Good afternoon, everybody. I'm Mike Petersen, Chair of Scales, and it's my pleasure to welcome you all to this annual meeting, in from a nice, fresh Canterbury day, but it's great to have you all here in attendance and online. It's the one hundred and twelfth annual meeting of the company, the tenth since it became a listed company, and my second as Chair. Once again, we're holding a hybrid annual meeting, and whether you're here in person or joining us online, I'd like to thank you and welcome you all. As you may recall from last year, shareholders, proxies, and guests attending the meeting virtually will be able to hear and see a live webcast. In addition, shareholders and proxies have the ability to ask questions and vote on resolutions. I'll provide further details on those matters shortly.
Firstly, some housekeeping matters for you, you who have joined in person. First, I'd like to remind you, as a matter of courtesy, to please put your mobile telephones onto silent, and also, if there is an emergency and we need to leave, please do so through the marked exits, and staff will be available to help us in the eventuality of that happening. I am pleased to declare and confirm that we have a quorum, and therefore declare the 2024 Annual Shareholders Meeting of Scales Limited open. The items of business for this meeting and the resolutions to be considered by shareholders were contained in the notice of meeting, which was sent to shareholders on the third of May. Our order of proceedings is shown on the current slide.
I'll briefly comment on the highlights of the last twelve months, followed by a review by Scales Managing Director, Andy Borland. We'll then attend to the resolutions, where we'll cover each resolution in turn and invite questions specific to those items. I'll shortly open the online voting and explain the voting process. Following that, I'll explain the process for asking questions. Once the meeting's complete, we hope that those of you present will join us for refreshments. It'll also be a good opportunity to meet the directors and senior management of the company and raise any other questions you may have on an informal basis. With regard to the online voting process, if you're eligible to vote, you'll be able to cast your vote under the Vote tab, as shown on screen.
Once the voting is opened, the resolutions will allow votes to be submitted, and to vote, simply select your voting direction from the options shown. You can vote for all resolutions at once or each resolution separately. Your vote has been cast when the tick appears, and to change your vote, simply select Change Your Vote, and you have the ability to change your vote up until the time I declare voting closed. You may submit questions on each resolution being put to shareholders using the questions process. For those of you that have joined us in person, those shareholders who are entitled to vote, and proxies who have discretion as to how they vote, should have received a voting or proxy form when they registered upon arrival at the meeting. If you completed a postal vote, you don't need to complete another voting or proxy form.
If you haven't received a voting or proxy form at the time of voting, please go to the Computershare desk in the foyer, where their representatives will be able to assist you. After voting, you should place your voting or proxy form in one of the ballot boxes, which will be passed around the room. I'll invite you to vote after all the resolutions have been introduced to the meeting. I now declare voting open on all items of business. For those of you attending via the Computershare online meeting platform, the resolutions will now be open in the Vote tab. Please submit your votes at any time, and I'll give you a reminder before I move to close the meeting, and, sorry, to close the voting. I'd now like to quickly summarize the process for asking questions to you today.
Online questions can be submitted at any time. If you have a question to submit during the meeting, please select the Q&A tab on the right half of your screen at any time, as currently shown. Type your question into the field and press Send. Your question will be immediately submitted. Should you require assistance of any sort, you can type your query, and one of the Computershare team will assist using the chat function. Alternatively, you can call Computershare on 0800-650-034, preferably from not in here. Please note that whilst you can submit questions from now on, I won't address them until the relevant time in the meeting. Please note also that your questions may be moderated, or if we receive multiple questions on the same topic, they can be amalgamated together.
Finally, due to time constraints and to ensure all shareholders have a chance to ask a question, I ask that you limit yourself to asking two questions. We may run out of time to answer all of your questions, but if this happens, we'll answer them in due course via email or after the meeting in person. For those of you present, we'll offer you an opportunity to ask questions on or speak to each resolution being put to shareholders at the appropriate time. As I indicated, there will be an opportunity to ask questions of individual directors informally, also, after the meeting. Before I go any further, I'd just like to take a minute to introduce my fellow directors who are in attendance, either in person or online. We've got Andy Borland, our Managing Director-...
Tony Batterton, the Chair of Scales Nomination and Remuneration Committee, also the Finance and Treasury Committee, and also an independent director. Miranda Burdon, an independent director. Nick Harris, an independent director. Alan Isaac, Chair of the Scales Audit and Risk Management Committee, and also an independent director. Nadine Tunley, Chair of the Health and Safety and Sustainability Committee, and an independent director. Online, we have Qi Xin, who's a director of Scales as well. Welcome to you all. Members of Scales management and staff, Deloitte, and Anthony Harper are also in attendance, and I'm delighted to welcome everyone to the meeting. As far as 2023 was concerned, it was a testing year for the group. However, we are pleased to report a commendable result of underlying net profit after tax attributable to shareholders of NZD 19 million.
This is at the top end of our 2023 guidance range. This is only possible thanks to the work of our management teams and staff, who worked extremely hard, often in extremely difficult conditions during and after the extreme weather events of 2023. Health and safety has always been a top priority for us, and the importance of this was confirmed during the cyclone, with our people-first culture shining through. We were also delighted to implement several people initiatives throughout the year, and we'll continue to progress these and other initiatives over the coming year. The 2023 year demonstrated that our diversified strategy contributed positively to our result, with Global Proteins delivering a strong performance during a period when horticulture was impacted by Cyclone Gabrielle.
Dividends of NZD 0.085 per share have been declared for the 2023 financial year, with this representing 63% of 2023 underlying net profit after tax attributable to shareholders. You will have hopefully seen our recent press release announcing the transaction with Bostock Group. This presents a very exciting opportunity for the horticulture division, with the acquisition of premium variety orchards, as well as the remaining 50% of Profruit that we didn't own. Andy will provide additional information on the transaction later in the presentation. In addition, we're pleased to have increased our shareholding in Meateor Australia from 33% to 50%, as announced yesterday. We believe that this is a strategically important investment for the Global Proteins Division, with excellent prospects for the future. The next slide provides a summary of some of our workforce statistics.
Having been with Scales for just over a year, I've come to appreciate the unique culture that exists within the group. This is especially important within Mr Apple, where staff numbers increased to over two thousand people at peak season, making it crucial for Mr Apple to attract and retain personnel, promote a positive work culture, and drive high performance. One of the numbers we found particularly encouraging was the percentage of female leaders and management personnel, which increased by 15% compared to two thousand and twenty-two. We're committed to further developing a diverse and inclusive work environment, and we look forward to monitoring progress on this in future years. As the group develops, so does the shape of our team.
Our people are one of Scales' most significant assets, and we recognize the importance of developing skilled teams in all of our group businesses, irrespective of their size or the nature of their operations. We believe that investment in our people will not only benefit our employees, but will also be advantageous to overall business growth. We'd like to extend a warm welcome to the new team members across our European joint venture, Esro, and through the recent Bostock transaction as well. We're seeking to expand our global proteins teams, including in our joint venture businesses, to support their growth. Additionally, we're really excited about the talent development across the group, with some exceptional emerging leaders who are leveraging the deep experience we have across our divisions.
On behalf of the board, I'd like to again say a very big thank you to all of the Scales staff for their continued effort, hard work, and dedication to the success of Scales Corporation. We completed this phase of our board refreshment and succession program in 2023 with the appointment of Tony Batterton in August. Tony brings extensive private equity, investment banking, and governance experience in NZX-listed companies. As Tony was appointed by the board during the year, he is required to offer himself for election by shareholders at this meeting, and you'll have the opportunity to hear directly from him later prior to voting. I'd also like to take the opportunity to announce the appointment of Nadine Tunley as Chief Risk Officer of Scales.
This is a newly created position to focus on health and safety, sustainability, and compliance, and we are thrilled to have Nadine as part of the senior management team. Unfortunately, by taking this role, it means that Nadine will be retiring from the board at the end of August, but we believe her experience will be invaluable in this newly created position. We are thrilled with Nadine's contribution at board and governance level, but we know she'll create incredible value for us as a company in this new role. At this stage, we don't intend to seek a replacement for Nadine on the board. I'd also note that there will be no increase to directors' fees paid to other directors as a result of Nadine's resignation. We also welcome Emma Wheeler as our sixth participant in the Future Director Program. Where's Emma? Just, Emma. Emma, just...
There we go. Just putting her hand up there. Emma is currently Chief Commercial Officer for Trust Codes, a company that provides brand protection, anti-counterfeit, and consumer engagement solutions, and we look forward to having Emma as part of our team. Welcome aboard. I'd now like to hand over to Andy, who will update you further on last year's results and activities, provide a business update, and also summarize the outlook for the group. Following Andy's presentation, we'll move to the formal business of the meeting. As always, we welcome feedback on any of the matters raised during today's presentation or other general matters in relation to the group. Welcome, Andy. Thank you.
Thanks, Mike, and welcome all. I'd also like to acknowledge that our bankers from Westpac are here, Richard Swan and Eugene from Lockton, our insurance brokers. So, all our professional supporting firms here with us, and they've been with us a long time, which we appreciate. Yes, so good afternoon, everybody. The current slide summarizes the topics that I'll cover in my presentation today, which includes a review of 2023, a summary of our progress on climate-related disclosures, details of the Bostock transaction, and an analysis of Global Proteins, and a summary of current trading conditions and the outlook for the group. I'll start with a brief overview of 2023. This current slide summarizes various financial and volumetric measurements for 2023, some of which I'll provide more information on later.
Notwithstanding the impacts of Cyclone Gabrielle last year, the group continues to perform well and has an excellent foundation for further growth. Our staff are the standout performers of Scales, and we're indebted to everyone for their hard work and dedication, particularly following the cyclone. After the cyclone, our primary focus was on supporting our people and community with tailored assistance, well-being initiatives, medical checks, and practical support, and while the recovery effort was larger than initially predicted, the twenty twenty-four harvest is a testament to the effort that was expended. Health and safety and well-being is one of our top priorities and continues to be a focus every day. A shift to a health and safety and well-being partnership model at Mr Apple has resulted in a reduction in its LTI rate of 43% since twenty twenty-two.
This is being supported by an in-house physiotherapist working on our orchard and post-harvest teams and an injury prevention and recovery. We also continue to partner with Pacific Island governments to develop recruitment plans for our RSE workers that meet the goals of both their respective communities and those of Mr Apple. The graphs on the slide illustrate our earnings and revenue over the last five years. This includes the admirable performance of 2023, despite the challenges that were presented to us. Moving on to some more detail in respect of our 2023 results, the reported NPAT attributable to shareholders was NZD 5.2 million, down from NZD 19.4 million in 2022. This decrease was in large part to a goodwill impairment and asset write-downs at Mr Apple and had a combined post-tax earnings impact of NZD 10.9 million.
Underlying NPAT attributable to shareholders was NZD 19 million, which is at the top end of our guidance range for last year. You can see the trends in underlying EBITDA for each of the divisions on the current slide. Of particular note is the growth in the Global Proteins division since 2019. I'll provide further information on our plans for the division later in my presentation. I'll now touch on each of the divisions in more detail, starting with Global Proteins. Following the record results in 2022, there was a decrease in pet food ingredients, volumes, revenue, and underlying EBITDA in 2023. This was primarily due to pet food ingredients customers returning to lower pre-COVID inventory levels, which resulted in lower volumes sold. We also continued to incur startup losses during the transition of our Australian business and the establishment of Esro Pet Food.
However, we benefit from full year's contribution from Fayman, with this edible proteins business completing our pet food ingredients operation, complementing our pet food ingredients operations. Pleasingly, our 2023 profit margins were in line with the prior year, and as you can see from the graph at the bottom right of the slide, both the revenue and underlying EBITDA per kilogram of pet food ingredients sold have been improving over time, in line with the execution of our strategic initiatives. The resilience of the Horticulture division was apparent in 2023, with the division generating an admirable, admirable result in the wake of Cyclone Gabrielle. It experienced a decrease in both revenue and underlying EBITDA, primarily due to lower volumes following the cyclone, with export volumes of 2.7 million TCEs compared to 3.3 million TCEs in 2022.
However, pleasingly, margins remained in line with the prior year. There was continued focus on premium volumes and a strong performance by Dazzle and Posy within Asia and Middle East regions. This slide shows a couple of the images that were captured that captured the condition of our orchards immediately following the cyclone. As you can see from the before photos, the land and trees were devastated, but looking at the after photos, it's almost hard to believe that the cyclone had such a devastating effect. Fortunately, the impact of Cyclone Gabrielle is largely expected to be limited to last year's apple season. Logistics produced a steady result despite the impact of reduced volumes of produce and the need to navigate difficulties in the trade routes.
However, it performed strongly, producing earnings that were in line with the results of 2019 to 2021. Both financially and operationally, logistics continues to be extremely strategically important to Scales. Our balance sheet continues to show a strong financial position. The decrease in net cash was primarily due to a few factors, including capital expenditure, including cyclone-related CapEx, dividend payments, including those to minority shareholders, and our investments into Fayman, Meateor Australia, and Esro Pet Food. And the drop in group return on capital employed was a result of our lower earnings. I'd now like to touch on the work that we've undertaken in the preparation of our first climate change, Climate-Related Disclosures, or CRD report. We were very pleased to publish our first CRD report earlier this year.
For this, we undertook a climate assessment process across the three divisions for three different climate scenarios. The intention is that these scenarios will be considered while we undertake our strategic refresh, as we continue to embed the consideration of climate risks and the opportunities into our business processes. This process will result in us setting group targets as one of our outcomes. While we haven't yet completed a standalone transition, we are already undertaking several transition initiatives. These will include the climate challenges and opportunities that we have identified in our CRD report. I would like here to thank Geoff Smith, our Chief Operating Officer, who did a great job working with the teams across Scales to produce this report, and I think it was quite a read.
If you did have trouble sleeping, sometimes it was helpful because there was a lot of information in it. But it was certainly a big step forward for us in this area, and we will be using the information to guide the business, but also with the target setting ahead of us. Now, moving on to the recently announced transaction with Bostock Group. In this transaction, we've agreed to purchase selected Bostock orchards, together with the remaining 50% of Profruit. This agreement provides us with around 240 hectares of planted orchard, which is geographically close to existing operations at Mr Apple. Approximately 48% of owned orchards, with the remainder are leased. A high concentration of premium Dazzle plantings, providing meaningful future growth in this variety.
The anticipation that premium varieties will represent around 80% of fruit sales in 2025. And last, but definitely not least, the benefit of having Profruit as a 100% owned subsidiary. Profruit is a very, very well-run business, and it complements, obviously, the wider horticulture division of Scales. We're currently marketing two of our existing orchards for sale, meaning that Mr Apple's total orchard area is expected to remain largely unchanged following the transactions. Including the contribution from Profruit, we believe this transaction will contribute around NZD 10-12 million to Horticulture's EBITDA per annum over the medium term, prior to the impact of orchard sales.
The purchase will initially be funded through a combination of debt and existing cash reserves, although the proceeds from the sale of the Blyth and Te Papa orchards will be used to retire debt in due course. The Bostock transaction is expected to complete in mid-June, with the sale of the Mr Apple orchards expected to conclude in the second half of this year. Moving on to the deeper dive into the Global Proteins division. This is a project we've been working on for a number of years now, and we've talked about it a lot to yourselves and to our wider investment community, and we have been asked by the institutions and analysts, the broker analysts, to you know expand on what the division's all about.
So tell your story a bit better, and this is a snapshot into that work we've done, and later in the month, we'll be launching a wider package on this area, 'cause we want to be able to tell our story and explain, you know, where it is we're going with it. So we have confidence in the global pet food market due to a number of underlying market trends. These underpin this large and growing market and include social and demographic changes, particularly across Millennials and Gen Z. They now represent the largest proportion of pet owners and continue to grow due to the changes across their family and work environments....
This demographic is also more educated and has higher incomes, which is leading to increased spending, supported by humanization of pets and the explosion of science-based nutrition products. Older age groups are also more likely to have pets due to associated companionship and health benefits. And finally, the increasing middle class is leading to growth across emerging markets. We've seen phenomenal increase in pet ownership rates and spend across Asia, which have also coincided with social and regulatory changes. Projected market growth for Asia, and USA, and the EU is shown on the graph to the right. This is a market worth over $100 billion, supported by macro trends that is expected to grow at a 5%-6% CAGR between 2023 and 2029.
The recent sector growth and its future potential has fueled expansion by the key retail brands, that is our customers. Both in the U.S. and globally, they have expanded their existing facilities and built new sites to increase capacity. They want, they also want to mitigate key risks, including supply chain resilience and scarcity of ingredients. This has resulted in many of our customers looking to develop longer-term strategic relationships with key protein suppliers, so they can focus on their core business of building retail pet food brands and product development. We believe that we can capitalize on this opportunity as we offer a number of beneficial factors. We're integrated into the supply chains of the largest global pet food manufacturers. We're able to aggregate and offer multiple ingredient products to simplify our customers' supply chain and logistics.
We have a proven track record of providing a reliable, in specification and on-time service. This is important for customers' just-in-time operations, and our recent strategic investments provide capacity for growth and a diverse production platform to solve our customers' challenges and leverage industry trends. We've identified the market opportunity to partner with our customer globally and have been strategically investing around the globe since two thousand and eighteen. We're now operating in four different countries, sell across six key protein species, have a diverse global customer base, and are developing a world-class team to execute on our plans. You can see from this current slide, the Global Proteins division has had almost thirty years of operating in the sector. This experience provides an excellent platform for our recent and future growth.
In particular, we've exhibited significant growth since 2018, when we acquired 60% of Shelby, followed by expansion in Australia and the development of European operations. We're excited for the next chapter in this division's development. We believe these embedded projects, many of which are either complete or in development, will contribute significantly to Global Proteins' earnings over the next four years. Our initial target for Global Proteins was to achieve 25 million of underlying EBITDA by 2023. We achieved this in 2021, which was not only demonstrate our ability to capture opportunities, but also to deliver on strategic initiatives. We expect this growth to continue in the plans I've just discussed, and we've now reset our target for Global Proteins to achieve underlying EBITDA of 70 million by 2027.
We're excited to announce this target and also our ambition for Global Proteins, which is to be recognized by global pet food brands as the world's leading natural proteins ingredient supplier. Moving on to the outlook for the current year. I'm pleased to reconfirm our previously advised guidance of underlying NPAT attributable to shareholders of NZD 30-NZD 35 million. Global Proteins has started the year well, despite ongoing rebalancing of pet food inventories by our customers. Meateor Australia has met one of its significant milestones, with customer audits and approvals having been completed. Fayman has also performed well in the year to date, with its volumes increasing over all of its major markets. Within horticulture, the harvest is complete, with a total pick of around 3.9 million TCEs.
This is slightly below our initial estimates due to a slower-than-expected recovery from the cyclone and cold spring conditions that impacted crop volume and fruit size. However, our export pack-out rate is expected to be in line with pre-cyclone levels. Early pricing indications are in line with expectations, and we're benefiting from global shipping rates that have reduced faster than was previously anticipated. Last but not least, channel mix has resulted in a solid performance to date by logistics. Overall, our earnings expectations for twenty twenty-four remain unchanged, although the mix of divisional earnings may differ from that initially forecast. So I've just got a little bit of an add-in here that, Steve Kennelly doesn't know about, but I would like to comment on Scales' teams and tenure.
In addition to what Mike has had to say earlier and my earlier comments, Scales has had a history of retaining and growing great people and teams. You'll note in this presentation, our current longest-serving team member has worked at Scales Logistics for forty-seven years. I was talking to her this morning, and she started in January nineteen seventy-seven. I'm getting old, and I started the third form that year. So well done, Julie Hammond. She doesn't know when she's gonna retire, but she can stay on for a long, long, as long as she likes. At our centenary celebrations in two thousand and twelve, we recognized an employee who had completed fifty years at Polar Cold.
These sorts of tenures are created by having strong leaders and a culture that, at its heart, at its heart, looks after and develops its people. These sorts of tenures at one employer will be hard to beat. However, in my team, who I don't look to be retiring anytime soon, but I have Andrew van Workum here, and he's well past thirty years at Mr Apple. Kent Ritchie's here, and he's done twenty-five years in shipping. He's probably lucky he doesn't go to as many lunches as he used to. John Sainsbury's not here. He's. We've shifted John off to Kansas City to lead the Global Proteins business, which is, if you've been to the Midwest of America, that is where there's a lot of pet food going on. So it's good to have John over there. So you can't beat experience.
Keeping on this same trajectory, I'd like to today to acknowledge our CFO, Steve Kennelly, who is clocking up his 30th year at Scales this year. He still looks 40, so he must have started young. Steve has been my wingman for more than 10 years, all of which we've added the extra tasks and responsibilities of being listed on the New Zealand Stock Exchange. Steve is a loyal, hardworking, accurate, and persistent man with a 10 out of 10 integrity. Thank you, Steve, and I hope you have a great and well-deserved extended holiday with your family. Before you all start worrying about us all being pending old-age pensioners, as Mike mentioned, we do have a strong group of young and diverse Scales team members coming through, all through all Scales divisions. Seeing them grow and develop into our future leaders is exciting for Scales.
So that concludes my presentation. We'll answer questions following the resolutions, but in the meantime, I'll pass back to Mike to cover the formal part of today's meeting.
Thanks, Andy. And, it, it's fascinating, isn't it? Seeing the length of tenure from some of our staff members, and it's something that's really unique, I think, to many companies these days. And I know the younger generation, they do things a bit differently, but they don't seem to hang around much in jobs. So it's really good to see. And I think, you know, this is one of the real strengths of Scales Corporation. We've got experienced people that have seen this business and company through many years of ups and downs. You will have noted, of course, that agribusiness is not having an easy time at the moment.
And so we are delighted to be, you know, one of a handful of companies that I know of, that is actually profitable, and is actually delivering for its shareholders. We really firmly believe in this three-legged stool. Of course, it started with logistics, with all those many years ago, and of course, then with horticulture and now with Global Proteins. And we think that has stood us in good stead, to withstand challenges that are thrown at us, and we know that these are regular challenges across the sector. So thanks, Andy. The fact that we've got experienced people that have taken us to this position is really exciting. But I'm equally excited. I was privileged enough to have a session with Geoff Smith, who is one of our young leaders.
He doesn't claim to be young these days, but as one of our young leaders, convened a group of people from right across the three divisions, in Hawke's Bay recently, just to get them together and to talk about, you know, the group as a whole. And it was truly exciting to see the next level of talent that's coming through in this business. It was great to see, and I'm really confident that, when this group of experienced leaders decide to hang up their boots, that we've got another group of leaders that's gonna come through and fill those shoes with aplomb. So very exciting. Thanks, Andy. I'll. We'll now move to the business of the meeting, and all items of business are ordinary resolutions and are required to be passed by a simple majority of votes.
Current best practice for shareholder voting is by way of poll. Accordingly, a poll will be held for each of the resolutions. I and my fellow directors hold the following undirected proxies: with respect to resolution one, the authorization for the directors to fix the auditor's remuneration for the coming year for 147,140 shares. With respect to resolution two, election of Tony Batterton as non-executive independent director, 143,297 shares. Your board supports these resolutions, and we intend to vote all these shares in favor of both of those resolutions above. I'll now move on to each of the resolutions. Resolution one relates to the remuneration of auditors, and nice to see the auditors here in the room here. Thank you.
This proposed ordinary resolution is to authorize the directors to fix the auditors' remuneration for the coming year. In accordance with the Companies Act, Deloitte has automatically been reappointed as Scales' auditor. As is usual with audit fees, due to the complexity and changing nature of the company's affairs, it is not possible to fix their remuneration at the beginning of the year. I now move, as an ordinary resolution, that the board is authorized to fix the auditor's remuneration for the coming year. Are there any questions on this resolution? Thank you. We'll now move to the next resolution. Resolution two relates to the election of a director appointed since the last annual meeting. The NZX listing rules state directors appointed by the board must not hold office without re-election past the next annual meeting following the director's appointment. Resolution two relates to the re-election of Tony Batterton.
Tony was appointed to the board in August 2003, and a brief biography for him was included in the notice of meeting. Tony, being eligible, offers himself for re-election, and the board unanimously supports his re-election and recommend that shareholders vote in favor of resolution two. I'd now like to invite Tony to briefly address the meeting, on his proposed re-election. Thanks, Tony.
Thanks, Mike, and good afternoon, everyone. Like I said, I'm Tony Batterton, and seeking re-election as one of your Scales directors today. As the summary says, I have a background in finance. I've been partner in two prominent and highly successful private equity firms in New Zealand. Before that, I worked in London, in investment banking for five years. And going right back to the start, I originally qualified as a chartered accountant, all of which is still all really useful and relevant to what I do today. In terms of board roles, I've been sitting on boards for the past twenty or so years in a wide range of industries. That includes other NZX experience.
For the last eight years, I've sat on the board of Briscoe Group, which owns the retailing chains, Briscoes and Rebel Sport, a really high-performing business. I've also some previous experience sitting on the Scales board. I was a director from 2011 to 2014, a period which Direct Capital was a major shareholder, having bought its shareholding from South Canterbury Finance. So I was one of the Direct Capital partners who led that investment. I sat on the board of Scales for just shy of four years, and I came off at the IPO, and delighted to have the opportunity to rejoin the board in the middle of last year.
That's the business background, which these things always tend to focus on, but I think where directors earn their stripes or should earn their stripes really is around the human elements that they bring to the role. And you know, I see the important ones, which I know all of us seek to bring to the role as your Scales directors. Obviously, firstly, holding ourselves to account to the very highest standards of integrity. Always bringing a genuinely independent thought and an inquiring mind. Obviously, good commercial acumen and judgments honed through our experience over the years. And last, but by no means least, always bringing a positive mindset.
Scales is a really well-run, a really well-performed organization with a really clear path of where, what the business would like to achieve in the future. Our role, first and foremost, is to help the company to achieve its objectives. I appreciate your support with my re-election. Thank you.
Thanks, Tony. I now move as an ordinary resolution that Tony Batterton be re-elected as a non-executive independent director. Are there any questions on this resolution? None from the floor? You got away lightly, Tony. Thank you very much. We'll now move to finalize the voting, and then we'll answer general questions. Once all the votes have been cast, they'll be counted by the company's share registrar, Computershare, and scrutinized by the company's auditor. The results of today's meeting will be released to the NZX on the completion of verification of voting. If you have not already done so, please cast your votes now and give your voting forms to Computershare whilst we take questions. So you'll see the couple of gentlemen walking down the aisles with a box for voting in person, and those online will be able to do so.
If there are any questions on the financial results, the business update, or any other matters you'd like to raise, for those online, please do so through the online Computershare meeting platform. A reminder of the process is shown on the screen. So that's how to participate in the virtual and hybrid meeting. If you need a hand, please either contact Computershare or talk to the helpful people in attendance. For those of you present, I'll open the floor to any questions. So I want to remind everyone, if we run out of time to answer all questions now, we'll respond either after the meeting or in writing following the meeting. And so, we will just have Steve monitoring the questions online. And then, we will have the opportunity for questions from the floor here.
When you ask a question, please, we have Jane and Lisa with microphones. And so please wait for them to bring the microphone to you. And just state your name so we know who we're talking with, and ask your question. And if I can't answer it, then I'm sure that any one of our team will be able to do so. Thank you very much, ladies and gentlemen, the floor is open for questions. Yes. Oh, one at the top, and then we'll come down to the front. Hello, Ian.
Could you elaborate, the advantage of having sold. You've bought land and you've sold land. What is the advantage of the land that you bought over the land that you've got for sale? Is it to do with the flooding risk, climate risk, or...? Obviously, it's more than just the varieties of apples on the land that you're buying. The other question is, I noticed with the map of Europe, you've included Belarus and Ukraine, so they're dicey areas, aren't they? So-
They are dicey areas. But I don't think we've got Russia and Ukraine included on the map, have we?
Byelorussia.
Byelorussia.
Yes. Yeah. Let me just go to your first question. Look, there's no doubt the Bostock acquisition has really given us a leg up in getting premium varieties of apples. We think that's a really positive move for us at Mr Apple and obviously for Scales Corporation. That will take us to nearly 80% of our apples in what we call premium varieties, and so that's been a big advantage for us. When it comes to the sale of the orchards, we are always conscious that we wanna be careful how we deploy capital, and so really, the sale of a couple of orchards is really to help us fund the acquisition of the orchards that have superior varieties on them.
Have you got a jump up in area or?
We'll end up having about the same area of apples.
Okay.
As we had when we've completed both transactions.
Yeah.
So look, I don't know whether... Andrew, Andrew, do you wanna comment?
Yeah, well, the other orchards we're selling do need quite a bit of redevelopment, so it's really about, you know, recycling capital into, you know, pretty well-developed orchards. You know, the ones that we're selling again would have needed quite a lot of redevelopment. If we'd done that ourselves-
But, uh-
It would be over five years.
Cyclone remedy or just redevelopment?
Redevelopment.
Okay.
Yeah, into these better varieties.
Right.
So, you know, and that takes time and money, so we've sort of fast-tracked that by buying into the Bostock orchards that are already redeveloped.
I think we're finding it about five to six years of age, those trees, mostly, Andrew, I think. Is that right, in the higher, in the newer varieties?
The better varieties?
It's really five, six years.
We're getting a kickstart of five to six years. The other point that the board are also very conscious about is just our balance sheet. We are a conservative company. We want to make sure we have a strong balance sheet, and so we didn't think that we should be buying the Bostock assets without actually freeing up some capital from elsewhere.
Prudence.
So.
Yeah.
Yep.
Thank you.
Thank you. There's a question down the front here.
Thank you. My name is Frank Stewart, and I represent the New Zealand Shareholders Association, and I've got a comment and a question.
Thanks, Frank.
The comment is that every year we produce a report card for companies under various criteria, and our report card for Scales, I didn't do it, but I've never seen so many green ticks for Scales. So in terms of the various categories we rate companies on, so congratulations-
Thank you.
For that. And my question is, recently, I ate an apple that came from Northland.
Yes.
It was called Breeze.
Yes.
It was designed to be red and sweet. I didn't particularly like it myself, and I wouldn't buy it even if it was available.
I'm liking this better and better.
But it's not going to be available in New Zealand anyway. But I wondered if you'd heard of it and whether, how you rated it as competition for the-
Fantastic. Look, and I'm glad Mr. van Workum answered that question, but,
Yeah, we give Andrew the mic.
We'll just take the mic to Andrew, but thank you, thank you for your comments about the report card. Look, we have read the report card, and we appreciate that. Look, we do a lot of work to make sure that we're doing the most possible to get best practice and governance in how we actually report on and perform in Scales. So thanks for that. It's appreciated. It's work in progress. There's a couple of little areas we need to keep working on, and we've got that in plan for the coming year. Andrew, did you want to comment on Breeze? Because it's not one of ours. You want to be careful.
Yes, yeah, look, no, Breeze is not one of ours. It's there are probably 35-40 different apples exported out of New Zealand. Some of them are completely unique apples, and some of them are sports or a version of another apple. Like, if you imagine you had six children, they're all the same parent, but they're slightly different. Breeze is one of those options, and it's a branded product. It's not one of ours. We haven't chosen to plant it. Probably can't comment more than that. But there are a lot of options, and we've got quite a basket of options ourselves-
Yes
that we're branding.
In fact, after the meeting, you'll be able to try some Dazzle. We also have some Royal Gala there, and I think we have some Pink Lady. Is that right?
Yes. Dazzle, Pink Lady, and Royal Gala.
Yeah.
Yes.
So there we go. You'll be able to test it. Great. Any other questions from people in person? Yes, there's one in the middle here.
Yes, my question's about the volume of apples from this year's crop, and how does it compare to the volume that we got prior to the recent weather event?
Yes. I wonder if we could... Seth, is there any chance of putting that slide up? I think it has the volume of apples on it. Andy, do you want to comment? Because one of the challenges for this season was that, you know, some of the smaller fruit size, particularly in the early part of the season, and that has affected the volume of the crop across New Zealand, not just for Mr. Apple. But I think you'll see.
Yeah, well, 3.3, 2022 was 3,324, 3.3 million, and obviously, with the cyclone was sort of like 2.8 or 2.73. And we'll be sort of in between that, you know, this year because of sort of bounce back to more like 2022, but you know, not quite there.
So the expectation is the volume will stay relatively stable, but we're hoping, of course, with those extra premium paying varieties, that will give us a better margin, for you know, our future harvests.
Yes, sir.
Paul Hewson. My question is, how saleable do you think these are, and these two that you're wanting to sell? Just, I mean, locally, in our area, South Canterbury, there seems to be quite a few more acres going into apples, even though other don't appear to be doing so well. But overall, I mean, what is the, is the acreage in New Zealand sort of balanced now, or is it going up or down or sideways?
We would certainly argue that Hawke's Bay is the best place in New Zealand to grow apples, and that's where all our orchards are located. In spite of the challenges we had with the cyclone last year, the weather conditions make it very well-suited. We're optimistic that we can secure a sale for those orchards at a value that's acceptable to us. And in fact, you know, we think there is interest in particularly land-owning assets in New Zealand from people that take a long-term view about investing. So, we're pretty confident that they'll sell, and they'll actually do the job that we need to do. Andy, did you want to add to that?
Oh, well, just to the second question, I think the apple volumes are proprietary and traditional apples anyway, are probably slightly falling because these, you know, the older varieties are either getting pulled out. But, you know, if you took apples overall, it's about flat 'cause there's a lot of new area gone into Rockit, for example. So I think overall, you know, the apple industry is probably just holding its own. But traditional farmers, you know, orchardists with no new varieties will be struggling to make money 'cause just the variety is becoming less favored. Hence our sort of drive to get into these premium varieties to, you know, really mitigate the margin erosion that we've been having with the increase in labor costs.
Great. Yes, sir.
Hello. The name's Ray Spring.
Hi.
Two questions. The first question is, if we chopped down all our apple trees and planted them in pine, we would get carbon credits. Why can't we get carbon credits for trees that are growing at the moment? Why do we have to chop them down before we can get them?
Now, do you realize once you open this up to Andy Borland, this is gonna be a, this will be a long conversation. He's argued for years that we should be claiming carbon credits. In fact, he's even talked about just putting a single leader up to five meters, so it would qualify. But there is some science around this, and I'm gonna let Mr. Borland explain. How's that?
It's bullshit anyway that apples don't sequester carbon, and it's just a politically driven thing out of the Paris Accord that they nominated what was a carbon sequestering tree and what wasn't. And you know, like, your natural calving story on a New Zealand farm is a carbon sequestering business, but they don't count because, you know, they're not pine trees. You're right. It's really a nonsense.
It's frustrating, yeah. We don't like it either.
... Sorry. Now, the next question is this, annual report, page 24, you're claiming ROCE, and I've no idea what ROCE, it might be something about rate of return or something, is 42% or, and 67%. The figures are incredible! How is it done?
Shh! Don't tell anyone.
Exactly.
Return on-
Why are you printing it?
Return on capital employed.
Look, I mean, one of the things. Look, and we have lots of discussions about what should be in the annual report. And, but, you know, we want to be transparent, and we want shareholders to make sure that they've got all the information that they need to hopefully make a very good investment in Scales. So, yes.
Right, any other questions? Steve, do you have questions from online?
We have one from, Grant Sinclair.
Yes.
Question is: Do you view the current challenges the Alliance Group are experiencing in New Zealand, plus the continuing decline in sheep numbers, as a threat to Meateor or an opportunity, or both?
I'll let Andy answer this question because I'm a director of ANZCO Foods, which is a competing meat company to Alliance Group.
Look, I think it's clearly going through a difficult patch, but they're a resilient bunch that the farmer... It's a farmer co-op, so we would think that, you know, they'll find a way through their current, you know, downturn, I guess you'd call it. And, you know, we'd have a lot of confidence that they're a pretty good team, and they'll pull things through. And I think from our Meateor now, it's we collect off all of the meat companies that are sort of close to our two processing plants, one in Hastings, one in Dunedin. So we get a wide sector of the meat industry's products through our plants. So Alliance is important to us, but, you know, and they'll continue to supply us over the years as well.
No more online questions, Mike.
Okay. Thank you, Steve. Any others from the floor? Yes, sir.
Just one for Andy.
Sorry, can I just pass that to you?
Just to add to this .
Thank you, Chair. Thank you, Mr. Borland.
Yeah.
Just wondering, a couple of questions, I think that's what I'm allowed, Mike.
Yes, Steve.
First one was the CapEx that's needed to get you NZD 70 million EBIT for your Global Proteins. And then subsequent to that, would be the governance oversight you've got on joint ventures, 'cause in my view, joint ventures are pretty tricky. So how do we keep our shareholders association green-tick right across the governance?
Thank you.
Thanks, Stuart. The CapEx is a lot of it's already embedded. We've started these projects, for some, some haven't. But there isn't significant CapEx. Some of it's plant and equipment that we just, you know, purchasing to put into plants. So it's certainly, you know, not what you'd think, you'd-- I wouldn't definitely call it significant. Probably not gonna give you a number right now off the top of my head, but, yeah, you should think of it as being not significant relative to our balance sheet and everything.
We're doing a couple of projects, for example, in Shelby, that they'll be able to fund out of their resources, rather than, you know, us, Scales, putting more money into it or the shareholders putting in more money into it. So I think overall, yeah, pretty confident that those nine projects we refer to are, you know, certainly manageable and, but not... Wouldn't say they're significant, and the governance side, yeah, it's a challenge with joint ventures. We put, you know, our, myself and John Sainsbury are, and Nick Harris actually helps us as well.
Certainly where we've got, you know, pulling in Nick's experience from Harris Farms, and obviously, John and I, so we're representing Scales shareholders in those joint ventures across the meat, you know, the Global Proteins part of it. And their partners are obviously joining us on those boards, finding them, you know, good contributors and, you know, it's everything's going, you know, reasonably well at the moment on all those companies. In the horticulture business with Profruit, obviously, we've been in a long-standing joint venture partnership where we had. In fact, Grant Sinclair's been a long-term director for Profruit for us.
I'm on that board with, and obviously, John Bostock and Neil Chittick will be coming off it, and we'll just put a, you know, an in-house directorship on. You know, and we report regularly through that board to back to the Scales main board. So, we don't keep anything from the main board. You know, everything that we're seeing in those subsidiary or joint venture boards are very, very well reported back to the full Scales board.
Thanks, Stuart. Nothing else? Afterwards, maybe. Yeah. Good. Any further questions from anyone else before we close the voting? Okay, thanks, ladies and gentlemen. That concludes our discussion on the items of business, and shortly, I'll close the voting system, so please ensure that you have cast your vote on all resolutions, and I'll now pause to allow you time to finalize those votes, particularly if you're voting online, and everyone in here has obviously voted, so that's been great. All right, voting has now closed. The results of all votes will be released to the NZX later today. Ladies and gentlemen, there doesn't appear to be any further business for discussion, so that brings us to the end of formal business for Scales Corporation 2024 Annual Shareholders Meeting.
I'd like to thank you all for taking the time to connect with us today, whether it's online or in person or online, and I will now declare the meeting closed. Thank you very much, and I invite all those present to stay on for light refreshments and the opportunity to have some informal discussions with directors, taste a few apples out the back, and have a general catch-up on any other issues you might want to raise. Thank-
Take apples with you.
Oh, take apples with you, the managing director said. Thanks very much, ladies and gentlemen, and we look forward to seeing you out the back.