Earnings Call: H1 2021

Feb 23, 2021

Thank you for standing by, and welcome to the New Zealand King Salmon Half Year Results Conference Call. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. I would now like to hand the conference over to Mr. Grant Roseborn, Managing Director. Thank you. Please go ahead. Thank you, and good afternoon, everybody. Let's make a start on Page 3 of our tax. Obviously, we are impacted by COVID-nineteen, many businesses around the world and in New Zealand are. I think the good news as far as Kingfasme is concerned is we're through the worst of that now and the effects that remain are temporary. Certainly, our profitability has been impacted. That's it's brought about by increased air freight costs. We had excess inventory, which is very unusual for us. Normally, demand exceeds supply by a great deal, but we had during the COVID situation, we had excess inventories that we had to take care of as those of. We've worked our way through that, and I'll comment on that as we go through a bit further. We also took the opportunity, if we were going to have some so called disposal sales, why not invest in our brands, so the legal brands in New Zealand, in our smoke products and used some of that money to increase our market share, and I'll take you through that, and that's been highly successful. The pro form a operating EBITDA results that we had for the first half was 10,500,000 dollars That compares to $16,500,000 last year. Our pro form a NPAT was $3,700,000 compared to $8,700,000 in the prior half. And the statutory NPAT was a loss of 4.3 compared with a 20,800,000 in the first half of twenty twenty. That is impacted by greatly by a fair value calculation of our growing biomass in the water, and Andrew will comment on that further as we go through the presentation. A third of the key to this is that we brought on an Atlantic program a few years ago now. As I mentioned, we've traditionally had a shortage of fish, one of the ways to address Blackwater's imported land salmon, and we're pleased that that's now making a positive contribution to our profitability. So let me go to Page 4. First half summary continued. So we've had strong domestic and international recovery in sales. So our sales of about 3,440 tonnes is similar between the two halves. That's good news. A really important point is none of our branded products have seen an increase in their base price. So we've held on to our pricing for Orocaine. We've held on to our pricing for Regal. So the excess inventory has either been cleared with a temporary price promotion that doesn't affect the base price. So there's no, for example, renegotiation with the retailer to try and reestablish that price. That just goes back automatically once we don't have as many price promotions on. Or it was placed in this business or retail channels unbranded. So the good news is Orocene has remained at extremely priced and retail channels also. We're pleased with the way that our business in North America has handled the pandemic. That business is incredibly dynamic as I think the whole American economy is actually and been able to pivot away from Michelin and Hackett Restaurant to more of home delivery. Also fishmongers, which is more into retail. We never really had Oracane in fishmongers that we do now. And that probably puts us in a good place for the COVID recovery. We think we will retain that business going forward. I mentioned that we have had some price promotions, and we've seen our market share increase from 49% to 56% as a result of that. And actually, during the COVID period, we did a calculation on what we think our position in that market is. And many of you know the number, 55%, we're 55% of the world's total supply of aquaculture king salmon. When we worked out what we are of smoked king salmon, it's about 95%. So we, as a single company, supply about 95% of the world's smoked king salmon supply. So that's a really strong position. And because of that, that's why we get such a positive reception from retailers typically around the world when we go and present our Regal Smokesman Ranch. Something that has caused us out though is during COVID, none of those supermarket chains are listed in new lines. They're not setting up new line appointments. What they're doing is focusing on toilet paper, sugar, flour, the basics of life. But that will come back, and we will be able to roll out our international smoke salmon strategy going forward as the pandemic subsides. We had sales of $82,300,000 which slowed down slightly on the comparable period. Something else that was really great during this during COVID or during this third part, we ran a concept, a trial on a new concept. So many of you would know, we have all the team and we could use some round numbers. Let's say that's worth $20 FOB Nelson and you know that we have this amazing digital tie in and that's more like $60 FOB Nielsen. But we didn't have anything in between. And so at the height of the pandemic, we thought one of these we run and strong on a concept called June Hom, And many of you are going, what the heck is a June hog? Well, it's a North American phenomenon. They come back in June, so they're 6 months out of cycle with the rest of the run. And they're as big as a peak, so they call it June hog. And we had some of them available because our fish had stayed longer in the water. So these were 7 kilos plus up to sort of 11 kilos in the 5 fish. And we said, well, can we get a premium? And we did manage to get a premium even though many of our restaurants were shut down, even though there was great financial uncertainty. So we're convinced now that we have an intermediate value added proposition between the Orokin and the Taiyuni, and it's called June Holt. We're very pleased with that. Then our outlook. We'll certainly make further comments on our full year, which actually ends now on the at the end of January. So we'll have further to say then. We haven't cleared all our excess inventory yet, but we're certainly taking provision for it. And we've lost and loaded it all. So when COVID happened and we had this perfect shift, we weren't sure what we were going to do with it. We've worked our way through that. We're pleased with the speed and the way our team has handled that. We're on track time wise. And we're pleased with our cash flow situation. So we thought we're going to have a bad cash flow situation, and we've managed that extremely well. The thing that has been more difficult is the margin on the disposal side. So I think you all know King Salmon in full flight, a 10 90 bird company can get great margins on the product. Demand is being supplied. Lots of great content to fill our fish under. So let's just use a theoretical number. Let's say we make $8 margin per kilo on that. When we went to disposal sales, we thought we'd probably make, I think, just $2 but the reality is it's more like minus $2 So if we stay true to our strategy, a 1,000 marketing word company, we're like an $8 per kilo margin company. But if we stride into that commodity territory, we know that we go to great lengths to stay out of that. COVID has forced a little bit of that. We're into a potential loss per kilo situation. And that was more than we anticipated. Then if we go on to the next slide, which is we've got a map there and some key financials. The only point I really want to talk to you here is how little those volume numbers have changed there. So that shows our revenue per country or per region. And there really hasn't been much of a change. So there's a change in the mix of a couple of countries where those disposal sales have happened. But overall, the revenue split has remained remarkably constant. And now I'll hand over to our CFO, Andrew Clarke. Thanks, Grant. So turning now to Slide 7, which is the summary financials. As Grant mentioned, the sales volumes have recovered strongly, and he'll talk a little bit more about that further into the presentation. But we've had our margins very significantly affected in the first half, by airfreight costs, disposal sales or the provisioning towards those sales and the New Zealand retail brand building and the promotion that we carried out this summer. The other thing that has generated a difference between the GAAP and pro form a results is fair value of livestock, and that's around a combination of slightly smaller fish in the water at gas state and also the margin squeeze from air freight and floating sales. We do see these impacts as temporary. As we've mentioned in the outlook slide, we expect to be through all of the excess fish frozen fish sales by about the middle of 2021 calendar year, so within 6 months' time. And then by late 2021 calendar, we anticipate that we'll be back to what's a much more normal situation for us, which is that we don't have enough fish available to meet the demand from markets globally. And one of the reasons for that is when you look at the U. S, for example, you see that we've sold the same or slightly more volume than we sold first half last year despite all the restrictions. So we've got new channels to market. And once some of those restrictions ends, there's a lot of opportunity to continue to grow our business. We anticipate being able to optimize our sales and tune up profitability along the way. Slide 8 shows our harvest by farm. And just a couple of comments here. So harvest up a little bit in this period. We slowed it during COVID, and we've accelerated it since then to get some of the fish back into the right position, balancing up our sales program and then our frozen program. You might ask a couple of questions there around Copawa that's been harvested in January, February and then Waitata the current N at the moment. Slide 9, the balance sheet, remains very strong despite having to fund a lot of extra livestock and inventory. During the period, we have taken on the business finance scheme line that the government's provided, which is done through our bank, but with government support, it's $5,000,000 And in addition, we've got our usual being debt funding facility for $60,000,000 Plenty of headroom there, support of bank and no compliance issues. We do anticipate selling down inventory during the first half, as we mentioned. Haven't seen any collection issues, which has been a combination of hard work, probably a little bit fortunate in some aspects. We had to work with 1 or 2 customers, but a very successful outcome there. As previously advised, we've slowed the CapEx a little just to preserve cash. The focus has been on the our 10th burn factory first feeding plant first feeding facility, sorry, and also some routine replacement items. Again, in the interest of preserving cash, we aren't declaring a dividend at this point, and that will remain under review at each reporting period. Other comment to note on our balance sheet is with during the COVID period, so going back between March June last year when the Kiwi tanked against other currencies, we took the opportunity to significantly increase our hedging portfolio, and that's now created with the New Zealand dollar increasingly strengthening against U. S. In particular, but also yen that's created a significant asset on our balance sheet. I'll hand back to Grant on Slide 11. Yes. Thanks, Andrew. So the main point here is to have a look at the chart at the bottom. So 'nineteen is in light blue, 'twenty is in dark blue. You can see the effect that COVID had and where the excess inventory came from. As I mentioned, that's a pretty unusual situation for us and something we have not experienced over the 11 years that I've been here. We have plans for all sorts of potential things that might go wrong, and we have all sorts of freezing programs in other markets we might open up. But I must admit, we just did not see COVID coming where every food service market in the world would go into a very difficult situation being locked down and many restaurants didn't close. And then also that retail that we normally engage with so well wouldn't be open for new business. So if you can see how we fought our way back out of that and then you see again the effect of the second Auckland lockdown and then the quick fairly quickly, totally out of that one. And then you see in our Q4, we're back to a very normal situation or even in December when we ran those price promotions by our smoke products, a very good result there. So really, that picture paints a 1,000 words about the initial problem, some follow-up problem, how we work our way out of that and then with a good result at the end then when it comes to evolving. Then to look at the individual markets. So our export markets, 1st off, so North America, always a bright start for us. So even though this country has been through a whole range of difficult things from election cycles, COVID mismanagement, everything. But our team there has done a stunning job. And as I mentioned, I think it's an incredibly dynamic market. They love the story that we tell. We get more questions and more interest from the U. S. Than anywhere else. In fact, you might have seen there was a stuff article that we sold a single fish for $1700 We put it on a platform called Gold Belly. So it just goes to show. And I think the customer mentioned in there that he was aware of Oracin from the various menus that he's seen and chef that he's spoken to and really wanted to have one. And it's pretty rare for that to be available to an individual plus $700 So we're pretty pleased with that. And you can see the June hold concept there. So it's still under the Orokin brand, but it's got very different delivery to both the standard opening, as I put it that way, and the Tyee. And as I mentioned, we're very excited that once COVID is cleared up, the fact that we got a good premium in the very high of the storm means we'll be able to do even better than that once a more normal situation returns. And we're really pleased with the way that, that's been embraced in North America. And we will also roll it out to other markets. Then looking at China. So China has always been difficult for us. We build our business, and then there's something that's wrong with some geopolitical thing or some Huawei decision or whatever it might be. Things go wrong in this market. And we're sort of our sales have been significantly decreased there. But the good news is pet food goes from strength to strength. For some reason, salmon seems to have a geographical focus that pet food doesn't. And we've got 2 people in Shanghai and China, and their attention now is nearly fully on pet food. And China is our most profitable pet food market. Then turning over to the page, you can see all of our other markets here, Australia, Asia, Japan and Europe. And you can see generally a good result in all of them. So Australia is under we've got a new manager in there. It's been there a while now, but the results are coming through. And we're making really good margins in Australia. Really, we've engaged with really top customers. They, like the Americans, appreciate the Oregon story. And you can see at least in 1000 results, and that's not driven by low prices. That's at full price, high margin products for Australia. So we're very pleased with that. We see some products in Asia, including Japan and China, and that's mainly airline and the lack of availability and problems associated with airlines into that market. So that market has disproportionately suffered as a result of that. Generally, once we got out of that initial COVID emergency situation, We've had enough air freight, but it's certainly been more expensive. So it can be anything like 50% or 60% up on what it was pre COVID. Japan, we've had some great sales in Japan. So a nice lift on the base there and the same with Europe. And Europe, likewise, is a very high margin product or high margin region for us. Then in the domestic markets, So this is working in food service, plus we do also have retail in food service, but retail is mainly our Smart brand. And it is the retail part of the business that has performed disproportionately well with a 14% year on year growth in that particular sector. So pleased with the way that that's gone. There's been some compression of margins there as we've done by steep price promotions. Some of you would have seen our normal sort of $18 reasonable 200 gram hot smoke might have been available for closer to $10 during Christmas, but I hope you've availed yourself for that rare opportunity because it's probably not even going to come back. Right now, I'll hand over to Andrew. Okay. So moving to Slide 15 on pricing and exchange. Our focus right through this challenging period has been around 20 2 aspects of our business separate. So as Grant mentioned, making sure that we're not undermining ourselves in our Ora King and Bridle pricing and positioning. So looking for premium pricing, differentiation and branding all the way to consumer has always been our strategy. So that has been successfully preserved other than our own choice to promote New Zealand retail during the period this summer. And then the second aspect has been looking to clear excess inventory as one off sales to customers, and some of that's selling to Japan and some of that's selling to the U. S. Some of that is still to come in the coming months. But as I mentioned, we have provided all the cost of that. When you look at the selling price between domestic and export, there's a little bit of mix in there. And so the New Zealand retail promotion, the smoke is a much higher proportion of the sales, but it's at lower margin. So the headline pricing there is off very slightly, but the product mix has reduced the margin. And then in the export markets, we have a little bit of pricing there with a small amount of disposal sales or excess sales and then also sort of support from exchange rates, which you can see down below. Moving to Slide 16 on fish performance. So we appointed Grant Lovell as our General Manager of Agriculture during this period, and he's got around 20 years of consignment experience. And I guess his focus has been on combining the best of our various production models. So examples would be upbelling. We've seen working very well on some sites. So we've trialed that last summer on all of our sites and have carried on with the sites. We've seen that successfully implemented this year and some of the other practices. So that's its focus. Our fish performance has been distorted this 6 month period by COVID, frankly. So we had to slow the harvest during the lockdown. Then we've increased it since then. The consequences of that are that we've been harvesting some very large fish, which allowed us to trial during the fall on the positive side, as Graeme mentioned. However, it has led to some challenges around survival. So there's some fish maturing, and that represents about nearly onethree of our mortality in the period, and that's about $2,000,000 worth. And we've also had other challenges around the big fish, and that has also impacted our feed conversion ratio. So it's not really a like for like comparison there. Those are temporary impacts, and we're just about through those now. I'll hand it to Grant. Yes. So then we're on Slide 17, which is the Future Farmers, Farming and Harvest volumes. So you're all aware that we've had the so called relocation proposal for many years. We haven't had 5 or 6 by about a I suppose one of the things to note is this proposal actually becomes more valuable with all endeavor in the open ocean because the florist is a fantastic place to grow salmon for the 9 months of the year. Yes, definitely, we have problems over summer. And the larger the fish are, the more problematic that can be. But for the remaining 9 months, the temperatures are great. And when we grow king salmon, it can be too cold and that affects fish performance. And of course, once you get above 16, you can definitely get problems with mortality and also the issues can occur. But we're working closely with EWE. We're working closely with the government. We think we can get a great outcome, both economically, environmentally, with EWE socially. So we think we really can get a good outcome. And if we get to the Endeavor, which we are highly confident about, by the way, the relocation becomes a more valuable prospect. So we're very keenly pushing forward. But the main size is still the open ocean, so that's good endeavor. That enables us to increase in the first phase by 4,000 tons. So I don't want you to be concerned about that. We know that, that volume is coming, assuming that we get the resource consent. And we would always put plans in place to ensure that demand fixes supply from day 1. So great plan. We know exactly how all the metrics work around how many people we need to put into food service. And I think most of you know, every one of our food service people delivers between 3.50 tons and 5 100 tons per person. And we normally just add to a city that's got a great culinary situation or large population. I think the last 2 that we added, 1 in New Orleans in the U. S. A, and we added 1 in Shanghai in China. And then we can develop that volume from there. Of course, we did have a hiccup in China, hence, we're focused on pet food. But normally, it's 300 to 500 tons per person. And also, we can step up retailers quite quickly. They normally mean sort of 8 months notice to take on this increased distribution. But when we front up and we've got a proposition that only we can supply a smoked king family, both hot and cold, we normally would see a fairly good reception around that. So very excited to be bringing together. Expecting the hearing to be June, the result in July, August, somewhere around June, July for the hearing, July, August for the results. Obviously, seeing our application, I think it's looking really great, and we're very positive about that. So with that, we might hand over to questions. Thank Thank you. Your first question is from Guy Hooper from Forsyth Bar. Go ahead. Thank you. Yes. Good morning, everyone. Guy here. Look, I just wanted to focus first, I guess, on the inventory and the clearance sales. So could you just give us a little bit of a guide as to I mean, you mentioned retail for some of promo stuff, but where else some of your promo and unbranded products had gone into? What markets? Yes. I think I'll hand over how I like to be very sort of open and candid and everything, but I do want to protect our customers. I'm going to hand this over to Andrew. Yes. So in the first half, Guy, there's a little bit under 200 tons or so of excess sales, and that's predominantly gone into Asian markets. And during the first half of calendar twenty twenty one, so the period we're now in, we do anticipate a combination of Japan and U. S. Principally. And those are not normal customers. That's different risk market. Again, that's trying to protect our core business, the premium price differentiated business and branded from what's essentially a cleanup operation. Okay. And just on your I mean, you mentioned provisioning for those lower cost sales into the second half. So that's just reflected in the inventory value. You got a lower margin or lower value in there at the heart? Yes. Yes, that's correct. Yes. On, I guess, U. S. Retail, a few, I guess, news articles showing some investment. You signed up a new distribution partner and made new hirings. Do you want to just touch on the success you've had in that market today? I guess, how big it could be? Yes. Okay. So yes, you might be moving to Fresh Time, which is the 74 store Midwest America supermarket chain. And I think we've now got, for example, they were open for business despite the COVID situation. And I think we've now got 100% of their shelf space for smoke salmon. I think they took out all the competitive. And they're really enthusiastic about our fresh proposition as well. So that is a new change that we've picked up. I think you're aware, guys, there's about 400 supermarkets in New Zealand. So picking up 74 in the States with a high market share is not bad. It's a pretty good outcome given the situation. So that's probably the most the biggest most positive thing that's occurred. Also, they really handed category management over to us. They said, look, you guys know more about smoked salmon and fresh salmon than us. So we'd like you to be the category manager and help us to maximize the sales to our customers. So that's worked out really well. But as I mentioned, the other retailers, and we were in some of them, well, we're in a number of other retailers, but we just haven't been able to get appointments with anybody else to any great degree. Or if we get an appointment, they say, look, we're not making any decisions until the travel situation is over. So that's put a bit of a hand raise on there. But we're very confident we can secure a number of those new chains, both in the States, both in Europe, in Australia and other places once they're not in COVID-nineteen anymore and they're thinking about the future. All right. And just on your relocation process continues to be ongoing. But can you give us a bit of color as to I don't know what is MPI actually looking for you? What do you think has been missing? Or what's the catch in the process that is making it so long? Well, the RMA is just a difficult piece of legislation where it aims to both enable people to earn a living or to develop but also protect the environment. So it's trying to do both those two things. And we think agriculture fits in beautifully with that. But in terms of people's ability to miss on it, and they might not have any local outcome in the situation. And then the ability for commissioning and people hearing the actual hearing, whether they can stay focused on the fines, they can get run over by some of the emotions. A lot of that was in the mix in our view, on the first time around, and we were not happy with the outcome. But we went back and refocused with ENWE. So in the first relocation process, I think we had only had the support of 1 unit. Now we believe we have the support of 7, which is quite positive. We continue to check that and to shore that up. And we think that's the real game changer. And the minister has the power under the ARC Lane to grant that space and to enable the relocation. And I know that the minister is also going to review the entire RMA. So he obviously thinks it's not fit for purpose. So we're positive about it, and we think it's a bit of a game changer to have that level of EU support. But as I mentioned, that space is more valuable with Blue Endeavor. So we're trying to get that one first. We'll move them both forward if there's an appetite for that or if there's an ability for that. But the main prize is new Endeavor and the relocation is a fantastic outcome for all stakeholders, both us and Ewe. Yes. Thank you. I'm sorry, I'm done. Sorry. I was just going to ask, to gain additional support, did that come with any, I guess, additional concessions to Eui? What it came is, is we said, look, as a result of the relocation, even though it was done on the basis of no increase in net space, we actually retire old space and we create new that actually creates a settlement obligation. So we could actually you automatically you have easily automatically get 20% of any new space that's granted. So if you were to support this application, you would be there'd be 20% coming to you in the cash flow space, Most of them prefer space. That could be put on the end of Midway Tata. So that's the line that we've pursued. We said, okay, we would naturally obtain 20% of the resource. It's quite valuable. And that's so that's not a concession from us. That's a concession from government. And I think that's what's really helpful in moving this across the line. Also, as we've gone back and done more engagement explaining what the impacts are or aren't allaying any concerns. And we're really demonstrating the government has a $3,000,000,000 agriculture strategy by 2,035 for a reason. They both want green industry, and they want those green industries to protect the environment. So if the government has that view, does that change your view as easy? And the government didn't have that strategy in the first relocation agenda as it does now. So all of a sudden, I think it'll be more aligned now. Thanks, guys. I'll hand it back over to the line. Your next question is from Nick Ma from Macquarie. Just a couple on the U. S. As well. Those other channels that you've developed, what's the kind of pricing and margin like on those compared to existing channels in that market? Yes. So the pricing is exactly the same. The margin will be different because there's potentially higher freight costs to get us there. We've not as Andrew and I both mentioned, what we're selling as Orangene is at the same price as it ever was. We're not taking that down $0.01 And what we're selling through, say, the fishmongers is exactly at that old price. So there's no diminishing unit value in that segment, for example. I don't know if Andrew can comment on that. Yes. Nick, I was just going to say you can back solve it as well. Note 'fourteen, we've got U. S. Revenue is up very slightly on the prior comparable period. And so it's actually a slight price split. And that, of course, includes the fixed in it. Does that also include the break loss as well? Because you're selling it by That's just the headline pricing. So we're selling CRU. So we're covering the freight cost, which is what sees their margin rather than their selling price. And then what we're looking ahead, there will be lower prices on the excess product that goes into the U. S. Yes. And because we ran that June HALT trial and it was pretty dark days, we're very confident when we come out of it, we can use that concept to create a lot of additional value between the original or a clean proposition and the timing proposition. Yes. And do you think that those channels are something that you'll continue to invest in when food service opens up more broadly in the U. S? Yes, we do. So the thing that we're very particular about is that quarantine is never in mainstream supermarkets. Now fishmonger, you could argue many people think fresh fish, where they want to get it from. The fishmonger, that's probably one of the most premium places to buy your fish from. So we're very comfortable with Orokin being there. So if it's in fresh fishmonger and premium through service, we're comfortable with that. So we're going to retain that distribution channel once we're back into a normal situation. Okay. And I guess the key is we'll then be back with excess demand, so we have choices around how we optimize that again. Yes. No, that sounds good. And then just in terms of going forward, like I know you mentioned you don't give any outlook commentary until the full year result, which will be next month. Just to confirm, are you guys still comfortable with the previous I know if you calendarize it, the production profile you updated at the last full year as well? In terms of harvest volumes, you mean? Yes. Yes. Yes. In principle, there's of course, there's a change in the balance date period. We will be publishing some comparative historic data for January July periods to assist understanding between now and when we come back with the full year results. So we'll put a bit of that out there, but won't issue any volume guidance. But in principle, there's no reason to change it at this point around the harvest expectations. Okay. That's great. And any update on what was happening at White Harto and whether or not you've got those step ups through? Or how are you working through that? No. I think we haven't got the step ups at White Harta. It goes back and we apply to that, but we haven't got that at this stage yet. Your next question is from Christian Bell from Jarden. Hi, Tate. So just ignoring the new balance date and given the current like monthly run rate, would it have been basically assumed that total sales volume would have been closer to something like 2,500 tons for the year to June? Do you mean for the period ended June 2021? Correct, yes. If you were just to ignore the new balance date? So you can see from Slide 11 that we were actually selling quite a bit faster than that in December, but that's our choice around promotion. And then we'll also see sales out of inventory during the next 6 months or so for frozen excess sales. The underlying business, yes, it's recovered. It's probably running a bit ahead because we were previously restricted on fish availability, and that's been less of an issue this year. It's been the least of the ocean, if you like. Yes. Okay. And so obviously, you've been selling it to new retail channels in New York or not. Have you got any idea as to what the sort of sell through is to the end customer? Like, what's the demand might happen and might be? Yes. Do you mean are we talking about in real time? Yes, correct. Like, for example, the first time distribution, what is the actual in consumer demand being like? Yes. So we checked that all the time. So not sure if you're aware, Christian, but the rate of sale of smoked salmon in the U. S. Supermarket is a lot less than here. So a fairly average result is 15 units per store per week. And in the States, it's about 6 units per store per week. The interesting thing is they're about where we were 10 or 12 years ago, But they've got like a massive growth rate. So even though COVID and everything, I think the Southern category grew 24% for the half in California. And in fact, we achieved the number one growth spot actually, which was great. So we achieved the number one growth spot in the whole USA in the most selling category as a fairly new engine, which we're very pleased about. So and we buy scans out, so we know it's not selling into the retailers and not selling out to the final consumer. So we've got no concerns about that. But we're pretty confident we can with our experience about what we did here, we can lift that result of 6 units per store per week to 7, 8, 9, 10. And ultimately, you probably can get it I don't see why we couldn't get it to what it is in New Zealand. When I joined, it was around about those levels, and we've got it up to roughly 15. So and we know exactly what we did here. We can't do it under COVID, unfortunately, but we can once we're out of that situation. Okay. Good. Great. And then it's still assuming a 30 June 2021 nearing that and given that it's kind of when you expect to have sold through most of your disposal inventory. Do you think there'll be a further compression? And obviously, still prices are pretty firm in the first half year. But will there be a slight further compression in the second half pricing just as you get rid of that final amount of inventory? I think we've taken the provision for what we know at the end of December. So I think that's okay. I guess the sales the overall balance is going to be lower margin because we've written it down below its original cost. And I'm talking accounting cost rather than the fair value cost that we've lodged in our financials. But once that's gone and then with markets continuing to recover, we'll be shorter cash. So that will allow us some optimization options that we normally that's where we probably look into in the last 4 or 5 years around optimizing markets, products, brands and customers to deliver improving profitability over those years. And we're not in a position right now, but I'm absolutely confident we will be by, say, late this calendar year. Okay. Great. And then just thinking about mortality. Obviously, it was higher because of the reasons you've sort of highlighted. But that was attributed to being about 30% of the reason why mortality was higher. So if you sort of come back that out roughly, it still looks like a relatively high period of mortality. And just noting that you reintroduced Wahina and Forsa into the harbor? Yes. So 30% is in terms of biomass. So about that, the 11.9% would have been, therefore, roughly 8%, but the dollar cost of that was more significant. So that's about $3,000,000 of the $5,000,000 is attributable to that maturation, which is a one off impact we believe. And then in addition, because we had slowed the harvest in sort of April, May, June period and getting accelerated recently, we have been harvesting very large fish off all the farms this first half. And so that's probably a bit of extreme mortality as well, let's say, I don't know the $500,000 maybe over what we would otherwise have expected. So if you look at that $5,000,000 versus the prior period, then I think about $2,500,000 of that increase relates to kind of one off impacts, which are essentially one way or another traceable back to COVID. So if you back all of that out, mortality still looks a little bit higher than what it was last year at the time. Yes, maybe a tiny bit higher, like we had 2.2% in the first half last year. So we're talking sort of very, very similar numbers, very slightly higher, maybe 10% or something like that. Yes. And it's more so that's not really summer related. That's more maturation problem. When you have large fish in the water and they start to undergo the maturation process, you can get that can be a stressful for them. And some of them suffer mortality as well. So that's what's happening. They've got a very large healthy fish undergoing maturation, which is a stressful biological thing that the fish should be. Okay. And just looking at the feed surface temperatures on the website, it looks like Torrey is starting to creep up more recently. Does that have you got any concerns there? The least of our concern is the Tory Channel. So knowing that we really have any particular concerns about the Tory Channel under any scenario. Our concerns are always for the farms that are in the rural park in the Queen Charlotte, the Tanarao. Both of those have upwelling done, and that works pretty well there. There's quite a thermoplasm. It's much colder down the bottom in the Queen Charlotte. The Polaris doesn't have such a good thermotile and is susceptible to higher temperatures. But so far, the summer's been pretty kind to us. So they're in a reasonable place as we've stated, nothing exceptional. Okay. Cool. And then just will your debt covenant reset with the new balance date? No. We've previously worked with the bank around a bit of extra headroom in this period through to June. So that's still in place. And I don't believe we'll meet that no need headroom past that. Yes. I think we used it anyway. We haven't used it. We haven't used it. We haven't We haven't used it. We never used it. We never used it. We never used it. We never used it. We never used it. We gave them extra headroom, but we never used it. And it took precautions. We haven't used them. Yes. Okay. And then just finally, if you want any update on Andrew's replacement? Not really. So there's a search underway. There's big shoes to fill there. We always go with that. Yes. So if you guys know a fantastic CFO available, maybe even one of yourselves, just trying to put your best foot forward. No, that's all for me. Thanks, guys. Maybe outside of the school if you can. I can do the interview now. No problem. Your next question is from Chris Byrne from Craig's Investment Partners. What's the starting salary? Well, I think we paid pretty well. So first, let's talk. We have humble 7 apartments. It is unlimited salmon. That's boneless, yes. Yes. Look, just on the excess inventory, I mean, is there a case for slowing that process down in terms of you've gone through a lot quicker than expected demand's been reasonably good. I mean, is there a case for slowing it down and just leading it out to market more slowly and getting higher margin for it? The challenge is that it's the only place we've really had to pay capacity to hold it in our system is frozen hogfish. And so it's already been frozen down. We had to do that with that fell once in April, May, June in particular, but also more recently. And so you sort of lock in your possible outcomes. We will be able to source some of that and smoke it in the coming months. So we are trying to optimize that. But really, it's getting clear, getting that sold down, getting our debt levels back to where we'd like to be so that we can focus on the future. But as an aside, we've been positively surprised by the reduced half sales and the resilience in the core business. Okay. So if you had time, you would just leave it in smoke at all and you'd end up with a better return than just having it frozen? No, we would. But we don't have we couldn't get that into our production facility, not at the current sales. Okay. That's correct. That's obviously a major use of the proceeds going forward is supplying our smoking plants. Okay. I really think there's a certainty effect here. It's not pretty in terms of having to sell some fish at a loss on what it originally cost us. But we don't know what's around the corner, so we're better off to get on with that and then focus on our core business as we have been. Fair enough. Okay. And in terms of freight, sorry. There's no right answer, of course. And in terms of freight, I mean, what are you seeing in terms of cost and availability? Is it improving, getting worse? Seems to be some mixed messages out there in terms of availability, etcetera. Costs have been pretty static during the COVID period, and you can see in our financials, there's about a $2,000,000 hit first half versus prior first half. And that's a reasonable indicator of our total freight because the market mix hasn't changed very much when you saw Grant Hook on slide 4, I think, before or 5. What we have seen is that the actual airfreight component, so that's total freight out to market. So there's a bit of road, there's a bit of handling this, the actual air freight components. Some of those have gone up by more than double. Others have only gone up by 10% to 15%. Availability seems to be okay. We are a bit wary of making sure that we don't that we use rather than lose slots. Some of them are a bit on that basis. So there's a lot of extra planning and execution goes into this and has done our supply chain team's done a whole lot of work in this space and executed it pretty well, frankly. We are grateful to government for the support program. We have the team to program in place, which is around all exporters. And I guess it's also keeping passenger routes open for Kiwis coming back. But both planes are flying, and there's a subsidy on some routes, which is not visible to us. It's between the government and the airlines. But I think that's contributed to making sure those services do run. Okay. And finally for me, how's the fish stock looking going into, obviously, March, April, like February, March period? I mean, are the fish have you got a lot of the older, bigger fish out? That something to be considered? Or is it sort of you've harvested a lot of that now and the stock is in pretty good condition going into this period? Yes. We've certainly maximized the harvest out of the forest to the extent that we can. So that's looking as positive as it can be. Andrew mentioned that our new general manager of aquaculture has taken the best of all the different models and changing what works best for us and upwelling was a positive. One of the negatives of the prior model is we have large fish in the pelores, and that's why we have harvested that to the maximum extent possible. But anytime you've got larger fish on a warmer site, there is increased risk associated with that. So it's pretty prudent that some have been quite mild up to this point. But yes, we've taken the maximum out that we can and still being in the position to supply our customers every day. Right. Okay. It's been a tough period, but the pricing performance has been quite impressive. So well done. Thank you. Thanks. Thanks, guys. Thank you. Your next question is from Jason Samantor from ACC. Go ahead. Thank you. Hi, guys. Just three forms for me. The first one, just can you just talk about these noncompliance issues which came out in October and the local council, especially at full South Bay, I think what's an update on that? And is there any potential risk that they lose licenses or other things? Yes. I don't think it certainly won't lead to a loss of licenses, certainly not that issue. So I'm pretty disappointed in what happened there, and we've certainly shored up the relationship with the council. So one of our concern conditions is basically there has to be worms under the farm that break the organic matter down that comes from the fish and then we get a very good outcome. But we had a methodology that only took 3 samples and 3 very small samples. And can you miss the worms when you do that? Or at least you can. So all we did to fix the situation is we went back and to many large samples. And for the first time now, we found 0 rooms and the second time, we found 70,000 rooms. It took a long time to count them. And now the farm is compliant again. And the council won't diversify because I said, well, you agreed to that methodology, which we did, unfortunately, and you agreed to the time that it had to be done. And now you've got this new methodology, and it's out of time. But the good thing is the council has accepted that new methodology going forward because it is a more thorough, larger sample that we're taking. So it yields a more accurate result. So the thing that they didn't mention is, yes, with that restricted sampling, we were found noncompliant. With the larger sampling, we were compliant, but the council has also accepted that going forward. So we're not really anticipating that, that will come up. And we need to make sure that we change to methodology that accurately reflect the situation and not use old techniques from a bygone era that might mislead the situation. So that's what basically happened. So we're not concerned from that point of view, from a compliance point of view. We regret that it happened and that's passing on us for sure that it did. Glad that we did the retesting. Because if we didn't do the retesting, then that would have affected our ability to farm that site. But now it's seen as an eminently compliant farm and we can farm it again, and we will use the new methodology going forward. So yes, Joe, not really concerned about that, but very disappointed with the publicity. And we didn't proactively change that testing methodology ahead of time. Okay. Just seeking, Christian, just on Atlantic Salmon, and I guess important to be done. I guess, is there anything in this result for that? Have you been importing salmon still? I'm guessing not. But and how do you what improved launch to them is how you see that playing a role as we're getting out of COVID and get to a more normalized demand environment, Ken? Yes. We see it as an important part of our portfolio. It gives us flexibility to manage our own harvest and to meet when demand exceeds supply. So the organic Cement margin is always going to be lower than what we produce ourselves. But as I mentioned earlier, it made a positive contribution. I expect it will make a positive contribution going forward. It's we're talking in the order of $100,000 We're not talking in the order of millions or anything like that, but certainly, it will grow going forward. That will grow into a substantial business because our strategy is very much is to be single-minded at the agriculture end, which is the most difficult thing we do. So actually growing the fish. And now with all the requirements around different sizes and things, that's not easy to do. So let's not distract the agriculture people by doing more than one species. Most of our competitors do. But on the sales, branding, channel market side, we have all been quite diverse there. And so at the moment, where you can buy regal, Epicurean Atlantic salmon, and that's probably sold up against regal Marlboro King Salmon. But we could grow and we will bring in a whole range of other products. For example, I said to the team, why don't we have regal craytails or things like that? They're the sort of we will get into other products to complement that fit under our brand, complement what we do. And it will it provides a more resilient profit stream independent of the summer, and we're always looking at ways to do that. And obviously, the main thing we can do is Blue Endeavor. But if anything we can do on the sales and marketing side that yields profitability from other sources is a positive thing. So that's the role of Atlantic Salmon, and we're really pleased with the way it's going. Okay. And just a couple more for me. The next one, just on the LECC guidance for the full year, given full year is like 3.5 weeks ago. I'm just wondering why you haven't provided any guidance and in the future, just give us more information around what sales and things are like in January. Just so I know it's a weird period and been 7 months and things, but just interested to understand why you haven't given guidance or what risk there are around the number for the full year then? So it's a solid sales in January and starting to see some disposals. But we're just we want to focus on getting this out of the way and we're still subject to order. So we'll get that out of the way and then back in 4 weeks' time with an update. Okay. And then just on that, I mean, good luck with the hearing for Blue and Debo in June, and I hope it goes well. But just what other funding plans as we stand today around funding the CapEx that will be required? And what sort of discussions have you had with the bank already around that? So no decisions have been taken around how growing level might be funded, but assuming the resource consent successfully obtained, I guess, some of the feedback we've had from investors around in the past around Bill and Beevor is that they want to see a clear path for that sales program. So I guess in terms of timing, we want to be want to work through the excess inventory before we have that conversation with investors, if that's where we're going. I guess and then we'd also look at what get up options that we're as an alternative to perhaps be putting. And good luck with the future, Andy, as well. Yes. No decisions yet taken. And I guess one of the questions is depending on what the world looks like at that time, do we want to build out Blue endeavor immediately to grow the volume very strongly? Or do we want to balance it up against some of the inshore farms? We'd have those choices there, which is a nice place to be. Okay. Thanks, guys. Thanks, Jason. Thanks. Thank you. There are no further questions at this time. I'll now hand back to Mr. Rosemond for closing remarks. Yes. Thank you. Yes. So as you can see, Andrew and I are as enthusiastic about the sector as we've ever been. So Andrew's different area of record loss to the company. As evidenced by Norway, the agriculture sector has amazing potential and now reinforced by government policy. We as firmly as ever believe that agriculture could be the most valuable industry and its greatest primary sector at the same time. So thank you, and we'll do it all again in a few months' time. Thanks very much. That does conclude the conference call for today. Thank you all very much for attending. You may now disconnect.