Thank you for standing by, and welcome to the Scales Corporation Limited full-year results conference call. All participants are in listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Andy Borland, Managing Director. Please go ahead.
Welcome to the Scales full-year results announcement for the year ended 31 December 2022. With me today is our CFO Steve Kennelly, Geoff Smith here as well, our Chief Operating Officer. Earlier this morning, we launched our results with the NZX, including a presentation pack that we'll base our comments on during this call. Steve and I'll run through the slides. We'll take questions. If you have any further questions after the call, we'll be available for the rest of the day. Our presentation today is in three main parts: a summary of the results for and performance of last year, an outline of our strategy for the Global Proteins division, and an update on the impact of Cyclone Gabrielle together with the outlook for the current financial year.
Regarding Cyclone Gabrielle, I can't emphasize enough the very difficult and stressful situation that this cyclone has put our teams under across the Hawke's Bay, impacting our staff at Mr Apple, Meateor, Scales Logistics, Fern Ridge, and Profruit. Our heartfelt sympathy goes out to those that have lost loved ones, and we will support our team and the Hawke's Bay community in every way that we can. Moving on to a summary of last year's result on Slide 5. We're pleased to report strong group performance with earnings towards the top end of guidance. Underlying NPAT attributable to shareholders was NZD 27.6 million, and reported NPAT attributable to shareholders was NZD 19.4 million. These results are driven by record Global Proteins earnings, which continue to exceed expectations. Horticulture was hampered by market conditions, particularly the lockdowns in China. Logistics also produced a record result.
Slide 6, our year-end numbers. This Slide highlights some key numbers for the group operationally. Global Proteins sold almost 160,000 metric tons of pet food ingredients. Horticulture exported over 4.5 million cartons of apples, and Scales Logistics managed over 27,500 containers. Financially, record revenue of almost NZD 620 million was recorded. ROCE was 14.3%, and we continued to retain net cash for investment purposes. Moving on to sustainability. Our key goal for sustainability in 2022 was to identify risks and opportunities in our business environment and revisit our materiality issues list. This allows us to get clarity on the key areas and have more focus in our action plans. We completed the first groupwide baseline calculations for water, carbon, and soil as part of our regenerative orchard trials.
The next slide summarizes the progress that we've made on some of our sustainability initiatives. As ever, people are our key focus as without them, we wouldn't be the business that we are. Mr Apple has built a value proposition program and also two leadership programs to help develop our employees and leaders. We've also re-engaged the Ethical Voice platform, an online survey targeted at our RSE workers so that we can keep informed about their overall wellbeing. We're pleased to note that Mr Apple has consistently scored excellent and exceeded results from 2019.
Touching on a few other initiatives. We've completed a decarbonation roadmap outlining key initiatives, CapEx, and reduction targets, supported New Zealand Apples and Pears' Smart and Sustainable program to investigate the minimization of sprays, set groupwide climate scenarios, and established sustainability committees across our divisions. We look forward to going into more detail about some of these schemes in our annual report. I'll now pass over to Steve to run through the financial results for the year.
Thanks, Andy. The table on Slide 11 summarizes our underlying and reported results for the group. As Andy mentioned earlier, the group delivered excellent results with record earnings for Global Proteins and Logistics. Underlying NPAT attributable to shareholders at NZD 27.6 million was towards the top end of our previously advised guidance range. Reported NPAT attributable to shareholders was NZD 19.4 million. This result includes a number of non-cash FS adjustments. Underlying NPAT and EBITDA increased 17% and 6% respectively compared to 2021, and record revenue of NZD 619.2 million was recorded, up 20%. These results were primarily due to growth in the Global Proteins division, both organically and by acquisition. Slide 12 gives our five-year performance graphs for underlying NPAT attributable to shareholders, underlying EBITDA, and revenue.
The next slide summarizes our divisional performance, which illustrates the change in mix of group earnings. Andy will go into further detail later, but I'll summarize the performance of each division here. Global Proteins outperformed the expectations, particularly in the second half of the year, to generate an underlying EBITDA of NZD 60.2 million. The division's growth was due to a number of factors, including strong market conditions and new product development, leading to improved volumes, mix, and margin. It also included a contribution from the Fayman investments in October 2022. Horticulture experienced extremely difficult operating and trading conditions, particularly in the latter part of the season, with price pressures due to China lockdowns. Lower volumes, higher shipping costs, and labor availability earlier in the season also contributed to the result.
I'd also like to note that we made the decision to transfer Profruit into the horticulture division for reporting purposes, as we believe that Profruit's operations and strategy are better aligned towards those of the horticulture division. We've updated the prior year comparatives accordingly. Logistics also generated a healthy increase in earnings despite a testing market environment. Slide 14 illustrates the five-year underlying EBITDA trends for our divisions, highlighting the exceptional growth in Global Proteins over the last few years. Slide 15 provides a summary of our financial position. Movement in working capital primarily reflects an increase in trade and other receivables due to market conditions in China and Europe towards the end of the year.
This is not a regular occurrence, and we expect receivables to return to normal levels. Working capital was also affected by an increase in inventory in the Global Proteins division, consistent with revenue growth. The movement in non-current assets mainly reflects CapEx, revaluation of land buildings and apple trees, a reset to the IFRS 16 leases calculation for Mr Apple, and also the investment in Fayman. Our movement in net cash primarily relates to dividend payments, including those to minority shareholders and the investment in Fayman. I'll now hand back to Andy.
Thanks, Steve. Moving on to the Global Proteins on Slide 17. The division generated a 6% increase in volumes from around 149,000 metric ton to around 159,000 metric ton. Given the primarily edible nature of products sold, we haven't incorporated Fayman's product volumes into the volume of pet food sold by Meateor and Shelby. Over 9,000 metric ton of product was sold by Fayman during November and December. Revenue increased 46% with underlying EBITDA increasing 80%. The increase in profitability was due to a number of factors, including significant operational efficiencies following development investment at processing sites. The impact of new product development, which is returning higher margins.
Leadership team with long-term customer relationships enabling expansion of geographic reach and product range, changes in product, customer, and market mix, and profit contribution from Fayman since completion, which is equity accounted. To Slide 18, moving on to the horticulture division. It's fair to say that it was a difficult year for horticulture, with a number of challenges presented to the business. Whilst revenue was only down 6% on last year, underlying EBITDA decreased from around NZD 41 million to around NZD 17 million. There was a 9% decrease in Mr Apple total own grown export volumes. Volumes of traditional premium varieties were down 12% and 7% respectively, although we did see pleasing growth in Dazzle and Prince volumes. Earnings and volumes were impacted by the factors mentioned earlier by Steve. This next slide summarizes horticulture's main KPIs.
A number of the difficulties that affected apple volumes also affected pricing. While we had an overall decrease in apple prices, premium varieties achieved an overall slight increase in price, confirming our strategy of investing in these varieties. Profruit continued to perform well as an integral part of our vertically integrated business. Turning to logistics. Logistics produced an exceptional full year result despite continued global supply chain sector difficulties. With a 51% increase in revenue and a 33% increase in underlying EBITDA. While there was a 9% decrease in ocean freight volumes, managed air freight volumes increased by 52%. Once again, the skill and expertise of the logistics team has been in evidence in 2022. We believe this is a key advantage for Scales' internal divisions, as well as the logistics external freight customers. Moving on to capital management.
Both Global Proteins and logistics exhibited significant growth in their return on capital employed percentages in 2022. Horticulture's ROCE was impacted by its lower earnings. Overall group ROCE was 14.3%, in excess of our target of 12.5%. Horticulture continued to account for the majority of CapEx, which included the orchard redevelopment and Whakatu pack house automation programs. Shelby commenced an investment program in plant machinery, which will allow an increases in volume. Future investment will be prioritized towards Global Proteins, given its strong growth prospects and return on investment. We're mindful of our desire to maintain appropriate cash levels, and we're keen to retain strength in our balance sheet for potential investment opportunities.
I'd like to now move on to the next part of our presentation, which is to provide some more additional background to our strategy for the Global Proteins division. This is the exciting part of this morning's presentation. We're extremely optimistic about Global Proteins. We've positioned ourselves in a series of partnerships that have very long-standing, enduring relationships with both customers and suppliers. The strength of these relationships, coupled with our added value processes and history, continue to mean that Scales maintains the strongest strategic presence in the industry. The industry is supported by many macro tailwinds, including the global growth of the middle class and its associated demand for protein. We see no abatement in the demand for protein for the foreseeable future. Given its nature, we believe that the sector is resilient against market cycles as well as producing above age- average returns on investment.
The worldwide nature of the opportunities in front of us allows us to leverage our existing networks with our near-term focus pointed towards establishing a new plant and business in Melbourne, ongoing multiple opportunities in the USA, and a potential new venture in Europe. Looking at Slide 25 in demand drivers, our pet food customers in the USA are particularly optimistic about the future and are investing substantial sums. More than NZD 2.4 billion is committed in 2022 alone to meet future demand. This additional capacity comes on stream over the next two years. The supply chain and sourcing of raw materials have been identified as the biggest future production challenges for pet food manufacturers.
Meateor and Shelby have a very experienced and well-connected leadership team and have developed deep relationships with customers over 25 years, which gives us confidence that we will participate alongside our customers in this growth. We're investing in broadening and expanding our own capacity within the U.S. to support current customers and internationally support many of those same customers with their global businesses. Slide 26 in Scales value proposition. Scales is uniquely positioned to benefit from the future growth in the proteins market. Our unique advantages include extensive and long-standing relationships with some of the biggest FMCG companies in the world, deep domain knowledge, including processing IP and know-how, and a comprehensive understanding of the market, a wide range of supply relationships spreading multiple markets and covering a broad base of proteins. Supply chain excellence. We continue to deliver on time and to specification.
Even through the pandemic, all customers were supplied successfully. We have our own in-house or captive logistics and supply chain functions to be able to continue to provide this level of service. We exist to solve problems for our suppliers and add value to our customers. In some cases, we're dealing with lower value or waste stream byproducts that need to be removed from our suppliers' factories regularly and consistently so that our suppliers can focus on their core business. We then repurpose these products into value-added proteins. To our global ambitions. As a result of the opportunities I've just described, we have global ambitions for our Global Proteins division. As shown on this slide, we already have significant operations in New Zealand, Australia, and North America.
With Europe being the second-largest market for pet food, and with many of our existing customers operating in this market, we're keen to extend our operations into Europe. As a result, discussions on potential opportunities are currently taking place, and we look forward to updating you on progress in due course. Further info on our game plan, the value chain. Slide 28 summarizes our value chain, from sourcing raw material proteins to production and shipping of high-quality products, and finally, through the sale of these products to the three main markets for animal byproducts. Whilst we have previously concentrated on supply of pet food, we also supply to the pharmaceutical industry, and with the investment in Fayman, now supply to the edible proteins market, particularly in Asia. It's our plan to grow our presence within each of these end markets. This, the continuation of this is on Slide 29.
The structure that we have in place today is a result of careful planning. We specifically target existing end-market players with strong existing relationships and find a way to partner with them. We'll continue to adopt this strategy for growth. Once we've invested, we'll leverage our existing experience and relationships to achieve win-win synergies and growth across the expanded group. Our current investment parameters will ensure that potential opportunities have strong earnings and cash flows, which allow a significant portion to flow back to the parent company. Looking at the U.S. case study, some key milestones. Slide 30 shows that our investment in Shelby is the template for successful partnerships.
Since our investment in late 2018, the business has achieved growth in all areas, including a 60% increase in volume sold, enabled through new product development, leveraging the shareholders' existing know-how and product knowledge, complemented with investment in plant and machinery. Significant expansion in the team, expanding its sales, marketing, procurement, manufacturing, and back-office capabilities. Ongoing development of multiple growth initiatives, some of which will come to fruition in the near term. We believe that we can replicate this model with other investments. Moving to the impact of Cyclone Gabrielle and the 2023 outlook. I'll give you an update, a short update, on the impact of Cyclone Gabrielle on Scales. Firstly, and most importantly, we're extremely pleased to report that all our team members are safe and well.
There are many people who have experienced significant loss or disruption as a result of this event. The Hawke's Bay community, its people, and its culture are an integral part of Scales. Accordingly, Scales is donating NZD 250,000 to the recovery. We'll also be providing tailored assistance to those staff members who have been particularly affected. As you'll appreciate, in terms of our businesses, given the scale of Gabrielle's impact, we're still assessing and understanding the full effect that the cyclone has had on our operations. As we've previously advised, three of our orchards, being Brookfields, Kinross and Pakowhai, have been extensively damaged, with Pilos orchards sustaining moderate damage. Our other orchards haven't sustained any material damage.
The four orchards mentioned cover around 318 hectares, approximately 28% of our planted orchard area, and include plantings of Royal Gala, Pink Lady, New Zealand Queen, Fuji, Dazzle, and Posy. Of the Posy fruit, a majority has been picked prior to the cyclone and floods hitting. We'd like to note that there is still some unaffected fruit on these orchards that we will pick and export. We'll continue to update you as further information becomes available. Moving on to our final section of the presentation, the outlook for 2023. As previously advised, due to the impacts of Cyclone Gabrielle, we've taken the step to withdraw our FY 2023 profit guidance at this time. However, we expect to provide updated guidance as soon as practicable once the financial impacts of the cyclone are fully understood.
Notwithstanding recent events, also as previously announced, we'll be delivering our dividend payments in three installments this year. The first installment of NZD 0.06 per share was paid in January. We intend to pay the second installment of NZD 0.035 per share on 31st of March 2023, we'll review and advise on the third installment in early May. Our intention from 2023 onwards, that our dividend policy will revert to 50%-75% of underlying net profit after tax attributable to shareholders. That ends the formal presentation, although we point you to appendix A of the slide pack which provides additional financial information and reconciles underlying earnings to reported earnings for each of our divisions as well as the group. We're now happy to take any questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. Your first question comes from Joshua Dale with Craigs Investment Partners.
Good morning, Andy. Good morning, Steve. Just firstly, I want to talk about food ingredients. This was obviously an exceptional performance. You previously mentioned it may not be wise to continue to extrapolate growth from record results. In this result, you sound very confident about the future of the division. It's sort of a change in messaging. Can you talk to that, please?
We are confident about its growth, you know, prospects, definitely. It's just with the projects that we've got on, you know, they are going to contribute to, you know, future earnings, particularly from 2024. You know, if you think, you know, if we've got, you know, a factory underway in Melbourne, you know, it'll be fully up and running during the second half of this year, but, you know, full contribution will be 2024 for that business. Yeah, and particularly in the USA, just with the various initiatives we've got going with both our suppliers and our customers, you know, we're confident of the of growth continuing.
Thanks. I suppose what I was getting to is in, I think one of your previous results you had mentioned, you were able to take advantage of your competitors not supplying. You know, there was inventory stocking. Are any of those one-off issues that may have boosted previous results, you know, are they present in this result? You know, can you-
I think there's an element of, there is an element of the COVID impact in that, in the 2022 result. You know, people, you know, not just in the pet food sector, but a lot of manufacturers stockpiled, you know, raw material to protect against supply chain disruption. There was a bit of that. We are seeing, you know, moderate, you know, I guess, adjustments in that market. I think we're sort of mitigating that effect with these new product initiatives we've got going. We've put new plant into that Amarillo site. The Dodge City facility is really kicking into gear with a couple of new initiatives going on there too. We think those, will help, you know, offset the positivity that was created by, if you like, that COVID demand, if you like, stockpiling, aspect of what our customers are doing.
Yeah. That's helpful. Just last question on food ingredients. How much of a forward read do you typically get in terms of demand from your customers? What, you know, how far ahead does the order book typically look?
Yeah, that's a harder one. You know, there. It is more of a, you know, just watching our stock levels, you know, just talking to our customers, what if they've got new, you know. We've signaled in our announcement, you know, this extra, the extra facilities that have been built by our customers in the USA. That's sort of, they're coming to us now, talking to us about, "Well, how are you going to supply us with the ingredients we need to fill these factories?" You know, we're actively talking to them now about how to supply those factories.
Great. That's really helpful. Thanks, Andy. Just moving on to the horticulture division. For the four orchards that were damaged, do you have any early indications around whether some replanting will be needed?
Well, we replant every year, so, you know, it's sort of a biological process. Clearly we've got some potentially new target areas post this storm. Look, it's too early to say, you know, what we're going to do at the moment and, you know, that's why we've, you know, taken the step of withdrawing the guidance. It's the guys there are really in, you know, tidy up mode. You know, they're actually removing dead animals from some of those orchards. The bins have been scattered to here and back again. You know, we're really in cleanup mode at the moment and working on, you know, the assessment of what the, what, you know, what we're gonna do next is sort of probably in the next phase. It's chaotic there at the moment.
Okay.
Absolutely chaotic there at the moment, there's no doubt about that.
Makes sense. For the three you were saying were extensively damaged and one that was moderately damaged, it's fair to say that the trees in there are, you know, I guess, are they damaged to the point of not being able to produce fruit anymore and, you know, therefore you'll have to make a decision around replanting? Can you just sort of, you know, I think you mentioned 318 hectares. Those orchards cover 318 hectares, but do you have a sense of how many hectares are, you know, completely wiped, so to speak?
We just haven't got that information available, you know, at this stage because we just don't know the, you know, are the trees that are under the silt, you know, layer of silt's too much. You know, how many are gonna die. It's too early to assess, make that assessment at the moment. Hence, we want to update the market iteratively, you know, over the next, you know, weeks, to keep you informed. We're better to do it on, you know, good assessments rather than, you know, just, you know, having hunches.
Yeah. No, I appreciate that. Of the four impacted orchards, are they leased or owned?
There's a mixture. Combination. You know, there's a mixture of freehold and leasehold in those orchards.
Okay. I mean, can you sort of tell us out of the four, what, how many are leased and how many are owned?
Yep, it's 50/50.
Just last one for me. You know, within your horticulture division, there's obviously costs you bear in any given year. Do you have an idea of how, you know, the split between fixed and variable costs? Just a rough estimate.
No, not at this stage. We're as Andy said, this, it's sort of too early to make any financial statements at this stage. We wanna do that proper detailed assessment of the orchards and the likely impact. We'll talk to that.
Okay. I mean, even just for historic numbers in that division, is there any idea or any steer you can give us? Is it sort of, you know, perhaps 50/50 or just rough numbers?
No, I just don't have that at this stage.
Okay. No, that's fine. Thanks very much, Andy and Steve. Appreciate that.
Cheers.
Your next question comes from Christian Bell with Jarden.
Yeah. Morning, guys. If I could just follow on with the horticulture stuff. If you do need to replant on the 318 hectares of extensively slash moderately damaged orchards, so you do the assessments and you find that you do need to replant that, at this stage, do you remain committed to actually replanting those? You know, will you forfeit a portion of that land, perhaps the leased land, and then replant on your own land?
We haven't made any of those decisions yet, Christian. It's, sorry, it's just too early to make those decisions, you know, because we haven't had the analysis to work it out.
Okay. I guess, you know, in the past, part of the margin recovery in the orchard business depended on automation projects. End of last year, you had said that you weren't going to do that in 2023. I mean, with all that's going on and potential, you know, capital required, given this event, do you still remain committed to those gross margin initiatives for horticulture?
Yeah, we do, absolutely. Because, you know, we're always looking to improve the margin in the business and recover the margin that's been, you know, lost to us. I guess we're keen. We're seeing some, you know, improvement in freight rates. You know, even this event's improved the freight rates already, we think. W e finished off last year, we've had robotic palletizing done in our Big Wairau Auckland Two store . They're sort of, we're pushing them through the wall into the adjacent building. We got that all done, so that was a net credit already. During the fall, you know, roboticization, if you like, of the pack houses is definitely on hold.
We'll pick that up, you know, in the next year or so, I would say. Our focus would be on replanting, you know, particularly, continuing the replanting to move to Asia. That would be. That will help our margin improvement. We also had the style of tree planting we had was improving our margins. You know, that'll continue. I think that the initiatives will be continuing. We'll probably just stall the next phase of the pack house until, you know, we get our heads around this latest replanting, you know, program.
Okay. Cool. Thanks. Just in relation to previous crop, even, of the apples therefore, you know, survival, you'll be able to salvage and sell through to market, how are you thinking about pricing? I mean, do you think there's likely to be quality issues or durability issues that could mean slightly weaker pricing in 2023?
Well, we don't know that yet. We've got a good crop. What's, you know, what, you know, and the rest of the orchards is a very good crop. You know, would we prefer, you know, a hot, dry rest of the summer and autumn? Absolutely. You know, that would help the crops quality. You know, we've got, you know, the good technology in our packhouses to look for internal browning issues and that sort of thing, so we'll be mindful of that. Look, we think we've got a, you know, good quality crop to sell and more importantly, in these events, there's normally a positive impact, dare I say it, on, you know, the remaining export crop, you know, as to price.
Okay, cool. If I could switch focus to Global Proteins. I guess following on from the previous question, are you saying that you do envisage margins remaining up around the 18% despite the sort of tailwind that was provided by COVID in the last couple of periods?
Look, we don't see it sort of absolutely falling away. Whether we can hold it there, it's just really it's down to the combination of the products we're selling, you know, the demand that we're seeing. You know, we're continuing to grow the business. I think, you know, I mentioned these other, you know, the CapEx that we've done and the efficiencies we've done and the new product mixes we've done, they're all combining to create the positive result that we had. You know, as we look for, you know, through this year, you know, we'll be wanting to see that, you know. We would see it, if you like, definitely stabilize this year and with what we've got going in, you know, in terms of projects for in 2023, we can see 2024 looking, you know, growth.
All right. Given all of those sort of projects going on and the fact that, your initial kind of guidance for second half 2022 was more around NZD 20 million of EBITDA based on the second half 2021 number, I think it was, and then you produced NZD 30 million. Just in terms of run rate, I mean, do you consider to use the NZD 30 million EBITDA number as a run rate going forward?
Are you talking about kiwis there or U.S. dollars?
New Zealand. New Zealand.
Oh. Yeah.
I think in our original guidance, we sort of alluded to, you know, maybe a bit of a lower result for FY 2023 in Global Proteins, we're not really seeing that fall off at all. As Andy talked about, you know, the margins are staying there. Yeah, I think it's, you know, we're more confident of that result and look, NZD 60 million, will we get there? We'd like to get there for FY 2023. As Andy said, there's also some growth initiatives going on in future years. I think we're more confident of that or around that level.
Okay, great. I mean, just given that you In your slide deck, you said that it's been identified in the supply chain that the biggest future challenge is around, kind of the space that you play in. Given the returns that you are making, are you expecting more competitions will emerge, which would inevitably drive those returns down?
Well, you never say never, do you? Like, you don't know what the competition is doing. You know, we just know what we're good at. You know, we've got some real good plans in place to drive, you know, the business and the growth. We're going to look at these new markets. You know, we're working hard with our customers to keep the supply up to them. You know, concentrating on ourselves is very. You know, that's the key thing for our business. Those relationships with the suppliers, you know, are really, I guess long lasting. You know, we're key to their supply, and we see that continuing.
Are there any reasons why any potential competition wouldn't sort of, why your customers wouldn't move to another, to a competitor? Like how long are your contracts, and, I mean basically just, why would they refuse someone to come along?
Some of them are 25+ years long. You know, some of them are, you know, ever since we've been in business because, you know, where our plants are versus where their plants are, you know, the distance, you know, even, you know, the distance factor, away from each other is a, you know, mitigation to competition. They've gotta come into our patch. They've gotta get equipment into the abattoirs. You know, we've got equipment in a lot of the abattoirs that helps the collection process. You know, that's our equipment.
You know, the, you know, we've built up a, you know, a network of, you know, both relationships and equipment and CapEx and facilities that are aligned to our, to our suppliers, both our suppliers, you know, supply chain, and then obviously, you know, to our customer supply chain. You know, it's, you know, it's not that simple for someone to just, you know, start up from scratch.
Okay, cool. Just the final one. You've talked about in the last presentation, I can't remember, that your contract with your supplier in Australia was sort of coming up to the end of that contract at the end of this year. Are you sort of planning on renegotiating that or at a higher rate? What's going on there?
Yeah, the only thing that's really changed is the exclusivity. It's, you know, they can go to other people, but, you know, we are very keen to continue to trade their product, you know, to work with them. Yeah, it's really just an evolution. You know, we're setting up that plant in Melbourne, so we're doing our own thing as well. We absolutely want to, you know, continue to, you know, to work with that partner.
Okay, great. Thanks a lot.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Margaret Bei with Forsyth Barr.
Hey, Andy and Steve. Glad to hear your team members are safe after the cyclone. I might start there. In terms of the damage at those, four sites, can you talk through what are the implications of not really having the crop insurance and also possibly what other types of insurance you have, anything that you could possibly claim back, for example?
Yeah. We've got full, you know, plant and equipment, buildings, you know, material damage, claims. I mean, policies. There's, you know, if there's any impact in our, you know, packing business, there's BI cover in there. We, you know, so it's a comprehensive package of insurance on the physical assets. Yeah, on the crop insurance one, you know, that's, you know, it's getting harder and harder to get crop insurance for, you know, the horticulture industry and, you know, that's probably the, you know, the reality of life. We are going to keep looking and keep negotiating to see if we can, you know, reestablish, you know, crop insurance because we see it as a good, you know, risk mitigation. Yeah, that's the reality of what we've got today.
Just to clarify, the trees themselves, is there any insurance over them?
No, there's not.
Okay. All right, just on the Global Proteins division, I think based on the numbers you've put out today in your report, Fayman's estimated share of NPAT for you guys is about NZD 2 million across October and December. Please, first, please correct me if I'm wrong. Second, can you please talk us through whether this is a normal run rate for the business or if there's seasonality, et cetera?
That number, Margaret Bei, is our, included in our report of impact. That includes some opening investment adjustments. No, it's not, it's not typical of the run rate. The underlying number, is probably closer to half a million. For that period, their trading was down, but we expect them to revert to what the expectations were, at time of purchase, going forward.
What were your expectations at the time of purchase?
Their contribution to us at an impact level is probably NZD 2 million-NZD 3 million, something like that, I think, off the top of my head.
Great. Thank you. You've mentioned quite a few CapEx and other investment opportunities, especially in Global Proteins, you know, also things across horticulture. I was just wondering how much capital or cash do you have left to deploy after the Fayman and new factory acquisition?
The new cash position as at 31 December was NZD 27 million, bearing in mind we've got elevated trade receivables related to horticulture, and there's also an increase in inventory levels in Global Proteins. Some of that will abate, so our cash level is probably slightly higher than that. We still do have adequate cash for investments going forward.
I see. I know you've previously mentioned that while you're waiting to deploy that cash, you're sort of using it to offset your working capital, which makes sense. I guess in that case, what are your expectations of CapEx over the next couple of years? How much are you expecting to spend on these initiatives?
I think our CapEx budget for this year was around about what we spent last year, and that would probably be a standard amount going forward. Obviously, we're gonna have to have another look at that when we get the full assessment of the cyclone impact.
That makes sense. That's all for me. Thank you.
Thanks.
Thank you.
There are no further questions at this time. I will now hand back to Mr. Borland for closing remarks.
Well, look, thanks very much. I appreciate your patience and understanding during, you know, what is this pretty unprecedented event we've had in Hawke's Bay. Look, we'll keep you informed as we get, you know, new information and updated information. We appreciate the support you give us, and we'll update you again as soon as we can.
That does conclude our conference for today. Thank you for participating. You may now disconnect.