Seeka Limited (SEK) Earnings Call Transcript & Summary

All right. Well, welcome, everybody, and welcome to this shareholder update in October. We're all in various locations around the world, no doubt, but as I'm aware, there are a large number of people online. I'm Fred Hutchings, and I'm the Chairman of the Board. I, together with Michael Franks, the Chief Executive, will spend a few moments with you today to sort of update you on our half year and give you a sense of the company's financial performance. So I'm going to spend a little bit of time giving you an update on the Board as we've appointed -- recently appointed a new Director to the Board. I'll spend some time on the consolidated financial results and also consider a comment on the earnings and dividend, earnings per share and dividend; comment on our borrowing; and also spend a little bit of time looking at our enterprise value and total shareholder value over the last financial trends are for the last few years. And finally, I will finish with dealing with our guidance for the year ending 31st December 2021. So this is the agenda. Now there's a lovely photo of Robert Farron. Robert is a chartered accountant in the Bay of Plenty here. He's had extensive commercial experience in Australia and New Zealand. He was the former Trustpower CFO; and was also Tilt Renewables CEO when he was at that time, was based in Melbourne. We just recently appointed him to the Board, which means we now have 8 directors on the Board as part of our succession planning, and that will revert to 7 directors following the ASM in April. Let's spend a few moments looking at the consolidated results for the 6 months. And as you'll see with all these numbers, they show a very nice trend, which we're very pleased with. And not -- and one of the key features of this trend, it's all operational. There are no asset sale benefits in the results for the 6 months. As you'll note there, the revenue at $224.5 million is up 26% on the prior period. EBITDA at $46.9 million is up 54% on the prior period. Similarly, our net profit before tax abbreviated to NPAT is $30.8 million, 77% up on the prior period. Now the one thing that when you do consider and look at the prior period in respect of the net profit after tax is that in the prior year, there was a significant tax benefit of $5.6 million. Now that been a benefit as a consequence of the reintroduction of tax deductible depreciation of buildings. So in summary, very pleasing 6 months. Now if we look at this from a shareholder point of view in terms of earnings per share and dividends through that period. Earnings per share was $0.65 per share. In the prior period, it's $0.57, so it's up 14%. And during the period, we also -- whilst during the COVID year of '20, we delayed the dividend payment. The dividend was $0.13, which was paid in October. Assets per share, also up. Up 9% to $5.92. And if we have a look at the balance sheet and one -- and measure that we constantly keep an eye on is our total net bank debt, you'll see that the total bank debt at the end of June was $127.8 million, which was down on the prior period. But a factor that increased it was our purchase of OPAC, which added $21.9 million to the debt. So if you compare it between '20 and '21 on a like-for-like basis, our debt would be significantly lower effectively by the impact of the OPAC purchase. Now since then, we've sold some assets in Northland. And we've also had -- the grower loyalty scheme has matured, and we've raised funds through that as well. So those 2 together, it's another $12.1 million of additional cash has come in since the end of June. So further reducing our debt. So to give you a sense of the debt reduction by the 30 of September, those numbers are there for you as well. We're now down to $95.6 million at the end of September compared to $92.8 million in the previous year. And don't forget, we also took on that extra $21.6 million of OPAC debt. So again, our debt is in a position which we are very comfortable with. Now this is probably one of my favorite charts in the pack. We thought this might be helpful to shareholders to just have it on one page. Some of the growth and EBITDA in the last 3 years, the growth in NPAT for the last 3 years and the total asset growth. As you can see, there's been cumulative growth in EBITDA, earnings before interest, tax, depreciation and amortization of 22%. A 30% cumulative annual growth rate in net profit after tax and a 19% growth rate in total assets. So this has been our strategy to diversify and grow the company. And I think this slide is indicating that we are doing that but -- as well as growing earnings. Now if we shift that growth to put a shareholder lens on it, and these graphs go back to December 12, which was shortly after Psa, right through to 30th of June '21. This is showing the enterprise value growth. Now how we measure this is by taking the market cap plus bank debt, showing a 27% cumulative annual growth rates since December '21. Something that I think the company can be well proud of is in terms of its continuing growth. Obviously, there was a little bit of a dip there in December '21, but that's because the debt came down, but we still managed to -- if you look at the market capitalization that grew through that period is still trending up. So we've gone from a company with an enterprise value of -- 10 years ago of $31 million to now around $300 million. Now this slide is capturing Seeka's total annual shareholder returns and how we've measured this is the total annual return is equal to the dividend -- gross dividend paid, plus a change in the share price for the period. And we've started this one 2 years earlier in the demonstration on the slide. Just to make sure -- so that you could see that of the impact of Psa back in 2010 and 2011. And obviously, the significant uplift that arose as a consequence as we moved out of that period with the introduction of the new gold variety. And at that time also, there were significant improvements in the green yields, which significantly improved our results in '13 and '14, and they've continued to trend upwards. There's a little bit of red there in '18. Whilst we've allocated that or indicated that it could have been the impact of the rights issue but there was also a downward trend in the overall market in that year as well. So it wasn't noted, I believe it was totally to the rights issue. There's also a market downturn in '18, and it's continuing to show growth over the last 3 years. So putting this just another lens to see how the company has continued to grow for the last 10 years. The Board last week met to reconfirm our strategy. and confirm the company's mission statement of market -- orchard to market excellence. And our conclusions where it's largely a reconfirmation of our strategy and that we need to continue to grow and diversify the company's activity. There's been a lot of -- we also have spent some time, as you will have seen in our own publication in respect of looking at the company through a sustainable lens as well. But for us to achieve that growth, we need to have operational excellence, and that involves significant planning and excellent execution of those plans. We got to be innovative and take advantage of automation, prove -- particularly proven automation to improve our productivity and also to give us the flexibility in the tight labor market that we have at the moment. We need to continue to transact acquisitions that are consistent with the strategy, but not forgetting that our core business is kiwifruit that's accretive to shareholders, which lifts returns on our capital employed, and also continuing with the aim to be bigger and more diverse. Climate change, I think, is with us. And we need to -- and it's not all risk. There is risk, but there is also opportunities. So we need to adapt to that changing environment and move with commercial innovation to take advantage of opportunities that also arise as a consequence. Where we do take fruit to the market. We need to make sure our customers are receiving excellent service and quality of our fruit. That is one of our mantras is quality in everything that we do. But we can't do all those things with our people, and this is -- Seeka has a clear ambition to be the place that people want to work. We want to be the employer of choice, but they all need to be safe. Everyone needs to and have a strong focus on making sure everyone goes home safe at the end of the day. Now what do we think is going to happen by the 31st of December 2021. Following the Board meeting last week, we updated our operational guidance. And what we are now forecasting a full year net profit before tax between $15 million and $17 million, which is a small increase on the guidance we gave in August. That guidance as a consequence of taking over OPAC earlier in the year also includes $1.4 million worth of restructuring and acquisition costs. But it doesn't include any one-off or extraordinary items arising from the sale of surplus assets. So it's purely an operating result this year. Because OPAC was purchased partway through the year, on an annualized basis, if we had purchased OPAC at the beginning of the year, there would be another $1.8 million. So that's a factor to consider for the new year, and that will include a full year's operating result for OPAC. When you compare that guidance with the previous year, there was a significant gain from the sale of orchard assets, and that amounted to $9 million of net profit after tax. So as you can see, our operator -- forecast operator -- our operational performance is a significant improvement on the prior year. We've also indicated to you in this -- on this page and in our earlier release that the kiwifruit claim has been settled. But at this point, it's still going through the high court to obtain approval of the distribution mechanism and methodology that will be followed to distribute the proceeds from the claim to the claimants. We expect and are hopeful that the high court will approve this before the end of the financial year. And if that is the case, a one-off will end up in the results for the December year-end, and that would lift our -- if that should happen, we expect -- the proceeds that we expect from that settlement, which is yet still to be confirmed, would raise our net profit before tax guidance to between $22 million and $24 million. So just to summarize, the financial -- consolidated financial results before I hand over to Michael, I think it's been an outstanding performance by the company for the 6 months. There has been shortages of labor, which the team have managed very well. We've changed our approach to labor to multi-skill and being more flexible as to how labor is employed. So in many respects, we argue that we've actually had the people we've had, even though we -- to get the job done through that more flexible use of labor than we might have in the past where we would have liked to have had more people. We've delivered the fruit quality that we aspire to. And the results, as you can see, have come into the financial results because of the operational excellence that the management team and all the employees of Seeka have worked hard and innovatively through that financial 6-month period. So with those closing comments, I'll now ask Michael to give you some more detail at a divisional level and an operational level of the results for the 6 months. Thanks, Michael.

Thanks, Fred. My pleasure to talk to you all and present to you over 150 people on the call today. So my pleasure to do it this way and look forward to doing it in person sometime in the future. As is the practice, I'll start with a safety review. Look, we've had a pretty good run in safety this year. We've had no serious harm injuries compared to 3 in the previous year. The company invested a lot of money in guarding and tractors and in technology to keep our people safe. And with the new safety team in place, really has paid dividends. We have avoided serious harm injuries. And we have been significantly short of labor throughout key parts of this year's harvest and processing operations across Australia and New Zealand, in fact. And so it's a credit to the teams that they have avoided hurting people, which is what we aspire to do. In terms of our lag performance indicators, our total recordable injury frequency rate, 3.6 injuries per 200,000 hours worked is below the target and below last year. We've had no serious harm injuries. We put no one in a hospital. And our inspirational people indicator is a forward indicator, so an indicator which is meant to work out how many people are going to safety meetings, their attendance and our offer -- we're holding them. And 92% attendance and frequency of those meetings is incredible, given the amount of disruption that we've had and lockdowns and people being unable to work. Just on the labor shortage, we ran through the season short every day between 250 people. Company invested just under $2 million, bringing in an extra 300 RSEs under the government -- out of the government's extra 2,000 people. And so we invested a lot of money to get the seasonal numbers of people that we needed. And so we made a big effort. COVID-19 continues to be a dynamic in our environment. We continue to take steps to make sure our people are safe. Our sites are largely locked down unless you work there, you can't go there. Your temperature is taken. You are logged and, in fact, this building here remains largely off limits to externals. And so we're taking -- we're operating as if we're in level 3. And in fact, we're in level 2 in parts of our business. Of course, in Auckland, we remain in level 3.1. And in Australia, it's a whole different regime. So really satisfied with where we are with the safety operation this year. Highlights for the 6 months. Yes, record 6 months profit, $30.8 million profit before tax, an outstanding result for the company really. Noting that this year, we had no drought. This year, we had no significant impact from COVID because we had them last year. And we had a lot more volume to handle. So $30.8 million, we're happy to lock that away. In addition to that, we've completed the OPAC acquisition. Teams have been now integrated into the business. We've gone through and reshaped our business and brought it into Seeka. Some heavy lifting has gone on by us and by those people being integrated. We're happy to say that that's completed now. Synergies are locked in and probably beyond what we expected. And of course, with that acquisition, we've pushed out east and increased our market share in that Opotiki region. And of course, since then, we have announced our acquisition of Orangewood. That remains conditional. We are waiting for approvals to fall into place and for all conditions to be met, and we'll see how we go with that. That will push our market share in Northland and bring our capacity close to 100%. $128 million in debt, down $1.5 million on the previous corresponding period and after the acquisition or the assumption of the OPAC debt into our business, just under $22 million. $519 million in total assets, some of them are seasonal, but $519 million in total assets is up 25% on the year before. We got $304 million in property, plant and equipment, up 35%. So numbers are getting big now. And one other highlight I think we should touch on is that our sustainability and momentum in the company is continuing to build. The company has worked out and calculated its carbon footprint, and I'll talk a bit about that in a few minutes when I get to that slide in my pack. Running through the operations by division. In terms of our orchard operations, we are a grower. We are the largest grower. We grew 14.4 million trays in our own right of kiwifruit, 5.5 million trays of SunGold, 8.9 million trays of Hayward or other classes, and that's up on last year. 13 million trays what we grew last year, up by 1.4 million. We're also a large avocado grower, 1.4 million kilos. And we grew 140,000 kilos of kiwiberries. Revenue of $53.7 million, up 13%. EBITDA, earnings before interest, tax, depreciation and amortization, up 36%, $5.7 million. And next year, the volume is set to rise again one with the purchase of OPAC. So we get the full year growing into our business because we took that business over on the 4th of May. So what happened before then was in the opening balance sheet and not in our accounts. And if we can complete Orangewood, more volume will come into that part of our business as well where we're good to go. So reasonably satisfied with those results really. Post-harvest operations, our engine room, so where we pack, coolstore and ship kiwifruit primarily to Zespri, but also to other programs, including those run by Seeka through a SeekaFresh program, avocados and kiwiberries. We handled 36.8 million trays at Seeka, 17.9 million trays of SunGold, 17.2 million trays of Hayward, 1.7 million trays of other classes of fruit including class 2. 262,000 trays of avocados packed in the 6 months. So that's between Christmas and the 30th of June, and 88,000 trays, 1.6 kilo trays of kiwiberry. Revenue of $145.2 million, up 34%, stunning increase, reflects volume and price changes. $49.1 million EBITDA, up 62%. And it's set to go up again when we bring in the full year's volume for OPAC and Orangewood. Of course, it's not just about the money as part of our business. It's also about delivering our growers, a fantastic return and they had excellent returns. We've got an excellent and timely harvest for their fruit and the marketers generally have had excellent offshore quality. So across the scale here, even with all the pressures we've had with labor and COVID and all the disruptions and harvest and maturity, actually, it's job well done because there's ticks right across every part of that business. It's been a big effort, but they have done well. In terms of SeekaFresh, SeekaFresh is where we are taking fruit ourselves. The fruit that we don't supply is Zespri and sell it through our own channels. It includes the supply and export sales avocado, export of class 2 kiwifruit or class 1 through collaborative marketing. Kiwiberry and our own production and sales of Kiwi Crush and avocado oil. This is a fledgling business that's been on a growth path for a number of years now. Revenue of $11.5 million is up 18%. We had a strong close to the avocado season from last year, a softer season this year, you can never get 2 in a row. $1.9 million EBITDA is up 45%. Team's done a great job. Businesses focusing on high-quality produce. We are importing produce. Tropicals, we're bringing in bananas, papaya and pineapples as well as other fruits. We have our own wholesale market in Auckland. We do have direct-to-retail connections in New Zealand and through into Australia. And so the volumes are building, and we're building our customer relationships. And actually, because we're a little bit smaller and nimble, we've been able to innovate and help retailers out when they've had problems with the supply chain. And therefore, make ourselves necessary, make ourselves relevant and actually make ourselves indispensable to those customers. And so we've been able to build our crop. We're building loyalty through service. And so they've done a good job really. And of course, avocado is at the moment, very low priced, very low priced in the Australian market, takes more than 80% in New Zealand avocados historically. Price here is extremely low, down by 2/3 on its normal pricing at this time of the year. Business has pivoted well, pushed free down to Asia. We've opened up Asian programs. We've got big volumes now going to China. Last year, we had none. And so they've done a very, very good job. And we're trying to drive some consumer demand for our product. And on the screen in front of you is an example of the innovative marketing that's coming through the marketing team alongside SeekaFresh to actually remind the consumer that when they buy our fruit, they're buying -- select excellence. Into Australia, business over there has been through significant challenges with COVID, isolations, lockdowns, labor shortage has done a fantastic job. Our revenue at $13.86 million for the half is up 4%. And in fact, the way that had to innovate over the year, we've learned here in New Zealand, we're learning from their experience, how they are innovating to cope with labor disruption, to cope with regional or lockdowns or isolations within a region, and how it's impacted on their business. And actually, we're making changes in our own business now here as a result. EBITDA of $2.73 million, up 44%. Of course, last year, we sold the kiwifruit orchards in Australia and leased them back. And so at an EBIT level, there is a cost of the lease this year that wasn't there last around $1.7 million. This business has made more money in the 6 months than last even after allowing for the share of its cost of those leases. So they've done extremely well. Kiwifruit, Nashi pears, apricots, plums, cherries and soon to be [ dates ] are the varieties that we grow in Australia and market there and a little bit of export. In terms of growth for 2022, some things already happened. Some things are on the way. In terms of OPAC, we purchased that on the 4th of May, just under $60 million what we paid. $39 million in equity and $22 million in debt. We expect there to be around $9 million EBITDA contribution from FY '22, which is the combination of the sustainable EBITDA that was set at acquisition time with the help of EY, and the synergies that we believe that we have delivered since. So we expect there to be growth in that part of our business from that acquisition next year. Our business is actually performing better than we forecast. It is now fully integrated. All the staff changes have been made. Business is locked down. We've got very positive momentum there. And I'm pretty satisfied with how that business is going and how it is building and the trajectory it's on. Likewise, in Northland, we have announced the conditional acquisition of Orangewood at a 2 million tray kiwifruit and avocado business, strong regional growth. It is actually at capacity in Northland asset as a needing some reinvestment. We've got a modern asset there. We've got a modern post-harvest business there, which is not at capacity. So we've got the opportunity by bringing this business into our own and bringing our numbers up to capacity. We would expect something around $2 million EBITDA, $6.5 million investment awaiting sign-off. Awaiting to get all the conditions done. Deals have been accepted by Orangewood shareholders, 100% endorsement. We're waiting to finalize the conditions, and we're waiting for any regulatory approvals to come through. So as a result of those acquisitions, we anticipate that we will be a bigger business next year. If those businesses were announced this year, our 35.1 million trays handled will be around 45 million trays next before the normal growth that we expect to have next year with some of our development orchards coming on. So the business in terms of our major part of our revenue generator, which is the handling and processing of kiwifruit, is anticipated to go up by virtue of those 2 acquisitions they've done. And of course, this year, we've got costs associated with those acquisitions in the numbers. We've delivered record profits even after having those one-off costs in. And so we expect there to be another $54 million in revenue or thereabouts as a direct result of those 2 acquisitions once they are finalized. And we expect to realize material synergies across the Seeka business from making them. Capacity is a big issue for the company. We spent a lot of time planning with the other capacities trying to get some certainty about what happens next, and making sure that we've got enough capacity on the ground to handle the crop as closest to its optimum time as we're able for our customers, for our growers. That's how we actually outperformed. So we did -- we had intended to build a new pack house precooling operation at Pukenga. We've held that off because we didn't have enough planning certainty. We had to put it away. We've gone to a contingency plan, which sees us building a new 8-lane MAF Roda at KKP, the coolstore close here at 360. We have MAFs at Huka Pak, and we have a MAF at OPAC. It will deliver us labor, speed and volume efficiencies. We can't run the existing machine at KKP at speed. It's not built for it. It's a big old, old machine, probably winning in 1995, I think. And so it's a very old machine. And so it will also take some labor out and will bring us up. Alongside that, making sure we've got enough coolstore horsepower, enough coolstore capacity, we're building a new 5 high coolstore at Transcool. 650,000 trays are static with precoolers. It will balance our packing and coolstore capacity back and to bring it all back into balance, be high efficiency, zero carbon footprint refrigerant. And we expect it to be ready for next year's harvest. In fact, the team is working through all the processes with MAF to make sure that it is. And the build -- Transcool, a lot of work is going on in the foundations to make sure that we've got a stable base there when the robots go in to run that coolstore. In terms of Agritech and sustainability. In addition to the other things that we've done, we've also had the pleasure of buying 26% stake in Fruitometry for $2.6 million. This is a -- we're a cornerstone shareholder in that business. It is an Agritech business, a business which, in fact, it's taking imagery, taking photographs with a canopy to tell us what's going on above our heads, so we don't have to rely on people trying to guess or systematically work out how much fruit is there. We can actually take photographs of it and work it out. And in time, we'll be able to work out growth rates. So in time, we actually have crop estimates by orchard right across our catchment are far more accurate basis for us to actually work out our capacity planning. And in fact, it's going to get so sophisticated that when we actually have people working in the orchards, we can actually direct them to where that work needs to be done because the concentration of fruit, for example, was too high, and we need to bring the density down. So it should lead us to a more efficient cost. It should lead us to a more efficient labor utilization. We've made the investment pretty much in a start-up business because that investment is going to help them get to where they need to get to. And now it's all around artificial intelligence. It has been used in other places. The developers behind this technology worked for team New Zealand -- And so -- and also worked at Apple. And so we're just bringing that back in, and we'll integrate that into our own work here. And even tie that perhaps into our farm environmental planning work that's underway in the company. Agile team sustainability has done a fantastic job in giving us a better understanding about how we impact our environment, how we impact on carbon. And they did calculate a base year for the company in 2019, and that base year has been independently verified by Toitu, companies impact 22,000 tonnes. Surprisingly, 34% of our impact comes from the use of artificial fertilizers. So that in itself was a revelation to us. Also, our use of artificial -- sorry, our use of environmentally damaging refrigerants, 25%. Along with electricity and [indiscernible] and transport and a lot of that comes from our air freight programs and around kiwiberry. So it's led us to reflect a little bit about how we can lessen our impact and in fact, how we can enhance our environment. And as a result, a whole lot of work has been going on. In the [ race for refrigerants ], we are mapping out a program that will remove all of the environmentally damaging refrigerants from our coolstores over time. That works underway at the moment because we need to map out how we can do it, even understanding where we've got the wrong refrigerants in itself is a mission. But we're working that out right now, and we will progressively remove them from our landscape. In terms of electricity, we are moving to solar. We are moving to more solar installations. And in fact, now have the solar in our [ KKP ] -- on our [ KKP ] to be more correct as well as here at Seeka 360. Fuel and transport, we are moving cars to hybrids as we can source them. And, if you like, embracing the move away from fossil fuels. In relation to fertilizer and compost, we have taken back the -- getting the fertilizer recommendations done out of house and brought them back in-house. We've got a whole drive coming around regenerative water culture. We had a whole drive coming around about understanding the soil and soil health and so that we can reduce the amount of artificial fertilizer that we use. And alongside that, and farm environmental plans will also help us better manage our water waste. In terms of freight, we don't have a solution for that just yet, but maybe new varieties, or maybe better technology or use of CA, control atmosphere, storage and transit may give us some insights to think about how we can remove our impact through freight. Our intention is in the current year 2021, we will have that recalculated, have our carbon footprint recalculated for 2021. And then our Sustainability Committee of the Board with the agile team will set us a pathway of targets that we will set out to achieve to reduce our carbon footprint. So in summary, look, I think for me, we're pretty satisfied with the results. Record profit. We have delivered excellent returns to our growers and harvest and fruit quality to our markets. We've improved Australian returns, improved in a very challenging environment. We've looked at the profitability over there through innovation, and we've continued to grow our SeekaFresh business. We've put away 2 acquisitions with OPAC and Fruitometry, and we have Orangewood conditionally in the process at the moment. We have managed our way through a very challenging business environment, including labor shortage, COVID and a soft -- in a current soft avocado market to deliver improved operational results and improved returns to our shareholders and stakeholders. People in the company have every right to be satisfied with their efforts. I know that it's taken a huge effort from some people right across the business to deliver the results that they have, and they continue to do it, and it's something that we don't take for granted. Thank you. I'll hand you back to Fred.

Thanks, Michael. I hope that analysis of a breakdown of the various businesses of the group have given you a good sense of the company's performance. And it also demonstrates the strength of having diversity in the business units. So of course, when they all perform in the right direction, you end up having an outstanding result. So on behalf of the shareholders, I'd just like to express your thanks to the management team for their performance over the last 6 months.

Now we do have had a number of questions coming in. Some of them I think I can answer. Others I might have to get some of the -- one of the management team to help me with. And there are a number of questions that can be grouped because they are of a similar theme. So one of them was alternative markets outside of China marketing strategy 2002 exportability in any new markets. And there was another one somewhere, which is not exactly the same point but part of the answer is similar. [ Theft ] of property knowledge, information by Chinese persons, what has been implemented to ensure this cannot repeat? Well, if you think about kiwifruit as a product, actually Seeka other than in Australia is not a marketer of that product to the world. That's actually a question probably better, in fact, directed to Zespri. So I don't want to appear that I'm sidestepping it. But we do have had feedback from Zespri in the last -- about 2 months ago in terms of what they believe the demand is for kiwifruit in the global market, and they're very confident of the growth particularly for gold on a global basis. Another question, which picks up the sustainability and the carbon point, does kiwifruit vines help with carbon sync? That's an interesting question because the answer is sort of yes and no. And that kiwifruit vines do [ sequester ] a little bit of carbon. But in terms of the methodology that's applied to measuring the carbon is not included in that measure. Green organics outlook. Might have to look to you, Michael, do you want to answer that? Or take Mike to answer that one? I think they're just rocked after who was the answer that one.

We're just [ thinking ] around it. But look, is, I understand from Zespri, good demand for organics. Some issues about getting organic fruit into China through the scale and for the sanitary protocols of getting it there. At the moment, they've watered off that, but there's a good demand for organics in Europe, good demand for organic in the U.S.A. And so there's no reason for -- from a market perspective, why there is anything other than a positive outlook for organic fruit.

Thanks, Michael. There's a question around how life if there's a capital raise? Well, there's no current plans for the company to raise capital. But should there be growth opportunities in the future, and the company has a need for capital, we'd have to take advice from experts on that. But it could very well be that we do raise capital in some form or another. But no plans at this point. There was another marketing one, which I think we've covered about product exported to China and how secure is the China market. Keen to hear about future development plans and dividends, please. We'll, our strategy is to continue to grow where it's consistent with our strategy and the activities that we currently undertake. Our policy is to pay dividends up to 75% of our net profit after tax. So if the company has got the profits, we'll continue to pay the dividends in accordance with their policy. Seeka's views on trends and orchard operating costs. Well, given we've got inflation running close to 5%, I suspect our -- all we can expect, I think, is continuing costs. But there's a drive to improve efficiency on the orchards to reduce cost. And Michael's talked a little bit about that with the Agtech and Fruitometry to actually help direct labor to minimize the cost and improve the efficiency on orchards. So but -- in this environment, with shortage of labor and inflation, there's no doubt that costs are likely to increase. So the pressure's going to come on being innovative to manage the extent of those increases. What actions have been taken to reject the EPA proposal to remove Hi-Cane? That's quite a technical question in some ways from the industry. I can assure you that we are in the process of making submissions and understanding the science to make submissions to protect the industry's use of that product. What is the future of New Zealand's [ water cold ] sector in a COVID environment as a local grower? How do we continue to operate in lockdown with limited labor and changing climate conditions? Well, the answer to that is we've just got to be innovative. We've got to be smarter with the rewards, how we reward people that work in that environment and improve and manage and stimulate wider skills so that we can be flexible in the labor use. What might we expect Seeka to look like in 10 years, product mix, capital use, ownership versus lease and management of climate risk [ stroke ] opportunity? Well, it is our stated strategy to be bigger and more diverse. We will -- we have already established a practice of recycling capital, so we would continue with that trend. We would want to make sure that we have a good balance between ownership and lease. And climate change, well, there's risk and opportunity. So we need to make sure that we mitigate the risks. If you think about our Australian business, we're -- the water is clearly an important part of that business. We manage that closely and also seek the opportunities that arise from change. When will our fruit labels be totally compostable, both aerobic and anaerobically? I cannot answer that without assistance. Michael will help us out with that one.

There's quite a few initiatives trying to put in compostable labels or even remove them altogether. Zespri aren't taking trials at the moment in Europe where they've got label-less fruit, no labels on the fruit. But of course, it's hard for us to differentiate our fruit away from Chinese or any other fruit if we don't have a label on it. So there is compostable labels being looked at. There is [ coming out ] in New Zealand, trying it along or -- simpler. And so you can expect that we will be moving compostable or no labels in the near future.

Thanks, Michael. And the last question was -- why at the last acquisition did Seeka share price drop? I presume they're referring to -- shortly the OPAC acquisition. Well, the share is actually at about the same time were -- so I suspect that was one of the reasons why the share price might have dropped at the time. Well, those are all the questions that we've had. I hope I've answered those to the questioners' satisfaction. Thank you for joining us. We appreciate the interest that you show in the company. We appreciate the time you take to keep yourself informed on what we're doing. We enjoy presenting to you so that we can help with you making your own judgments about how well the company is performing. So thanks again for joining us, and I'll now close the meeting.