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

Okay. We'll get started. Welcome, everyone, and thanks for joining us, and welcome to the First Half Financial Year 2025 Results Presentation for Cobram Estate Olives Limited for the 6 months to 31 December 2024. My name is Sam Beaton. I'm one of the joint CEOs. I'll be taking you through a finance and commercial update. I'll then hand to Leandro Ravetti, the other joint CEO, who'll take you through an operational update and an update on our strategic objectives. [Operator Instructions] This 6-month period has been a very pleasing one for the business. We continue to see strong demand for high-quality locally produced extra virgin olive oil. And this, combined with our continued investment in marketing, particularly marketing the quality, the health benefits and the versatility of extra virgin olive oil have driven a sales increase of 13.5% for the 6-month period, up to $123.5 million. Pleasingly for us, this result was driven by the increase in packaged goods sales in both Australia and in the U.S.A. In Australia, our packaged goods sales grew by 20.9%, up to $86.4 million and in the U.S.A., our packaged goods sales grew 18.5% up to $23.9 million. From a cash flow perspective, so cash flow from operations, which is before interest and tax, we grew by 36% up to $43.6 million for the 6-month period. And from a profit perspective, on an EBITDA basis, so earnings before interest, tax, depreciation and amortization, we reported $14.5 million EBITDA profit, and that was an increase of 75% on the prior period. We reported a loss after tax of $4.5 million, which is an improvement on $7.2 million last year. On profit, it's very important to understand that with our Australian crop, we don't recognize any of the profit or fair value at half year. It just sits on our balance sheet at cost, the Australian crop. All the profit or fair value is recognized in the second half of the financial year and will come through in our full year results. And we expect that to be material, and Leandro will talk about our Australian crop in his section. And just a reminder how we account for the fair value of the oil. When we get to June 2025, when we finished the Australian harvest, we take all the olives we've harvested and milled into olive oil, we then estimate the net selling price or the fair value of that oil. We then deduct the actual cost of production, and that fair value difference is taken to our profit in the year of harvest. The fair value of the oil then sits on our balance sheet at that value. And then as we sell that oil, it's expensed through our cost of sales. So really important to remember that none of the fair value relating to the Australian crop is recognized at half year. It will all come through in our second half. From a profit perspective, so we think about our business in 2 business segments, the Australian operations and the U.S. operations. We saw growth in sales in both of those divisions, which drove an increase in profitability, also combined with better product mix and higher pricing. The Australian operations EBITDA grew from $6.7 million to $11.9 million and the U.S. operations EBITDA grew to $2.6 million, up from $1.5 million. Our cash flow statement. So this shows our cash flow from operations before and after interest and tax. Pleasingly, our cash flow from operations before interest and tax grew to $43.6 million, up from $32 million. And as you can see from the chart on the bottom right, we continue to see solid growth in operating cash flow compared to the last 5 periods. The business continued to invest in capital projects. We invested $52.1 million for the half. The majority of this CapEx went into the U.S. in purchasing land for future growth developments and existing growth developments, where we spent over $32 million. And beyond this financial year, so once we get to 30 June, the Australian business will largely turn to maintenance CapEx and our future CapEx will predominantly be focused on increasing -- continuing to increase supply in our U.S. operations. We also paid a dividend during the half of $12.1 million net of the dividend reinvestment plan. Importantly, for the business, we had $53 million of undrawn debt facilities and cash at 31 December, which will allow us to continue with our CapEx program and fund the land acquisitions that Leandro will talk about in his part of the presentation. From a balance sheet perspective, so strong assets of $734 million on our balance sheet and net assets of $316 million. A couple of items to point out. So our brands, so Cobram Estate and Red Island sit on our balance sheet as an intangible at cost, not at fair value. You can't fair value them under accounting standards or revalue them. Our olive trees and irrigation infrastructure portion of our olive groves also sit on our balance sheet at written down cost. We have these assets valued externally at 30 June 2024, and there's around $166 million of value relating to the trees and irrigation infrastructure on our groves that doesn't sit on our balance sheet, but very important to consider when looking at our assets. From a -- the other point is the noncurrent tax liability of $83 million, that relates to historical write-ups for accounting purposes of assets. It would only ever be realized if we sold assets outside of the group. From a net debt ratio perspective, we increased over the 6-month period from 31.5% to 34.4%. Importantly, to note also that this time last year, our net debt ratio was 33.5%. This chart here shows our adjusted asset value, taking into account the trees and irrigation infrastructure value or external value that's not on our balance sheet. So the 2 taller bars are June '24 and December '24 assets that are on our balance sheet and the light green part at the top is the $166 million relating to the trees and irrigation infrastructure that's outside our balance sheet. The brown smaller bar is the borrowings less cash. And really, we put this chart here to demonstrate our borrowings against what we view as real property -- real asset value. So our adjusted asset value of $890 million compared to net borrowings of $240 million. So an adjusted net debt ratio of 27.9% at 31 December. Moving on to sales. So this is sales across the group. As you can see, 89% of our sales comes from packaged goods, and I'll talk more about that in the coming slides. The growth of 13.5% was really -- we're really pleased with that and really on the back of having to restrict our customers on oil supply. So we certainly -- as a business, we're very much looking forward to our growth maturing both in Australia and the U.S.A. so we can meet that ever-increasing demand for high-quality extra virgin olive oil. One last point in this slide. So our bulk sales actually decreased as we prioritized our extra virgin olive oil into packaged goods. The majority of our bulk oil that we sell now is all our low value oil and is sold through B2B customers. So this slide is just our Australian packaged goods sales shown over the last 4 periods, half year periods. The purple bar is branded sales and the green part of the bar is private label. As you can see here, our branded sales in Australia grew by 23% and really driven by better product mix within that branded portfolio and also pricing. If you take into account all packaged goods, our sales in Australia grew by 29 -- sorry, 20.9%. Moving on to the U.S.A. We're particularly pleased with the growth in branded sales in the U.S.A. and Cobram Estate in the U.S.A. is really gaining sales momentum and the guys over in the U.S.A. are doing a terrific job. Branded sales grew by 83% for the half. As you can see, we've made a shift -- more of our oil shifted into branded product compared to private label, where we certainly overcommitted in the FY '24 year. The growth in these sales is really driven by 3 factors. The first being increased distribution where our store count increased to 18,700 stores, up 7.5% compared to this year through increased turn rates at store level and increased facings and also partially by price increases. Within that branded sales mix, our Cobram Estate sales more than doubled for the half. Moving on to costs. So costs across the business have been relatively stable. We put a few points here on water. Water is one of our main variable costs, particularly in Australia. We're still expecting our water cost this year to be well below our long-term average price, which is $197 a megaliter. As of Wednesday, we purchased just over 70% of our annual water requirements at $124 a megaliter. The Southern Murray Darling Basin sits at just over 60% right now towards the end of summer and all allocations for the water that we use are at 100%. In terms of business update, so we continue to see strong trading since 31 December '24, and costs very much in line with expectations. Our Australian oil supply is extremely tight. We're looking forward to starting the Australian harvest, and we expect to have new season oil on shelf by the end of April. As we announced prior to Christmas, we extended our CBA debt facility by $42.2 million. This was primarily put in place to help fund the U.S. land acquisition to enable us to continue to increase supply in the U.S. We also funded that through operating cash flow. And we entered into a long-term agreement with a third-party grower before Christmas as well, which we have already announced. It's a 30-year agreement. It's 1,000 hectares that will be planted over 2 years commencing next year. We're growing the nursery trees, and we'll market the oil over that 30 years. And the arrangement very similar to arrangements we have with other growers already. In terms of financial outlook, we're certainly expecting sales profitability and operating cash flow strength to continue into the second half of the financial year. Our CapEx program will continue in the second half. It will be less than the first half but the CapEx program, certainly beyond 30 June 2025 will be focused more around increasing supply in the U.S. as the Australian business returns more to maintenance type level CapEx. From a profit perspective, just a reminder, this year is an on-year in Australia. We expect the crop to be materially higher than last year. And as a result, we expect our EBITDA or profitability to be materially higher than last year as well. There will be time for questions on anything I've spoken about at the end. I'm now going to hand to Leandro. And before I do, I'd just like to thank all our staff for the amazing effort again over the last 6 months. Thanks, Leandro.

Thank you, Sam, and thank you very much to all of you joining us live today. As Sam said over the next slide, I will try to provide a summary of the key updates from our operations and a brief overview of the important actions linked to the ongoing implementation of our growth pillars. Move to the next slide. As we have announced already, our 2024 California harvest was completed on time, by early December last year, achieving a total production of 3 million liters of olive oil. Now, this is a production level 77% higher than in 2022, which was our previous comparable off year. Now, this growth in production was fundamentally driven by the increased fruit supply from the larger area of third-party groves under contract, together with the maturing profile of our groves and good levels of extraction efficiencies in our mill. There's no doubt that we welcome this 2-year rolling increment in oil availability to enable us to continue growing the domestic sales in the U.S., which as Sam said, have been for the past 6, 7 years, always constrained by supply. Move to the next slide. Moving to Australia in terms of these upcoming harvest here in Australia, the season is shaping up well despite some challenging spring weather conditions that we discussed during our AGM, such as alternating temperatures and potentially damaging frosts. Fortunately, the investment in frost fans over the past 5 years protected vast areas of our growth from those events. Flowering took place between late October and early November, which is in line with long-term average and the favorable weather conditions and that led to normal levels of fruit sales. So everything going as expected and subject to obviously the normal risks associated with farming and natural variability from now until the harvest. Crop projections for the 2025 Australian oil harvest are within the range of our original expectations. And the crop yield of this on year, as Sam said, is projected to be significantly higher than in FY '24. The last one on operations overall. Both the U.S. and Australia experienced rather normal weather conditions over the past 4 to 5 months. We always like normal. Water usage to date in Australia is only slightly lower than average due to some early December rains and all arrangements are certainly on track for harvest to begin by mid-April. In the case of the U.S., we have experienced excellent weather conditions since the end of harvest with above average rain and no damaging frost events recorded today. All the reservoirs delivering water to our groves over there in California have above average water levels for this time of the year. And this led to full district water allocation already announced for the upcoming 2025 growing season, which is always great news for us. Moving to the next slide and to finalize our presentation, I'll touch on the key developments related to our growth pillars. These pillars, as you know, are quite simple and focus on producing more oil from our Australian oil groves through maturing trees and efficiency gains, growing our fully vertically integrated business in the United States, growing branded product sales with a focus on improving net return per liter for our oil and capitalizing on our sustainable position and upcycle of our oil byproducts. In terms of the pillar #1, on the bottom left corner of this slide, you have the full age profile of our trees in Australia, represented by each of those bars while the line describes the oil production levels per year of age of the tree. As you can see, about 10% of our groves here have not even reached productive age yet being less than 3 years old, so they have been harvested, 25% are still immature being between 3 and 8 years old and 65% of the fully productive trees are still quite young in the expected life cycle of olives, with most being 20 years old or younger, having at least another estimated 20 years of production in front of them. Without any further new plantings and the associated capital expenditure, the company's mature grove in Australia will increase by 53% over the next 8 years, and that is -- then on top of that, we have to add the added oil availability coming from these long-term contracts, one of them that Sam mentioned that has just been signed in December this year. Moving to the next slide. Well, it may look like an optical illusion with mirrors but these are actual images of our mill at Boort as it is completing its final upgrade. The new equipment is being installed as we speak and doubles again the milling capacity of the site to over 100 tonnes per hour, making it one of the world's largest olive mills. The installed capacity will be sufficient to handle the fruit from the maturing trees on-site and related third-party growers in the foreseeable future. It's a beautiful site. Some of you have been able to see it last year. Well, now we've got double the amount of equipment that you saw back in April in 2024. Moving to the U.S., our second growth pillar and utilizing a similar graph for our groves in California and what we saw in Australia. We can clearly see the significantly younger profile of our orchards in America with only 20% of our trees being of a young mature age, 28% still immature between 3 and 8 years old, and a staggering 52% of our farms are yet to come into production with obviously plenty of organic growth to come over the next few years. Moving to the next slide and still in California and our second growth pillar. These past 6 months have certainly been very active in terms of project development and acquisitions. In terms of development, we planted 164 hectares of new groves between October and November 2024, right next to already existing projects. The company is also in the process of purchasing nearly 1,600 hectares of prime agricultural land in very close proximity to our existing groves. And this will support additional plantings and increased scale of up to 1,080 hectares of new olives groves that will more than double our current planted area and includes an existing 109-hectare mature olive grove. All these developments and acquisitions are funded from cash flow and existing debt facilities. In the U.S., the second important growth capital project in California has been the first phase of the Woodland site expansion, which was successfully completed in time in the 2023 California harvest. As explained before, this investment doubled our milling capacity from 32 to 64 tonnes per hour and increased our olive oil storage from 2.9 million to 4.5 million liters. The expansion of the finished goods warehouse and the installation of a new bottling line with 4x the current capacity is currently underway. And once completed before the end of this calendar year, this new infrastructure will be sufficient to meet our projected increase in production over the next 5 to 8 years. Last slide, finally, on the sustainability, innovation and value-add pillar. We are pleased to see that it continues to be a profit center for the company. At the same time, that delivers on the objectives and targets of our 2030 sustainability strategy. You can access this document that strategy through the Sustainability section of our recently updated corporate website at cobramestateolives.com.au. I think that this brings me to the end of our half year results presentation. And before we take any questions that you may have, we would like to wish our Chair and Co-Founder, Rob McGavin, that you most likely know a very happy birthday today. Sam?

Excellent. So we're done with our presentation. [Operator Instructions] Now, we've got quite a few, which is good. The first one is Larry. So Tim or Sarah, if you could unmute, Larry?

Can you hear me guys?

We can.

Fantastic. Well done guys on a fantastic result and long may the growth continue. Just a few questions. With this on year and strong volume increase in the harvest, does that -- you guys have been constrained in Australia for volume. But it's hard to say whether the additional harvest will drive volume growth for you in this market in the near term? Or do you spread it out over the next couple of years? How does it work? Do you expect volume growth for Australia? And did you not have volume growth, say, the last 12 months?

Yes. So to answer your second part, the volume was relatively flat. And as I said, we were restricting supply to our customers because it's very important for us to be on shelf 12 months of the year. We are expecting volume growth next year. But having said that, of this larger crop, we will supply particularly the Australian market for 2.5 months before we get to 30 June 2025.

Certainly, Larry, Australian consumers are up for a treat and then we get very fresh Australian oil all the way from probably the end of April that we'll be delivering already this harvest oil. So a fair bit of oil of this harvest will be packed into this financial year, and we expect that the production will help us to bridge in a quite good way with the next coming on year -- off year.

Yes. And I think as we've spoken about before, Larry, it's the 2-year average that's really important, and we manage that crop the on and off year over those 24 months. So we can continue to supply our customers relatively consistent amount. So as that 2-year average increases, then there's obviously more oil that we can sell into the market.

Just specifically on this, so you'll close out April, May, June, maybe with some volume growth in the Australian business?

Yes.

Okay. Great. Just on the upcoming reval in Australia, which you haven't taken yet. Obviously, it's going to be a larger crop. But in terms of the, sort of say, value per unit, last year was already elevated. Do you think that you'll be using an elevated value per unit for this year's upcoming reval?

Well, essentially, we use what we expect to sell it for. And so, that's based on our current sales price and rates at the moment. It's a difficult one to answer right now because we assess it at 30 June. But we think that at these levels that consumers are still getting great value for the product that we're supplying. So for us, we don't see it as an elevated level. But yes, it's a difficult one to answer right now.

Okay. And then one last question for me. Mix shift in Australia, I'm starting to see quite a bit of the new varietal range on the shelf. How impactful is that in terms of lifting your average price? And how much more does it have to go?

Yes. I think you're talking about the Black Label product range, which is in most Coles and Woolworths nationally now. It is certainly a higher returning product. It's not a big volume driver but it obviously has a positive impact on earnings as does our infused range, which is a high-margin product as well. But the majority of our volume, particularly in Cobram is sold through our core range, which is our 375 ml and 750 ml range. I've got Jonathan Snape, who's next?

Yes. Can you hear me okay, guys?

Yes.

Yes.

Yes. Look, can I just follow-on on the -- maybe a question around the crop valuation for this year and maybe the sell-through pricing you're kind of thinking around next year. I mean, obviously, Spanish olive oil prices are now down 50-odd percent. I think year-on-year, they're almost a 3-year low. There started to be some shelf price reductions already from what I can see. I think one of the Spanish brands dropped their own shelf price in Coles the other week. How are you thinking around the pricing dynamic? I mean, it's obviously changed quite a bit in the last 12 months. And, obviously, your assumption, what you bring into account to and then what you can sell it through to in the next year makes a big difference. So how are you guys thinking about those, I guess, the change in the market backdrop in the last, I guess, 2, 3 months and what that means for you?

Yes. I go up front a bit more on the production side and then if you're happy to go there. Your point is valid regarding the international drop, although it's important to remember that the current pricing in the Spanish oil is the highest that has ever been before the last price spike for the previous 2 decades. So that's just to put it in relative terms with what was experienced 2020 and before. But over the past few months, certainly, we have seen a return of more aggressive pricing and discounts from imported products and supermarket sales with no impact to our sites. To be honest, this hasn't stopped, right? As we've been telling you all the way along the investment in education and building the trust with our customers, it is clear that they are not prepared to compromise on buying local produce, high-quality and more health benefits. And we certainly try to thank them with the loyalty every day by delivering what we think is still, as Sam said, great value for money for the olive oil market. So it didn't happen before. We don't really expect it to happen now either.

Yes. I think Bertolli dropped their price almost 40% in Coles alone. I mean, that's a big drop. And I'm wondering it's -- we've got a cost of living issues, retailers will obviously reset all their house brand contracts in the coming months as these harvest progress. I mean, surely it has a knock-on effect to, I guess, your thinking in promotional activity and net realized selling price at some point, it's a fairly different environment, so I guess what we've been in the last 6 months.

Yes, not really. I mean, I think we're essentially selling -- we're not selling a commodity style Spanish oil. We're selling a high-quality domestically produced extra virgin olive oil in both Australia and the U.S.A. You're right, there has been price changes, and we expect that the imported oil price will soften or they'll promote more over the coming 6 months. But we haven't seen a change in our demand at all. And I think it's -- and the research that we see shows that once the consumers try a quality product like Cobram Estate, that they don't switch back. And as Leandro said, we think we're still delivering a high-value product at that price point. And it's also probably important to remember that a lot of imported brands almost doubled in price on shelf, and we haven't gone anywhere near that. So all those factors but we're certainly more focused around just continuing to deliver a high-quality product as we have done throughout various commodity cycles over the last 7 years. Ian Munro?

Just got 2. Just the first one, just around the cash flow, operating cash $36 million, $37 million looks really strong. So congrats on that. Just wanted to get a sense of any kind of seasonality or working capital adjustments we need to be thinking about for that number. Obviously, we're not probably going to double it for the second half but just kind to understand if there's any kind of one-off benefits in there to think about.

If think about it in -- we obviously don't give out forecast of operating cash flow. But if you think about it in 2 business segments, and the Australian business segment be pretty similar in terms of operating cash flow for the second half. The U.S. will actually be stronger. The sales in the U.S. will be skewed more heavily to the second half as they were last year. Interest to be relatively stable, if not come off slightly if interest rate cuts keep happening but not material. And we will pay tax in the second half of the financial year.

Very good. And then just on the U.S. package sales, so just looking at Slide 14 in the deck, you can see that the branded mix of sales has increased materially. So it looks to be around the sort of 70%, 80% of sales. So we've seen quite a pickup there. Can you perhaps help us understand whether -- is that a maintainable kind of level going forward? And does that have an impact on GP margins at this point?

Yes. I mean, we do think it's maintainable. Obviously, it's a higher price point. So it's not representative of volume distribution. I think -- and we touched on this time last year. This time last year, we overcommitted to some private label commitments, and we were very open about that. So that's reset this year. I think importantly, though, for us, private label plays a really important part and our retail partners, both in Australia and the U.S.A. promote the local category, and it forms an important part of our strategic relationship with our key customers. We've got Mark Topy.

Just to follow-up then just on the pricing points. If the pricing points were under a little bit of pressure, I'm just wondering how much benefit you'll get from additional supply in the current year, maybe just touch on that point. And just some of the retailers were quite short the product last year like Aldi, for instance, in the New Zealand market, I think, as well. Can you talk us through the benefit of that additional supply that you might see this year?

I think the first point is that, yes, certainly, demand has been a lot stronger than we'd anticipated. We don't like having to ration any of our customers but we've had to because we want to be on shelf 12 months of the year. Once we have new season oil towards the end of April, that obviously changes and we'll be able to go back to normal supply. So -- but we don't -- we certainly don't see there was a real shortage on the shelf domestic and imported this time last year, and we don't think that will happen this year. But we're certainly looking forward to more oil coming on from the 2025 Australian harvest.

Okay. So not that much additional supply. I just -- like there's going to be additional supply that you got to the prior year. So I'm just wondering how do you see targeting that additional supply?

It really depends on our harvest results. So we -- as I said in one of the questions that we manage our oil over 24 months. So as we -- as that rolling 2-year average continues to increase in terms of volume, then we obviously sell more volume, which translates to sales.

Right. And just then on that crop size, can you expand a bit more on what you're seeing or how you're seeing the yield at the moment or the commentary about some frost impact? But given the weather conditions and certainly in the almond market, it's pretty good up there on Mildura. What's your sort of expectation around the yield?

As I said, the yields are still within the range of our initial expectations. It certainly has been more widespread -- frost was more widespread event affecting the whole of Southeast Australia with some impact around the industry, especially in South Australia. And as I said, fortunately for us, the investment on the frost farms really covered vast areas of our groves, avoiding any damage there, which will help us to support our initial assumptions on yield. As I always said, even if we can't predict with accuracy the number of fruits that are hanging on the trees at the moment, they can still change in weight and oil content by plus or minus 20% from the long-term average, depending on the conditions that will go from now until harvest. So it's always very difficult to give that precision within a few million liters. And that's why we don't -- we try to avoid providing that. But in general terms, all the indicators in terms of fruit set and fruit sampling that we do up to this time of the year are on track with our expectation.

Great. And then just on Boort, obviously, a fantastic facility there. And you sort of talked about how the crop is still maturing. Can you sort of talk to the next 2 or 3 years, what sort of increase in production we might see?

In general, both Australia and the U.S., obviously, they've got very different maturing profiles. Australia is a much more mature [ performer ] still with the new plantings that have taken place over the past 8 years. The expectation is to see we said that depending on the year-on-year rolling average, a growth of somewhere between 5% to 10% year-on-year, combining our own growth and the third-party oil availability. In the U.S., that growth, we expect it to be a little bit steeper just simply because, obviously, there's a much larger area of new groves are yet to come into production. The third-party supply, which at the moment represents a larger percentage of our total volume in the U.S., more than 70% will gradually shrink as a percentage, not in total volume, but as a percentage as our own production grows, and that will drive the majority of the additional volume available over the next 4 to 5 years.

Fantastic. And just lastly then on that U.S. with a lot of European product coming into the U.S., is there any implications on the tariffs Trump's sort of implied threats against Europeans on tariffs? And would that be beneficial to local producers? How would you see that?

To be honest, we are yet to see any specific announcements on olive oil has been the general announcement that early this week talking about countervailing tariffs in general. And certainly, if that gets implemented, it would potentially apply to European imports in terms of olive oil per se. There is some limited impact on some of our packaging costs but not to a great extent to that.

Right. So if there was a tariff applied to the European product, would it be fair to assume the U.S. price of olive oil would go up in general then?

I'm not sure if it'd go up, but it will certainly be a positive for our business, producing -- most of our sales in the U.S. are from a product that's produced in California.

I was just kind of thinking that just pass-through the cost increase to the Europeans or...

Certainly will increase the cost to the imported products in the U.S., particularly if they're coming from Europe, how those brands react if they absorb that extra cost of reducing profit margins or if they pass on with price increase, making our products more competitive is yet to be seen depending on the details of the specifics of any announcement.

Yes, of course, ultimately it's going to be favorable for your U.S. business.

Correct, yes.

I don't think we've got any more questions. I'll just give it a minute or so. Grant [indiscernible] has a question.

Congratulations on the business is in good nick. Just one question. Could you just pass comment on the L.A. fires? And you're obviously well north of them. But is there any risk or was there any risk on either the supply or even some commentary on the demand side for your product?

No. Thanks, Grant. Definitely, we are way north -- over 500 miles north and a very different environmental conditions, particularly through winter where we've got much rainier area. And so, the vast majority of our groves are located in heavily developed agricultural area, not so much exposed to bush fire, which are quite typical from California like they are in the U.S., but certainly not affect our operations at all.

Yes. No impact on supply disruptions well across the category in general. Thanks, Grant. We got [ Ben Rodney ].

Thanks for a great presentation and good result. Just taking a step back on the U.S., can you talk about just as, I guess, a category, how domestic oil, I guess, particularly in California, what kind of penetration that has from overall domestic supply and where you see that growing to over the next, say, 5 or 10 years?

Yes. I think -- so firstly, the pretty much all of the oil in the U.S. is produced in California. Of the domestically produced olive oil, it only accounts for less than 5% of consumption. The rest is imported. We're seeing really strong demand for California oil. It's certainly great quality oil. And so, in terms of the growth, the growth at the moment has been unlimited -- is being limited by supply, which is why we're investing in land and grove assets. So we certainly don't see the market as a limitation.

Yes. I think that the message that was true in Australia and is also true in the U.S. that local expression is better and healthier for you. And as Sam said, largely any additional grove has been always constrained by not having enough oil. And that's why we continue to invest into developing that productive base that will help us to continue to drive the growth of the [indiscernible]. But in general terms, it's easy to see that the American market is a market that is not quite almost 10x bigger than Australia, and we always make the same reference that if we look back at the Australian market 20 years ago when Cobram started, the consumption was about 1 liter per capita with less than 5% of that oil being produced locally. Now, the consumption in Australia have gone to more than 2 liters per capita with almost 50% being locally produced largely by us. The California situation now is a bit like in Australia 20 years ago, 1 liter per capita and less than 5% of the production coming from domestically produced oil, which we see as a great potential moving forward in terms of much more oil or at least how strong the demand for locally produced product can be.

So with that kind of opportunity in mind, is it -- I mean, are you balance sheet constrained to try to go harder at that opportunity in terms of bringing new oil on? Or is there more third-party deals that you can do to meet that demand and growth?

I think -- I mean, we've invested significantly in this half on land, which we plan over the next couple of years. So certainly not constrained on that side. In terms of third parties, yes, we're working with a number of third parties. We think that's another avenue to growth where we work with parties who plans and we either manage or just process or mill their oil and sell through our channels. So it will be a combination of both but we're certainly going as hard as we can. Excellent. We've got no more questions. So that wraps up today's presentation. Once again, thank you, everyone, for joining us. We really appreciate the interest and the support for the business. And, of course, Leandro and I are here if you want to reach out at any time. Thank you.

Thank you.