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

Good morning, everyone, and welcome to the Cobram Estate Olives Limited Full Year Results Presentation for the 12 months to 30 June 2026, and thank you for joining us online. My name is Sam Beaton. I'm one of the Joint CEOs. I'm joined here by Leandro Ravetti, who is my other Joint CEO of the group. I'll be taking you through a financial and a commercial update for the year. I'll then hand to Leandro, who will take you through an update on the California Olive Ranch acquisition, an update on our operations and also an update on our capital projects. We'll have plenty of time for questions at the end. [Operator Instructions] This year has certainly been a transformational year for the company, following the acquisition of California Olive Ranch in March 2026. Not only has this increased the scale of the business on a global basis, but more importantly, delivered us scale in the U.S.A. and a great platform for growth. We're now the #1 grower and producer of U.S. extra virgin olive oil, and we're also the #1 marketer of locally grown olive oil in that important U.S. market. Pleasingly for us, our normalized EBITDA, particularly in an off-cropping year in Australia, was $61.4 million. This was underpinned by modest growth in Cobram Estate on the back of tougher competitive environments, maturing olive groves in Australia and a 3-month contribution from COR. So all these results have 3 months' worth of results and cash flow and profit relating to the California Olive Ranch business that was purchased at the end of March 2026. We strengthened our balance sheet during the year. We raised $178 million in September, October 2025. And so, that capital raising has largely been deployed investing in groves in the U.S.A. and contributing to the funding of the acquisition of California Olive Ranch. Our asset value now sits at $1.4 billion. And pleasingly, during the year, our Cobram Estate Australian sales grew despite very heavy promotional campaigns run by our imported competitors. And this really highlights the strength of the brand and the consumer demand for high-quality extra virgin olive oil. From a CapEx perspective, we continue to focus our growth CapEx into the U.S.A. For a more detailed profit and loss. Our sales grew by $27.3 million. I'll talk through the sales in more detail on the coming slides. From a normalized EBITDA perspective, our Australian business reported EBITDA of $52.1 million, which was down from $110 million. This was expected due to the off-cropping year in Australia. And as a reminder, 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 that by estimating the expected net selling price of that crop, and then we deduct the actual cost of selling. It was also driven -- the result was also driven by higher operating costs, particularly in Australia, where we saw an increase in water cost of over $6 million, temporary water costs, and also a modest reduction in selling price across our packaged goods portfolio. In the U.S.A., our EBITDA increased to $9.4 million. The majority of this increase was driven by the 3-month contribution from California Olive Ranch, offset slightly by an increase in costs. And then, from a normalized earnings before tax perspective, $13 million against $76.1 million in the prior period. There's a number of one-off costs or abnormal costs in our profit and loss this year, particularly most of them relating to the acquisition of California Olive Ranch. So I'll just take a little bit of time explaining that. The warrant expense of $41.8 million. So, as you may remember, as part of the acquisition, we issued subordinated debt to both the sellers and the third-party AGR partners. As part of that subordinated debt, there were warrants attached to that. The warrants are actually the warrants relating to the AGR debt, the third-party debt. The value of that acquisition is required to be measured through our profit and loss and expense. And then, the movement in the warrant valuation between the acquisition date at the end of March and 30 June is also required to be expensed. So, that makes up the $41.8 million. It is noncash, and I'll explain a little bit more about the warrant when we get to the balance sheet. Transaction costs of $4.8 million relating to the COR acquisition has gone through our balance sheet -- sorry, our profit and loss, and also other of $4.1 million, which is predominantly made up from a downwards revaluation of a property that was externally valued. From a tax perspective, the reason this is positive number of $33.5 million is because of we recognized historical losses from our U.S. business. Previously, they hadn't been recognized on our balance sheet. With the acquisition of COR and the assessment of profitability of our U.S. business, we're able to recognize those carryforward tax losses and will offset future tax gains and sit on our balance sheet, and the other side has gone through our profit and loss as a tax benefit. Cash flow statement for the group. We reported a $47.5 million cash flow from operations before interest and tax. This was down from $83 million, and we've got a slide coming up that explains the variance in those 2 numbers. Other key items on our cash flow statement. So we spent $101 million on CapEx projects during the year, the majority of those in the U.S. and the majority of those in -- on growth capital projects. We also paid just under $160 million for the purchase of California Olive Ranch. That's the cash component of the purchase. And of course, we raised equity during the year, which totaled just under $180 million. From a liquidity point of view, we have undrawn debt facilities and cash of $115 million at the end of June 2026, and this compared to $41.5 million at the same time last year. This chart shows our cash flow from operations over the last 5 years, both pre-interest and tax and post interest and tax in the gold bar. I just want to point out here that we did pay $27 million in tax during the year. There was $12 million that related to FY '25 being the final installment of the FY '25 tax. To explain the variance in our operating cash flows and why that decreased so much this year. Last year, we reported operating cash flow before interest and tax of $83 million. We invested more in buying olive oil during the year, both in Australia and in the U.S.A., which totaled just over $16 million. The temporary water price in Australia contributed to $6.2 million more in operating cash outflow. And from a bulk sales perspective, so we sell all our non-extra virgin low-value oil as bulk. Our pricing certainly softened during the year, and there are some timing differences there as well. And of course, our core transaction costs, which go through our operating cash flow of $5.7 million. From a balance sheet perspective, our net assets increased to $517 million. Just a reminder here that our trees and irrigation infrastructure are carried at written-down cost, not at external valuation. Our brands, Cobram Estate and Red Island, are also carried at initial cost, which was under $7 million. There is an apportionment to the California Olive Ranch and Lucini brands now on our balance sheet. The deferred tax asset of $40 million, that relates to the carryforward U.S. tax losses that will offset future tax gains in future periods. And the $66.8 million of carryforward tax liabilities. That relates to a historical asset write-up of property, plant and equipment for accounting basis -- for accounting and would only be payable if we sold the assets outside of the group. In other noncurrent liabilities is the warrant liability of $61.7 million. We're required to measure that at 30 June using the Monte Carlo simulation model, which takes into account, amongst other things, the share price at the time and the time value of those warrants. In those warrants, there's 30.8 million warrants. And the real value of the warrants is actually when you pay it out. We have to pay out the warrants when we repay the subordinated note. And the warrant payout is the Cobram Estate's share price at the time we pay out that warrant, calculated as the higher of the 30-day trailing volume weighted price and the 12-month volume weighted price. We then deduct the $3.20 share price, and the difference is multiplied by the warrant -- the number of warrants and paid out. So for example, if that price was $4.20 when the notes -- when the subordinated debt was paid out, if it was $4.20, we deduct the $3.20 share price, which gives you a $1 gain. That would be multiplied by the 30.8 million warrants, and the liability would be $30.8 million. Moving on -- sorry, and just another point to highlight here. So our net debt ratio has increased from 32.7% to 35.6%. Just a comment on debt. The Board is certainly comfortable with the debt levels, particularly with the level of tangible assets on our balance sheet and our assessment of forward earnings and cash flow. We will expect our free cash flow from the group to increase in the medium term. And as a result, those debt ratios are expected to come down. Tangible asset backing. So these charts show the tangible asset backing, where the purple bar is up to the light green at 30 June 2026 compared to 30 June 2025 against our net debt levels. This excludes any value relating to the brand and our lease assets. So, as we can see, $1.3 billion of real tangible asset backing. Accounting for the acquisition of COR. I'll take a little bit of time to talk through this. When we purchased California Olive Ranch, we required to consolidate their balance sheet. And we do that by taking their balance sheet at the end of March 2026 and then adjusting those balances to fair value. So the column on the left-hand side is the COR balance sheet on acquisition. And then, we make a number of adjustments. And the column on the right-hand side is the balance sheet that we adopt. The key movements that were assessed when we did this assessment of COR balance sheet. We wrote down the value of inventory by $22 million. So that's an assessment of net fair value of the olive oil. The other key items, the right-of-use assets. So, that relates to the leased olive groves. During due diligence, we recognized that these leases were onerous and certainly required us to turn them around, and certainly, we're expecting to in the medium term. But as a result of that assessment on acquisition, we wrote down the right of use of those leased assets by $34.9 million. And the property, plant and equipment increase of $15.7 million, that relates to an external valuation of our property, plant and equipment. The brands and customer contracts, so we had this externally done. So this was valued -- the valuation was placed on the brands, California Olive Ranch and Lucini, and also our customer contracts. So, that came in at $65.3 million. So net assets adopted of AUD 219.9 million. This compares to what we pay or the accounting consideration, which was cash, vendor notes of $64.9 million and the purchase price warrants, so the warrants issued to the sellers, less a small adjustment. So the total consideration paid is $245 million. The difference between that and the net assets is recognized as goodwill on our balance sheet, which is $25.2 million. Again, all this is in Australian dollars. Moving on to sales. We reported sales growth for the year. This chart shows the last 4 years of Australia and U.S. sales. And I'll talk more detail around the packaged goods sales, which makes up well over 95% of our sales. From an Australian perspective, so our sales grew only by 1.6%. Pleasingly for us, Cobram Estate grew by 2.1%. And this is really on the back of a more competitive trading environment, where we saw total supermarket sales across the category actually down by 2.6%. And from a total Australian sales perspective, we reported a small decrease from $172 million down to $170.6 million, and that includes our bulk sales. In the U.S.A., we reported 82% growth in packaged goods sales. All of this growth was driven by the acquisition of California Olive Ranch, where it contributed sales of $35.1 million from the California Olive Ranch brand and $6.7 million from the Lucini brand. Cobram Estate, if you exclude big box retailers where we had a big rotation in one of those retailers in 2025, Cobram Estate supermarket sales grew by 6.5% for the year. If you include that big box retailer, then our revenue actually declined by 16.2%. Again, pleasing results, given the category declined by 6.6% in dollar terms. If you include bulk sales, our U.S. business sales increased from $64.6 million up to $95 million. From a marketing perspective, we continue to invest significant amounts across multiple marketing channels and strategic partnerships. And really, a lot of our marketing continues to be on educating our customers around the health benefits and superior quality that we sell through our domestically produced olive oil in both Australia and in the U.S.A. So business update, looking ahead. The U.S.A., certainly the COR acquisition and the development we've been doing in the U.S.A. on our own grove development gives us a terrific platform to accelerate growth and earnings. We're seeing continued growth in oil supply through both our maturing groves and by turning around a large portion of the California Olive Ranch underperforming groves. We'll continue to drive sales. And of course, we have a much stronger retail footprint through the acquisition and a much better brand architecture to leverage on. And of course, this coming year, we'll have a full year of California Olive Ranch earnings and a full year of synergies. In Australia, we're expecting to continue to increase supply of olive oil as our groves mature. Leandro will talk more around that in his slides, but there's certainly a significant amount of growth still to come from maturing groves. We continue to invest heavily in marketing and selling our Australian oil in the domestic market. And again, this is really around education of the benefits and the health benefits of extra virgin olive oil that's been domestically produced. Cost control is a big focus and focusing on production efficiencies. And as we've said in the past, the Australian business has transitioned to a sustaining CapEx level, which is around $10 million to $15 million, and all our growth CapEx will be in the U.S.A. From an outlook perspective, so next year, FY '27, we expect EBITDA to be materially higher, driven by a couple of factors. Firstly, the Australian crop, which will be an on-year, and also the full year of earnings from California Olive Ranch and a full year of realizing the synergies of combining our 2 U.S. businesses. We also expect operating cash flow to be materially higher. In the short term, we're seeing trading conditions to remain challenging, mainly due to continued discounting from our import competitors and, of course, cost of living pressures. Debt levels, as I said before, we expect our debt percentage to come down in the medium time -- in the medium term as the business generates more cash flow -- more free cash flow. And really excited by the foundations that we've established in 2 key markets, and Leandro will talk more around that in his slides. Dividend, we announced the dividend this morning. We're keeping the dividend flat at $0.045 per share. It still will be 100% or fully franked. Full details of the dividend are on this slide and in the announcement. We will be offering a dividend reinvestment plan again, and the payment date will be the 6th of November 2026. Before I hand to Leandro, I'd just like to thank all of our employees in both Australia and in the U.S.A. It's been a huge year for the business, and there's been some extraordinary efforts from a number of individuals, which I won't name here, but you know who you are. So, thank you. You are very much appreciated. And Leandro, thank you to you and your wife [indiscernible] for moving to California. Certainly one thing buying business, but integrating the business is another thing. So we're very grateful that you're over there. You've been there nearly the best part of the year. So, on behalf of the company and the Board, thank you for making that move.

Hello, Sam, thank you. And thank you to everyone joining us today. I think we can move into -- straight to the next slide that in very quick terms, this slide summarizes the scale of the platform that Sam was talking about and that we now have. In Australia, we remain the #1 olive oil producer and marketer with approximately 7,000 hectares of owned groves and 1,000 hectares of third-party groves and a mature production base that continues to grow. In the U.S., following the acquisition of California Olive Ranch, we are now also the #1 producer and marketer of U.S.A.-grown olive oil. In an almost identical position than in Australia, the production of our own groves, combined with third-party growers, in the U.S. is approximately 2/3, 66%, 67% of the total amount of oil produced in the U.S. What I think is most exciting is that this scale, both in Australia and the U.S., is not static. In both countries, a significant proportion of our future growth is already embedded in the business through young groves maturing, new plantings coming into production, and as Sam touched on, the application of our operating systems across a broader asset base. Move to the next one where we will be turning to Australia first. The FY '26 harvest was successfully completed on time in early July with a total production of 11.1 million liters of oil. FY '26 was an expected lower-yielding off-year. But importantly for us, the production was still around 10% higher than the previous comparable off-year harvest in FY '24. That is a good operational result, particularly when we consider that the oil accumulation during the past year was about 14% below long-term average due to seasonal conditions. In other words, the trees delivered a very strong volume of fruit, but the amount of oil within that fruit was lower than normal. So, that distinction for us is actually very important because it shows that the underlying productive capacity of the groves remained really sound. Looking ahead, FY '27, as Sam said, is expected to be an on-year for most of our Australian groves. I've been at the groves for the past couple of days, and the trees are currently in really good shape. And winter conditions since harvest has certainly been encouraging. Rainfall has helped to replenish soil moisture. And importantly, we have not experienced any damaging frost events to date. These are all positive conditions for flower differentiation and give us the confidence, subject of course to normal seasonal risk, that FY '27 Australian crop should be materially higher than FY '26 and above the previous on-year harvest in FY '25. We can move to the next slide. Very briefly say that despite the very volatile cost environment that we're all aware of, disciplined management kept FY '26 operating costs very much under control, excluding largely water, and broadly consistent with the prior year. Obviously, we cannot control certain input prices like fertilizer and fuel, but we can control efficiency. And that is why we continue to develop and invest in adopting technology, including the first new generation of faster harvesters that we successfully tested this year in Australia, and for example, the rolling of automatic guided vehicles in different areas of the business, just to name a few examples. In terms of water, in FY '26, like we normally do, nearly all Australian grove water was sourced from the temporary market at a weighted average price of $349 per megaliter. Rainfall timing helped to reduce total water use for the year. And pleasingly, recent rains have lifted Southern Murray Darling Basin storage levels above the levels we saw this time last year. Move to the next slide, where -- well, in our modern medium density production system, olive trees typically reach full productive maturity at around 8 years of age. Today, approximately 75% of our Australian groves are mature, while the remaining 25% are either immature or not yet productive. That means that they are less than 3 years old. Based on the current plantings, as you can see in the -- from the graphs on this slide, our mature grove area in Australia is expected to increase from around 5,250 hectares to 7,000 hectares over the next 6 years. That represents a 33% natural uplift in mature area without needing to plant a single additional hectare. The implication is, it's quite powerful because as these trees mature, the average Australian production, including 1,000 hectares of third-party growers that we have long-term signed contracts, is expected to rise to around 20 million, 21 million liters per annum over a 2-year cycle average. And for an agricultural business, this is very attractive growth because it's already planted, it's already managed and is expected just to flow through as the trees reach full potential. Moving now to the U.S. As obviously Sam has touched on, we completed the acquisition of California Olive Ranch at the end of March. It was certainly a transformational transaction for us. It added leading household brands, approximately 1,675 hectares of owned and leased groves, around 2,500 hectares of contracted third-party groves, and a large-scale mill, bottling and warehouse in Artois. Just probably as importantly, I would say, it brought together 2 organizations with complementary strengths and a shared commitment to high-quality extra virgin olive oil to help California successfully compete against lower-quality imported oil. I think that I'm stating the obvious here, but integrations of this size are never simple. And that's why we should acknowledge the effort required from both teams to get us there. We are very pleased with the progress so far. The U.S.A. operations are now fully consolidated. And most of the initial annualized synergies of approximately USD 12 million have been already implemented. Obviously, as Sam touched on, because the acquisition was done late in the FY '26, the more meaningful impact will come through in FY '27 and beyond. One more thing, importantly, past the initial costs and operating synergies that we touched on before, we see a larger opportunity to lift yields, improve production efficiency and reduce cost per liter across the California Olive Ranch grove base. This is where our Oliv.iQ system is highly relevant. The aim is simple, more high-quality oil from each acre or each hectare produced at a lower cost and with better sustainability outcomes. I think, as I said before, this acquisition, it is not only company changing, but it is also industry shaping. The Board of the company visited California recently and saw firsthand the progress being made. And we all remain highly encouraged by the integration, the quality of the people, the scale of the opportunity and the long-term prospects for a stronger Californian olive oil industry. I think that I'm right to say that few food categories offer this combination of market size, consumer relevance, domestic production potential and quality differentiation. So our role is probably almost simply, just to put it in those terms, to help unlock that potential in a disciplined way from now on. The next slide touches a little bit on our U.S.A. brand strategy that can be expressed quite simply saying that we want to make fresh the new premium. Obviously, for many of our Australian shareholders, this is a new -- this is not a new thing. We think that -- we honestly believe that for consumers, freshness is easy to understand. Fresher products generally taste better. They retain more of the natural character, and they are more closely connected to origin. So our ambition is to position California extra virgin olive oil as the freshest, most trusted and most desirable olive oil in the United States. We are very conscious that, that requires more than just marketing. It requires local production and the availability of it, consistent quality, a lot of consumer education, as well as credible industry standard and a clear understanding of why, in this particular case, really origin matters. In the case of California, the Olive Oil Commission of California already provides a very strong quality assurance framework. And we believe that industry bodies like the OOCC will play an important role in building that -- or helping us to build that consumer trust and lifting the overall category. Our commitment, and we've been very open about this, to transition all California Olive Ranch extra virgin olive oil products back to 100% Californian-grown is the clearest expression of that strategy. It links local production with freshness, freshness with quality and quality with taste, health, sustainability and overall trust. I think that is a very powerful message for consumers, for retailers, for our growers, our large base of growers that we have in California, and for the industry as a whole. Probably the last thing that I want to say on this slide here on the brands. Sam mentioned that new portfolio architecture, and that architecture for us is very, very important. In very simple terms, California Olive Ranch will be our flagship U.S.A. brand, representing the best of California extra virgin olive oil and serving as the main platform for driving awareness, trust and category leadership, just like Cobram Estate does here in Australia. In the U.S., Cobram Estate will play a complementary role by helping us set a high standard for quality and helping through pricing to recruit mainstream shoppers into premium California extra virgin olive oil. Lucini, in the meantime, will continue to serve premium imported oil consumers who value provenance, craftmanship and also Italian heritage. I think these brands are designed to play distinct roles across the different consumer occasions, price points and origin, and that is a major advantage that we have now. As you can see there, the detail in this slide, we know through research that only a very small proportion of shoppers currently buy both California Olive Ranch and Cobram Estate, which tells us that there is a limited overlap and quite a meaningful opportunity to grow that total portfolio. I think that together, these brands give us a broader platform to educate consumers, to expand our household penetration where there's a massive opportunity in the U.S.A. and to trade shoppers us up from unhealthy seed oils or commodity olive oil into higher-quality extra virgin olive oil. I think also that it's a sizable commercial opportunity because this combined portfolio already has significant retail presence. And I think that the next stage for us is about using that established platform more effectively with clear brand roles now that we're all together, stronger investment in education, better shelf execution and a more compelling link between Californian-grown freshness and quality. Move to the next slide. I think from the operational footprint perspective, CBO now has around 3,000 hectares of owned and leased groves in California that we manage. We also have key operating hubs in Woodland, Artois and Chico. They're all in Central and Northern California, supporting a wide range of activities from milling to bottling, storage, warehousing, finance, HR and supply chain functions. The map shows the geographic spread of our managed grove base and some of those production assets in Northern California. The 2 main production hubs, which are the purple and the light blue dots, surrounded by green dots, provide a meaningful horticultural and water source diversification, but remaining still close enough -- we're talking about 130, 140 kilometers -- for efficient coordination across people, equipment, milling and logistics, not that dissimilar than what we have here in Australia between Boort and Boundary Bend. Move to the next slide. Well, I think that this slide highlights the scale and the age profile of our Californian grove portfolio. The COR acquisition significantly increased the mature grove area, as we can see in these graphs. But importantly, I think it's worth understanding that these groves have not yet reached the full productive potential under our management system. So although they are mature, they still have not fully realized the crop-yielding potential. At the same time, 37% of our Californian groves are still immature or not yet productive. And this figure does not include over 800 hectares that are going to be planted in the coming months that you can see in the graph on the right as the bar [ in year 0 ]. So obviously, that young age profile is a major source of organic growth coming forward. I think the opportunity is similar to what we have seen in Australia over time. When young groves mature, the production rises naturally. And when yields improve and fixed costs are spread over more liters, the cost per liter falls. And this is why grove maturity, improving yields and the operational discipline are actually so critical for the value of the company. We move to the next one. Operationally, the U.S.A. business continued to perform effectively, while at the same time, progressing the integration of the merged operations and several important capital projects that I'm going to touch on at the same time. That is obviously a demanding combination. And because of that, I also want to acknowledge the professionalism and the commitment of our teams across all sites in the U.S.A. and also the support from many of our Australian staff over this challenging period. In terms of outlook, the Californian crop is developing well. The flowering took place in April with good spring and early summer conditions supporting good flowering induction, fruit set and the early development of the fruit. Obviously, as with any agricultural crop, final yields will still remain subject to seasonal conditions. But at this stage, the outlook is encouraging to us. We expect the production from our own Californian groves to increase significantly, mainly as the young orchards mature. And many of our third-party growers are also expecting a moderately better crop than in FY '26. In terms of water availability, the situation also remains in good shape with our groves drawing from both surface irrigation districts and groundwater systems, and another favorable rainfall year in Northern California supporting full water allocation through FY '26 and what is about to start in FY '27. Moving to the next one. Well, just showing some photos. During the FY '26, we planted 340 hectares of new groves in California. These plantings form part of the early stages of a high-quality development in the Yellow County, close to our existing Woodland operations and other groves that we're already managing. The images on this slide show some of those young trees. But I would say that for us, the photos actually represent more than just new groves. They are the future supply, the future brand growth and the continued expansion of the Californian extra virgin olive oil supply. We move to the next one. Well, touching on the capital projects to come. Looking forward, we plan to develop 840 hectares in FY '27. They're largely going to be planted over the next 3 or 4 months, and a further 420 hectares in FY '28. That would take our total Californian owned and leased grove area to around 4,260 hectares by the end of FY '28. These developments, we touched on this before but worth repeating it, are being funded through free cash flow, debt and the proceeds from the 2025 capital raising, and obviously, an important part of building the supply that we need for our U.S.A. brand strategy. I think that it's probably also worth saying that given the strong level of interest that we are receiving from prospective third-party growers willing to enter into long-term supply agreements with us, we do not currently have plans for further own grove developments beyond those that are already outlined on this slide and committed to happen. At full maturity, those hectares of Californian groves that I touched on are expected to produce approximately a bit over 11 million liters of olive oil on a 2-year average basis, excluding third-party grower volumes. When we add our third-party grower base, the total future productive footprint in the U.S. becomes very comparable in scale to Australia, and we expect that to reach or exceed 20 million liters, but with a more balanced mix between own production and partner growers. So in practical terms, this is a long-term ag investment with very clear strategic logic. We plan high-quality groves. We manage them exceptionally well. We process the fruit quickly and carefully and then sell it through premium brands. This is the same -- exactly the same tree-to-table model that has underpinned our success in Australia, just now being scaled in the United States. The next slide, also some photos showing the preparation of the FY '27 development sites. I think it's important to understand that in permanent ag, much of the value is created before the first tree goes in the ground, the land selection, the irrigation design, the soil preparation, all of that. And these images show that work progressing well. Then in this slide, we've got to see the Woodland site expansion, which has been another part of the U.S. growth platform. These investments are not just about adding space. Obviously, they help improve our ability to mill fruit, to store olive oil, to test it and then to distribute high-quality packaged goods efficiently. They also help us create a stronger working environment for the people that we have and support that technical capability required for a larger and more integrated U.S. business. And finally, on the last slide, I just want to touch on sustainability. Since launching our 2030 sustainability strategy, we have continued to make meaningful progress across the business. In FY '26, in particular, highlights included progress on safety, really, really good numbers on safety. So great credit to the team, the specific team on safety and the broader employee base that have contributed to that, waste management and some sustainability-linked loan targets. For the third consecutive year, we also delivered better than neutral greenhouse gas emission positions when considering Scope 1, 2 and 3 emissions across the business. We're obviously quite proud of the progress made, but we also recognize that this is and will be an ongoing journey. And for those that are interested in more detail, our FY '26 voluntary sustainability report is included in the 2026 annual report, and we will welcome any feedback or engagement from shareholders, customers and staff that you may have. I think that in summary, we can say -- or I can repeat some of the words that Sam mentioned before. It was a year of significant execution and transformation for the business. We successfully managed an Australian off-year in a very competitive retail environment. We completed and began integrating a major U.S.A. acquisition. We advanced quite important capital projects and continue to invest in future supply, strengthening the foundations of, no doubt, the world's leading vertically integrated premium olive oil company. I think that despite the potential short-term trade headwinds that may exist, the opportunity ahead is substantial. And we are very conscious that it will be realized through doing what we know how to do, which is through operational excellence, strong brands, quality without compromise, and deep commitment to our people, growers, customers and shareholders. So thank you, and I will now hand back to Sam for questions.

Fantastic. Thank you very much, Leandro. And we've got some time for questions. [Operator Instructions] So we've got Ian Munro has got a question from Ord.

Just first one relates to the purchase price adjustment that's still ongoing. I'm just wondering, are you able to provide any commentary with respect to how long we're expecting the process to play out? Is this a kind of 6-month process, anything of that nature?

Yes. Thanks, Ian. I think you're referring to the USD 31.5 million adjustment in our favor that we're disputing with the sellers relating to the California Olive Ranch transaction. Firstly, this adjustment relates to excess olive oil on hand at acquisition, and there's a mechanism under the share purchase agreement that we can claim that adjustment. The sellers are disputing it. So it is still going through a confidential legal process. Unfortunately, I can't give you much guidance on timing. But of course, we'll update shareholders if we have any material information.

Yes. Very good. Yes, I understand that's the case. Just with respect to the inventory adjustment on -- within the acquisition accounting and then also your points around the onerous kind of lease adjustments, are you able to maybe just give us a sense whether there's any kind of earnings impact associated with those? And has much of that been captured in the first 3 months of ownership relative to what to expect during FY '27?

Yes. I'll just -- in terms of the first point, on the write-down of the olive oil, so yes, we knew during due diligence that there'd be some expensive Californian olive oil on the balance sheet. So that's really writing it down to what we deem as fair value, so similar to what we do with our Cobram oil. There is some impact on our P&L for the first 3 months and going into next year, but it's really more normalizing the cost of sales more than anything. In terms of the write-down of the leased assets, so the lease liability, we didn't write down at all, just the asset. So the earnings impact there is really decreased depreciation going forward.

I would say, I would add to that, that in the case of the groves and the position of the lease and the need for the groves to improve, nothing was a surprise to us. It was all identified and it was expected from the due diligence process. It's part of where we can see that we can add value to it, or what we call the medium-term synergies or the realization of those medium-term synergies. But short term, that's the situation as it is.

Yes, very good. And just combining that comment on the synergies with the actual earnings contribution in the first 3 months of ownership being a little bit better than we expected, how are you kind of seeing, I guess, that run rate into FY '27? Is there any -- it feels like you've kind of gotten all of the kind of due diligence items fully transparent now. How are you kind of feeling about kind of peak P&L into the next financial year?

Yes. I think of the USD 12 million, the majority has been actually realized, but obviously, from a 3-month perspective, not annualized. The one call-out there is the bottling line integration, which will happen probably halfway through the year as the new [ bottling lines ] on the water. But by the end of FY '27, we'll have all that fully realized, and then we'll get the full annualized savings in FY '28, but a big portion will come through in '27.

I would say, remember, Ian, that taking -- with the transaction going through at the end of March, it took us, let's say, a good part of 1.5 months to complete the implementation of the synergies. So there was actually not much room left to get the benefit of that seen through, and we are going to see definitely a lot more of that through FY '27 and after that.

And just on that U.S. trajectory, in terms of Californian extra virgin olive oil sort of Cobram, COR together, as you've noted, 70% of branded sales now. How are you kind of seeing that engagement from the U.S. supermarkets this early in the transaction? Has that been sort of better than expected relative to when you acquired it?

Yes. I think it's fair to say that retailers customers really like the fact that we are returning it back to 100% California, and of course, as does the industry and growers. Certainly, from a retail perspective, it takes time. And some of these retailers, you're meeting once a year. So it's not going to happen immediately, but certainly, the feedback from the trade has been incredibly positive.

It was certainly more of a case for us clearly defining the portfolio structure. And I agree with Sam, the feedback from the industry in general has been very, very positive. And once we have the structure, it gets about the time to transfer that structure into the negotiation with the retailers, which normally and typically in the U.S., requires a bit longer cycles than in Australia.

Just hopefully not outstaying my welcome here. Just one more question, please, on the Australian business. You've called out like a challenging kind of environment with cost of living pressures, but still I know delivered growth in FY '26 in terms of sales. Are you kind of indicating that conditions are getting worse? Or is it kind of more of the same? And what levers have you got on sort of price and volume over the next 12 months to try and offset some of that industry pressure?

Yes. I think like any year, we plan to sell out of this year's crop by the time we get to next year, and that's no different here. We are sort of seeing continued deep promotions from our import competitors. So that's more likely to just continue rather than get worse. But of course, on top of that, there's soft consumer spending as well. So from a promotional perspective, though, our competitors that promote, probably no different to where it was pre-COVID levels. We certainly had some good tailwinds in the last 4 years. So nothing unusual, but certainly makes us work for ourselves. We've got Mark Topy. We can't hear you, Mark. It might be an unmute problem.

It seems to be unmuted, but we cannot hear Mark. No, still not -- just looking at the site, seems to be unmuted, but we cannot...

Can you hear me now?

Yes.

I'm sorry. Yes, there was another bit I had to do there. Apologies for that. Just to pick up on that domestic point and in terms of that European competition, particularly. I suppose, with the hot summer in Europe now, I'm just wondering, do you have any feedback as to how the volume coming from Europe might be impacted by that? Or do you see any mitigation on that, Sam, going forward in terms of the volume that might come into Australia?

I think it just -- it would be -- if I can summarize, it would be probably more of the same. For the past 2 years, the production overall from the Mediterranean has been a bit above average, not record but above average. And the rainfall conditions and everything that they had during winter time was allowing and driving another above-average crop. So good expectation. What naturally happens, as you've got really dry hot summers, as you pointed out, some of those expectations get downgraded, but usually not catastrophically. It's just probably all taking a little bit out of it to make it not a record crop. But I think all things indicate there will be still another strong crop, which pleasingly is also matched by pretty strong demand for the product globally, too.

Right. Okay. And just a reference to the big box retailer, does that imply a low-margin contract that you had with this big box retailer? Can you maybe comment or expand a little bit more as to the nature of that business?

Not necessarily lower margin. I think that big box retailers generally operate at a lower margin themselves. So we price it. So we're effectively happy with our return. But with big box retailers, likes of Costco and Sam's Club, BJ's, et cetera, some of their sales, and this is what -- this is referring to rotations where they'll bring you in for 1 or 2 months into all regions or some regions within the U.S.A. So you can get lumpy sales. So that's really why we've called that out, very different to our core supermarket range.

And then, across the brands between Cobram and [ Red Island ], just wondering, is there scope to, I guess, combat some of this sort of consumer pressure? Or how do you see that -- the ability to position your portfolio?

Yes. I think that's a good point between Cobram and Red Island. We've certainly been -- we have been discounting more in Red Island, and we have the ability to do that. Cobram sales promotional discounting levels returned to more normal levels. So yes, we have the ability to do that. But at the end of the day, we have a certain amount of oil to sell as well. So we -- I think we had something like 2 weeks' stock on hand at 30 June this year. So we're always trying to balance not overselling at the same time for a less-than-satisfactory commercial return.

Right. Okay. And then, just lastly, domestically, the sort of talk about super El Nino and sort of looks unclear at the moment with the sort of rain that we've had, but some are saying it could still be relatively wet over the period. Just wondering in terms of water purchasing, how you're thinking about that? As you note, water prices have come off. Do you sort of start to -- is the scope to buy some water now? Or how are you thinking about the season going forward, given that El Nino sort of backdrop?

In general terms, we've given up about trying to be smarter on the market, and we just continue to buy water as we need it and ended up accepting to pay whatever has been the weighted average for the year because with the new expectations that we say, hey, here we are coming to a pretty dry period, and we've got one of the best probably late winters over the last few years with rainfall. So just trying to predict weather and trying to predict pricing, it's -- we made the view a long time ago that it's better not to try to play that and just continue to buy as we need it, and we will maintain that position.

Right. Okay. And then, Leandro, maybe just lastly on the U.S., you've talked about the yield enhancement potential with the Cobram sort of process there. Can you maybe expand on is that like -- do you see that as a 10% or 20% increase in yield over the next couple of years? Can you maybe expand or give us a bit more insights into that?

Yes. If we compare our average yields of our mature groves in Australia and some of the very early mature yields that we're getting from our oldest groves in the U.S. in comparison with the current yields of the core asset that we're looking at improving, our yields are more than double.

Right. So, yes, some significant upside then even if you -- yes.

I mean, it's depending on the asset and the condition and everything, you may not be able to fully realize that difference, but certainly shows what the potential is. It's quite significant.

And any thoughts about time frame? Is that like a 2- to 3-year project? Or how would you see that?

Yes. Normally, with olives, because of the cycle that they have, you're looking at a 2- to 3-year cycle to really get at least the bulk of it. And then, there would be a bit of an ongoing thing. But 2 to 3 years, you normally get the big jump that you're expecting.

We'll go to [ Paul ] next, who has been on there for a while with his hand up.

Can you hear me okay?

Yes.

Yes.

Brilliant. Awesome. I just got a few follow-ups from some previous questions that were asked. Maybe just one on the water strategy. So obviously, you buy on the market temporary sort of water cost there. Is there any consideration around maybe buying permanent water rights at all to try and hedge against future risks of water costs going up or water prices going up?