Ask a question into the Ask a Question box. I would now like to hand over to SunRice Group CEO and Managing Director Paul Serra and Group CFO Dimitri Courtelis. Please go ahead.
Thank you and good afternoon, everyone. I'd like to welcome you to today's investor call webcast. We really appreciate you taking the time to join us following the release of our 2026 half-year results this morning. My name is Paul Serra, and I'm the Group CEO and Managing Director of SunRice. I'm joined here today in Sydney by our Group CFO, Dimitri Courtelis. Our plan for today's call is to provide you with an overview of our half-year results, and I'll take you through some of our key achievements and strategy. I'll hand over to Dimitri to take you through some key financials and segment performance before coming back to cover our outlook, and then we'll open for questions.
You should also see the investor presentation on screen, and that was lodged on the ASX today. Please note the disclaimer on screen. I could not think of a more fitting way to start today than by reflecting on our business and our 75 years of history. Established in the Riverina of New South Wales to help Australian rice growers take their rice to the world, the SunRice Group has become a part of Australian food story for over 75 years now. From those modest beginnings, we have grown into an ASX-listed diversified global FMCG group with an integrated value chain that spans every stage of food creation.
As we celebrate our 75 years, we look to the future with confidence and optimism as we seek to continue our global growth. Our commitment remains clear, creating value for consumers, customers, employees, growers, shareholders, communities, and our stakeholders now and into the future. Similarly to past results, approximately 60% of our revenue is generated outside of Australia, with more than 70% of our sales coming now from branded products across more than 50 countries.
The portfolio spans over 1,500 products across 45 major brands, with operations in 10 countries and employing more than 2,400 people. We currently source rice from 12 countries, including Australia. This diversification has been absolutely fundamental to our resilience and growth, allowing us to capitalize on the opportunities across different markets while managing regional challenges. It also uniquely positions us as an Australian-listed FMCG group with a truly global footprint and the ability to capitalize on global growth opportunities. As we come to our half-year results, we have strengthened our group profit margin and advanced strategic growth areas while continuing to manage a challenging operating environment.
I'm pleased to report this resulted in a solid set of financial results with higher earnings than in prior corresponding periods, despite some pressures on our top line. Looking at some of these highlights, we delivered improved profitability with net profit after tax of AUD 36.6 million and EBITDA of AUD 71.3 million, up 14% and 5% respectively on the prior corresponding period. On the revenue dynamics for the half, we saw strong growth in our key strategic areas, notably in the Middle East, the U.S., and through our Toscano and SavourLife brands in Australia.
Together, these contributed about AUD 25 million in additional revenue compared to the same period last year. However, these gains were offset by challenges in lower margin, price-sensitive Pacific markets, where the group is rebasing some of its businesses to improve profitability going forward. And finally, a reduction in lower priority tender volumes as the group remains very focused on high-value branded growth. Combined, these market sales declined close to AUD 50 million compared to the same corresponding period last year.
As a result, group revenue was AUD 884 million, slightly down 3% on the first half of FY 2025. We continue to maintain a disciplined approach to capital management and declared a fully franked interim dividend of AUD 0.20 per B Class Share. We've updated the estimated range for the CY25 paddy price for Riverina rice growers to AUD 385-AUD 420 per paddy tonne for medium grain rice. Diluted earnings per share for the half were up 14% to AUD 0.533 per B Class Share. And we delivered total shareholder return of 63.3% versus the ASX 300 Accumulation Index TSR of 11.4%.
Finally, SunRice was selected for inclusion into the ASX 300 Index in the first half of FY 2026. This reflects the progress we've made over many years, the increasing liquidity of our B Class Shares, and the confidence our shareholders have placed in our strategy and performance as a global branded food business. The snapshot you see on screen now is our group financials in more detail, and I will hand over shortly to Dimitri to explain these further. Importantly, on this page, I'd like to draw your attention to the EBITDA percentage to net sales growth we have achieved over the last two years.
In that time, we have moved from an EBITDA margin of 6.9% two years ago to 8.1% this year. This reflects the focused approach we have had in driving higher value differentiated branded food products across the group, along with our disciplined cost control. Through our 2030 Growth Strategy, which you can see on screen, we're looking to strengthen the business for the long term, growing with purpose, expanding our value-added offerings, and building resilience across our supply chains. We continue to make good progress against our strategic initiatives, which are aimed at positioning the business for higher value margin growth.
More detail around our strategic process can be found in our interim financial report. As I shared at our annual general meeting, for us to achieve our 2030 Growth Strategy, it was essential we positioned the business appropriately with the right people, talent, structures, and systems to achieve our bold and ambitious strategy. In May 2025, the group transitioned to a new market-based divisional structure and leadership alignment to take greater advantage of our scale in ANZ while deepening our expertise and presence in key international markets.
Led by Belinda Tumbers and Ganesh Kashyap, these geographic market-based commercial divisions will support us to grow our presence across these key markets by leveraging the expertise of local teams who are close to the market, understand the culture, and can execute quickly to drive results while utilizing our global presence and scale where appropriate. I'm proud to lead this incredibly talented team, and along with a clear strategy, it's helping drive us to new highs.
So because of this change in the way our group is operated, we have also changed the group's reportable segments. And you can see those on screen now. These segments better align our business to the markets we operate in. We have three segments moving forward: consumer packaged goods internationally, consumer packaged goods Australia and New Zealand, and Bulk Rice and Animal Feed. With that, I'll now hand over to Dimitri to discuss our FY 2026 half-year financial results and each of the business segments in more detail before coming back to talk through the outlook and open for questions.
Thank you, Paul, and good afternoon to everyone joining us on the call and the webcast today. The first half of FY 2026 saw strong earnings delivery, disciplined cost management, and continued progress on our strategic priorities. Let me take you through the performance of our consumer packaged goods segments, starting with International. International CPG delivered revenue of AUD 355 million, down 7% on the prior period, with EBITDA of AUD 37 million, down 12%. Despite this, we achieved an EBITDA margin of 10.3%.
The segments' results were achieved while navigating a challenging environment, and there were several key drivers of the performance: investments in the Middle East, where we successfully introduced a premium SunRice Basmati range and appointed new distributors to strengthen our go-to-market capability, category share gains in the U.S., expanding distribution of Hinode microwave cups and core rice across the West Coast and Hawaii, the lower cost of U.S. rice and the broader normalization of global rice prices following the lifting of India's non-Basmati export ban last year, and the freight and supply chain efficiencies, which delivered cost improvements to the group.
At the same time, we did manage through several headwinds. We had the temporary disruption to Papua New Guinea volumes due to GST legislative changes, which caused significant market disruption early in the first half. Sales have since been recovering progressively across the first half, but it will take the full year to rebalance entirely. We also had intensified competition in our Pacific markets, to which we responded with additional discounting given consumer price sensitivity in those regions.
And in this highly competitive environment, the group is currently in the process of rebasing some of the Pacific business to a more profitable base in the future. Foreign exchange pressures, particularly the PGK depreciation against the U.S. dollar, which continue to impact imported products into Papua New Guinea, and the impact of upfront costs associated with executing our 2030 Growth Strategy, including increased advertising and promotional investments and an expanded Middle East team to support our ambitious growth.
Turning to Consumer Packaged Goods ANZ, this segment delivered revenue of AUD 375 million for the half, broadly in line with that of last year, with EBITDA of AUD 32 million, down slightly on the prior period, and a healthy EBITDA margin of 8.6%. Overall, this segment delivered a solid performance as we focused on building brand leadership and accelerating innovation for future growth.
There were several key positives during the half, and those included continued growth in bakery, led by our Toscano brand, supported by range expansion in Italian flatbreads, brioche burger buns, and desserts, alongside marketing initiatives to build consumer awareness. We also had positive performance of SavourLife, which contributed its first full six months since acquisition in August 2024 and continues to resonate very strongly with our consumers.
At the same time, we did navigate some challenges, such as intensified competition across certain categories, fueled by evolving spending habits as consumers shift towards lower price offerings in areas such as rice, microwave rice, and condiments. The broader pet sector also displays some early indications of a slowdown in the first half. Temporary supply constraints as new packaging equipment was commissioned at the beginning of the year in our Leeton manufacturing operations, and operational challenges which have since been addressed were faced in our equine feed manufacturing plant.
Foreign exchange pressures, with the weak AUD continuing to increase imported production costs into Australia, and pricing strategies are in place but will yield benefits that we're expected to flow through later in FY 2026, and upfront costs associated with the execution of our 2030 Growth Strategy, notably the SunRice Baby marketing campaign, which was launched to stimulate rice consumption across all categories in ANZ.
In summary, both of our CPG segments are delivering on strategic priorities despite competitive and cost pressures. Finally, to talk bulk rice and animal feed, which achieved a marked improvement in profitability in the first half of FY 2026. Revenue was AUD 153 million, down 1% in last year, with EBITDA of AUD 8 million and an EBITDA margin of 5.5%. The uplift in profitability was driven by three main items. Firstly, the growth in our animal feed segments, which, with new customers onboarded and increased demand for supplementary feed across ANZ, we also had a progressive recovery in global rice tender prices, as well as the sourcing advantage with lower U.S. rice costs and a more favorable rice sourcing mix.
These gains were achieved despite an overall reduction in global rice tender volumes, which was partly due to timing and, in some cases, the lower mill-out rates of our Australian crop, limiting our ability to trade as planned. It also reflects the group's focus on driving sales in higher margin branded activities in line with the 2030 Growth Strategy. Moving now to capital management, this is the first time the group is publishing its capital management framework, which is designed to help maximize value for all investors by guiding our financial stewardship.
The group uses this framework to inform key management decisions, including investments in both organic and inorganic growth, as well as auxiliary functions. We are committed to targeting strong and consistent levels of dividends while ensuring prudent management of our debt levels. Importantly, the group considers operating outside of the proposed targets if, following assessment, the circumstances justify it and the group's long-term risk management profile is not adversely impacted.
The group continues to take a disciplined approach to capital management, balancing investments, divestments, and corporate development to help drive shareholder value. In the first half of the year, monetization of non-core assets delivered approximately AUD 1.5 million in incremental profit, while we maintained a strong pipeline of strategic M&A opportunities. Consistency and quality of earnings remain a priority, and we were pleased to declare a fully franked interim dividend of AUD 0.20 per B Class Share. I'll now hand back over to Paul to provide an update on outlook for the remainder of FY 2026 and beyond.
Thank you, Dimitri. Turning to the group's outlook for the rest of FY 2026, the group reaffirms its previously provided outlook that it expects to grow at both the top and bottom line in FY 2026. A number of factors are expected to support the group's full year FY 2026 performance, and these include the strengthening of the group's brand and pipeline of innovation across both the international and ANZ consumer packaged goods segments, our plans for targeted expansion into new product categories and markets, particularly in the Middle East, with a redesigned portfolio of key partners in that region, the ongoing recovery in our global rice tender pricing and lower global rice sourcing costs, and the continued growth in our animal feed business and the recovery from temporary trading impacts in the PNG business following the legislative changes to the application of GST at the beginning of the year.
And finally, our disciplined approach to cost and operational efficiency plans across the group. However, some of the challenges that impacted the first half are expected to continue with the potential to moderate the group's full year growth, and these include ongoing competition across several key markets in the Pacific and certain Australian and New Zealand categories, prolonged weakness of the Australian dollar and Papua New Guinea and Kenya, affecting the cost of imported products into Australia and Papua New Guinea respectively, and other inflationary pressures on the cost base involving consumer habits. And finally, the need to preserve Australian paddy premium markets in light of an upcoming dry season. There, of course, also remains a heightened level of uncertainty in global trade driven by U.S. policies, and these may have the effect of impacting global flows throughout the year.
This, coupled with global instability, particularly with conflicts in Europe and the Middle East, may have the impact to deliver on the group, to impact on the group. As shared in our FY 2025 annual report, at around 511,000 tonnes, the crop from the Riverina this year ensures a very full milling program and branded sales in premium markets for FY 2026. The recovery in global tender pricing, freight cost efficiencies, and a well-hedged position against the USD are also benefiting the CY25 paddy returns. However, the persistence of low whole grain mill-out rates that impacted the CY24 crop remain a significant issue for CY25, weighing on the paddy returns. The need to preserve paddy for premium markets, given the upcoming dry season, is also likely to moderate the revenue growth year- on- year.
As a result, the group today updated the CY25 paddy price range for Riverina rice growers from AUD 380-AUD 450 to AUD 385-AUD 420 per paddy tonne for medium grain rice, which we understand may be very disappointing for our growers. Finally, looking ahead to FY 2027, the Australian rice crop in the ground that's been currently planted is substantially lower than average production, and we anticipate this for the upcoming year due to the dry conditions and ongoing water reform. Regardless of the final CY26, FY 2027 crop size, the SunRice Group will enter FY 2027 year with carryover inventory volume from this year, CY25, FY 2026. As shown over the last five years, SunRice continues to diversify its global supply chain and now sources the majority of its rice outside of Australia under a multi-source, multi-market model.
These diversified sourcing options give us confidence in our ability to supply SunRice Group's global branded markets with quality rice, regardless of any single weather or crop event, including here in Australia. These global sourcing options also give the group the ability to help absorb cost under recoveries in the Riverina should they arise. We are currently working through our sourcing plans for next year, and further updates will be provided as we approach FY 2027. We remain confident in our ability to execute against our 2030 strategy and the value it is expected to create for our shareholders. As we position the SunRice Group in its next chapter of growth, we've taken some important steps to ensure our identity reflects the scale and ambition of our business today.
In November, we unveiled a refreshed corporate identity and a new SunRice Group logo, a symbol of our evolution into a diversified global food group, proudly Australian-founded, with deep local roots, but an expanding international footprint. This update creates a clear distinction between the corporate group and our consumer brands while bringing consistency and cohesion to how we present ourselves across the market. In closing, the first half of FY 2026 has shown strong progress against our 2030 Growth Strategy, disciplined capital management, and continued momentum across the group. While challenges remain, our diversified supply chain, innovation profile, pipeline, and focus on operational efficiency give us confidence in our ability to deliver on our commitments and create value for the long term of our shareholders.
Finally, as we enter the second half, we do so with a very clear strategy, a purposely designed organization, a balance sheet to help fund global growth, and most importantly, a truly talented global team that I'm proud to lead. Thank you for your ongoing support as we continue to shape the future of the SunRice Group, and Dimitri and I are now happy to take questions.
Thank you. If you wish to ask a question via the phone, you will need to press the star key followed by the number one on your telephone keypad, and if you wish to ask a question via the webcast, please type your question into the Ask a Question box. We'll pause a moment for questions to register. Once again, to ask a question via the phone, please press star one, and to ask a question via the webcast, please enter it into the Ask a Question box. Your first question is a webcast question from Allan Franklin from Canaccord Genuity, who asks, "On the CPG AU business, please talk to the investment in marketing, defining what you are seeking to achieve with the two different campaigns.
Please frame the turnaround in performance in the North American business and next steps in the strategy in the market, and should we continue to see strong FCF generation with inventory unwind and a lower tax rate through 2H26?
I'll take the first part of that, and then Dimitri can take the second part. Thank you, Allan. So the two new marketing campaigns that we've launched in Australia, the first SunRice Baby campaign, was really about driving relevancy and awareness to the rice consumers in Australia. We also wanted to reset our tonality and how we speak about ourselves to consumers. This will not only raise the awareness of our brand and our group, but as we look to bring more innovative products to the market, slightly reposition SunRice with a more modern, fresh approach. We've seen some really pleasing initial response to this with some big increases in total awareness of our brand, despite already having quite a large awareness.
It provides us with a campaignable start to this, so we can expand this in multiple different ways, and you'll see this come to life over the next 12 months- 18 months in multiple different ways. The second campaign behind Toscano was, again, an awareness-driving campaign. Toscano, despite its amazing growth, has a very low, both prompted and unprompted, awareness with consumers in Australia. This campaign was really driven behind the singular truth that, together, we eat, and it's made much easier through our products. It's resonated very well again so far with consumers, and we've seen in our tracking some very nice uplifts in that awareness. So both of those will carry and will translate through, obviously, to more sales over time. Both are very campaignable in that we can extend off these for 12months to 18 months to two years.
And flowing on into the numbers, so the free cash flow is expected to increase for the balance of the year, and that's as a result of us reaffirming our guidance for the current year, so that profitability from an operating perspective coming through the mix, similar levels of CapEx as we had in the prior year, and that's consistent with our outlook from year-end. And with that going into a slightly lower inventory position, we expect that net working capital to come off. So all of those items will improve the free cash flow position by the time we get into the end of FY 2026. And then on the tax rates, this year is a bit of an anomaly as we've had some permanent deductions that we were able to push through in the half as a result of the exercising of some B Class Shares.
This year's tax rate is a bit of a one-off around 22%-23% for FY 2026, and then we expect to go back to more normalised levels in the future, which is consistent with last year, which was around the high 20s, probably 27%-28%, all things being equal.
Thank you. Your next question comes from John Burgess from RaaS Research, who asks, "What is the status of the Leeton packaging plant? Are you achieving the benefits expected, and are there any major projects planned?
Yeah, I'll cover that one. So the plant is up and running and operating as expected. So I think the biggest issue with our mills at the moment is just the lower mill-out rates, which is obviously weighing down on the paddy price. But as far as the packaging upgrade goes, as planned.
Thank you. Your next question comes from Philip Anthes, who asks, "Competitors were mentioned several times. Who are the key competitors?
Our competitors vary greatly depending on which part of the world that we're talking about. Obviously, here in Australia, we compete against a very different set in the Pacific than we do in the Middle East. I think in general, what we're seeing across the globe in developed markets in particular is a continued push for lower value products as consumers look to offset the cost of living.
That's where our innovation has been really well received. Obviously, value to consumers can come in numerous different ways, and as we evolve and provide more value-added solutions to consumers, that's helping us achieve that at a higher price. Here in Australia, for example, the competition we see predominantly is private label, and with the retailers launching more ranges of private label, that's something that all branded food players are combating against. In the Pacific, it's different to the Middle East and the U.S., as I've said. The macro trend really is that value that consumers are looking for.
Thank you. Your next question comes from John Burgess from RaaS Group, who asks, "Your debt-to-EBITDA target ratio of 2x-3x implies a willingness for a meaningful acquisition. Is that the message/intention?
Yes. If we can find the right acquisition that fits with our strategy and the way in which we see our ability to generate economic profit, then we have a balance sheet that will enable us to go after those kinds of acquisitions.
Yeah, well, with the core debt now essentially at zero, our entire leverage is based on our seasonal facilities. So at 1.1x , we absolutely have the right strength in our balance sheet and our prime to go after and fund acquisitions as they present themselves. And that's consistent with how we've approached the last seven years of our acquisitive growth. And building on Paul's comment, organic and inorganic growth is absolutely key to deliver the 2030 strategy. So looking forward to those opportunities as they present themselves and updating the market accordingly.
Thank you. Your next question is also from John, who asks, "Are lower rice prices and U.S. tariffs a disruption or opportunity for the broader business?
To not answer this politically, they can be both. They're predominantly an opportunity on the cost line of our business, but they do put downward pressure in price-sensitive markets as competition is able to procure cheaper rice. So net-net for the group, it's been a positive outcome having lower prices coming through on the rice side. U.S. tariffs are at the moment not impacting the group significantly at all directly, as what we sell in the U.S., we predominantly manufacture in the U.S. But as I think Dimitri has commented in the past, the impact on FX and the Australian FX is impacting the imported Toscano range with the Australian dollar having declined.
Thank you. Your next question comes from Bob Slonica, a private investor who asks, "Are the reorganization and associated personnel, systems training, brand changes, distribution partners and agreements, and other costs significant? Are the costs ongoing or have they been expended in the current period?
Yeah, sure. Thank you for the question. So we did incur some of those costs last year in FY 2025, and we did incur some of those costs in the first half of FY 2026. So not to expect anything material going forward. This is all investing behind our people, our brands, and our strategy ultimately, where we obviously expect a return on that investment. So we do put those through our economic hurdles to ensure that we're getting that return. But to your specific question, it's not like we're going to get any chunky costs going forward unless that's behind some pretty material projects that we would expect an ROI on.
Thank you. There are no further questions at this time, and I'll now hand back to Mr. Serra for closing remarks.
Well, thank you all for joining us today, and we look forward to your continued support. Thank you very much.