Livestock Improvement Corporation Limited (LIC.NZ) Earnings Call Transcript & Summary

[Foreign Language] Greetings, everybody. Firstly, sympathies to the Murray King [indiscernible] May he rest. Secondly, acknowledgment to the Murray Queen, [indiscernible] of this area, we acknowledge you all. Greetings to everybody. Good afternoon. Welcome to LIC's General Meeting. I'm Corrigan Sowman, Chair of LIC. Thank you for attending today's meeting. I'd like to acknowledge that this is a busy time for our farmers, both this time of the year and also this time of the day. So thank you for taking the time to be here with us. I'll start off firstly with some housekeeping. In the unlikely event of an emergency, you will be directed to the assembly point in the car park, which is directly behind me. In terms of bathrooms, they're located out through these doors that you came in and down to your right. Some of you may have entered the LIC today through a new hub. The hub is named [indiscernible]. This was a name gifted to LIC by Nate Hauer. It means to improve or to do better for all and support. And all terms of which are fitting for both the essence and the purpose of LIC and the passion for continuing to drive improvements for our farmer shareholders. The opening of this entrance area and space is a testament to LIC's commitment to growth and innovation and it's about providing a great facility that acknowledges the land that we are on, our long history, delivering world-leading innovations to the dairy sector. And I think particularly importantly for me, it's a place where we can all meet together. Before we start proceedings, I just have a few more little housekeeping matters to cover. If you like me and you're carrying one of these in your pocket, could you just please make sure it's on do not disturb or silent. We've designed the procedures for today's meeting so that those online have the same opportunity to participate as those in the room with us and I understand that these meeting formats can cause some complications with voting and asking of questions. So before we officially begin the meeting, I'd just like to cover a few points regarding the use of the online platform. So in terms of voting, there are six resolutions to be considered today, and a poll will be held on each one of those. To vote, you need your shareholder number, and that's been provided to you in various numbers of e-mails from MUFG corporate markets, so you can search those for that number. You can vote using the online platform, and you'll find that if you please click on get a voting card button, you can enter your shareholder number there. Voting remains absolutely confidential. No one on the call can see your vote. Also in terms of questions today, if you would like to ask questions using that online platform, please click on the box beside the voting one, which is ask a question button and I probably got there on the screen. And you also need to enter your shareholder number for the question. We may take a few minutes to collate and review those before general business. And it's worth noting that if your questions will certainly only be visible to myself and our team who are moderating them. For those of us joining online, if you've got any issues at this point with asking questions or voting. Can you please call the phone number that's on your screen now, which is a help number 0800 200 220. If anyone has any items of general business or questions a little bit more technical nature, I'd really ask that those were placed into that cushion box earlier and that will give us time to get those in front of the most appropriate person to answer those. So in terms of running an efficient meeting today, I'd just ask that we could take one question or one issue at a time in terms of working through those general business. Shareholders should keep discussions, particularly to applicable parts of the meeting, and then we'll have the general business opportunity for a more wide-ranging discussion. And speakers should also keep to the motion being discussed in any relevant discussion around that motion should please be avoided. If you are in the room, and you're asking questions, can you please raise your hand for me. We'll have a microphone that will take to you. I would like it if you could state your name and direct your question to me, and that will really help our online audience to hear as well. For anyone joining online that has any items of general business or questions they would like to ask just a reminder to use that "Ask the Question" button as we go through the meeting, so we can collect those for the end. So the notice of meeting has been circulated to all shareholders, and I'll take that as read. And with Maurice, I think we've got a quorum present today. So I will now declare the meeting open. Thank you. So firstly, I'd like to extend a really warm welcome to LIC's Annual Meeting to thank our shareholders for the time that they've taken out of their day to be with us. I'd like to welcome my fellow Board members who are largely sitting in the front row here. Matt Ross, Victoria Trayner, Sophie Haslem, Ben Dickie, Alison Watters, Duncan Coull, Tim Gibson and Candace Kinser. I'd like to welcome Mark Hooper, Chair of our Shareholder Reference Group. Welcome, Mark. Ben Smith, Deputy Chair and members of the Shareholders' Reference Group: Aleisha Broomfield, Michelle Oldham-Smith, Johan van Ras, Andrew Wiffen, Jared Clarke, and Daniel Joho. Have I missed anyone who's left guys, I think there's everyone here. Also, I welcome to Ian Brown, Chair of Honoraria Committee and member Shirley Trumper. I'd like to welcome Trevor Newland. I saw Trevor earlier. Welcome Trevor, from our external auditors, KPMG; and to Andrew Matthews. Who is Andrew? Welcome Andrew from Simpson Grierson and Louis. Also joining us is our LIC Chief Executive, David Chin; our Chief Financial Officer, Brent Mealings; a number of the senior leadership team today and other LIC staff, welcome. I'd like to acknowledge departing Board members today also. Firstly, I'll start with Matt. He'll be hiding there, out of the lime light, I'm sure. Matt Ross. Matt Ross was elected to the Board in June 2017 and he's had a long association with the LIC Cooperative and experience in many leadership roles. Matt's been a highly valued member of the LIC Board who bought his knowledge and practice core experience in farming and excellence to our Board table. I'd like to also acknowledge Dr. Alison Watters. Alison was elected to the Board in June 2014 and has significant experience in directorship and dairy industry innovation. Alison's passion for the New Zealand Dairy sector and focus on its success has been extremely beneficial for the LIC Board. And Candace Kinser. Candace has held a number of senior roles in biotech and technology sector, and that experience has been valuable to LIC. Candace has completed 9 years as an independent director on our Board and her contribution to LIC's decision-making and the technical advisory group, that she chaired, especially has been particularly beneficial in setting the company in good stead for the future. I wish you all well and your future endeavors, and thank you massively for the contributions that you've bought to LIC. I'd also like to acknowledge departing Shareholder Reference Group members. Mark Benns, who I don't think is with us today; and Jared Clarke, who's sitting there as well. Thanks, Jared. Thank you for your time, commitment and challenge to our co-operative. Moving on to apologies. I've received the following apologies today. Phil Lowe, who's our Upper South Island Shareholder Reference Group member. Shaun Baxter, our Lower North Shareholder Reference Group member. Gordon Glentworth, member on Honoraria Committee; Scott Montgomerie, departing member of the Honoraria Committee; Jim van der Poel. And is there any other apologies in the room tonight? No. Thank you very much. So I'll move these apologies. Thanks, Duncan. So in terms of the agenda for today's meeting, everybody. I'll just run through these briefly. So I'd like to share my views with you about the direction of the Co-operative from the farmer's perspective, for a start. I'm going to pass on to our Chief Executive, David Chin, and following that, our Chief Financial Officer, Brent Mealings, will present the year-end review, before David in Texas through a look at the Co-operatives going forward. From there, Honoraria Committee chair, Ian Brown will present Honoraria report. We'll then move to voting resolutions. And finally, we'll finish with general business where there's going to be an opportunity for our questions and answers. I don't know where Steve, found that photo of me from a lot of years ago, but thanks, Steve. That's awesome. So in terms of an address from me, I guess I wanted to share a perspective of -- from my view as Chair of the Co-operative as a farmer, who's been in the role for the last 12 months. On every dairy farmer across New Zealand, the herd is at the core of everything we do. And as farmers, we provide what they need to grow to stay healthy and be safe. And every decision we make impacts their well-being, both now and in the future. So when we discuss the economic value of our farms, it's the herd that enables that value to be realized and keeping them helping, thriving is key to our livelihood. LIC mirrors this principle. LIC exists to help us safeguard and develop our herds by harnessing our shared experience and expertise. It was founded on the understanding that herds are not only the backbone of dairy farming, but they're essential to our nation. They nourish our people, drive our exports and they play a crucial role in our economy. LIC works to make herds better, both now and in the future. In the context of the herd, whether on our individual farms or as a commercial enterprise as a constant that outlets does. It becomes our legacy. It represents the decisions of past and present farmers and embodies our hopes for future generations. Every newborn calf is not just a result of our choices, but also of those who came before us. And the herd is more than an economic asset, it's a bridge between the past and the future. So when I think of my herd, 750 herd down in Golden Bay here, I see it as part of something bigger. It's not just mine, it belong to my parents and grand parents. And one day, I hope it will belong to my children and their children. And before us, it was someone else's herd and after it will be again. And so, it's also a small pace of New Zealand's herd contributing to that larger hold. And this cycle has always existed and it will continue. We care for and we pass on our herds. And in doing so, we invest in each other and in future generations. LIC exists to help us achieve that balance, strengthening one herd, our dairy cows, directly strengthens the other, our people. And both are equally essential to New Zealand dairy farming. And in the coming year, LIC will more openly acknowledge and embrace this dual connection, recognizing that the success of one depends on the well-being of the other. Our challenges and changes are constant just as they were in the past, they will be in the future. But by working together for both our herds and each other, we can overcome them. Kiwi Dairy farmers have always understood that power of cooperation. We've always known that working as a collective, achieves more than going it alone. We've taken a holistic view of our system and acting today to safeguard what we're building for the future. So as we look ahead, our focus may evolve, but our purpose will remain clear to protect and ensure the success of all of our herds. Every decision we make those beyond this year's milk yield or gross profit, we're actually considering the long-term health and productivity of our herds and how they contribute to New Zealand's national herd. Our work on farm doesn't just support our families and communities, but it actually strengthens the wider dairy sector in New Zealand's economy. So like every dairy farmer, LIC is responsible not just for today's herd, but for those that will sustain future generations and our decisions to shape the future of this sector, of our country and also of our global contribution. Every calf born and every family caring for it, they represent growth, success and continuity. And that's a testament to the hard work of past and present farmers. Together, we'll ensure that herd remains a source of strength and pride for New Zealand, because together, we are the herd. Now I'll hand over to our Chief Executive, David Chin, who will share how we've been fulfilling this role of supporting your herds and families over this past year. David?

Thank you, Corrigan, and welcome, everyone, to our general meeting. My name is David Chin, Chief Executive of LIC. I'm pleased to present the business highlights for the '23/'24 financial year. Creating value for our farmers is at the heart of everything we do. Our strategy focuses on building a strong, sustainable cooperative, leading the world in pasture-based genetics and herd improvement and delivering real value every year, this year in 5 years' time and for another 100 years. We create value by focusing on four key pillars: our farmers, the animal, data and digital, and innovation. How the strategy delivers for our farmers is captured by our three commitments. These commitments are to be operationally excellent to deliver faster genetic improvement and to ensure our software is both reliable and performs to your expectations. Now before I get into how we've delivered and performed on these commitments, I'd like to acknowledge that we didn't deliver up -- didn't live up to being operationally excellent last year with our semen quality batch issue. Following a thorough investigation, we've been working hard to implement the improvements across the semen processing business. We've conducted an independent review of our processes. We are implementing the recommendations and have moved the critical quality control process to 5 AM in the morning, so we can catch any issues before the cows are inseminated. We have more backup in the field. And winter mating season went very smoothly without a hitch, and we are confident we'll have a successful season this spring. On another note, the performance of our sexed semen product has also been incredibly good. Last spring, the non-return rate for fresh sexed semen was only 3% below conventional. And over winter mating the non-return rate was 1.9% below the performance of conventional semen for stores inseminated in the same herd on the same day. This is really pleasing as we see sexed semen playing a big role in accelerating genetic gain and allowing farms to get more replacements from the best cows. To be operationally excellent, we aim for all greens on a number of metrics. We had an ambitious target for herd testing to reduce the number of complaints on shed setups by 50%. We know herd testing can be a stressful time on farm, and we want to make sure the information that you get from herd testing, we know it's incredibly valuable. And we want to reduce the stress for you by getting everything from our end just right. It all helps. By the end of the year, we had reduced issues related to shed setups by 38%, which is really pleasing. We've made a big difference. We'll continue to focus on improving this further. We also want to make sure that the turnaround time for all of our testing, milk pregnancy testing, Johne's disease, et cetera, has all happening within 10 working days. We didn't quite meet those targets this year, but we will continue to strive to improve on them. Continuing on with the operational excellence of over 850 AB technicians that we have operating every single year all around the country, we had one whose performance was below our expectations. A near low group is where a technician's non-return rate performance is 10% below the supervisor average and the low group is we're at 15% below the supervisor average. I can report that we had one near low group and no low groups. Our AB technicians are doing an absolutely fantastic job. And it's pleasing to see that we're giving a good number of apprentice AB techs qualifying each season. This year, we had 105 past training this year, which ensures we have a good pipeline of AB technicians for the future. For GeneMark, we have a goal of getting results back to farmers within 4 weeks. We achieved this 99% of the time. We know this importantly, these results, how important these results are for you and giving them to you on timely fashion is our aim. I'm proud to say that we have delivered on all of our targets when it comes to genetic gain for our, Sire Proving Scheme, for our Premier Sires bull teams and for all of our farmers on farm. I'll talk more about genetic gain, how we are ramping this up later on in this presentation. And lastly, MINDA is performing really, really well. We continue to focus on ensuring that MINDA is available at key times on farm. And this will be more important going forward as you have more third-party providers connecting in to MINDA and as we increase the data and operability. Except for the same quality issue, it's been a really, really good year operationally for LIC, and I would like to thank all of our frontline staff and herd testing on the farms, and Animal Health, the GeneMark labs, our AB Techs, and all the staff in our semen processing labs in [indiscernible] for all the hard work and dedication. I'll now pass over to Brent Mealings, our CFO, who will run through the financials for last year. Brent?

Thank you, David. Thank you, Corrigan. Good afternoon, everybody. Despite some challenging additions, I'm pleased to present a positive result for our farmer shareholders. Delivering value for our farmers is at the center of everything we do. This financial year, we paid a special dividend, returning $18.5 million to our shareholders as a result of the National Milk Records divestment. We were able to pass through the total proceeds of their divestment directly to our pharma shareholders, including a $9 million gain on sale and the carrying value of the investment of a similar amount, which was effectively paid out of retained earnings. This was paid at a helpful time of year just after Christmas. During the year, we focused on delivering efficient and effective food improvement products and services. And importantly, we focus on the right R&D investment to help our farmers herds profitability and sustainability into the future. This year, we reported net profit after tax or NPAT of $7.7 million. Total dividends of $26.8 million, including the special dividend paid earlier this year and a final dividend of $8.3 million or $0.0584 per share. Underlying earnings were $13.9 million. Your co-operative continues to have a strong balance sheet with no debt. And at year-end, total assets of $358.6 million. Underlying earnings were close to $10 million lower than last year, driven largely by three key impacts. In August and September last year, we saw an understandable reaction to the significant decrease in Fonterra's forecast milk price by our shareholder customers. As a result, total revenue was down 3.3% on last year, driven largely by a decrease in demand, impacting our volumes across key products and services. Our response was also to focus on controlling our costs across the business. The after-tax impact of the semen quality issue during the year was $1.5 million. There was also a one-off impact of a government policy change removing the tax deductibility of depreciation on commercial buildings. This was a $3.6 million impact within the financial year. In the last 2 years, we've seen a significant increase in investment into capability. Across our digital platforms, MINDA software, GeneMark genomics technology, amongst other initiatives. To stay ahead of the game, we're always going to have to invest into technology. But over the last 2 years, in particular, we have invested into important foundations. We're committed to completing these critical pieces of work even in a challenging year. As we firmly believe these critical investments are in the cooperative space interest longer term. I'm pleased to say that these foundational investments are almost in place. In this financial year, we expect a revision to more sustainable levels of spend in this area. Investment in R&D was $21.2 million or almost 8% of revenue, up from $18.2 million the year before, maintaining a position as one of the largest private investors in R&D for the primary sector. David will talk further about some of the key R&D focus areas, including the slick breeding program and also our methane research program. We are seeing positive signs in the sector. Confidence is slowly rebuilding. However, it will take time for us to see the results. A short-term cash constraints on farm continue to make farmers take a considered approach to spend. This view is reflected in our underlying earnings outlook for the '24/'25 year to be in the range of $16 million to $22 million. We will, of course, remain focused on our controllable costs, ensuring our ongoing capital investments are well considered and at a sustainable level with a focus on the future. Back to you, David.

Thank you, Brent, for the update on the financials. It would be fair to say that farmers had faced difficult trading conditions over the previous 12 months, and that has had a flow-on effect throughout the sector. But as Brent said, as you're co-operative, we've continued to try and look through these cycles and invest for the long term. I just want to cover off a couple of those highlights now. Last year, we significantly advanced the technology that we use to identify parentage and generate animal genotypes. This means more accurate estimates of an animal genetic merit for all animals in MINDA. The advanced technology is what we use to power our GeneMark Genomics product and it was incredibly proud moment for the cooperative to launch GeneMark Genomics this year, and I'm pleased to see many farmers signing up for the new service, giving them genomic evaluation to make good decisions on farm, leading to more efficient profitable dairy herds in the future. It was even more pleasing to bring the cost of genotyping down by 46%. This is a critical technology and to make it widely available and accessible to all farmers is a tremendous achievement. I was talking to the Board just recently and the SRG and reminded people that in August, we uploaded an additional 600,000 genotypes to our reference population, taking the total to over 900,000 genotypes. As these young genotype animals start lactating in the future, we start collecting the phenotypes' fat, protein, volume, somatic cell count amongst others. That will make the Co-operatives genomic evaluation tool far more powerful, allowing us to select the elite young size with more reliability than ever before and giving farmers more reliable genetic evaluations on the young calfs. This is truly a step change in our genetics program and it is something we'll reflect on in 5 to 10 years' time as being a watershed moment in our Co-operatives proud history. This also goes a long way to addressing some of the key recommendations raised by the Dairy NZ and commissioned Industry Working Group Report on genetic gain. And net report, Professor Hays estimates that having a genomic reference population of around 400,000 animals is what we should be aiming for. And it is pleasing for us to surpass that figure. This all ensures that New Zealand dairy farmers can unlock faster rates of genetic gain and milk the most efficient cows possible. Another achievement in the last 12 months, it's worth reflecting on is in the area of data interoperability. In the last 12 months, we released our MINDA integrations page. This is where we use our modern API platform and those investments we've made into that platform to share data between MINDA and third-party software providers such as Wearable providers. The uptake of this has exceeded our expectations with over 4,800 farmers connecting in the first 6 months. We are sharing data with 11 third-party providers and had plans to bring more on board. We have an open door policy when it comes to who we partner with to make farmers lives easier. And we are pleased to see this collaborative attitude reflected in the sector partners we're working with, too. Over the next 12 months, we'll continue to focus on new and existing research projects with an aim to deliver sustainable advantage for the entire sector. Shortly, we've had a significant milestone in our methane research program. We will determine if the variation and methane efficiency we have seen in our young bulls is passed on to the daughters. From there, the final test will be to determine if the daughters display their trait when they're lactating. We are very encouraged by this research and other similar research from around the world. Low methane genetics will play a really important role for both our sector and our country, as we try and meet our emissions targets. I'd like to acknowledge our partners in this research, MPI and the New Zealand Greenhouse Gas Research Consortium, who have helped fund this research, CRV have measured the methane outputs on their bulls and Palmer who have supplied the cows and to be mated and subsequent progeny that are being measured right now. Also of note, as the announcement we made last week on the collaboration with U.S. company Acceligen, and the Bill & Melinda Gates Foundation to explore the potential of gene-edited heat-tolerant counts to improve the productivity of dairy farmers in sub-Saharan Africa. This project is funded by the Gates Foundation. And it's indicative of the quality partnerships and how they are a really important part of our future and it's great to be able to make that announcement. And in the coming weeks and months, we'll be making further announcements on collaborations to improve genetic diversity, deliver a better [indiscernible] traits and give farmers more options for the non-replacement calfs. The key message here is that we have ramped up our delivery of genetic gain for farmers. We have improved access to the data, and there are a number of exciting projects in the pipeline to further improve the efficiency of the National herd. Why is this important? Because this is our challenge. It's not only a challenge for our Co-operative, but also for our sector. The rate of genetic gain that we are getting are arguably as important as now as they have ever been. We need our cows to produce more milk for every mouthful of feed eaten and to do this as efficiently as possible. We need them to get back in calf, and we need them to last in the herd. We know that we've improved the efficiency of dairy calfs in New Zealand from averaging about 200 kilograms of milk solids in the 1950s to 400 kilograms of milk solids now. And now our challenge is to accelerate those gains to assure our farmers have the most efficient herds possible. Some of the solutions we are doing right now have come from many years of investment in patients. And I'd like to give you one example of them. And this is the short gestation length product. The idea that gestation length was both variable and heritable was first proven in 2000 by LIC scientist, Dr. Ann Winkelmann. Since then, we've been breeding a team of bulls specifically for gestation length with some outstanding results. For the last 6 years in a row, we have delivered over 1 million extra days in milk for farmers. And within the next couple of years, I see us hitting 2 million days in milk in a single year, which will be a fantastic achievement. But it is the synergies between the different technologies and advancements that really drives efficiencies, with the increasing adoption of wearable technologies, farmers are extending AB to weeks 10, 11 and 12. And with the use of size or gestation lengths of 22 days, this will make a huge contribution to farmer's profitability. Using short gestation genetics later in the mating program, the cows will not only carve 10 to 12 days earlier, they also have longer to recover before mating the following year, thus increase their reproductive performance and improve their longevity in the herd. More days in milk, better reproductive performance, more opportunities to get back in calf and extending -- by extending AB, improved health and safety outcomes from not having service bulls on farm, the benefits speak for themselves. To be able to deliver this to farmers has required many years of patience and focus, which is why it is important for the Co-operative to continue to invest for the long term. But while short gestation in semen improves herd efficiency by generating more days in milk, we still have some massive opportunities to accelerate genetic gain within individual herds. We need more farmers to closely look at the cows they keeping replacements from, too many replacements, Heifers are being generated from poor-performing cows. The evidence is really clear that the best cows with high BWs are more efficient at turning milk, feed into milk. They produce more, they are more emissions efficient, and they have better fertility. You can see here in this table that the best cows right now are generating 493 kilograms of milk solids, which is the weighted average of the top quartile of foods across the country. If we're going to help our farmers improve their profitability and in turn, help our entire sector meet its environmental goals, we must breed more highly efficient cows that sit at the top and fewer from those at the bottom. We've made good progress over the years, but we need to continue on this trajectory and sharpen our focus. Considering the progress we have made and what we can do with the introduction of genomics, it is incredible to think of the kinds of genetic gains that could be achieved in the future. And we are very optimistic about the future, what the future holds for herd improvement. We see more use of dairy beef semen and sexed semen in the first 5 to 6 weeks of matings, as farmers make more of their poorer cows to beef semen from day 1 and use sexed semen to get the required number of Heifer replacements from the best cows in a shorter time as possible. This not only improves the genetic gain, but optimizes the farm operation by getting more Heifer replacements early, giving them the best opportunity to grow out well. As more farmers adopt Wearable technology, we see more use of SGL semen in weeks 6 to 12 to improve days in milk, her reproductive performance and health and safety outcomes. To this end, we will continue to invest in data interoperability to grow that category so farmers can get more value from the technology investments on farm. For LIC, we will continue to review the fresh semen products to ensure we're getting the most use out of our very best bulls. We'll improve genetic diversity, and we'll look to improve other confirmation, introduce more dairy beef offerings with the convenience of a fresh semen service and continue to drive performance of sexed semen to make it more accessible to farmers. There is no question in my mind that the Board, management and frontline staff are all aligned on the importance of improving the profitability and efficiency of the National Dairy herd. The results that the best farmers are achieving right now show that if we sharpen our focus on herd improvement, we continue to have -- we can continue to have the world's most efficient dairy herd at converting pasture into milk solids. High-producing emission-efficient cows aren't just a hope for the future. They exist in the National Herd today. They are well within reach of every dairy farmer. We just need more of them. I'd like to take this opportunity to thank you all for attending the AGM. These results are made possible by a great team of people at LIC who are dedicated, and passionate and committed to maintaining New Zealand's position as the world's most efficient pasture-based dairy herd. I'd also like to thank Corrigan and the Board for your hard work and support, Mark Hooper and the Shareholder Reference Group for your input and guidance. And finally, thank you to all of our staff at LIC for all of your hard work over the past year. We look forward to working with all of you together for another great result. Now I'll hand it back to Corrigan.

Thanks very much, David. I'd now like to welcome our Chair of Honoraria Committee, Ian Brown, to the stage for his presentation.

Thank you, Mr. Chairman, and good afternoon, ladies and gentlemen. In accordance with Clause 24.2 of the LIC Constitution, your Honoraria Committee is made up of between 2 and 4 Pharma shareholders who are elected by LIC shareholders. The current committee members are Shirley Trumper, he is with us today; Gordon Glentworth; Scott Montgomerie; and myself. The role of the committee is to consider and recommend to shareholders to form an amount of remuneration paid to directors and shareholder reference group members of LIC. The committee met formally on two occasions this last year in order to perform its role. And it's important to note that the Honoraria Committee undertakes its role on behalf of shareholders, independent of LIC, the Board and the Shareholder Reference Group. And arriving at our recommendation, the Honoraria Committee takes into consideration analysis of data sourced from annual reports and director fee surveys compiled by both Strategic Pay the New Zealand Institute of Directors. We have consultation with the Board, the Shareholder Reference Group Chairs, LIC management as well as the committee's individual knowledge and judgment of the wider LIC operating environment. The survey size of those data sets is approximately 400 public and private companies and encompasses responses from some 2,500 individual directors. Although the information contained within the surveys is detailed and wide ranging. The Honoraria Committee also more closely considers comparable agricultural organizations within the data set. The committee acknowledges the importance of LIC, both attracting and maintaining a high caliber of directors on its Board and members of its Shareholder Reference Group. The exception of the 2020 year, which was impacted by COVID, the Honoraria Committee have recommended that the Honoraria for the Board increased slightly each year, recognizing the time and commitment required as a Director of LIC and to maintain relative parity with similar organizations. The objective of the committee is to ensure that director remuneration is relevant to the market. There is some recognition of opportunities forgone and is sufficient to attract and retain good governors for LIC. The committee recognizes the workload and compliance obligations of the LIC Board given its listing on the New Zealand Stock Exchange. The Board -- last year's remuneration increase was approved by shareholders and the view of the Honoraria Committee this year just to further increase remuneration to maintain relativity to similar organizations and the wider operating environment of our directors. The committee has considered and recommends an increase to the discretionary pool of $10,000, bringing the discretionary pool up to a maximum $70,000. The purpose of the discretionary pool available to the Board specifically to compensate directors for extra duties, skills, roles, including committee shares. This year, the Board used approximately $46,000 for total pool. The committee recommends for this year an increase of 1.4% for the board share from $143,000 to $145,000 and 9.2% for directors coming from $65,000 to $71,000, an overall increase in the Honoraria of the board of 8.2%, resulting in a total remuneration of $783,000. The shareholders -- the role of the Shareholder Reference Group differs from that of the Board, and that is an independent body of shareholders, whose purpose is to work collaboratively with the Board and LIC management to promote the interest of the shareholders and assist the company to deliver on its purpose and vision. There are a few organizations that have a body similar to the Shareholders' Reference Group. Given it's fairly unique role. And as such, the Honoraria Committee has few organizations which can use for direct comparison. Again, discussions with the LIC management, the Board and the Shareholders Reference Group help inform our view. Last year, the Shareholder Reference Group's remuneration was approved by shareholders. And this year, the Honoraria Committee recommends an adjustment to remuneration of the Shareholder Reference Group to ensure fair recognition of the commitment to the role and time away from the members own farm businesses. The Honoraria Committee recommend the following increases to members of the Shareholder Reference Group, the Chair, $40,000 increasing to $42,000, 5%; the Deputy Chair from $19,000 to $21,000, 15%; and members $14,000 going up to $15,000, 7.1%. So an overall increase, the Honoraria of the Shareholder Reference Group of 7%, resulting in total remuneration of $213,000. The committee also considers the daily allowance paid to members of the Shareholder Reference Group for days spent on LIC business outside of their normal meeting schedule and recommend no change for the current daily allowance of $400. I would like to finish with a couple of acknowledgments. First, by thanking Scott Montgomerie, who retires at the conclusion of this meeting. For his efforts and contributions to the committee over the years. Scott has brought a wealth of knowledge and experience to the committee, and I personally enjoyed his calm and well-reasoned approach decision-making. I would also like to thank Melanie Tonkin, who is the Secretary of our Honoraria Committee up until her retirement in August this year. The committee found Melanie's contribution extremely helpful in understanding and sizing the changing role of the Shareholder Reference Group. Melanie was always very well organized and professional in her role with the Committee. I would also like to acknowledge the contribution of my fellow committee members, Shirley Trumper and Gordon Glentworth for their efforts over the year and welcome Ellen Bartlett to the Committee for next year. Thank you.

Thank you very much, Ian, for that. So now we're going to get into the resolutions for the meeting today. There are six resolutions for us to consider, and a poll will be held on each one of those. Resolutions 4, 5 and 6 are elections for the Board of Directors and Shareholder Reference Group and unable to be voted on by the Employee Share Scheme members. Shareholders in the North Island region can vote on Resolution 4. Shareholders in the South Island region can vote on Resolution 5. Shareholders in the upper North territory can vote on Resolution 6. We use the first past to post system for Board of Directors and Shareholder Reference Group elections. And this means that candidates receiving the highest number of votes will be appointed. All shareholders can vote on all other resolutions. Those are Resolutions 1, 2 and 3. The ordinary resolutions and require 50% approval. The results from these resolutions will be disclosed to the NZX and available later this evening. So the first resolution is as follows: to receive and consider the LIC Honoraria Committee's recommendation as to the director's remuneration. And I thought that to resolve by way of ordinary resolution to approve the total remuneration of all 9 directors to a maximum of $783,000 per annum. Here, we have a breakdown of directors' remuneration. Can I ask to have a mover please for that resolution? Thank you, Ian. And a seconder. Thanks very much, Shirley. And if you're in the room and have your voting papers, please cast your vote by marking your paper. Those online who haven't voted yet, please cast your vote electronically. [Voting]

So Resolution 2: To receive and consider the LIC Honoraria Committee's recommendation as to Shareholder Reference Group remuneration and a thought that to resolve by way of ordinary resolution to approve the total remuneration of all Shareholder Reference Group members being increased from $199,000 to $213,000 and the daily allowance remains the same at $400 per day. And here, we have a breakdown of the SRG's remuneration. Can I ask for a mover for this resolution please? Thank you, Ian and a seconder. Thanks, Shirley. And if you're in the room and have voting papers, please cast your vote on this resolution now. And if you're online and haven't voted, could you also do so please. [Voting]

So our third resolution this afternoon, is as follows: To consider, and a thought fit to resolve by way of ordinary resolution to reappoint the chartered accountancy partnership, KPMG, as the auditor until the conclusion of the company's next annual meeting and that the directors be authorized to fix its remuneration. So I'm going to move this resolution and looking for a seconder please. Thanks, Ben. Again, if you're in the room, could you please mark your voting papers and also do so online Thank you. [Voting]

We now move to Resolution 4, which is for our North Island Director vacancy. To consider, and I thought fit elect one candidate representing the North Island as an elected director to the Board of Directors with effect from the conclusion of this annual meeting. So I'm going to move that resolution, and I'll ask for a seconder. Thanks. Thank you, Alison. So I'll ask those in the room to mark their voting papers. Thank you and also those online to make their vote electronically. [Voting]

Resolution 5 is for our South Island Director vacancy. So to consider and thought fit elect one candidate representing the South Island as an elected director to the Board of Directors with effect from the conclusion of this annual meeting. I'll move that resolution and look for a seconder. Thanks, Matt. If you could please mark your voting papers and also those online complete that. Thanks. [Voting]

And it takes us to our last resolution. And that is to consider and thought fit, elect one candidate from the Upper North Island territory to the Shareholder Reference Group with effect from the conclusion of the senior meeting. I'll move that resolution and look to a seconder. Thanks, Victoria. And I'll ask for the conclusion of those voting in the room to mark their cards and those online. Thank you. [Voting]

So with that, we're now just going to take a quick break for a couple of minutes and review any questions that have come in online during this meeting. And I'll look to the team, who will be assembling those for me. And then we will come back and I'll open for general business and take questions also here in the room. If you've got any issues on asking those questions and you're online, please remember our helpline, 0800-200-220. So everyone, I'll just ask for you to be with us for another couple of moments, having a few technical difficulty. This sometimes happens with these online meetings in terms of your online questions.

Sorry, just before we get into the questions, it's just an apology for some of the technical difficulties, that people who have had, who have been joining us online. At the end of this, everyone who has been registered will receive a link so they can watch and catch up on any of the parts of the AGM that they had missed out on. So I just wanted to acknowledge that in case you had any other comments from shareholders who are trying to get in online.

So if we've got any questions online at this stage, got two. Okay. I'll take those first, and then I'll come to the questions in the room, if that's okay.

Okay. The first one is from Natera Group Limited. It says in the annual report, given that it was a tighter financial year. It says that expenses were reduced to maintain a surplus looking at statements, both software and HR expenses went up. What are the examples of reducing costs that you were referencing?

Okay. So the question relates, in their annual report to a reduction in expenses that we've referenced. You're happy to answer those, both Brent and David.

Certainly. Yes, a good question. What we did really very early on in the piece is we did a full review of all discretionary spend. We cut back on travel. We looked at any vacancies that came up and were reviewed. We did ensure that all essential frontline worker roles were maintained and were continued. So overall, we took quite decisive action early on the pace to ensure that we could keep our costs down as much as possible. Thank you.

The next one is from [ Gerard Van Beek. ] LIC profit is highly impacted by the revaluation of the bull team. We've seen significant increases in devaluations of the team over time. The actual number of bull and potential semen delivery a similar year-on-year, here we see huge swings. Can LIC change the valuation methodology impacts less on profit?

Okay. And I see Gerard in the room as well. Is there anything you want to add to that? Thank you. Thanks, Gerard. I would like to [indiscernible]

Happy to talk to that, Gerard. So just for content, Gerard, showed me a graph of a number of changes over the years, which I think is also everyone is understanding as well of the valuation is highly volatile. I think there's two points I wanted to make or three actually. The first one is the reason why we talk about underlying earnings is to exclude the volatility of the full valuation. So that's the reason why we talk about underlying earnings rather than impact, because it's a better way to compare year-on-year performance. Secondly, the requirement to do the bull valuation driven by IFRS, so it's one of those things we have to do. It's not a choice and it's very well prescribed and audited by KPMG in the regard that we do it. And the third point is that I think if you look at this year in particular, we had a number of quite significant variable changes. And when those variable changes -- when those variables change, it's and a consequence of that, like for example, interest rates, our view of semens staws into the future is a 5-year forecast. When those variables change, they have a significant impact. So it's one of those -- I guess, I would say, it's unfortunately things, it's just that's the way the process currently works.

Thanks, Brent. David, just wondering, do you have a comment also on the relationship between genomics and our move to more genomic bulls in relation to valuation?

That's to do with the bull runoff profile. And so as we use younger bulls, the daughter-proven bulls actually stand up on the bull valuation. We get more use out of them. So with the younger bulls, they have a shorter runoff. So ironically it brings the valuation changes, the valuations down. As we use more high generic younger bulls for short amount of time.

Yes. Okay. I think. No more questions Thanks. So I've got a question here, but I said to Graham, so Edwards, I'll take a question from him first, if it's all right. Thank you. So Graham, I just got the mic here.

Nice story presentation, but I guess the rubber hits the road somewhere. Your return on assets, Brent, I've just forgotten your balance sheet for it, but it was a $350 million?

Total assets. Yes. Yes. That's less than a 3% return, and that's adding back to the government's tax adjustment.

That's all the good stories and motherhood and apple pie, but when the rubber hits the road, that's not an acceptable return.

Got a comment on that at all, Brent?

No, other than to say that is the result, yes. And I guess we talked about the reasons for that. And part from the -- as you said, ground the tax change, the volume impact what we had, we've added that back. But the impact we had around the reduction in demand that we experienced during the season was a major impact.

Supplementary, Mr. Chairman. How can a 3% revenue decline have the profit?

Yes. So the question is how can a drop in revenue of 3% have that profit.

You must have a very high fixed cost, sort of, impact.

We do. Yes. It is. We do. We're a business that's driven by volume. We have a high percentage of fixed costs. Yes.

Actually you're going to change that that leads back to the first question of where are the costs reduced. I mean a bit of travel and so on, relatively trivial on the scheme of things.

So you spoke, Brent, investments being made within the business, particularly right now and foresee a decline in those in the next couple of years. Do you want to elaborate on that further?

I mean, the way I think about it, if you look at the trajectory of our volume, the season before last was what we've normally -- what we'd expect to be our normal season. Last year wasn't. We know the reasons for that. The early stages of this year, whilst, as I said in my presentation, there is a little bit more positivity. We haven't seen a significant impact on our farmers behaviors in terms of those debt demand. In the event that milk price returns back to a normal level when it continues on, we do expect some of that demand to come back. But the issue is for us, this is a busy time heading into it now. People are already locked and loaded.

Yes. So does that explain the lack of ambition to improve the results as indicated in the annual report that you're only really adding back the cost of the semen issue. That seems a very modest ambition when your profit is basically halved on what it's been in the last 5 years?

Yes. Well, I mean, it is the end of the first 3 months of the financial year that we've got a range of $16 million to $22 million for the reason that we're not sure how that's going to play out. And I don't have a good answer for you rather than we're aiming for that range, which will be an improvement on last year.

And we've got $9% milk futures and $8.50 medium forecast from Fonterra. And sure you can get out there and sell the stuff. That's actually not a bad result.

Graham, I acknowledge the question. And I guess I've got a view, and I think the Board's got a view on that as well. And I think we definitely take responsibility for one particular issue, I think, which is that we didn't deliver a couple of season to go on performance of the sexed product and that was a key line in our revenue stream. The team have done a lot of work over the last, particularly, two seasons. And I guess, better understanding and optimizing how that product goes to market -- that's not to say there's not still more work to do and more opportunity, I think, and how we get out in front of it and sell that product, because it's what a lot of David's talked about this afternoon is, it's key to advancing that genetic gain. It's key to the dairy beef opportunity. But we do have to own it. We didn't get that right. And we've certainly seen the repercussions in that. The other thing I don't want to do, Graham, is stand up here and give you excuses. But I think it is very important to reflect the period of the last sort of 2 to 3 years that we've all collectively really run businesses through. We're both farmers and we know the extraordinary inflation that we've been through. We recognize that big responses come in terms of interest rates to respond to that inflationary cycle. And the implications that's been for a lot of farmers. And I think what most of us talk about at the moment is farmers is, when can we get our interest rates down. And the reality is, we haven't had free cash. And while I think fundamentally, an investment in herd improvement at LIC is not discretionary, there is a component of discretion. And I think we've seen that. And honestly, as a farmer, I respect the fact that people have paid interest bills and put food on their table first. So that's not shying away from the fact that we haven't quite delivered ourselves. But I think -- and I have absolute confidence, and I know the Board does and certainly in our senior management team that the sorts of things we're investing in right now will see an improvement in revenue. Will they ultimately respond to the headwinds we have of declining cow population? I do not know that, and we're going to have to continue to work really hard on that. I know that's a subject you've talked to me about as you look at landscape change around you. And the regulatory sort of environment has been a particularly interesting one for the last couple of years, and that's certainly put some headwinds up, people's appetite really for taking a punt and having a push. And I guess, I was quite deliberate in my opening address today, because I do believe that an investment in your herd today, in terms of herd improvement is an investment in the sector going forward and in our competitive advantage as a country. So I don't shy away from your criticism, and I want to see a better return going forward as well. But I believe that, that fundamentally will come from building relationships inside the farm gate with farmers and on our product delivery.

Market share? Can you talk to that, David?

Yes. We haven't seen a dramatic change in market share for our genetics products. It would be fair to say that the beef portion or segment of the market is quite competitive and in different areas, it is competitive better than farm software. It's still set up. I don't have the exact number at my finger tips. I don't want to give you the wrong number. But herd testing stays solid as has MINDA, the work that we do in DNA. But the genetics market share is in the high 70s, which is a slight improvement on previous years.

Thank you. The question, thanks for waiting for me down in the back. Just waiting for the microphone.

Yes, Robert [indiscernible] so I'm a shareholder from [indiscernible] I promise to be as brief as I can. Just with reference to Page 11 of the report, green dots across the page, yes, just congratulations on that. That's my area of interest. With regards to sustainability, we all know that good cows are better than poor cows. Yes, good cows are better than poor cows. I'm out of my depth commenting on free Asian cows, but with regards to the best 100,000 jersey and best 100,000 cross-bread cows in this country, they are absolutely the world's best animals with regards to mainly past your eat in your diet. On the other hand, the bottom 0.5 million of our 4.7 million cows are actually worse than the owners of them now. They are truly appalling. They are the result in main of the national herd as we all know, going up 2 million cows from 3 million to 5 million cows over a 20-year period. Cows that should have been cowed were gift, and they were actually breed from. These are the 0.5 million cows resulting from that. The owners of them don't know how poor they are. The LIC haven't done a good enough job in letting them know how poor they are. Dairy New Zealand have done a disastrous job in this area. I've attended discussion groups for 50 years. Not once in my 50 years has the subject been good cows. I feel like Dairy NZ treated a little bit like religion and politics, you don't talk about it an open company. Moving on, I have got a point to make again. Moving on, I went to a conference in 1987. The keynote speaker said, and most people here will find this hard to believe, but I've got a guy over on the right that will verify it. The keynote speaker told us that by the year 2000, not only would fat be worthless, we would actually be having to pay for the disposal of it. The LIC took this on as gospel. They didn't quite do a U-turn in their breeding policy, but they certainly went sideways. It had the potential to decimate the jersey breed. Yes, we -- the LIC bought out Dr. Ruben [indiscernible] the lead geneticist in Israel. He actually stayed with us for a time during that visit. And he did -- had no humor. He believed that anything short of an F-16 was dog tucker. Moving on to the introduction of genomics. I went across to Stratford, believed what I was told. Well, I don't know if I believed what I was told, but I certainly came home with the fear that if I didn't go with it, I'd get left behind. As we all know, initially, it was disastrous. It was actually coupled also the double whammy was in the LIC bull team members. There was at least one was from a different planet. So the top 1,000 cows in the country at the time, probably 50% of them were made to something better than a donkey, but not much better. I know humor, it was disastrous. The initial thing in 1987 collectively probably had little effect on the national herd. This one with the introduction of genomics, coupled with poor decision-making at the LIC was disastrous for the national herd. Moving on to today, and this is my point to the Board and the Reference Group. I have a lot of contact. I've got no science degree on genetics. I have a lot of contact in New Zealand and overseas. I'm interested in breeding. I don't quite buy into how far we've been left behind in the genomic race. I accept the truth in it. I think it's definitely exaggerated. So I just kind of...

Just to clarify, that's in relation to the report that came out of the independent working group around whether we were going as fast as the...

Yes. The rest of the world. Yes. I think it's half true. I think it is overexaggerated. And just -- yes, just both groups, that's just my opinion, unscientific opinion. Yes. And just kind of moving sideways from that, I hope none of that sort of thing is used as justification for reducing the size of the sire proving teams. And then just finally, as an unscientific dairy farmer, I'm uncomfortable with really less than 20% of the size. I would like to see 20% of the size being daughter proven size, and that's just a gut feeling. But in saying that, that's a gut feeling, I have a lot of contact with the owners of the top 1% of herds in New Zealand, and that would be definitely a general viewpoint. But in general, I think you're doing very well.

Thank you, Robin. And thanks for your observations and statements in a number of those areas. And I don't think that any of -- some of those are news to us around. Some of the missteps that we might have had in the past. And also, I guess, to reflect on your presentation today, David, and the investment we're making in genomics right now, why that's so valuable for the rated genetic gain going forward. And I think you make a really valid point around understanding the basis for some of that recommendation and the independent Working Group report, which really speaks to a very unique population of cows in the world that we have here in New Zealand being cross-breed. And to do that, you need population justice. We need a bigger population to understand it from, and test it against which is really the basis for how we're trying to respond in terms of setting up appropriate mechanisms to address some of those recommendations in their report. Have you got any points said, David, like I know there's some pretty passionate? Yes, sorry.

I actually missed that one line. With that disastrous introduction of genomics and personnel, et cetera, it is no wonder that Malcolm Melisa was greeted like a night and shining armor when he arrived.

There's a vote of recognition for you, Malcolm. I know you're in the room somewhere. And I was just going to mention there's some pretty passionate Jersey breeders in the room, too. So I'm going to stay well clear of that subject. But have you got anything to respond to that, David? Because I think there's some good observations in regard to that. And I guess there's still some good challenges for us in terms of delivering this product that we're putting a lot of time and effort into.

Thank you for your comments, and I think you're well made. We've done a lot of learning around running genomic tools on multi-breed populations. We have -- we are very cognizant of the role that genetic gain and a more efficient cow will play in our Dairy sector's future. And we are absolutely laser-focused on delivering that, increasing our investments in that and making sure that we put our sector in the best possible position to meet the people who purchase our milk, the requirements of us. So we have increased the investments we've made in our breeding scheme, both in the data platforms that support it as well as the programs and partnerships that we've got in the pipeline as well. So absolutely, that's why we've got those metrics around the faster rates of genetic gain. We want to see better than 20% improvement when we take the 10-year average of genetic gain. The last 3 years has got to be 20% better than that. And so we -- and each year, as you do that, then that bar keeps rising, and that's what we're aiming for. We're also aiming for not just -- and I think you made a good point about the mix of traits in our national breeding objective. And I thought was one of the good parts about the industry working group, looking at more forward-looking aspects, because the national breeding objective now is very historic looking, looking at historic averages to set those weightings. We think we need to be more forward-looking because the last slide that I had was the matings that we make in 2024 in this spring, those daughters will finish their first lactations in 2028. So we have to have -- we need to make sure that the sorts of animals we're producing that have finished their first lactation in 2028 are the right ones now. We're making those decisions now. So looking at those traits and making sure that they're properly weighted is good work for the industry to do.

Thanks, David. Yes. Just in the interest of time, I'll probably say we're only going to take 1 to 2 more questions. Is that all right? So I've got a question here at the front. Thanks, Chris.

My question also relates to Genomics. So my heifers have been genomically tested this year. However, my bull calfs were only eligible to the DNA tested. Why?

It's a good question. David, you able to respond to that in terms of our process around genomics?

Yes. At the moment, if we have a contract mating out on a bull calf, we will genomically test it. So you can make an informed decision around whether you take royalty or flat fee, but the IP on our reference population is something that we're very cognizant of. So we make it available for heifers, but not for male animals. Widely available. However, we are open for discussions with third parties if they want to access that reference population. But that has been a significant investment for the Co-operative and it's something that a lot of people want to get their hands on. We've invested over $100 million to build up that reference population. And so there is -- we need fair access on commercial terms for that.

So the question -- hopefully, everyone heard it, but just, is there a risk we're missing bulls?

Yes. So we're doing a large screen on the female population. So we think we're getting a good view of elite dams, and we do thousands of contract meetings each year to make sure that we're screening the best possible pool of male animals to join the breeding scheme.

Thank you. Graham last question, if possible. Thank you. I'll start with the [indiscernible] I didn't see the hand up. Graham, can I just go over here first for this one I'll come back and finish with you.

Actually, all [indiscernible]. Just a question around LIC's targets on cow efficiencies per kg of live weight. So where are we now? What are your aspirations for that? And also genetic gain, what are your aspirations for shareholders or for users per year genetic gain rates?

An answer to your first question around the target rate of milk solids per kilogram of live weight, that actually is really driven by the systems -- feeding systems that a farm would have. So if you're system one, you can probably have a very, very profitable farm producing maybe 80% or less, whereas if you were doing more intensive feeding, you probably want to be doing 120%. It's probably not up for LIC to determine what the exact target is. It's really more systems driven and how much you want to feed them. But we definitely put live weight in as an efficiency driver. So if we can improve protein and fat yield and maintain live weight, we know that, that animal is not putting a lot of feed into the maintenance of body or body live weight and they're putting more into fat and protein. So we will still put as the National Breeding objective does, put -- try and put a limit on these cows getting larger and larger. It's not always easy always looking for these genetic outliers. But yes, that's what we are attempting to do. In relation to your second question around what is the target rates of genetic gain, the way we're measuring it at the moment is we take the 10-year average because every given year, the teams can move up and down. But if we take the 10-year average as a set rate of genetic gain, we would look at the 3 years just being we average that out and we say we want it to be 20% better, both in the Sire Proving Scheme in the Premier Sire Scheme. So there's one in terms of all of the bulls that we'll collect to bring into it, the ones that we make commercially available. And then we measure that also in farmers' herds in terms of the cows because at the end of the day, it's the genetic gain in your cows that matters. The bulls are just a way of you getting to a more efficient cow. So we measure that when we take herds that are well recorded in MINDA, use 80% or more of LIC's AB products and have confirmed matings and have more than 200 days in milk. So we take those and we then take that average and make sure we're driving that gain up as well. And that's all reported in our sustainability report each year.

Thanks, David. Graham?

I think you mentioned that you're going to return to a more sustainable level of capital spend. Can you elaborate that just reinforcing my comment that there must have been some very poor investments in the past if we making 3% or less than 3%?

Like any organization that's been around a bit, we do have technical debt and that we need to get over. And we have invested in that. And I think in the last 12 months, we chose to continue to invest in that to get through that. We've got now a very modern digital platform, which we are migrating our business on to. I think that makes -- reduces the risk, makes us more resilient in the future. But now we are sitting there thinking about how we reduce that capital burn to make it funded out of cash flow and then only look at exceptions where we will have to dip into the balance sheet to fund capital over and above that. So that's definitely the plan going forward.

Yes. Just changing the subject a little. Murray Douglas, we've got quite a few cows in Northland, and we're also significant partial dairy farmers in Brazil, with my family. So my question relates to the most recent announcement really. And you're going to provide some embryos to subsequently go through a process to then be breed up in Brazil. So I guess the thing for me is that we've had wearables on our cows in Brazil now for about 3 years. We have a very clear information and operation as to how that heat in Brazil, which is just slightly more significant than Northland is affecting performance of cows on the ground. We have a couple of slick genes in the herd in Brazil, but it's not enough to be statistically useful. I mean, I guess the thing that's of interest for me for New Zealand is as we go through this process, and I know we have a government that is potentially going to change the rules. What are our options and opportunities through LIC to subsequently bring this technology to New Zealand for use if we're allowed.

Okay. So answer to your question. One, we do have a traditional or traditional breeding program around heat tolerance. So we are doing that. We think we'll have a commercial product by 2029. With animals that are both heat tolerant as well as high genetic merit, because we don't believe that we want to trade off BW heat tolerance. So we're going to carry on with that breeding program. I think the exciting thing about the announcement we made last week with Acceligen and the Bill & Melinda Gates Foundation, is that gives us an opportunity to partner with one of the leading organizations in the world around gene editing to see how it works, to see what the uptake is from farmers and to learn a lot from that. So when the government does change the -- or modifies the legislation to allow us we're in a very, very good position to take advantage of that. So we think this partnership gives us a lot of optionality to bring those sorts of solutions at the consumer and farmers want that in New Zealand when the time is right. We think we've got the optionality to do that through this partnership. So it's quite exciting from that point of view.

Thanks, David. I think with that, I'm going to close the meeting. Thank you very much. It's been a really good question and answer session. And I appreciate those who have traveled today and made the time to come and ask us questions and those online. I apologize again for some of the technical difficulties. We try pretty hard with these things, but sometimes it does lead down just when you need it. So in terms of that, I just want to thank everyone again for their time for those that have traveled today. We're now going to come together outside for some drinks and refreshment and look forward to seeing the results coming out shortly for those resolutions, which I'll announce same. Thank you.