If I could have everyone's attention, please. Great to see you all here. I'm particularly pleased to be here. It's always a bit of a drama, as you know, traveling between Australia and New Zealand. It is happening, so yeah, as I said, I'm really pleased to be here and, while Zoom and other online vehicles are a great fallback, there's nothing like, as I said last year, being here personally and particularly seeing you all on a, you know, a personal basis and certainly more of a single dimensional basis, which is what you see on Zoom. Pleased to be here. It's my pleasure to welcome you to the 110th annual meeting of the company and the 8th since we became a listed company.
Last year, we had held our first ever hybrid annual meeting, and we are doing so again this year. 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. Now, just some housekeeping matters for those of you who have joined us here in person.
First, I'd like to remind you, as a matter of courtesy, to turn your mobile phones to silent. Also, in the unlikely event of an emergency and we need to leave, please do so through the marked exits and venue staff will be available to help us there. I'm pleased to confirm that we have a quorum and therefore declare the 2022 Annual Shareholders' Meeting of Scales Corporation Limited open. The items of business for this meeting and the resolutions to be considered by shareholders are contained in the notice of meeting, which was sent to shareholders on the sixth of May. Our order of proceedings is as shown. First, I'll briefly comment on the highlights of the last 12 months, followed by a review by Andy Borland, our managing director.
Then we'll 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. Excuse me. Once the meeting is complete, we hope that those of you present will join us for refreshments. There will also be an opportunity to meet the directors and our senior managers and raise any questions you may have on an informal basis.
With regard to the online voting process, if you're eligible to vote, you will be able to cast your vote under the Vote tab as shown on the screen. Once the voting has opened, the resolutions will allow votes to be submitted. To vote, simply select your voting direction from the options shown. You can vote for all resolutions at once or by each resolution separately. Your vote has been cast when the tick appears. Now, to change your vote, simply select Change Your Vote. 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 question process. For those of you who 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 Computershare online meetings platform, the resolutions will now be open in the Vote tab. Please submit your votes at any time. I will give you a warning before I move to close voting, so you will have plenty of time to vote, and you will also get warning of when voting will close. Now, I'd like to quickly summarize the process for asking questions. 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 anytime, 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. Please note that while you can submit questions from now on, I won't address them until the relevant time in the meeting. Please also note that your questions may be moderated or if we receive multiple questions on the one topic, amalgamated together. Finally, due to time constraints, and importantly, 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 will answer them in due course via email.
For those of you present, we'll offer you the opportunity to ask questions on or speak to each resolution being put to shareholders at the appropriate time. As I indicated, there will also be an opportunity to ask questions of individual directors and management informally after the meeting. Now, what I'd like to do now is introduce my fellow directors who are in attendance either in person or online. They are Andy Borland. You all know Andy. He's our managing director. Nick Harris. Nick is our chair of Scales' Health and Safety and Sustainability Committee and an independent director. Mark Hutton. Mark is chair of Scales' Nominations and Remuneration Committee. He's also chair of our Finance and Treasury Committee, and also an independent director. Alan Isaac. Alan's the chair of our Audit and Risk Committee, and also an independent director. Now, joining us online is Nadine Tunley.
Nadine is a member of the Health and Safety and Sustainability Committee and an independent director. I'll just add that Nadine certainly intended to be here, but unfortunately she's been struck down with well, we all know, COVID. Joining us also online is Qi Xin. He is a director representing China Resources. I'd like to also note that members of Scales' management and staff are in attendance here and online, as well as our external auditors, Deloitte, and our lawyers, Anthony Harper. In addition, Kelly Brown, our Future Director, is here in the audience. Now, just an overview. 2021 was another challenging year for many businesses, including Scales, and we don't need reminding of that. As we all too well know, COVID-19 affected areas such as labor availability, markets, supply chains, and logistics.
Our life was, as we all know, turned somewhat upside down. However, as in 2020, all of Scales' businesses operated throughout the lockdowns and the various alert level changes. We ensured that the health, well-being, and safety was the top priority for our staff. I'll speak more about the efforts of our exceptional team shortly. Notwithstanding those difficulties, an extraordinary effort was made by everyone in the apple team to pick, pack, and export the harvest. Food Ingredients continued its remarkable growth path, exceeding its long-term EBITDA target of NZD 25 million, a target that was only set at the end of 2018. The strategic benefit provided by Scales Logistics was evidenced in relation to the ongoing supply chain difficulties, ensuring both Scales businesses and our external customers were able to successfully export their produce.
As a result, and with the benefit of diversification, our results exceeded our revised guidance issued following our interim results last year with dividends being paid as planned. 2021 put a strain on everyone, both personally and professionally, and it shouldn't be understated. We are extremely grateful for the tremendous efforts of all of our staff in supporting our customers, suppliers, local communities, and each other throughout the year. Across the business, our people faced the challenges that were presented to them with strength and ingenuity. Their ability to adapt was tested every day as we strived to update safe work practices in line with changing situations. Our staff's courage was vital to ensure that our essential products and services continued to reach customers. We're extremely proud of their enterprising spirit, resourcefulness, and extraordinary effort.
As in previous years, we also observed the importance of our critical RSE workers within our team. Compared to 2020, the RSE workforce was approximately 14% lower over the key harvest period, which placed significant pressure on our local permanent team. We're also aware of the mental and emotional toll that the last two years have brought and considered a number of strategies to help. One of the tools that we implemented is a partnership with Groov, previously called Mentemia, a mental health and wellbeing platform that provides practical tips and tools to help our employees take control of their daily mental wellbeing. Andy will touch on this again later in the address. Despite the trying times, teams have pulled together and the positive results driven and supportive culture of Scales has shone through.
I'd like to take this opportunity to extend our thanks on behalf of the board to the full team of Scales for their contribution and commitment, which has once again been invaluable. I also wanna point out at this point to particularly commend the executive team of Andy, Andrew van Workum, John Sainsbury, Kent Ritchie, and Steve Kennelly for the strength, and I emphasize this, leadership that they have shown over the past 2.5 years. That leadership has delivered in spades for Scales shareholders, I can assure you of that. In terms of governance, we're pleased to have commenced the process around our board succession, assisted and guided by specialist governance advisors, BoardWorks.
As part of that process, Mark Hutton and I indicated at last year's AGM that we will not seek reelection at the current end of our current term, which is scheduled to end in two years' time. We'll continue to update you on our succession plans as they progress. We're also delighted to welcome Qi Xin as our China Resources representative onto the board during 2021, in addition to Kelly Brown, our fifth future director. Kelly's tenure ends today, and I'd like to thank her for her contribution over the past 12 months. Kelly treated the role seriously, and I hope that she feels she has benefited from the experience. In addition, Geoff Smith was appointed as our Chief Operations and Sustainability Officer at the end of January this year.
Geoff brings a wide range of operational, supply chain, strategy, and investment experience from across the agribusiness sector. We believe these appointments serve to strengthen our already robust leadership and senior management group. I'd now like to hand you over to Andy, who'll give you a broader update on last year and provide you up-to-date on sustainability and business operations for each of our trading businesses. Following Andy's presentation, we'll move to the formal business of the meeting. As always, we welcome feedback on any matters raised during today's presentation or other general matters in relation to the group. Over to you, Andy.
Thanks, Tim. Bit taller than me. Good afternoon, ladies and gentlemen. The current slide summarizes the topics that I'll cover in my presentation today, which includes a review of 2021, an update on sustainability, a summary of our individual business performance, and commentary on the current year. First, a quick recap of some financial and operational highlights of the 2021 financial year. This slide shows some of our financial and volumetric measurements for 2021, a few of which I'll go through in more detail later. Despite the difficulties presented, we set a record revenue target performance together with a substantial 29% increase in pet food ingredient volumes sold. This next slide illustrates a summary of our earnings over the last five years, including the record revenue.
The group also generated very pleasing increases in both underlying EBITDA and underlying NPAT attributable to shareholders. Moving on to some more detail in respect of our 2021 results. Together with the 9% increase in revenue, we achieved a 15% increase in underlying EBITDA, 20% increase in underlying NPAT, which was another record result, and an 8% increase in underlying NPAT attributable to shareholders. Accordingly, earnings per share were up 27% on the prior year. This was an overall outstanding result, which we believe was aided by our strategy of diversification, together with the exceptional performance of all the teams. The next slide summarizes some of the divisional highlights for 2021. In horticulture, a lower volume of fruit and cost pressures were balanced by strong end market pricing.
Mr Apple also commenced the automation of its Whakatū packhouse and the installation of tray denester machines. As Tim has already mentioned, Food Ingredients experienced an outstanding year with significant increases in volumes sold, revenue, and profitability. We believe the division's diverse geographical locations proved beneficial for this result. Logistics performed strongly in what were extremely trying conditions for the logistics industry as a whole. The expertise provided by the division was invaluable to both internal and external customers. This slide shows the movements in divisional earnings over the last five years.
Most noticeable is the significant growth trajectory of the Food Ingredients division. More on this later. Moving on to our balance sheet, which continues to show a strong financial position. The movement in capital employed mainly reflects capital expenditure primarily at Mr Apple and revaluation of land and buildings in line with accounting standard requirements. Some of our CapEx projects are pictured on this slide. Other movements include an increase in working capital in line with our increase in revenue and a revaluation of foreign exchange derivatives, again in line with accounting requirements.
Our net cash position at 31 December decreased by around NZD 15.5 million compared to December 2020, due primarily to the investment in the Mr Apple new Whakatū cool store. Notwithstanding this movement, we continue to be in a strong position to invest in growth opportunity as they occur. An increase in other liabilities was due to increase in deferred tax liabilities. The next section I'd like to cover is sustainability. It's been a very busy year from an environmental point of view, and some of our environmental projects, both big and small, are listed on this slide. One of our bigger undertakings last year was the commissioning of the new Whakatū cool store.
We're proud to note that not only does the cool store provide operating and financial efficiencies, it also provides environmental efficiencies such as a reduction in the movement of freight. Other projects included a soil health project to help us understand our impact on the ecosystem, an in-house carbon footprint assessment undertaken for Meateor New Zealand, and the receipt of a report from AUT on the potential carbon sequestration of apple trees. All of these are covered in more detail in the sustainability section of our annual report, which I encourage you to read. While we don't treat our staff as just numbers, this current slide provides a few statistics about our workforce, a number which we are proud of. We endeavor to provide an environment where staff can develop and grow. We were delighted that one of our team members celebrated their forty-fifth year working with us.
That level of knowledge and expertise is difficult to replace. We also seek to provide an equal opportunities workplace and hope that the success of our female senior leadership team and staff members helps to inspire others. As Tim mentioned earlier, all our businesses continue to operate during lockdowns and level changes in 2021. Using our pandemic preparedness policies, we're also able to adapt our COVID-19 response as necessary, including new contact tracing technology. I'd also like to stress how important health and safety is to our group from a physical, mental, and emotional viewpoint. A few of our health and safety initiatives are noted on this slide, including our partnership with Groov, a business established by Sir John Kirwan and technology entrepreneur Adam Clark, to help people with their mental health.
It provides an evidence-based self-care product for workplaces, including practical tips and tools to help users take control of their daily mental wellbeing. We're eager to embed mental health and wellbeing into the daily working lives of our staff and look forward to seeing the impact of that has. Moving on to an update of our divisional businesses, starting with horticulture. While we encountered an overall decrease in apple volumes in 2021, there was a pleasing 6% growth in premium varieties, including significant growth in sales of Dazzle and Posy. Over the 10-year period, this represents a compound annual growth for premium varieties of 14%, which aligns with our orchard redevelopment strategy. The decrease in traditional volumes was mainly a result of inclement weather and a decrease in the number of traditional variety orchards due to the orchard redevelopment.
As mentioned earlier, we achieved an overall increase in pricing. This was due to a combination of reduced end-market volumes, better fruit size for certain varieties, and strong demand for varieties such as Dazzle, resulting in pricings that were above prior year levels for most varieties. Total export volumes decreased by just under five million TCEs, with external grower volumes reflecting a challenging season for Nelson growers. During last year, we commenced our multi-year investment and automation plan to increase productivity and sustain margins with the installation of tray denester machines at the Whakatū packhouse. This complements the commissioning of the Whakatū cool store in February, which has already provided financial and operating efficiencies. We believe that when finished, the automation project will result in Whakatū packhouse being one of the world's most automated apple packhouses and will significantly enhance labor productivity.
Mr Apple continued to plant and redevelop its orchard, with 35 hectares converted into primarily Dazzle and NZ Prince varieties during winter 2021. This, together with our intensive planting techniques, are expected to help increase prices and yields as the orchards reach commercial scale. We believe the outcomes from these projects will help us to sustain our margins. Pleasingly, we experienced strong growth in our Asia and Middle East markets last year with them accounting for around 72% of sales and that of China comprising around 20%. Of that, China comprising 20%. However, I'd like to note that sales to Russia this year have been suspended for obvious reasons.
We've continued to invest, excuse me, in our branding and marketing strategies, with a particular focus on customers in these key markets, in addition to consolidating Dazzle's early, strong, and growing presence there. We undertook market research with consumers in China, Vietnam, and Thailand to provide a baseline of brand awareness, affinity, and conversion. While the Mr Apple brand is seen as meaningful, the market research identified there was opportunities to differentiate it and make it more relevant. New simplified branding has been developed for Mr Apple, with a couple of examples shown on the slide. This continues to link to the Mr Apple five-point promise and is being incorporated in packaging and other marketing and advertising material. Moving on to Food Ingredients and its outstanding performance for the year.
As mentioned earlier, the division generated significant increases in volumes, revenue, and profitability in 2021, reflecting both the ongoing demand for global pet food and the benefit of its geographical and protein diversification strategy. Shelby in particular continued to grow strongly. This was assisted by increased volumes being available through the commissioning of a new plate freezing capacity in the toll processing facility at Dodge City, Kansas. Underlying EBITDA of NZD 35 million, a 52% increase on last year, significantly exceeded the Food Ingredients' long-run EBITDA target of NZD 25 million, which was only set three years previously. Profruit volumes were down only slightly on last year's record volumes due to a lower availability of product and yield. Again, strong domestic markets helped negate some of the difficulties in export.
The pet food industry continues to grow, with reported increase in global pet food products over 8% in 2021, led by a 17% increase in the Asia Pacific region. North American markets rose at the second highest rate of almost 13%. There's also a reported increase in global pet food sales, including an increase of almost 10% in the USA in 2020, and there was a projected 5% increase for 2021. As in recent years, the strengths of the industry is being attributed to an increase in pet ownership due to COVID-19 and a focus on pets' health and well-being. While supply chains continued to be impacted by strong global shipping demand, as well as port and logistics constraints, the impact on Meateor New Zealand and Shelby was lessened due to their respective domestic customer bases.
The global strategy for the Meateor division is to be a key provider of pet food ingredients to a wide range of international brands. While previous travel restrictions that limit our ability to pursue opportunities, industry growth has reinforced our strategy of investigating both internal and external opportunities. We're pursuing opportunities that will expand our geographical presence and protein offering, and we're also seeking to expand our product range with added value and functional pet foods. In addition, due to our confidence in the market, and particularly in the USA, our division CEO, John Sainsbury, is in the process of relocating to the USA on a permanent basis to further drive this growth. John has previously lived and worked in the States, and that, along with his leadership abilities, means he's able to hit the ground running, and is already reviewing a significant number of potential projects.
Last, but certainly not least, is the Logistics division. The challenges faced by the supply chain and logistics industry have been well documented in the press and are unfortunately showing no sign of abating. As a result, the expertise and experience of the Scales Logistics team proved, and continue to prove, strategically important for other Scales divisions, as well as external customers. An exceptional effort by the team provided a strong result with a 5% increase in revenue and a 17% increase in underlying EBITDA compared to 2020. This was despite a decrease in volumes freighted due to lower apple volumes and reduced sailings. Pressures are unfortunately expected to continue in the availability of containers and ships, labor shortages, increased costs, and high demand.
Moving to the outlook for the current year. Our diversified agribusiness strategy continues to provide some mitigation to the global difficulties being experienced. Food Ingredients continues to trade strongly, and its earnings are now forecast to at least match those of last year. Apple prices are strong compared to last year, and we have had a positive start to sales in Asia and near markets. Due to a few reasons, which I'll go into the next slide, Mr Apple's crop volume was down around 9% this year. As a result, we're pleased to reconfirm our initial market earnings guidance for 2022 at this present time. I'd now like to give an update on trading for each of the divisions.
As mentioned within the Horticulture division, total pick volumes of around 4.3 million TCEs were lower than both originally forecast and 2021. However, decrease in crop volume is not unique to Mr Apple. In May, Pipfruit New Zealand revised its crop estimate down by 15% for the Hawke's Bay region and 12% for the national crop. By comparison, Mr Apple's total picked volumes are approximately 10% lower than its previous crop estimate for this year and 9% down on last year. The decrease in our pick compared to last year was due to a number of factors. This included a portion of orchard that was either not in production or producing at lower levels due to recent redevelopment into higher value proprietary varieties. In addition, approximately 23 hectares of leased orchard, principally planted in traditional varieties, was not renewed.
Weather also played its part, as we've indicated on the slide. The effect of these factors are summarized in the volume bridge chart at the bottom right of the slide. Notwithstanding the lower apple pick, it was another amazing effort by the team to harvest the crop. Packing is ongoing with the initial export packout rate in line with previous years, and as I previously mentioned, early pricing indications are positive, with prices in the key markets up on 2021. This has helped negate the increase in overall costs, especially with the substantial increase in sea freight expenses. There has also been a positive start with Posy and Dazzle being well-received across all markets.
Mr. Apple expects to progress the Whakatū pack house automation project once this year's harvest is complete, and we expect this will continue into next year. Within our food ingredients, our pet food business continues to perform strongly. In addition to organic growth, John Sainsbury is continuing to explore opportunities in the USA and elsewhere, with value-adding options also being actively pursued. In Australia, our exports have outperformed expectations, and as of 31 December 2023, we note that we'll no longer have an exclusive ongoing relationship with our existing supplier. In terms of Scales Logistics, difficult global supply chain conditions are ongoing, with restricted shipping capacity, labor shortage, and increased costs. However, we're confident that logistics will continue to provide significant strategic support to its customers, including Mr Apple and Meateor.
In respect of overall group trading, we are anticipating higher net interest income for the year. In addition, no material M&A costs have been incurred to date. That concludes my presentation. We'll answer questions following the resolutions, but in the meantime, I'll pass back to Tim to cover the formal part of today's meeting.
Thanks, Andy. We'll now move to the business of the meeting. All items of business are ordinary resolutions and are required to be passed by a simple majority of votes. The resolutions that we'll be voting on today are as follows. Resolution one, authorization for the directors to fix the auditor's remuneration for the coming year. Resolution two, re-election of Alan Isaac as a non-executive independent director.
Resolution three, re-election of Nadine Tunley as a non-executive independent director. Resolution four, re-election of Andy Borland as a director. Resolution five, election of Qi Xin as a non-executive director. Resolution six, authorization that the maximum total pool of directors' remuneration payable by Scales to directors be increased. Current best practice for shareholder voting is by way of poll. Accordingly, I require that a poll be held for each of the resolutions.
I and my fellow directors hold the following undirected proxies. With respect to resolution one, authorization for the directors to fix the auditor's remuneration for the coming year, 202,129 shares. With respect to resolution two, re-election of Alan Isaac as non-executive independent director, 208,192 shares. With respect to resolution three, re-election of Nadine Tunley as non-executive independent director, 218,157 shares. With respect to resolution four, re-election of Andy Borland as director, 206,662 shares. With respect to resolution five, election of Qi Xin as non-executive director, 218,157.
With respect to resolution six, authorization that the maximum total pool of directors' remuneration payable by Scales to directors be increased 180,049 shares. Your board supports these resolutions, and we intend to vote all these shares in favor of these resolutions. I'll now move on to each of the resolutions. Resolution one relates to the remuneration of auditors. This proposed ordinary resolution is to authorize the directors to fix the auditor's 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 the 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 move to the next resolution. Resolutions two through four relate to the re-election of directors. The NZX Listing Rules state that the directors must not hold office without re-election past the third annual meeting following the director's appointment or three years, whichever is longer.
Accordingly, Alan Isaac, Nadine Tunley, and Andy Borland are required to retire at this meeting. Resolution two relates to the re-election of Alan Isaac. Alan was first appointed to the board in 2014, and a brief biography for him was included in the notice of meeting. Alan, being eligible, offers himself for re-election, and the board unanimously supports his re-election and recommends that shareholders vote in favor of Resolution two. I now invite Alan to briefly address the meeting on his proposed re-election. Thanks, Alan.
Thanks, Tim. Good afternoon, everyone, wherever you are today. I welcome the opportunity to speak briefly to you. By profession, I'm a chartered accountant, but I've had significant commercial experience with a number of leadership roles, both in New Zealand and internationally. I mention the commercial experience because, in my opinion, experience is being underrated today in the interest of greater focus on diversity in many aspects of our life. I retired from KPMG in 2006 after leading the firm in New Zealand for 10 years and have been a professional company director since then. In my governance roles, I've had a number of audit and risk committee chair roles, as I've done at Scales since it listed.
In addition to my other current listed company roles, Oceania Healthcare and Scales, I have in recent times been on the board of other then-listed companies, Opus, Wakefield Hospital, and Flyway. In part, to respond to an observation made by the New Zealand Shareholders' Association, my other roles include chair of New Zealand Community Trust, chair of the Basin Reserve Trust, and deputy chair of the Wellington Free Ambulance. For two years up until the end of July last year, I was the president of the Institute of Directors in New Zealand, which apart from other interests, facilitated me keeping up to date with many current and emerging governance issues.
Again, in response to an observation made by the New Zealand Shareholders' Association, the board has strong focus on the skills required on the board to effectively govern Scales and has a succession plan which is being referred to today by Tim. In this regard, I confirm, as the notice of meeting says, that if re-elected, this will be my last term as a director of Scales. I believe we have a great board with a high level of trust and respect in each other, and I look forward to your support so that I can continue to add value to Scales, which has a strong balance sheet and is, in my opinion, well-placed to achieve profitable growth. Thank you.
Thank you, Alan. I now move as an ordinary resolution, having retired by rotation, that Alan Isaac be re-elected as a non-executive independent director. Are there any questions on this resolution? Thank you. We'll now move to the next resolution. Resolution three relates to the re-election of Nadine Tunley. Nadine was first appointed to the board in 2019, and a brief biography was also included in the notice of meeting. Nadine, being eligible, offers herself for re-election, and the board unanimously supports her re-election and recommends that shareholders vote in favor of resolution three. Now, to avoid some of the online glitches that we already had in the practice run for this, I will actually read Nadine's address to shareholders. This is from Nadine: "Apologies that I cannot be with you all in person today, a reflection of our past two years of COVID-19.
I would like to take the opportunity to thank the shareholders for supporting my ongoing involvement as an independent director of Scales Corporation. I've been on the board just over 3 years now and thoroughly enjoy the role. 12 months ago, I accepted the role of chief executive for Horticulture New Zealand after four years as CEO of Oha Honey Limited, a mānuka honey company in the Wairarapa. These two roles, along with my directorships at Plant & Food Research, and until late last year, the Strong Wool Action Group Limited, has given me greater insights and understanding of our broader New Zealand food and fiber sector and how and where that intersects into our international markets.
It has also allowed me to understand firsthand, in many cases, the ongoing and constant challenges of our Scales CEOs have to face over the last few years with regard to COVID-19. I enjoy working with and supporting the Scales health and safety wellbeing team, especially over the last two years amidst this challenging COVID-19 environment. The teams across the entire group have worked incredibly hard, and it's been that incredible team effort that meant our businesses could carry on operating when many others were unable to do at times. As a director of Scales, I am always proud to say that the team's commitment and dedication to continuous improvement for the group is directly reflected in our ongoing success. I look forward to supporting that drive and commitment over our next term. Thank you.
I now move, as an ordinary resolution, having retired by rotation, that Nadine Tunley be re-elected as a non-executive independent director. Are there any questions on this resolution?
Can I-
Oh, sorry. Sorry, yes.
Not so much a question on the specific resolution, but a question on the diversity of the board. I noticed that Nadine is the only woman on the board of how many? 7, 8 directors. You did mention some sort of diversification program before. Are you able to give us a quick rundown of how that's going to work and how that might affect the diversity of the board?
Yes. No, no, it's a very appropriate question, and something in terms of obviously the need for diversity, and diversity is much. You know, it's not necessarily physical, but it's obviously of thought and viewpoint. We certainly recognize the need for a focus in that regard. As we mentioned, that opportunity to actually reinforce, let's say, diversity or certainly increase diversity on the board is part of the renewal process that I referred to. As we indicated last year, Mark and I will be stepping down at the end of our term or towards the end of our term. Alan's made a commitment in terms of his re-election statement. That will certainly provide the board with that opportunity to address the diversity issue, and it's one which I can assure you is front of mind.
A little vague.
Yeah. No, well, until we obviously. Look, I understand it and I don't want to sound wishy-washy, but, what I'm really saying is it is a key focus for the new board, you know, the board selection process. We're into that selection process at the moment. As I said, it's very much front of mind. You can expect, well, you will expect to see more diversity on the new board over the coming terms. Once we have obviously in a position to give you names and we've made those appointments, you'll obviously see that.
Um-
Yes.
I'd like to make a point. Surely skill comes before diversity. The best person for the job.
Yes. Part of being the best person for the job, it also means what's, you know, what is the best board that you can have? That board obviously needs diversity. That's, you know, obviously that's key. The best people and diversity is obviously one of those criteria. Invite Andy to briefly address the meeting on his proposed re-election.
Thank you, Tim. An absolute highlight of my 15 years at Scales. I'd also like to point to my various. I've had a lot of agribusiness experience, starting back in the days of being a banker in the rural bank and at Westpac. I feel like I've got a broad knowledge across the New Zealand and global agribusiness scene. This has been improved recently with my last 5.5 years being on the Rabobank board. On that board, I see a lot of trends and changing dynamics that are across the agribusiness scene, and that has helped my broad knowledge and I help bring that back to Scales to enhance and grow our diverse agribusiness business that we've got in Scales.
I think, again, I reiterate my thanks for the support I've had and, you know, humbly look for your ongoing support and votes.
Thanks, Andy. It reminded me that we are his boss, so. I now move as an ordinary resolution, having retired by rotation, that Andy Borland be re-elected as Executive Director. Are there any questions on the resolution? Thank you. We'll move to the next resolution. Resolution five relates to the election of directors 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 five therefore relates to the election of Qi Xin. Qi Xin was appointed to the board in December 2021, and a brief biography for him was included in the notice of meeting. Xin, being available, offers himself for re-election or for election, and the board unanimously supports his election and recommends that shareholders vote in favor of Resolution five.
Now, again, to avoid the glitches with the online connection, I'll read Xin's address to shareholders. I was appointed last December as the Non-Executive Director representing China Resources on the Scales board. My current role with China Resources is the Senior Director of Investment Management. I've been with China Resources for nine years and have held director and CFO roles within the group. I have an MBA from the University of North Carolina at Chapel Hill, and I am a CFA. I think I bring a different perspective to the board from the aspects of strategy, investment, and understanding, importantly, of the Chinese market.
I would welcome a term on the Scales board, and thank everyone for your support. I now move as an ordinary resolution, having retired by rotation, that Qi Xin be elected as a director. Are there any questions on this resolution? Thank you.
We'll now move to the next resolution. These are the ones that shareholders like. Resolution six relates to a proposal to increase the maximum total pool of directors' remuneration available for your board of directors by NZD 50 thousand per annum from a total fee pool of NZD 600 thousand to NZD 650 thousand per annum, effective from the close of this annual meeting. Shareholder approval is required under NZX Listing Rule 2.11.1. An appropriate fee structure is important to ensure that your company can continue to attract and retain the right director skills and experience to govern your business, and that those directors are being fairly remunerated for the work they do. The proposed increase in the directors' fee pool provides the board with a pool considered appropriate to remunerate a board of six non-executive directors, including for associated committee work.
I now move as an ordinary resolution that the maximum total pool of directors' remuneration payable by Scales to directors in their capacity as directors be increased by NZD 50,000 per annum from NZD 600,000 to NZD 650,000 per annum. In accordance with the NZX Listing Rules, the directors and their associated persons are restricted from voting on this resolution. Is there any discussion on this resolution? Oh, sorry. Yes.
Can I ask how the NZD 50,000 was arrived at?
We took into account, obviously, we looked at comparable companies in relation to remuneration of directors. We also took into account the fact that for this to aid the transition process, it won't necessarily be new director comes on, existing director drops off. That there might be a carryover, a transition period. Effectively, that's where we were. From the work that we did, you know, even in terms of increases in director fees, we were still around the median. We certainly were not the top. I assess personally from my perspective, we needed an amount of money available so that we could actually attract good people, the best people, to be your directors. Effectively, you know, we wanted to be in the market.
Just a supplementary.
Please.
Can I ask, was the pool increased last year?
No.
It was at last.
I might ask Mark.
2019.
2019. Yeah. Mark's our chair of our Rem committee. Thank you.
I know it's a favorite one for shareholders, so. Yes, sorry. Six. As I said, we're looking at obviously a further renewal process that may increase, as I said, as part of the transition. You know, for example, rather me dropping off on the day the new person arrives, I might stay on, as in for a period of time to assist that transition.
Thank you for that. We'll now move to finalize the voting, and we'll answer general questions. Once all the votes have been cast, they will be counted by the company 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've not already done so, please cast your votes now and give your voting forms to Computershare while we take questions. I think the boxes are going around at the moment, so please, if you're still to vote, please put the votes in the boxes.
If there are any questions on the financial results, the business update or any matters that you'd like to raise, please do so through the Computershare online meetings platform. A reminder of the process is shown on screen. For those of you present, I'll open the floor now to any questions. I just wanted to remind if we do run out of time, which we shouldn't, hopefully we shouldn't, we will respond to any additional questions in writing following the meeting. Now, I think I said before, we do have a lot of number of the senior management here in the room. It is an opportunity either now or at the end of the meeting to have those people, you know, answer any specific questions you like. You know, the floor is yours. Yes, sir.
I don't have any questions, but I'd like to make a couple of observations. Firstly, like you, I'm so grateful to have the opportunity to be here to attend this meeting rather than being at home trying to follow what's going on. Secondly, the last two years have been a very, very difficult period for the business community of New Zealand, as well as the ordinary citizens of New Zealand. A number of businesses are really finding it extremely difficult. Other export companies also finding so. Right now, the kiwifruit industry are crying out for people to pick their fruit. Their cool stores around the country full of processed fish but cannot get fish shipping to export their products. In our case, we're...
It's all done. We've organized for the last two years. We've organized staff. We've got a big pool of temporary people who've come in and working for us to achieve those results. We're getting our products offshore. Hopefully, others here share my views. I live in Wellington, and I came here today because I personally wanted to congratulate the board on an outstanding two years of operation. Also, the management team and the support shown by the band of employees. Thank you.
Look, thank you for that. You quite rightly referred to the management team. I mean, these guys are sick of me saying this. I've been around in agribusiness for 40 years. I think my bio says 40 years. It's getting closer to 50 now, so I don't wanna update that, though. 40 years. I've worked in a lot of businesses. I've worked in two listed companies. I was a senior exec in one. You know, I've worked for Zespri, the CEO. I have not seen a culture of personal accountability so strong in any organization. You know, if you talk to people like. Well, the one I know most, more from the food industry than, let's say, the food ingredients business. I'll pick out Andrew van Workum, who's here today.
You know, Andrew lives and breathes this business, and he takes it personally. You know, if you don't take things personally, I don't think you're doing the job you should be doing. He takes it personally. You know, we've got John Sainsbury who, you know, it can be a relatively complicated business when you're managing or responsible for business on several continents. You know, they're led by a guy who, you know, when I first heard about Andy, when I think I was approached to be involved on the Mr. Apple board, which was, you know, 10 years ago or more. They said, "Oh, he's a former banker." I nearly said no straight away. I met him because he's got great EQ.
Look, I'm not-
Sorry, no disrespect to our current banker here tonight.
I always go off script, guys, as you've seen. Look, I think the thing is that I'm not being self-congratulatory because I'm not in that square. As I said, it's the management. Obviously, we've got some great board members. You know, the resilience of the management team. You know, Kent Ritchie, who's been involved in the logistics business, like I say, the shipping business all his life. You know, having some. You know, I don't know how many of you know the shipping business. Well, I used to work as a shipping clerk at one stage. Wasn't very successful at that career, so I moved on pretty quickly, or I was moved on pretty quickly. You know, having people like Kent who actually...
The business runs based on experience and favors. Having someone like Kent in the business who can call on favors, who understands whether what he's being told is true or not true. I guess, as I said, what I'm saying, you know, we're fortunate to have a team and a great team. That's why. You know, we're always pretty careful. I'm all for change. Going back to the board again, you know, we do need to change. Some of us have been there, you know, we've been there for the time that we need to be there, and it's time to change. We are very careful about how we implement change. Back to the point of, I think, with the gentleman at the back, getting the right people is so critical.
Because, for me, people are. Businesses are all about people. You can have the best ideas in the world, but if you ain't got the right people to make it happen, the idea is worth nothing. We're very careful about getting the right people, and it goes to our growth strategy. There are many opportunities out there. There aren't a whole lot of good people who can make those opportunities happen. You know, I'm going on again, but to me, it's a real passion of mine. I think as shareholders, you do need to hold us to account if you think the people that are running the business aren't the right people. Anyway, long-winded. Thank you anyway for the comments. They deserve it. Yeah. Yes.
I have a question relating to pet food, which has obviously been very successful and has been a great contributor to Scales' success. For my own information and perhaps information of other shareholders, how much of the raw material for that division is derived from New Zealand producers?
Thank you. Andy, I'll get you to answer that.
Of approximately 150,000 tons we talk of. We noted that we traded, it'll be just a little under 10,000 from New Zealand. It has been as high as 15,000 or 16,000 in prior years. The reduction of the lamb, you know, numbers is 'cause lamb is one of our big products that we export. It's probably the reduction has been about a decrease in the lamb volumes farmed, more than, you know, us losing market share or anything like that. The other point about that I'd make about that in New Zealand is that that product is a bit like what we do with our Profruit.
10 years ago, 80% of Profruit's juice was exported, and now it's, you know, probably flipped the other way. It's more 80% domestic, and that's happening with that 10,000 tons of pet food product is being sold more to New Zealand manufacturers as they ramp up their production.
Thanks, Andy. Sir.
Again, on the, your pet food, you've branded your own apples, and that sort of thing. I'm just wondering, why don't you brand your own pet food?
Yeah. Look, it's a good question. We feel that, you know, our customers are those branded businesses, Purina, Mars, Smucker's. They all have those big branded products. You know, even in New Zealand, we sell to K9 Natural and Ziwi. Really it's been a desire to not compete with our customer base. There's a whole lot of skill set required to build a brand and what Mr. Apple's building up their teams and that customer direct to consumer. We're a, if you like, business to business model, and we're finding that, you know, a good space to be. People say, like it's a commodity. You know, I feel like you change a commodity through the value add we create for it. We change its shape.
You know, we take the meat from the bones. We put it frozen. We add a lot of logistics to that pet food to get it in the location for the brand manufacturer to use it. I mean, you get a 20-minute time slot to get into the Nestlé Denver plant, and you daren't miss it. Because if you miss that with your truckload of ingredients, you know, you're back in the queue to get it in or they could cancel it. Our sort of strategy is source from global and get it to the plants that the people want it for, you know, on time and you know, in spec. I feel like that's a skill set, you know, that the branded companies don't have.
We're sort of doing things that they don't have. We certainly, you know, one of the main principles is not to compete with our customers.
Yes, ma'am.
Thank you. A comment. Last year, I asked about the use of wallaby meat because of the processing. For the people here today, I'd like to comment that John Sainsbury has followed up twice-
On my request, he has pointed out that he there are difficulties and but they have looked at wallaby processing, and with a firm who are doing feral deer in New Zealand. There's lots of extra costs, and there's lots of embargoes or difficulties with compliance. I just thought the people here would like to know what a positive response. Thank you. Thank you to John.
Yeah. Look, thank you for that. I've asked the same question of John about the kangaroos in my place at home. Excess ones, I mean, I don't want to remove them all, obviously. Any other questions? Yes, sir.
Hi. Thank you. I want to congratulate the board again for the achievements in the last two, three years. My concern is around the international market risk. I know that there has already been some influence around the Pacific from China, and I know also there is a TPP agreement going on with North America. I know that 20% of your exports go to China at the moment, and I know that you are sending a new CEO to be based in the United States. Can the board anticipate any strain going on between playing off the sort of major players in this market? Whether the board has got any plans to hedge against that risk?
Yeah, look, it's an interesting question. I think we play within the game as we see it. At the moment, certainly the relationship between our customers in China and Scales is very positive and very strong. As we all know, our major single shareholder is China Resources. From that perspective, we're comfortable and we continue to build on that. Andy's part of an investment we've made in terms of representation in China itself. Like any market, and this includes markets in Europe and well, anywhere in Asia as well. I mean, how much fruit or how much of the food ingredients or pet food ingredients we'd supply to any particular market.
We always review it in terms of not having too much dependence on one market, 'cause we have other risks, as you well know. Phytosanitary risks, those sorts of things, where markets can close on you, for reasons totally outside your control. Similar to the political risk that you're talking about here. We monitor that. But other than that, we just have to deal with the day-to-day that we can control, and that's what, you know, what we do. Well, if there's no more questions, I'll close that session off. Again, the back to one-
Tim, we've got-
The gentleman who said, "We're here." I was keen to get here by. I was gonna say fair means or foul.
Sorry. There is some online.
Oh, sorry. Sorry, Steve.
There's a couple of questions online.
Oh, yes, please do.
If you can hear me, Tim. The first one is, "What impact has the COVID-19 lockdowns in China had on our sales there this year?
Well, look, what I might do is ask Mr. van Workum to actually respond to that. Andrew,
Yeah, look, it's a good question. It's the last couple of years have been hugely challenging. But we've managed to maintain our sales in China. It's very, very good market for the Mr Apple business, and our brand is very strong and we represent in the order of 50% of the New Zealand fruit that goes to that market. We have a lot of long-term relationships, particularly retail, online, developing that part of the business. It's very important. It's been challenging, but we've found a way to make it work.
Thanks, Andrew. Steve.
Second part is, "In a time of logistical challenges, has Scales been able to get all desired product to market?
Does Mr. Ritchie wanna answer that question?
Oh, thank you.
It's not a free lunch, Kent, so
No. No, thank you, Tim. Well, yes, it's been a huge challenge to get all the fruit and Food Ingredients away. Sliding schedules have caused disruption. Port of Auckland hasn't been exactly an easy path. I can assure you that both Mr Apple and Meateor product is on the water, and we have all the capacity we need to ensure that we get both away.
Thanks, Kent. Steve.
Lastly, "Can you provide some background clarification of your hurdle rate for new investments? Is there a risk that this prevents you from seeing the wood for the trees?
Over to you, Mr. Managing Director.
Well, yeah, it's obviously a very unique time for, you know, returns on capital. We've seen this very, very low interest rate environment and now latterly the increases off a very low base. We're still feeling that there's opportunities in the lane we're choosing to swim in, if you like, on that front. We have lowered the ROIC hurdle to 12.5%. We feel like there's opportunities in that space for us to invest the capital that we've got available.
I think as we've said before, I mean, we take a well-considered, and I suppose somewhat conservative approach to or any new investments. It's taking us a while, but, you know, we're confident we will achieve something in that space, you know, in the near term.
That's all the online questions, Tim.
Thanks, Steve. Okay. Well, look, thank you. Again, I just wanted to say it's a real pleasure for me personally to be here. A real frustration on occasions that I haven't been able to get here. I mean, I'm talking throughout the year. I've just been pleased to be able to make the AGM in particular. We are here, so for those of you who've got some questions for either the board or senior management, please take the opportunity now to do that. We'll go and have a cup of tea and collar anyone you feel you wanna collar. You know, we'd actually appreciate the contact with you, frankly. Particularly given the frustrations the last couple of years. Again, I thank you for coming.
Look, what we'll do now is, I'll close the voting system in a couple of minutes. Is there anyone here who still has to get their vote in? I mean, if that's the case, please let me know and we'll get that finalized. Please make sure you have got it in. Steve, can I now from your perspective, close voting? Voting is now closed. The results of all votes will be released to the NZX later today. As there's no further business, I would like to thank you all for taking the time to connect with us today, be it online or in person. I now declare the meeting closed.