Clover Corporation Limited (CLV) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. My name is Rupert Harrington and I am the Chairman of Clover Corporation Limited. I welcome shareholders and visitors to the 2024 Annual General Meeting of the Company. By way of an opening comment, the Board is mindful of where our share price is, which is clearly somewhat a reflection of the performance of the last 12 months. And we hope that you will hear today that we've got confidence in the strategies of where the business is positioned going forward to hopefully, see a recovery in the share price based on the performance of the business. The meeting is being webcast at the same time and we are holding a physical meeting from the offices of our auditors, PKF in Melbourne as advised in the Notice of Meeting. We're now recording using a virtual meeting at the AGM today. Company Secretary has informed me that a quorum is present and therefore, I formally declare the meeting open. I acknowledge the Traditional Owners of the land on which we're meeting. I pay my respects to their Elders, past and present and the Aboriginal Elders of other communities who may be here today. Thank you for attending the meeting in person and online. We are again using the Computershare platform to host the meeting. This platform allows shareholders, proxies and guests to attend the meeting virtually. All attendees can watch a live webcast of the meeting. Only shareholders, proxies and corporate representatives have the ability to ask questions and submit votes. Before we proceed, I would like to introduce you to members of our Board, Mr. Graeme Billings, Toni Brendish, Ian Glasson and Dr. Simon Green. Also present is Peter Davey, MD and CEO; and Andrew Allibon, Company Secretary and CFO. Mr. Ken Weldin from PKF is here representing the auditors. Ken will be available to answer questions on the accounts at the appropriate time. To attend this meeting, you will have downloaded the links as supplied from the Notice of Meeting and enter the credentials provided to you that recognize you as a shareholder or proxy. Alternatively, you may have entered as a visitor or guest. I propose that the Notice of Meeting dated the 18th of October 2024, which was mailed to shareholders be taken as read. Before we proceed any further, I would like to address general housekeeping around questions and voting. Questions can be submitted at any time during the meeting online. To ask a question in the app, press the Q&A bubble icon. Please note that whilst you can submit questions from now on, I will not address them until the relevant time in the meeting, either when the particular item of business is open for discussion or after the close of business, but before the close of voting polls. 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I will shortly open voting on all resolutions. And if you are eligible to vote at this meeting, a vote icon will appear. Pressing this icon will bring up the list of resolutions and present you with voting options. To cast a vote, simply select one of the options. You have the ability to change your vote up until the time I declare the voting closed. This is shown at the bottom of the page as noted on the slide. Any open proxies that are directed to me, I will vote in favor of the resolutions. In a likely event that we experience a loss of signal with the webcast, please do not log out of the application. We have a backup webcast stream running, which will automatically appear in the Computershare application within about 30 seconds of the initial loss of signal. Finally, voting on every resolution is held open until the end of the meeting. I will communicate when voting closes. This concludes housekeeping of questions of voting. Before we move to the formal business of the meeting, I would like to present my Chairman's address. Dear shareholders, the past financial year has been a challenging, but ultimately a positive one for Clover. From a trading perspective, it has again been a year of 2 distinct halves. Due to market conditions, we experienced a significant decline in revenue in the first 6 months. Management responded by reducing operating expenses, improving working capital whilst continuing to focus on new product development and customer engagement. The market progressively stabilized during the second half, resulting in more normalized demand and improved profit performance in the final quarter. The forward sales pipeline has continued at this standardized and normalized level. During the year, Clover continued its strategic focus on mitigating risk by improving and diversifying its supply chain. As previously reported, the performance of Melody Dairies has been unsatisfactory. Changes to the ownership structure are providing better alignment of capacity usage in addition to the appointment of a new management team. This resulted in a profitable outcome in the final quarter of financial year 2024. Our state-of-the-art fish oil extraction facility was commissioned on time and on budget in Ecuador in July. This strategic investment will provide improved supply chain and cost benefits for Clover over the coming years. We're pleased to announce that an Innovation and Development Committee has been established under the Chairmanship of Dr. Simon Green. The IDC will review and assist the Board in its oversight of sustainability and long-term viability of Clover's research and development portfolio and its contribution to long-term growth and success. The appointments of Professor Colin Barrow and Dr. Efi Farmakalidis to the committee will greatly enhance its ability to achieve these objectives. The company recently announced the successful development of a commercial powdered choline product. A patent application has been registered to protect our IP. Choline is essential for lipid deposition in the human body and is mandated for use in infant formula and used in prenatal products. Customer trials are expected through financial year 2025 and Peter will give you more background on it. Our business development team continues to implement -- the implementation of strategy to use our encapsulated powders and Gelphorm in nutraceutical markets. As you may be aware, customer trials and shelf life testing in these high-quality markets results in extended lead times for market acceptance. The planning for commercialization of Premneo continues, a critical step for regulatory approval in various markets, including Australia, New Zealand and the EU, is completion of an independent safety data study. The results of this are currently under expert review and should pave the way for market access. Whilst our traditional infant formula customer base has been challenged during the year, we are pleased that the normalized trading performance experienced in the final quarter has continued into the current financial year. On behalf of the Board of Directors, I extend my sincere thanks to you, our shareholders, for your continued support. I also want to acknowledge the dedication of our employees and management in responding to the fluctuating demands of our customers throughout the year. I'd now turn to the presentation to Peter Davey.

Thanks, Rupert. Welcome to the Managing Director's report for FY '24, give you an overview of the performance of the business across the year and some guidance going forward as well. If I move to the next slide, please. The vision of the business is to optimize the health and development of adults, infants and children. We only ever want to do good, which is a wonderful thing. The values of the organization are the 3 Rs. We live by Respect, Response and Responsibility, the guiding values of our company and the purpose of the organization is to develop customized high-value nutritional ingredients, enhancing the well-being and dietary needs of their customers. So, we help our customers to achieve results. We're not a commodities product. We are a unique differentiated product in the marketplace. Next slide. The full year performance revenue of $62.2 million against the prior year of $79.9 million, [indiscernible] as Rupert gave in the statement, reduced market demand, and I'll cover that some more. Our net profit after tax was $1.5 million, down 77% on the prior year. Our operating expenses, which reduced in line with our reduced sales and what conditions we could put in place were at $12.9 million, down 6% to 7%. Working capital position, we reduced during the year in line with the lower sales position down to $38.2 million and our balance sheet remained quite strong for $12.2 million at the end and we certainly strengthened that in the last quarter. And the final dividend was declared for the year at $0.75. New products are continuing to diversify the business with new customers and that's been a major focus for the year. Next slide. I'll give an update of what happened across the year. Rupert pointed out, it was certainly a story of 2 halves. The second half delivered nearly $35 million in terms of revenue against the first half of $27 million. That was an increase of 28%, which was a pleasing second half result, certainly paved the way for where we should be. Our NPAT result in the second half was $2.1 million against a loss of $600,000 in the first half. The last quarter certainly improved in terms of orders and we saw a return of our Chinese customers back to the marketplace, which I'll talk a little bit. Company's inventory position closed nearly 20% down. That was a real focus across the year to try and turn inventory into cash. The lower sales volume resulted in reduced manufacturing hours and therefore, overhead recovery and the disposal of inventory reduced our gross margin across the year. And our attention towards the future, we attended a lot more trade shows. We visited a lot more people. We engaged with a lot more customers to expand our customer base and really pleasingly was the announcement of Ecuador to effectively start and build a factory in 12 months and get it achieved on time and on budget was a wonderful outcome going across the entire world. Next slide, please. Summary P&L for the year 2024 against the prior year. Really, as I discussed, customer engagement is certainly the focus, trialing new products, diversifying our markets away from the infant formula market to extend and grow our business. That's been our real focus. And we did in a very poor year, we grew in that segment of the marketplace, which was pleasing. The NPAT was impacted by the lower sales, the slow production, and we invested heavily in new market development with some of the new products that we've talked about and I'll talk about more and also some supply chain risk mitigation work we're putting in place at Ecuador and getting more control around the Melody Dairies investment as well. The overall NPAT result was $1.5 million, a disappointing result against the prior year, but reflective of the poor sales conditions that we're in. Next slide, please. I think this next slide gives you a good understanding of what's happened to us over the last couple of years. So, this represents FY '23 and FY '24. In the first half of FY '23, we had a record first half. That was reflective of customers having to apply for a license to enter China. So, to sell into the retail market in China, they introduced a rule that you had to achieve a SAMR license. Customers didn't know when they were going to get that license. They didn't know if they would get that license. They didn't want to lose their retail position. So, what most of them did and this was global, they produced an enormous amount of inventory because anything produced before February 2023 could be sold in the marketplace post February 2023. So, we saw a huge impact in demand. What that did was created a pipeline fill. So, over the next 2 halves, we saw a decline in sales. So, you can see in the second half of FY '23, sales went down, it impacted us and then we started very poorly in FY '24. That was also added to with the low birth rate in China and across globally. And then there was a movement in China away from our tuna powdered products towards algal products. And that was driven by a fear in China that the release of the radioactive waters from the Fukushima incident in Japan would impact fish and therefore, tuna fish and the oil may be radioactive. Was it? No, but it impacted our sales. Every customer that we had built in sales with in China moved away from us, 100%. We did not achieve sales for the entire half year. Then in the second half of FY '24, a lot of that inventory started to be exited. That's still being exited today. And customers that had concerns with our tuna oil started to buy back from us. So, we saw very late in the year in the last quarter, a return of Chinese customers buying back from us. That has continued. And a lot of our Western customers that may have not achieved a SAMR license have found their way to marketplace in China back through the online market, the dairy market or the bonded warehouse market. So, they've been able to build their sales back into the China marketplace. And hence, we ended the second half of that FY '24 year with a dramatic improvement in sales on what the trend had been. The next slide, please. The balance sheet gives you an overall summary. It reflects the tighter inventory control. That's reflected in our cash position, which has dramatically improved year-on-year. We had a really strong final quarter, as I referred to, especially with China coming back in. We closed our receivables higher and a real focus of the business has been debt reduction. We don't have a great deal, but we certainly want to make sure we manage our cash position and our debt across the business. Next slide. Melody Dairies, you'd understand that this has been a very strategic investment for us over a series of years. We built this dairy during the middle of COVID, which certainly had some constraints and had some challenges in terms of management. Across the year, we installed a completely new management team. So in December, all of the management of the business and a vast number of the employees were changed to really get a focus on the quality of production, really maximizing its production schedules. We weren't getting the full utilization of the facility and therefore, the return on the investment that we required. The ownership structure changed during the year. So, the original partner that we had, which was Food Innovation Waikato, which is a semi-government department that originally invested in the facility with us, they sold out their share to ourselves and to Landcorp, another major partner. That allowed us as the shareholders to install a new management team. FIW was the management of the business prior. So, this allowed us to get some control of the business. They then sold some of their share to a customer who is called SpringSheep. They're a New Zealand manufacturer of infant formula in their own right. And thankfully, they've just achieved a SAMR license in China, which opens up the marketplace for them. Under that management team and the additional business brought in by SpringSheep now as a partner and a shareholder in the business, we ran profitably for the last quarter of the year for the first time of that business. So, it was a big turnaround. We still had to take up $0.5 million in our own books for the loss for the entire year, but it did turn it around in the last quarter and it is continuing to operate quite well today with much higher production levels. Overall, Clover now owns 43.9% of that business. So, we are in a much more stronger position to direct its business and performance. Next slide, please. As part of our vertical integration strategy and to achieve a better supply chain, we invested in a head oil extraction business. So, this is a tuna facility where we extract oil from the heads of tuna, which is in Ecuador, so [Technical Difficulty]. It cost us around $5 million. We started and finished it effectively across the 1 year. It's a very good facility. It's state-of-the-art in terms of what it's got and the investment that we've put in there. It will provide us with long-term supply chain improvements. We can ensure that we've got quality, source and pricing of tuna oil, which is 50% of our oil input. And it allows us -- whilst it's too [ wild ] for the people, it allowed us to obviously have price control across other suppliers as well. The first shipment is about to arrive. So, it's going quite well for us as a business, not that Ecuador isn't without its challenges and trying to run a business on the outside of the world. We have a very good manager in the business. But it's been a wonderful credit to the people that manage this process across the business that we were able to build the facility and get it going in a very short period of time. And the quality of the product we're getting out of there is the best we've ever seen in the world. Update on some of our growth platforms, our new products, adult infant formulas and then new market development. Next slide. If you can move on to the next slide, please. We launched to the marketplace recently that we have developed a completely new product, which we have branded choline [ Excel ]. We filed for intellectual property around this product. So, we've turned choline into a powdered product. Choline generally comes as a crystalline product and it has significant problems that I'll discuss. We completed a production trial in August of the product and we will make that product available to customers for test. I've just returned from Europe showing customers there's genuine excitement around this product. Choline is not without troubles. Choline is used in prenatal products, so pregnant mothers, mothers that are breast feeding, mothers that are thinking about becoming pregnant and also is required, it's a legislated ingredient into infant formula in the EU and in China. The market value for infant formula part is about $150 million currently. It's also used significantly in the nutraceuticals and stock feed market is by far the biggest. So, there's real opportunities around it. It's a totally new segment for us, completely new product that we've never used before. The challenge of choline is that it's hydroscopic in nature. And that means that it naturally attracts moisture out of the atmosphere and dries into a hard rock. So, you could imagine trying to take a liquid product and put it into a manufacturing process that draws in a hole of moisture, it sticks to everything and turns everything into a rock. It is the most difficult product you can manufacture with. We were challenged with this some 10 years ago by one of our customers who [ mind ] flippantly said we could fix it. 10 years later, we fixed it. It's not an easy product to fix, but we have a very unique solution of a free flowing powder that will be able to be used in a dry blending operation with no handling issues whatsoever. So, you can imagine customers are really excited about getting this product. We will now hand it out to customers under CDA as we go through the intellectual property licensing and they will go through the trials of that product. So, it will take about 12 months to become a commercialized revenue-generating product as they go through their shelf life trials and testing. I'm sure this is going to really extend the business for the future. It's a very exciting development for the business. And no one else has been able to solve this in the world, we have. Some other new products. If you go to the next slide, please. I've talked to some of these products over the years as we've talked to you in these presentations. We have a highly concentrated oil powder. This allows omega-3 to be incorporated into gummies, into powdered drinks, into foods, into nutraceuticals. This powder can be pressed into a tablet form directly. It can withstand hot melt processes of a gummy. It can stay in blends and powders. It doesn't move to the bottom or the top. It stays in blend and drink form. It is quite unique in terms of its performance and best in market. It allows very high levels of omega-3 to be incorporated into a whole range of products. And over the last year, we actually got sales of this product into a number of customers in different applications. So, it's actually now generating revenue. There are a range of products that suit this, both vegan forms and non-vegan forms and fish forms. It's giving us product sales into all markets. So Americas, into Asia and into Europe. Gelphorm, a unique product that we developed, it's a double-emulsion product of DHA oil. It is a product that allows effectively fish oil or algal oil to pass through the UHT process. You would normally put any oil through a UHT process. It would cook it in seconds. So, it would then oxidize that and you would get terrible taste and smell problems and even reactions with other things within that formulation. We've been able to create this product to pass through the entire process with no sensory issues whatsoever. So, we've solved a significant issue that people have had to be able to incorporate this product into UHT. It was launched in the U.S. in a branded product initially in one state at the start of the year. Now, it's just gone national in the last few months. So, it's -- and they've extended the range to vanilla, plain and chocolate mixture for kids nutrients. It's going into a plant-based milk drink and it's going -- it's across all of the Americas now. We've got it on trial with other customers in Asia and in the U.S.A. Another development that opens up some other segments of the marketplace for us. And then the third one, which we've talked about before a little bit is probiotics. Probiotics by nature, they are a live organism. And effectively, the way that they're delivered today is in a frozen form. And you can imagine trying to deal with a frozen product in the manufacturing processes causes problems. It sticks to things. As soon as you start to deal with it, it melts. As soon as it melts, then the probiotic, which is a live organism starts to die. So, our innovation team has been working on a powdered solution, encapsulated solution to allow the probiotic to be delivered in a powder, so it doesn't stick to anything. It doesn't have to be frozen, doesn't have to be distributed under refrigeration and then it will extend its life out. We've done it at a shelf life at a shelf base level in a lab. We're now trying to turn to production methodologies of how to do it at scale and with all different probiotics, as you can imagine, there's millions of probiotics and each one is different. So, we're doing it across the range of different robotics as well. So another development that will set us for the future, a significant marketplace that we don't -- we're not part of today. Next slide, please. For Nu, you may be aware that we developed a DHA emulsion some years ago, which went through the largest clinical trial that's ever been done with preterm infants. It proved through that clinical trial that we can improve the IQ of preterm infant. It's one thing having a product and then it's the second thing of trying to get it approved by the regulators. You can understand that you're trying to take a new product that's never been done before and put it into a preterm infant. So, they're very, very skeptical of anything. This emulsion contains a very highly concentrated DHA, so, omega-3 level that a baby would normally receive in the last trimester through the placental fluid. That oil is fed through a nasal gastric feeding tube in a NICU, so, a NICU unit. It's fed through the tube and directly into the baby stomach. We had 1,200 babies, there was not baby that rejected this product, not one, no regurgitation of it whatsoever, which is quite incredible. But the regulators required a review of every clinical trial that's ever been done with DHA and preterm infant. It's taken us -- we had to get an independent body to do it. It's taken a year to do that. That trial has now gone out to other experts that then review that clinical trial work, the data and they are reviewing at the moment. So once they've done it, then we could submit for approval and we would get EFSA approval, which is for the EU. Once the EU qualifies it, then Australia will qualify. We already have FDA approval for the use of the product as a medical food in the U.S.A. Once we get the regulatory, we're confident that, that will give us the approvals to go ahead, then we will ignite discussions that we've already started with customers that could potentially take this product to marketplace for us. So, it's a cross-over, it's a medical food product. It would have to be prescribed by a doctor. So therefore, it will go through the medical distribution channel into hospitals and we will need to find the partners. Another great opportunity for the business for the future. The next slide, please. A little about adult and infant formulas. A lot of you may be aware, the infant formula market has been subdued and not just in China, but across the world with lower birth rates. Europe is experiencing extremely low birth rates at the moment. A lot of our customers last year hardly ordered product of us that has turned around in the last quarter of last year. Our products, our unique powders have allowed customers to achieve much higher levels of DHA into their infant formulas that gives us a bit of a unique position with some of these customers. New regulations in the EU and China required a significant increase in the DHA levels. And we have one business because of our formulations are higher dosages of DHA that can be achieved with competitor products or light products. The second half of FY '24 saw sales improve with Chinese manufacturers as they overcame the thoughts around the tuna oil. So as I explained, they thought that the tuna oil maybe radioactive because of the Fukushima incident. Over a 6- to 12-month period, they worked out that, that wasn't the case. And so we have got orders coming back on a more regular basis and have continued since the last quarter of last year back into the China market. Very disappointing and hard to lose that business, but it's nice to see it coming back again. And a lot of our other customers have reported in their own reportings and we're seeing the results of that, that they've found ways into the China marketplace back through the bonded warehouses. So, a significant amount of China sales occur online and they can provide product that doesn't go through the retail channel, so they don't need a license. They can go into a bonded warehouse where they hold the product and they don't pay a tariff to get into the marketplace. A customer can order online and then the product is delivered directly from these warehouses. So, it takes out the whole bricks-and-mortar chain and they can get a significantly cheaper product. It's another channel for Western companies to access the marketplace. Slowed significantly, but the Chinese have increased the amount of bonded warehouses significantly, recognizing that it's a channel to the marketplace and consumers want choice. So, it's working quite well for them. And then a new area that we're really seeing some growth and we're working with both Chinese manufacturers and Western manufacturers is in DHA that's helping diversify our business into seniors' drinks. In the China marketplace, the seniors market is nearly as big as the [ infant formula ] marketplace now. So, we're working with both the Chinese manufacturers and with Western manufacturers on creating drinks or powdered drink products with high levels of DHA going into this segment of the marketplace, targeting the older consumer. And it doesn't come with the sort of regulations you'd imagine that go around infant formula with easier access. The next slide, please. So, as we look towards the FY '25 market, our operations supply chain efficiencies, we've got a vertical integration strategy that we have been pursuing to ensure supply, quality and cost-effectiveness. So, Ecuador helps us do that and getting that product supply back into our business will help us control our supply chain and also provide us with gross margin benefits. We've got optimization of Melody Dairies going that helps us with the new management team in place and that will lower our cost to manufacture as well and ensures our supply chain now we can provide from oil right through the finished product. We have control of the entire supply chain. So that allows us to make a bit more money across the supply chain than paying somebody else to do it. We will still use other facilities and buy from other people. And then across the innovation of our business, we're going through a process of appointing new distributors. We recognize that our limited sales force has been very good at accessing the infant formula market to diversify the base we need to access more customers. So, we're putting in place distributors across markets. We've done a good job so far in the U.S., and we will appoint them across Europe as well. The new choline powder, we will make available to customers to do trials with that will move towards commercialization of that product across the next 12 months. And we're hoping to get the regulatory approval for Premneo, which will allow us to access Australia, New Zealand and the EU, then we can go and commercialize the product with a partner in the marketplace. And that may be regional, but it may be national. And then diversification remains the key for this business. We are very good in the infant formula market, which is in decline at the moment because of the birth rates. So, we're looking outside that the nutraceuticals market. So, with the projects that we've already talked about with Gelphorm and Premneo, we're looking to grow outside of infant formula, not at the expense of infant formula, but in addition to. So, we will extend that with the products we've already talked about today and other products that are in development. And the new choline product will let us get into both the infant formula market and other marketplaces we currently don't service today. It is a significant extension of a new product in a marketplace that's quite large and as large as the DHA market. Next slide, please. So, our outlook for FY '25. Clover has sustained the demand profile from the second half of FY '24 in the first half of FY '25 and aims to build on this demand for the remainder of the FY '25 year, a vast improvement on the year before, pleasingly. Thanks very much for your attention and attending. I appreciate it.

Thank you, Peter. We now move to the formal business set out in the Notice of Meeting. Each of the resolutions will be taken in turn. I will introduce each item and resolution. Shareholders will have a chance to ask questions on the resolution and I will display the proxy results received for the resolution on the screen before we move to the next resolution. Voting is now open. I will go to the first item on the formal business. As required by the Corporations Act, the financial reports of the company for the year ending 31st of July 2024, comprising the company's financial statements, directors' declaration together with the directors' report and the auditor's report will be considered and I present a copy of them to the meeting, which is signed by me for the purpose of identification. I invite you to ask any questions about these reports. I remind you that there are no resolutions required for this item. Please limit your questions at this time to matters relating to the financial statements and other reports. There will also be time for general questions at the conclusion of the meeting. Questions may be addressed to me or to Ken Weldin of PKF, the company's auditors [indiscernible]. Are there any questions regarding the reports?

There are no questions online, Mr. Chairman.

Chair, there's no questions on the phone.

Thank you. If there are no questions, we will move to the next item of business. Item 2, Resolution 1 sets out the Notice of Meeting, which relates to the adoption of the remuneration report for the year ending 31st of July 2024. The remuneration report is in the directors' report section of the published company's annual report, Pages 14 to 23. By way of summary, the remuneration report explains the company's remuneration policy and the process of determining the remuneration of its directors and executive officers and sets out the remuneration details for each director and each of the company executives named in the remuneration report for the financial year ending 31st of July 2024. Section 250R of Section 2 of the Corporations Act requires companies to put a resolution to their members that resolution report be adopted. Please note the resolution is advisory only and does not bind the Board of the company. I move that the resolution for adoption of the remuneration report for the year ending 31st of July 2024 be put to the meeting in the form of Resolution 1 set out in the notice of meeting. Details of the proxy votes in respect of this proposed resolution are shown on the screen. Are there any questions regarding the remuneration report?

No questions online, Mr. Chairman.

Chair, there's no verbal question on the phone.

If there are no questions, I now put the motion to the meeting that the remuneration report be adopted. The results will be decided by way of poll at the end of the meeting. I will now move to the next item. Third item being the second resolution relates to the reelection of myself, Rupert Harrington. I'm required to retire by rotation pursuant to the constitution and being eligible, offer myself for reelection. I've been a Non-Executive Director of Clover since 2015 and I became the Chairman in 2017. I'm an experienced company director, both in extensive private companies through my private equity background and a number of ASX boards. I've got a broad commercial background and skills, which I bring to the company and with a lot of success being engaged with companies who are focused on global niche growth applications. I'm experienced Chairman, and I'd like to have a collegiate Board that's focused on growth and really focusing on helping management and challenge management in relation to the decisions they make to try and drive the growth of the business. And clearly, the last 12 months is not a reflection of what we're trying to achieve. But hopefully, from the presentation today, you get some sense that we believe we're back on track. I've got time and capacity to continue in the role and I look for shareholder support to support me in my application. And over to you, Graeme.

Thanks, Rupert. The Board, with Rupert abstaining, unanimously recommends the reelection of Mr. Harrington as Director and Chairman of the company and recommends that you vote in favor of this resolution. Details of the proxy votes in respect of this proposed resolution are shown on the screen. Are there any questions regarding Resolution 2?

No questions online.

Chair, there's no verbal questions on the phone.

Okay. If there's no questions, I now put the motion that Resolution 2 be adopted. Results will be decided by way of a poll at the end of the meeting. This concludes Item 3, Resolution 2. I'll now hand back to Rupert.

Thanks, Graeme. Item 4 being Resolution 3 set out in the Notice of Meeting relates to the approval of the issue of the financial year '25 performance rights granted to the Managing Director under the company's long-term incentive plan. Approval of this resolution will permit the company to issue 582,356 performance rights to Mr. Davey with a vesting date subject to performance on the 31st of July 2027 accounts. The Managing Director has 504,911 outstanding performance rights yet to vest previously approved by shareholders at previous AGMs. Mr. Davey will hold 1,087,267 performance rights vesting over the next 3 years if Resolution 3 is approved. The terms of these performance rights are summarized in the Notice of Meeting on Page 8 of the explanatory statement. I move that the resolution for the approval for the acquisition of the Managing Director's performance rights and the issue or other provisions of shares in satisfaction of the performance rights be put to the meeting in the form of Resolution 3 set out in the Notice of Meeting. Detail of proxy votes in respect of this proposed resolution are shown on the screen. Are there any questions regarding Resolution 3?

There are no questions online, Mr. Chairman.

Chair, there is no verbal questions on the phone.

If there are no questions, I move that approval be given to the grant of performance rights to Mr. Peter Davey on the terms described in the explanatory memorandum accompanying the notice of meeting. The final formal part of the AGM runs the polls in accordance with the ASX listing rules. I now ask the floor and anyone online to finalize their votes. We will conduct the poll on the motions numbered. First, if there are any persons present who believes that they are entitled to vote but has not registered to vote, would you please raise your hand for assistance. Persons entitled to vote on this poll are all shareholder representatives and attorneys of shareholders and proxy holders who hold color admission cards; blue voting cards, yellow non-voting and white visitors. On the reverse of your admission card is your voting paper and instructions. I will now go through the procedures for filling in the voting papers. Proxy holders have attached to their admission card a summary of the proxy votes, which details the voting instructions for business items on the appointment documents in your favor. By completing the voting paper when instructed to vote in a particular manner, you are deemed to have voted in accordance with these instructions. In respect of any open votes or proxy holders may be entitled to cast, you need to mark a box beside the motion to indicate how you wish to cast your open votes. Proxy holders should refer to the summary of proxy votes form attached to your voting paper for further information. Shareholders also need to mark a box beside the motion to indicate how you wish to cast your votes. Please ensure that you print your name where indicated and sign the voting paper. When you have finished filling in your voting paper, please lodge it in the ballot box or pass it to the Computershare representative who will move around the room to collect and ensure your votes are counted. If you require any assistance, please raise your hands. I will pause while voting papers are completed and collected. Shortly, I will close the voting system. Please ensure that you have cast your vote on all 3 resolutions. As Chair and as previously advised in the meeting, it is my intention to vote all open proxies to me in favor of each resolution. I will now [Technical Difficulty]. Voting is now closed. With the formal business of the meeting having been completed, I now open the floor for questions from shareholders to the Board. Questions may be asked through the moderator or through the portal from the floor. Any questions?

Cheers. [ Mark ], shareholder. Peter, you outlined improved conditions in China. I'm just wondering if you could go further maybe talk about the market dynamics as you're seeing it in China. Like obviously, we've had reduced birth rates. Is it putting pressure on margins. Can you expand on this in terms of how you might see the China market next year just so we get an understanding of the company's penetration in the China market going forward?

Thanks, Mark. It's going to be challenging. I had someone say to me 10 years ago that if you don't like what's happening in China today, just wait 6 months because it's going to change. That's absolutely true for the last 10 years. Every 6 months, something changes. we're really well positioned. We've done a lot of work in terms of qualifying our products with customers. So, the top 5 infant formula manufacturers in China have all qualified our product for some applications. We are listed as one of the ingredients in the SAMR licenses of those companies. And we are now working with them either on other products for infant formula, but a lot on growing up and adult formulas. It doesn't mean it's not going to be -- it's going to be easy. It's going to be a really competitive, hard road that often is based around price positioning, not just around quality. If it's quality, we win every single time. The market itself seems to have settled in terms of its inventory position. The Chinese manufacturers introduced -- they produced enormous amounts of product themselves. So, they didn't lose their retail position as they went through the licensing. A lot of them spent time selling that product out before they went and started manufacturing again. I visited manufacturers myself, which had massive spray dryers that they weren't doing a thing last year. So, they're starting to see -- we're starting to see a turning of the corner in terms of that. So, from what I see today and our demand profile at the moment, it's around what we saw in the last -- the very last quarter of the second half of last year and that's continued on as we reflected in our outlook statement. We know what's going to happen 3 years just wait 6 months, it will probably change again.

And just secondly, just on IP. You talked about new product areas. Can you touch on the IP protection or is it a manufacturing process now that you think will be, if you like, safeguarding or anything the company's IP position to [ start these ] new products?

So, we've applied for intellectual property protection. For the new choline product, for example, you get -- first of all, you get a 12-month period where you can alter and change that application. So, as we do go through more manufacturing trials and understand from a customer feedback perspective, you get 12 months to alter that application, expand it, change it, direct in different ways. Then it gets filed as what's called a PCT, it then gets open to the marketplace for question. So, other people will be able to look at your application and say we've already developed that. We've done all the testing of that IP. There is no product like ours at all in the marketplace. It's never been done repetitive [indiscernible], we've tested everything. So, we're confident that we will then get that protection, which will give us basically global protection of that product for the next 20 years, to be unique for 20 years of a product that no one else has ever developed. So, we've got a lot of confidence in.

Mr. Chairman, there's 4 online questions. I might just ask the first question from [ Stella Wang ] and it's probably aligned to Mark's questions in some regards. Question reads, in recent months, all New Zealand and Australian infant formula producers received SAMR license. Have you seen any improvement in the Australian demand recently?

Peter, would you like to take that question?

We haven't seen any customers achieve SAMR license in Australia. We are aware that some of the customers have been audited to achieve a license. Listen, I've been away for the last -- I've been in Europe for a while. So, somebody might have got license while I've been away. Mark, probably is better person to know. Certainly, in New Zealand, where many of our customers have achieved a license. And as I reflected before, the SpringSheep have achieved their license only in the last probably 3 months. We've seen an improvement of demand because of that. There's a bit of a care of this that we've seen people get a license, which has opened up a retail distribution position. So, they've built inventory to fill that position. Does it mean they're going to get continuity of sales afterwards? I don't know. But what we do is we see some pipeline fill as they find a distributor that's willing to take a licensed product to marketplace in China.

The next question, again, linked to SAMR from Stella. SAMR started consultation for regulation pushing infant formula makers to use fresh milk directly into its production process, including requiring usage of base powder made from vendors licensed for infant formula products. Any feedback from you and the customers on potential impact from this development?

Yes, both ways. So, to achieve a SAMR license, the SAMR license actually goes to the factory, the spray drying to the blending and packing company that produces the product. If you get a SAMR license, you can have up to 3 of them per factory. What we've seen with some customers if they've achieved it, mainly New Zealand customers, they've been able to attract branded products to take up that license position and we've been quite successful in winning some of that business. In Australia, it worked the other way. The spray drying and packing businesses haven't achieved the SAMR license and their businesses declined effectively because of that. If you get a SAMR license, you get a sugar hit, you get some additional business, which may not continue or could continue. And if you don't, then it's your business is going to decline. And therefore, as I reflect to a lot of people are looking at other ways into the marketplace and that's why the online marketplace is growing.

The next question, Chairman, comes from [ Gary Ellis ]. What are the likely implications for Clover with the change of government in the U.S.A. and possible imposition of tariffs?

I don't have a crystal ball. I don't know. I think a lot will depend on what happens to Australia's position rather than necessarily our position. We know that when you look at the -- what happened in recent years with China and Australia and where the tariffs or embargoes on Australian product because of political issues between Australia and China, the industries who were exposed suffered. And so I think we will be recipients of the outcome of that. It's -- when we look at the high level of -- if you look at where a lot of our businesses since it's in infant formula and if you look at America versus China, just as a category, the U.S. doesn't export infant formula to China as far as I know and -- or if it is, it's very small. And we certainly don't do. We don't have any meaningful business in infant formula in the U.S. Now to the extent if it's infant formula related, if it's something between China and the U.S., I don't see where the issue is. So, we'll just have to respond and as we always do in the dynamic of the market, but I don't have a crystal ball to actually anticipate what it might be.

The last question I have again comes from Gary Ellis in regard to behavior of our largest shareholder for the last 12 to 14 months. Sort of paraphrasing the question at the end of FY '23, we saw our largest shareholder acquiring shares and then prior to announcements this year, a large disposal of their shares. Can you make a comment on that?

Our largest shareholder, that's what our largest shareholder wants to do as a shareholder. So, I've got no particular comment. The only observation I would have is that over the period of time I've been a director on Clover, on many occasions, they bought shares and they're selling shares. And so they're a frequent buyer and seller of shares, but the reasons behind it, they're still our largest shareholder. And certainly, in any conversations we have with them, they are constructive in relation to how we might think prospectively about things they want to do outside of the normal course. Any other questions online or from the floor?

Chair, there's no verbal questions on the phone.

I have no more online questions, Mr. Chairman.

If there are no other questions, I declare the meeting closed. And I thank you for your attendance and look forward to bringing better information and more positive information the next time we meet. Thank you.

Thank you.