Select Harvests Limited (SHV) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Select Harvest Limited Investor Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. David Surveyor, CEO and Managing Director. Please go ahead.

Thank you, and good morning, everyone. We're here to discuss the Select Harvest capital raise and strategy. Thank you for the introduction. As noted, my name is David Surveyor, the Managing Director of Select Harvest. And joining me in delivering this presentation is our Chief Financial Officer, Mr. Tim Bradfield. Thank you all for being available today. I think what we'll do is we'll start by talking you through the presentation deck, which is available on the ASX. So we'll give an overview of that, and then we will move into a Q&A. What I might do, you'll note there are some disclaimer pages. We'll take -- they have the usual disclaimers and basis for information contained in the presentation. What we might do, I think, is start with the company update and specifically the slide titled Unlocking a Stronger Select Harvest and then use that to go through the deck. So let me start by saying the company is partway through the execution of its new strategy. That work has identified a number of initiatives that increase our profitability and provide a disciplined approach using our project management office. In the short term, there are a range of opportunities that are sitting in front of us, the 2 largest of which are actions that seek to improve the performance of our horticultural assets, particularly yield, and we think there is a potential gain of up to 15% in the performance of our farms. And then the second issue is -- for gain is increasing the capacity of our processing plant at Carina West. This year has seen the capacity of that plant increase to 40,000 tonnes, and we see the opportunity to increase this further to 50,000 tonnes. I think for several years, there's been a view that Select Harvest would undertake a capital raise and the company has determined that with our strategy in place, now is the prudent time to address the capital structure. This will strengthen the balance sheet and provide the financial flexibility to enable Select Harvest to enact its strategy. But given we're doing a capital raise close to the year-end, we're also providing an end of year results update, and I'll specifically spend some time discussing the results forecast as well as the net debt forecast, its drivers and why we think specifically as it relates to some logistics issues, what we have is more of an interim or immediate problem that will ultimately pass through in the coming months. The equity raise itself is $80 million. It's structured as an institutional placement of $30 million with an NREO of $50 million. And in terms of the use of funds, the proceeds of the capital will effectively go to 2 uses. First of which will be the repayment of debt and will increase our banking facility headroom. We will then hold net debt going forward at sensible levels. We do not have large specific plans for capital spends going forward. Our future program is really about organic growth. And then the second application of funds will be to support the capital expansion of our Carina West processing facility to provide a further 10,000 tonnes of capacity and increase our total processing capacity to 50,000 tonnes. We view this as a low risk and also an outstandingly good return on investment, and we'll talk about that further as we go through the presentation. So if I move through to the next slide in the deck, specifically to talk about our crop and price update. In terms of the 2024 crop, hulling and shelling of the 2024 crop is largely complete. The quality profile of the crop has been excellent, and we're expecting the total volume to be approximately 29,500 tonnes. This number is a record crop for Select harvest, although slightly below, in fact, where we actually expected the crop to land. This year, we have contracted sales for the 2024 crop running at about 80% of the total crop volume. And if you look at our total sales velocity for 2024, we have, in fact, contracted some 36,600-odd tonnes. This comprises some carry-in from the 2023 year, our F '24 crop and, of course, the external third-party grower volumes that we have. Our sales rate has increased compared to the previous 3 years where our average contracted sale rate had been 27,000 tonnes, approximately 800 tonnes per year. So the point is there is a step change in our sales velocity, and that is something we have previously communicated to the market as one of our objectives. Whilst there's still several thousand tonnes to contract out of the 2024 crop, our current view is that the final price for the 2024 crop will be in the range of $7.70 to $7.75 per kilogram, subject, of course, to a continuation of current pricing trends. In terms of the 2025 crop, the overall tree health remains positive. Bloom started on the 29th of July, completed on the 30th of August across all of our growing regions. And we've seen generally positive bloom with good beflight hours. We saw a very good flowering of our pollinator variety trees, but perhaps with slightly more patchy performance across our nonpareil variety, and that experience seems to be consistent with the feedback that we've had from the rest of the industry. So on balance, our expectation is that 2025 will be another positive crop for Select Harvests. This, of course, again, being premised on continuing positive farming conditions. We think the macro forward pricing environment for farmers is extremely positive. If I take you back to 2023, we saw a smaller Californian crop of 2.45 billion pounds. That crop has largely been sold through to the market and the industry has the lowest carryforward crop it has seen in a number of years at 500 million pounds versus 800 million pounds in the prior year. I think there's also a general recognition that of that 500 million pounds, there is generally low quality, which is also supportive of prices going forward. And we note the U.S. actual crop size has reduced each year since 2021 to now. We also hold the view generally that supply chains, particularly in India and China, have low inventory levels. We think that bodes well for pricing. And the objective forecast for the 2024 California crop was, of course, 2.8 billion pounds and the early harvest consensus seems to be it will be that number or possibly slightly lower with almond nut sizes reduced. And we also note there are varying reports on defect levels. But at this stage, we are assuming defects will probably align around their normal rates for approximately 2%. I think it's also interesting to have a look at the California Almond Board's August report because if you look at the carry-in plus the 2024 crop receipts to date and said that equaled effectively supply and then looked at committed sales, you would draw the conclusion that, in effect, all inventory is currently sold, and therefore, we are seeing resulting more price discipline from U.S. sellers. The upshot of all of this is that we're expecting strong prices for 2025, and we think that will likely continue into future years. I'd further note that our views on pricing are supported by other external forecasts. Rabobank, for example, has spoken about a $7.90 to $8.40 price for 2025. For those of you that review strata markets, you can also see that prices are going up on a week-to-week basis, and there is no doubt other places that you can look for resource to draw your own conclusions around where you think the forecast price will be for '25. But clearly, it looks like it is moving upwards. If I move to provide an update on our trading position, the trading outlook for Select Harvests has a 2024 EBIT range of $17 million to $19 million with NPAT at $2.5 million to $4 million and importantly, underlying NPAT in the range of $1.5 million to $3. I think it's worth noting that, that number is slightly below the consensus position, but certainly within the analyst range of where they thought the profit result would land. So what I think I'll do is provide some key drivers for the variation from consensus. So I'll start with the positives, and that is with Select Harvests saying that we have a forecast price of $7.70 to $7.75 per kg versus what had been a consensus price of $7.60. If you took the midpoint of the range that I've given you for Select Harvests prices at the volume of 29,500 tonnes, that would add approximately $3.7 million to our profit result. Then there are some negatives. The first is that in 2024, we have taken a write-off on some of the carrying inventory for the 2023 year. Now we do not, by practice, run an inventory provision model because not every year we have an inventory write-off. It depends on the quality of the crop in any given year. The impact of this, however, is $4.2 million, and you could well argue this is a one-off. And you could also argue that it's part of the '23 result, but it's an operating issue. And so therefore, we think credibly it sits within the underlying operating results. The second reason for the difference is the result of having delayed shipping, and we'll spend some time talking about shipping and logistics today, but we have delayed shipping of approximately $20 million versus the consensus position, and that has a profit impact of about $600,000. This has not lost revenue, and it is not lost profit. It will be captured in the 2025 result. Then the third reason for variance for consensus is that our interest costs this year were higher than the consensus by about $2 million, and the reason for that is the result of a higher-than-average debt level. So the net result of the positives and the negatives is an impact of $3.1 million, which if added to our forecast, would mean that our underlying NPAT would get us back to the consensus number. Moving on from underlying NPAT to forecast NPAT, there are 3 key issues to note. The first is a one-off gain on the sale of water as we rebalance our water portfolio. We have previously communicated the water portfolio rebalancing. And essentially, what we are doing is we are taking -- we are selling some water in New South Wales, and we are purchasing with the cash generated water in South Australia and Victoria so that we better balance our water portfolio more closely to where the volume of our farming is. There is additionally a one-off loss associated with the impairment of the Yoga farm. That is a leased farm and the impairment is likely to be around $6.5 million. And we have also taken a provision of $1 million related to possible costs associated with the logistics issue that I'll now talk to in some more detail. So net debt this year will be substantially higher than our previous guidance of around $170 million. It will be $60 million to $75 million higher. And the driver for the difference is the delayed cash collection resulting from changes we have made to our logistics service provision. Now before I get into an explanation of events, what I'd like to do is make a couple of observations. The first is that the issue that we are facing is transitory. It is cash delayed, and it is not cash at risk. The second point is that whilst I've noted that we are providing for a $1 million provision for potential costs associated with this exercise, thus far, the costs have been minimal, and we will see if that changes, of course, as events unfold. But so far, the cost has been minimal. And in many cases, any costs that have been incurred have been taken up by our service provider. And then the third point I'd make is really a customer-facing comment, which is whilst no doubt we have created some difficulties for our customers through these logistics issues, we have not lost any of our customers and Select Harvests retains strong customer relationships. Now let me talk about what's happened. In effect, what's occurred is that as our sales velocity has increased, our processes have not scaled effectively. And that's really created 2 fundamental issues. The first is that it is taking longer than expected to produce all of the required export documentation for any individual order, and that slows our ability to get product cleared at port and customers, therefore, are delayed in paying for product. The calculated value of that is some $35.5 million. And the second impact is one of orders where we have an order in place, but we are awaiting a slot on a vessel to get product delivered and shipped to customers. The calculated value of that delay is $20.6 million. So you add those 2 things together and you have $56 million in terms of delayed cash, and we expect all of that money to be received by the end of December, and hence, my comment on it being transitory. The company believes it is now getting on top of its logistics issues. We've engaged Deloitte to help us with process improvement, and we are now completing documents and error amendments faster than we are shipping. So the backlog is starting to reduce, and we have no incomplete document sets prior to September. We have some increased shipping volumes over the last couple of weeks, and that will help us push more product to market. I think in terms of learnings and managing forward, the company started to derisk its shipping by adding an additional service provider. Their current performance on documents has been excellent. And internally, we will be doing our own process engineering around all of the cash logistics so that we're better and more capable of managing at scale, and that will include things like process automation, clear lines of responsibility and better process definition. If I move to the next slide and talk about the balance sheet reset. I think this slide shows you primarily the use and application of funds. So you can see that of the $80 million that comes in, $72 million will be applied to debt reduction. There's $5 million that is being applied to the capacity expansion at Carina West, which I'll come to in more detail. And then you see that $56 million of cash coming in as we move through this issue related to our logistics piece. The net result is a pro forma debt position at the end of September of $110 million to $100 million. That would get us to a gearing level of about 20%. And whilst the company does not have a formal policy on gearing, its target range is typically in the 20% to 30% range, and we intend to hold our debt position in that range going forward. I think the other part of this slide is really a conversation on the logic for doing a capital raise because some will ask if we believe cash is arriving by December, then why would we do a capital raise now. So let's discuss that logic. Firstly, I'd say that the capital raise is a topic that has been considered by the Board for a long period of time. It's a conversation that, in fact, even predates my arrival at Select Harvests. The Board continuously considers the balance sheet position, and the company has held out in this position for as long as practical. The company has previously acknowledged it has more debt than it would like and needs to reduce debt. So whilst the company could arguably continue to operate with a capital raise, the reality is that logistics experience has really demonstrated to us that it's prudent to reset the balance sheet so that the company is more capable to manage given that we operate in an industry that is prone to shocks, be it global events, weather bees, Ukraine war, et cetera, et cetera. And so we need to balance and reset our position so that we have a clean base to move forward with our strategy. I can tell you that we did consider selling water and did discuss this with our banks, and they were generally of the view that water is a strategic asset. They did not want us to sell water and increase operating costs. And I expect if we had sold water, the result would have been simply a reduction in our facility, so no net gain to our headroom position. The other obvious option is that we would look to sell farms. And given our core business is growing and selling almonds with a strategy based on increasing almond volumes, this did not make sense to us. The point is that we consider the range of options for balance sheet reset and the company has concluded that the most prudent of these is a capital raise so that we can build the business forward rather than be constrained. If I move to the slide that is titled Strategic Priorities. I think with the 2024 results discussed, debt and capital raise logic discussed, I want to move to a conversation that's much more forward-looking. with a focus on some of the opportunities that sit in front of Select Harvests. We see the global almond dynamic is clearly moving in a positive direction. The company has previously put forward its strategy, and it's built around the delivery of the 4 pillars that are on this page. The first being substantially growing our almond supply, the second being leadership in processing scale and efficiency and the third being maximizing the returns from the crop and then looking to drive some step-out growth. I'll focus on the first 3 pillars as we go through the next slide. But what you can see is you can see a number of sticks on this slide, and they go to the fact that I think we're making meaningful progress on a number of elements of the strategy. Let me move to the next slide, however, and talk about horticulture. I think there are a couple of points to be made on this slide. The first is that in 2024, we have had a fivefold increase in our external supply of almonds to approximately 10,500 tonnes, and we will be seeking to grow that further over time. It is profitable business for us, and it also helps reduce the level of agri risk that is direct to the company. The second point I would make is that the company concluded in January 2024, a review of its horticulture strategy. We believe there is a $10 million upside potential as a result of the work that we've got going on in this space, and the work is happening across 3 streams. The first stream is about increasing our yield. The second stream is about improving quality and hygiene performance on farms. And the third is a series of cost-out initiatives. While some of the cost savings we think will flow into 2025, we're really expecting to see the yield and quality gains start to come through from year 2 of our program. If I move you to the slide on processing opportunities. I think our second strategic pillar is about leadership in processing scale and efficiency. I think the key progress that's been made for the 2024 year has been a shift in our capacity from 30,000 to 40,000 tonnes by effectively raising the operational cadence from approximately 7 to 10 tonnes per hour. The capacity shift has been matched to the increase in external supply of almonds to that 10,500 tonnes that I've just referred to, and this ensures that we keep our business balanced. It's profitable and effectively comes with only variable cost to process and helps spread our fixed cost base. We have now identified a low-risk and low capital path to get a further expansion in Carina West. It's approximately $5 million to get a 10,000 tonne further capacity change to 50,000 tonnes. We'll fill this capacity through our own on-farm yield improvements and through increased external supply, and we can balance between those 2 to ensure the capacity is full. So we're confident that we will get the leverage from increasing the capability of our existing plant, and we expect that capacity to arrive in 2026 on the basis there is a lead time for hit to arrive in Australia and get installed. If possible, we will try and bring some elements of that capacity increase forward to 2025. And then if I can take you to the strategic refresh on sales slide. This is our third pillar around maximizing the value of the crop. We've really got 4 work streams that sit in that space. The first is about making sure that we've got a customer base with the size and capability to consume our increased sales velocity and the increased volumes that we are selling. The second part of this is about making sure that we are maximizing our margins. So we're benchmarking our prices with international trading data, and we're also looking to optimize the tariff positions and margin advantages that Australia gets against Californian suppliers. The third thing that we're doing in this space is where it makes sense, we are looking for increased direct supply with large manufacturing customers. That sees us potentially claw back some margin from intermediaries and also allows us to get closer and a deeper understanding for the needs of our larger customers. The fourth stream is really early days, but we are looking to optimize our supply chain, having done some work around our -- some activity-based costing work so that we can make an optimal decision on any given day between whether or not in any -- given the global markets that we sell into, should we sell something effectively as kernel or is there more profit in the moment for putting it into value add. So there will be more on that unfold as we go forward. So I think to summarize, Select Harvests has got a strategy that is underway. We are seeing some improvements starting to flow into the business. For the 2024 result, the biggest variance to the underlying NPAT consensus is the $4.2 million of write-off for the 2023 crop. We have no doubt experienced some challenges around our logistics project. It's created a meaningful shift in our cash position. We think we're now starting to get on top of that with the backlog reducing and the effects transitory, but it has certainly highlighted the need to reduce debt. And the Board, after serious consideration has determined it's prudent to run a capital raise. 2024, I think, pleasingly saw us return to a strong crop. We expect 2025 will be another good year. The macro environment is clearly improving with prices rising. We think we're starting to get traction on the strategic direction, and we want a clear path forward so we can get on with the delivery of strategy. We think there's a meaningful price to deliver, and it's our intent to do that for our shareholders. So at that point, I will stop and open up for any questions.

[Operator Instructions] Your first question comes from Josh Kannourakis from Barrenjoey.

Can you just give us a bit of context in light of all these initiatives that you're putting through and obviously, some of the freight issues, how we should just be thinking about cost per kilo rolling into sort of FY '25? And also just a little bit more context around that value-adding and processing component, both what sort of maybe within this year in terms of the assumptions on the numbers you've brought out and then how you should be thinking about it into next year?

Thanks, Josh. Well, I think in terms of our cost base, at our midyear results, we said that our cost base on a 29,000 tonne, if you use that as your notional base would be $6.85. I think the way to think about our cost base going forward is we will try and eat any of the inflationary impacts that are coming our way in which all Australian businesses are facing. And so we will look to run our cost base flat in absolute dollar terms as we go forward into the 2025 year. That's net of some investments that we are making in horticulture, as I was talking about, particularly in terms of yield gains. And if we get an increase in the volume of the crop above 29,000 tonne, clearly, the unit price per kilogram would reduce accordingly.

Yes. Okay. And so just in the context of that, the value-added and processing into next year, how should we be thinking about that in light of all to discuss?

Well, I think that to one of the -- we don't -- well, first of all, we don't give a specific forecast of value-added in terms of where that sits in our model. But to answer your question, I think that the point that I was making, and you can see it on the slide around the strategic refresh and I was talking about the fact that we're looking to do optimization of mix and quality. What will happen is we'll make specific decisions in any given moment whether or not we're better off servicing or putting product into the value-added space or whether we're better off it's more profitable to sell it as kernel so that we can actually optimize the margin between those 2 different points when you look at sell price, cost to produce for value-added relative to the margin that you can get off kernel. Now that said, we have -- we are increasing our volume of supply into pace for almond milk this year as that category continues to grow. And Select Harvests has strong committed relationships with each of the major manufacturers in that space where you will more likely see flex in our volumes for the issue that I'm talking about relates to whether we are slicing product or producing meal. That's where we'll start to flex our volumes.

Got it. And maybe just one quick one for Tim. Just on interest given the debt level and maybe just in the context of the discussions with banks and stuff, how should we be thinking about interest into '25?

With the debt raise, interest should be getting better into 2025. I'm not going to talk about global interest rates. But yes, on our profile, our debt will be declining, and therefore, the interest will be improving.

I think that the pro forma picture of -- in the presentation deck, I think, will give you some sense of where that would get to.

And the rate -- similar rates, though, in terms of the actual rate on the debt?

We have had no change in the rates that we experienced. Of course, it depends on what happened in global markets around the cost of money, but we've experienced no change or increase in any of our rates in recent times.

Your next question comes from James Ferrier from Wilsons Advisory.

To ask you about the debt guidance, first of all. So the revised debt guidance for FY '24, $60 million to $75 million above the previous guidance. You've talked through, David, the shipping component to that. What's driving the remainder of that higher debt $5 million to, what is it, $20 million relative to the previous guidance?

Yes. It's a very good and fair question, James. So there is -- so I described for you $35 million of your documents, $20 million of product waiting on a boat. We have, in fact, another $23 million worth of orders that we've got that are also waiting to go on to a boat, but there is always a lag between getting an order and the organizing the shipping. We just happen to have drawn -- we've taken a reasonably conservative position in the way that we explain it. And we've just drawn a line with a view that says that next $23 million, we have assumed that would fall into the October period. But actually, you could -- I could have created an argument that said it was sitting in the September period. I thought that would be disingenuous. But if you put it in there, that would add to the full amount of money.

Okay. Understood. So then to translate that into the gearing topic. So you mentioned in your prepared remarks that the company is still targeting a net debt to equity of between 20% and 30% and obviously, we know debt moves through the year, peaking in the first half given the cost to grow the crop. So in the fullness of time with the benefits of the proceeds of this equity raising with the benefits of the delayed cash receipts related to the shipping issues, where do you see your gearing into FY '25 within that range? Is it lower end? Is it upper end? How much room do you have now?

I think the way I'd answer, James, is that what we intend to do with this capital raise is that -- so we don't have -- we intend to stay broadly within this 20% to 30% range, giving you a number of top end and bottom end, given the vagaries of crop sizes and everything else, I'm a bit loath to do. But I think the point really to be made is we think running the business at that sort of 20% to 30% range is prudent in terms of the balance sheet given the vagaries and challenges that can exist across the agri sector. And so we're not looking to take this capital raise and then go on a spending spree for the one of the better phrase and consume the money that's been generated through the range. We intend to keep our debt levels low and effective.

Yes. Okay. Well, I guess what I'm going at with that question, David, is post this raise, do you think you actually have surplus capital available to pursue growth initiatives as they come along? Or are you still positioning this business to essentially operate what it is and what it has as efficiently as possible. And that's basically -- that's it.

Well, I think what we're saying is for the foreseeable future, our view is that we need to run the business tightly and effectively. We'll stay within -- we'll look to stay within that range. If a large opportunity came up at some future point, well, then that's a whole issue to assess on its merit as and when it sits in front of us. But at the moment, we do not have a program that sees us -- and we have no active things going on around, for example, buying farms or doing anything else at the moment.

Yes. Okay. Last one for now. Just previously, you've talked about profit and cash flow improvement programs, and you've had quantified targets on those, and they're very impressive targets and you've demonstrated good progress on them. Can I just -- I haven't seen all the materials yet today, but have you confirmed those targets are still in place?

We haven't -- to your question, we have not covered that off in this presentation. But I would say to you that the program remains -- it remains intact. It is delivering as we expect it to. And when it comes to the full year results announcement, we'll make sure that we provide an update on progress with that. So that it's clear for everyone. We just took a view that in terms of this presentation, it would add -- it would distract from what the key message and the key issue is, which was about a reset of our balance sheet and making sure that we could get on with the Carina West expansion.

The other item on what we're trying to achieve, the logistics improvements we were targeting have not quite met our target at this point.

[Operator Instructions] Your next question comes from Mark Topy from Select Equities.

So Tim, just to pick up on that last point, can you help us to understand the change in the logistics, why was it taken? And what other sort of benefits that you're looking for in terms of the new logistics provider going forward once you get everything sorted?

So the reason for our change was we were, one, scaling the business up. So we were looking for a substantial provider that could scale with us. We're also looking for a reduction in the cost on a per kilo basis. What -- I think David went through the things that have gone wrong with the process since we brought it in. But if you have questions on that, I'm happy to talk to it. But that was really our motivation. So going forward, we are still looking for the same outcome, but I think we've just got to reassess the strategy of how we deliver that. So again, David talked, we've got some process improvements we can look at internally, but we have to look at what our partners can deliver as we go through this process as well. So we have brought in another partner who is -- he is delivering very well, both on their ability to get our slots on boats as well as the documentation. So really, that is what we're looking forward to going forward.

So just to understand what will be the end benefit then? Can you give us any -- without going into maybe specific numbers, but just to get a feel what are you looking for in terms of cost improvement?

Well, we -- Mark, we thought we'd get -- we thought there was a couple of million dollars without giving you a specific number in making the change. So it was a cost-driven reason for the change. I think the reality is, given what's occurred, we're not seeing the cost gain, and we've clearly had issues as it relates to the timing of our cash. So we're really in the space, I think, getting the situation under control, which we are now starting to do. And so we are getting on top of it and hence, why we believe we'll have cash in the door by December 31. But then we've got a piece that says we need to rebuild forward to make sure our model is as effective as it needs to be. And so that's why we've got a piece of process reengineering to do ourselves. And then we'll also be making sure that we are weighting our shipping to service providers that can best meet our needs.

Yes, sure. Great. Okay. And then just looking at the global market, there seems to be a bit of a pricing differential between inshell and other process. Can you tell us what's happening like in terms of the India market now coming into their festive season and China market? Can you give us a bit more insight as to and how you're targeting to maximize the return in terms of the product now?

Yes. So well, firstly, I think you're right, Mark. There is at the moment almost a disconnect between inshell and kernel price. So I expect that, that will ultimately self-correct and go back to a sort of normal position. In terms of India and China, we are seeing good demand out of both markets. One of the things that we have been doing, however, is to that -- my point about tariffs and tariff relativity between Australia and California. The tariff advantages mean that there's the opportunity for margin -- more margin out of China than India. So where we've got grades that can go into China relative to going into India, we will -- we increasingly try and weight our portfolio to supplying into the highest margin application or highest margin market.

So no softness in China given their economic backdrop?

No. One of the things that we have seen is we see continuing demand out of China. And one of the things that I think that has made a difference that may be unique to Select Harvests is that we have ensured that we've had a continuing ongoing presence in China. So we're visiting it regularly. And I think there's no doubt that has helped secure and ensuring that we're getting good sales volume into that market. And to my point earlier, with the rate of selling of contracting 36,000-plus tonnes versus a historical average of about 27,000 tonnes goes to make and underscore that point.

Yes, sure. And then just lastly, in terms of the residual crop. In some years, I suppose we see that last portion of the crop being lower grade or being lower in terms of -- how does it look at the quality of the crop at the moment and sort of that residual crop quality and what the price expectations around that last 20%?

Well, I think when I -- if I start with the price piece, when we provide our $7.70 to $7.75, it considers the product mix that we've got, including the back end of the crop and our view on the prices that we'll sell it for. So it's got that consideration in it. And then to your question, generally, across our crop profile this year, we have seen a return to good high-quality product and particularly at the bottom end of the quality range, it has noticeably returned back to its sort of previous long-term average. So we're not sitting there with a view that says we've got a low-end quality problem.

[Operator Instructions] Your next question comes from Charles Kingston from K Capital.

Just a question on just noting your comments that alternatives were considered selling water, et cetera, which you didn't think was optimum. But was the sale of the company as a whole considered given you do put forward your market value of our assets at $5.75. And as I raised previously, I think it was 7 years ago that the entire company was bid for at a price of $5.85, which the Board at the time, not you, but the Board did reject, but Swiftly raised further equity at $4.20 post that rejection. But here we are 7 years later, diluting shareholders yet again at a price of $3.80, which is a very significant discount to what you suggest our assets are worth. And to be fair, it does make that $5.75 figure just seem a bit hard to believe given the raise again today. But the first question is, was a company as a whole sale considered by the Board, given it really has been a bad experience and hasn't delivered any value and we're diluting yet again. So that's my first question, please.

So the answer to your question is the company has not considered as part of this a sale of the entire enterprise. The company is tradable, of course, on the market on any given day. But no, the company did not consider a sales process for the entire enterprise and nor has the company been approached about a sale of the business.

Okay. But given the discount again, but I'll take that as -- I'll accept that. And then just the second question, on the last earnings call, when the topic of raising equity in the balance sheet was raised, you said that we don't look at the business and think that we have a specific need to raise capital. I'm just struggling to reconcile that comment with the comments today that you and the Board well before your time have been considering the debt levels are too high and the potential for an equity raise. So can you just help me reconcile those comments, please? Because you did speak about selling water last time in the earnings call. And again, here we are raising equity again.

So I think -- yes, no, I think it's a fair question to raise. I think what I would say is the company has publicly recognized over time that it does have a level of debt that is too high. And what we have said is that we have been -- and we've been trying to do specifically over the program that we've laid out to the market is that we have been trying to, through a series of operational improvements, reduce our debt position and get into better space. And then as part of that, we also spoke about a series of lines of defense if we were under pressure, one of which was the sale of water, I would absolutely acknowledge. So I think that's correct. What has changed is simply that we had a program. If you took out this issue that we've had with our supply chain logistics, we would notionally be at this sort of $170 million mark that we had previously forecasted that we would -- that the end of year position would land around. But with the supply chain logistics issue, I guess all it has done is it has highlighted the fact that over time, there have been an accumulation of issues that have increased the debt profile of the company. And it goes to if there was another risk or shock that came our way, as per my comment earlier about the agri space certainly has a tendency for those to occur, it would be more challenging for the business. And so the business took a view that ultimately, given that scenario, the prudent action was to do a capital raise.

Okay. And then just finally, just to confirm, that $5.75 market value of the assets that the company believes are worth, I appreciate there's a bit of dilution today, but are you still happy to stand by that value? And is it your target to somehow close that gap, I'm not sure how it's going to -- because it does seem chronic, but are you happy to sort of stand by that value that the value of our assets is well in excess of where we're trading today. Are we dominating again?

Yes. So with the exception -- with the inclusion, sorry, of my comment about -- that I've made earlier about the Yoga Farm and a possible impairment on that. We have no other assets that we think are sitting there with any particular issue sitting around them. We don't have an audited set of accounts yet. So I don't want to make promises ahead of the audit process. But I have got no reason to -- in this conversation to think that there is any change to the rest of our asset values.

Thank you. There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may now disconnect.