Right, David and Tim, over to you.
Good morning and welcome to the Select Harvests 2024 full year results presentation. My name's David Surveyor, the Managing Director and CEO of Select Harvests, and joining me delivering this presentation is our Interim CFO, Tim Bradfield. The 2024 full year results presentation will be delivered by webcast on the link displayed below, as advised the ASX. After Tim and I have delivered the presentation, there will be time for questions before we commence our Investor Roadshow. To ask a question, simply raise your hand via the button on the bottom of your screen. We'll progress you through the queue and you'll be given the opportunity to ask your question. In the event that there have been any outstanding questions at the end of the allotted time, please contact Andrew Angus via the email on the screen and we will deal with them separately.
This slide simply outlines the disclaimer and the basis of preparation of the information contained in this presentation. So if we move to the agenda, I'll start by providing a business update before handing over to Tim, who will discuss the financial results in detail. Following Tim, I'll discuss strategy, transformation, and the forward outlook before we both take questions. Next slide, please. And one more. So let's start with safety. People are critical to Select Harvests and we continue our focus on safety improvement. Our TRIFR, as at the full year, was 7.1, and we think our data is increasingly accurate and we have stabilized at a much lower rate than any point in our history. However, we still have much to do to achieve our sustainability goal of zero harm. We're driving a clear sense of deep and felt safety leadership to our people. We're training our people.
We're raising the visibility of safety across the organization. We're building better safety systems, reducing workplace incidents and hazards, and ensuring compliance. And this year we have invested and added additional safety capability to the business. If we move on to financial results, the company has delivered a net profit after tax of AUD 1.5 million, and this sits just below the guidance provided by the company during the capital raise. The 2024 NPAT result was affected by the timing recognition of water sales. A AUD 12.5 million gain has been made on the sale and rebalancing of water, with AUD 6.7 million recognised in 2024. The remaining profit of AUD 5.8 million, as a matter of timing, did not meet our revenue recognition rules and will be recognised in 2025. The few days difference in timing is immaterial. The cash is collected and the transaction now completes.
While this result is clearly a substantive improvement on last year's net loss of AUD 114.7 million, the result really highlights we are partway through our transformation program. And while there are many positives in Select Harvests, it does not miss me, and nor do I suspect anyone else, that when the company has recorded a record crop, it has not recorded a larger profit. The five years of low global prices are, of course, the key component of this, and we pleasingly note the uptick in global prices in the last four months of the year. But we must find our own way to greater prosperity. The capital raise successfully completed. The raise was made up of two components: AUD 58.9 million in September and AUD 17.4 million completed in October post-balance date, with transaction costs of AUD 3.7 million.
The company's balance sheet has now been strengthened, debt reduced with our post-gearing raise, with our post-raise gearing, sorry, at 29% versus 46% in the prior year. We're underway with our Carina West expansion, which I'll talk to later. Operating cash flow makes a pleasing return to the positive. The logistics project was one of many projects that have collectively delivered AUD 32 million in profit, but the logistics project itself did not deliver. The issue has been of interest to investors, and the materiality remains as initially described. The company provided for AUD 1 million of costs associated with logistics, and this number remains reasonable. There was a two- to three-month AUD 56 million delay in cash, of which AUD 51 million is now in the bank, and the balance is expected before the end of December. We are back on track.
Of course, this money coming in further lowers debt and improves our gearing. What I'd like to do now is to provide some more detail on each of our key results drivers: volume, price, and production costs. Let's start with volume. It was very pleasing to see the Select Harvests crop bounce back so strongly from 2023, with a record crop of some 29,527 tonnes. The Australian almond growing year was supported by an outstanding bloom and generally better growing conditions. New South Wales, however, remains an exception, and we have seen four years in a row where there has been more than 550 millimeters of rain. This is effectively double the average, and dependent on the soils and drainage on any farm, the crop has been living with wet feet.
The impact of this is lower yield and health, even though we have invested in the horticultural program. This year we trialled an earlier harvest so that we could better manage hygiene and reduce insect damage. We commenced 10-14 days typically earlier than we normally would. We've also innovated our approach to tree shaking by changing the oscillation frequency and duration. This will improve collection with fewer nuts left on the tree. We will continue with this approach for 2025, and the company did an exceptional job in getting harvests complete and looking after the quality of the crop, and I'll talk further about our farming portfolio later in the presentation. Let's move on to price. As mentioned, it's very pleasing. Prices started increasing in May, June. We are back towards prices of four to five years ago.
We've continued to see crops removed in California for each of the last three years, with total acres now sitting at approximately 1.5 million acres, and bearing acres look to have peaked at just below 1.4 million acres. The industry, including Australia, needs more price, and it is our view there is more price upside to come. The global supply and demand dynamic is in much better balance. The growth in the demand side is demonstrated in the data of increased shipments for the U.S. crop year and the Australian crop year. The supply side has also improved. As U.S. acres are removed, as I've just mentioned, we also see U.S. carrying volumes being lower at 500 million pounds and of low quality. The objective forecast of 2.8 billion pounds is likely too high based on the rate of capture in the position reports.
An anecdote also suggests it will be lower. The U.S. defect rate remains above the norm at approximately 3%, and we'll give a sense of the Select Harvests outlook position later in the presentation. Let's move on to talk about costs. Total production costs, which is the cost of growing, harvesting, and processing, reduced in 2024 in absolute terms to AUD 6.60 per kg. Unit cost, however, is also a function of crop size. So to allow a year-on-year comparison, we've shown our cost base on a normalized volume of 29,000 tonnes on the slide, and what you can see is that in real terms, our costs are down by some AUD 0.21 per kg. There were noticeable improvements in the cost of labor, harvest costs being lower, reduced processing costs.
I think it is worth noting that water savings are probably more a function of weather than they are a function of management practices. A negative impact is increasing lease and amortization of capital development costs for trees of AUD 6 million. We have more than offset that cost increase through savings. As we go forward into 2025, we are attempting to hold our costs flat. They may increase by approximately 1%, so we will find further gains in our project management office to offset that amount. Let me hand over to Tim to talk about the financials.
Thanks, David. As David explained earlier, the crop quality, yield, and price have significantly improved since the 2023 crop, allowing an additional AUD 116 million to drop through to the bottom line when compared to FY 2023. At the top line, Select Harvests increased its revenue from AUD 206 million in FY 2023 to AUD 337 million in FY 2024, a 64% year-on-year improvement. The key drivers of the top line growth have been a 9,800 tonne increase in high-quality yield, a AUD 1.27 a kilo price increase, a 7,100 tonne increase in external grower processing, and a AUD 7 million increase in wholesales. Added to this has been management's ability to reduce the cost of production both on a per kilo basis as well as in total costs, saving the company AUD 7 million and offsetting the inflationary pressures.
The improved overall crop quality, yield, and price, combined with management's focus on cost control, has reduced inventory write-offs and asset impairments by AUD 46 million when compared to FY 2023. In summary, the company has delivered an EBITDA of AUD 46 million, a turnaround of over AUD 160 million year-on-year. You will note a more comprehensive EBITDA walk on the following slide that I will leave you to read at a later time. I will stay on this slide to explain the complete P&L. Interest expense has continued to grow due to higher interest rates, plus the increase in our net debt profile throughout the year. I will discuss net debt in greater detail in a few slides. As we discussed during the equity raise, Select Harvests had three non-underlying one-off activities that impacted the profit for FY 2024. The first is the sale of water rights.
In line with our water rebalancing strategy, we booked a AUD 6.7 million gain during the year. And as David mentioned earlier, there was an additional AUD 5.8 million that will be recognized in FY 2025 due to our revenue recognition policy. The second is logistics-related costs. We incurred AUD 1 million in costs associated with issues driven by the new logistics provider for the 2024 crop. These costs were made up of external consultants used to assist us with managing the issue, as well as some minor claims from our customers for costs such as demurrage and detention for overstaying on the wharf. The third is the impairment of the Yilga farm.
We completed our normal assessment of the carrying value of owned assets and leased assets at year-end. As a result of the value-in- use assessment of the Yilga farm, we determined that an impairment of AUD 6.6 million was necessary. There remains a risk that if the yields on Yilga and Mooral continue to underperform, there will be further impairments in the short to medium future. Working capital has increased as a result of the significant increase in our crop volume and price year-on-year.
Included in this movement is the non-cash AUD 27.1 million fair value uplift of our crop recognized at the time of harvest, in line with our fair value accounting standard. The most helpful way to explain working capital is to look at the cash movement for the year. We had net outflows from receivables of AUD 48.4 million, biological assets of AUD 3.3 million, and these were offset by net inflows from creditors of AUD 52.5 million and inventory net of fair value of AUD 10 million, giving us a year-on-year AUD 10.9 million net inflow from working capital.
The AUD 59 million cash receipt prior to year-end from the capital raise has been applied directly to debt, lowering our borrowing levels to AUD 162.3 million and resulting in a gearing ratio of 34%. Post the retail portion of the raise received after year-end, we applied AUD 17 million to debt, and the gearing ratio was 29%. In addition, now that we've received the AUD 51 million delayed cash receipts from the logistics issue at year-end, that ratio would be 19%. I can confirm that we have met our debt covenants and forecast to meet those covenants throughout the coming 12 months. In addition, we continue to have carry forward tax losses of AUD 45.7 million. The result of this is AUD 152 million of future profits that will not be subject to cash tax. Both our tangible and intangible non-current assets are recorded at historical cost.
However, as this slide demonstrates, the market value of our owned farms, processing facility, and water rights are well above book value. For the farms and processing facility, we have a policy for an external valuer to provide a three-year rotating valuation of each property. During FY 2024, we valued the Carina West processing facility, Hyang Ma, Allinga, and Mount View. If any of those valuations indicate that we have a shortfall to market, then we perform a value-in- use calculation to confirm the carrying value remains appropriate. Water rights are readily traded on the market, and with our current water rebalancing strategy, we are actively participating in the market. This valuation is internally generated and based on those market rates. There has been a strong increase in operating cash flows for FY 2024, despite the AUD 56 million delay in cash inflows due to the logistics issue.
Just for clarity, AUD 51 million of the AUD 56 million has now been received by Select Harvests, and the remaining AUD 5 million is expected to be received by calendar year-end. Investing cash flows have been directly invested in specific assets to support the ongoing crop yield improvement strategy, farm efficiencies, and processing capacity. Financing cash flows show the receipt of funds from the capital raise, reduction of debt, and payment of ongoing lease obligations. We've discussed the key movements in net debt as we've moved through the slides. You can clearly see that the AUD 59 million in funds received through the capital raise prior to 30 September have been directly applied to the company's debt.
We continue to have a total facility limit of AUD 270 million, being AUD 260 million of committed and AUD 10 million of overdraft. The committed facility is due to reduce by AUD 40 million on the 30th of June 2025. We remain confident that this debt facility is adequate to support the business for at least the next 12 months. As the overall facility agreement is due to expire on 31 March 2026, we are currently undergoing a refinancing process. I'll now hand back to David to discuss the ongoing strategy and transformation.
Thanks, Tim. Let's move on, as you say, to talk about strategy. So this slide has been seen previously, and it's for context. It lays out strategy plan number one. It gives the company direction and a clear path forward, and we've committed to delivery of the strategy over three horizons. The company has four very clear priorities, as shown on the slide. And with that connection to strategy, I'll talk about progress on the four priorities on the next slide and then link it to the PMO and the dollars created. This year, we've made substantial progress in execution. The traffic lights show performance, and the white dots, sorry, are areas that were not previously in focus. The first strategic priority: increasing margins. The strategy for maximizing horticultural outcomes is underway.
It's year one for yield, so we're enacting better practices, but not expecting the results for 2025 as growing is a two-year cycle. But as we benchmark our farm performance against others, we are confident we will get more yield over time as we optimize fertilizer, bee density for reduced flight distances, and water. There is a very meaningful upside for improvement. Every extra 1,000 tonnes comes with very limited incremental cost. We've discussed gains in quality from the changes we're making to our hygiene and harvest timing approach, and we intend to continue with that in 2025. Costs are reducing as we improve on-farm efficiency for sprays, seasonal labor, and organizational design. We have this year had a multi-fold increase in our external volumes to approximately 10,500 tonnes. This creates a step change in the turnover of Select Harvests and brings profit in processing and selling without agri risk.
We might add a small increase in 2025. With our water strategy review, we have developed a model whereby we make sell and/or buy decisions for optimal profit outcomes based on the cycle over the short, medium, and longer-term horizons. We're in the execution of our water balancing, water rebalancing strategy, and at the end of it, we expect to have purchased water close to the farms and have had a small increase in the total percentage of water that we own. The second priority is leadership in processing. In terms of execution, as with farms, our processing costs are reducing. This year, we have successfully increased the Carina West facility by 30% to 40,000 tonnes. This is a step change for Select Harvests, and it has allowed us to increase the external supply of almonds to create a balanced business.
Having proven to ourselves 40,000 tonnes is possible, we're going after the next step shift in capacity, and I'll talk about that on some of the following slides. But we've actually run at the required speed, so we know it's possible, but we can't do it consistently without the spend. While the focus of the conversation on Carina West has typically been on capacity, it should not be missed that we've also improved plant yield. We have less damage on stock pads. We have less product going on the floor. We have less chips and scratches, and we have fewer customer complaints. In fact, a 30% improvement in customer complaints year-on-year. The third pillar is maximizing returns from the crop. Within that, the first stream has been to ensure that we have a customer base that's broad enough to consume and increase supply from Select Harvests.
We've increased sales velocity in 2024 with contracted sales of over 36,000 tonnes compared to a prior three-year average of approximately 27,000 tonnes. We've added 21 significant new customers in 2024. The definition of a significant customer is a customer that is capable of taking 1,000 tonnes or more of product from the company. The second stream has been to review sales to see where we get tariff and margin advantages against Californian supply. This is seeing us look to increase weighting to China and ensure as much China-grade quality as product as possible can be sent to this market. And it has, for example, seen us divert in shell from India to China. The third stream is seeing Select Harvests looking for increased direct supply with larger-end customers.
This is seeing us claw back margin from intermediaries, and it sees us getting closer and a deeper understanding of the needs of large direct customers. We have this year increased direct supply by 13% as a proportion of our total sales. And the fourth stream is really in early days in improving our supply chain optimization. So we're making more informed full value chain decisions on when and which product mix we sell as kernel and when it's more profitable to sell as value-added products. 2024 generated AUD 4.1 million in additional profit from these activities, and we expect further gains in the sales area will kick in for the 2025 crop year. The fourth priority is a step out growth, and the reality is we're only opportunistically spending time in this area. The focus of the business is really about getting the basics right.
Finally, we've added almost the fifth pillar to our model. It's become increasingly apparent that we have gaps in organizational design and that we need to further develop our back office capability to facilitate the success of the company. Logistics has clearly been an example of back office, but it's equally true of business information. The quality of data and access to it results in slow decision-making and risk when data is incomplete. For example, we cannot accurately activity-based the profitability of each of our value-added SKUs because the data is not granular enough. We know there's money to be had, but we struggle on visibility at this level. Let me move on to talk about the farm portfolio. It's been a couple of years since we've shown the farm portfolio, so we thought it might be useful as a refresher.
And it shows that the work of earlier leadership in establishing a portfolio for farms has us operating in the sweet spot for maturity, and this should continue for some time forwards. That said, we're conscious of the fact that a focus on cost without enough consideration of yield has seen performance lower than it could be, and hence our strategy for improving yield. The company is continuously improving its farming operations with an investment in better drainage at Piangil this year. We also have a sensible replant strategy with some 69 hectares being replanted at Jubilee this year. That was replacing some 33-year-old trees. We have 12 hectares at Mount View that will be replaced in 2025, replacing some trees that were lost in the 2022 floods.
Going forward, we need to see the recovery of our New South Wales farms that have been inundated with water over the last four years. As I said, the trees have wet feet, and this has impacted health and yields. Let's move on to talk about Project Optimus. We found a low-cost next step to creating another 10,000 tonnes of capacity, and we are applying AUD 5 million of the capital raised to its delivery. There are, in essence, two phases to the game. Phase one is about our hulling and shelling decks. They have a series of shear rolls to remove the hull. We can automate the speed of those shear rolls to the rate of wear of the shear rolls and then balance each of these shear rolls across their various decks to get optimal throughput and not overload any one deck.
We will also upgrade our hulling and shelling color sorter so that we take out lower quality product earlier in the process and don't overload the decks when they are run at fast speeds. Phase two is about balancing flows to our shelling decks to make sure that we get optimal throughput and increasing the capacity of selected decks, then ensuring that we have the conveying capacity to utilize downstream sorting assets. We expect all of this to be operational in 2026, but are gunning to get some of the gains earlier. Let's move to talk about the PMO. We continue to use the Project Management Office to drive outcomes within the business, and as you can see, in 2024, we have completed 27 projects. We have 47 ongoing projects, and we've recently done our next chunk of work to ideate a potential another AUD 12 million in value creation.
The PMO in 2024 has created AUD 32 million of profit, but it would be disingenuous of me to claim every dollar and not mention the challenge all Australian bases, all Australian businesses face with inflation and, of course, the logistics issue consuming some of this value. So the net gain is AUD 15 million. Every time I've publicly spoken to this slide, I've made the point not every project will be successful. The logistics project being the prime example, and you can see it in the slide, and for the purpose of reinforcement rather than repetition, I make the point once more. The net gain from these projects is massively more accretive than the odd miss. Each initiative is initially tracked and monthly reported to the board, all of which returns me to the observation I made on the results slide. It's great that prices are rising.
They absolutely need to from an industry perspective, but ultimately, Select Harvests needs to set its own path to prosperity, and that's the purpose of our strategy and the PMO. We might now move to talk about the outlook. Next slide, please. Thank you. And so I look. Crop forecasting is, of course, a fool's errand. 2024 was a record crop off an outstanding bloom. The 2025 bloom was good, but it was not outstanding. And we've also seen some modest frost damage to potentially 500 tonnes of the crop. Now, you need to form your own views at this stage on the size of the crop, but our current sense is that it's more likely going to be another good solid crop rather than an aggressive uptick in volumes. Our view on the California crop remains consistent. We think they have reached peak acres.
The 2024 California crop is reasonable, but more likely slightly lower than the 2.8 billion pounds objective estimate, with defects running above historical rates. With excess supply consumed from the market and growing sales being witnessed out of the US and Australia, we are seeing strong demand in China and in India in the segments that we play. We have not experienced the general economic slowdown discussion that you sometimes hear about the China economy. We expect, we further expect, sorry, the US election results to be potentially positive to Australia-Sino relationships. We have seen prices start to increase, and our prognosis is supply and demand dynamics will see prices continue an upward trajectory. The consensus price looks reasonable, and price could well be higher than the consensus position. Our long-term view remains there is global growth and demand at 5%-7% CAGR.
So I think in terms of the key messages for 2024, with the capital raised behind us, the balance sheet is materially strengthened. There has been a demonstrable and significant progress on transformation initiatives. The net gain in value is substantive, and our objective is to grow, process, and sell as effectively and efficiently as we can. The leverage in Select Harvests comes from five key areas: capture as much price as we can, maximize our yields, expand our midstream earnings, keep tight on costs, and improve our back office so we can accelerate returns. There remains a lot of upside to Select Harvests. So thank you, and I will now hand back to Andrew Angus to manage us through questions that you may have.
Thanks, David. We've got a few online here, so I'll go to them first, and then we'll work through the Q&A. So first up, we've got Apoorv Sehgal from UBS. Apoorv, can you hear us?
Yeah, good morning, guys. Can you hear me?
Yes, we can, Apoorv. How are you?
Yeah, good, thanks. Good, thanks. A few questions for me. Just firstly, in terms of the crop for FY 2025, presumably you'd typically aim for at least 30,000 metric tonnes, would have thought. Just taking into account the frost impact of 0.5, should we be sort of going for a flat sort of crop production year, like 29 and a half again in 2025?
Yeah, so as I was saying, I think everyone's got to form their own view on crops too early, I think, for us to give a formal forecast. What I would say, though, is I note the consensus crop size is about 30,500-ish tonnes, given that last year was a record with an outstanding bloom, and this year was a good bloom, but not outstanding. That number does perhaps feel a little bit toppy.
Yep, yep, okay. That makes sense. And then just wanted to clarify the cost comment in the presentation talking about it being flat. So just so I interpret it right, almond production costs were about AUD 195 million in FY 2024, and you're saying that number should be flat in FY 2025 or at most, I think you said, up 1%. Is that right?
Yeah, that's the way to think of it. My 1% comment actually related to total cost, so growing, harvesting, processing. But yes, you should view us directionally as being flat. There's a potential for it to go up by 1%, and our job is to make sure that it doesn't. And we've got a program in our PMO to try and ensure that we have a flat cost base year on year, having reduced our costs from last year to this year.
Yep, yep, okay. And then maybe one final question from me. Just the value-add processing business. What was the EBITDA contribution in FY 2024, and just how should we think about hopefully an increase in FY 2025?
Well, we deliberately do not sort of provide that data at that level of detail up front, so I'd probably rather not answer that question. I think one of the things that is important that you should hear from us, and it was a comment that I made, is that we're increasingly thinking about where margin sits between kernel and value-added, depending on what's happening in the market at any given moment in time. So one of the things I think that's an interesting part of the dynamic is we're seeing prices increase at a pretty meaningful clip at the moment. And so what we will be doing is we'll be optimizing the profitability of the company by choosing at any given moment in time where it makes more sense to sell something as kernel or to convert it into value-add, depending on which is the most profitable.
Understood. Okay, thanks, guys.
Apoorv. David, next we've got Josh Kannourakis from Barrenjoey.
Good morning, Josh. Hey, good day, David. Good day, Tim. Can you guys hear me okay? Apologies, I'm on the road, but we can hear you just fine. Perfect, thanks, mate. So just, David, you mentioned around optimizing pricing. Can you give us a bit more context of how you're thinking about the timing of this year's sort of sales cycle and also just in terms of the sort of potential tariff impacts that are coming out of the U.S., just how we should be thinking of the potential benefit or opportunity for you guys given your sort of sales into China?
Well, I think if I start with your latter comment first, I think in terms of tariffs, there's already a tariff advantage that exists for Australia relative to California for supply into China. My comments really reflect the fact that the incoming U.S. president has already made public comment about the fact that he intends to increase his tariff regime. I simply note that that's a benefit for Australia, likely at least for the Australian almond industry as we go forward.
How that actually plays out, time will tell as President Trump comes into office. In terms of pricing and price optimization, we are running an increasingly disciplined process whereby we measure the price spreads that we achieve against international pricing benchmarks, and we often use Stratamarkets for this. We are ensuring that what we're doing is that our price points are optimized through our conversation with customers, through understanding of tariff and through clarity of need in market to look at our price spreads to get the maximum value out of it because we think there's more discipline.
More disciplined approach to pricing gives you the ability to get margin gain, and we've got the evidence to demonstrate it in the year that we've been through, and we think there's more to come as we go into this into the 2025 crop.
Got it. That's really helpful. Second question, just around the third-party processing, the incremental 10,000 tonnes, how should we be thinking about the timing and phasing of that? And should we also be expecting a similar return profile in terms of the dollar per kilo sort of expectation, or does the extra volume maybe potentially discount that a little bit?
Good question. So the formal timing of the delivery of that capacity will be for the 2026 year. As I indicated, we're going to try and get a bit of that capacity early, actually, so I'm hopeful that we'll have a little bit of it for next year. And then once we've got the 20,000, sorry, the extra 10,000 tonnes of capacity, I think what you'll see is it'll probably be filled with a combination of external supply and also with a combination of our own yield improvements. So those two things will ultimately fill that next 10,000 tonnes of capacity.
And the margin for it in terms of the externally supplied capacity should remain at its current level, so there should be no deterioration in margin. What we have is a range of external growers that we've got very good relationships with. People recognize the quality of Select Harvests as a processor and marketer of almonds, and so people generally want to deal with us because they believe that we can get them better value over time. And so we'd expect the value that we create for them will also create value for Select Harvests at the same rate that it does now.
Great. Thanks, guys. Appreciate your time.
Thanks, Josh. Next question is James Ferrier from Wilsons Advisory. James, over to you. You're on mute, James.
Sure was. Hopefully, I'm not now. Hello, James. Hi, you're good. Hi, David and Tim. Thanks for your time. Can I first of all ask you about the cost of production in FY 2024? AUD 6.60 per kilo is the figure referenced today in the presentation. Back in May, in the first half, that figure was projected to be AUD 6.85. Can you add a bit of color as to where the additional cost reductions or the lower outcome on costs came through?
That's a good question. We've really seen a consistency across the business. We've continued with our acceleration around our PMO initiatives. So we have changed some of our organizational structure in horticulture, for example. That's seen some costs down. We have continued to get yield gain and improvements in terms of the processing assets and facility that we've got. That's helped with our cost position.
Water, as I mentioned, is something of a free kick because the weather had supported the use of less water that we had to pay for going onto the crop. But there we have. It's that 27 projects that I referenced, James, that go to a whole range of initiatives that are running through the business to the delivering gains. And they're coming through at the farming cost line level. They're coming through at the processing cost line level, and they're coming through at the increased price and margin level for sales.
Understood. Thank you. Just staying on cost of production, and it's probably more of a definitional clarification question, but the cost of production includes processing. So does the benefit of third-party processing, the earnings benefit that accrues to Select Harvests, does that flow through at that line, cost of production, sort of netting off, if you like, or does the income generated from processing third-party hit the P&L post-farm gate?
It's sort of a combination of yes and yes to this question. So there's no doubt that the increased volume that we have coming through the business in terms of third-party grower volumes allows us to further spread our fixed costs. So that does help lower the unit cost rate per kg. It certainly comes through there. But the way that our third-party agreements are structured is that it's ostensibly a charge for processing and a charge for the sales and distribution activities. And so there's margin through that part of the model as well.
Understood. Okay, that's helpful. Back in September, when you first referenced the delay in cash receipts, you described a figure of AUD 60 million to AUD 70 million of delayed cash receipts, of which AUD 56 million was the specific reference to some of the shipping delays. Today, you've talked about the update on where you're at with the AUD 56 million. Where are you at with the rest of that money, that collection that sums up to $60 to $75 total?
Yeah, I think—you're testing my memory here, but I think, James, where that other piece came from was we contemplated the fact that we hadn't sold as much as we thought that we would like to. So the $56 related to delays in shipping and delays in documents. And so that was specific to that issue. And then we said we'd also actually probably not sold as fast as we would have liked to have done so, and that was the balance. And so when you go to what's left of the 2024 crop to sell, now I think we are—I have a number in my head, but rather than giving you a specific figure, we are less than 1,000 tonnes of the 2024 crop to sell.
If I just add to where we ended up with net debt at the end of the year, we ended up with net debt at AUD 162. If you add that shortfall onto that, we ended up with an equivalent of pre-raise of a AUD 220 net debt. And we went to market at the end of March for the raise and said it'd be between AUD 230 and AUD 245. So that shows we actually were addressing our cash. You're cutting ahead. Yeah.
Understood. Thanks, Tim. That's helpful color. And then lastly, there was some very helpful color you added to an earlier question around pricing, but just probably simplistically, where do you see spot almond prices based on an average quality mix and variety mix and all of that?
Well, I think that as we are today, I think the number that's sitting in the consensus position, which is about AUD 8.30, certainly seems reasonable. You could argue that's even slightly conservative to today's price. And then we definitely think that there's more upside to come without putting a number on that.
Yeah. But just to be crystal clear, you're saying that that AUD 8.30 on a forward-looking basis where you think the price is going because clearly there's positive momentum in it, or are you saying that spot pricing you're getting offered today is already at that level?
Yeah. So for clarity, if you had ostensibly the same mix in 2025 as we had in 2024, so assuming no change in the product mix, today you would be looking at a price that was about that AUD 8.30 level.
Great. Thank you, David. Thank you.
Thanks, James.
David with Paul Jensz from PAC Partners and Ag Food Fund next.
Paul, good morning.
Morning, David and Tim, and thanks, Andrew. Two quick questions. Just following on from price, what is the long-term price expectation for that mix, David?
We don't have a published formal view on the portfolio where we think that price is going to go. And that really starts to get us into crystal balling. So we're probably not in that space at the moment.
Okay. Second one is just on, I suppose, the risk changes perhaps you've made, the risk management changes you've made since the logistics issue, David. It's more probably at board level, but you talked about the—on slide 19, you've got an excellent sort of traffic light. Have you got a similar sort of thing with the risk management and maybe some changes there?
That's a super question, actually. I think risk management is an increasing focus for the company, and to your point, an increasing focus for the board. We've got a chunk of work that we're starting to do around risk management, and we also have engaged some external expertise to help us make sure that our processes are as rigorous as they should be going forward, and so explicitly, actually, we're using KPMG to help us with that work, so I think it's a fair question that you raise, and it's work underway, and there's further development to be done in that space, which is not to suggest that we've never done anything in it because, for example, over the last 18 months,
we've done a lot of work around reducing the risk profile around Carina West in terms of susceptibility to things like fire, so we have an ongoing program of that. We have a series of practices about how we think about managing FX and policy for all of those kinds of things. But to the point where your question comes from, our experience with logistics has certainly said that we should review our risk management practices, and we're underway with that.
Thanks again. Bye.
Thanks, Paul.
David, next question is Mark Topy from Select Equities. Mark, over to you.
Good morning, David and Tim. Just first question, just to clarify on the accounts and the fair value that was brought to account 2024, does that fully account for the 2024 crop, or is there any additional fair value to come from the 2024 crop in 2025?
We did have fair value accounting in March when we harvested the crop. So there's no further change to that to come through. We've recognized the whole.
Okay, great.
Then go ahead. That sell price might be different to the fair value accounting adjustment. The sell price would be, but their fair value accounting adjustment is done.
Very good. Then just, David, around your comments on New South Wales and lower yields and without forecasting weather, but there's some expectation it might be drier this summer. Is there any possible yield gains, if you like, then if New South Wales, if we do have that dry and improvement in New South Wales orchards?
It's a good question. Certainly, we have changed some of our farming practice, actually, in New South Wales to try and make sure that we do dry them out a little bit. If you get dry weather, that is certainly conducive to a better harvest and to a better outcome. You could create the argument that if there was upside in our volumes, there could be some that came from there. But I think I wouldn't be advocating that as highly likely at the moment. I'd simply say that we're aware of the fact that four years of extremely wet conditions have impacted yield. We're not forecasting an increase in yield out of New South Wales the way that we think about the business. But you're right. Good weather could bring some upside.
So we're thinking around Griffith and those sorts of regions?
Yeah, well, we've got four farms, and you're right. They're sort of in that Griffith, Euston area. And some great weather there would be very helpful.
No, great. And to take up your comments about China markets and I suppose your direct relationships there, I just wondered if you can comment. Does that mean you can perhaps pick up a bit more margin that you previously might have had to pay to some of the intermediaries in that market? And maybe just to give us a bit more explanation of why do you think the China market is strong? We've seen sort of discretionary spending in some areas really see a downturn. So what's the state of the China market consumption for almonds?
Well, I think to your first piece, we're spending more and more time in China as a company. And so we regularly have people there. In fact, I think we've got someone in China at the moment. And what we see in China is we've got some very good distribution partnerships in China. And so we absolutely want to keep those and keep those running along well and effectively. But we're also building out a series of direct relationships with large manufacturing businesses or dairy nut company businesses.
And so we're sort of running two races, if you like, within the China market. To the second part of it, it is interesting that to us, and it's why I called it out in the presentation that we hear, and you can read lots of commentary around challenges around the China economy. It's just that we don't see it in terms of the position that we have in the marketplace. So we see strong demand from the people that we've got good relationships with. It might also be that we're expanding out our network in the China market that's covering some of this. But what we're seeing is good, strong demand.
We see real appreciation for Select Harvests when we're in market. People really value the fact that we turn up and that we go and talk to them. We see recognition of the quality of our product produce from our customers. And so we see strong demand, and we see good, strong prices, and in fact, we've probably increased, this is a slight pluck out of the egg, so I haven't checked the numbers specifically for this presentation, but we've probably increased our volume into China by 30-odd%. And in fact, if you look across the Australian almond industry, all of the various companies are putting more and more product into China because everyone's seeing the opportunity there, both in terms of price and volume.
And that's obviously gained in market share from the U.S. that even they talk about. Do you perceive there's any risk that the US producer could try and retaliate via product via Vietnam, or do you think this is just a continuing trend that Australia is going to gain market share in China?
Well, I think with the current settings, it's certainly really sort of tariff and global settings and global politics. It's certainly an advantageous position for Australia relative to the US for the China market. Vietnam's an interesting part of the puzzle because you're quite right. There's access into the China market from Vietnam. There is product produce going into Vietnam, and some of that's being value-added and then on-sent to China. So that is certainly a path that people can use into that market. And it'll be interesting to see whether that remains open and productive over the long term or whether the Chinese government ultimately decides to change the rules that allow that to occur because they'll obviously be aware that it's happening. But it's a path, but it's not affecting our business and our ability to directly sell into China at great margin.
Right. And so the pricing differential between inshell and kernel at the moment is starting to close, but you're obviously taking advantage of the kernel price at the moment as well.
Yeah, it's a super observation, actually. There have been a couple of moments in history where the sort of price on kernel is higher than inshell, but typically inshell is higher than kernel. And as you know, it's sort of heading back to its more normal state. So what we're doing at the moment, we're starting—we've just recently started, if you like, our pre-selling of the 2025 crop. And because of where the price differentials have been, our GM sales, Ephraim Gomez, he's been focusing on selling kernel ahead of inshell on the basis that we will see inshell prices come back up again. And as you know, that's starting to occur.
Yeah, very good. And then just lastly, just looking at the Aussie dollar and the FX, can you talk through sort of how you see cover going forward? And thanks to the US dollar increase, how do you see that benefit in FY 2025? And you're sort of putting cover into place or taking sort of a position on that?
Thanks, Mark. Yeah, the way the company operates is that we have a pretty clear treasury policy in terms of the way that we run FX. The policy essentially runs on the basis that as the year progresses and certainty on the size of the crop increases, we can take cover in a level of proportion to the total size of the crop that we think that we're going to get. That's broadly the premise. It runs with the objective of trying to run the lowest possible risk position that we can take. We have some cover in place for the 2025 year. We've got sort of half of it roughly covered, and it's covered at a rate of around AUD 0.66 at the moment.
Right, okay.
So we think we've got a reasonable position, and at this stage, you wouldn't see us rushing to take more cover because, as you and everyone would be aware, the rates actually have been heading south or heading close towards 65 cents or even below over the last perhaps three or four weeks. So we think we've got a good position, and it's right for us to sit now.
Great. All right. Thanks for your time there. Appreciate that.
Right.
David, last question is Jonathan Snape from Bell Potter. I'll just put him through. Jonathan.
Thanks. Can you guys hear me okay?
Sure can, Jonathan.
Yep. Great. Look, I just want to ask two questions. Can I do one just to follow on from, I think, James's question earlier around spot pricing? I mean, most almond reports I see are quoting kernel prices up around kind of $2.85 a kilo at the moment in US dollar terms, which, given the maths of 2.2045 pounds to a kilo and a 65-cent dollar, would give you a price well north of $9.50 at the moment. So can you just reconcile to me that price relative to, I think, the $8.30 average number you kind of gave to James where you thought spot pricing was at the moment?
Well, I certainly can't reconcile to quite the number that you've got at the top end of that. I think what you've heard me say is that I think there's upside above $8.30. You just haven't heard me put a number on it. But I can imagine that over time, you might be able to get to the sort of number that you're talking about. But that's not what we would be seeing in our world at the moment.
Yeah, okay. Because I'm not seeing many under like $2.50, $2.60 a pound. That's all, which is giving pretty big pricing.
I mean, if I wanted to be supportive of your position, I would particularly look at what we're seeing in terms of, and I'm just trying to find a piece of data as I'm talking to you, but I would be particularly, if I want to be supportive of your position, if I take our Standard 5 product, there's no doubt we are seeing some handsome prices in that part of the offer at the moment. And so, yeah. So you can get me to some big numbers as we go forward.
All right. And look, can I just do some reconciliation on net debt at year-end? Because if I'm reading through, there's a lot of material to go through. So just correct me if I got any of the numbers wrong. But I think you finished at AUD 162 million. You got 17 odd million in from the equity raise post-balance date on the retail side. Am I reading right that there's another AUD 12 million of water sale cash proceeds to come through as well post-balance date?
And obviously, you've got the AUD 51 million in, which would suggest that all things being equal, you're probably AUD 80 odd million better off than the AUD 162 million. I'm just trying to think when we're thinking about where you exit 25, if this working capital issue isn't a recurring thing, is that kind of the baseline pro forma number in a sense that we should be starting with before you start thinking about CapEx and stuff like that?
Yeah, that is a reasonable place to start. It is. I mean, at the moment, as you're aware, we're incurring a lot of the costs for the 25 crop at the moment. But you're right in that we have collected the things that should have been there at year-end, and they're the right dollar values to include.
Although we only had the 6.8 part of that cash in for the water. So the balance of it was still coming into the, which has now arrived, that said, but was in the 25 year.
Yeah, but the total number was 23, wasn't it, in terms of contracted sales? So I get the profit number was sort of some to drop. I think it was six still.
True, true, true, true.
Your cash proceeds actually is higher.
You're quite right. Sorry, you're quite right. You're quite right. I didn't say that clearly. The point that I was simply trying to make was part of it arrived in the, if you're trying to do your sums, part of the cash arrived in the 2024 year, and part of it technically arrived in the 2025 year, but it has arrived.
The other thing to consider on the water is we're going to spend every cent of water that we get in from the water, we're going to spend on water to rebalance. We won't keep that water.
The cash. Yeah, the cash is being used to rebalance the portfolio and buy additional water.
Okay, great. All right. Thanks, guys.
David, I think that's it. There's a couple online, but I think we're due somewhere else now. So I think we might wind it up. We'll follow up with those other questions offline.
All right, good. Thank you, everyone, for listening to Select Harvests talk about its full year result.