Welcome to our first half 2026 results presentation. I'm David Surveyor, the Chief Executive Officer and Managing Director of Select Harvests, I'm joined today by Liam Nolan, our CFO. The first half, next slide, please. The first half 2026 results presentation will be delivered by a webcast on the link displayed as advised to the ASX. After Liam 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 your screen. We'll progress you through the queue, you'll be given the opportunity to ask your question. In the event that we have questions outstanding at the end of the allotted time, please contact Andrew Angus via the email on the screen, we'll deal with them subsequently.
This next slide simply outlines the disclaimer and basis of preparation of the information contained in this presentation. Slide. In terms of the agenda, I'll start with a business update before handing over to Liam, who will discuss the financial results in detail. Following Liam, I'll close on strategy, transformation, and the key takeaways before we both take questions. Next slide. One more. Let's start with the results. Profit is increasing. Over the last three full year results cycles, Select Harvests has delivered a significant turnaround in profit performance. With a first half 2026 NPAT of AUD 26.6 million and more importantly, an underlying NPAT at AUD 29.1 million, this is a 33% increase in profit. I note underlying NPAT is a preferred internal metric of true performance with a definition provided in the appendix to the presentation.
With the benefits of the second half still to come, we expect the full year underlying and reported NPAT will be another substantial increase in profit for Select Harvests. The company is increasing profitability while absorbing the inflationary input cost pressures confronting every Australian business, as well as cost pressures unique to almonds. We'll talk more about these costs and our response during the presentation. The revenue graph shows our growth, and together the two charts on this page tell the story clearly, that we are now a different business and at a different scale. We've operated with financial discipline. That is capital investments that generate strong returns on investment and a continued focus on cost and debt. The company is delivering performance across every key dimension of its operational metrics.
Record safety performance, a high performing crop, possibly a record crop driven by better farming practice, record capacity with step changes in processing scale and efficiency. Record price capture flowing directly to profit, and record external grower volumes. Importantly, today marks a return to rewarding shareholders. This reflects the Board's strategy and confidence. Last year, the company, through the CFO, presented the market with its capital allocation model, whereby we intend to pay between 25%-50% of NPAT to shareholders each year in dividends. Select Harvests will pay an interim fully franked dividend of AUD 0.035 per share, and a decision on the size of the full-year dividend will be made at the completion of the financial year. The company is also announcing a share buyback of up to 10% of issued capital of 142 million shares.
The Board's view is the company is well undervalued, and so this is an effective allocation of capital. The company will, on any given day, make an assessment of the buying opportunity relative to our assessment of intrinsic value, conservatively determined considering our future prospects. Now, if we move on to safety. People are critical to the success of Select Harvests. Our TRIFR for the first half was its lowest ever at 3.7 injuries per million hours worked. We've demonstrated a sustained step change in safety performance, and this connects directly to the improvements we have seen in operating performance. You cannot get great operating outcomes without great safety outcomes. We're achieving this by driving a clear sense of deep and felt safety leadership. We're training people, we're strengthening safety accountability and behavioral ownership, and ensuring compliance.
The Bradley Curve shown on the right-hand side of this slide measures the maturity of the organization's safety culture, we still have opportunity. Our position on the curve evaluates how deeply safety is embedded in behaviors and attitudes across the workforce. As our safety culture matures, injuries and accidents will continue to decline and safety outcomes improve. Let's move to talk about the almond macro. The global demand and supply dynamic remains positive with tailwinds in place. I think this is now well understood by the market, I won't drain every point on this slide. On the demand side, the total global almond demand growth continues with a CAGR of 5%-7%. Prices have been increasing as the long-term global almond economic macro has improved. We continue to see this as recently as Wednesday this week when Stratamarkets reported another increase in price.
It's worth noting that this is also supported by industry expert Dr. Abe Padilla from Spectrum Data Analytics using his price elasticity model to forecast yet another 2.8% increase in price, or in other words, another AUD 0.30 / kg. Unit costs are shown on the bottom left of the slide. Australia has significant relative competitive advantage to the U.S. of slightly more than 30%, this being a function of both operational costs and yield performance. The key point being we have structural and durable cost advantage. On the supply side, the U.S. 2025 crop is 2.69 billion lbs with in-shell effectively complete, and limited high-grade kernel available to sell. California represents approximately 80% of global supply. Bearing the almond acres had reduced by 15,000 acres, and this is the first drop in 31 years in California.
Whilst the total farming area has reduced for four consecutive years and declined this year by some 47,000 acres. It should also not be missed, California now has an aging tree base. Australia's about 10% of global supply and forward volumes appear reasonably flat and likely naturally constrained by water access. There are varying estimates, it's worth noting that 30%-40% of Australian almonds will require replacing from 2030 onwards. Select is about 1,000 acres- 1,500 acres of this over the next four to five years. The time to maturity for trees is six to seven years, the supply side cannot quickly respond to an uptick in demand. U.S. new tree plantings are low, there are no indications that would suggest a change in this direction of trend. In our view, despite inevitable fluctuations in price, we have a very positive almond macro.
We think that's sustainable over at least a seven-year horizon. We have relative competitive advantage in cost. Select is very well-placed to benefit with good to medium-term pricing. Moving to financial results. As previously mentioned, the company has delivered a first half underlying net profit after tax of AUD 29.1 million, based on recognition of 75% of the crop. The result is an improvement of 33% on the previous corresponding period. The transformation of Select Harvests has seen the earnings profile of the company both change shape and become more robust. The second half of the year will see the benefits of external grower volumes, wholesales, and value-added sales contribute gains to the P&L. This year is also seeing the company strategy and execution overcome industry cost pressures. We expect profitability will meaningfully increase year- on- year.
Total production costs have been impacted by both uncontrollable cost increases and one-off costs. We'll cover these later in the presentation. The crop size this year is positive as our horticultural strategy starts to pay off. With a forecast crop of some 29,500 tons and a crop range of 28,000 tons-31,000 tons, despite the inevitable crop losses from the weather. We have 46% of the 2026 crop contracted. The forecast price for the 2026 crop is AUD 10.21. The pricing outlook remains positive. I'll provide more detail later in the presentation. Net debt for the first half of 2026 was broadly in line with our normal working capital cycle at AUD 183 million. We have continued to invest and allocate capital where there are strong returns.
Cash flows in the second half will be stronger, and you will recall me saying at the 2025 results announcement that there was still considerable upside for cash generation, and the gains resided within inventories and receivables. This view remains, noting the delayed harvest this year. For the purpose of reinforcement, the company has confidence in performance and a fully franked first half dividend of AUD 0.035 per share will be paid with a final dividend to be considered at the end of the year. This being supported with a share buyback of up to 10% of our issued capital of 142 million shares. Importantly, following our most recent strategy workshop, the Select Harvests Board has set a growth ambition of 65,000 tons and AUD 700 million of revenue for the company.
This is the next step forward in the transformation of Select Harvests, and we'll talk about it further in the strategy section of this presentation. What I'd like to do now is provide some more detail on each of our key results drivers, specifically volume, price, and production costs. Let's start with volume. The 2026 crop was grown with generally good growing conditions, although the heat to finish the crop did arrive somewhat later than normal. The big challenge for the Australian crop was the massive amount of rain we experienced during harvest, with our wettest area being our Bunnaloo Farm that received some 200 mils during February. The weather has notionally put a month's delay into processing and sales.
We are, however, thus far seeing outstanding yield results with a crop forecast of 29,500 tons, which is remarkable given the inevitable loss of some of the crop from the rain. It's almost certain our program would have delivered, and still might deliver, a record crop but for the weather. For several years, the company's talked about its new horticultural strategy and the goal of increasing yield. The strategy, goal of increasing yield, sorry. It looks like the strategy is delivering results ahead of schedule. We're currently processing our Nonpareil crop and have not yet commenced processing our pollinator varieties. In terms of determining crop size, the process this year is no different to prior years.
Whilst it's a large crop, there is always some uncertainty around total crop size at the first half results, and hence we provide a range. Liam can talk to the detail of that. There's naturally been speculation about the quality of the crop given the wet weather. Thus far, we are seeing excellent levels of in-shell and almond quality is high. To date, an 8% increase. This reflects the work we have done at the Carina West Processing Facility with Optimus Phase 3. This level of in-shell is positive for both price, it delivers an extra AUD 1 /kg for in-shell versus kernel at current prices, and it's also positive for cash velocity. We do, however, expect to see a wider range of quality this year as a result of the wet crop.
It should, however, not be missed, the company accelerated harvest to effectively a 24/7 operation, albeit at a cost, to protect the crop quality. The company also had the foresight to invest to manage for these types of events. We are using our new AUD 14 million crop dryer. We have the biggest drying capacity in Australia, and this will limit damage and give us some quality advantage. The expected lower quality mix profile is already reflected in our forecast market price. Now as committed, we have delivered a major increase in external grower volumes. Our expanded capacity is being filled with these increased volumes that deliver substantive profit value at about AUD 1 /kg . Our proposition is compelling as growers recognize our ability to get them better market prices, better yields for their crop, and better operational capability.
That is, they get their crop off the farm and onto our Stock Pads fast, and if necessary, we dry their crop to protect their earnings and we get them faster cash. The 15,400 tons of contracted external grower volume is currently sitting on Select Harvests' Stock Pad, and as it's processed in the second half, it will contribute to revenue and earnings. We continue to attract and add new external growers to Select Harvests. Next slide, please. Moving on to market price. Last year, we gave the first glimpse of Select's work in getting a price premium for our products. The top chart shows our invoice price performance against Stratamarkets, which is our industry recognized published price index. The data is based on price at the time of signing a contract, the FX rate of the day, and an adjustment for tariffs.
Far this year on invoiced sales, Select has taken a global commodity and delivered a price premium over the global market price of 6%. From a business perspective, the critical issue is the direction of travel, and what gives me great heart is the premium has grown from the 2.4% the last time I shared this chart at the end of 2025. I think there's now enough evidence to state Select Harvests uniquely brings leverage to every horticultural and processing improvement, and the leverage flows directly to the bottom line. The California crop receipts for 2025 at 2.69 billion lbs were within our forecast range, and we see an implied carryout of some 480 million-520 million lbs at the end of the California crop year. The most recent California bloom had some trying conditions with wet and cool weather.
We think the current 2026 crop size estimates as released by Terra Nova Trading, there's the AgWise/Famoso Wonderful forecast, the Blue Diamond forecast, and of course, the U.S. Subjective Forecast. The range across these is from 2.64 billion-2.7 billion lbs. We think this seems like a reasonable number. With these crop volume forecasts, we have seen prices increase through April and May. It is Select's view there will be more price to come. Demand growth is being driven by China, India, and Southeast Asia, underpinned by increasing health awareness. With China and India expected to double consumption by 2030, we see long-term demand and core organic growth for Select Harvests. Select has 77% of the 2026 crop hedged at AUD 0.6583. It remains our prognosis while prices may show fluctuation, we will see prices continue an upward trajectory over time, subject of course to FX. Next slide, please.
Let's talk about production costs. Total production cost is the cost of growing, harvesting, and processing. As we have done for the last several years, we normalize our cost per kilo to a 29,000 tonne crop, so you have effective comparative data. After three years of flat costs, this year you can see an increase in both inflationary and uncontrollable costs to AUD 7.33 /kg . We had previously signaled to shareholders at the November annual results and the February AGM that there is a shift in our cost base of up to AUD 20 million from items such as water, bees, power, and labor. That number has been compounded by one-off costs from the Middle East and wet weather. To manage this, we committed two actions. The first being to remain tight on the costs that we can control.
These have reduced by AUD 0.14 /kg and are already contained within the AUD 7.33 shown on the chart. Now we're not standing still on costs and have already identified the next AUD 10 million of cost savings to be delivered over a couple of years. These savings have come from a program of work that's been driven from the ground up with our people identifying waste and costs that can be reduced. Each initiative, as per normal, is to be mapped to a project with profit and cash impacts and timelines all managed in our project management office with the same executional cadence that has been delivered over the last three years.
The second commitment recognized the non-compressibility of some costs, and hence we committed to deliver on other actions that expand margin. Two examples being our investment in kernel recovery and investment in shakers, and these are captured in our PMO. Having covered off on the key drivers, I think I'll now hand over to Liam to discuss the financial results in detail, and you will give him some forgiveness if he has an unfortunate flu.
Thank you, David. I'll step through the following areas. First, the drivers of earnings. Second, capital management and shareholder returns. Finally, cash flow and the balance sheet. As you'll see, the first half reflects strong underlying operating performance, with the full year earnings to benefit in the second half from external grower volumes and an uplift in value add margins. Earnings growth in the first half is being driven by recognition of 75% of the estimated crop profit. In determining the crop size estimate. We have captured data points from all regions to form a view of the most likely outcome. As David mentioned, management has formed an estimated range of 28,000-31,000 metric tons. Crop profit has increased substantially, reflecting improved yields, stronger orchard performance and our sales team achieving a market price premium.
These results are all linked to strong strategy execution, specifically investments we've made in the horticulture program, investment in processing, specifically kernel recovery and Optimus 3, which are now delivering tangible results in terms of both volume and quality. Our sales premium is coming from being in market, understanding our customers and delivering measurable outcomes. Against that, we've seen higher production costs. As David mentioned, these are largely in line with what we've previously guided, namely across water, fertilizer, pollination, plus the impact of wet harvests. The wet harvest alone contributed approximately AUD 6.9 million of additional costs in the half, primarily in labor as we sought to expedite harvest, and also the additional cost of drying. The important point is the shape of earnings for the full year.
The earnings profile has now materially shifted with a much stronger weighting to the second half, and this reflects the timing and scale of external grower volumes going from 7,329 metric tons in 2025 to 15,400 metric tons in 2026. The uplift in contribution from value add sales, where we see full year benefit of pricing and operational margin enhancements. Finally, the seasonality of wholesale. While we've got a really strong first half result, it should be noted that we expect to see a significant increase in second half earnings compared to 2025. Turning now to capital management. Over the last three years, our focus has been very deliberate, strengthening the balance sheet and maintaining capital discipline.
We've largely achieved that, and as a result, we're moving to the next phase of capital management, which is balancing three priorities, maintaining a strong balance sheet, continuing to invest in growth, and returning capital to shareholders. Importantly, these are not competing priorities. The business is now in a position where it can do all three, and you'll see that reflected in both the dividend and the buyback we've announced. Starting with dividends, we're reinstating dividends for the first time since February 2023. Our policy is to distribute between 25%-50% of net profit after tax. For the half, we've declared a fully franked interim dividend of AUD 0.035 / share. We've approximately AUD 18 million of franking credits available, which supports franking distributions through to 2028. We've also announced an on-market share buyback of up to 10% of issued capital. The rationale is straightforward.
We believe the current share price does not reflect the intrinsic value of the business, and we have the capacity to return capital to shareholders. The buyback gives us a flexible mechanism to return capital where we see value while still maintaining optionality. It will be conducted over a 12-month period. It will be opportunistic, and it will sit alongside investment in the business. This is a balanced capital management approach, supporting shareholder returns without compromising growth or balance sheet strength. Turning now to our balance sheet, and the headline here is that Select Harvests is in a strong financial position to support both growth and shareholder returns. Net debt at the half sits at AUD 182.6 million, which reflects the normal seasonal working capital cycle as you'd expect at this point of the year, with crop sales still to come through.
Importantly, we expect this to reduce materially through the second half as sales cash flows come through. April and May are already tracking towards record sales volumes. We're confident in that trajectory. On the point of debt, firstly, it remains well within our facility limits. We have total facilities of AUD 300 million. Second, it's also important to note that the seasonal peak is now behind us, and we expect debt to reduce in the second half as inventory is converted to cash. Third, our balance sheet remains strong and flexible, supporting both growth, investment and capital returns. It's worth noting that further, due to the crop and delay in harvest, we anticipate having a higher carryover into 2027. This means that along with. We're finishing 2026 with a strong debt profile. We will also benefit from 2026 crop sales into 2027.
This will support sustained lower debt through 2027, and another reason we have confidence in our balance sheet. All debt covenants were comfortably met at 31st of March, and we forecast continued compliance over the next 12 months. When you consider the underlying asset base of the business, the balance sheet is not just solid, it provides a strong foundation for capital returns, which is why the Board has declared a fully franked interim dividend and an on-market buyback. Subsequent to the half, we've also secured an additional AUD 60 million of committed debt capacity on favorable pricing terms and a five-year tenor. This increases total debt facilities to AUD 300 million and delivers three key benefits. First, it reduces refinancing risk by increasing available headroom and extending our debt maturity profile. Second, it reduces the overall cost of debt, reflecting improved pricing achieved in the current environment.
Third, it enhances flexibility, ensuring we have capacity to manage potential volatility, and also growth. The additional facility increases the average tenor of the debt portfolio from 2.7 years- 3.3 years, which is a meaningful improvement in the maturity profile. This is a proactive step to further strengthen balance sheet, providing certainty and flexibility as we execute on our growth strategy. Looking now to cash flow. The first half cash flow is broadly in line with our expectations, but impacted by higher wet harvest costs and lower crop carryover from the prior year. The success of our faster to cash initiatives implemented during 2025 are expected to again deliver in 2026, with the company focused on further optimizing our sales and operations planning. On the investing side, cash flows are higher, but this is deliberate.
We've invested in Optimus Phase 3, kernel recovery, crop drying capability, and new harvest equipment. These are all high return product enhancing investments. We expect stronger operating cash flow in the second half, driven by the higher sales volumes, improved planning and execution, and the contribution from the non-crop earnings. Similar to earnings, cash flow is also weighted to the second half. David, might move to you to talk about strategy and transformation.
Great. Thanks, Liam. Next slide, please. The company transformation continues to translate into tangible operating results. We started with reset in 2023, moving through stabilization, capacity build, and now being growth-ready. The benefits are evident across profitability, operational metrics, and customer experience. The historic view of Select has been based on profit in horticulture, specifically this year's crop size times this year's sell price less costs. This framing of Select Harvests is now too narrow and numerically incomplete. The company's strategy is now generating returns by broadening value creation across its core functional streams. This slide gives you a segmented view of where Select makes money across horticulture, processing, and sales. Certainly value is created through growing almonds, however, it's also being leveraged by the rest of our business model such that revenue has more than doubled, profit is growing, and ROCE is increasing. Next slide.
As we move the conversation to executing strategy for our strategic pillars, the company now has a demonstrated track record of delivery. With respect to our pillar for sustainably greater almonds, the horticulture strategy for Select's farms are delivering volume and quality with a possible record crop to be recorded for 2026. We have better fertilizer, water, and hygiene practices, and the relative health of the trees is obvious as you drive the highways. The next crop year is the first full complete year of the horticultural program. With excellent tree health, we create the capacity for bigger crops. We're excited about the future and specifically the 2027 crop size. Harvest practices are improved. We are timing harvest to maximize nut growth and minimize the impact of insects. We are running faster and shifting our harvest towards 24/7 operation to optimize the quality.
We've also invested in new kit to maximize the yield and minimize the number of nuts left on the tree. In terms of portfolio management, it's also worth noting the pending sale of various Australian almond assets. The market should not assume the Select Harvests Board views all existing leases as being something we would extend past current dates. You've seen this in action with Select doing an early hand back of 300 hectares of the Yilgah farm. As we've already covered, our external growers' proposition is compelling. We have record external supply, and we are growing rapidly. From a processing perspective, you have seen us shift scale. Optimus 1 is completed. It added 10,000 tons, taking us from 30,000 tons- 40,000 tons of capacity. Optimus 2 is complete. It added a further 10,000 tons, taking us from 40,000 tons- 50,000 tons of capacity.
We discovered Optimus 3 during Optimus 2, that has added another 5,000 tons to create a total of 55,000 tons of capacity. Just as importantly, it has allowed us to step change and increase in-shell by what looks to be approximately 8% on high-quality crop. In terms of maximizing returns from the crop, the gains around sales and logistics velocity are apparent and directly support our cash flow. We said there was more to gain from inventory and receivables, we're now going after this prize. From a margin perspective, we continue to gain through our pricing disciplines, as you saw on the earlier slide, our ability to tailor quality grades directly to customer requirements. I'll cover step out growth on a different slide, I'd like to talk about our enabling pillar. The people capability build continues, having top-graded skills across finance, HR, and IT.
That our procurement capability is building with the function centralized. We've commenced the automation of processes, such as connecting our ImpexDocs export documentation to our core ERP. We have data and analytics rolling out with Power BI and selective use of AI. By way of example, we're recreating our price premium management tool. It's called the upside tracking tool, and that's moving into our BI system to further enhance capability. Next slide, please. Now, the purpose of this slide is really to try and bring to life the shifts we've made across the company. The page lists four key projects. It shows you how our investment aligns to our strategic pillars, and in many cases, touches several of them at once. We're consciously investing to synchronize the business across almond supply, processing capacity, and sales to maximize the company return.
The shaker investments drive horticultural yields to substantially increase almond supply, but they also lower cost to operate. The crop dryer maximizes quality, so we maximize price and returns from the crop. The crop dryer is also attractive to external growers to substantially increase almond supply and processing margins. Optimus I, II, and III ensure leadership in processing scale and efficiency. They provide low-cost production, but also high quality, being low chip and low scratch almonds. It increases capacity to process both our own yield improvements and attracts external growers and maximize the return. Kernel recovery increases our yield and substantially increases almond supply. In doing this, it also increases the attraction of Select Harvests to external growers and opens up new returns. The point is, we're using our capital allocation to generate growth aligned to our strategic pillars. Next slide, please.
In terms of step-out growth, the company has effectively doubled in size over the last three years. The Select Harvests Board has now set the next series of targets with the aim of increasing Select Harvests to 65,000 tons and AUD 700 million of revenue by 2030 from today's base of being approximately a 45,000-ton business. The program takes the existing strategy and benefits for shareholders and moves them to the next logical scale. The substantially greater almonds will come from, firstly, the first or another crank on the wheel on the horticultural strategy to drive yields much higher on a per acre basis. Secondly, we think there's the opportunity to improve the productive capacity of our existing assets. To this end, Select Harvests has appointed a capital projects manager to lead this part of our portfolio. Thirdly, through the continued acceleration of external grower volumes.
We think our value proposition is compelling. We will be at least 20,000 tons next year. In fact, we would have to slow down to achieve that target. From a leadership in processing, there are two key activities. The first is we have identified a path to further increase plant capacity from 55,000 tons- 65,000 tons. The second is to speed up or debottleneck sorting and packing so that it runs at the same speed as our 55,000 ton and then 65,000-ton primary processing front end. This will dramatically reduce working capital. It will further improve the customer experience, and it will increase our cash position. Both of these improvements repeat the themes of low-cost capital spends and fast paybacks. From the perspective of maximizing returns from the crop, we think our model's scalable and leverages higher upside margins. It will give more capability to maximize price.
The increased volume will also unlock a faster supply chain and speed order to cash. Critically, the program of work delivers margin growth. The achievement of 65,000 tons will be a combination of Select Harvests volumes and external grower volumes and is well within our capability with only targeted investment. Whilst this slide notes Select has some M&A capacity, you should explicitly not assume this means the company is about to undertake any acquisitions. The Select Harvests Board is clear. Financial discipline is not negotiable. We move now to our PMO. We continue to use the project management office to drive outcomes within the business. The PMO has, in many respects, never been more important. You can see on the slide some AUD 18 million on the right-hand side of inflationary costs and another AUD 6.9 million of one-off costs that we expect will not be repeated.
Without our various business initiatives, the starting point for Select's profit would have been back by AUD 25 million this year. You can see the H1 gains do not completely recover the issues, and we're still at a - AUD 3 million. There's high certainty in the second half gains, the reality is it takes until the second half for the ship to right itself. As I previously noted, the company has found another AUD 10 million of cost savings to be delivered over the next couple of years, and these will be added to our PMO. I think as you look at Select Harvests, what you see is a company that is now a safer company. The company's in good shape with underlying profitability increasing. The company's keen to reward shareholders through both a fully franked dividend and a share buyback.
You can see the capacity to fund this as our working capital turns to cash. The Board has set a new ambition for growth that logically leverages the strategy, it's deliverable, and will increase profitability. The transformation strategy has created for Select Harvests a wider earnings profile from horticulture, processing, and sales that is more robust, and this will flow through second half outcomes. All of the company's key operating metrics are performing and capable of managing the pressures of inflation and wet weather. Select's approach to financial discipline on capital, cost, and debt is supporting the balance sheet. On that note, thank you, and I'll hand back to Andrew to coordinate any questions.
Thanks, David. We've got a bunch of questions here, so I'll head to that. First up, we have Apoorv Sehgal from Jarden. Apoorv, can you hear me?
Hey, good day, Andrew and team. Can you hear me?
Perfectly.
Yep, gotcha.
Awesome. Okay, thanks. First question, just on the 28,000-31,000 metric ton crop production range or midpoint of 29.5. A couple of questions. The wet harvest recently, can you quantify the tonnage impact that that may have had, if any? Secondly, it's a reasonably wide range. Can you just talk to the low case and the upside case scenario there? What needs to happen for either 28,000 or 31,000 being realized? Do you see that upper end being more probable than the lower end?
Let me have a go at this. In terms of the wet harvest, it is difficult to quantify exactly how much we've lost at this point in time. We do know there was absolutely loss that's come through from some of the rain events, particularly we talked about Bunnaloo. Where the rain was so intense it really had nuts being destroyed and flow onto the road. We know that we've experienced some weight loss during that, kernel loss during that. In terms of the range. We'd need to see for the top range, we'd hope to see continued numbers coming through like they're coming through. That's probably the best we can sort of talk to in that. It is uncertain.
We do the same process each year in terms of how we estimate the crop, and at this point, we don't have pollinators. We haven't processed any pollinators. Our assumptions are that we're going to continue to see strong results from the pollinators. If they were to outperform, then we'd see the top end range. If they weren't to outperform, we'd see at the lower range.
Okay. The 2%-3% yield improvement from the kernel recovery line, is that benefit already reflected in the midpoint of that volume guidance?
Yes, that's reflected in those numbers. Yes, at the midpoint. Yep.
Yep. Okay, cool. Just on cost, if I look at FY 2026, the almond production cost around AUD 220 million. Can you just talk to the FY 2027 cost outlook as well? Just because, so water, fertilizer, freight costs, they've all moved a fair bit higher in recent months. Assuming current rates kind of hold, I presume there's an annualization kind of impact there that flows through in FY 2027. Then I guess on the flip side, I'm just thinking you've got AUD 7 million of wet harvest costs as well this year, which theoretically unwind in FY 2027. Net- net, if normally for Select Harvests we'd assume or a low- single digit percentage sort of cost increase in most years.
How should we think about that in the context of the annualization of some of the recent cost headwinds coming through, but then also the unwind of the wet harvest costs?
Let me just You're spot on in terms of the wet harvest costs. All things being equal, we wouldn't expect those to occur, but it's still obviously subject to the weather in 2027. In terms of the annualization, I wouldn't expect any further incremental increase based on an annualization. It's not necessarily first half, second half weighted. All our crop growing costs are essentially incurred in that first half. There would be just a normal CPI adjustment, is where I'd expect it to go. Nothing abnormal at this point.
Effectively, you grow your 2026 cost by CPI, but you take off your AUD 7 million for the wet harvest, one-off impact?
Yeah, we've got some cost out initiatives as well that we're working through.
Okay. No, that sounds reasonably positive. Just one final one, again, for probably for you, Liam. Just on the almond price of AUD 10.21 a kilo that you've indicated. I may have misheard on the call. Did you say 77% is hedged at AUD 0.6583? Is that right?
Yes, I did say that. Yes.
Yeah. The remaining 23% that's unhedged, at what rate are you assuming that's going to be in your model?
We have a very clear treasury policy for the way that we go about managing FX, and that is based on taking the lowest possible risk position that we can. We're an almond growing and selling company, we don't try and be an FX trading company. We lock in a rate of a proportion of our crop increasingly as we have certainty about the crop size. We're absolutely sitting within policy for doing that, and we'll take up the next balance of it over the coming period. If you locked in today, you'll be at the sort of AUD 0.71-AUD 0.72 range on the stuff that you'd lock in now, and that would probably give you an average that'll be around AUD 0.67 over the course of the total.
Which is used for our AUD 10.21.
Okay, awesome. Thanks, guys. Appreciate it.
Okay. Next question that we've got is Josh Kannourakis from Barrenjoey.
Good morning, Josh.
Hi, David, Liam. Thanks for taking my calls, and Andrew. Questions. Just a couple from me. Just firstly, just understanding around first half, second half, because it is a bit different from what has historically been the case. Just so I understand, all the almond crop is clear. As you mentioned, the third party is sitting on the pad, so that all comes through, and you mentioned the sort of AUD per kilo rate. In terms of hull, if we look back a year or two where sort of similar levels. Hull was 50,000, doing AUD 200 or so per ton. How should we think about hull into the second half and also some of the value-added unwind? I imagine you get a pretty big delta on that as well.
Yeah, it's a good point. As you know, we don't specifically break out the various bits of our profit stream at that level of detail. To try and give you some steer, clearly our hull volume will be increased because our processing volume's increased. The value of hull continues to trade at pretty high levels over the last few years. A quick Google search would probably give you a good sense of what that number is.
Got it. Okay, cool. I think a couple of years ago, it was almost AUD 10 million or something. Yep. Okay, that's good. Second point, just around the value-added stuff. Obviously, you had some headwinds, I guess, in previous years because of the timing of the cost, because obviously the cost reflects where you are. Because of some of those things, you'd probably got a more favorable backdrop there as well. I'm just trying to reconcile, you obviously got a slight loss in the first half there from that component. Obviously the net of that would unwind into the second half. Is there anything else you can say on that? Also just in terms of maybe some of the other initiatives you're doing around the value-added side of things on the sales elements as well.
Yeah, sure. The non-crop loss, yes, for the first half was roughly about AUD 4 million. We expect that to turn around, that's driven by the sort of the three elements that really we've touched on. First, we've talked about wholesale. That's really largely timing. We achieve all those in the second half, and volume as well, we'll see a higher number. You talked about the value add. This year we'll see the full year benefit of price coming through. We had some contracts that had a lag into the second half, so we'll see an uplift in the second half. We've also had some operational improvements in our value-added facility, which is really driving some substantial loss reduction and yield improvements in that part of our line. That's been really encouraging, and we expect to see the benefits of that in the second half.
That's great. Then just in terms of some of the longer-term guidance, you mentioned around the 65,000 tons. I imagine, in a year like this where people have been going through a lot of issues and reductions in quality and volume because of the wet harvest, I imagine the dryer's getting a lot of attention. Can you fulfill the capacity? Can you sort of fulfill, I guess, the demand side of that equation as well moving into next year? I think, David, you said north of 20,000 tons is likely. Just remind us the capacity and then some of the additional unlocks you've got planned, and how we should think about that scaling into 2027 and beyond.
Certainly, as it relates to the processing capacity, specifically in drying, we can dry about 1,200 tons a day through our dryer. If we topped out that capacity, we actually have some other mechanisms that we run, A-frames and things on the ground that allow us to actually increase our drying capacity. We've got some flexibility in being able to manage through an increase in supply. 1,200 tons, you can do the math, could get you through 20,000 tons. If the external growers takes you 10 days or so. That reflects the rate of things that are coming through, obviously, when various farmers are dropping off product. We're pretty comfortable around our ability and capacity for drying capacity. The unlocks that get you from to 55,000 tons- 65,000 tons, it's not one issue, but it's a series of projects.
A lot of them come to things that relate to how do we change the exit speeds of things out of our main processing parts of the plant. I'll give you an example. The speed at which we exit the hull and shell to a hull and shell pile so that we can sell that for cattle feed and other applications. If we can speed that up, that allows us to speed up the front end of the processing part of the plant. We've got a series of those sorts of small de-bottlenecking pieces that we need to do that allow us to actually change the pace of the plant and get to the 65,000.
Okay, that's great. Thanks, guys. I'll pass it on to someone else. Appreciate it.
Josh. David, next one we've got is Ron Shamgar from TAMIM Asset Management. Ron, over to you.
Hi, guys. Good result. Just a couple of questions. In terms of the external grower harvesting and processing, what's the margin there?
The margin on that's about AUD 1/kg .
Yeah, okay. Net debt is around AUD 180 at the moment. What do you expect sort of ballpark on June 30?
June 30, we don't do a June 30.
Sorry, yeah.
30 September. Yes. I think we're broadly in line with 2025 is where we're at tracking. Just as a reminder, we are tracking roughly a month behind in terms of our late and wet harvest. That's one thing just to note around that. The second thing is we've made a decision to bring forward into 2026 some expenditure relating to the 2027 crop. We've been able to secure fertilizer, which is really important in this environment. There's a shortage of that. To do that we've had to pre-buy that, so that's impacting our 2026 cash flow of roughly about AUD 12 million or AUD 13 million. This year will also be impacted by dividend and buyback, which is probably just a bridge to why it isn't as low.
Why it's not going down further?
Why it's not going down further, yeah.
Otherwise we would've expected a lower full year debt position than the sort of similar number to last year, but showing that sort of AUD 79 million, AUD 80 million. The fertilizer one, just to put one more line of color on that. We had all of our fertilizer booked and organized, and then of course the Middle East war came along, and we received a series of force majeure issues that came towards us. Clearly, having fertilizer is critical to ensuring the forward-facing yields of the company and continuing our horticultural program. We found a solution to that problem, but it has meant that we have to part with the cash earlier than we otherwise would've, and hence, that puts a little bit of drag on our full-year cash position.
Yeah. Okay. Similar to FY 2025, September 30th, but you're also including some buyback and dividend?
Correct.
Spend. Yep. Okay. Last question is, obviously you come out with a 2030 sort of target. The business sort of seems to be doing well. You got industry tailwinds. Why are you leaving now?
Sorry, what? Sorry, why am I leaving?
Why have you resigned? Why not stay for the good years?
Yes. Well, look, I think the answer to that is, clearly it is my view that Select is a great company. I think it has got some great opportunities ahead of it, and the company is trying to lay those out with that growth part. I also, by the way, I think the company has got a very good Board. I am supportive of what they are doing and where they are going, and I have got great relationships with them. There are no issues related to Select Harvests as to why I would be departing. My departure really relates to a specific opportunity that sits in front of me and things that are good for the future of my family.
Okay. Thank you.
Thanks, Ron. Next question we've got is from Paul Jensz of PAC Partners. Paul? Paul, are you there?
Yeah, I'm here. First quick one is just on the percentage of the almond crop to be sold from here. Maybe Liam would be the one to ask that. It looks as though it's 25% from what David said, but I just want that confirmed.
I think we're 40% contracted.
Yeah, we're 46% contracted at the moment. Sorry, Liam.
Yeah, no, you go.
No. You finish.
Yeah, 46% contracted, Paul, at this stage.
All right.
So we've got 54% to go.
All right. Good. When we do our first half, second half split, we're putting 54% into the second half number, correct?
In terms of what? No.
No.
It's probably not.
That's the number I'm after. It looks as though you were trying to point us to saying 25%.
Yeah.
Got in the second half.
There's two answers to this question. From a profit perspective, you've got 75% of the crop profit in the first half, 25% of it in the back half.
Yep. That's the number.
In the second half, profit-wise, you need to add the profitability of the external processing.
Yep.
The profitability of the value add, and the profitability of all of our wholesale. That's at a profit split, that's the way that it works. At a cash split.
Yeah.
The majority of the cash will come in, you know we've got this sort of seasonal profile that as our debt profile increase in the first half as we invest in to grow the crop. Then in the second half you'll see that come down substantially. Similar to that last question, we'll get down close to the sort of last year sort of numbers, that sort of AUD 79 million-AUD 80 million number. That's because with the physical selling and invoicing and then cash collection is happening in the second half of the year.
Just inside that then, the cost base for that 75% that we're saying is sold in the first half, with your guidance, we've got to, I suppose, make an assessment of lowering that, or raising that margin, or lowering that margin a bit because we haven't got the benefit of the hull and shell and all of the extra benefits that lower your cost to that AUD 757, correct?
That's not in the first half results. Paul, if I just take you through just the accounting rules. Essentially what we do for the first half is we create an estimate about crop profit. Which is our estimated sell price. Our estimated costs to produce the crop, and then by the size of the crop, which gives us an estimated crop profit. Which is, I think it's on the financial summary slide. We take 75% of that number.
Yep.
And book it to profit. We book that in the first half, 25% in the second half. In the second half, we expect to get all the gains from the third party processing.
Yep.
Which has been booked in the second half, along with the wholesale, which are all timing phased in that second half. Also, we flagged an uplift in our value-added margins in that second half as well.
All right. Can you hazard an estimate for your full year guidance then?
We don't put out a specific number for the full year guidance, Paul, no.
Okay. You're keeping us in a job. That's good. Second is on just the cost base versus the California cost base, which is pointing to the medium term. Your confidence as a team of that being a sustainable difference going forward?
Yeah, very confident about it. We don't see any evidence that would support an increase in yield through. I was really saying the cost, the difference is a function of both yield and actual operational cost. If I start with the yield piece, there's no evidence to suggest that yields are going to increase out of California. In fact, one of the challenges that they still have, and there is variability, but you've got some farmers putting on a full fertilizer and water and hygiene practice model and some doing a greatly discounted one because they have not been making money for a period of time.
You've got that overlay on the yieldness, and the other overlay that you have on yield, which is very unquantifiable, is that, they talk in California about as their trees tend to age, they tend to see a drop-off in the yield of those trees. We don't see that when we look at Select Harvests, by the way, when we look at our tree profiles. We've got some trees that are old that still yield very well. Anyway, you've got a yield issue, and then when you look at the cost-based drivers, we don't see anything that would immediately drive a shift in that. In fact, again, the pressures for things like water in the U.S. continue. There's nothing that would lead me to think that there's going to be a change in the cost relativity at a dollar operational cost level.
The replanting cost. Just a final question for you, maybe David or Liam, is what replant cost estimate does Select have for both Select and California? Because that would be in addition, I would imagine, to those numbers.
Well, I think first, for California, we don't have a particular view on the amount that's going to be replanted. In fact, we expect that.
Maybe I can reframe it, David. Sorry. To maintain that acreage of the 1.3 million acres or so not increasing, but as the trees mature, have you got that factored into the 9.69, or do you think that's in addition as I think it is?
What's your AUD 9.69, sorry? Just lost.
In your slide seven, you say AUD 9.69 cost per kilogram.
Oh, sorry.
For California.
Sorry. Yeah.
if California wants to maintain, and as the trees mature and they need more trees.
Yes.
To replace the existing ones.
Yes.
What do you say is the cost base for that?
That AUD 9.69 is based on what we think the operational cost of farming is. It's not really a consideration that goes to the cost of replants or otherwise.
Okay.
It's direct operational comparison.
Okay. Good. Thank you. We'll see you later in the week.
Thanks, Paul. Cheers.
Cool.
David, we are right on time for our next meeting, so we're going to have to wind up. I'll hand over to you to do that, and thank everyone for participating.
All right. Well, thank you all. We greatly appreciate you listening to the Select Harvests story. We hope there's some good news in there and that you're as excited about the future as the company is. Thank you very much for attending, and we'll look forward to speaking to several of you later on in the week. Thank you. Bye