Cobram Estate Olives Limited (CBO) Earnings Call Transcript & Summary

Okay. Welcome everyone to the Cobram Estate Olives Limited Financial Year 2024 Results Presentation. And thank you to everyone for joining us. My name is Sam Beaton. I'm one of the Joint CEOs of Cobram Estate Olives Limited. I'm also joined by Leandro Ravetti, who's the other Joint CEO. In terms of agenda for today, I'll be taking you through the financial and commercial highlights of the year. I'll then hand to Leandro. Leandro will take you through the operational highlights and an update on our growth strategies. And then we'll have plenty of time for questions. To ask a question, when we get to that point, there's an icon at the bottom of your screen, which has got a raised hand symbol. Please press on that button and then when it comes time for questions, we'll ask you to verbally ask the question and also unmute your screen. This year has been a very pleasing year for Cobram Estate Olives, a year in which we've seen continued strong demand for high-quality extra virgin olive oil. And we saw sales growth in both Australia and in the U.S.A., growth in profitability, growth in operating cash flow and our asset base continued to grow as we invested in growth assets in both Australia and in the U.S.A. The business is very well positioned to take advantage of growing supply from our olive groves in both Australia and the U.S.A. as the trees mature. And we believe that this will increase -- will continue to drive an increase in sales, profitability and cash flow. Moving to the highlights of the financial results...

Mr. Sam, I think you have to share the screen. There's no sharing the presentation.

Sorry, I'll start again. Excuse me. Is that working, Leandro?

Yes.

Apologies to everyone on that. So, moving to the highlights of the financial results. During the year, we saw sales growth of 34.6% with sales up to $220 million for olive oil sales. This was largely driven by our packaged goods sales, where we saw growth in both Australia and in the U.S.A. Australian packaged goods sales up 28.1% to [ $143 million ] and U.S.A. packaged goods sales up 78.9% to $50.5 million. Pleasingly, for the business, our EBITDA was $66.7 million, which was up 63.4%. This was a really pleasing result, especially given that this year was an off cropping year in Australia. And I'll explain more about the profit in the coming slides. Net profit after tax was $18.5 million and we reported an operating cash flow of $64.1 million, which was a record operating cash flow for the company and up 18.4% on last year. Moving to the detailed profit and loss, and just a reminder to participants that in terms of the accounting for our olive crop, under accounting standards, you're required to measure the majority of the profit relating to the crop in the year of harvest, not in the year of sale. And we do this by taking the fair value of the crop or the expected net selling price. We then deduct the actual cost of selling and then that increment is taken to our profit and loss as a net change in fair value. That inventory is then recorded on our balance sheet at that higher value and then taken through our cost of goods sold as we sell the product. Now, importantly, this year being an off year, it was a very pleasing result to see an increase in EBITDA in Australia. And this was really driven by the terrific trading during the year and increased margin and also the increased expected net selling price of the 2024 crop. EBITDA in Australia grew to $60.1 million. The U.S. business EBITDA grew to $5.8 million, up from $2.9 million. The growth in EBITDA driven by an increased sales and also an increase -- a better product mix where a higher percentage of our sales came through packaged goods as opposed to bulk. And our innovation and value-add business, where we reported a small profit of $800,000, up from a small loss, as we continue to focus on value-adding our waste streams. Moving to the next slide in terms of our balance sheet, our balance sheet grew from -- net assets grew from $287 million to $322 million. A couple of items I'd like to point out on our balance sheet. The first item is that our trees and irrigation infrastructure are carried on our balance sheet at written down cost. So this year we had our groves valued in Australia and in the U.S.A., and our industrial plants. And there's $166 million worth of value over and above book value that is not on our balance sheet, that relates to our trees and irrigation infrastructure. In addition to that, our brands are carried at cost. So just under $6.7 million relates to the value of our brands, Red Island and Cobram when we purchase them. So they're not fair valued or not -- we can't change the valuation on our balance sheet to fair value under accounting standards. And the other item, I'd just like to point out, is the tax liability. So we have a $90 million tax liability. The majority of that relates to an historical asset write up, so it's a deferred tax liability. We'd only ever pay that tax if we sold the assets outside of the group. This next slide really demonstrates the real asset backing of the company. If I look at the bar on the left-hand side, this is the balance sheet assets. And adding on to that, the green part of that bar is the land -- sorry, the trees and irrigation infrastructure, over and above book value. So we call it on this slide the adjusted asset value, which takes into account the real asset value of those trees and irrigation infrastructure. And that is sitting at $845 million, up from $718 million in the prior year. Our borrowings in aggregate did go up, but our debt ratio, so our debt divided by our adjusted asset value, stayed relatively similar, so up slightly from $24.8 million to $25.3 million. Moving on to cash flow. So cash flow across the group was $64.1 million before interest and tax, up from $54 million. Just a reminder that cash flow is a lot more consistent than reported profit. And that's because of the way we manage our oil in both Australia and in the U.S.A. So we manage our oil over a 2-year cycle. So a lower cropping year like we've just gone through in Australia, we'll sell that oil typically over around 9 months, and then a high cropping year like we're expecting in FY 2025 in Australia, we'll sell that over as much as 15 months. And what that means is we can sell oil to our customers who buy oil very consistently, month in, month out, without having the highs and the lows. And it also means that as a result, our operating cash flow is much more consistent year-on-year. We continue to invest in growth capital projects, both in Australia and in the U.S.A., $66.2 million. And of course, we paid a dividend during the year net of DRP, which was $11.5 million. The company is well positioned to fund future growth. We have $42.9 million of cash and available debt facilities. Moving on to the next slide. So this chart shows the group's operating cash flow, both pre-tax and interest, and post-tax and interest, which is the darker green line over the last 5 years. As you can see, we're seeing steady growth in this chart. We're expecting that the operating cash flow of the business will continue to grow over the medium term, particularly as the Australian groves mature and also the U.S. business continues on with its sustainable growth. In addition to this, from a CapEx perspective, we're expecting our Australian CapEx to reduce in the medium term to more of a maintenance CapEx, and our growth will be focused in the U.S.A. in terms of capital projects. We have talked about our 2-year rolling average EBITDA, which takes into account both a high and a low cropping year. It's still a very good measure of the business' performance, but we also encourage investors to look at our business on an operating cash flow basis. It's a very effective measure and also very straightforward. This next slide, we're showing the expected growth. This is just our Australian groves and 1,000 hectares third-party groves, which we contract long-term market and process their fruit and oil. If you look at it over the last 2 years, the average yield from our groves and the third-party grove was $11.5 million. If all those trees today were at full maturity, which we expect in 8 years time progressively, then that yield would be between 19 million and 23 million liters. So significant growth expected from a supply perspective over the medium term. The chart on the right just maps the growth in yield, the bottom line over an 8-year period, and the top line is the progressive increase in costs per hectare as you reach that year 8 point. As you can see from that chart, when a tree gets to around year 5, the incremental costs are very minimal, yet the yields keep increasing progressively through to year 8, which in turn will decrease the cost per liter of olive oil. Moving to the U.S., just a reminder that we now have grove assets in the U.S.A. of just under $190 million. This year, we've reported our second consecutive year of EBITDA profit and we still have just under 60% of our groves, which are yet to produce a crop. And so we certainly expect the maturation of these groves, the continued investment in grove assets in the U.S.A., to continue to drive this business forward in the U.S.A. Moving on to marketing, I'll take you through some more detail on marketing in the coming slides and, of course, sales. From a group perspective, our sales -- our olive oil sales were up 34.6% for the year. The majority of our oil is sold in packaged format. When I say packaged format, I mean Cobram Estate, Red Island and private label, predominantly in bottles and tins. We -- 65% of our sales are still in Australian in packaged goods, 23% in the U.S.A., and the balance is bulk. And the most of the bulk is our lower value oil, which is sold business to business. From an Australian perspective, so this is just Australian sales. Our sales were up 28.3% to $156 million. The chart at the bottom just shows packaged goods sales. In purple, branded sales and then private label in green. And during the year, we saw these sales increase to $142 million, which was up 28%, which was very pleasing. From a market share perspective, so this is supermarket data. Our market share between Cobram and Red Island of the olive oil category is now just under 38% and that compares to 34.8% this time a year ago. We did see increase in household penetration during the year, which certainly should set us up for future growth. But in value terms, our sales at supermarket were up 34% at the scan and 17% in units. Cobram Estate remains the #1 olive oil brand and Red Island the #2 Australian olive oil brand. From a marketing perspective, we continue to focus all our marketing messages around promoting the superior quality of our oil, the terrific health benefits and particularly the usage occasions. During the year, we entered a partnership with the Melbourne Mavericks that play in the Super Netball league. We're very proud to be a brand partner with Olympic champion Kaylee McKeown and we continue on our partnership with Neil Perry. In addition to that, we also invest a lot in marketing our brands and our oil through our social media assets. Moving to the U.S.A., so this is U.S.A. sales specifically. The chart on the bottom shows the growth over the last 10 years. The purple bar is branded sales, green is private label and then bulk on top. It's all in Australian dollars. We saw terrific growth, particularly in packaged goods sales, up 78.9% for the year. We're now the #8 brand in the U.S.A. in supermarkets -- supermarket sales that excludes private label SKUs and we're in 18 -- just over 18,400 stores, which was a growth of 16.6% compared to this time last year. Marketing in the U.S.A., really where our marketing messages are very similar to what we've done in Australia for the last 15 years and really promote -- promoting high quality, fresh olive oil, the amazing health benefits. We've entered into a partnership with Curtis Stone, who has a large presence in the U.S.A., and we've also launched our infused oils, which are in selective supermarkets already. Moving on to the financial outlook, the sales outlook certainly remains very strong and we continue to see strong demand for high-quality extra virgin olive oil. And we've had a good start to the year with sales in Australia and the U.S.A. exceeding budget. Our Australian crop, despite it being slightly lower than what we'd hoped in FY 2024, we will have sufficient oil for our packaged goods sales plan right through to the commencement of the FY '25 or the 2025 Australian harvest. We'd previously announced that our U.S.A. crop, we were expecting similar to or above this last year's crop of 3.2 million liters. This is very pleasing given it's supposed to be an off year in the U.S.A., but due to the favorable growing conditions and also the maturing profile of our growth, we're expecting a strong yield in the U.S.A. Pricing, we didn't move on price in the U.S.A. during FY '24. We are putting through a 15% price rise and that will be effective in September 2024, so next month. From a cost perspective, major costs being the Australian input costs, they have certainly stabilized and we're seeing water. As a reminder, we buy most of our water on the temporary market. Water is trading well below long-term average. Looking forward in terms of cash flows, we're expecting our operating cash flow to remain very strong. And really combined with our existing debt facilities, we expect this to fully fund our planned U.S. expansion of growth, development and land purchases. Last one on outlook, this year, FY '25 is an on year in Australia. As a result, we're expecting materially higher EBITDA than FY '24 and of course that's subject to the normal risks of agricultural production. Our dividend -- we will maintain our dividend rate of $0.033. The Board anticipates that this will be a fully franked dividend. Last year, it was 70% franked. We will be paying this in December, but full details around that dividend will be announced at our AGM on the 1st of November 2024. Before I hand to Leandro, I'd just like to thank our amazing employees. They're so dedicated and hardworking. We really appreciate all the effort. None of this is possible without you. So thank you and I'd like to hand over to Leandro.

Thank you, Sam, and thank you very much to all of you for joining us today. I will provide you now with a brief update on our operations in Australia and in the U.S.A., and how we continue to make progress strengthening our company's forward growth [ pivots ]. I won't go -- if we move to the next slide, I won't go through the details of this slide in detail because we'll cover that throughout the presentation. But fundamentally, they show the consolidation of our company as one-off, if not the largest fully vertically integrated olive oil company in the world, when we combine the geographical reach, the area planted, the level of production and the strength of our brands. Move to the next slide. From the operations point of view, our Australian olive harvest was successfully completed on time by the end of 2024 with a total production of 10.1 million liters of olive oil. That was 3% higher than the 2022, which was our previous off year. We feel that it is valuable to understand this result in the context of the entire industry. Although very difficult to measure and predict beforehand, as harvest progressed, it became quite evident that the Cobram's shorter than average growing season in FY '23 had a widespread negative impact on the Australian olive industry's 2024 harvest. This estimate indicates that excluding Cobram Estate Olives groves, the Australian production in 2024 was down 43% versus 2022. That sheds a different light over the previous results. And as Sam said, it's also important to point out that 2025 is an on year in our Australian groves and we expect our crop to be significantly higher that in 2024, subject to the usual risks. Moving to the U.S., Californian groves are typically harvested between October and November, with the groves having been through peak flowering period and having already started the oil accumulation phase. Winter and spring weather conditions were beneficial for flower induction and fruit set. In fact, the photo that you can see on the screen is an actual shot of the very nice levels of flowering observed in one of our ranches this past night. And based on current observations, we expect the 2024 California olive production, as Sam said, to be similar to or slightly above the 3.2 million liters produced in 2023 harvest, which is quite pleasing considering that initially we projected this to be an off year for most of the industry over there. And this is a consequence of our maturing orchards performing very well, more acres under contract and the fact that many third-party groves responded well to the positive weather condition. Now we move to the next slide. Just to finalize the presentation, we always like to touch on the key developments related to our 4 growth pillars. The pillars are quite simple and stay the same. They focus on producing more olive oil from our Australian olive groves through maturing trees and efficiency gains. Growing our fully vertically integrated business in the United States, growing the branded product sales with a focus on improving the net price per liter for our oil, which Sam covered at length, so I won't touch on that one. Sam capitalized on the sustainable position and upcycling of our byproducts. Let's start with the first one with the growing the production in Australia. With our modern production system, olive trees reach maturity and maximum production when they are approximately 8 years old. And we can see that on the line -- on the red line of yields on the graph. Given the significant investment that the company has done over the past decade in new groves, our maturing area in Australia is set to increase by 53% over the next 8 years, as 25% of our trees are still immature, so they are between 3 and 8 years old and 10% are not yet productive. For more details specifically on that you can see the area and the current tree ages in Australia in the graph of this slide. When all that area -- it is when all that area reaches maturity and assuming that no further replanting or new developments occur, they should reach the potential production figures that Sam mentioned before. This is extremely relevant in terms of the future. As Sam had shown, many of our production costs are fixed and this growth pillar is directly related to the improvement of the company's financial performance with the value of the additional oil mostly flowing directly as [ profits ]. And this is also relevant considering that the Australian grown olive oil still accounts for less than 50% of the total domestic consumption. Moving to the next slide, we see that the main capital project that took place in this past financial year in relationship with this very important pillar has been the 271-hectare redevelopment of our Wemen grove. This is the last block of underperforming trees of the Barnea variety that require replanting across all our farms, concluding a 14-year replanting program. No other significant capital project apart from the additional processing lines that will be rolled out at port is required in Australia in the near future to support the organic growth of production expected from the maturing orchards that I explained before. Moving to the U.S., as we said many times, oil supply continues to be our main growth limitation in the U.S.A. So I just wanted to highlight the key investments linked to this. As you can see from a similar graph and the table here and the chart here, we're expecting a significant boost to our Californian supply from the maturing profile of our growth given that nearly 30% of our growth are immature, and a massive 59% are yet to start bearing fruit because they are too young. Almost equally important in terms of securing future olive oil supply, we have increased our third-party growing area under contract to 2,100 hectares up from less than 1,300 hectares in FY '21. And we're talking about domestic supply in Australian market. Well, in the case of American-grown olive oil, it barely accounts for less than 5% of the total domestic market, so plenty of growth over there. Move to the next slide and we certainly have several key capital projects on the go relating to this second growth pillar. Firstly, we have completed our Phase 2 of the Dunnigan Hills Ranch and the Hungry Hollow Ranch developments with a total of 179 hectares of olives planted between November 2023 and July 2024. And you can see an image of our Dunnigan Hills Ranch here on the screen. And we're also actively working on the projects for this current financial year with an additional 178 hectares of olives to be planted in the Northern Hemisphere's autumn in 2024, so just a few months away. Additionally, we've got a pretty strong pipeline of new properties currently being considered for acquisition and future development. Second, we have completed a much needed expansion of our mill and oil storage. Moving now to revamping of the bottling and warehousing operations in Woodland. The expansion that you can see in these photos doubled our milling capability and increased our olive oil storage capacity from 2.9 million to 4.5 million liters. The expansion of the finished goods warehouse and the installation of the new bottling line are underway. And once completed, we will have the infrastructure in place to meet its projected increase in throughput over the next 5 to 10 years. Moving to the sustainability side, another very active year in this pillar. We are very pleased with the results of the strategic change that we adopted regarding this area of the business, a couple of years ago. The lean cost structure for this division and the focus on selling our byproducts directly to other agribusinesses, food manufacturers, hospitals and nurseries, particularly as ingredients and as renewable energy sources for heat and electricity production, delivered the first year of net profit for this division, with a record total of 11.4 million kilograms of biomass sold to external parties in this past financial year. Moving to the next slide, and still on sustainability, after becoming a publicly listed entity in 2021, we recognized the need to implement a more formal approach to sustainability that is in line with mainstream expectations and corporate best practice. As a result of this, we have identified a list of priority topics that have been clustered into the pillars of people, planet and business and are integrated in our recently adopted 2030 sustainability strategy. Now this strategy is the first step in formalizing the company's achievements and the ambitions in this space. Moving to the next slide, in the body of our financial year '24 report, you can read in more detail about all our formal commitments and targets across a wide range of topics, from safety to healthcare professional education, and from protection of biodiversity to equality and diversity and inclusion. Given the time constraints of this presentation, I cannot go through all of them in detail. But to those of you with particular interest in those areas, I would encourage you to read it and we will certainly welcome any feedback that you may have. There's one important aspect we're highlighting in this list is that the -- we have done in FY '24, our first greenhouse gas assessment company wide, including Scope 1, 2 and 3 emissions. Pleasingly, for this past financial year, the total CO2 sequestered from our groves alone, not counting the native vegetation component, neutralized all our Scope 1, 2 and 3 emissions with excess sinking capacity. This is actually a very encouraging result given the inclusion in these calculations of a fully comprehensive list of Scope 3 emissions and the still maturing profile of our groves, particularly in the U.S.A., which also has been included in the study. And then the last slide or the last sustainability area that I want to highlight is related to increasing the receiving of our operations regarding water usage. After several years working with government agencies and water authorities and undergoing extensive scientific testing, our company has just been granted a couple of months ago, a 5-gigaliter annual license to sustainably extract and use underground water at its Boundary Bend grove, improving clearly our water position, particularly in periods of drought or extreme market volatility. And this aquifer contains saline water. When the company considers it appropriate, a modular desalination plan would need to be installed to convert the water to quality levels suitable for irrigation. Fortunately for us, and this is probably a first one for us, we won't be reinventing the wheel with this. A similar technology is currently being utilized to successfully treat water from the same aquifer to regain horticultural crops in the area. We haven't only been working on this area for Australia, moving to the U.S., we funded a $1 million installation of a 4-kilometer pipeline to the Hungry Hollow district in California. This pipeline services our groves and some neighboring farms covering almost 800 hectares with surface water from the Indian and Clearlake reservoirs.. The important thing here is that irrigation -- irrigating with surface water improves groundwater recharge in this area, and that allows for more sustainable management of the regional aquifer during years of reduced district water allocation. And now we -- on the last slide, I think we just wanted to highlight that pleasingly, all these efforts were independently recognized by several organizations, including our key retail partners Coles and Woolworths here in Australia. And also I wanted to highlight that all those sustainability efforts are not only linked locally with our U.S.A. operations, also achieving the certification to the Leading Harvest Farmland Management Standard. That is all I have for today. So happy now to ask Sam to join me back for any questions that you may have.

Thank, Leandro. Sarah, have we got any questions?

Yes. First we've got -- Larry Gandler has got a question, Sam.

Hi, Larry.

You have to unmute yourself, Larry. That's it.

Okay, great. Congrats on the excellent year. I really am excited about those long-term projections you have for olive oil production in Australia, Sam. It made me think, as you have to look out 8, 10 years when you're planting your trees, when do you sort of think about the need to plant, start planting again? I know you've got CapEx to sort of harvest at the moment. And then, I guess, one of the comments I think I recall you guys talking to was that you'll be able to make use of third-party growers and leverage your existing milling infrastructure in Australia. So can you talk to maybe that sort of capital outlook for the Australian business?

Yes. No, certainly, I think most of our capital will be allocated to growing U.S. supply. And we've said that before and I said that during the presentation. In terms of your specific question, you're right. We've got significant supply coming on progressively over the next 8 years. We also are working with several parties on planting their own growth on their balance sheet, similar to what we've got with the existing 1,000 hectares where their plant grows. We contract with them long-term, process their olives and market their oils. So, yes, we are continuing to work on that and we're likely to see some of those contracts in the next couple of years. And that will really continue us to grow supply beyond that 8-year time frame and also utilize some of our excess capacity, particularly at our board mill.

And to the question regarding the replanting the yields per hectare that are on the graph where you see the chart of different age of the trees, that maximum yield is considering a discount, assuming a 2.5% replant per year. Olive trees will typically commercially live for 40 years, but that varies a bit. So in our assumptions, we expect a 2.5% replanting per year, which means that you're going to have 5% of your trees not productive, and then a larger amount in that sort of growing period. Having said that, we have actually replanted a much more aggressive program, largely forced to try to remove the underperforming Barnea variety trees, which means that we are not anticipating a large replanting program, at least for a number of years, because we sort of accelerated that 2.5% per year until now. So lastly, it's led by tree age, but also by underperforming of the varieties, and certainly that has been done so far.

Okay. And that range of 19 million to 23 million liters, is that the top end and bottom end of that range? Is that on your off year or is that just giving us an average of the average?

That is an average of 3 years. That's why we decided to work on the average of the 2 years.

Yes. Okay, great. All right. Fantastic. And one other question from me on private label in the U.S.A. It looks like bulk really expanded in the U.S.A. and -- sorry, not bulk, private label really expanded in the U.S.A. and branded expanded, not to take anything away. But I'm just wondering why the emphasis is more on private label? Is that opportunistic? What's happening there?

No, it's a good point. We certainly -- a lot of that private label oil went to a key strategic customer. In hindsight, we overcommitted allocation before harvest. If we had our time again, we wouldn't have committed as much, which meant we didn't have as much for our brand. Now, what we're expecting in FY '25 is a much higher proportion of our growth will come from branded sales.

And I imagine that will have a positive mix effect on the revenue line.

Yes, that's right. That's right. Branded supplies are still very important for us. It's been a -- strategically a really important way to work with some of our key customers. So we will continue to supply private label going forward. And it also allows us to give our Cobram customers the very best of our extra virgin oil, similar to what we've done in Australia over time.

I'll leave it to the next question, guys.

Thank you. We've got Charles.

Sam, Leandro, great results. Well done. My question is just on the water that -- the water license. So should I think of that as a tool that will immediately start to reduce water input costs or as a tool that just, I suppose, narrows the impact of price volatility for water?

Essentially, it's a narrow or toned down the potential impact of extreme high water prices when that event [indiscernible].

Okay. No worries. And I've just got one other question. So you put out a long-term number there for your Australian groves. And I'm just wondering about your U.S. groves, and I know you might not want to put out a number, but you know, you're producing X amount of liters now at 11% maturity. How should I think of the long-term number for those growths in the U.S.?

From the U.S. perspective, we are not really seeing any significant difference between Australia and the U.S. Although the profile of the groves in the U.S. is clearly younger, we have, let's say our main of the younger ranches, the Hungry Hollow Ranch about to reach maturity and the yield profile. So the way that the yields have increased from year 3 to year 8 or is about to move into [ year 8 ] has been very consistent and quite similar [indiscernible]. On a per hectare basis, I will not expect much of a difference in terms of the liters per hectare over there. Thanks, Charles. We've got Mark Topy.

Congrats on the results. Sam, just the first question just around the domestic -- the market share gains. Impressive, I think, given what's going on in the price increases you've had domestically. Just wondering how you see that going forward that mix? And does it suggest you put more product into the bottles as opposed to, if you like, the tins? And maybe in context of what's happening globally, like we saw global shortages last year, Sam, did that impact the domestic market and do you see that changing going forward as well?

Yes, I'll talk a little bit about domestic and then I [ might try ] Leandro for what's happening from a global perspective. But yes, we certainly did see a growth in share and really driven by household penetration. The shortage of olive oil on shelf in parts of the year certainly helped us. We wish we had more oil to supply. But yes, it was really pleasing given the pricing environment, certainly the work we do around continually educating all our consumers and new consumers around the health benefits and the quality of Australian extra virgin oil. Our customers have remained very loyal to us. And what we -- by increasing our customer base or household penetration, yes, we're expecting that to really set us up in the medium term, because what we've seen in the past, that consumers that grab our product and try it, that happened before, are reasonably sticky and we're certainly seeing evidence of that. In terms of global supply, Leandro, perhaps touch on your view on global supply and impact on the Australian market.

Before I explain the global supply, I just always like to clarify that all the reasons that Sam stated, if we look how much we invested in educating our consumers over the past 10 years, I think we've done a very good job teaching them about the unique value proposition behind locally produced, healthy, high-quality extra virgin olive oil to separate that a fair bit from commodity pricing. But I'm not going to shy away from talking a little bit about Spain. I refer to Spain to make it simpler because Spain produces 50% of the olive in the world and a large amount of what gets exported. Most recent forecasts, you know, if you talk about the combination of some of the government and private forecast, there is a consensus in general terms that the country is likely to have only a slightly above average crop in this coming 2024 harvest, about 1.4 million tonnes. Remember that the Spanish average over the past 10, 11 years has been around 1.25 million tonnes. So it's only just a little bit more about. And considering the amount of out of stocks that the industry have at the moment, certainly pipeline filling is likely to soak up a fair bit of that and also to rebuild the carryover stocks which currently have been mined down to virtually 0. So when you consider all that, it's going to be good to have more availability of oil worldwide, but it won't be significantly higher on a month per month basis than what we have seen until now. And what we expect that to show is that we are likely to move back to a normal cycle of promotional activities, which, as Sam said, is actually a positive for the industry because promotional activities help to reward consumers, drive trials and penetration. And probably, if I have to throw a couple more things about the international context that I think they're worth considering, on one side, for the past 3 years, during the drought period in Spain, and not related to the drought, related to other things, the cost of production in Europe had increased by some 30%. These are sort of the official figures. We also know that for 2 years in a row, large trading companies that publicly present their results have been operating at significant losses. And then on top of that, you throw the dramatic thing where this outlook comes receiving [indiscernible] awards, which means potentially new dry cycle for the Mediterranean are perhaps contributing as well, that the situation is going to remain relatively -- relatively stable. But we're certainly not in the business of forecasting prices, but we expect that to be the case.

Would it be fair to say there that if there was shortages in the prior years, that the internal consumption will probably soak up the current year's crop to a larger extent in Europe?

Certainly when you looked at the world situation, this most significant drop of consumption occurred in the producing countries. So Spain, Italy, Greece experienced double figures drop in consumption. We haven't seen that in Australia or the U.S. or Japan. None of those countries' consumption was relatively flat with increasing prices in Europe was a drop, and certainly there was a lot of pressure, even political pressure, to lift those consumption levels back again. To the extent that you probably heard that Spain have removed -- the government have removed GST from olive oil and the supermarket level to try to encourage more consumption and tone down the average price rises. So certainly we expect a bit of focus from the companies trying to lift back the domestic consumption.

Got it. And just on the U.S., just 2 points. Just I'm wondering, with the success of the strategy, attracting more third-party growers, is there potential for that? And maybe in terms of strategy, you just talked about the points of presence that you're building in the U.S. as well?

Yes, certainly in relation to third-party growers, we're continually working with existing olive growers to put them under contract. There's certainly some -- we're seeing a little bit of conversion into olive oil and also farmers that are greenfield planting. So, yes, we're actively pursuing more third-party growers along with the development of our own growth.

And just the points of presence in the U.S. Can you maybe expand on that a little bit?

Can you -- sorry about that...

The retail sort of points of presence that you're building in the U.S., in terms of retailers you alluded to.

Oh, yes. Okay. In terms of distribution, yes, we're really focused on a couple of things, or a few things, really in the U.S. Distribution points, so growing distribution points absolutely is our focus for the number of retailers and regions we're not even in yet. I also increasing our presence within existing supermarkets, so increasing the number of spacings, putting in things like infused lines. So you've got bigger brand blocking, which attracts. And also, of course, through marketing, and we do a lot of in-store marketing in the U.S., which is one of big differences to Australia, trying to promote increased consumption. So increased turn rates within existing supermarkets. So a combination of all those 3, we expect to continue to drive sales going forward.

Great. And just lastly, so domestically, I know it's early days, but I think the almond blossom has gone pretty well. Just wondering, any comments at this stage? The weather has been sort of benign and not too many frosts. How's it looking in the olive groves?

We're -- certainly we're not out of the boots yet regarding frost, but certainly so far so good. Olive trees have a much, much delayed development in comparison with almond. Yes, you're right. It is full blooming almond out at the grove a couple of days ago and full blooming almond is almost right there. And olives are just starting to move, just starting to wake from the winter period. And so far everything is looking on track for that higher expected drop. We certainly hope that continues, but there's a long process. But we haven't seen anything yet that would negatively affect the 2025 harvest.

Thanks, Mark.

Thank you, Mark. I'm not seeing any more raised hands.

All right. Just give it a bit. Yes. Thank you to everyone for joining us. It's great to see so many people on the call. And please reach out directly if there are any further questions or clarifications. I can't see any more, Leandro.

No, I think it's fine.

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Thank you very much to all of you for joining us today.

Thank you very much.