Scales Corporation Limited (SCL) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Scales Corporation Limited Full Year Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Andy Borland, Managing Director. Please go ahead.

Welcome to the Scales full year results announcement for the year ended 31 December 2022. With me today is our CFO, Steve Kennelly but Geoff Smith here as well, our Chief Operating Officer. Earlier this morning, we lodged our results with the NZX, including a presentation pack that we'll base our comments on during this call. Steve and I'll run through the slides, then we'll take questions. If you have any further questions after the call, we'll be available for the rest of the day. Our presentation today is in 3 main parts: a summary of the results for and performance of last year; an outline of our strategy for the Global Proteins division; and an update on the impact of Cyclone Gabrielle, together with the outlook for the current financial year. Regarding Cyclone Gabrielle, I can't emphasize enough the very difficult and stressful situation that this cyclone has put our teams under across the Hawke's Bay, impacting our staff at Mr Apple, Meateor, Scales Logistics, Fern Ridge and Profruit. Our heartfelt sympathy goes out to those who have lost loved ones, and we will support our team and the Hawke's Bay community in every way that we can. Moving on to a summary of last year's results on Slide 5. We're pleased to report strong group performance with earnings towards the top end of guidance. Underlying NPAT attributable to shareholders was $27.6 million and reported NPAT attributable to shareholders was $19.4 million. These results were driven by record Global Proteins earnings, which continued to exceed expectations. Horticulture was hampered by market conditions, particularly the lockdowns in China. Logistics also produced a record result. On to Slide 6, our year-end numbers. This slide highlights some key numbers for the group operationally. Global Proteins sold almost 160,000 metric tons of petfood ingredients, Horticulture exported over 4.5 million cartons of apples and Scales Logistics managed over 27,500 containers. Financially, record revenue of almost $620 million was recorded, ROCE was 14.3%, and we continued to retain net cash for investment purposes. Moving on to sustainability. Our key goal for sustainability in 2022 was to identify risks and opportunities in our business environment and revisit our materiality issues list. This allows us to get clarity on the key areas and have more focus on our action plans. We completed the first group-wide baseline calculations for water, carbon and soil as part of our regenerative Orchard trials. The next slide summarizes the progress that we've made on some of our sustainability initiatives. As ever, people are our key focus as without them, we wouldn't be the business that we are. Mr. Apple has built a value proposition program and also 2 leadership programs to help develop our employees and leaders. We've also reengaged the Ethical Voice platform, an online survey targeted at our RSE workers, so that we can keep informed about their overall well-being. We're pleased to note that Mr Apple has consistently scored excellent and exceeded results from 2019. Touching on a few other initiatives we've completed a decarbonation road map outlining key initiatives, CapEx and reduction targets, supported New Zealand, Apple & Pears' Smart and Sustainable program to investigate the minimization of sprays, set group-wide climate scenarios and established sustainability committees across our divisions. We look forward to going into more detail about some of these schemes in our annual report. I'll now pass over to Steve to run through the financial results for the year.

Thanks, Andy. The table on Slide 11 summarizes our underlying and reported results for the group. As Andy mentioned earlier, the group delivered excellent results with record earnings for Global Proteins and Logistics. Underlying NPAT attributable to shareholders at $27.6 million was towards the top end of our previously advised guidance range. Reported NPAT attributable to shareholders was $19.4 million. This result includes a number of noncash IFRS adjustments. Underlying NPAT and EBITDA increased 17% and 6%, respectively, compared to 2021 and record revenue of $619.2 million was recorded, up 20%. These results were primarily due to growth in the Global Proteins division, both organically and by acquisition. Slide 12 gives our 5-year performance graphs for underlying NPAT attributable to shareholders, underlying EBITDA and revenue. The next slide summarizes our divisional performance, which illustrates the change in mix of group earnings. Andy will go into further detail later, but I'll summarize the performance of each division here. Global Proteins outperformed expectations, particularly in the second half of the year to generate an underlying EBITDA of $60.2 million. The division's growth was due to a number of factors, including strong market conditions and new product development leading to improved volumes, mix and margin. It also included a contribution from the Fayman investments in October 2022. Horticulture experienced extremely difficult operating and trading conditions, particularly in the latter part of the season, with price pressures due to China lockdowns, lower volumes, higher shipping costs and labor availability earlier in the season also contributed to the result. I'd also like to note that we've made the decision to transfer Profruit into the Horticulture division for reporting purposes as we believe that Profruit's operations and strategy are better aligned towards those of the Horticulture division. We've updated the prior year comparatives accordingly. Logistics also generated a healthy increase in earnings despite a testing market environment. Slide 14 illustrates the 5-year underlying EBITDA trends for our divisions, highlighting the exceptional growth in Global Proteins over the last few years. Slide 15 provides a summary of our financial position. The movement in working capital primarily reflects an increase in trade and other receivables due to market conditions in China and Europe towards the end of the year. This is not a regular occurrence, and we expect receivables to return to normal levels. Working capital was also affected by an increase in inventory in the Global Proteins division consistent with revenue growth. The movement in noncurrent assets mainly reflects CapEx, revaluation of land, buildings and apple trees, a reset to the IFRS 16 leases calculation for Mr Apple and also the investment in Fayman. Our movement in net cash primarily relates to dividend payments, including those to minority shareholders and the investment in Fayman. And I'll now hand back to Andy.

Thanks, Steve. Moving on to the Global Proteins on Slide 17. The division generated a 6% increase in volumes from around 149,000 metric ton to around 159,000 metric ton. Given the primarily edible nature of products sold, we haven't incorporated Fayman's product volumes into the volume of petfoods sold by Meateor and Shelby. However, over 9,000 metric ton of product was sold by Fayman during November and December. Revenue increased 46% with underlying EBITDA increasing 80%. The increase in profitability was due to a number of factors, including significant operational efficiencies following development investment at processing sites, the impact of new product development, which is returning higher margins, leadership team with long-term customer relationships enabling expansion of geographic reach and product range, changes in product, customer and market mix and profit contribution from Fayman since completion, which is equity accounted. Slide 18, moving on to the Horticulture division. It's fair to say that it was a difficult year for Horticulture with a number of challenges presented to the business. Whilst revenue was only down 6% on last year, underlying EBITDA decreased from around $41 million to around $17 million. There was a 9% decrease from Mr Apple total own growing export volumes, volumes of traditional premium varieties were down 12% and 7%, respectively, although we did see pleasing growth in Dazzle and Prince volumes. Earnings and volumes were impacted by the factors mentioned earlier by Steve. This next slide summarizes Horticulture's main KPIs. A number of the difficulties that affected apple volumes also affected pricing. How we've -- whilst we had an overall decrease in apple prices, premium varieties achieved an overall slight increase of price, confirming our strategy of investing in these varieties. Profruit continued to perform well as an integral part of our vertically integrated business. Turning to Logistics. Logistics produced an exceptional full year result despite continued global supply chain sector difficulties with a 51% increase in revenue and a 33% increase in underlying EBITDA. Whilst there was a 9% decrease in ocean freight volumes, managed airfreight volumes increased by 52%. Once again, the skill and expertise of the Logistics team has been an evidence in 2022. We believe this is a key advantage for Scales' internal divisions as well as the Logistics' external freight customers. Moving on to capital management. Both Global Proteins and Logistics exhibited significant growth in their return on capital employed percentages in 2022. Horticulture's ROCE was impacted by its lower earnings. Overall group ROCE was 14.3% in excess of our target of 12.5%. Horticulture continued to account for the majority of CapEx, which included the Orchard redevelopment and Whakatu packhouse automation programs. Shelby commenced an investment program in plant and machinery, which will allow an increases in volume. Future investment will be prioritized towards Global Proteins given its strong growth prospects and return on investment. We're mindful of our desire to maintain appropriate cash levels and we're keen to retain strengthen our balance sheet for potential investment opportunities. I'd like to now move on to the next part of our presentation, which is to provide some more additional background to our strategy for the Global Proteins division. This is the exciting part of this morning's presentation. We're extremely optimistic about Global Proteins. We've positioned ourselves in a series of partnerships that have very long-standing, enduring relationships with both customers and suppliers. The strength of these relationships, coupled with their added value processes and history, continue to mean that Scales maintains the strongest strategic presence in the industry. The industry is supported by many macro tailwinds, including the global growth of the middle class and its associated demand for protein. We see no abatement in the demand for protein for the foreseeable future. Given its nature, we believe that the sector is resilient against market cycles as well as producing above-average returns on investment. The worldwide nature of the opportunities in front of us allows us to leverage our existing networks with our near-term focus pointed towards establishing a new plant and business in Melbourne, ongoing multiple opportunities in the U.S.A. and a potential new venture in Europe. Looking at Slide 25 and demand drivers. Our petfood customers in the U.S.A. are particularly optimistic about the future and are investing substantial sums, more than $2.4 billion is committed in 2022 alone to meet future demand. This additional capacity comes onstream over the next 2 years. The supply chain and sourcing of raw materials have been identified as the biggest future production challenges for petfood manufacturers. Meateor and Shelby have a very experienced and well-connected leadership team and have developed deep relationships with customers over 25 years, which gives us confidence that we will participate alongside our customers in this growth. Consequently, we're investing in broadening and expanding our own capacity within the U.S. to support current customers and internationally support many of those same customers with their global businesses. Slide 26 is Scales' value proposition. Scales is uniquely positioned to benefit from the future growth in the proteins market. Our unique advantages include extensive and long-standing relationships with some of the biggest FMCG companies in the world, deep domain knowledge including processing IP and know-how and a comprehensive understanding of the market, a wide range of supply relationship spreading multiple markets and covering a broad base of proteins, supply chain excellence, we continue to deliver on time and to specification. Even though the pandemic -- through the pandemic, all the customers -- even through the pandemic, all customers were supplied successfully. We have our own in-house or captive logistics and supply chain functions to be able to continue to provide this level of service. We exist to solve problems for our suppliers and add value to our customers. In some cases, we're dealing with lower value or waste stream byproducts that need to be removed from our suppliers' factories regularly and consistently so that our suppliers can focus on their core businesses. We then repurpose these products into value-added proteins. So to our global ambitions. As a result of the opportunities I've just described, we have global ambitions for our Global Proteins division. As shown on this slide, we already have significant operations in New Zealand, Australia and North America. With Europe being the second largest market for petfood and with many of our existing customers operating in this market, we're keen to extend our operations into Europe. As a result, discussions on potential opportunities are currently taking place, and we look forward to updating you on progress in due course. Further upon our game plan, the value chain. Slide 28 summarizes our value chain from sourcing raw material proteins to production and shipping of high-quality products and finally through the sale of these products to the 3 main markets for animal byproducts. Whilst we have previously concentrated supply of petfood, we also have supplied the pharmaceutical industry and with the investment of Fayman now supply to the edible proteins market, particularly in Asia. It's our plan to grow our presence within each of these end markets. The continuation of this is on Slide 29. The structure that we have in place today is a result of careful planning. We specifically target existing end market players with strong existing relationships and find a way to partner with them. We'll continue to adopt this strategy for growth. Once we've invested, we'll leverage our existing experience and relationships to achieve win-win synergies and growth across the expanded group. Our current investment parameters will ensure that potential opportunities have strong earnings and cash flows, which allow a significant portion to flow back to the parent company. Looking at the U.S. case study, and some key milestones. Slide 30 shows that our investment in Shelby is the template for successful partnerships. Since our investment in late 2018, the business has achieved growth in all areas, including a 60% increase in volumes sold enabled through new product development, leveraging the shareholders' existing know-how and product knowledge complemented with investment in plant and machinery, significant expansion in the team, expanding its sales, marketing, procurement, manufacturing and back-office capabilities. Ongoing development of multiple growth initiatives, some of which will have -- will come to fruition in the near term. We believe that we can replicate this model with other investments. Moving to the impact of Cyclone Gabrielle and the 2023 outlook. I'll give you an update -- a short update on the impact of Cyclone Gabrielle on Scales. Firstly and most importantly, we're extremely pleased to report that all our team members are safe and well. However, there are many people who have experienced significant loss or disruption as a result of this event. The Hawke's Bay community, its people and its culture are an integral part of Scales. Accordingly, Scales is donating $250,000 to the recovery. We'll also be providing tailored assistance to those staff members who have been particularly affected. As you'll appreciate, in terms of our businesses, given the scale of Gabrielle's impact, we're still assessing and understanding the full effect that the cyclone has had on our operations. As we've previously advised, 3 of our orchards being Brookfields, Kinross and Pakowhai have been extensively damaged with Pilos orchard sustaining moderate damage. Our other orchards haven't sustained any material damage. The 4 orchards mentioned here cover around 318 hectares, approximately 28% of our planted orchard area and include plantings of Royal Gala, Pink Lady, New Zealand Queen, Fuji, Dazzle and Posy. Of the Posy fruit, a majority has been picked prior to the cyclone and floods hitting. We'd like to note that there are still some unaffected fruit on these orchards that we will pick and export. We'll continue to update you as further information becomes available. Moving on to our final section of the presentation. The outlook for 2023, as previously advised, due to the impacts of Cyclone Gabrielle, we've taken the step to withdraw our FY '23 profit guidance at this time. However, we expect to provide updated guidance as soon as practicable once the financial impact of the cyclone are fully understood. Notwithstanding recent events and also, as previously announced, we will be delivering our dividend payments in 3 installments this year. The first installment of $0.06 per share was paid in January. We intend to pay the second installment of $0.035 per share on 31st of March 2023, and we'll review and advise on the third installment in early May. Then our intention from 2023 onwards that our dividend policy will revert to 50% to 75% of underlying net profit after tax attributable to shareholders. That ends the formal presentation, although we point you to Appendix A of the slide pack, which provides additional financial information and reconciles underlying earnings to reported earnings for each of our divisions as well as the group. We're now happy to take any questions.

[Operator Instructions] Your first question comes from Joshua Dale with Craigs Investment Partners.

Just firstly, I want to talk about Food Ingredients. This was obviously an exceptional performance, and you've previously mentioned it may not be wise to continue to extrapolate growth from record results. But in this result, you sound very confident about the future of the division. It's sort of a change in messaging. Can you talk to that, please?

Well, we are confident about its growth prospects definitely. So it's -- just with the projects that we've got on, they are going to contribute to future earnings, particularly from 2024. So if you think -- if we've got a factory underway in Melbourne, it will be fully up and running during the second half of this year, but full contribution will be 2024 for that business. And yes, and particularly in the U.S.A., just with the various initiatives we've got going with both our suppliers and our customers, we're confident of growth continuing.

I suppose what I was getting to was in -- I think one of your previous results, you had mentioned you were able to take advantage of your competitors not supplying. There was inventory stocking. Are any of those one-off issues that may have boosted previous results, are they present in this result? And can you then...

I think there is an element of -- yes, there is an element of the COVID impact in the 2022 result, people not just in the petfood sector, but a lot of manufacturers stockpiled raw material to protect against supply chain disruption. So there was a bit of that. And we are seeing moderate, I guess, adjustments in that market. But I think we're sort of mitigating that effect with these new product initiatives we've got going. We've put a new plant into that Amarillo site, the Dodge City facility is really kicking into gear with a couple of new initiatives going on there, too. And we think those will help offset the positivity that was created by, if you like, that COVID demand -- if you like, stockpiling aspect of what our customers were doing.

Yes. That's helpful. And just last question on Food Ingredients. How much of a forward read do you typically get in terms of demand from your customers? What -- how far ahead does the order book typically look?

Yes, that's a hard one. There -- it is more of a -- just watching our stock levels, just talking to our customers what -- if they've got new -- we've signaled in our announcement these extra facilities that are being built by our customers in the U.S.A. So that's sort of -- they're coming to us now talking to us about, well, how are you going to supply us with the ingredients we need to fill these factories. So we're actively talking to them now about how to supply those factories.

Right. That's really helpful. Just moving on to the Horticulture division. For the 4 orchards that were damaged, do you have any early indications around whether some replanting will be needed?

Well, we replant every year. So it's sort of a biological process. Clearly, we've got some potentially new target areas post this storm. But look, it's too early to say what we're going to do at the moment, and that's why we've taken the step of withdrawing the guidance. It's just -- the guys there are really in tidy up mode, but they're actually removing dead animals from some of those orchards. The bins have been scattered to here and back again. So we're really in cleanup mode at the moment and working on the assessment of what we're going to do next, is sort of probably in the next phase. It's chaotic at the moment, absolutely chaotic there at the moment. There's no doubt about that.

Makes sense. So for the 3, you were saying were extensively damaged and 1 that was moderately damaged. It's fair to say that the trees in the -- I guess, are they damaged to the point of not being able to produce fruit anymore? And therefore, you'll have to make a decision around replanting? Or can you just sort of -- I think you mentioned 318 hectares. Those orchards cover 318 hectares, but do you have a sense of how many hectares completely wiped, so to speak?

We just haven't got that information available at this stage because we just don't know the -- where the tree is going -- that are under the silt layer, if the silt is too much, which -- how many are going to die. It's too early to assess, to make that assessment at the moment. And hence, we want to update the market iteratively over the next weeks to keep you informed. And we're better to do it on good assessments rather than just putting -- having hunches.

Yes. I appreciate that. And of the 4 impacted orchards, are they leased or owned?

There's a mix gen -- combination yes, there's a mixture of freehold and leasehold in those orchards.

Okay. Is that -- I mean, can you sort of tell us out of the 4, how many are leased and how many owned?

Yes, it's 50-50.

Just last one for me. Within your Horticulture division, there's obviously costs you bear in any given year. Do you have an idea of how the split between fixed and variable costs, just a rough estimate?

No, not at this stage. We're at -- I think as Andy said, it's sort of too early to make any financial statements at this stage. So we want to do that proper detailed assessment of the orchards and the likely impact and then we'll talk to that.

Okay. I mean even just for historic numbers in that division, is there any idea or any steer you can give us a sort of perhaps 50-50 or just rough numbers?

No. Look, I just don't have that at this stage.

Your next question comes from Christian Bell with Jarden.

Yes. If I could just follow on with the horticulture stuff. If you do need to replant on the 318 hectares of extensive, at least moderately damaged orchards, so you do the assessments and you find that you do need to replant there. At this stage, do you remain committed to actually replanting those? Or will you [ falter ] a portion of their land, perhaps the lease plans and then replant on the -- on your own land?

We haven't made any of those decisions there, Christian. It's a -- sorry, but it's just too early to make those decisions because we haven't had the analysis to work it out.

Okay. And then I guess, in the past, you -- part of the margin recovery in the Orchard business depended on automation projects. End of last year, you [ hedged ] that you weren't going to do that in 2023. I mean for that's going on and any potential capital required given this event do you still remain committed to those gross margin and initiatives for Horticulture?

Yes, we do absolutely because we're always looking to improve the margin in the business and recover the margin that [ spring lost us ]. I guess we're seeing some improvement in freight rates. Even these events improved the freight rates already, we think. But in -- we finished off last year, we got the robotic [ power tying ] done at our Whakatu store and sort of we're pushing them through the wall and into the adjacent building. And so we got that all done. So that was a [ net credit ] already. During the full robotization, if you like, of the packhouses out is definitely on hold and we'll pick that up in the next year or so, I would say. But the -- our focus would be on replanting, particularly continuing the replanting to move to Asia. So that will be -- that will help our margin improvement. And we also had the style of tree planting we had was improving our margins. So that will continue. So I think that the initiatives will be continuing. We'll probably just stall the next phase of the packhouse until we get our heads around this latest replanting program.

Okay. And then just in relation to previous crop, even of the level survivals, you'll be able to sell them and sell through to your market. How are you thinking maybe about pricing? I mean, do you think there is likely to be quality issues, storability issues that could mean slightly weaker pricing in 2023?

Well, we don't know that yet. We've got a good crop and what -- in the rest of the orchards is a very good crop. We would -- would we prefer a hot dry rest of the summer and autumn? Absolutely. That would help the crop's quality. We've got the good technology in their packhouses to look for internal browning issues and that sort of thing. So we'll be mindful of that. But look, we think we've got a good quality crop to sell. And more importantly, the -- in these events is normally a positive impact, dare I say on the remaining export crop as to price.

Okay. Cool. And then if I can switch focus to Global Proteins. I guess following on from the previous question. So you're saying that you do envisage margins remaining up around the 18% despite the sort of tailwind that was provided by COVID in the last couple of periods?

Look, we don't see it sort of absolutely falling away and whether we can hold it there. It's just really -- it's down to the combination of the products we're selling, the demand that we're seeing. So we're continuing to grow the business. So I think with -- and I mentioned these other -- the CapEx that we've done and the efficiencies that we've done and the new product mixes we've done, they're all combining to create the positive result that we had. So as we look for -- through this year, we'll be wanting to see that we would see it, if you like, definitely stabilized this year. And with what we've got going in terms of projects in 2023, we can see 2024 looking [ for ] growth.

All right. Given all those sort of projects going on and the fact that your initial kind of guidance for second half '22 was more around $20 million of EBITDA based on this second half '21 number than it was -- and then it produced $30 million. Just in terms of run rate, do you -- I mean, do you think it's fair to use the $30 million EBITDA [ number ] as a run rate going forward?

You -- that -- you're talking about Kiwis there or U.S. dollars?

Yes, yes. I think original -- in our original guidance, we sort of alluded to maybe a bit of a lower result for FY '23 in Global Proteins. But we're not really seeing that fall off at all. And as Andy talked about, the margins are staying there. So yes, I think it's -- we are more confident of that result. And you -- look at $60 million. will we get there? We'd like to get there FY '23. And as Andy said, there's also some growth initiatives going on in future years. So I think we're more confident of that or around that level.

Okay. Great. And then, I mean, just given that you -- in your slide deck, you said that it's been identified in the supply chain that the biggest future challenges is around kind of the space that you play in. And then given the returns that you are making, are you expecting more competition to emerge, which would inevitably drive those returns down?

Well, you never say never do you? Like you don't know what the competition is doing, but we just know what we're good at. We've got some real good plans in place to drive the business and the growth. We're going to look at these new markets. We're working hard with our customers to keep the supply up to them. So concentrating on our sales is very -- that's the key thing for our business. Those relationships with the suppliers are really, I guess, long-lasting. We're key to their supply, and we see that continuing.

Sorry, are there any reasons why any potential competition wouldn't sort of -- why your customers wouldn't move to another, to a competitor? Look, how long are your contracts? And -- I mean, basically just why would they remain with you if something sort of comes along?

Some of them are 25 years plus long. Some of them are -- ever since we have been in business because where our plants are versus where their plants are, the distance -- even the distance factor away from each other as a mitigation to competition. They've got to [ commandeer and to add packs ]. They've got to get equipment into the abattoirs. We've got equipment in a lot of the abattoirs that helps the collection process. That's our equipment. So we've built up a network of both relationships and equipment and CapEx and facilities that are aligned to our suppliers, both our suppliers' supply chain and then, obviously, to our customer supply chain. So it's not that simple for someone to just start up from scratch.

Okay. Cool. And then just a final one. You've talked here in the last presentation of -- I can't remember, that your contract with your supplier in Australia was sort of coming up to the end of their contract at the end of this year. Can you sort of counting on renegotiating that or at higher rates? And what's going on there?

Yes. The only thing that's really changing is the exclusivity. It's -- they can go to other people. But we are very keen to continue to trade their product, to work with them. And so yes, it's really just an evolution. We're setting up that plant in Melbourne, so we'll be doing our own thing as well. But we absolutely want to continue to work with that partner.

[Operator Instructions] Your next question comes from Margaret Bei with Forsyth Barr.

Andy and Steve. Glad to hear your team members a safe after the cyclone. I might start there. In terms of the damage at those 4 sites, can you talk through what are the implications of not really having the crop insurance? And also possibly what other types of insurance you have? Anything that you could possibly claim back, for example?

Yes. We've got full plant and equipment, buildings, material damage claims -- I mean, policies. There's -- if there's any impact in our packing business as BI cover in there, but -- so it's a comprehensive package of insurance on the physical assets. On the crop insurance one, that's -- it's getting harder and harder to get crop insurance for the horticulture industry, and that's probably the reality of life. We're going to keep looking and keep negotiating to see if we can reestablish crop insurance because we see there's a good risk mitigation. But yes, that's the reality of what we've got today.

And just to clarify, the trees themselves, is there any insurance over them?

There is not.

Okay. All right. Just on the Global Proteins division, I think based on the numbers you've put out today in your report, Fayman's estimated share of NPAT for you guys is about NZD 2 million across October and December. First, please correct me if I'm wrong. And second, can you please talk us through whether there's a normal run rate for the business or if there's seasonality, et cetera?

So that number, Margaret, is included in our reported NPAT. So that includes some opening investment adjustments. So no, it's not typical of the run rate. The underlying number is probably closer to $0.5 million. And for that period, their trading was down, but we expect them to revert to what expectations were at time of purchase going forward.

And what were your expectations at the time of purchase?

Contribution to us at an NPAT level is probably $2 million, $3 million, something in there I think, off the top of my head.

Great. Now you've mentioned quite a few CapEx and other investment opportunities, especially in Global Proteins. But also things across Horticulture. I was just wondering how much capital or cash do you have left to deploy after the Fayman and new factory acquisitions?

Net cash position at 31 December was $27 million, but bearing in mind is we've got elevated trade receivables related to Horticulture and there's also an increase in inventory levels in Global Proteins. So some of that will abate, so our cash level is probably slightly higher than that. So we still do have adequate cash for investments going forward.

I see. I know you've previously mentioned that while you're waiting to deploy that cash, you're sort of using it to offset your working capital, which makes sense. So I guess in that case, what are your expectations of CapEx over the next couple of years? How much are you expecting to spend on these initiatives?

I think our CapEx budget for this year was around about what we spent last year, and that would probably be a standard amount going forward. But obviously, we're going to have to have another look at that when we get the full assessment of the cyclone impact.

There are no further questions at this time. I will now hand back to Mr. Borland for closing remarks.

Okay. Well, look, thanks very much. I appreciate your patience and understanding during what is this pretty unprecedented event we've had in Hawke's Bay. So look, we'll keep you informed as we get -- gather new information and updated information. And yes, we appreciate the support you give us, and we'll update you again as soon as we can.

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