New Zealand King Salmon Investments Limited (NZK) Earnings Call Transcript & Summary

Welcome, everybody. We'll make a start. [Foreign Language] My name is Mark Dewdney. I'm the Chairman of New Zealand King Salmon and it's absolute privilege and pleasure to host you here today for our eighth AGM. So welcome. Carl, the good looking follow and slightly younger looking fellow, even though he's older than me, but he's preserved himself better. And I will largely run the and AGM, we'll have sessions where we can have questions and we've got some formal resolutions, et cetera. So I'll lead us through it. And once we finish the formal proceedings, we'll have a really nice demonstration of the wonderful, wonderful product that we grow and sell and have a little bit of social time. So what I'd like to do, firstly, today is acknowledge our shareholders, shareholders that are here, iwi representatives and our auditors. Everyone has a different interest in the company and a different reason being here today. And I just want to acknowledge you for your role with New Zealand King Salmon and for taking the time today to join us. A little bit of housekeeping. If there's an emergency, an alarm will sound. If you hear that alarm, then just make your way out, and we'll go into the car park. We'll assemble by the toilet block and we'll take stock from there. If there's an earthquake, and I think the chances are really low, although Catriona was telling this morning, the last time she was here for a Board meeting, there was an earthquake. So never say never. Better if there is, the safest thing you can do is just get on the floor and cover yourself just wait until the shakings stopped and then we'll regroup and we'll work things out from there. I'd like to introduce my Board colleagues. We've got Victoria Taylor, we've got Paul Munro, we've got Yong Tiong, Yong you are there. Catriona Macleod. And we have apologies from Jack Porus, who's up in London and Carol Chen, who is the representative of China Resources. She's back up in Asia. So they've sent their apologies. We had a Board meeting this morning, and they asked to just express their sadness for not being here and best wishes for today's meeting. We also have a number of our senior management team starting Carl Carrington, our new CEO. Carl, you're probably about 6 months, 8 months, feels like longer. It has been slightly longer, but Carl will address us and take us through all of the business matters. We've got Ben Rodgers, CFO. Thank you Ben. And we've got Graeme Tregidga, looks after sales customers, all of our international business. Grant Lovell who many of you know is at the back there, who runs our aquaculture operation. We've got Richard Smith, who runs all of our processing and factories. Richard is down the back. And Monique Hatfull, who is our Head of Relationships has worked with [indiscernible] [ Morgan ] over there and Katie to put this event together. So that's the executive team. And then we've got Katie Bennett, who will take any technical questions on the financial results. And we've got Dr. Zac Waddington, who's our Fish Health and Welfare Manager, so if there are any technical questions in and around the fish that Carl and I can't handle, then we'll call an expert. And then we've got Antony Page, who's out in the kitchen. Antony is part of our South Island sales team. and Antony will talk to us at the end and give us a demonstration of the products that we will eat. And we also Iain Wood, who's the Audit engagement Manager from EY with us. And Ian, thank you for joining us today. Thank you for the work that you and your firm do on our audit. And there will be an opportunity if shareholders have any specific questions of the auditors to -- you can ask those today. So look, I'll just start with an overview of the year that we've just finished and the year ahead, and then I'll pass to Carl. And Carl will give you a really thorough overview of the business, the markets, our strategy and how we see the future, what we're prioritizing. And then we'll take questions and do the procedural resolutions. So I'm really pleased to be able to announce today that we had a really solid year last year from an operational performance perspective and from a financial perspective, which is really nice because the last -- at the last AGM, we were reporting on what had been a really tough period in the company's history. And I remember, it was my first AGM, and I was there, and I remember Paul Steere who chaired that stood and apologized to shareholders for what really was a performance and a result that was not good enough. And it's nice today to be able to report that the result that we delivered last year was inside our initial guidance range. That's really pleasing because it says that we were able to forecast what was going to happen and deliver within what we believed we could deliver, and that gave the Board confidence and I think should give shareholders confidence that we were able to say what we were going to deliver and come inside that range. And I think that's a really important thing for a Board and a business to be able to do is forecast and deliver within forecast ranges. Our revenues increased from $167 million to $187 million, a 12% increase. That was really good. Net profit increased from $1.9 million to $28.5 million. So that was another -- it was a really good step up, and it was the start of what we believe is our journey to where we believe we can get the business to in a sustainable manner for the long term. EBITDA, so earnings before interest, tax, depreciation and amortization, was a loss of $2.7 million in FY '23, and it turned around to a profit of $24.5 million in FY '24, which was the last year. We reduced our mortalities, which is a key performance indicator for us and a key driver of whether we have a successful or an unsuccessful year. Mortalities reduced from $25.9 million to $12.6 million. None of us are satisfied with $12.6 million mortalities. But yes, it was -- it trended the right way we halved it and we've got a huge number of initiatives, which Carl will talk to continue to lower mortalities over time. This year, we have provided a pro forma EBITDA guidance range of $26 million to $32 million. And we were forecasting total harvest volumes this year of 7,000 tonnes. And Carl will confirm, but just for the record, we are still maintaining that guidance range for this year. The progress we made is really the result of continued significant operational and strategic changes within the company. As primary producers, we know that there are always going to be a range of factors and challenges that we have to deal with that are outside our control, climate, weather and global supply levels. And largely, those things happen and we have to adapt. And what we've learned, I think, from the past challenges we've had is, how to adapt and how to assess what is happening in the environment that we're operating in and fine-tune the way that we are running the business. And so we've become, I feel a lot more resilient and a lot more adaptable. And those two things, adaptability and resilience are key things that we have to continue to take into the future. I'd like to acknowledge the team of people that we have working for us at New Zealand King Salmon. They are really the foundation of the business. Our fish are critical to us, but our people are as critical, if not more critical, because our people deliver the business results. They look after our customers. They grow our fish. They run our processing factories. And we have a wonderful team of people working in this business. I've been constantly struck by the passion and the enthusiasm and the commitment and the loyalty that our teams have right throughout this company to the business and to the products that we sell and to the shareholders that we have and others that invest in work as part of our business. And so I just want to really acknowledge the team of people that we've got today and thank them for the work that they tirelessly do on behalf of the company. We spent a lot of time in the last year refreshing, and refreshing is a tricky word because it sometimes sounds like you're safe, you're getting rid of things you didn't want and getting things now you do want. Some of that's true, but some of it's not in this case. But we did appoint Carl Carrington, and we're delighted with the way that Carl has come on board as our CEO. I'd like to acknowledge the leadership of Graeme through the period from when Grant Rosewarne left until Carl was appointed. That coincided with probably one of the toughest periods in the company's history, and Graeme or GT, as we call him, stepped up, stepped in, led the team, made on behalf of the business a number of really tough decisions. What stood out most was the way he led the team of people through what was a crisis. And GT your leadership through last year was one of the key reasons why I think the results were so good and the business is in such a strong position now. So thank you for that. And we're delighted that you stayed with the business, took on a much bigger priority or set of responsibilities and you're doing a great job with them. At a Board level, we said goodbye to Paul Steere. Paul had worked for the company as its inaugural CEO, and he finished as CEO in 2009. He joined, the Board is an Independent Non-Executive Director and Chair of the Audit and Finance Committee. Paul leaves a huge hole. But again, Paul, thank you finally. Last time we thanked you, officially. But what you did for the business over your tenure was superb and we'd like to keep things simple. So we replaced one Paul with another. And so we welcome Paul Munro, who has joined us as our Independent Non-Executive Director. Paul started on the 1st of March and became the Chair of the Audit, Finance Committee very quickly thereafter. Paul's a really experienced executive with a very strong financial governance and management background, spent 24 years as a partner in Corporate Finance with Deloitte, and then moved from there into a range of governance and executive leadership roles. And Paul has joined our Board, and it's great to have you, Paul. I'll get you to sort of speak a little bit later on when it comes time to get reelected. I think the future looks really positive for New Zealand King Salmon. As you will all be aware, we have received the final permissions from Fisheries New Zealand for our Blue Endeavour initiative, and we're working now on putting together the pilot phase of that project and planning for the ultimate implementation of the move to fishing out in the open ocean as we call it. And a lot of work to be done there. Carl will talk more about that, but it's exciting finally to be able to make a start. We spent a decade or more and an enormous amount of time and energy and money to get to this stage. And it's nice to be at the start of what now could be a really exciting growth opportunity for us. We've worked really hard over the past 35 years to be the world leaders in the farming of New Zealand King Salmon. It's a really nice position to be in, and it's a really strong position to be in, but we can't take where we are today for granted, and we can't assume that whatever we have done in the past will be good enough for us to succeed into the future. We need to invest a lot into growing our business, building the infrastructure that we will need to support growth in fish volumes as they come through. And that is going to require an enormous amount of work and investment. I was wondering what everyone was looking at. The whole part. I thought it was me. But, I guess, in short, we have a series of initiatives that we are working through at the moment from our fishing operations, moving into the ocean and then looking at how we can build the supporting infrastructure through our factories, hatcheries and through our markets. And those things will all take a lot of investment. That has been the reason that the Board has said that for the foreseeable future, while we are planning and putting in place those investments, we don't believe that we will be in a position to pay dividends. We feel for shareholders and for the business, the best use for the long term of the capital that the company has -- and the capital that the company will earn will be to reinvest into strengthening and growing the business for the future. I'd finish by saying that we remain cautiously optimistic, but we need to be disciplined and we need to be realistic and understand that we are in the aquaculture game. Aquaculture as with any form of agriculture can be volatile, can be cyclical, and it rewards those who have the patience and the foresight to play the long game, and that's what fundamentally is driving us as a company and as a Board in terms of how we think about how we run this company for the future. But we're really looking forward to the future, not only for New Zealand King Salmon for our Te Tauihu regional communities and for New Zealand as a whole. Again, thank you for joining us today. Thank you for your support. And I'll pass to Carl now, who can really take you through the detail of the business.

[Foreign Language]. My name is Carl Carrington, and I'm the Chief Executive Officer. I came on board in August '23, and it's a privilege to be here today for my first NZ King Salmon Annual Shareholders Meeting. Today, I will be taking you through the highlights for the last financial year, our strategic reset, our progress in the sustainability space, a business update and finishing with the outlook for the coming financial year. So turning now to the financial summary, the slide shows how the business improved the pro forma EBITDA from -- result from a loss of $2.7 million in 2023 through to a profit of $24.5 million in 2024. For clarity, one of the major differences between the GAAP results and the pro forma EBITDA number is that GAAP includes noncash fair value movements associated with both our biomass and inventories on hand, whereas the pro forma results remove these noncash fair value movements. Moving from the left to the right, the volume increase contributed $1.8 million to the earnings improvement. By far, the two biggest drivers were improved pricing and a reduction in fish mortalities. Improved pricing added $18.2 million which came from a combination of price increases, improved product mix and market optimization, which basically means prioritizing fish to higher-margin customers. The reduction in fish mortalities improved earnings by a further $13.3 million. There were further reductions in freight and corporate costs, which added another $1.7 million. And offsetting these gains was an increase in the cost of goods sold associated with the increased volume and inflation driving COGS. Overall, a solid return to profitability with more opportunity to improve further. A 12% lift in revenue to $187.1 million reflected a combination of the market optimization, an increase in harvest reflecting improvements under the second year of the revised farming model and price increases reflecting increases to input costs such as feed and labor. You will see our sales are concentrated predominantly to North America at 41% and the domestic market at 36%. We are growing into Australia at 11% and have a renewed commitment to establish a premium position in China ahead of the anticipated increased supply availability from Blue Endeavor. China was just 1% of our sales last year. Turning to the strategic vision and reset in this space. During '23/'24 as a business, we reviewed our strategic context in which we are operating, assessed our strengths and weaknesses, explored the opportunities in front of us and took stock of the risks we face, considering an ever increasingly volatile world. From this, we developed a new vision. As you know, our previous vision was to create the ultimate salmon experience. While there is nothing at all wrong with this, and it definitely allowed us to drive hard at premium marketing, we decided we needed a vision that was more holistic and that the wider company and our stakeholders could see themselves within. We came up with creating a healthier world as being a unifying theme. And note that this is an active statement and acknowledges it will always be a journey of progress across our 5 pillars. Our aspiration statement is that we strive to grow healthy kai, healthy communities, healthy relationships, healthy environments and a healthy economy, will contribute to growing a healthier Aotearoa and ultimately a healthier world. We distilled our strategy to 8 core enduring themes. Sitting behind each of these themes are detailed plans to convert strategy into action. I'll take -- I'll briefly take you through what each of these mean to our business. Firstly, we value our people and that we acknowledge that people are at the heart of our business. We need to build an inclusive, achievement oriented culture where individuals and teams strive to be their best. Talking about nurturing healthy relationships means across our communities, mana whenua, customers, investors, government and beyond, our ability to operate depends on the strength of those relationships. Partnering with customers. That is our customers who ultimately pay the bills. And we have strong customer partnerships that we greatly value and continue to build. We are conscious of the need to maintain diversified channels, not to be overly reliant on any 1 channel or market where there are risks for which diversification offers a prudent mitigation. Build a sustainable future. We recognize the importance of achieving positive environmental and social outcomes. Aquaculture requires both quality freshwater and marine environments. To lose focus on our dependence on a healthy natural world would be to score an own goal. Not only is this prudent to good business, but it is also important to us to be a good corporate citizen as well as to maintain our social and cultural rights to operate and be responsive to our customers. Excellence and risk management. We recognize that the world is an increasingly volatile and uncertain place. We will continue to build our culture and capability in the risk management space. Building a strong foundation. Whilst we've had a good return to profitability, we believe there is more we can do to further optimize the current business. We need a strong foundation to enable us to make the significant investments required to step into the open ocean aquaculture at Blue Endeavor. Focus on our fish is about building our aquaculture expertise to improve fish health outcomes and to acquire expertise in new technologies and infrastructure and to accelerate our breeding programs for resilience. And finally, respecting the whole fish. This captures our desire to maximize the utilization and value of the entirety of the fish. Our Omega pet food business is a good example of adding further value to our remaining raw materials. Sustainability. Client-Related disclosures and sustainability more widely is a journey and an evolving landscape. This is our first year reporting under the Climate-Related Disclosure regime, and we released our climate-related report in May this year. Our focus has been on the assembly of quality baseline data from which we will develop concrete targets, which will be supported by defined pathways to deliver realistic outcomes. Our sustainability goals will be holistic, covering carbon reductions, water and waste management, infrastructure resilience and a focus on fish health for welfare and resilience. We will not be drawn into overpromising and under delivering, but rather, we will be taking considered, meaningful and verifiable steps to secure or future resilience and make our contribution to a sustainable environment. Carbon is likely a lens through which consumers will increasingly assess a company's sustainability commitments. Although for our business, fish health is also a visible metric that consumers increasingly pay attention to. We recognize that our carbon footprint in absolute terms is likely to increase over time as we grow more protein. Our focus will be on reducing carbon intensity that is the tonnes of carbon dioxide produced per tonne of production. The world needs more protein and salmon is one of the lower carbon footprint forms. So the fact that New Zealand King Salmon carbon footprint will increase is not a perverse outcome, provided our intensity falls appropriately as we invest in improvement measures. We stand by our core belief that salmon farming contributes to a healthier world. For those who are new to the climate-related disclosure space, we need to divide our carbon emissions into Scope 1, 2 and 3. Scope 1 emissions are direct emissions from our own operations. Scope 2 emissions are indirect emissions from purchased energy. And Scope 3 emissions are other indirect sources. 95% of our footprint is Scope 3, essentially, that is feed and freight. So targeting only the 5% in Scope 1 and 2 is a bit like rearranging deck chairs on the Titanic. It might create good appearances, but it's not really getting to the core challenges. Now having said that, there are actually some low-hanging fruit that we can knock over, such as improving electrification to a hatchery in Takaka which enabled us to remove a generator, and that saved nearly 100 tonnes of carbon per year, definitely worth doing, and we have done it. With the installation of our ensilage operation in Picton, shown here on the slide on the bottom left, will not only be -- we'll be able to not only divert all fish mortalities from landfill, saving carbon from being released by the decomposition process but it also allows us to convert the fish mortalities into valuable biofuel and fertilizers. Every tonne of fish the landfill creates 2 tonnes of greenhouse gas equivalents, so this is a big step for us in our circularity journey, and we are proud to be leading in this space. A greenfield processing facility would provide an opportunity to invest in technologies that make step changes and carbon and water. Energy usage would be more efficient and through investment in more modern freezing technologies, we'll be able to sell more product and frozen formats to high-end customers and thereby reduce air freight emissions. All of this would lead to improved carbon intensity reductions. In respect of fish feed, fish are not going to change their physiology to eat less, but we are scoping technology to help us be as efficient as possible through a centralized feed center and utilization of AI to monitor fish behavior and support feeding technicians. More precise responses to feeding behavior can potentially improve our feed conversion ratio and in turn lower carbon intensity. We are also partnering with our feed suppliers to constantly improve the diet we feed our fish, both from a fish health and performance perspective, but also a sustainability perspective and raw ingredient alternatives such as the inclusion of algal meal. Our carbon footprint is one aspect of climate-related disclosures, but we also need to consider business resilience in the face of climate change such as storm, flood and drought protection. The business is undertaking hydrology mapping at Tentburn and Takaka sites to better understand the nature of drought and flood risks. We're investigating pilot trials of Recirculating Aquaculture systems or RAS, which is a fully contained and controlled tank system which recirculates the water and requires minimal water take, and Re-Use systems, which is like a hybrid of our current flow through models and a full RAS at both of these sites which, when proven-up and scaled-up, will improve both climate resilience and fish health. The restoration of the Tentburn culvert also shown on this slide was an infrastructure investment completed last year, which improves flood protection. We are focused on thermotolerance in our breeding programs. And thermotolerance is about identifying fish families who can cope with elevated temperatures. As with all populations, there will be certain family genetics, which enable some to handle different conditions better than other families. We are pleased with the early results of thermotolerance trials conducted at the Cawthron Institute, which identified several families with particularly good thermotolerance under controlled conditions in laboratory tank environments. These traits have also demonstrated good heritability. We are now conducting sea trials with these families to check how they perform in the real environment where there are more stressors such as -- more stressors than just temperature. We're also starting to invest in genomics to accelerate our thermotolerance breeding program. Our independent certifications help us build credibility and trust through an audited process, the Best Aquaculture Practices or BAP is our main certification program, which is an internationally recognized program to certify sea -- farm seafood that is produced safely, responsibly and ethically. It's a fully integrated process across the value chain, which aligns with our company's structure and approach. BAP is of particular importance to our discerning international customers, and we continue to achieve our 4-star status. Turning now to our aquaculture operations. Our forecast harvest volume for the coming financial year is approximately 7,000 tonnes G&G or Gilled and Gutted, and this is in line with our long-run sustainable production estimates of currently farm sites of around 6,800 to 7,000 tonnes. 5 of our inshore farms with the consent set to expire this year are presently in the consent renewal process. We have been farming at these sites for several decades. And while our use of these sites has evolved over time, they continue to play an important role in our revised farming model and future plans, including Blue Endeavor. For example, they could be used as nursery sites of Blue Endeavour, harvest sites or research and development activities. Our ongoing thermotolerant work will also assist in planning future use. Getting consenting certainty for our current farming operations is critical to our commercial viability and our ability to invest in future growth initiatives. The consents are currently going through under the NES-MA, National Environmental Standards for Marine Aquaculture process, which is designed to be a more streamlined process. Irrespective of the legislation currently before the house, our guiding principles remain that a healthy marine environment is vital for our long-term operations. [Foreign Language], with a healthy ocean that people will thrive. Blue Endeavor. We're excited to have finally, received all the permissions required to progress this open ocean site. 9 years and around $7 million in costs reflects a long and expensive journey, but we are finally here. The fact we have now have the license many people have a mistaken understanding that we are off to the races, and we will be growing and selling up to 10,000 tonnes of fish from the site in just a few years, this is unfortunately not the case. While we fundamentally believe that Blue Endeavor will be a success, we will not be gambling our company's long-term existence in the process. Aquaculture is a sector that rewards patients and caution, and we will adopt a prudent approach to pilot trials, improve up the infrastructure and fish health before commencing to scale up appropriately. The scale-up phase will in turn be phased in a manner that allows us to develop markets and customers such that we keep demand ahead of supply. We are currently undertaking baseline data monitoring to build a robust understanding of the benthic environment as well as seabird and mammals, prior to any infrastructure being established on the site. Baseline monitoring will continue through to June 2025, which is the earliest that we can install our infrastructure. At this point, we will install our 2 pilot pens to begin testing of the pen infrastructure and fish performance to ensure it operates as we expect. At our pilot farm, we will put smolt into our inshore farms to grow to around 1.5 kilos. They will then be moved to the Blue Endeavour pilot farm around October, November '25, sufficient to grow up to 500 tonnes of harvest. We will tow smolt from the Pelorus Sound to the pilot farm and back for harvest in 2026. And this will enable us to learn how the first perform in this new environment, and this will be the first year of a pilot trial. We will then repeat the trial program for a second year with for a second year with a larger quantity of fish, but still at a pilot scale. To conduct the pilot trials, we will operate the farms on a daily basis with the permitting for our specially designed service vessel currently under construction, from which we will undertake feeding, environmental and fish monitoring as well as pin and net maintenance. Developing the world's first commercial scale King Salmon open ocean farm requires many enabling and interconnected projects. As I work my way around this slide, you'll gain an appreciation for the road map ahead of us. Firstly, on the top right, we need to maintain a stable core business. This means keeping a solid foundation as we continue to focus on optimizing our base operations. This provides the cash flow platform from which we can sequence the required investments. Then we need to prove Blue Endeavour through pilot farming and testing, as discussed earlier and in parallel an investment decision regarding building a blue -- building a greenfield processing facility is required. The current Nelson facility is both close to capacity and reaching end of life for our purposes. We can process the additional volumes projected for Blue Endeavor pilot operation, but not any meaningfully scaled production. Production. The current facility is around 40 years old. And whilst I'm in favor of [ sweating ] assets, there comes a point where if you [ sweat ] something too far, it becomes emaciated and a liability. The practical constraints of our current severely -- of our current facility severely restrict our ability to drive productivity gains, which is important to maintain competitiveness in a global market notwithstanding that our King Salmon commands strong premium pricing. A higher inflationary environment, matched with static base volume requires us to maintain price growth and to focus on being as efficient as possible. Competition forces the tyranny of doing both simultaneously, not affording us the luxury of choosing to rely solely on our ability to command an ever increasing premium. Productivity is as important as pricing power. We have been working on greenfield feasibility for some time now and continue to evolve and refine our thinking in this area. We will only proceed with the greenfield build once we are sufficiently confident in the return derived from productivity, environmental and quality gains based off our current volumes or until such time as we have increased confidence in the additional volume from Blue Endeavour, likely once the outcomes of the pilot are known. As such, there is no fixed time line for committing to a greenfield build other than to say a sensible lead time for detailed design, consenting build and commissioning is at least 4 years prior to when we expect to have the first scaled Blue Endeavor harvests. So I think you can appreciate it's a long and complex road to charter. To supply the additional 10,000 tonnes of fish for Blue Endeavour, we also need to invest in building our freshwater capacity. We are currently investigating the feasibility of building a pilot RAS system at our Tentburn hatchery and smolt grow-out facility. Successful implementation of RAS for the salmon industry is a necessary step to scaling as it allows significantly more production from the same volume of fresh water as 95% is recycled, and that is a precious and limited resource. RAS technology also allows much more control over the water quality and the environment the fish are reared in, for example, photoperiods, temperature and stability -- and salinity can all be controlled. This control can have the potential for improved smoltification, which is the transformation of salmon from freshwater to seawater prior to transfer to the farms by using photoperiod and/or salinity. By reducing early runting, otherwise known as failed smolt, we would reduce early at sea mortality, improving fish health outcomes along with improved production planning. We also need to invest in building our brood stock capacity at Takaka. For this, we are investigating the use of reuse technology, which is like a hybrid of the current flow-through model and full RAS. the benefits of reuse are primarily around more efficient use of freshwater providing enhanced drought resilience and control over water in the environment in which the brood stock are held. Turning now to the future breeding. Climate change has begun directly impacting salmon farming across New Zealand in the past 10 to 15 years. The environmental challenges to our fish will continue. And therefore, our fish must adapt faster than climate change. In parallel, we continue to invest in breeding for resilience and fish health. We are doubling down, so to speak, on investments in our breeding program. and extending our R&D program to include conversion of an existing commercial sea pen to trial pens at our Ruakaka farm to enable more focused R&D into feed diets and breeding evaluations. Investment in RAS, Re-Use, trial facilities and breeding programs are sound investments irrespective of scaling Blue Endeavour. Upon a successful outcome of the Blue Endeavour pilot, we will then commence phased scaling to commercialize the full size of the farm. This will be characterized as the progressive addition of more pens and fish each year according to the sales forecast such that we can match growth to demand growth. We will progressively scale freshwater investments to match the forecast requirements of Blue Endeavour. The tow model we'll operate for the pilot pens is not scalable beyond the pilot phase. We will require further investment in feed barges, net cleaning and a well-boat. Some infrastructure is logical for us to own outright. However, for some such as a well-boat, no conclusion is yet made as to whether a buy or lease model is best. That is a decision that is deferrable until the pilot is proven up. I'll show you this video of Blue Endeavour as a reminder, of the end goal. [Presentation]

Excellent. A successful pilot will open a transformational growth pathway for New Zealand King Salmon and open ocean aquaculture more generally. Salmon aquaculture can make a meaningful contribution to an export-led recovery for New Zealand. We are not making any assumptions about the outcomes of the pilot other than to say we are in equal measure, excited and cautiously optimistic. As aquaculture demands, we will be patient and disciplined as we step into this new environment. Turning now to resilient brands. This slide shows the spread of our brands that maximize the value and full utilization of our fish. Ora King. I continue to be astounded by the strength of our Ora King brand. In my opinion, the brand has moved beyond a premium functional offer and has been referred to as the wagyu of the sea to become a networked global community of opinion-leading ambassador chefs who choose to represent our King Salmon, not only because of its superior taste and presentation, but also for the relationships they form with each other and their customers while demonstrating their exceptional skills in creating memorable culinary experiences. We have forged powerful personal and emotional connections to our business, fish and our chef communities. Ora King was selected to feature on the menu for the 2023 Met Gala. This was picked up by Vogue Magazine and promoted to around 9 million readers. This is evidence of Ora King's superstar power. I'm going to run this video in a minute. This is a very well-respected Canadian Chef, Darren Maclean. Darren has been an ambassador for 4 years now, and this video was made on his own initiative, nothing to do with us. This post reached an audience of around 45,000 people within hours of being released. I could have picked any one of a dozen such posts. And this organic promotion fuels much of our social media as chefs around the world celebrate the hero dishes that they create with Ora King salmon. [Presentation]

It is a power brand and in my opinion, probably unequaled in global seafood. In the center there, this is a Tyee grown at Takaka, our largest on record. And also there is Liwei, another extraordinary chef from California. Liwei would actually buy every Ora Tyee we produce if we let them. We harvest about 200 per year. And for context, an Ora King Tyee is worth over $110 a kilo. So this particular Tyee, which Liwei did buy was just under $2,600 for a single fish. This fish was dry aged and just a week later -- and just, sorry, just last week was heroed by Liwei at the world's 50 Best Restaurant Awards in Las Vegas. That's the power of the Ora King brand. We also celebrated our 1,000th Tyee late last year alongside a screening event of our Ora King Documentary in New York. And it is fantastic to see that our documentary is still being viewed -- is still being so well received globally, with screenings and events having taken place around New Zealand, Australia, New York and L.A. to date. Ora King is our hero brand for the foodservice channel and Regal is our hero brand for consumers in retail channels. I'm sure you all know Regal well. Over the past few years, we conceded market share in the domestic New Zealand retail channel. This was a conscious choice as we needed to balance heavily restricted supply globally to maintain supply to all our priority markets and channels. Now that supply has rebuilt, we are reinvesting in our digital marketing programs and supporting trade customers via promotional programs designed to stimulate consumption occasions and sales. Our awareness, preference and market share has responded accordingly and Regal is the clear #1 brand in New Zealand retail across all these measures. Regal Epicurean, which is an important Atlantic product marketed under our Regal brand has continued to build the category by attracting younger consumers interested in more contemporary flavors than offered under our current Regal King portfolio. This sub-brand enables us to build our New Zealand sales base, which would otherwise be under greater supply pressure. We are extending Regal into global markets and building our distribution in Australia and selected North American retailers. We are very pleased to have partnered with China Resources Food Supply Chain, to start building the premium position of King Salmon via the Regal brand in China. This is a slow burn strategic initiative to build our premium position ahead of increased supply from Blue Endeavor. China Resources provides us with the importation in in-market cold chain, distribution footprint including supporting access to leading supermarket chains and in-market execution muscle to achieve our long-term joint growth ambitions. China currently represents less than 2% of our sales, slightly up from the 1% last year. There's an untapped opportunity that has been starved of supply as a result of over a decade of lost opportunity for New Zealand through an inability to access additional marine space. Omega is a platform through which we respect the full value of our fish. Many of you will have seen Omega Plus Salmon oil, treats, canned and kibble food for pets in the grocery and specialist channels. In the Treat segment, we have an inherent unique selling proposition, access to a single ingredient salmon pieces and smolt as seen here in this slide. Cats and dogs absolutely love our salmon and treats, and we enjoy incredibly strong consumer engagement. Kibble and canned food is a more challenging market. The grocery channel is a battleground where global pet food heavyweights fight it out. Success in this environment is as much or more about your ability to fund trade investment above and below the line, and cost position to produce and sell at competitive price points than it is about the nutritional quality of the product. During 2023, we made -- the business made the choice to focus its kibble efforts and the specialty channels where we believe there is greater opportunity for smaller players to establish defensible, profitable niches underpinned by the product performance. This is work in progress across 2024. We are making good gains and continue to build out our distribution footprint and tailor our product range to the needs of shoppers in this channel. Turning to the outlook. I have 6 key outlooks I'd like to share with you is to finish my presentation. Firstly, we are building confidence in our revised farming model. We're working with nature by recognizing that the Pelorus and Queen Charlotte Sounds provide excellent farming conditions from the end of March through to December. But across the warmest summer months, these waters can provide a challenging environment for our King salmon, which is something we are working to change via our fish health and thermotolerance breeding programs. The Tory Channel, on the other hand, provides excellent farming conditions all year round. The adapted farming production plan has worked well for 2 consecutive summers. That is a foundation for confidence. A third and a fourth repetition builds more confidence in the trend. Secondly, we are gearing for our Blue Endeavour pilot trial. This is an exciting opportunity and one which we are taking a suitably cautious approach to prove up with an investment pathway in which we can manage unknown outcomes before committing to the larger investment program for which we need greater performance certainty. Thirdly, to the political environment. The coalition government is supportive of aquaculture, and there will be plenty of opportunities ahead for both our company and the wider sector to access tools and funding that could accelerate our sustainable industry. This is a welcome endorsement of the value our sector can provide to both our export-led recovery and the regional development opportunities within. Fourthly, last year was a good return to profitability. I acknowledge the efforts of all our staff to deliver that and the support of our customers and investors to hold the faith. We believe we can further optimize our current business, and hence, our market guidance for this financial year pro forma EBITDA remains unchanged at $26 million to $32 million. Fifth, we are focused on building our resilience and reducing, and so far as practical in an aquaculture setting, the opportunity for volatility in our earnings. We are making investments to build climate resilience into our operations and to invest in science to improve fish health. These investments, by their nature, are medium term before they produce demonstrable results. And finally, solid results in FY '24 with FY '25 building on that foundation. Combined with the pathway to prove up Blue Endeavor, offers the promise of a transformational growth pathway for New Zealand King Salmon and the aquaculture industry. It is a journey for the patient. It is not for those looking for quick wins. We are aquaculture farmers adopting a pragmatic approach to unlocking our potential and aquaculture rewards the patient and cautious. Thank you for your time today. As I've covered a pretty comprehensive review of the year and where we're heading, and we look forward to taking your questions. [Foreign Language] Thank you.

Thank you, Carl. It was -- as I said at the start, a really thorough and complete overview of the performance of the business for the year and our thinking going forward. So what we're going to do now is we're going to go to questions. So we can take questions from the room, and there could be some questions that have come in online. So we'll start with questions in the room. If you have a question, please put your hand up. Monique will come over, give you the microphone. And that way, it can be heard online. And then once we've exhausted questions from within the room, we'll see if there are any questions online. So I'll open up. Does anybody have any questions? We'll just let the mic come over.

I'm Thomas. I'm currently representing the NZSA. Unfortunately, apologies to [ Oliver ] he couldn't make it. So congratulations on getting Blue Endeavour over the line. And that's going to need a lot of investment, is that going to have any effect on the existing farms? Or have you budgeted for that already?

Well, I think I'll get, Carl, do you want to kick of this question. You just come up here and do it up here.

Yes, Thomas, good question because you can see from the number of investments that need to be made Blue Endeavour is going to take a lot of capital. There's no question about that. But underpinning that capital, we have to preserve, maintain our current farming operations. And so we are prioritizing investment into those operations as required. We have to have a strong foundation, and that's one of the pillars on our strategic plan. So it's the tourney of doing both. We have to invest in existing operations and have enough to fund Blue Endeavour.

Yes. So following on from that, is there enough flexibility in the balance sheet to -- sorry, through the debt headroom or existing cash to fund requirements?

So you will see in our current balance sheet that we've got circa $30 million being of cash on hand. And we are predicting guidance EBITDA of $26 million to $32 million. So that's the cash earnings. If you add those two together, that gives us a capital base in cash that will fund the first phases of Blue Endeavour and potentially the early phases of either greenfield or RAS depending on how and when we prioritize and time them. We believe if we can continue to generate strong cash earnings, then the cash earnings we generate plus earnings we can generate from additional growth should allow us to fund the majority of the foreseeable capital requirements from our existing capacity. And so as you know, we have no debt. At the moment, if we got to the point where we felt we needed bank debt, then there will be obviously a strong asset base there that we can go and start to put bank lending lines and against.

Now moving on, you've obviously had a lot of Board changes recently. And we noticed that this year, there hasn't been a skills matrix put out on the presentation. Can we expect to see that at one point? I assume it's a bit too recent with the new changes to the Board.

So as you know, we've had 2 changes. So John Ryder stepped aside at last year's AGM and I joined as the Chair and the Chair Paul Steere has finished and Paul Munro has come through. So that's the Board change you referred to. We work with a company called [indiscernible] New Zealand-based organization that's specialized in governance in terms of Board assessment, performance improvement, direct evaluation, and we have a program that we're starting now to bring [indiscernible] back into the business. They've worked with us in the past prior to the Board changes, and we're going to work with them to reassess how we're performing as a Board, the skills that we have across the current mix of directors and part of that process. We'll be looking forward to what do we need in the future. And from there, we'll obviously continue to adjust and adapt the Board as we see the need, and I suppose, we'll probably look at reintroducing our skills assessment of the new Board for next year once we've had that process completed.

On to the third question. You've had the CEO and the Chair be replaced in the last 12 months, has that created any unintended consequences in terms of managing that change of loss of knowledge or relationships?

Unintended consequences. Not the right thing off. We eat more pies now at the Board lunch. But seriously, people change. Yes, people change. They bring different perspectives and different experiences and different skills. We are lucky that we've got an exec group who have been with the business for a long time. So a lot of corporate and memory is held within our exec team. We work very closely with the exec. We make sure that our Board meetings are really inclusive and the exec team are working with the Board and because we see that governance and management is 1 team with 2 groups that have got very distinct sets of responsibilities. So I think the Board is working really well at the moment. We're very conscious of needing to perform and needing to improve and needing to deliver. So I think it's bound to be different. It's working well from my perspective. And I think from Carl I agree, are you okay?

100%.

And the final question, and then I'll hand the mic off to someone else. Is Picton is quite out the way for shareholders? And apparently, we've noticed that voting is unavailable for shareholders online -- in the meeting online. Would there be any chance of if it's going to be held here next year offering a full hybrid meeting where people can vote online?

So I'll answer that. I think like all companies, we have to continually look at ways that we are communicating and ways that we're sharing information with our shareholders. We don't have a big turnout here today as we can see. I think we need to be aware of the cost of AGMs, and we need to continue to think about how we get this best coverage. I suspect we will do more online next year, whether we continue to have a physical and online hybrid or whether we go 100% online, which will involve, obviously, ensuring we've got the right voting technology in place. There's a discussion we need to have as a Board over the next 6 to 9 months and make a decision on it. I think we've just got to be pragmatic, right? It's hard to get shareholders altogether in 1 location. And we've got a relatively small shareholder base. We just have to be -- we've got a kind of get with the times. Thank you for your comments. Anyone else?

Yes. Good afternoon. I'm [ Andy Endersby ] and I'm a shareholder from Picton, and I appreciate you having the meeting here. It's great.

Thank you very much.

The question I've got, obviously, with farming salmon, the big -- one of the biggest costs would be feed in the salmon. Can you tell me what you actually feed the salmon with? And also, is there any research and development into helping the salmon health-wise and cost-wise? Obviously, we are what we eat. And that is the same with the salmon. So if you could answer that for me, I appreciate it.

Those are wonderful questions. Thank you for those. I'm going to pass these two questions to Grant and Zac and between them as it comes from sort of two angles, but coming up the front, guys. Zac, you can come. So we've got Grant Lovell and Zac Waddington.

Good afternoon. Yes, salmon feed it's by far and away a #1 expense. And over the last couple of years, we've seen significant inflationary pressures come across salmon feed. We're sitting close to [ $3.50 ] per kilogram now. The question of what we feed our fish is it's a pretty regular question for us, and it really has changed over the years. If you -- and it's one that is -- there's a lot of science and a lot of adaptation that goes on. I want to do quick listing and I apologize for that. So if you go back in time when salmon industry first started with a lot of fish meal, fish oil that was add a bit of weight. It was pretty much about it. Now actually, it's just a significant mixture of feed of ingredients. We've got a lot of plant-based proteins, canola oils. And there's a lot of ingredients that are from basically, the human food industry. So meat meals, chicken meals, the leftovers, which is a fantastic story about taking something that's been used for human consumption, taking those leftover ingredients and then putting them into salmon feed to grow and so forth. Fish oil and fish meal has come a long way down. Most of our diets now sit between around 5% to 10% fish meal and around that 7% fish oil. Fish oil is the hardest ingredient for us to replace from the wild fisheries. I mean that's really because of the Omega 3 and the EPA and DHA in those -- in the oil, which then obviously go through to the flesh. But even that's now starting to develop. So we're starting to see development of algae meals, algae oils coming through now, which is really assisting. So we do a lot of work on feed and a lot of feed trials. We have heard Carl talk a little bit around the investment that's been just making -- being made this year for a trial facility out at Ruakaka. That's going to have 12 pens. Most of that is going to be feed-based trials so that we can really understand and make developments. King Salmon is a species that is it's a minority farm specie. Less than 1% of the world's salmon is King salmon. All of the research is down Atlantic salmon. And although we're able to take a lot of that research in our plant, there's obviously a lot of species differences that also occur and we have constantly been doing research to work that through. Our feed comes from 2 major feed suppliers, both based out of Tasmania, Biomar and Skretting, and they're 2 of the largest 3 suppliers in the world. Do you want to add to that?

I think the only thing I would add is that we're constantly doing R&D on our salmon feeds to try to optimize them. The trial system that was referenced at Ruakaka is going to be a bit of a quantum leap for us because it will allow us to do it with replication, with smaller numbers of fish, and that's going to be a huge leap forward for us to build to constantly optimize the feed. So just to give you guys an idea, we probably have 3 ongoing benchmarking trials or commercial trials right now. One that's ongoing currently in Cawthron as we speak. So we're constantly trying to improve. There is every reason to think that we can get feeds that are much, much better than what we currently have, and we'll reduce our FCRs significantly.

Don't get too far away, but often, the questions are about the fish. Yes, that's excellent. Thank you very much. Great. Thank you for that question. Are there any other questions? It sounds like we are exhausting the questions from the room. Any questions online? I think we've covered questions. We'll have another opportunity, of course, when we finish formal proceedings over salmon and other snacks for you to ask questions that may come to you or that you may have not asked now. So thank you. Thanks, Zac. Thanks Grant. Thank you, Carl. We'll move now to the formal resolution part of the business. Obviously, there have been a number of votes sent in by polls over the last couple of weeks. This is the opportunity for any shareholders in the meeting today to vote if you haven't already done. So there are 4 very standard resolutions. The first resolution is for the Board to approve the remuneration. And it's just...

Sorry, we just got a -- as we close, there was a question that came in online. Can we answer that? Is it okay?

Sure. Yes, sure. We'll come back to the resolution and will...

Okay. I'll just read it out. Can you share some uncertainties that can block the progress of building Blue Endeavour? And the second part is how likely are we to make Blue Endeavor fully operational according to the plan?

Okay. So I'll take -- I'll have a crack at that. So the second -- the answer to the second question, 100% relies on the outcome of the trial. As Carl mentioned in his presentation, moving away from our existing farming locations out into the ocean, brings a whole new set of challenges, both in terms of the environment we're farming in, distance from the shore, wave height, currents. We won't be able to beyond that farm the whole time as we are with our inshore sites. So have we to be able to prove that we can get to the sites, monitor them, maintain them, feed the fish, collect the fish. So there's a whole program of work that we have to put into place before we will have the confidence to expand beyond the pilot. I guess the -- and Grant and team pitching here, I guess, the obvious challenges are going to be weather related. What is -- what are the waves like out there? What's the duration of weather events going to be in practice? How can we get in and get out? How are the fish going to actually perform in an environment that we haven't farmed before? So those are the unknowns. We've done a lot of modeling. We've done a lot of planning. But until we're there and until we're doing it in a live environment, we just don't know. And we suspect that from the time we start, we want to run 2 years of fish out there because no year is the same as the next. So it will be 2 to 3 years for us to prove to a level of confidence that's sufficient for us to invest more capital than expanding and invest more resources and generating the fish to put out there. And only then will we be able to answer the second part of that question. Any others? Online? No its right. So we'll go back to the resolution. So Resolution 1 is that the Board be authorized to approve the remuneration that we pay to the auditors for their services. That's an annual event. Post audit, we sit down and we talk to the auditor for the business and we negotiate and we set fees. And this resolution simply gives the approval to the Board to do that. The second resolution is that the Board is, I just moved this one on the right, I'm one slide wrong. Yes. So the second one is that the total annual remuneration available to all directors has increased from $600,000 to $660,000, which is a $60,000 or 10% increase for the financial year that ends January 2025. So this is another resolution that comes to shareholders annually. Each year, we assess several things. We assess the workload that the Board has in front of it. We assess the market remuneration ranges for similar businesses. And New Zealand, we use an external company called Strategic Pay, who are experts in assessing Board fees across all sorts of companies and industries, and they give us a range within which they believe the fees should be set for an organization like ours, and we use that to guide the recommendation that we make to shareholders. And we assess how well the business is doing and is anticipated to do. As a philosophy, we believe that the business needs to perform for shareholders for directors to be in a position where they should be paid more. And so we believe that we are improving the business and the returns and results for shareholders are improving. And so that just helps us to feel comfortable that making this recommendation is the right thing to do. So that's the background there. The third resolution and this one, which is a tricky one and it's about yourself, but it's to recommend to shareholders that I'd be reappointed as I joined the Board this time last year and the way the rotations work, I came up for reelection now. I hope that I have the support of shareholders. I've thoroughly enjoyed my first year. It's been part of the King Salmon governance team, and I'm really enjoying my role as the Chair of that Board. It's a great privilege for me. It's a business that I love and I'm really enjoying and I want to continue to serve shareholders and work with the team. So yes, hope I get reelected back, and I'll do my best for you. The next resolution is the same resolution, but Paul Munro, our new Director. And I'll just ask Paul to step up and introduce yourself.

[Foreign Language] Conscious that I'm standing between all of you and myself and some of that beautiful food over there, so I'll keep this pretty brief. I've got a corporate background, 24 years with Deloitte as a Corporate Finance Partner, so strong financial background. Love that time, but was never going to do it forever, and I needed a change. So jumped out of that and was the CEO of a company in Christchurch called Christchurch City Holdings for 6 years, has a lot of commercial infrastructure in Christchurch Airport ports, telco company, Alliance company, loved that but time was right to move on to doing something else when I turned 50 and had that sort of mid-life crisis, and that means I'm going to live to 100, which is good and decided that I wanted to stick to my plan, which was to pursue governance opportunities, not full time because I'm not full time, but do governance stuff for the rest of my career and step into that when I was 50, and I'm a couple of years into that now and really loving the variety of things that I'm lucky enough to do. This is one of the highlights. And I was saying to Mark the other day or yesterday, when we were at looking at the safe farms that is an absolute privilege to be able to be part of New Zealand King Salmon and to be out in this wonderful environment doing what Carl and Mark have been talking about in terms of farming aquaculture sustainably. It's not the primary sector stuff I've done in the past. I've been involved with a lot of land-based farming activities and other capacities. So this is a bit new to me, but a lot of transferable skills and a lot of parallels with what our farming community does on the land with what we're doing out in the ocean. So really enjoyed the 3 months now that I've been involved with the Board, the passion, the knowledge, the commitment from the whole team, some of them are here today and many of them aren't, is really great to see and a real privilege to be involved. So like, Mark, I thank you and I ask you for your support, and thank you for your support, if you're good enough to give it to me and look forward to working really hard for you as our shareholders going forward. So thank you very much.

Thanks, Paul. It's fantastic having you on board. So from here voting, if you haven't already voted, then you just put your votes in the box. One more there, 2 more here, 1 here. [Voting]

Thank you for -- the votes will all be counted and then the results will be posted sometime this afternoon. Yes. So again, thank you for that. That brings the formal ASM to a close. Again, thank you for coming and spending time with us today. Shareholders, thank you for your continued support. The King Salmon team that are here, thank you for everything you do for the business and for our shareholders. To my colleagues on the Board, it's been great -- this last 12 months. And I'm really looking forward to continuing to do everything we can to continue to build this business into a stronger and stronger organization. We have a world-class wonderful product, the best in the world. We have fantastic people working through our business. We have a great opportunity in front of us. We need to be cautious. We need to be sensible. We need to make good decisions, and we need to always keep in mind that this is a very long game, and rewards will come to those that are able to make sound decisions, see through the cycles and continue to build and build and build, and that is what we are all about. So thank you, again. What we're going to do now is we're going to get Antony to join us. And I'm just going to get Antony to talk a little bit about the product, where it's -- yes, you -- well, why don't we just get him stand and just sort of cluster around there. Antony can give us a quick demonstration, talk to us, and then we'll have refreshments. Okay. Thank you.