Seeka Limited (SEK) Earnings Call Transcript & Summary

Okay. Welcome, everybody. Welcome to this analyst briefing presentation for our financial results ended the 31st of December 2025. From the outset, let me first express some appreciation from the directors of the company, from management and probably from the company itself, I'd just like to take the time to thank everybody who has been involved in our operations last year and the production of these results. So we all appreciate it's been a big effort from our growers, from our suppliers and our contractors and our own people. And so let me start by thanking you all. Results are, again, a second year of record results. We don't take it for granted. It's been a big effort and so well done. Pleasure to present, let me tell you a lot better than having to present more challenging information. And delivering on our strategy, we have had another year of excellent crop yields and quality. In many respects, the 2024, 2025 growing and harvest season was excellent. Out the gate, very good. 47 million trays plus one trays trace of kiwifruit picked in New Zealand, up 10%. Australian volumes up 25%, continuing rebound over the last year really has helped us produce the numbers. In terms of the financials, earnings before interest, tax, depreciation and amortization, EBITDA, $96 million. Profit before tax at $47.5 million is at the upper end of the range. We had advised the market that we expected the range to be between $44 million and $48 million of profit before tax level. So $47.5 million at the top end of that. After tax $32 million well up on last year's $8.8 million, understanding that last year's after-tax results were impacted by the deferred tax adjustment required after the government removed the tax deductibility of depreciation on buildings. Earnings per share, $0.76 per share, very good. And we paid $0.30 per share in dividends, of which $0.05 related to the year before. So we'd actually paid interim dividends of $0.25 for the 2025 years earnings. Of course, later in the pack we've announced another $0.25 to be paid. So full year dividends $0.50. Operational teams delivered excellent performance. Our orcharding operations, very good yields. Post-harvest performance, low onshore fruit loss. Our game is to keep quality problems here onshore, not ship them offshore. We've had excellent offshore quality, our premiums earned by delivering better fruit into the market has come back to us. And we've given excellent service to all of our customers, our growers, our consumers and to Zespri. So yes, we're very satisfied with what we did last year. We've invested in our growth assets. We've invested in New Zealand and Australia orchard developments. We've introduced and introduced Reemon technology, which is packing technology to three of our sites, one machine-focused on citrus and two full kiwifruit solutions. And we have leased our cool store expansion at Pioneer at Mount Maunganui with Green Sleeves, with Mr. Vass, which will give us extra cool store capacity, which is third-party farm to release. Our fourth focus remains to maintain strategy, keep focused on what we do to make money. We are focused on driving efficiency gains through automation and we are driven to deliver excellent operational performance. And by way of an introduction to the year that we're heading into, we've got the infrastructure in place, we're actually delighted with where the capacity is at the moment. The systems and personnel are ready. We're just on the edge of the rear harvest, which packed a little bit and the Australian harvest underway. Understanding that in Australia has been very hot. Nine days above 40 degrees quite challenging. Looking at the financials here, the group financial performance, $440 million in revenues, up 7% on the $411 million last year. And our group turnover, which is not reported on the slide, around $500 million, up $50 million. So starting to get up there now. $96 million in EBITDA is up 26% on last year's number of $76 million. $47.5 million profit before tax is up 60% on last year's comparative number, $26.7 million. And as I said before, at the top end of the guidance range. And you can see that the $32 million profit after tax is up 265% on the artificially low $8.8 million last year, but up 50% on a normalized profit after tax. If we actually just put normal tax through and removed the deferred tax adjustment, where the number would have been $21.2 million. Our return on capital employed is a slide coming later in the pack 14.5% net tangible asset backing now $6.31. Some people like to see these numbers as graphs. Here they are. You can see the graph quite nicely going up. We had the blip in FY '23. And every year. But outside of that, really the company remains on a growth trajectory. In terms of looking at the segments, the business units that were operating at orcharding EBITDA $10.3 million is well up on $6.2 million. Better yields, better performance, better margins and actually great returns from Zespri, the marketer. And so 19 million trays handled. And so remarkable forms for that part of our company. Post-harvest EBITDA, $105 million, big numbers, up from $90.4 million last year. This is the hotel for fruit. Great occupancy, well handled, efficient automation, driving and delivering the returns that you would expect for the kind of investment we've got in that part of the business. SeekaFresh continues to build. This is our fresh markets, retail services part of our business, including the DNFC, the Delicious Nutritious Food Company, which we named so that you tongue tie me in these presentations. About $3.2 million in EBITDA, up from $2.6 million last year and having some momentum behind it. Team has done a great job. And over into Australia, EBITDA of $4.7 million up from $3.2 million last year, 5.6 -- 5,600 tonnes of produce handled. Excellent performance in Australia. And it's set to go forward, of course, occasionally, we might hit the odd weather-related speed bump, orchards coming into production in Australia give it a pretty good outlook. Looking at the capital management for the business. $17.7 million increase of capital employed during the year, $24.6 million increase in Plant & Equipment -- Property, Plant & Equipment, which is really around post-harvest technology. We're investing to mitigate material damage risk. The number includes the accruals that we've got. Because we've put in plant and we're yet to pay for it as is some deferred payment until it's all installed to the $24.7 million includes that. $525.7 million total capital employed now. Companies continue to focus its investment on risk, plant rooms, switchboards, program maintenance and automation. And so you can see the company $525.7 million now in capital employed. Company has focused. We have focused on our debt. We have focused on building balance sheet resilience. $100.3 million in net bank debt at the end of December down $37 million on the year before and down $72.1 million on 2 years ago, quite a remarkable reduction, all funded from operations, all funded from normal cash flow. We've continued to enjoy a great relationship with our banking syndicate led by Westpac New Zealand, alongside Westpac Corporation, ASB BNZ and Rabo. So we appreciate their support. We've got extensive unutilized debt lines of approximately another $100 million. We did finally sell that last orchard in Northland 13.5 hectare, which was sold in February. I think we've signaled that before. And importantly, One of the key measures that we're focused on is the leverage ratio now at 1.3x to 1. That's the debt-to-EBITDA. So at the bottom end, of the Board's range actually below. So I think we're reasonably satisfied with those numbers. We think it's prudent, and we're not worried about debt now. Earnings per share and dividends as earlier reported EPS $0.76. $0.30 was paid in dividends last year, of which 5 related to the year before, so we paid $0.15 in October and then $0.10 this January was declared last year. And we've just declared a new dividend of $0.25 to be paid in April this year, is declared on 26th of February. Record date will be the 20th of March and is paid, I think, on the 19th of April, Nicola? 15th of April, sorry. The DRP will apply to that dividend. And so in total of the $0.76 EPS that we've had, we're distributing $0.50. The Board had a big debate about that what was the right level of dividend to pay debt as well within its range. We are managing our capital well. We've got the ability to borrow more if we need to, and we've delivered record earnings. And so if this isn't the right time to pay at the top end or towards the top end of range, winners. And so that is the thinking behind the dividend. Looking at the segments. The orcharding business is a business led by Barry Penellum, $10.3 million in EBITDA is up 66% on the previous year. We have got future investments we've been investing in. We have got 65 hectares developed with landowners and funding agencies, namely Karnoa, that is coming on stream up north and Rekokiri up above Tikaha, we've got $6.3 million directly invested in long-term lease land more locally, of which 12 hectares is in kiwifruit. Team has done a great job, 19 million trays of kiwifruit, all varieties packed. Yields are actually excellent. Team's done very well. In terms of our post-harvest business, led by Paul Crone, $105 million and EBITDA is up 16%. This is the hotel for fruit. Occupancy is up. We are a toll processor in this part of our business. All of the varieties were up, and we've invested ahead of it. And so team's done a fantastic job in delivering the efficiencies and delivering the margins but also delivering excellent returns to our gross. And so really got the tax right across the board and no crosses. And at the same time, they have focused on capital maintenance, capital management and on our automation plan with the three new machine upgrades in place now finalized really for packing 49 million trays and total Class I and Class II 47.1 million Class I trays. Nearly $400 million in investments and assets and this part of our business, segment assets. In terms of retail services business. It's led by both Kate Bryant and Jim Smith. Jim led because Kate Bryant looks after our SeekaFresh, and Jim Smith looks after the Delicious Nutritious Food Company, the DNFC. So there's two general managers looking up to these business units for us. $3.2 million in EBITDA is up 24%. Strong growth in the tropical fruit sale. Our wholesale markets in Auckland has done an excellent job. It's the importing business. Banana, pineapple, papaya as well as selling New Zealand grown produce either domestically or by way of export. And so well done. Good performance. Kiwi Crush. And Kiwi Crush is products that we've got in the DNFC, which are performing well. And of course, last year, we moved to rationalize what was happening in our avocado oil business, which culminated in us buying the assets of the previous Olivardo business, integrating them into our own business, establishing a new brand called Luvo. And getting that underway is now in retail. Experiencing some strong growth in demand and sales, albeit it's a very small part of our business. These things are important because it does connect us through to retail. Segment asset is quite small. You can see by way of comparison, only $12.6 million invested in this part of our world. Over into Australia, General Manager leading this part of our business. This business for us is Jon van Popering, wonderfully experienced General Manager only ever worked for this company. $4.7 million in EBITDA, up 48%. Good pear and nashi yields, great kiwifruit yields as well, got good pricing and demand for Australian grow on produce in that market. We only export a very small amount of fruit from that business and only really to manage capacity. We've got new auto developments underway. With 18 hectares of kiwifruit entering production in 2026. We've got another 36 hectares of kiwifruit that will come into production by 2028. Our new Ruby Roo red nashi is scheduled to start producing in 2027 is going well. And we've got new Jujube orchards producing in 2027 as well. That product has also got good demand and good pricing. The outlook is positive in Australia, although it has been very hot. And so there will be some impact because of that heat, you've got to imagine 9 days over 40 degrees consecutively as challenging for anything. I would vote in it. Segment assets, $78 million, and team is doing a good job of building that business towards required return on capital employed that we need really. So if I look forward, the three Reemon installations are commissioned and ready to go. Just final tweaking on those machines now and just dialing them in, getting the cameras calibrated, getting the last bits of automation to arrive that automation drive will continue delivering an array of highly flexible pack houses throughout the regions and here centrally in Te Puke. Labor availability in the current year is excellent. Most sites are reporting that they are full with waiting lists. Of course, a number of people sign up at different companies, they'll appear. The same name will appear on three or four companies. So getting away early is important. So we're focused on doing that. But even then, we've got waiting list. I can't remember a year where it's been like this in terms of labor. All sites are ready for harvest. They're ready to go. Some fruit has been picked. Our first Zespri red has been picked. We expect to get going with SunGold sometime later this week. Some issues for us, it's a different growing year the yields look pretty good. We're not worried about it, certainly not a down year. Matters like the Waioeka Gorge, for example, some things we're having to deal with in terms of how we organize the harvest. But that's just the normal harvest to get an issue or two along the way. It is too early to provide you with a reliable volume forecast, but I guess you might better read into the conversation or the commentary that we're not concerned about it. We don't think it's a down year. We're just not quite sure how good it's going to be. So we will see and we will be able to update you and give you some progress report, should you attend the Annual Shareholder Meeting, which is on the 15th of April 2026 at 2:30. That being the case, do I have any questions from anywhere?

Yes. So we have a question from Trevor. If the net leverage ratio is better than the board figure, why is the company continuing with the dividend reinvestment plan?

Well, that's a remarkable question, Trevor. Well, we think it's prudent that we do continue to keep debt down. We think it's sensible that debt is held low. The discount with the DRP is 2%. It's not a significant discount, and it continues to keep some cash in the company. And so the thinking around the dividend at $0.50 was about rewarding shareholders who have stuck with us and been resilient, and we've had record earnings. And the DRP gives everybody, all shareholders the opportunity to participate at a small discount and can continue to be shareholders. But it's a very good point, which we'll raise with the Board when we talk to them at the next dividend.

A question from Tony. Is this year peak earnings? Or do you see scope for further growth?

Is this question this year peak earnings. Well, I think capacity is a hard thing to understand and hard thing to calculate, but we're not completely full. And so we are able to take more fruit. So that's important. So we're probably not at the peak just yet. If we had the fruit, we could make more money. There are some inflationary pressures ahead of us. We do know that things like packaging and electricity, in particular, and the delivery of electricity of both inflationary pressures, which we face, but the market will price for those. And so I expect that the margins that we've made on the volume that we've handled will be maintained. And so if we have more volume, we can handle it, we can sensibly invest to handle more volume. So I don't think we're at the peak yet. But we are a seasonal business. Volumes will go up and down. It's not like an engine that just produces cash. We are talking about a plant that may produce different yields in a different season with different weather events with different growing challenges. And so this is not the peak, but that's not to say we'll get to the peak this year or next.

Question from Jason Familton. Can you please give some guidance around capital investment in the coming 12 months and potentially beyond?

The -- with guidance. Well, we are continuing to reflect about and consider our strategy around capacity going forward. You will have heard more recently in the press that Zespri is thinking about doubling exports in the next 10 years. And so we're quite rightly thinking about do we want to maintain market share? Or do we want to run our capital, sweat our capital and keep ourselves as full as we can. And so in terms of an ongoing sense, our intention on a business-as-usual basis is to invest capital around depreciation around that number. And we've done a reasonably good job of that in the last 2 years in terms of limiting our spend to debt, which is necessary program maintenance, some automation and capacity expansion. At some point, if we want to participate in the doubling of the industry, we're going to have to invest a bit more. But at the moment, we haven't made that decision that something the Board will contemplate in the next quarter, I imagine.

No further questions.

Right. Well, we're happy to take any questions off-line, understanding that we can only provide you with information that's been publicly made available. We thank you for attending the briefing. We thank you for your support and interest in the company. We hope that we have given you enough confidence to maintain it or increase it, we're here and we're only as good as our last season, and our mission right at the moment is to do a little again and deliver great numbers this year to the maximum we can do. So thanks very much for hopping on the call. And we will see you on the 15th of April, if we're lucky. Thanks very much.