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

Okay. Good morning, everyone. Welcome to the Cobram Estate Olives Limited Half Year Results Presentation for FY '26 for the 6 months to 31 December 2025. My name is Sam Beaton. I'm one of the joint CEOs of Cobram Estate. I'm also joined here today by Leandro Ravetti, the other joint CEO. In terms of today's presentation, I'll be taking you through the first half financial results. I'll also give you a commercial update. Leandro will talk through the acquisition of the Californian Olive Ranch business. He'll then give you a business update and an update on our growth strategies. Of course, we'll have plenty of time for questions at the end. If you do wish to ask questions [Operator Instructions] This slide provides a summary of all the key messages. Leandro and I will be talking through in detail each one of these key messages during the presentation. Before we get into the results, I'd just like to reemphasize one thing. Under accounting standards, we are required to measure the profit related to the crop in the year of harvest, not in the year of sale. And we do this by estimating the net selling price or the net fair value of the oil. We then deduct the actual cost of selling, and that difference is taken to our profit and loss in the year of production. Now in Australia, at half year, so the results we're presenting today, we don't have any of that fair value taken into account. It will all be taken into account in our second half, and we expect that to be materially positive. In the U.S.A., it's the opposite, given we finished harvest in November, early December, that increment is taken into account in this half. But given the immaturity and the size of the crop at this stage, that amount is still relatively small, but there was a $1.3 million fair value adjustment in this half. So the key point there is really that our Australian crop, the fair value increment is taken to our profit and loss in the second half of our financial results, not this half. Moving on to our summary results. Our underlying EBITDA for the business was $9.5 million. This was slightly ahead of the guidance we gave in December 2025, which was a range of $4.5 million to $7.5 million and compares to $14.5 million for the corresponding period. This doesn't include the $2.4 million of transaction costs relating to the core transaction up to 31 December '25. But it is included in our net loss after tax, which was $11.9 million for the half compared to $4.5 million last year. Cash flow from operations of just under $10 million before interest and tax, which was within the guidance range given in December. This is significantly lower than last year. And in the slides throughout the presentation, I'll talk through the drivers of this variation. Our net debt ratio dropped to 21.7% following our capital raise in September, October '25. From a sales perspective, our group package sales were flat at just under $110 million. This was actually a pleasing result for us, particularly as the olive oil category returned to more normal trading conditions, both in Australia and in the U.S.A. and following on from 2 consecutive years of global extra virgin olive oil shortages. Cobram Estate sales grew in both Australia and in the U.S.A. A more detailed profit and loss. So we think about our business in 2 business units, the Australian Olive Oil business and the U.S.A. Olive Oil business. The Australian Olive Oil business EBITDA was $8.8 million, down slightly on last year. Pleasingly for us, our net selling price of the oil we sold during the half was slightly higher than the corresponding period, but it was impacted by the higher cost of extra virgin olive oil sold, which is predominantly our own oil that was valued at 30 June 2025, but also a small amount of third-party oil that we purchased. In the U.S.A., our EBITDA was $700,000 positive, down from $2.6 million. Similar to Australia, we reported a net higher net selling price than the corresponding period, but this was more than offset by the increase in marketing spend and overhead costs really to support future growth. We did see a small cost in olive oil sold, packaging and distribution costs. The other one I would like to point out is the $2.4 million, as I said on the opening slide, relates to the transaction cost accrued to 31 December '25 for the pending core acquisition that is required to be taken through our P&L. Cash flow statement. Cash flow from operations was down $33.7 million to $9.9 million. The following slides, I'll explain that variation. During the half, we paid tax of $17.4 million. This was primarily a result of the record profit in 2025 financial year and also the commencement of income tax installments. During the half, we continued to invest heavily in property, plant and equipment, investing $67.9 million in capital projects. This is predominantly around land acquisitions in the U.S.A., grove developments in the U.S.A. and the expansion of our industrial facility and mill in California. We also paid a dividend during the half, which was up from $0.033 to $0.045 fully franked of $17.5 million net of our dividend reinvestment plan. And of course, we did our equity raising in September, October 2025 through an institutional placement, a share purchase plan and shortfall placement, which was $177.8 million, net of transaction costs. At 31 December '25, we had available cash of $115.4 million. It's worth highlighting that since then, we've signed an agreement with the Commonwealth Bank of Australia, which is our main banker to extend all our debt facilities through to February 2029. We also increased our facility limit by an additional $152.2 million, of which $76.9 million is conditional on the completion of the core transaction. So if you take this additional facility into account, our available liquidity is actually $267.6 million at 31 December. Operating cash flow. So this is the operating cash flow for the half over the last five periods. I will emphasize that operating cash flow is still a very important measure of our business performance. But of course, it can be impacted by working capital movements and in particular, this half, third-party oil purchases and the timing of more lumpy non-extra virgin olive bulk sales. In terms of explaining the variation between last half's operating cash flow before interest and tax of $43.6 million down to $9.9 million. I'll just spend a little bit of time talking through the key factors. During the half, we spent $3.8 million more on water purchases in Australia due to the materially higher prices of water. We purchased $6 million more of third-party oil, and that certainly puts us in a good position going into an off-crop year in Australia. In the U.S.A., we purchased just under $6 million of third-party oil. And again, that puts us in a good position right through the next harvest. During this half, we actually had to ration oil in July, August, September due to a shortage of oil. And with these purchases, we don't anticipate we'll have that issue next year. $9.2 million related to the timing of bulk oil sales, mostly timing, some price, where it was $9.2 million down on the corresponding period. This is all non-extra virgin bulk sales, and we're expecting the second half to be materially higher. OpEx of $2.3 million, which is predominantly around increased marketing spend and overhead costs in the U.S.A., and $6.4 million relating to timing of other working capital, which predominantly is around the collection of debtors. Moving on to our balance sheet. So our balance sheet was strengthened to $510 million in net assets during the half, primarily due to the capital raising in September and October. A couple of key items just to highlight here. So our trees and irrigation infrastructure on our balance sheet are carried at written down cost, not at valuation, and there's around $170 million over and above book value when you compare it to valuation. Our intangible assets, so most of that relates to the cost of the Red Island and Cobram brands when we originally purchased them. So they're not carried at fair value or valuation. And the deferred tax liability of $90.6 million relates to historical accounting write-up of our olive groves and would only ever be payable if we sold those assets outside of the group. From a debt ratio perspective, we dropped from 32.7% to 21.7%. This chart here, so the 2 left-hand bars at 31 December '25 and the 2 right-hand bars at 30 June '25, compares our asset value against our net borrowings. The top light green bar is the amount relating to the valuation of trees and irrigation infrastructure over and above book value. So as you can see from here, we have assets of over $1 billion against adjusted borrowings of $188.3 million. So an adjusted debt ratio of 18.2%. Moving on to sales. Packaged goods sales were flat across the half compared to the corresponding period. We certainly think it was -- it's a solid result, particularly on the back of aggressive discounting by our competitors in both Australia and in the U.S.A. markets. And pleasingly, our net selling price in both markets was slightly ahead of this time last year. Looking at just Australian sales. So pleasingly for us, Cobram Estate sales grew by 9.3%, and this was really -- we're really pleased with this result and certainly reinforces our long-held view around consumers recognizing the differentiated position of the brand, particularly around health and quality. And we continue to invest in marketing initiatives, both in Australia and in the U.S.A., reinforcing this differentiated position, which we think certainly sets the business up for long-term success. In the U.S.A., our packaged goods grew by 6.2% for the half, which was predominantly driven by private label sales. Although our Cobram Estate growth was just under 1%, if you look at just supermarket sales, so excluding one-off job lots that we did last half in Costco, our packaged goods sales in supermarkets actually grew by 5.5%. We're certainly anticipating a stronger second half in the U.S.A., particularly on the back of our oil supply. In terms of business update and outlook, Leandro will talk more around the Californian Olive Ranch transaction. As we announced on Wednesday this week, though, the transaction is still subject to antitrust regulatory approval from the Department of Justice. Over the last 3 weeks, we have been responding to voluntary requests for information, which is relatively standard. But what that means is that it's very unlikely our transaction will be completed by the 28th of Feb this year, which we contemplated in our December '25 announcement. However, we are confident we'll still get approval, and we're expecting to get approval on or before the 12th of February next month with completion of the transaction 2 weeks after that. In Australia, we're expecting to sell out of our oil around 30 June '26, and we're expecting packaged goods sales to be broadly in line with last year, but growth in Cobram Estate. As I said before, the second half, we're expecting a stronger growth in the U.S.A. across our packaged goods sales. Leandro will touch more around our crop, but we are -- this year is an off year for our Australian crop. However, we're only expecting it to be moderately lower than last year. But this lower crop will mean that our FY'26 EBITDA will be lower than FY'25. Again, Leandro will talk the detail around water prices, but they are materially higher than this time last year. However, other costs, other growth costs and corporate costs remain relatively stable across the group. We talked about our CBA facility, but that was -- that's all been put in place, the additional $152.2 million post 31 December. And importantly, our Australian business has now transitioned to a sustaining CapEx program, including this year and beyond, and we expect that to be around $10 million to $15 million per annum. I'm now going to hand to Leandro, and Leandro will start off by taking you through the acquisition of California Olive Ranch.

Thank you, Sam, and thank you to everyone joining us online today. As Sam said, over the next few slides, I'll walk you through the key highlights of the California Olive Ranch acquisition, and the strategic advantages that this transaction brings to our business. After that, I'll just provide a broader update on our operational performance and some growth initiatives across both Australia and the U.S. Move to the next slide. And as you will recall, on Christmas Eve last year, we announced that Cobram Estate entered into a binding agreement to acquire California Olive Ranch for $173.5 million with a combination of cash, vendor notes and an earn-out payment. It is worth highlighting that as of the 30th of September 2025, which is the end of the financial year for COR, COR reported net assets of $132.6 million on a cash-free debt-free basis. Now for clarity, all the financial figures that I quote during this section about COR are in American dollars. This acquisition really position us well -- extremely well, in fact, both strategically and financially. Some key points show that our planted footprint in California will expand from roughly 1,400 hectares to about 3,300 hectares. We will also accelerate our sales trajectory by adding well-established premium brands to our portfolio. And also importantly, the proximity of our operations, the cultural alignment between the teams and the ability to apply our Oliv.iQ and modern oil expertise provide us with a clear pathway to unlock meaningful synergies, some of which I'm going to talk about in more detail in the next slides. We expect this transaction to be approximately 9% EPS accretive from FY'27. That will be the first full year of integration. To be honest, and just before we jump to that slide, I think that both the Cobram and the core teams are generally excited by this opportunity. This is not just a company changing transaction. It is an industry-shaping moment. A more unified California Olive industry guided by the principles of our Oliv.iQ system can deliver more high-quality extra virgin olive oil at a lower cost, ultimately improving the returns for all growers. And at the same time, we have an entity like the Olive Oil Commission of California that is already home to one of the most stringent quality certification systems in the world that will be able to pair those robust standards with increasing volume of Californian grown oil. That means stronger brands, proudly claiming the local origin, greater investment in consumer education and ultimately, more informed and loyal American consumer base. With better availability, strong quality assurances and a trusted category of local extra virgin olive oil, we believe that the value proposition for U.S. consumers and producers alike will strengthen significantly. Now we can get into more of the details on the next slide, looking and seeing that California Olive Ranch is COR's flagship brand and the #1 selling California produced extra virgin olive oil in U.S. supermarkets and the #4 selling olive oil brand overall. Under our ownership, California Oil Ranch would become our leading domestic brand in the U.S. And as supply grows, we would return it to where it started being 100% Californian origin oil. Lucini was acquired by Cor in 2015 and is also the #1 super premium imported extra virgin olive oil brand in the U.S. and would be another strategic addition to our brand portfolio. As shown in the chart, our 3 brands together generated over $211 million in retail sales in the 12 months to November 2025, despite excluding very important retailers like Costco, Ingles, Whole Foods, and HEB in those figures. Move to the next slide, where we show the different EBITDA that COR reported. COR reported an EBITDA of $16 million for the financial year ending the 30th of September 2025 before any potential synergies that I mentioned before. It is important to, I think, flag and point out that the EBITDA in the prior 2 years to September '23 and '24 was affected by higher prices for imported olive oil used in both the Lucini and COR global brand portfolios and prior to the implementation of price increases. The sales volume during the 12 months to September 2024 was also negatively impacted by the tight European supply conditions. Move to the next slide. As I mentioned earlier, we see substantial synergy opportunities across the combined business. We expect to realize approximately $12 million in annualized savings during FY '27, which is the first full year of combined operations. And this would come from reduced overheads, better utilization of existing infrastructure, combining labor pools, optimizing freight, particularly fruit freight to the mills, enhancing milling efficiency, increasing supply chain efficiencies, expanding direct distribution to retailers and reducing brokerage costs. If we look further ahead, we expect those annualized synergies to exceed $20 million by as early as 2029 or 2030 and this step-up is mainly driven by improvements in yields across the existing COR groves as we invest in those orchards and we implement the Oliv.iQ principles. With rising yields and improving extraction rates, the cost per liter will fall and our byproducts will also generate stronger returns. I think that crucially important also is to flag that the yield and efficiency improvements won't just benefit Cobram, but they will also enhance the economies for our and course long-term partner growers. This is very important because we see that more sustainable grower returns will support a stronger, more engaged grower base and pave the way for additional long-term supply partnerships, which will be crucial to continue to support the growth of those great brands. Move to the next slide. From an asset perspective, the COR acquisition brings over 4,000 hectares of Californian groves into our network, more than doubling our current footprint. This includes COR's owned and long-term leased orchards as well as a broader group of partner growers. The transaction will also more than double our milling capacity and would lift our total storage capacity about 15 million liters of temperature-controlled tank space, which is on par with Australia. Finally, the acquisition would also add bottling, warehousing and equipment assets that allow us to fully support and service this expanded platform. Move to the next slide. The map on your left gives a clear sense of the operational layout. Most of COR's groves, along with the milling and storage assets shown in purple in the map. Sit roughly 120 kilometers north of our main hub in Woodland, represented by the dots and the star in green. The Northern region, where COR assets are primarily located, draws from an entirely different water source in comparison with our Southern groves and its environmental conditions are distinct with this geographic diversification, reducing our overall horticultural risk. At the same time, the proximity between those 2 hubs remains close enough for very easy operational coordination, much like the relationship between our Boort and Boundary Bend hubs in Australia. Move to the next slide. This slide essentially just illustrates the significant lift in California olive oil supply that will be enabled by the COR acquisition. In the short-term, over the next couple of harvest, we expect the total Californian production to more than triple relative to our 2025 crop of 3 million liters. And over the medium to long-term, we anticipate more than doubling that again, reaching or exceeding 20 million liters. Slightly more than half of that would come from our own managed groves. Move to the next slide. And well, I won't go back through the full list of strategic benefits because we covered those in detail. But before we move to the broader business update, I just do want to briefly highlight why we are really so excited by the role that we can play in shaping the future of locally sourced olive oil in the U.S. Few agricultural categories, in fact, offer this amazing combination of market size, growth momentum and a domestic production base that still is at its infancy. The next slide probably shows why that [Audio Gap] and on the left, the chart compares the consumption trends in the world's 3 largest olive oil markets, Italy in green, Spain in red and the U.S. in blue. All sit at roughly 450,000 tonnes a year of olive oil consumption today. But the trajectories to get there cannot be more different. Italy, as you can see, peaked around the year 2000 and has slowly trended downwards since then. Spain has been relatively flat with rises and dips tied closely to its own production cycles. At the same time, the U.S. has delivered remarkably consistent growth at almost 5% per year for more than 3 decades. Based on that trajectory and the fact that the consumption per capita in the U.S. is only 10% of that found in Italy or Spain, there is very little doubt that America is on track to become the world's largest olive oil consumer in the very near future. At the same time, on the right, the top chart shows a correlation between consumption in full line and domestic production in dotted line in Italy with the bottom chart showing exactly the same relationship in Australia. I think that the pattern is very clear. When domestic production grows, consumer engagement and consumption tend to follow. And when production falls, consumption weakens. So locally produced brands do really matter. They shape category behavior. And this backdrop creates the greatest opportunity as the U.S. consumption is surging, yet domestic production covers only 3% of the market. If I had to draw a line, that line would be so close to 0, it would barely register on the chart. So the gap between demand and local supply is enormous, and we will be exceptionally well positioned to help to close it with very, very strong brands and really good production base assets. That wraps up a bit of an introduction and a recap on the reasoning and the strategy behind the core acquisition. And now we can move to a brief overview of our operations and growth programs. Move to the next slide. Our 2025 California harvest was completed on time in early December, producing around 3 million liters of olive oil. We also purchased, as Sam indicated, 800,000 liters from other California millers, giving us now 27% more oil to support sales compared with the previous year. The production from our own groves accounted for 28% of the total, up from 23% in FY '25 and just 11% in FY '24. This is a good reflection of both orchard maturation and the benefits of applying our Oliv.iQ system. Operationally, all business units in California are performing well with stable costs and the expansion of our finished goods warehouse and installation of a new bottling line quadrupling current bottling capacity remain on track for completion by the end of this financial year. Move to the next slide. I think that this chart that you see here highlights the exceptionally young profile of our Californian groves, always excluding COR. Only 14% of the orchard area is in a young mature phase, 18% is still in mature and an astonishing 68% has yet to reach productive capacity. This represents built-in organic growth that will translate into significantly higher oil availability and progressively lower cost per liter as those orchards mature. Move to the next slide. During the first half of the financial year, we developed 382 hectares of new groves in California. You can see some of the photos on your right, bringing our total area, excluding COR to 1,422 hectares. We are currently planning to plant approximately a bit over 850 hectares in calendar year '26 and a further almost 390 hectares in the calendar year '27, taking the total area, again, excluding COR, to around 2,666 hectares by the end of calendar year '27. These developments are being funded through free cash flow, debt and proceeds from the 2025 capital raise. With the expanded footprint following the core transaction, we will have obviously the opportunity to reassess plantings beyond that calendar year 2027. Move to the next slide. Turning now to Australia. The season is progressing very well. The current crop assessments suggest that even in an off year, the 2026 yield should be only moderately below the 2025 levels, assuming typical environmental conditions through harvest. All business units are operating effectively. The integration of Leda Ag is complete, and the teams are now focused on harvest preparation, including the initial field testing of a new harvester prototype that aims to deliver faster and more efficient performance. Operating and input costs, as Sam mentioned, remain stable with the exception of water. The usage of water has been below average until now due to some early summer rainfall, but the water prices remain above historical averages. We have secured to date about 70% of our full year water needs at a weighted average price of $327 per megaliter. Move to the next slide. And just as a comparison, by the start of the 2026 harvest, approximately 4% of our Australian groves will still be pre-productive, so less than 3 years old. Another 21% will be in the immature phase between 3 and 8 years old and 75% of our fully productive trees will still be young by industry standards, that is 20 years or less with at least 2 decades of very strong yields ahead. So even without further plantings, our mature Australian grove area will naturally expand by 33% over the next 8 years adding significant production relative to the 2024, 2025 baseline. And next slide. Well, this really concludes our half year results presentation. But before taking questions, we would like to invite all Cobram Estate Olive shareholders to join us for our Shareholder Open Day at the Boort Olive Grove in Victoria on Sunday, 19th of April. Full details will be released to the ASX and e-mail to shareholders with an active e-mail address. If you wish to receive electronic communications, please update your details online or make sure that you submit the electronic communication form. So thank you very much for that. Now I think if Sam join me back again, and we will be opening for questions.

Thanks very much, Leandro. Just one clarification. When I was talking about the COR transaction and the antitrust regulatory approval, I said we expect to receive it by the 12th of February. Of course, I meant the 12th of March 2025 as we've written in this presentation. So we move on to questions.

[Operator Instructions] We have Ian Munro from Ord Minnett.

Just a couple. Just with respect to the sales volumes during the first half, just relative to PCP in Australia, I note there's been some, I guess, revisions to expectations there. Is that more volume or price driven? We know it's only a 6-month period. So just interested in your kind of outlook, I guess, for underlying revenues in the second half on a volume and price basis, please?

Yes. No, certainly, I think in terms of volume, relatively similar to the prior corresponding period. Our net price was slightly higher, but only just above last year. We expect the second half to be -- to bring us really pretty much in line with last year when you're looking at our overall packaged goods sales. But we have seen and we will continue -- we're expecting to continue to see growth in Cobram as opposed to Red Island and private label, which have been impacted by the aggressive discounting in the market.

And just the underlying EBITDA a little bit better than expected. Is this a kind of signal that gross profit margins are increasing as the -- I guess, the maturity of the groves starts to feed through to higher volumes in Australia. Is that sort of, I guess, that dynamic maintainable? You called out a few cost pressures in water at this point in time. How confident are you as they're getting some of those cost pressures passed through to price on -- with key customers?

Yes, I think slightly better in terms of net margin. In terms of cost pressures, we called out water. But in terms of the overall cost of production, it's not overly material on a group level. And certainly, in this environment, we wouldn't expect to pass through cost to consumers right at this stage.

Yes. And then just, I guess, looking at some of the weather conditions that we've seen in sort of January in kind of Northern Victoria, maybe give us an indication of any potential impact of kind of, I guess, heat on the groves and historically during pockets of above-average temperatures, how have the yields been impacted come harvest time?

Yes. Look, up until the period of hot weather that we've seen in January, the conditions have been actually really, really good with very good levels of fruit set and everything else that's driving it. Fortunately, I would say, for us and with olives, that heat wave occurred during a period where others physiologically are not driving any yield-related activity. So it happened during what we call the pit hardening period. That means the fruit is already set and it's hardening in the pit and forming the seed. That was just before the oil accumulation starts. The oil accumulation process starts during February and then goes on in March and early April. Usually, really high temperatures will tend to have a bigger impact at that time than when it happens a little earlier in the season back in January. Obviously, it's a bit early to call. We're just starting the accumulation measurements, and we see values are relatively normal for the season in relationship with the time that the flowering occurred. So it seems to confirm that at least until now, there was no negative impact from that heat wave that we got in January.

We have a question from [ Lindsay Stubbs ].

Just in terms of the types of olives you're growing, like here in Australia, I see in the premium range, you've got to forgive my pronunciation, Picual, Coratina and Hojiblanca. Are they the same sort of types that are growing in the U.S. for your Cobram Estate or the Cobram Ranch Olive ones?

Yes. From our own groves, one of the big points of difference that we made going to the U.S. was actually introducing in large scale some of those premium varieties, call it premium varieties of varieties that have the potential to produce premium oils like Picual, Coratina, Hojiblanca, Mission in the case of the U.S. And that has been definitely a change for the typical Californian industry that was largely based around more milder style of oils with varieties like Arbequina, Arbosana. That sort of -- our participation now and is growing every year as our trees mature, will bring more of those more robust, higher polyphenol levels, more fruity oils into the marketplace. And we see that as a very potential -- as a great potential strength of our operations to be able to bring that diversification of oil style to the American market as well.

And just a follow-up question. Can I ask?

Sure.

Do the Americans really care whether the olive oil they're buying is from the U.S. and California or coming from Europe?

I suppose that it's -- I mean, it's difficult to provide an absolute answer. I would say it largely depends. To some consumers, origin and truth of labeling and the link between local origin, freshness and health attributes matter. And in part, that is also linked with the education of those consumers. That's something that we have done very well in Australia for the past 20, 25 years and that we are intending to repeat in the U.S. I mean it's very important that consumers are educated about olive oil, and we strongly believe that the more educated they are, the more likely that they will become loyal followers of brands that deliver on quality, health attributes and flavor consistently.

There's a reason I ask. I asked 2 American friends who live over there if they heard of the California Olive Ranch and they said, "No, no, we always buy the foreign stuff."

It's certainly a valid point. And this is why I reinforce why the opportunity is so great. At the moment, the production of Californian oil represents less than 3% of the total American market. And so it's very difficult to have awareness across a market of that size with only 3%. In fact, in Australia, our hardest yards were back in the late '90s and early 2000 when we were producing less than 5% of the Australian consumption. The moment that the Australian production became 10%, 15% and more of the total consumption, the awareness of the general public over the quality and the freshness and the health attributes of locally produced oil became a lot stronger and certainly push those brands that deliver that with it. So it's definitely a valid point, and it's definitely where we see that there's a lot of opportunity moving forward.

We have Greg Biss.

Sam, I'm just following up on the growing evidence of health benefits of fresh olive oil. I'm just wondering from a quality point of view, are you -- is the team focusing on increasing the amount of psychoactive antioxidants and improving the ration of mono and polyunsaturated fatty acids? And do you apply that to your third-party oil that you buy? I'm not wishing to give away any trade secrets, but if you can answer that, that would be much appreciated.

Sure. The answer -- the short answer is yes, we continue to -- although we are very happy with the quality that it gets delivered, we are continuously researching into ways, both at the milling side and particularly the growing combined with harvesting side to continue to deliver better and higher health attributes in the form of more complex, higher quantities of antioxidants and a better fatty acid profile. And when it comes down to the third parties, that's why we put a lot of emphasis on long-term relationships. And this is what we have been largely building in Australia. This is what we are aiming to continue to build in the U.S. because through those long-term partnerships, we can pass on a significant amount of IP to ensure that the quality of the oil produced from third-party growers is as good as what we can produce ourselves or at least as good as what we are happy to put into the different labels that we provide.

We don't have any more questions, but we will give everyone a couple more minutes before we wrap it up. [Operator Instructions]

There you see another nice photo of one of the latest plantings in the U.S. This grove was planted in November last year, and you can see how much rainfall we had during the December and January period with a very lushy green growth of just natural grass in the roads. It's looking fantastic. That photo was taken only a few days ago.

We have Campbell Rawson, who's got a question.

I'm just wondering if you could talk to water a little bit more given the fluctuating prices currently within that market and how you think about that as a capital allocation strategy for yourselves in any given year as opposed to thinking about forward buying versus in spot and noting you've got 30% still to purchase for this year.

Yes. I think we certainly -- our long-term strategy has been to purchase temporary water, and we'll continue to do that, which means that we do have fluctuation in water costs. I think it's very important to note that even if you do own permanent water that you're still subject to the annual allocation. So you don't get any water from that permanent allocation until it was actually a temporary or an annual allocation. So it certainly doesn't protect you completely from fluctuation in water. And we certainly think that in terms of our capital allocation, it's better spent in olive groves and of course, going forward and what we've done over the last few years, capital expansion in the U.S.A. Leandro, you might want to just -- given the water situation, just touch on the U.S.A. in terms of how that's quite different to Australia.

Yes, certainly very different. Rainfall levels in most of California, particularly where we are located has been above average during winter time, delivering third or fourth year in a row of above average rainfall. All dams or most of the dams are actually full, profiles are full and the expectations are for full allocation throughout this year. And looking at back in history, it provided a high level of certainty over the year after that again, and still raining right now it's raining. We had a couple of inches of rain 2 days ago, and there's another inch coming over the next 2, 3 days. So a very, very welcome condition across the state. It's one of a few years where the entire state is now in very good shape from the water perspective.

It looks like we don't have any more questions. Thank you so much, everyone, for joining the call, and thanks for those who've asked questions and certainly look forward to the 6 months ahead.

Thank you very much.