Ricegrowers Limited (7H0.F) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the SunRice Group Full Year Financial Results Investor Conference Call. [Operator Instructions] I would now like to hand over to the conference call host, SunRice CEO, Mr. Rob Gordon; and the company's CFO, Mr. Dimitri Courtelis. Please go ahead.

Thank you, operator, and welcome, everyone, to this morning's call. We appreciate you taking the time to join us following the release of our full year results just yesterday. My name is Rob Gordon. I'm the CEO of SunRice, and I'm joined today in Sydney by our CFO, Dimitri Courtelis. Our plan for today's call is to provide a brief overview of our full year 2020 financial results, then open to questions to all participants who have dialed in today. Along with yesterday's announcement, we also lodged an investor presentation on the ASX, which I'd encourage you to read. Before going into the details of our results, it goes without saying that FY '20 has been nothing short of an extraordinary year with Australian supply dramatically reduced by 91%. Despite having hardly any local rice to sell, we delivered a profit. This is a significant achievement and would not be possible without the strategy we've built over the course of many years. In addition to overcoming a severe local supply shortage, our strategy has also allowed us to navigate and overcome a whole host of additional challenges faced during FY 2020, including deteriorating conditions in Pacific markets; the devastating bushfire season; and the global pandemic, which produced mixed impacts for our business. We could not be prouder of this outcome. We've built a business which is agile, diversified and well positioned to take advantage of the many strategic opportunities in front of us. At the core of our evolution as a business is SunRice's 2022 growth strategy, which I'm pleased to say we've made significant progress against during the year, and I'll touch on it in more detail later on in this call. I, along with the rest of our management team and Board, am incredibly proud of how our team has responded in a coordinated way to the challenges faced during the year. We thank everyone for their continued contribution and commitment, which is critical to our ongoing success as a business. Now before getting into the key highlights and other details of this result, I would like to call out an important milestone for SunRice this year, which is it's our celebration of 70 years as a business. From origins as a small group of Riverina rice growers in 1950 to the global ASX-listed food group we are today, it's been an incredible journey for our company. Underpinning this longevity has been a tradition of innovation, which is a key component of our DNA and something which we are proud to carry on today. SunRice's heritage forms the theme of our 2020 annual report, which was released yesterday, along with our results, and is our first to combine both financial and nonfinancial performance measures as we move towards integrated reporting in the future. This year's report also contains a comprehensive overview of the various sustainability initiatives we have embedded across our business during the year, explaining how each works to support SunRice's overall strategy, and I'll call out some of these initiatives later this call. With that, I'll now move on to the detail of our results, starting with a snapshot of key financial metrics and other highlights. As we reported yesterday, consolidated revenue for the group during the full year was $1.13 billion, down 5% on the prior corresponding period. Net profit after tax was $22.7 million, a decrease of 31% on the prior period. And in line with last year, we have declared a fully franked dividend of $0.33 per B Class share. Now while disappointing to record a decline in profit from the prior year, it is very pleasing to see our unique model continue to deliver profits through very trying circumstances, many of which would have been difficult to conceive just 12 months ago. Our ability to generate profits in this environment should give our B Class shareholders as well as potential new investors comfort around why our model has been set up the way it has and how it responds under pressure. It should also provide investors with insight into the mindset of our management team, which does not view losses as an acceptable outcome even in a highly cyclical industry. Compared to other pure-play agriculture and commodity companies, we have the advantage of strong consumer brands and diversified earnings, which can deliver even in a down cycle. As I alluded to earlier, there were several factors impacting overall group profitability this year. Firstly, our Rice Pool business, which deals with the receival, milling and selling of Riverina rice, recorded a small loss due to its inability to absorb all overheads as a result of a 91% reduction in this year's crop compared to the prior year. By contrast, in average years of production, proceeds from the sale of Riverina rice, less costs, are payable to growers for the supply of their rice, and this results in a nil profit for this particular business segment. Considering the severe drought conditions, low water availability and high water prices faced by growers this year, we offered commercially viable prices for rice of $500 per paddy tonnes for Reiziq and up to $1,350 per paddy tonne for organic varieties of rice. This was done to incentivize a minimum level of production and maintain baseline operations in the Riverina. Fortunately, we were able to contain losses within the Rice Pool to some extent, which we'll talk about further following discussion of each profit business. Another impact to group profitability occurred within International Rice where strong gains in our trading business combined with our maintenance of key market positions were offset by a host of circumstances, which included rising global rice prices, foreign exchange fluctuations putting pressure on margins and increased brand charges and group overhead charges in line with increased revenue for the business during the year. Weakness in our Pacific markets also weighed on what was otherwise a positive performance in the International Rice. Finally, within CopRice, while early drought conditions in FY 2019 had a positive impact on sales through increased demand for supplementary stock feed, ongoing drought conditions in FY 2020 have the reverse effect by way of lower volumes and higher input costs, resulting in both revenue and profit declines in this segment. On a more positive note, and before I hand over to Dimitri, who's going to run through each of our profit businesses and the Rice Pool, I would like to briefly mention some highlights from the year. The first and most significant was progress made with respect to delivering against our 2022 growth strategy. This work is being undertaken to further expand and diversify group earnings, and there are some exciting initiatives we are launching this year that I'll -- which I'll go into in more detail later. The innovation pipeline remains strong in our Rice Food, Riviana Foods, CopRice and International Rice segments, and we look forward to realizing the benefits of this work in the current financial year. Importantly, we've continued to strengthen our dynamic culture and our values at SunRice, which, in turn, has enhanced alignment between our employees' understanding of their contribution to SunRice's goals and growth strategy with some 86% understanding this connection. This is an important measure of employee engagement for our company and will serve us as well as we continue to evolve as a business. Our approach to culture and values is also reflected in how we manage business risk, which is something that we are continually monitoring to ensure we are well placed to anticipate disruption and achieve our strategic objectives. We are continually looking to the future to evolve our business, an example of which is our supply chain infrastructure now operating in 11 countries, excluding Australia, and this is to meet the global demand of our customers. Further detail on our approach to risk is outlined in this year's annual report, if you'd like to learn more about it. I'll leave you with one final highlight, which we called out in both our annual report and investor presentation, which is SunRice being in the top 4% of the most iconic, fast-moving consumer good brands in Australia. This recognition is significant and speaks to both our rich heritage and our ever-increasing presence in the lives of consumers across a variety of brands and product types. Without the right culture, values and approach to risk, this brand strength recognition would not be possible. It is a recognition which our team looks forward to building upon further during the coming year and well into the future. With that, I'll now hand over to Dimitri to discuss each profit business segment.

Thank you, Rob, and hello to everyone joining us on the call this morning. The first business I'll talk about is International Rice, which sources, processes and markets rice to our international markets. Whilst revenue increased 10% during the period to $531.4 million, the business produced a loss of $1.4 million, which, as Rob mentioned, worked against our overall group profitability for the year. Our Singapore trading business continued to play a critical role for us during FY '20, flexing its international sourcing capabilities in response to the very small Australian crop and growing global demand for our products. It is important to note that demand for SunRice's products now substantially outpace volumes of available Australian rice even in what we would regard as an average year of production, highlighting the importance of our trading business and the role it plays, providing us with an affordable supply to match the required style and quality of rice to the markets that we serve. This strategic sourcing and supply model has allowed us to fulfill and retain existing markets historically supplied by Australian rice, which could only supply approximately 5% of our global demand based on this year's harvested crop. Incremental profits were, therefore, generated in the International Rice segment to compensate for the losses incurred in the Australian Rice Pool business, further demonstrating the complementary nature of these 2 business groups within SunRice. In addition to gains from our trading business being offset by rising global rice prices, foreign exchange pressures on margins and higher overhead absorption and brand charge allocations as the result of the low Australian crop, we also continued to face deteriorating economic conditions in our Pacific markets, which were amplified by very aggressive competitive pricing ultimately driving the segment into a negative result. In response, we introduced a range of cost-saving initiatives and developed a new price fighter brand offering earlier this year in order to help maintain our position. These conditions, however, significantly weighed against the improved year-on-year performance in the rest of our international operations. Now putting the loss aside, it is pleasing to see that this business continues to increase its global presence, with new supply sources activated during the year across Asia and South America, bringing the total number of countries that we source from to 11. SunRice brands also retained their market-leading position in the Middle East and other key markets, and our Lap Vo Mill in Vietnam achieved profitability in its first year of operation, which was an excellent result. Our operational model in Vietnam has allowed us to strengthen the supply chains out of Asia and into markets that we serve, and demonstrates our ability to partner with local communities and governments to replicate the standards of Australian rice overseas and ultimately capture more value for our shareholders. The next segment that I will talk to is our Rice Food business, which manufactures, markets and distributes value-added rice products. Both revenue and product remained -- and profit remained in line with results achieved during the prior period FY '19 at $99.6 million and $4.6 million, respectively, despite significant devaluation in the Australian dollar. Impacts on performance included continued aggressive competitor pricing, which eroded both market share and margins in the ready-to-go meals and microwave rice categories. Other factors working against performance included the lack of Australian crop and the supply from the Rice Pool, the inputs of which are used in certain products, and an also weakened Australian dollar in relation to the USD, which has increased the cost of some of the imported products. Despite these impacts, SunRice has retained its leading market share for microwave rice and rice cakes in Australia and New Zealand during the year, and COVID-19 purchasing late in the year helped the business to maintain revenue and profits in line with FY '19 levels. As we have noted previously, the product portfolio within Rice Foods continues to be a major focus of innovation and investment. This year saw the launch of Low GI instant rice cups in China, focusing on hospital and online channels, and we also reengineered our snacks portfolio to cater for consumers seeking healthier options with the extension of our range to include new rice puffs and rice cracker chips, utilizing distribution reach into markets right throughout the Middle East and Asia. We continue to implement cost-saving initiatives and strategic initiatives to improve efficiencies in Rice Food. We are also making investments to support the product innovation in the segment, including in our Leeton rice food facilities to strengthen the microwave rice capabilities. Within Riviana Foods, our specialty gourmet and entertainment food business, revenues increased by approximately $10 million to $136.6 million, whilst net profit before tax decreased 8% to $8.1 million compared to the previous corresponding period. We experienced organic growth across most categories during the year, driven by the strong performance of our Always Fresh and Fehlbergs brands. Core supermarket categories also performed well with notable growth both in pickled vegetables and premium biscuits. Now foreign currency movements continued to weigh on Riviana's performance as the Australian dollar declined against the USD and the euro in the last quarter in particular, increasing the cost of imported products, which put pressure on our margins and worked against us, which was otherwise a very good growth for the year. Roza's Gourmet, which was acquired last year, delivered benefits to SunRice through diversification into the chilled product segments as well as new product lines with the launch of Roza's hemp-based sauce range and olives offering during the year. This is also the first full 12 months of trading for Roza's within Riviana, which delivered revenue gains for the segment. Other impacts included the tragic bushfire season, which negatively impacted the summer holiday spending, which is traditionally a peak trading period for the business. However, increased purchasing products within the segment resulted from COVID-19 partly offset this as the year closed. Conversely, this pandemic caused a dramatic contraction in the revenue for Riviana's food service business with sales halving during the month of April after what had been a strong year of growth. We continue to pursue several growth initiatives in this business, which Rob will speak to later. Within our animal feed business, CopRice, revenues decreased by 10% to $139.9 million compared to the prior year, and profits decreased to $3.6 million. CopRice's performance weighed against group profitability as the benefits of increased demand for stock feed during early drought conditions last year eventually reversed with prolonged dry conditions and lack of water availability this year resulting in reduced livestock numbers and therefore, limited demand for supplementary feed. Less availability of rice inputs due to the low crop, combined with high input costs for commodity inputs such as wheat and barley, which could not be passed on to consumers, also provided some headwinds. However, despite the prolonged drought and the reduced feed demand, sheep and beef feed categories continued to perform well above historical averages. In other areas, CopRice experienced margin growth after relaunching the Working Dog range and an improved stabilized rice bran premium in the equine offering. This work is part of our strategic push to develop a more consistent volume and margin-accretive business unit. Similar to other segments within SunRice, we continue to pursue growth initiatives within CopRice, and an example of this is our investment in the new rice brand stabilization plant in Leeton, which was commissioned in September of 2019, and the repurposing of the Coleambally rice mill to a ruminant feed plant. These initiatives realized incremental profits in the second half of FY '20, and we expect to contribute to a greater extent in the future. The next business I'll briefly touch on is Corporate, which captures the income and costs of holding and financing the assets that are used by both the Rice Pool, represented by the A Class shareholders; and the Profit Businesses, or the B Class shareholders. In addition to approximately 30 SunRice brands, this business also holds rice receival and storage facilities across the Riverina as well as rice milling and packing facilities across Australia. Corporate earnings were $18.3 million for the year, down approximately $7 million, or 30%, compared to the prior period. The decrease in profit for FY '20 was primarily driven by nonrecurring costs associated with the increased level of risk due to COVID-19. These provisions were taken as part of our prudent approach to risk management in light of this unprecedented events. The low interest rate environment also drove down the cost of capital during the year, reducing the asset financing charge normally payable by the Rice Pool business, the offset of which positively contributed to the Rice Pool, helping to contain its loss. The final segment I will discuss is our Rice Pool business, which is held by A Class shareholders, and deals with the receival, the milling, the marketing and the selling of Riverina rice. As we have touched on already, severe drought conditions, low water availability and the high water prices provided a very challenging environment for our growers this year with the C19 crop 91% down than the prior period. Due to the lower volume harvested this year and the fixed price contracts offered, the Rice Pool was unable to absorb all of the overheads in the business and recorded a loss of $4.1 million, which impacted overall group profitability. Fortunately, we were able to contain the shortfall by prioritizing the supply of available Australian rice into premium markets, which demand it, reinforcing the value of our strong brands and the product portfolio. Other factors working in our favor included a weakening Australian dollar against the U.S. dollar during the year, which had a favorable impact on export sales, and also the surge in demand associated with COVID-19 pandemic in the final 2 months of the year. Importantly, approximately 300,000 paddy tonnes of carryover from the C18 crop was milled during the year, which supported sales and sustained baseline Riverina assets and operations, contributing positively to the absorption of manufacturing overheads. Further relief was provided by the Rice Pool attracting a lower brand and asset financing charge as well as a smaller group overhead allocation. As a result, the overhead cost allocation was further absorbed by International Rice due to the higher volume of rice sold in that segment. Despite the challenging conditions linked to water availability, we continued to invest in key projects within the Riverina during the year to ensure our workforce and facilities are maintained. And once seasonal conditions improve and pricings increase, we are well positioned to take advantage of the increased rice crop volumes. I will now hand back over to Rob to touch on sustainability as well as our growth strategy and outlook.

Thanks very much, Dimitri. Before providing an update on our 2022 growth strategy, I'd like to quickly touch on some of the key sustainability initiatives we've embedded into our business in FY '20 and others which we are pursuing this year. Highlights included approval of a new supply sustainability code, which will apply across the group in FY '21, and creation of the framework to capture and track sustainability data, allowing us to set baselines for the current year. We've also taken initial steps to follow through with our commitment of working towards implementing the recommendations of the Task Force on Climate-related Financial Disclosures, or TCFD. Like other areas of our business, the work around sustainability currently underway is dynamic and is critical to delivery of our business strategy. We've included a slide summarizing our approach to sustainability in the investor presentation lodged yesterday. And for those of you wanting to learn more about activities underway, of which there are many, I would strongly encourage you to read our annual report, which is available on the ASX and our website, and this contains a comprehensive overview. I'll now discuss progress against our 2022 growth strategy during the year, which, as I said at the start of the call, has been a major highlight. Our growth strategy is a critical element of the SunRice group in the context of our current activities and, more importantly, where this business is headed in the future. During the year, we were pleased to open our new stabilized rice bran plant in Leeton, following investment over the last 2 years of $10 million to improve the efficiency and use of valuable rice products for the Rice Food and CopRice segments. Within CopRice, we successfully repurposed the Coleambally Mill into Australia's largest ruminant nutrition plant for less than $3 million and have acquired and are upgrading for a combined $6 million the assets of FeedRite to expand the pet food production capabilities. Within Rice Food, we commenced a $4.5 million upgrade to Leeton's microwave rice facilities to increase capacity and significantly improve production capabilities. Our healthier snack range was also extended to rice puffs and rice cracker chips, along with our geographic footprint in the Middle East and Asia. We continue to build sales for our Low GI table rice in Asian markets, including Singapore and Hong Kong, and are building momentum in the Australian and New Zealand markets as well. In the Rice Pool, Rice Food and International Rise segments, the innovation pipeline remains strong, and there are several initiatives being launched in FY '21 to deliver benefits for the group in the coming year. These include the launch of SunRice's new infant range in Australia and China in late calendar year 2020, and this spans baby rice cereal, rice puree and rice snacks. We'll also continue to grow our expanding rice snack portfolio through broader distribution channels internationally while, at the same time, strengthening and diversifying our international supply chains and infrastructure to source quality and affordable rice during the period of high demand. CopRice and Riviana Foods have several important initiatives underway for the year ahead, and we plan to pursue and integrate further value-accretive merger-and-acquisition opportunities with both these businesses. With CopRice, we will continue to build our industry-leading animal nutrition business with initiatives spanning dairy, sheep, beef, equine and companion animals while bringing fast-moving consumer goods thinking to agricultural retail and cater to the whole life cycle of companion animals. Investment will also continue to be made in pursuit of further operational efficiencies within the business. With Riviana, we are focused on achieving further scale to increase Riviana's share of the entertaining platter and the premium food category in Australia whilst also growing our Always Fresh, Fehlbergs and Roza's Gourmet brands through continual new offerings in retailers. Despite the dramatic short-term challenges, our outlook as a business remains very positive as we focus on the growth and diversification of earnings in FY '21. While this year's crop year '20 crop is lower than the previous year, when coupled with crop carried over from prior years, the reduced volume of rice we have is expected to maintain a baseline milling program at the Deniliquin and Leeton mills at least until the end of the calendar year. Being able to do this is critical to allowing SunRice to keep our operations and workforce engaged so that we can respond efficiently and take advantage of improved conditions when they return. We will also continue to vigilantly monitor a range of factors that have the potential to impact revenue and margins in the short term, including global prices, foreign currency exposure, conditions in Pacific markets, competitor activity and of course, the ongoing COVID-19 pandemic globally. With that, I'll hand over to the operator to open the line to participants for any questions that you might have.

[Operator Instructions] Your first question comes from Finola Burke from RaaS Advisory.

Congratulations on delivering on your guidance on the dividend, and on the strong cash flow generation across the group in what has been a very tough environment. I have 2 questions. 2020 was obviously a year of investment and restructure within the group, particularly with your repurposing of the Coleambally rice mill and the investment in the Leeton rice bran stabilization plan. You said that you had delivered -- that you saw some delivery benefits in the second half, I think, Dimitri. Should we anticipate additional benefits in 2021? And what's the runway for your return on investment in these initiatives? I'll reserve my second question for the best, if you will.

I think both the questions are just one.

That was just one.

So you're quite right in observing we've made a number of investments during the course of the year, Coleambally and the bran plant in particular, but also FeedRite at Wangaratta. We did see some profitable revenue coming in through the rice bran sales that commenced sort of at the end of last calendar and continued into this year. So obviously, we would expect to see in the coming year, on the year we just started, a full year benefit of that. So therefore, we should see further earnings. The Coleambally Mill has got to build volumes with farmers in the region around their offering of grain-free feed for both beef and dairy. We are seeing some really significant interest there, and we expect that we will be making sales out of that facility. So again, with -- hardly any sales were made in the end of the calendar -- the financial year that was, we expect to see the full year -- that full year run rate building. And then we are expecting to see our expanded pet food facility that we acquired in Wangaratta and to come on stream late calendar this year, and therefore, we'd expect some earnings from it. And we already have contracts secured to put into that facility for the end of the year. So indeed, we will expect to see further earnings from those. There are additional headwinds across the group and so, obviously, whilst their earnings will contribute, we would expect to see also some further headwinds for the group from the fact that we have seen a still smaller crop harvested for the Rice Pool business. And we have much rice carried into the year, and therefore, we will see headwinds in the form of further underabsorption of costs in the Rice Pool business in the coming year. I think the opportunity to say that with 200,000 tonnes less to mill in the coming year, we have already backfilled that supply from alternate sources and are now sourcing in the current year from 12 countries in addition to Australia. So we haven't backfilled that. But nevertheless, we still do have a very heavily underutilized set of assets in the Riverina without rice flowing through those in larger volumes, then clearly, they'll still weigh on the performance into the future.

Actually just flowed into what I was going to ask secondly, Rob. I mean you previously announced that you've sourced rice from China to meet your current share in FY '21. And I think you've also, in the presentation, mentioned that you're sourcing rice from South America. Is there enough sources in the current environment to offset the lower crop in Australia to meet your -- I think, on average, you need at least 1 million tonnes? Is there enough of them elsewhere? Or do you think you'll -- it will be a little bit lower this year?

No. Indeed, we have already secured in excess of 1 million tonnes of rice from around the world for the coming year. The diversity of supply chains that we've built, I think, has really served us extraordinarily well, not only to backfill those markets that were no longer to be able -- able to be serviced from Australia in a normal year. I think the point we'll make in a number of forums is that we now have built global demand well beyond what Australia could ever supply even in a good year. And with the diversity of supply sources that I've described and we were public, and with regard to some of the supply chain difficulties imposed by COVID. So in the course of 1 week, at the peak of COVID a couple of months ago, the Vietnamese government gave about 4 hours notice of putting a ban on all rice exports. The Cambodian government then followed suit the following day, and a couple of days later, Myanmar shut its borders. So 3 of our supply sources effectively rattled off in the course of just days. We were able to lobby governments and also flex other parts of our supply sources and actually didn't miss a beat. And interestingly, our China supply was completely reliable throughout into the Pacific. I would note that that rice flows into the Pacific, not into Australia. And so we're -- and all of those supply sources are back working fully. In fact, we only lost a couple of weeks out of Vietnam. But nevertheless, the diversity of supply was able to provide us with choices to sort of avoid the obstacles as the year went by. And I think that highlights how nimble or dynamic the business has been because obviously, we're selling branded product in supermarkets. This is not commodity. So every time you switch source, you have to switch product label. So our ability to switch packaging sources, make sure that rice suits the end market, I think, demonstrates the sort of flexibility we've now built as a core competence of the group.

[Operator Instructions] Your next question comes from [ Malcolm Harvey Sprague ].

My question basically is about the profit -- 2 profit centers of the business. It seems to me that there is a constant cross subsidy from the business activities across section across to the paddy pool section. This has happened, I think, for the last 3 years and will probably continue to do so in the future. Can you tell me why these 2 profit centers are necessary in this business when this cross subsidy from B Class shareholders to A Class shareholders continues, and in 1 year some time ago, it amounted to $32 million, to my memory. And my second question is, can you guarantee to B Class shareholders that you will not provide any information to A Class shareholders during the growing period that may influence their investments in the business where B Class shareholders -- the same information will not be available to B Class shareholders?

Thank you for your questions, [ Malcolm ]. I might just touch on the second question first, but I will make sure I come back to your point with regard to your concerns on subsidization. With regard to conflict, we observe very strict conflict resolution, and we also make sure that our obligations with regard to continuous disclosure to all stakeholders at all time is met. So at any time there is any information that's material either to As or Bs, we actually post that either on our website or on the ASX site according to the regulations. So there is a uniformity of available information to all stakeholders. So that, I'd just like to highlight that. If, at any time, there is a topic or a decision that looks like it may provide conflict, we do actually have a conflict resolution policy. And if -- at the Board level, if there is a grower who actually has a personal interest, then they recuse themselves from any discussion, conflict themselves out, and indeed, and this probably leads into your first question. In years where the full absorption of costs in the Riviana has not been possible in the paddy pool, the decision to pay a price that leads to a loss in the pool, which obviously weighs on profit, to your point, actually is a decision that is recommended by the Independent Directors who are not rice growers and members of the management team, including myself. And the assessment that is made is whether the decision to pay a particular price is in the best interest of the business as a whole on a longer-term point of view. Now we have income into corporate, which is based on many things, 2 of the things which relate to your question. One is an asset finance charge, which effectively is rewarding the B Class shareholder with income based on effectively renting out the assets that you own to the Rice Pool for their use. And secondly is a brand charge, which is charged as a percentage of revenue on all branded sales around the world, including brand sales made from the Australian Rice Pool. So there's 2 sources of income there. So if we have 1 drought year, the Board wrestles with the idea of, so if we were to not maintain a Rice Pool in Riverina, then at that point in time, it would threaten the ongoing viability of the assets that you own in the Riverina. And therefore, if we were to take a decision that those assets were no longer viable, we'd see an impairment of those assets, and we would hand you a very substantial impairment through the P&L in that year. What we've clearly seen is in 2016, which I think the year you referred to, when world rice prices were very low but there was very expensive growing conditions in the Riverina, we paid a price which led to a supplement or a loss in the Rice Pool. Nevertheless, because we put a decent price in the market, which allowed growers to grow, the following year, we bounced back -- our C17 year bounce back with a very healthy Rice Pool and a very healthy profit, and that's actually helped us to maintain and pay a dividend and also paid to retained earnings, both of which are attributable to the B Class shareholder. We have 2 key cadences as a business. One is to increase shareholder value, and the other is to increase the paddy price over time. And we take both of those very seriously, and we take our obligations to both sets of shareholders very seriously. And that's the -- if you haven't looked at this year's results, this year's result, there was a small loss made in the pool. So despite the fact that water prices are expensive, and we paid a $500 a tonne price at the farm gate, we recorded a small loss of circa $4 million in the pool. That actually was after taking $4.5 million worth of redundancy costs in downsizing the Riverina footprint. So effectively, the Rice Pool was flat from that restructuring cost. So the amount of subsidy or cross-subsidization pool was minimal in the scale of things and has actually kept the faith with rice growers in the Riverina and also, very importantly, helped us to maintain the assets with people who know how to use them and those assets to your account.

Can I make some comments up, Robert?

Yes, certainly.

Given all you said, I still fail to see why this whole enterprise is structured in 2 different divisions. I mean, surely, we can achieve everything you said, including reasonable paddy pricing that would produce the maximum yield, local yield we need all from 1 enterprise and not 2. My second point about the transparency of information going to A Class shareholders, are you saying that when prior to the growing season commencing, when you're in constant communication with your A Class growers about adequacy of water supply, indicative pricing, all those sort of things, that information is not coming to B Class shareholders. You are dealing direct with the growers and trying to incentivize them to grow rice. And so I think that's a dangerous situation to be in where you're dealing with A Class shareholders differently to what you are being, and they are in a position where they can make a substantial investment in the company on this forward information, which is not available to ordinary B Class shareholders who are not A Class shareholders.

Thank you, [ Malcolm ]. I guess what I'd highlight is we are 1 enterprise. We have -- since we've been listed and since, frankly, corporatization, which is back in 2005, the -- we've had a dual structure, and it's been running for that length of time. So any investor who comes in does so with full disclosure and knowledge of the structure that we operate as a company, and they have a choice about whether they buy or sell our shares and whether they are prepared to be in the model. The model, we expect to have some level of discount because of the complexity and because of the -- some of these inherent issues that you are talking about. But there's a very clear conflict management between the A and B returns in the business, and they're highlighted in the prospectus that we put out at the time of listing on the ASX. And I think we've actually served both A and B Class shareholders very well over time, increasing returns to both but never comprising the model other than in the years where it makes sense in the best interest of the business for us to pay a price at farm gate, which retains the value of your investment in the assets. With regard to your comments on growers versus A Class shareholders, I guess I'd point out that they're not necessarily the same thing. We have growers who are suppliers. We have conversations with suppliers of packaging material, et cetera, which, again, B Class shareholders are not privy to. We have not had conversations with growers with regard to trying to incentivize them until such time as we actually publish those offers through our own website, not necessarily the ASX. And any presentation material that is used is posted on our own website, even if it doesn't qualify to post on the ASX. So I guess I'd draw the distinction between an A Class shareholder and a supplier to the business, and we have normal commercial relations with supplies to the business. And as I say, they're not necessarily privy to B Class shareholders on the basis of their commercial incompetence in many instances. If they are material to the outlook for the business, then they are disclosed appropriately.

[Operator Instructions] There are no further -- my apologies. Your next question comes from [ Andrew Marshall ] from [indiscernible].

Rob, very quick query. I'm just wondering if you could spell out a little bit more about the Pacific market situation, please, the sort of difficulties you had and the competition that you're talking about there.

Thanks, [ Andrew ]. And thanks for your continued interest in the business. Certainly, the Pacific markets, as I think a number of people on the call may understand, have not enjoyed the strongest of economies and have actually been hit quite hard by COVID. There's -- if I look across the Solomon Islands, for example, as COVID hit, people were encouraged to leave the capital, Honiara, and move out to their home islands. And also, we saw restrictions on ships coming from Asia being put in quarantine for a couple of weeks before they could offload. So not only was there a restriction in -- or a reduction in affordability for some of our Pacific Island customer consumers, but also the supply chains were quite heavily disrupted. We've also seen, in Papua New Guinea, a continued decline in the kina cost rate and no liquidity available or very limited liquidity available. So our results include a mark-to-market on the intercompany payable balance between our Trukai subsidiary and the parent. And we've seen, therefore, lack of affordability. We've also seen some very aggressive competitive activity as the Wilmar Group attempts to buy market share across the Pacific and is effectively trying to undermine a branded position. We've maintained our branded position but had to -- when you have very impoverished consumers charging a very significant brand premium, obviously, is constrained. So whilst we've maintained the brand premium, some of that has come under a bit of pressure over the course of the year, and that's taken, as we said in the notes, the Pacific segment into a loss-making position for the full year. But we've maintained our market positions, and we've been able to hold off the march, if you like. So it's a bit of a -- and I think a competitive opportunity for them to try to establish a toehold in the Pacific and very much on a loss-leading basis. Fortunately, we believe we have the lowest-cost supply chain across the Pacific and therefore, expect through the launch of alternate price-fighter brands over the course of the closing months of the year to be able to take this position back into a more favorable position in the coming year.

Your next question comes from [ David Marsden ] from [ DW Marsden ].

My question is about the American operations. What is happening with the grain there? And has it been utilized?

May I clarify, is that South America or the Californian position?

The Californian. And if you could elaborate on the South American as well, please.

Yes, certainly. So we have a subsidiary called Sun Foods in Sacramento Valley in California. It is -- it always comes into its own when Australian rice crops are low, we're able to backfill a Californian Calrose product, which is very close to our Reiziq product into key markets, particularly in the Middle East. We did that during the year, flexing supply from that up to backfill where Australian rice was unavailable. The business has actually had a positive year and is also going to serve us well in the coming year. It is likely to be pretty full during this coming year supplying those back markets on the basis of this yet smaller availability of Australian crop that I mentioned earlier. They've made good progress in the domestic retail and Asian wholesaler markets. Our Hawaii business has taken a little bit of a beating in the back end of the -- of our financial year. You'd understand that the Hawaiian economy is largely based on tourism and cruise ships, and I probably don't need to say too much more than that, but it's closed to cruise ships. So similar to a lot of other countries around the world, the food service channel has really taken a beating at the back end of the -- of our financial year and starting to recover and open up again now, but nevertheless, I think still under a good degree of revenue pressure. And with regard to South America, we anticipated that if there was ongoing drought conditions in the Riviana, we needed to find another source of temperate climate rice in the southern Hemisphere and, as a consequence of have started some supply chain establishment in South America. We are putting some really interesting and high-quality Koshihikari Japanese style rise out of Uruguay, relatively small quantities, but nevertheless, a factor over some Australian food service markets and retail out of this part of the world. And you'll see us increase our presence over the course of the coming year, given the quality of grain is actually as a temperate client, Japonica-style rices grow very nicely there. Of course, we ideally want to make sure that we get as much rice planted in October, November this year, so that we can, once again, fully utilize our Australian assets, which give us a real advantage also into a number of export markets.

That is all the time that we have for questions today. I'll now hand back to Mr. Gordon for closing remarks.

Thank you very much, operator. Look, I'd just like to thank everybody for their interest on the call and the questions. We really appreciate your continued interest in the business, and thank you for your time today.

That does conclude our conference for today. Thank you for participating. You may now disconnect.