit. The Company Secretary will advise of any questions received in respect of this item of business. We ask for your patience as we provide shareholders with time to submit their questions.
Thank you, Mick. We have no questions at present, but we'll just allow a moment for shareholders to submit. Mick, there are no questions on this item.
Thank you, Kirsty. I'll proceed with the resolutions to be considered. I now ask members to consider and adopt the remuneration report, as set out on pages 27 to 36 of the 2021 annual report. The Corporations Act requires the REM report to be put to the vote. Please note that the vote on this item is advisory only and does not bind the directors or the company. The remuneration report sets out the policy for the remuneration of the directors, the CEO, and other designated senior executives, and details how their remuneration is structured. It also contains remuneration details for the directors and senior executives for the year ended 30 June 2021. Noting that each director has a personal interest in their own remuneration from the company, as set out in the remuneration report, the directors recommend that shareholders vote in favor of adopting the REM report.
No votes may be cast on this resolution by key management personnel, details of whose remuneration are included in the report and their closely related parties. As Chair, I will be voting as proxy only and only where I am entitled to do so. The resolution and a summary of the proxies are displayed on the screen. Company Secretary will advise of any questions received. We ask for your patience as we provide shareholders with time to submit their questions.
Thank you, Mick. At the moment, we have no questions, but we'll just give shareholders a minute to submit. There are no further questions on this item.
Okay. Thanks, Kirsty. I move the adoption of the remuneration report. We now move on to item three, the election of Ejnar Knudsen as a director. Ejnar retires by rotation in accordance with the company's constitution and being eligible, has offered himself for re-election. Appointed in June 2013 to the Ridley board, Mr. Knudsen is the CEO of AGR Partners, an associated entity of Ridley's largest shareholder, AGR Agricultural Investments LLC. Ejnar has more than 20 years of experience investing in and operating food and agriculture companies. Ejnar was Executive Vice President of Western Milling, a startup California grain and feed mill company that grew to over $1 billion in sales. Ejnar spent 10 years as Vice President for Rabobank in New York, managing a loan portfolio, equity investments, and corporate advisory services. The resolution and a summary of the proxies are displayed on the screen.
The company secretary will advise of any questions received in respect to this item. Again, we ask for your patience as we provide time for questions.
Thank you, Mick. We currently have no questions, but we'll just allow a moment for shareholders to submit. There are no questions on this item, Mick.
Thank you. We'll now move to item four, the election of David Lord as a director. David Lord retires by rotation in accordance with the company's constitution, and being eligible, has offered himself for re-election. Appointed in April 2016, Mr. Lord has enjoyed a senior management career, primarily in consumer products and agribusiness, most recently as President and Chief Operating Officer of Saputo Dairy Division Australia and the CEO and Managing Director of Warrnambool Cheese and Butter Factory Company Limited from 2010 to 2015. Between the years 2002 and 2009, David was CEO and Managing Director of Parmalat Australia. David has extensive experience in supply chain and in the domestic markets for consumer and industrial food products and the marketing of Australian dairy products in the international commodity marketplace.
From 2018 through to 2021, David served as a non-executive director of Dairy Australia Corporation, Australia's peak dairy services body. The resolution and a summary of the proxies are displayed on the screen. The Company Secretary will advise of any questions received in respect of this item of business. We ask for your patience again.
Thank you, Mick. At present, we have no questions on this item, but we'll just allow shareholders a moment to submit. There are no questions on this item.
Thanks, Kirsty. We'll now move to item five. The Ridley Corporation Long Term Incentive Plan is part of the company's remuneration policy of providing long-term rewards linked to shareholder returns. ASX Listing Rule 10.14 requires shareholder approval for the issue of new securities to a director under an employee incentive scheme. Mr. Quinton Hildebrand is a director of the company. Subject to the receipt of shareholder approval under this resolution, the board has resolved to offer the Managing Director 1,045,273 performance rights. These rights will convert into fully paid ordinary Ridley shares, subject to the achievement of all relevant performance criteria over a three-year period from 1 July 2021 to 30 June 2024. A detailed summary of the terms and conditions of the proposed offer is provided in the notice of meeting.
The resolution and a summary of the proxies are displayed on the screen. The Company Secretary will advise of any questions received on this item of business, and again, we ask for your patience as we provide time for shareholders to submit questions.
Thank you, Mick. We have no questions at present on this item, but we do have a question on item four, which we just dealt with. The question's from the Australian Shareholders' Association, and the question is: Would the chairman comment on the significant votes against re-election? That was item four.
Thank you.
of the election of David Lord.
Yeah. Thank you. Thank you for the question. Two things. First of all, factually, we're not aware, and we haven't been provided with reason or reasons for the vote against, noting that we expect the resolution nonetheless to be comfortably passed. We understand, or to the extent to which we do understand the reason, we believe it's linked to proxy advisors and the issue of gender diversity, particularly on the board, and that some advisors appear to have advised their clients to vote against the chair of the Rem Committee on that basis. I would restate, we don't factually know the reason, to the extent to which we have been, there's been no communication of a reason or reasons, but that would be our assessment.
Thank you, Mick. We have no more questions on item four or on item five.
Thank you, Kirsty. We'll now move to item six. The board intends to continue to make regular grants of rights under the LTIP to eligible employees. Resolution six seeks the approval of shareholders for issues of performance rights under the LTIP for the purposes of ASX Listing Rule 7.2, exception 13B, and for all other purposes. ASX Listing Rule 7.1 requires shareholder approval for an issue of equity securities if, over a 12-month period, the number of equity securities issued is more than 15% of the number of ordinary shares on issue at the start of that 12-month period.
ASX Listing Rule 7.2, exception 13B, provides that an issue of securities under an employee incentive scheme is not counted when calculating the available 15% limit under ASX Listing Rule 7.1 if approval is sought in accordance with that exception. Accordingly, approval is sought for the purposes of ASX Listing Rule 7.2, exception 13B for the issue of rights to employees under the LTIP, so that such issues do not detract from Ridley's available 15% limit. This approval continues for three years, at which time it must be reviewed or it will expire. Shareholder approval was last received on 27 November 2018.
In the absence of shareholder approval, issues of rights under the LTIP must be made within Ridley's available 15% capacity at the time of the grant, unless separate shareholder approval is obtained for those issues under ASX Listing Rule 7.1. The board considers that this resolution will assist the company in continuing to manage its capital requirements efficiently by ensuring that the 15% limit is not diminished by issues of rights under the LTIP and capacity is available for capital management initiatives as may be necessary. The detailed summary of the terms of the LTIP is provided in the notice of meeting. The maximum number of rights proposed to be issued under the scheme over the next three years is 16 million. The resolution and a summary of the proxies are displayed on the screen.
The Company Secretary will advise of any questions received in respect to this item of business. Again, we ask for your patience as we provide shareholders with time to submit their questions.
Thank you, Mick. We currently have no questions on this item, but we'll just allow a moment for shareholders to submit. There are no questions on this item.
Thanks, Kirsty. We'll now move to item seven. Under the Corporations Act, a company may include in its constitution a provision to enable the company to refuse to register shares acquired under a proportional takeover bid unless a resolution is passed by the members in a general meeting approving the bid. The board considers that it is in the best interest of Ridley members for the board to have a proportional takeover provision in its constitution. The proportional takeover approval provisions are currently included in the company's constitution and require member approval of a proportional takeover bid. These provisions expire three years after their last adoption, which was at the 27th of November 2018 annual general meeting. Without further adoption, the existing provisions will cease to have effect from 27th of November 2021 .
After consideration of the advantages and disadvantages, as outlined in the notice of meeting, the board considers that it is in the best interest of members for the company to operate with proportional takeover provisions embedded in its constitution for a term of three years from the date of this meeting. A detailed summary of the proposed provisions is provided in the notice of meeting. The resolution and a summary of the proxies are displayed on the screen. The Company Secretary will advise of any questions received on this item of business. Again, we ask for your patience as we do so.
Thank you, Mick. We have no questions at present, but we'll just give shareholders a moment to submit. There are no questions on this item.
Thanks, Kirsty. I would like to advise that the voting on all resolutions will close five minutes following the end of this meeting. The voting results for all of today's resolutions will be released to the ASX and also made available on the Ridley website after the conclusion of the meeting. The business of the meeting is now completed, and I declare the meeting closed. However, we would like to provide an opportunity for you to ask any general questions that you may have.
Thank you, Mick. We have two general questions. Going to the first general question. It's a question from Jeffrey Lapidos, Lifespan Investments. Can we please have an update on Novacq? I saw there have been technical issues with drying the output after it has been harvested from the growing pools. Has this been resolved in an effective and economic manner? What success have there been with the sales of Novacq in Australia and internationally?
Thanks, Kirsty. I think, Quinton would be best placed to answer that question, if we can hand over to Quinton.
Thanks, Mick, and thank you for the question. Yes, you recall correctly, we had some challenges drying the product and, but I'm pleased to say that the commissioning of the plant in Thailand for dewatering and drying was successful a few months ago, and that plant is operating to our expectations. The objective of that dewatering and drying plant was to allow us to continue to process Novacq all year round. And as you will recall, we also use solar drying, but in Thailand, solar drying can't be done in the wet season. The mechanical drying will operate with the new equipment all year round, and then we will use solar drying in the dry season. That is giving us a good viable base to operate from.
In regards to sales performance, you know, based on the current production levels that we've had, our focus has been on supplying first the domestic Australian prawn customers. I'm pleased to say that all of our customers are taking Novacq in their early season composite diets this year. In terms of the international markets, we haven't had much product up until recently to sell into international markets. We have done some trials with international customers, though I would say that this has been hampered in the last 12 months due to COVID and the lack of travel, and there hasn't been the uptake we would have liked in terms of conducting trials in some of the larger customers in international markets. Our focus has shifted to supplying a composite early nursery diet containing Novacq.
Similar to what we're supplying into the Australian domestic market, we're looking to sell that product, which is a high-value, early life cycle product, to larger international customers. We're at a price point that's competitive with their current early season diets, and based on our work, we are confident that our product performs better based on our research. That's how I would to respond to that question. Thanks, Mick.
Thanks, Quinton.
Mick, we have a second journal question from Peter Aird of the Australian Shareholders' Association. I was pleased to see gender diversity as part of your sustainability review, but note that only one of your directors is female. Is there an issue with diversity on the board?
Thanks, Kirsty. Well, first of all, we would like to see more diversity on the board. If we look at my time as Chair over the last year, we took the view with new directors coming on board and the blend of experience and fresh perspectives, that we would utilize the first 12, 18 months, which we're partway through, to leverage that experience and drive commercial and strategic outcomes. I think shareholders should be able to see the results of that. We are generally in a sector which is underrepresented from a gender diversity point of view, and that's a challenge, but should not be an excuse for us not to have appropriate representation on the board.
As we go into the next 12 or 18 months of assessing or updating our strategy, assessing the skills and experience required to support that strategy, including at director level, then we would look to ensure that we address that shortcoming. I would note that we do have updated or issued a new gender diversity and inclusion strategy in May, and we will look to be applying that, you know, not just at board level, but throughout the business. Thanks, Kirsty.
There are no further questions, Mick.
Okay. If there are no further questions, I'll just finish by thanking everyone for your participation today and for your continued support of Ridley. I'll now close the broadcast and wish you all a pleasant day. Thank you very much.