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

Thank you for standing by. Welcome to the SunRice Group First Half FY '25 Financial Results. [Operator Instructions] There will be a presentation followed by a question-and-answer session. [Operator Instructions]. I would now like to hand over to the conference call host SunRice CEO, Mr. Paul Serra; and Group CFO, Mr. Dimitri Courtelis. Please go ahead.

Thank you, and good morning, everyone. Welcome to this morning's investor call and webcast for our half year results for the 2025 financial year. My name is Paul Serra, Group CEO and Managing Director of the SunRice Group. I'm here in Sydney with our group CFO, Dimitri Courtelis, to provide an overview of our half year results, highlight some of our key achievements and provide an outlook for the group. We will then open for questions to all participants who have joined online or dialed in. We have lodged an investor presentation with the ASX, which we'll display during this webcast. Please note the important notice and disclaimer on the screen, which also includes important information about our corporate structure. Moving to our half 1 FY '25 performance for SunRice Group has had a positive start to the first half of 2025, delivering a solid financial performance, which was largely in line with expectations. Compared to the first half of last year, we have consolidated revenue, increased group EBITDA and net profit after tax and strengthened our business model despite challenging market and geopolitical conditions. As you can see on screen, we've delivered top line revenue of $912 million, EBITDA of $67.9 million and net profit after tax of $31.9 million for the first half of FY '25. These results were supported by a favorable product mix, successful new product launches, the realization of manufacturing and logistics efficiencies and strong cost control initiatives. During the first half, we also completed the acquisition of SavourLife and Simply Delish bolstering the CopRice and Riviana Foods segments here in Australia, respectively. I'm also pleased to share that a fully franked interim dividend of $0.15 per B Class share has been declared and that this and the increased liquidity in our B Class shares over the last 6 months has qualified Ricegrowers Limited for inclusion into the S&P/ASX Agribusiness Index. We note that the dividend reinvestment plan remains suspended. As we can see over the last 5 years, SunRice has delivered an outstanding total shareholder return of over 408% compared to the S&P/ASX 300 Accumulation Index of 122% and that represents an outperformance of the index of 286%. Over the first half of financial year '25, SunRice has delivered a total shareholder return of 48.2% versus the S&P/ASX 300 Accumulated (sic) Accumulation Index TSR of 17.2%. The SunRice Group has experienced profitable growth over the last 3 years since the first half 2000 -- FY '23, revenues have increased by $154 million, and net profit after tax rose by $12.3 million. This growth has been driven by organic development, strategic acquisitions of SavourLife and Simply Delish and the launch of new product innovations. When compared to prior corresponding period, EBITDA increased by 7.3% and basic earnings per share rose by 0.6% to $0.422 (sic) [ $ 0.472 ] per B Class share. Significantly, this represents an EBITDA margin improvement of 49 basis points to 7.4%. We incurred a higher effective tax rate in the first half of FY '25, which reflects a greater segment contribution in higher tax jurisdictions. Looking at revenue and EBITDA for the period. Revenue declined by 0.7% or $6.3 million compared to the first half of FY '24, and this was primarily driven by pricing pressure in global tender markets. Nevertheless, EBITDA grew $4.6 million or 7.3%, supported by an improved product mix, new product launches and realization of efficiencies and cost control measures across the group. Turning to capital management our balance -- and our balance sheet, we continue to exercise discipline in capital management. Over the last 6 months, we have invested $21 million in capital expenditure and a further $21 million in acquisition of Simply Delish and SavourLife, both of which were funded from existing cash reserves. Our core debt was fully repaid in April 2024. All remaining debt relates to seasonal debt facilities to support working capital and near-term marketable inventory in our supply chain. Seasonal debt, including bank overdrafts and lease liabilities increased by $22 million. Our net debt reduced to $202.1 million, reflecting the strong EBITDA generated and reduction in net working capital over the reporting period. The group's leverage and gearing ratios reduced to 1.4x and 25%, respectively, compared to 1.6x and 27% as at the 30th of April 2024. Those healthy positions associated with the headroom of undrawn facilities available mean that we maintain our balance sheet flexibility to support further strategic investment opportunities. Further, our return on capital employed increased to 13.5% compared to 12.7% as at the 30th of April 2024. As we can see, the SunRice Group is a truly global food business. And this slide showcases our global presence and scale. As you can see, 53% of group revenues for the first half of financial year '25 were generated outside of Australia through sales to over 50 countries. Notably, approximately 70% of our sales were achieved through branded products, a proportion we drive as part of our 2030 Strategy. I'll now hand over to Dimitri, who will walk you through our segment performance in more detail.

Thank you, Paul, and good morning, everyone, on today's call. Looking at our segment snapshot, you can see the significant role that our International Rice segment plays in supporting the SunRice Group as well as the contribution that our segments make to the overall group revenue, EBITDA and net profit before tax. And in the first half of FY '25, our Rice Food, Riviana Foods and CopRice segments delivered some solid margin improvements. I'll now discuss the performance of each of our segments in a bit more detail. So let's look at the Australian Rice Pool business first, and this is aligned to our A Class shareholders and deals with the receival, the milling, the marketing and the selling of Australian Riverina rice. The crop year '24 harvest delivered 618,000 paddy tonnes, which underpinned strong branded and traded sales across both domestic and international markets. And this performance was further supported by the weak Australian dollar that enhanced the contribution of U.S. dollar-denominated rice exports to our total group revenue. However, there were some challenges in key markets, particularly in the Middle East where our volume growth has slowed a little bit. And this was in some part due to the local geopolitical situation and the flow and effects on shipping and some customer creditworthiness in particular, in some of those markets. Declines in global tender pricing over the last 12 to 18 months to more historical levels, also significantly impacted the Australian Rice Pool business and primarily drove the 6% downturn in its revenue to $183 million compared to the first half of last year. And with consideration of the dynamics from the first half as well as the lower whole grain yield mill out rates from the C '24 crop that we have milled to date, the CY '24 paddy price range has been updated to $380 to $420 tonne for medium grain. Turning our minds to the International segment, which sources, processes and markets rice in Australia and to over 50 markets globally. Overall volumes in the segments grew during the first half, and this was in part due to some ample Northern Hemisphere rice supply, which did underpin a significant increase in our U.S. export volumes as well as category share gains in Papua New Guinea due to our strong brand position in that market. However, the significant fall in global tender and export pricing, offset volume gains and together with the ongoing high cost of internationally sourced rice on the back of the Indian export ban on non-Basmati rice, impacted the top and bottom line performance of the segment during the period. Revenue for the first half of FY '25 was $418.8 million, and that was slightly below the prior corresponding period by $2 million. EBITDA decreased by 5% versus the prior period to $25 million and our net profit before tax was down 6% to $18.5 million. Now looking at our Rice Food segment, which manufactures, markets and distributes value-added rice-based products. Revenue coming in at $65.5 million, which was 11% up on the prior period. EBITDA increased by 69% to $7.7 million and net profit before tax, up 105% to $7 million. The uplift in revenue was driven by the additional ranging and distribution of rice cake products in Australia as well as new export markets for the rice flour business. It was also supported by new product launches and increased investment in our brand building. Trade spend efficiencies and the implementation of pricing strategies in the prior period to partially absorb inflationary pressures also supported revenue growth and increased profitability in the first half. The segment's profit margins were further enhanced through the realization of our manufacturing efficiencies delivered in that business unit. Within Riviana Foods, which is our brand-led specialty gourmet food business, our top line revenue grew 5% on the prior period to $117.3 million. This was driven by the growth of the Toscano brand in the bakery category in particular, where our volumes were up 20% year-on-year and also from the Hart & Soul portfolio of products, which benefited from a successful soup season. Riviana Foods did encounter some challenges with lower priced offerings and cost of living pressures impacting the Premium biscuit, pickled vegetables and the food service categories, which affected top line performance in the first half. The segment has achieved profit margin growth during the first half of FY '25, supported by operational changes in our logistics network and savings in our distribution costs. And as a result, EBITDA increased by almost 100% from the prior period to $3.6 million and net profit before tax increased 124% to $1.7 million. During the half, Riviana Foods also completed the acquisition of Simply Delish, which is a branded manufacturer, and this acquisition is expected to expand Riviana's presence in the chilled product channel through its own vertically integrated supply chain. Looking now at our animal nutrition business, CopRice's performance in the first half was supported by its companion animal division, which grew both in its branded and contract manufacturing businesses in particular. And of course, the acquisition of SavourLife, which is a highly differentiated, purpose-driven brand, also bolstered CopRice's performance and its participation in high-growth, higher-margin branded categories. Challenging trading conditions in the equine feed and the ruminant stockfeed category drove a 3% decline in the segment's revenue on the prior period to $126 million. Now despite these challenges, CopRice was able to achieve improved profit margins through cost control initiatives, optimized manufacturing and logistical processes and a favorable shift towards branded companion animal products. And pleasingly, as a result, EBITDA was $11.9 million, which was up 50% from the prior period, and net profit before tax coming in at $8.7 million, which is 85% up on the first half of FY '24. Finally, turning to our Corporate segment, which captures the cost of holding and financing the assets that are utilized by both the Australian Rice Pool business as well as the Profit businesses. It also includes cross-segment charges for the use of the SunRice brands and the access to the milling and the storage assets, all of which are owned by the B class investor. The lower asset finance charges received from the Australian Rice Pool business, due to the reduced net asset base and the cost of capital, directly impacted corporate segment's performance in the period and resulted in EBITDA of $19.7 million, which was down nearly $3 million from the prior period. This reduction in EBITDA was magnified by the $1.1 million worth of property sales that were recorded in the first half of last year. I'll now hand back to Paul to discuss our strategy and outlook for the group.

Thank you, Dimitri. So if we turn to our future now and our 2030 strategy, we continue to refine our strategy on a page, which you can see here on the screen as we progressed the work under each of these work streams. Since we last presented the strategy at our AGM in September 2024, we have simplified our SunRice Group values and redefined what they mean to us in the context of our updated strategy. We've also further clarified our commercial strategies and enabling strategies, which are underpinned by a focus on our consumers, having Rice at our heart and adopting a more global mindset. In addition, we have defined what successful implementation of our strategy would look like, which includes aspirational targets of growing our revenue to $3 billion and importantly, expanding our margin and realizing value for our shareholders, becoming one of Australia's most valuable food companies, creating significant opportunities for our talented workforce, having a strong portfolio of brands, which delight our consumers and are underpinned by innovation and quality. Continuing to drive sustainable outcomes for our consumers, communities and planet through lower-emission rice and a diversified, resilient and increasingly traceable supply chain. We have commenced work on a range of initiatives to lay the foundation as we look to achieve our ambitious growth targets. Due to their transformative nature, many of these large initiatives will, if realized, contribute to the group's performance over time. However, concurrently, our portfolio of strategic initiatives also includes projects, which we expect to deliver benefits over a short time frame, especially in relation to continuing growth in existing markets, unlocking efficiencies and effectiveness. Moving to our outlook. Looking ahead, similar to the first half of financial year '25, the group expects full year results to show revenue broadly consistent with FY '24, moderate growth in EBITDA on the back of improved margins and NPAT impacted by a higher effective tax rate. We are confident in our ability to deliver for the second half by remaining focused on driving branded product sales, positive mix and delivering cost and procurement savings and implementing operational and manufacturing improvement initiatives across the group. Having said this, the headwinds I mentioned earlier, remain relevant for the second half of financial year '25, particularly the impacts -- the ongoing impacts of the Northern Hemisphere rice availability on both volume and price competition; geopolitical tensions in the Middle East affecting shipping and sales opportunities; ongoing competition from lower-priced offerings; and conditions in the ruminant and equine markets here in Australia. As I mentioned earlier and as communicated at the full year, the SunRice Group has reviewed its growth strategies to identify new opportunities and we look to evolve and build on the momentum created in recent years. We look forward to updating the market as this work progresses. Our commitment to sustainability is an important part of how we create value for our employees, customers, consumers, shareholders and stakeholders. It's also critical to our 2030 Growth Strategy and we are focused on achieving lower emission rice and a diversified, resilient and increasingly traceable supply chain. In terms of the progress we have made, I'm pleased to share that our Science-Based Target initiatives were validated and reduction targets in December of 2024. Our commitment is aligned to reaching net-zero by 2050 and includes a Forestry, Land and Agricultural target. We further progressed the development of our Net Zero Road Map, including modeling initiatives against our emissions reduction targets, and we'll publish this Net Zero Road Map in mid-2025. We enabled the group's business to assess suppliers against our Supplier Sustainability Code, including human rights and deforestation and commenced drafting a new code that clearly outlines the expectations of suppliers. And we undertook further social and ethical audits using the SMETA protocol of our domestic and international operations, including further embedding our training on the ETI Base Code, more information on our progress on the modern slavery in financial '24 can be found in our 2024 Modern Slavery Statement, which is available on our investor website. In terms of the sustainability into action, we look more closely at our near-term science-based emissions reduction targets, which was approved by the SBTi this month. We've committed to reducing absolute Scope 1 and 2 greenhouse emissions and Scope 3 industrial emissions by 54.6% by 2000 -- financial year 2033 from a base year of 2023. We've also committed to reducing absolute Scope 3 Forestry, Land and Agricultural emissions by 39.4% by 2033, again, off a base year of financial year 2023. We have also committed to reach net zero across our value chain by financial year 2050 and our long-term targets include a 90% reduction in absolute Scope 1 and 2 greenhouse emissions and Scope 3 industrial reduction by financial year 2050 and 72% reduction in Scope 3 FLAG emissions by financial year 2050. Having our emissions reduction targets validated by the SBTi is a significant milestone in our sustainability journey and SunRice is 1 of only 4 companies in Australia to have approved the near-term and long-term Scope 3 FLAG target. As I mentioned in the previous slide, we'll publish our Net Zero Road Map in mid-2025 and in line with the requirements of the SBTi. Finally, turning to our outlook for the Australian Rice Pool business. The crop year '24 Riverina rice harvest was another strong crop at approximately 618,000 paddy tonnes. However, several factors continue to weigh on the anticipated pool returns, the most significant of which are the prevalence of lower whole grain mill out rates from the crop year '24 crop observed to date, similar to those experienced in crop year '18 and recent global tender pricing lows. Together, these elements are expected to negatively impact the CY '24 pool returns in the order of approximately $70 per tonne when compared to CY '23 crop. However, despite these factors, SunRice is effectively managing cost and working to maximize opportunities arising from a weaker AUD against the USD to help minimize their impact on crop year '24 paddy returns. Accordingly, the crop year '24 paddy price range has been updated from $370 to $430 per paddy tonne to $380 to $420 per tonne -- per paddy tonne of medium grain. While the recently planted crop year '25 is slightly smaller than the crop year '24, pleasing volumes are in line with our production capacity and we'll ensure full milling program for FY '26. We remain focused on driving grower returns in the Riverina as we manage the transition to a deregulated market for New South Wales grown rice with the end of rice vesting in July 2025. This work includes modeling contracting options and other initiatives to help secure volume in the Riverina, in line with market demand. A number of these options will be explored with growers in the new year in order to seek input before they are finalized. Next year marks SunRice's 75th anniversary, and our Riverina growers who originally found Ricegrowers as a cooperative in 1950, will continue to be front and center as we celebrate this milestone and look forward to the future together. Thank you, and I'll now hand back to the operator.

[Operator Instructions]. Your first phone question comes from Allan Franklin with Canaccord Genuity.

Perhaps just a question on CopRice, please. Pleasing to see that margin improvement coming through. Just hoping for a bit more detail to the drivers around that. And just same business, different topic, just a bit more detail around how the [ Profit ] business is performing [indiscernible] year embedding into that acquisition?

Yes. So I'll give a little bit of color and let Dimitri add to that if necessary. So I think in the CopRice business, it's really kind of been 2 main drivers to the increased profitability that we see year-on-year. The first is think of the ruminant business, it's been quite difficult with quite heavy natural feeds available in New South Wales and Victoria, but the team has remained really focused on driving the sort of profitable growth, so not chasing volume but really driving profitable mix of businesses, and that's been really important in light of the market conditions, and that's certainly something we'll continue to do. The second piece is really the growth of the companion animal business there, both in terms of the branded play and the contract manufacturing business, and that obviously comes at an incremental margin mix to the business. So it's really been those 2 and then underpinned by strong, obviously, executional discipline and cost control. I think in terms of price, the business is largely continuing well. I think, however, the different factors than the ruminant business, however, the commercial outlook in equine has been impacted by the cost of living, particularly we see in recreational horse riding. So there's been a little bit of a slowdown in the category, but we're still quite comfortable in terms of our market share and driving that business.

Yes. And I'll just add to that, Allan. The [ Profit ] business, to Paul's point, the leisure segment slowed down but the racing segment still tracking well. And when we think of CopRice, it's really a 60-40 split, 60% of the revenue coming from the ruminant side, that's only delivering 40% of the profit. And then 40% of the revenue, delivering 60% of the profit, which is from our animal nutrition and the more branded pet food market. So again, aligned with the strategy and where we've been in the past, really helping to step change this business away from that pure bulk ruminant feed into that more branded play and that's evident with the SavourLife acquisition that we made earlier this year.

Helpful. And maybe just on Rice Food. Again, good to see some sort of margin improvement there. Just hoping for a bit more detail around what those manufacturing efficiencies were? And then just second part of that question, just in terms of further plans for export growth in that business. How can we view that optionality into the medium term, please?

Yes. I think Rice Foods is a similar story to the overall group. We've been very focused on growing our margins and we'll continue to be so. And that's just really 3 key levers that we're focused on in terms of that. The first is the innovation and new products that we're bringing to market. The second is really the mix of the business and driving parts of our organization that are more profitable. And the third is a combination of pricing efficiencies and operational efficiencies. And all 3 of those levers working together is really what helps to drive margin accretion. So Rice Foods in particular, we've had really good growth in parts of our business, such as rice flour. We've opened up new customers in Japan, where we're working those assets to almost full capacity now, and that's coming at a positive margin mix to the business. And we've also helped with some great innovation that's come to the market that's helping to drive both growth and margin growth in that business.

Next question comes from John Burgess with RaaS Research.

A couple of questions. Just -- I noticed through most of the divisional commentary that efficiencies in logistics and manufacturing is pretty prevalent. So, I guess, my question is, has that been an increased focus for you guys or just business as usual? And is there more sort of efficiencies that you see that you can extract from the various businesses?

Yes. I think I'll start it broadly. Again, I think I always look at those 3 levers as a way of driving margin growth. So that's innovation, new product launches and achieving margin accretion with those programs. The second is the mix of business and the third is the efficiencies. On the efficiency front which is your question, I don't think it's an acceleration. I think the team have always been very focused on things. As we've grown in scale and complexity, it opens up opportunities for us to drive efficiencies off the back of that growth, and we'll continue to be maintaining our focus in that space. It's -- there's absolutely more to come. Every year, there's more to come in operational efficiencies, and we remain very focused on that. However, growth is our top focus for the organization, but we obviously need to make sure we do that as efficiently as possible. And I'll let Dimitri comment on some of the individual programs.

Yes. So that's particularly across logistics, warehousing and procurements in particular, where we're looking at a lot of the existing contracts and also new contracts and also our shipping opportunities and inland logistics, in particular, are ones where we've had some key focus on in the last 6 months and look to underpin some of that cost control over the next 6 months and into -- driving that momentum into FY '26 as well.

And presumably, some of the sort of Leeton upgrade is part of that efficiency program?

It is longer term, although that didn't impact the half. So those programs are still very much in spate. Yes, we see that the packaging, in particular, that we're looking to put into Leeton as the major investment will continue to unlock efficiencies and also give us flexibility around packaging to achieve our sustainability goals as well. So it opens up new product formats as well. So it touches on all 3 of those levers I mentioned earlier.

I'm interested in your views on the -- so the Indian rice export ban being lifted. In theory, that should be a net positive for you guys. But I'm just interested in, I guess, is it and then the sort of timing of realizing some of the benefits that flow from those export bans being lifted?

Yes. We certainly -- so if we break it down into -- I guess, from a sourcing perspective broadly into the long grain versus medium grain. So from the medium grain perspective, the market has been relatively stable for a period of time now since the California industry has come back to full capacity more than 12 months ago. So that the pricing dynamics in that part of the global rice complex, if you like, have remained fairly consistent. The long grain pricing post the lifting of the non-Basmati ban from India have certainly started to come down. We expect them to continue to come down for a period of time as we have quite healthy inventory levels across the world. And this helps to offset some of the risk that we were having in the business, and you can see some of that has flowed through into the international rice segment as Dimitri commented on earlier. So we do expect some relief in that space. But we also expect an increase in competition as that product becomes cheaper and more readily available for competitors to source as well. But overall, we see that as a net positive for the international rice segment, in particular, as we move forward.

Okay. And just a final one. You mentioned the Agribusiness index. Have you seen increased investor interest after being included in that index?

Yes, that was very pleasing to see that announcement a few weeks ago now. And we have seen a tick up in activity, which is something that, again, we're quite pleased about, and it's been a long journey and a lot of work over a number of years. But I guess, last week is a good example. I think it was Wednesday or Thursday, we had our single largest trading day since we listed on the ASX with over about 100,000 shares traded. So that was about $1 million of daily liquidity on that particular day. So great to be in that index. And then of course, when investors look at us amongst the peer set and want to have that exposure into that segment in their portfolio. Hopefully, they can see our metrics compared to theirs and see the offering that SunRice brings to that table with particularly the levels that we're trading at. So hopefully, that's just another stepping stone in the journey of SunRice, but that aggregate that's certainly one of the positive developments in the last 6 months for us.

Your next question comes from Finola Burke with RaaS Research Group.

Congratulations on the great result Paul and Dimitri and team. A couple of questions from me. You've reduced debt to almost 3-year lows, and it's now pretty much seasonal debt relating to working capital needs. With the balance sheet in such good shape, are you tempted to look more at acquisitions as they present? Or are you more focused on capital management initiatives?

Thanks, Finola. Yes, both are absolutely a core focus for us, and that hasn't been a change if I reflect on the previous strategy and certainly the forthcoming one. M&A has always been a core component of the strategy. And a good lens into that has been the acquisitions of SavourLife, in particular, over the last few months. So whilst the core debt is back to 0, we were able to pay off that acquisition essentially out of existing cash reserves. We've also got the upgrade of the Leeton packing [ hall ] plant, which is also coming out of the existing cash reserves. So we're primed to go after opportunities as they present themselves, and that's exactly as has been the case in the past. So that will certainly continue. And if we look forward into our strategy that growth is certainly going to be complemented from an organic perspective, but equally from an inorganic perspective, so something that we're watching very closely.

I'd just add one point to that, which is we will look to absolutely invest behind our strategy in line with our strategy. And I think as we now have that clearly defined not just here in Australia but across markets globally, we have that balance sheet flexibility to invest both organically and inorganically.

And just to follow on from that capital management. I mean, obviously, the company last year raised the dividend -- the final dividend quite substantially. Is that something that you're also looking to as well?

Yes, the Board turns their mind to that very, very closely. And again, the track record hopefully starts to speak for itself from a consistency of earnings perspective, not just through the cycle, but also as we navigate through the performance of the business and into the strategy going forward at the $0.15 interim obviously consistent with prior period. Last year's final was a big step up from where we were in the past. And again, as I mentioned, the Board's extremely mindful of rewarding the B class investor and balancing the needs between the As and the Bs. So again, track record hopefully speaks for itself on that front.

And just on the tax rate, it ticked up to 28%. Can we expect to see it stay at these levels? And how much of that rate has been impacted by the mix of international business?

Yes. There's been a bit of noise in the tax front in the first half. And so if I just reflect on the segments, in particular, we've got this year almost 60% of our net profit before tax has been generated in the segments that are exposed to more of the Australian tax rate. So between the Rice Food Group, CopRice, Riviana and corporate, that's all coming in at 30%. So that's compared to about 50% in the prior period. So it's not that the international segment has materially moved backwards. It's more so that we've generated more profit in jurisdictions with a higher tax rate. But also internationally, we've also used up pretty much all tax credits, particularly in markets like PNG so -- which is also now a 30% tax regime. So it's just that balance. So you can expect the tax rate at the half year to be more reflective of how we think will come in for the full year. And again, from a moving-forward perspective, we'll keep guiding the market accordingly on where we're generating revenue across the group. But that's a bit more color to what's happened this year, well, the first half and certainly for this year.

And just finally, if I may. We just -- we've seen some significant volatility in the AU dollar against the U.S. What impact is that going to have on SunRice near term?

So from the Rice Pool perspective, that would be a positive because we export rice into U.S. dollar-denominated markets. And as you translate that back into Australian dollar, that helps the Rice Pool. But having said that, we've got a hedging strategy. So it's not like we're riding on spot and can take opportunities left and right. But on the import side of the business, that is a bit more pain that's expected, particularly Riviana, RFG on the import side as we import products whether it's euro or USD denominations. But then equally, with that, as we make a big chunk of our revenue, as Paul said, over 50% internationally as we -- and that's all in USD as we translate that back into Aussie dollars, that would be a helpful benefit that helps to offset some of those previous impacts that I've mentioned.

I'll just move to webcast questions. Your first webcast question is from Mark Topy with Select Equities. Can you comment on inflation costs in the domestic market in terms of impact? And what has been the price momentum achieved in the last 2 years? What is the outlook on costs in FY '25 in Australia and globally in context of the lower pricing and pressure on margins?

Yes. Good question. So I get -- let me go back to those 3 levers I talked about in terms of new product innovation, a positive mix and overall cost efficiencies. We're focused on all 3 of those. And in terms of offsetting inflation, you need to have all 3 of those working well. It's not a pure price play. It's not a pure price efficiency play. It's not a cost savings through supply chain, but it's the combination of all of it that we look to, to really help to offset the input cost inflation coming through, whether that's here, whether that's in overseas markets and wherever that comes from in terms of shipping or input cost inflation of raw material, energy and the like. And I think the group has been very focused on looking at it like that and looking at the suite of tools that we have available to us to offer product to the consumers at the most effective price and the convenience that the consumers are willing to pay for. In terms of that and how it's played out in Australia, specifically to the question, we continue to see that cost of pressure -- cost of living pressure here in Australia and that is driving people to lower products, lower-cost products, such as private label. And that's why it's really important to have those 3 levers if we rely just on pricing or pricing efficiency and not innovation and not offering new products to consumers, then we will struggle. But we've been able to do that. And I think we've been able to effectively offset the impacts or at least mitigate the impacts of that to our business.

Your next webcast question is from [ Lyonel McFadden ] with Bell Potter Securities. Can you explain impact on excess paddy tonnes grown on NPAT? ?

I'll take that one. So from the perspective of excess paddy tonnes, the way that -- it works in our system is we store the rice and the paddy in our storing network and sell that through. And any profit or loss on that goes to the growers in the form of the paddy price. So in terms of the impact on NPAT, it's not so much the excess paddy. It's more -- and what is evident in the first half is a good example of what's happened in our corporate segment. Due to the mill out rates and the yield -- the milling yield of our paddy in the first half of the year from the C '24 crop, we've actually ended up with less inventory that we otherwise were expecting in the system, and that's reduced the net asset value that our asset finance charge is calculated on and that impacted the corporate segment to the tune of about $2.5 million in the first half. So that will repeat in the second half because we're still dealing with the same milling program. But that's -- we're dealing with extremes from a milling yield perspective, that certainly isn't the norm. And this is one of the lowest milling yields we've experienced over the course of the last probably 10 or 15 years. So it's more treated as an outlier. But otherwise than that, if you have more normalized yields, the question in terms of the size of the paddy on the NPAT is not material.

And I think just further to add to clarify for all on the call, we don't have excess paddy. I think we're in a really balanced position across our Australian rice crop at the moment in terms of the crop for last year and the crop that's in the ground for this year. And we expect to be able to really keep our full milling programs and full efficiencies that we've been generating from that in the B class of the business as well as through to the paddy price for the A class.

Next question is from Julie Tayles with JMJT Investments. Can you elaborate on group sensitivity to a stronger U.S. dollar? And also on your comments regarding the opportunities arising from a weaker AUD versus USD?

Sure. So on the import side of the business, as I mentioned, we import products from Europe in our Riviana segments, and those are euro-denominated and also USD denominated. So as the USD strengthens, those products become more expensive for us to procure in Aussie dollars. And by the time you bought them to Australia with shipping rates that are again denominated in USD, that landed price is at a premium compared to when the Aussie is stronger. So that's something that affects our import book, which is Rice Food group in certain products like some of our Microwave Cups that we import out of Asia and predominantly the Riviana segments that we import out of Europe. And then on the export side of the business where we export our Australian crop, that's the reverse as we sell those products into U.S.-denominated markets and that would be a benefit for the export book, but that goes to the paddy price within the Australian Rice Pool. So I hope I've clarified the difference on those fronts.

You have another question from [ Lyonel McFadden]. What is the impact of the PNG Kina up or down 10% against the Aussie dollar on NPAT?

Yes. So the Kina is an interesting one. And as we know, it's not a tradable or marketable currency globally. So if we look at what's happened to the Kina over the course of the last probably 18 months or so, it's depreciated somewhere around 15% against the U.S. dollar. And our access to currency in PNG is essentially critical, and we work very closely with the Central Bank in PNG. And selling rice is one of the core products and certainly core businesses that we get access to currency compared to other noncritical businesses, particularly on the food supply side of things. And if you look at the financials in the expenses note, we've got about $6.5 million of an FX loss in the half year. The lion's share of that would be PNG related. And -- but again, it's not just directly related to the depreciation, it's also the speed of access to how quickly we can get currency and then therefore translate that currency back into the group. Another nuance on what's happened in PNG, whilst the Kina has depreciated against the U.S. dollar, it's actually appreciated against the Aussie dollar. So there's been a bit of a one-off double impact there because we've had a depreciating Kina. But then by the time we translate that back into Australia, it's been the opposite effect because the Kina has appreciated. But again, this is something that we've navigated for the better part of over 50 years that we've been operating in PNG. It used be one of our most material and significant markets, but as the rest of the group has grown, we've been able to absorb those impacts in PNG. So it still remains a core market in the group. But, I mean, we really are operating on a number of fronts globally, and that helps to offset that. So it's literally just a one-off item there.

I'd add the fundamentals of the business are performing very well. The in-country execution and the market share is very healthy and has slightly grown. And I think to Dimitri's point from an outlook perspective, we're factoring in continued devaluation of the Kina. So we're able to balance that.

I have another question from Julie Tayles. Can you please elaborate on the issues affecting the equine and ruminant markets?

Yes. I think as we discussed earlier, really 2 big factors at play. The first is there's lots of natural feeding, lots of grass, so to speak, in the ground. And so farmers are turning more to that natural feed solutions when it comes to the ruminant business. And that's really driving volumes in the ruminant business down across the sector. So we're -- in that scenario, we remain very focused on keeping the right balance of overhead efficiencies through volumes through our plants with the customer mix and the profitability of our business. And we've been able to largely offset those volume declines through that kind of program. The equine is slightly different. As Dimitri mentioned earlier, I think the main dynamic at play to think about here is that the leisure industry has declined slightly as sort of more leisure horse owners are looking at cheaper feed options. And again, there's more natural feed options available through most of the market. And then the second piece that we're driving to offset that is our partnerships with the racing and more commercial industry. And a great example of that is the [indiscernible] partnership that we have together and using that to help drive our penetration into the racing industry. So that's how we've been offsetting some of that leisure decline in the equine business.

Your next question is a follow-up from Mark Topy. Can you please update on the India production and restrictions on export changes? What other implications you see going into FY '25 in India coming back into the export market?

So I think as I mentioned earlier, again, if I try and simplify it down as much as possible, we -- I think we'll start to see long grain pricing normalize to more historical levels as the sort of complex settles itself down around the different markets. In terms of the India export ban, we have no indication that India would take action to ban again, however, that's always a possibility. So we always keep that in the back of our mind with our positions. But we're managing quite well in terms of procuring rice now at a lower point than we were, say, 6 months ago. And so we do believe that is overall a net positive for the group moving forward.

Thank you. There are no further questions at this time. I'll now hand back to Mr. Serra for closing remarks.

Okay. Well, thank you all very much for joining us for our half year '25 results and we look forward to talking at the full year. Thank you.

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