Select Harvests Limited ($SHV)

My name is Andrew Angus, and I look after Investor Relations for the company. Joining me today are Select Harvests' Manager Director and CEO, David Surveyor; and Select Harvests' CFO, Liam Nolan. David, over to you.

Well, good morning, and welcome to our first half 2026 results presentation. I'm David Surveyor, I'm the Chief Executive Officer and Managing Director of Select Harvests, and I'm joined today by Liam Nolan, our CFO. The first half -- next slide, please. The first half 2026 results presentation will be delivered via webcast on the link displayed as advised to the ASX. After Liam and I have delivered the presentation, there will be time for questions before we commence our investor road show. [Operator Instructions] In the event that we have questions outstanding at the end of the allotted time, please contact Andrew Angus via the e-mail on the screen, and we'll deal with that subsequently. This next slide simply outlines the disclaimer on basis of preparation of the information contained in this presentation. Slide 3. In terms of the agenda, I'll start with a business update before handing over to Liam, who will discuss the financial results in detail. Following Liam, I'll close on strategy, transformation and the key takeaways before we try to take questions. Next slide. One more. So let's start with the results. Profit is increasing. Over the last 3 full year results, Select Harvests has delivered a significant turnaround in profit performance with the first half 2026 NPAT of $26.6 million and, more importantly, an underlying NPAT of $29.1 million, this is a 33% increase in profit. I note underlying NPAT is a preferred internal metric of true performance with the definition provided in the appendix to the presentation. With the benefits of the second half still to come, we expect the full year underlying and reported NPAT will be another substantial increase in profit for Select Harvests. The company is increasing profitability whilst absorbing inflationary input cost pressures confronting every Australian business as well as cost pressures unique to almonds. We'll talk more about these costs and our response during the presentation. The revenue graph shows our growth. And together, the 2 charts on this page tell the story clearly. We are now a different business and at a different scale. And we've operated with financial discipline, that is capital investments that generate strong returns on investment and a continued focus on cost and debt. The company is delivering performance across every key dimension of its operational metrics. Record safety performance, a high-performing crop, possibly a record growth, driven by better farming practice; record capacity with step changes in processing scale and efficiency; record price capture flowing directly to profit; and record external grower volumes. Importantly, today marks a return to rewarding shareholders. This reflects the Board's strategy and confidence. Last year, the company through the CFO presented the market with its capital allocation whereby we intend to pay between 25% to 50% of NPAT to shareholders each year in dividends. Select Harvests will pay an interim fully franked dividend of $0.035 per share and a decision on the final -- on the size of the full year dividend will be made at the completion of the financial year. The company is also announcing a share buyback of up to 10% of issued capital of 142 million shares. The Board's view is the company is well undervalued, and so this is an effective allocation of capital. The company will, on any given day, make an assessment of the buying opportunity. Relative to our assessment of intrinsic value, conservatively determined considering our future prospects. Now if we move on to safety. People are critical to the success of Select Harvests. Our TRIFR for the first half was its lowest ever at 3.7 injuries per million hours worked. We've demonstrated a sustained step change in safety performance, and this connects directly to the improvements we have seen in operating performance. You cannot get great operating outcomes without great safety outcomes. And we're achieving this by driving a clear sense of deep and felt safety leadership. We're training people. We're strengthening safety accountability and behavioral ownership and insurance compliance. The Bradley curve shown on the right-hand side of this slide measures the maturity of the organization's safety culture, and we still have opportunity. Our position on the curve evaluates how deeply safety is embedded in behaviors and attitudes across the workforce. As our safety culture matures, injuries and accidents will continue to decline if safety outcomes improved. Let's move to talk about the almond macro. The global demand and supply dynamic remains positive with tailwinds in place. I think this is now well understood by the market, so I won't drain every point on this slide. On the demand side, the total global almond demand growth continues with a CAGR of 5% to 7%. Prices have been increasing as the long-term global almond economic macro has improved and we continue to see this as recently as Wednesday this week as Stratamarkets reported another increase in price. It's worth noting that this is also supported by industry expert Dr. Ed Padilla from Spectrum Data Analytics using his price elasticity model to forecast yet another 2.8% increase in price or, in other words, another $0.30 per kilogram. Unit costs are shown on the bottom left of the slide. Australia has significant relative competitive advantage to the U.S. of slightly more than 30%. This being a function of both operational costs and yield performance. The key point being we have a structural and durable cost advantage. On the supply side, the U.S. 2025 crop is 2.69 billion pounds within shell effectively compete -- complete, sorry, and limited high-grade curable available to sell. California represents approximately 80% of global supply. Bearing that almond makers had reduced by 15,000 acres, and this is the first drop in 31 years in California. Whilst the total farming area has reduced for 4 consecutive years and declined this year by some 47,000 acres. So it should also not be California now has an aging 3 [indiscernible]. Australia is about 10% of global supply, and forward volumes appear reasonably flat and likely naturally constrained by water access. There are varying estimates, but it's worth noting that 30% to 40% of Australian almonds will require replacing from 2030 onwards. Select has about 1,000 to 1,500 acres at this over the next 4 to 5 years. The time to maturity for trees is 6 to 7 years, so the supply side cannot quickly respond to an uptick in demand. U.S. new tree plantings are low, and there are no indications that would suggest a change in this direction of trap. So in our view, despite inevitable fluctuations in price, we have a very positive almond macro. We think that's sustainable over at least a 7-year horizon. We have a relative competitive advantage in cost. And Select is very well placed to benefit with good to medium-term pricing. Moving to financial results. As previously mentioned, the company has delivered a first half underlying net profit after tax of $29.1 million based on recognition of 75% of the crop. The result is an improvement of 33% on the previous corresponding period. The transformation of Select Harvests sustain the earnings profile of the company both change shape and become more robust. The second half of the year will see the benefits of external grower volumes, wholesales and value-added sales contribute gains to P&L. This year is also seeing the company's strategy and execution to overcome industry cost pressures, and we expect profitability will meaningfully increase year-on-year. Total production costs have been impacted by both uncontrollable cost increases and one-off costs, and we'll cover these later in the presentation. The crop size this year is positive as our order cultural strategy starts to pay off with a forecast profit on 29,500 tonnes and a crop range of 28,000 to 31,000 tonnes despite the inevitable crop losses from the weather. We have 46% of the 2026 crop contracted, and the forecast price for the 2026 crop is $10.21. The pricing outlook remains positive, and I'll provide more detail later in the presentation. Net debt for the first half of 2026 was broadly in line with our normal working capital cycle at $183 million and we have continued to invest and allocate capital where there are strong returns. Cash flows in the second half would be stronger. And you will recall me saying at the 2025 results announcement, there was still considerable upside for cash generation and the gains resided within inventories and receivables. This view remains noting the delayed harvest this year. For the purpose of reinforcement, the company has confidence in performance and a fully franked first half dividend of $0.035 per share will be paid with a final dividend to be considered at the end of the year. This being supported with a share buyback of up to 10% of our issued capital of 142 million shares. Importantly, following our most recent strategy workshop, the Select Harvests Board has set a growth ambition of 65,000 tonnes and $700 million of revenue for the company. This is the next step forward in the transformation of Select Harvests, and we'll talk about further in the strategy section of this presentation. What I'd like to do now is to provide some more detail on each of our key results drivers, specifically volume, price and production costs. So let's start with volume. The 2026 crop was grown with generally good growing conditions, although the heat to finish the crop to drive somewhat later than normal. The big challenge for the Australian crop was the massive amount of rain we experienced during harvest with our wettest area being our Bunargool Farm that received some 200 [ ml mills ] during February. The weather has notionally put a month's delay into processing and sales. We are, however, thus far, in outstanding yield results with a crop forecast of 29,500 tonnes, which is remarkable given the inevitable loss of some of the drop from the rank. It's almost certain our program would have delivered and still might deliver a record crop but for the weather. For several years, the company has talked about its new horticultural strategy and the goal of increasing yield. The strategy -- a goal of increasing yield. Sorry. We said it would take several full properties for the yield gains to appear, and it looks like the strategy is delivering results ahead of schedule. We're currently processing our [indiscernible] and have not yet commenced processing pollinator varieties. In terms of determining crop size, the process this year is no different to prior years. Whilst it's a large crop, there is always some uncertainty around total crop size at the first half results, and hence, we provide a range. Liam can talk to the detail of that. There has naturally been speculation about the quality of the crop given the wet weather. Thus far, we are seeing excellent levels of in-shell when arm and quality is high. To date, an 8% increase. This reflects the work we have done at the Corina West processing facility with Optimus Phase 3. This level of MSL is positive for both price. It delivers an extra $1 per kilo for each shell versus kernel at current prices, and it's also a positive for cash flow losses. We do, however, however, expect to see a wider range of quality this year as a result of the west crop. It should have not been missed the company accelerated harvest to effectively a 24/7 operation, albeit at a cost to protect the crop quality. And the company also had the foresight to invest to manage for these types of events, and we are using our new $14 million crop drive. We have the biggest drying capacity in Australia, and this will damage and give us some quality advantage. The expected lower quality mix profile is already reflected in our forecast market price. Now as committed, we have delivered a major increase in external grower volumes. Our expanded capacity is being filled with these increased volumes that deliver substantive profit value at about $1 per kilogram. Our proposition is compelling as growers recognize our ability to get them better market prices, better yields for their crop and better operational capability. That is they get their crop off the farm and onto our stock [indiscernible] fast and if necessary, drive the crop to protect their earnings, and we get them faster cash. The 15,400 tonnes of contracted external grower volume is currently sitting on Select Harvests stock back. And as it's processed in the second half, it will contribute to revenue and earnings. We continue to attract and add new external world to Select Harvests. Next slide, please. So moving on to market price. Last year, we gave the first glimpse of Select's work in getting a price premium for our products. The top chart shows our invoice price performance against data markets, which is an industry-recognized published price index. The data is based on price at the time of signing a contract, the FX rate of the day and an adjustment for tariffs. So far this year, on invoiced sales, Select has taken a global commodity and delivered a price premium over the global market price of 6%. From a business perspective, the critical issue is the direction of travel and what gives me great heart is the premium has grown from the 2.4% the last time I shared this chart at the end of 2025. I think there's now enough evidence to say Select Harvests uniquely brings leverage to every horticultural and processing improvement and the leverage flows directly to the bottom line. Now the California crop receipts for 2025 at 2.69 billion pounds were within our forecast range, and we see an implied carryout of some 480 million to 520 million pounds at the end of the California crop year. The most recent California blue and trying conditions with wet and cool weather. We think the current 2026 crop size estimates as released by Terranova. It's the Adwise for almost a wonderful forecast, the Blue Diamond forecast. And of course, the U.S. objective forecast, the range across these is from 2.64 billion to 2.7 billion pounds. And we think this seems like a reasonable number. With these crop volume forecast, we have seen prices increase through April and May, and it is Select's view there will be more price to come. Demand growth is being driven by China, India and Southeast Asia, underpinned by increasing health awareness. With China and India expected to double consumption by 2030, we see long-term demand in core organic growth for Select Harvests. Select has 77% of 2026 crop hedged at $0.6583. And it remains our prognosis while prices may show fluctuations, we will see prices continue an upward trajectory over time, subject, of course, to FX. Next slide, please. So let's talk about production costs. Total production cost is the cost of growing, harvesting and processing. Now as we have done for the last several years, we normalized our cost per kilo to a 29,000 tonne crop so you have effective comparative data. After 3 years of flat costs, this year, you can see an increase in both inflationary and uncontrollable costs to $7.33 per kilogram. We had previously signaled to shareholders at the November annual results and the February AGM that there is a shift in our cost base of up to $20 million from items such as water, bees, power and labor. Now that number has been compounded by one-off costs from the Middle East and wet weather. To manage this, we committed to 2 actions. The first was the first being to remain tight on the costs that we can control. And these have reduced by $0.14 per kilogram and are already contained within the $7.33 shown on the chart. Now we're not standing still on costs and have already identified the next $10 million of cost savings to be delivered over a couple of years. These savings have come from a program of work that's been driven from the ground up with our people identifying waste and costs that can be reduced. Each initiative as per normal is to be mapped to a project with profit and cash impacts and time lines or managed in our project management office with the same executional cadence that has been delivered over the last 3 years. The second commitment recognized the noncompressibility of some costs, and hence, we've committed to deliver on other actions that expand margin. Two examples being our investment internal recovery and investment shape as these are captured in our P&L. So having covered off on the key drivers, I think I'll now hand over to Liam to discuss the financial results in detail, and you will give you a given us as an [indiscernible].

Thank you, David. I'll step through the following areas. First, the driver of earnings; second, capital management and shareholder returns; and finally, cash flow and the balance sheet. As you'll see, the first half reflects strong underlying operating performance with the full year earnings to benefit in the second half from external growth volumes and an uplift in value-add margins. Earnings growth in the first half is being driven by recognition of 75% of the estimated crop profit. In determining the crop size estimate, we have captured data points from all regions to form a view of the most likely outcome. And as David mentioned, management has formed an estimated range of 28,000 to 31,000 metric tons. Crop profit has increased substantially, reflecting improved yields, stronger order performance and our sales team achieving a market price premium. These results are all linked to strong strategy and execution, specifically investments we've made in order culture program, investment in processing, specifically kernel recovery and Optimus 3, which are now delivering tangible results in terms of both volume and quality. Our sales premium is coming from being in market, understanding our customers and delivering measurable outcomes. Against that, we've seen higher production costs. As David mentioned, these are largely in line with what we've previously guided, namely across water, fertilizer, pollination plus the impact of wet harvest. The wet harvest alone contributed approximately $6.9 million of additional costs in the half, primarily in labor as we sought to expedite harvest and also the additional cost of drying. Important point is the shape of earnings for the full year. The earnings profile has now materially shifted with a much stronger weighting to the second half, and this reflects the timing and scale of external grower volumes going from 7,329 metric tons in 2025 to 15,400 metric tons in 2026; the uplift in contribution from value-add sales where we see full year benefit of pricing and operational margin enhancements; and finally, the seasonality of wholesale. So while we've got a really strong first half results, it should be noted that we expect to see a significant increase in second half earnings compared to 2025. Turning now to capital management. Over the last 3 years, our focus has been very deliberate: strengthening the balance sheet, and maintaining capital discipline. We've largely achieved that. And as a result, we're moving to the next phase of capital management, which is balancing 3 priorities: maintaining a strong balance sheet, continuing to invest in growth and returning to share -- capital to shareholders. Importantly, these are not competing priorities. The business is now in a position where it can do all 3. And you'll see that reflected in both the dividend and the buyback we've announced. Starting with dividends. We're in starting dividends for the first time since February 2023. Our policy is to distribute between 25% to 50% of net profit after tax. And for the half, we've declared a fully franked interim dividend of $0.035 per share with approximately $18 million of franking credits available, which supports franking distributions through to 2028. We've also announced an on-market share buyback about 10% of issued capital. The rationale is straightforward. We believe the current share price does not reflect the intrinsic value of the business, and we have the capacity to return capital to shareholders. The buyback gives us a flexible mechanism to return capital where we see value while still maintaining optionality. We'll be conducted over a 12-month period, it will be opportunistic and it will sit alongside investment in the business. And this is a balanced capital management approach, supporting shareholder returns without compromising growth or balance sheet strength. Turning now to our balance sheet. And the headline here is that Select Harvests is in a strong financial position to support both growth and shareholder returns. Net debt at the half sits at $182.6 million, which reflects the normal seasonal working capital cycle, as you'd expect at this point of the year, with crop sales still to come through. Importantly, we expect this to reduce materially through the second half as sales cash flows come through. April and May are already tracking towards record sales volumes so we're confident in that trajectory. So on the point of debt, firstly, it remains well within our facility limits. We have total facilities of $300 million. Second, it's also important to note that the seasonal peak is now behind us, and we expect debt to reduce in the second half as inventory is converted to cash. And third, our balance sheet remains strong and flexible, supporting both growth, investment and capital returns. It's worth noting that further due to the crop and delay in harvest, we anticipate having a higher carryover into 2027. This means that along with we're finishing 2026 with a strong debt profile will also benefit from 2026 crop sales into 2027. This has supported sustained lower debt through 2027 and another reason we have confidence in our balance sheet. All debt covenants were comfortably met at 31st of March, and we forecast continued compliance over the next 12 months. So when you consider the underlying asset base of the business, the balance sheet is not just solid, it provides a strong foundation for capital returns, which is why the Board has declared a fully franked interim dividend and an on-market buyback. Subsequent to the half, we've also secured an additional $60 million of committed debt capacity on favorable pricing terms and a 5-year tenor. This increases total debt facilities to $300 million and delivered 3 key benefits. First, it reduces the refinancing risk by increasing available headroom and extending our debt maturity profile. Second, it reduces the overall cost of debt, reflecting improved pricing achieved in the current environment. And third, it enhances flexibility, ensuring we have capacity to manage potential volatility and also growth. The additional facility increases the average tenor of the debt portfolio from 2.7 to 3.3 years, which is meaningful -- which is a meaningful improvement in the maturity profile. This is a proactive step to further strengthen balance sheet, providing certainty and flexibility as we execute on our growth strategy. Looking now to cash flow. The first half cash flow is broadly in line with our expectations but impacted by higher wet harvest costs and lower crop carryover from the prior year. The success of our faceted cash initiatives implemented during 2025 are expected to, again, deliver in 2026 with the company focused on further optimizing our sales and operations planning. On the investing side, cash flow outflows are higher, but this is deliberate. We've invested in Optimus Phase 3, kernel recovery, crop drying capability and new harvest equipment. These are all high-return, product-enhancing investments. Looking forward to the -- we expect stronger operating cash flow in the second half, driven by the higher sales volumes, improved planning and execution and the contribution from the noncrop earnings. So similar to earnings, cash flow is also weighted to the second half. David might move to you to talk about strategy and transformation.

Thanks, Liam. Next slide, please. The company transformation continues to translate into tangible operating results. We started with reset in 2023, moving through stabilization capacity build and now being growth ready. The benefits are evident across profitability, operational metrics and customer experience. The historic view of Select has been based on profit in horticulture. Specifically, this year's crop size times this year sale price less costs. This framing of Select Harvests is now too narrow and numerically incomplete. The company's strategy is now generating returns by broadening value creation across its core functional streams. And this slide gives you a segmented view of where Select makes money across horticulture, processing and sales. So certainly, value is created for growing almonds. However, it's also being leveraged by the rest of our business model such that revenue has more than doubled, profit is growing and ROCE is increasing. Next slide. As we move the conversation to executing strategy for our strategic pillars, the company now has a demonstrated track record of delivery. So with respect to our pillar for sustainably greater arm the horticulture strategy for Select's farms are delivering volume and quality with a possible record crop to be recorded for 2026, and we have better fertilizer water and hygiene practices, and the relative health of the trees is obvious as you drive the highways. The next crop year is the first full complete year of the horticultural program. With excellent tree health, we create the capacity for bigger crops. So we're excited about the future and specifically the 2027 crop sizes. Harvest practices are improved. We have timing harvest to maximize net growth and minimize the impact of insects. We are running faster in shifting our harvest towards 24/7 operation to optimize the quality. We've also invested in new kit to maximize the yield and minimize the number of nuts left on the tree. In terms of portfolio management, it's also worth noting the pending sale of various Australian almond assets. The market should not assume the Select Harvests Board views all existing leases as being something we would extend past current dates. And you've seen this in action with selecting an early handback of 300 hectares of the Allinga Farm. As we've already covered, our external growers proposition is compelling. We have record external supply, and we are growing rapidly. From a processing perspective, you have seen a shift scale. Optimus 1 is completed. It added 10,000 tonnes, taking it from 30,000 to 40,000 tonnes of capacity. Optimus 2 is complete. It added a further 10,000 tonnes, taking us from 40,000 to 50,000 tonnes of capacity. We discovered Optimus 3 during Optimus 2, and that has added another 5,000 tonnes to create a total of 55,000 tonnes of capacity. And just as importantly, it has allowed us to step change and increase in-shell by what looks to be approximately 8% on high-quality crops. In terms of maximizing returns from the crop, the gains around sales and logistics velocity are apparent and directly support our cash flow. We said there was more to gain from inventory and receivables, and we're now going after this price. From a margin perspective, we continue to gain through our pricing disciplines, as you saw on the earlier slide, and our ability to tailor quality grades directly to customer requirements. Now I'll cover step-out growth on a different slide, but I'd like to talk about our enabling pillar. The people capability build continues having top-graded skills across finance, HR and IT. Our procurement trackability is building with the function centralized. We've commenced the automation of processes, such as connecting our INPEX export documentation to our core ERP. We have data and analytics rolling out with Power BI and selective use of AI. By way of example, we are recreating our price premium management tool. It's called the upside tracking tool, and that's moving into our BI system to further enhance capability. Next slide, please. Now the purpose of this slide is really to try to bring the life so really to try and bring to life the shifts we've made across the company. And so the page lists 4 key projects. It shows you how our investment aligns to our strategic pillars and in many cases, touches several of them at once. We're consciously investing to synchronize the business across almond supply, processing capacity and sales to maximize the company return. The shape of investments drive horticultural yields to substantially increase almond supply but they also lower cost to operate. The crop driver maximizes quality so we maximize price and returns from the crop, but the crop drive is also attractive to external growers to substantially increase almond supply and processing margins. Optimus 1, 2 and 3 ensure leadership in process and scale and efficiency. They provide low-cost production, but also high-quality being low-chipped and low-scratched almonds, but it increases capacity to process both our -- both our own yield improvements and the tracks external roles and maximize the return. Kernel recovery increases our yield and substantial increases almond supply. In doing this, it also increases the attraction to select parts to external growers and opens up new returns. The point is we're using our capital allocation to generate growth aligned to our strategic pillars. Next slide, please. In terms of step-out growth, the company has effectively doubled in size over the last 3 years. So the Select Harvests Board has now set the next series of targets with the aim of increasing Select Harvests to 65,000 tonnes and $700 million of revenue by 2030 from today's base of being approximately a 45,000 tonne business. The program takes the existing strategy and benefits for shareholders and move them to the next logical scale. So the substantially greater arms will come from, firstly, the first or another crank on the wheel on the horticultural strategy to drive yields, much higher on a [ peer-rated ] basis. Secondly, we think there's the opportunity to improve the productive capacity of our existing assets. And to this end, Select Harvests has appointed a capital project manager to lead this part of our portfolio. And thirdly, through the continued acceleration of external grower volumes. We think our value proposition is compelling. We will be at least 20,000 tonnes next year. In fact, we would have to slow down to achieve that target. From a leadership in process, there are 2 key activities. The first is we have identified a path to further increase plant capacity from 55,000 to 65,000 tonnes. The second is to speed up or debottleneck sorting and packing so that it runs at the same speed as our 55,000 tonne and then 65,000 tonne primary processing front end. This will dramatically reduce working capital. It will further improve the customer experience, and it will increase our cash position. Both of these improvements repeat the themes of low-cost capital spends and fast paybacks. From the perspective of maximizing returns from the crop, we think our model is scalable and leverages higher upside margins. It will give more capability to maximize price. The increased volume will also unlock a faster supply chain and speed order to cash. Critically, the program of work delivers margin growth. The achievement of 65,000 tonnes will be a combination of Select Harvests volumes and external grower volumes and is well within our capability with only targeted investments. So whilst this slide notes Select has some M&A capacity, you should explicitly not assume this means the company is about to undertake any acquisitions. The Select Harvests Board is clear: Financial discipline is not negotiable. We move now to our PMO. We continue to use the project management office to drive outcomes within the business. The PMO has, in many respects, never been more important. You can see on the slide some $18 million on the right-hand side of inflationary costs and another $6.9 million of one-off costs that we expect will not be repeated. Without our various business initiatives, the starting point for Select's profit would have been back by $25 million this year. You can see that H1 gains did not completely recover the issues, and we're still at a negative $3 million. There's high certainty in the second half gains, but the reality is it takes until the second half for a ship to right itself. And as I previously noted, the company has found another $10 million of cost savings to be delivered over the next couple of years, and these will be added to our PMO. So I think as you look at Select Harvests, what you see is a company that is now a safer company. The company is in good shape. With underlying profitability increasing, the company is keen to reward shareholders to [indiscernible] their fully franked dividend and a share buyback. You can see the capacity to fund this as our working capital turns to cash. The Board has set a new ambition for growth that logically leverages the strategy it's deliverable and will increase profitability. The transformation strategies created for Select Harvests a wider earnings, profile from horticulture, processing and sales that is more robust and this will flow through second half outcomes. All of the company's key operating metrics are performing and capable of managing the pressures of inflation and wet weather. Select's approach to financial discipline on capital, cost and debt is supporting the balance sheet. So on that note, thank you, and I'll hand back to Andrew to coordinate any questions.

Thanks, David. We've got a bunch of questions here. So I'll head to that. So first up, we have Apoorv Sehgal from Jarden.

Andrew, can you hear me?

Perfectly.

Awesome. Okay. First question, just on the 28,000 to 31,000 metric ton crop production range, so midpoint of 29,500, a couple of questions. The wet harvest recently, can you quantify the tonnage impact that may have had, if any? And then secondly, it's a reasonably wide range. Can you just talk to like the low case and the upside case scenario there? Like what needs to happen for either 28,000 or 31,000 being realized? And do you see that upper end being more probable than the lower end?

So let me have a go at this. In terms of the wet harvest, it is difficult to quantify exactly how much we've lost at this point in time. But we do know there was absolutely loss that's come through from some of the rain events, particularly we talked about Bunargool where the rain was so intense, it really had not been destroyed and flow on to the road. So we know that we've experienced some weight loss during that kind of a loss during that. In terms of the range, what would we need to believe to be -- we need to see to the top range. We hope to see continued numbers coming through like they're coming through. So that's probably the best we can sort of talk to in that. But it is uncertain. We do the same process each year in terms of how we estimate the crop. And at this point, we don't have pollinators. So we haven't processed any pollinators. And so our assumptions are that we're going to continue to see strong results from the pollinators. And if they were to outperform, then we'd see the top range. And if they weren't to outperform, we'd see at the lower range.

Okay. And the 2% to 3% yield improvement from the kernel recovery line, is that benefit already reflected in the midpoint of that volume guidance?

Yes. That's reflected in those numbers. Yes, at the midpoint, yes.

Yes. Okay. Cool. And just on costs. So if I look at '26, the almond production cost of around $220 million, can you just talk to the FY '27 cost outlook as well? Just because the water fertilizer freight costs have all moved a fair bit higher in recent months. So assuming current rates kind of hold, I presume there's an annualization kind of impact there that flows through in FY '27. But then I guess on the flip side, I'm just thinking, you've got 7 million wet harvest costs as well this year, which theoretically unwind in FY '27. So net-net, if normally for Select Harvests, we'd assume or like a low single-digit percentage sort of cost increase in most years. FY '27, though, how should we think about that in the context of the annualization of some of the recent cost headwinds coming through, but then also the unwind of the wet harvest costs?

So let me just -- you're spot on in terms of the wet harvest costs. All things being equal, we wouldn't expect those to occur. That's all obviously subject to the weather in 2027. In terms of the annualization, not -- I wouldn't expect any further incremental increase based on an annualization. It's not necessarily first half, second half weighted. So all our crop-growing costs are essentially incurred in that first half. So there would be just a normal CPI adjustment is where I'd expect it to go. So nothing abnormal at this point.

So effectively, you grow your '26 cost by CPI, but you take off your $7 million for the wet harvest one-off impact?

Yes. And then we've got some cost initiatives -- cost out initiatives as well that we're working through.

Okay. Okay. Now that sounds reasonably positive. And just one final one, again, for probably for Liam, just on the almond price of $10.21 a kilo that you've indicated, I may have missed it on the call, did you say 77% is hedged at 65.83? Is that right?

Yes, I did say that, yes.

Yes. And so the remaining 23% is unhedged. At what rate are you achieving that's going to be in your modeling?

So we have a -- the way we have a very clear policy to policy for the way that we go about managing FX, and that is based on taking the lowest possible risk position that we can. So we're an almond growing and selling company. We don't try to be an FX trading company. And so we have -- we lock in a rate of a proportion of our product increasingly as we have certainly about the crop size. So we're absolutely sitting within policy for doing that, and we'll take up the next balance over the coming period. And if you locked in today, you'll be at the sort of $0.71 to $0.72 range on the stuff that you'd lock in now and that would probably give you an average that will be around the 67s over the course of over course over [indiscernible]

Which is used [indiscernible].

Okay. Next question that we've got is Josh Kannourakis from Barrenjoey.

So just a couple for me. Just firstly, just understanding around first half, second half because it is a bit different from what it has historically been the case. So just so I understand all the crop is clear. As you mentioned, the third party is sitting on the pad, so that all comes through and you mentioned the sort of dollar per kilo rate. But in terms of hull, like if we look back a year or 2 were sort of similar levels, hull was 50,000 doing $200 or so per tonne. I mean, how should we sort of think about hull in the second half and also some of the value-added unwind because I imagine you get a pretty big delta on that as well.

Yes, it's a good point. We don't -- as you know, we don't specifically break out the various bits of our profit stream in that level of detail, but to try and give you some there. Clearly, our volume will be increased because our processing volumes increased. And the value of whole continues to trade at pretty high levels over the last few years. And a quick Google so it should probably give you a good sense of what that number is.

Yes. Got it. Okay. Cool. Yes. So I think a couple of years ago is almost $10 billion or something. So yes, okay, that's good. And then second point, just around the value-added stuff. Obviously, you had some headwinds, I guess, in previous years because of the timing of the cost because, obviously, the cost reflects where you are because of some of those things, you've probably got a more favorable backdrop there as well. I'm just trying to reconcile, you obviously got a slight loss in the first half there from that component. But obviously, the net of that unwind into the second half. Is there anything else you can say on that? And also just in terms of maybe some of the other initiatives you're doing around the value-added side of things on sales elements as well.

Yes, sure. The noncrop lots, yes, for the first half was roughly about $4 million. We expect that to turn around, and that's driven by sort of the 3 elements that really we've touched on. First, we've talked about wholesale. That's really largely timing. We achieved all those in the second half and volume as well see a higher number. We've also -- we talked about the value add. So we had -- this year, we'll see the full year benefit of price coming through. So we had some contracts that they had a lag into the second half. So we'll see an uplift in the second half. We've also had some operational improvements in our value-added facility, which is really driving some substantial loss reduction and yield improvements in that part of our line. So that's been really encouraging, and we expect to see the benefits of that in the second half.

That's great. And then just in terms of some of the longer-term guidance you mentioned around the 65,000 tonnes, I imagine any, like, this where people have been go through a lot of issues and reductions in quality and volume because of the wet harvest, so I imagine the dry is getting a lot of attention. I mean, can you fulfill the capacity? Can you sort of fulfill, I guess, the demand side of that equation as well moving into next year? And I think, David, you said north of 20,000 tonnes is likely. Like what's just remind us the capacity and then some of the additional unlocks you've got planned and how we should think about that scaling into '27 and beyond?

Well, certainly, as it relates to the processing capacity, specifically in drying, we can drive about 1,200 tonnes a day throughout dry. And if we topped out that capacity, we actually have some other mechanisms that we run frames and things on the ground that allow us to actually increase our drying capacity. So we've got some flexibility in being able to manage for an increase in supply. But 1,200 tonnes, you can do the math to get them through. 21,000 tonnes for external grower takes 10 days or so. So -- and that reflects the rate of things that are coming through, obviously, when various farmers are dropping our product. So we're pretty comfortable around our ability and capacity for drying capacity. The unlocks that get you from to 55,000 to 65,000, there's -- it's not one issue, but it's a series of projects -- and a lot of them come to things that relate to how do we change the exit speed of things out of our main processing parts of the plant. So I'll give you an example of the speed which we exit hull and shell to a hull and shell so that we can sell that for cattle feed and other applications. If we can speed that up, that allows us to speed up the front end of -- front end of the processing part of the plant. So we've got a series of those sorts of small debottlenecking pieces that we need to do that allow us to actually change the pace of the plant and get to 65,000.

David, next one we've got is Ron Shamgar from Tami Asset Management.

Good result. Just a couple of questions. In terms of the external grower harvesting and processing sort of how much -- what's the margin there?

The margin and that's about $1 per kilogram.

Yes. Okay. And net debt is around $180 million at the moment. What do you expect sort of ballpark on June 30?

So June -- we don't do at June 30. We've got a 30 September. So yes, look, I think we're broadly in line with 2025 is where we're tracking. Just as a reminder, we are tracking roughly a month behind in terms of our -- the late and wet harvest. So that's one thing just to note around that. The second thing is we've made a decision to bring forward into 2026 some expenditure relating to the 2027 crop. We've been able to secure fertilizer, which is really important in this environment. There's a shortage of that. And so -- but to do that, we've had to prebuy that. So that's impacting our 2026 cash flow of roughly about $12 million to $13 million. And this year will also be impacted by dividend and buyback, which is probably just a bridge to why it isn't as low...

It's not going down the...

Going down...

Otherwise would have expected a lower full year debt position than the sort of similar on the last year, we said it sort of $780 million. The fertilizer one, just to put one more line of color on that. We had all of our fertilizer are booked and organized. And then, of course, the Middle East wall came along, and we received a series of force majeure issues that came towards us clearly, having fertilizer is critical to ensuring the forward-facing yields of the company and continuing our horticultural program. So we found a solution to that problem, but it has meant that we have to part with the cash earlier than we otherwise would have enhanced that puts a little bit of drag on our full year cash position.

Yes. Okay. So similar to FY '25 September 30, but you're also including some buyback and dividend?

Correct.

Yes. Okay. And then last question is, obviously, you come out sort of target the business sort of seems to be doing well. You've got industry tailwinds. Why are you leaving now?

Sorry, what was...

So why have you resigned? Why not stay for the good years?

Yes. Well, look, I think the answer to that is, clearly, it's my view that Select is a great company. I think it's got some great opportunities ahead of it in the company trying to lay those out with that growth part. I also -- by the way, I think the company has got a very good Board. I'm supportive of what they're doing and where they're going. And I've got great relationships with them. So there are no issues related to Select Harvests as to why I would be departing. My departure really relates to a specific opportunity that sits in front of me and things that are good for the future of my family.

Next question we've got is from Paul Jensz of PAC Partners. Paul?

First quick one...

Are you there?

Yes, I'm here. First quick one is just on the percentage of the almond crop to be sold from here. Maybe, Liam, would be the one -- twice that. It looks though it's 25% from what David said, but I just wanted that confirmed.

I think we're 40%...

We're 46% contracted at the moment. Sorry, yes.

46% contracted, Paul, at this stage. So yes, that's -- the [indiscernible] 54 to go.

All right. Good. So when we do our first half, second half split, we're putting 54% into the second half number, correct?

In terms of what? No.

That's the number I'm after because it looks as though you were trying to point us to saying 25% in the second half.

There's a couple of things that -- there's 2 answers to this question. From a profit perspective, you've got 75% of the crop profit in the first half, 25% in the back half. Second half, profit-wise, you need to add the profitability of the external processing, the profitability, the value add and the profitability of all of our health sales. So that profit spread that's the way that worked at a cash split. The majority of the cash will come in and we've got sort of seasonal profile as our debt profile increased in the first half as we invest in to grow the crop. And then in the second half, you'll see that come down substantially. And similar to that last question, we'll get down so sort of last year sort of numbers at $79 million to $80 million number. And that's because with the physical selling and invoicing and the cash collection is happening in the second half of the year.

Okay. So just inside that then the cost base for that 75% that we're saying is sold in the first half, with your guidance, we've got a, I suppose, make an assessment of lowering that or raising that margin -- lowering that margin a bit because we haven't got the benefit of the whole and all of the extra benefits that lower your cost of that 7 57, correct?

That's not in the first half results. Paul, if I just take you through just the accounting rules. Essentially, what we do for the first half is we create an estimate about crop profit which is our estimated sell price, our estimated costs to produce the crop and then by the size of the crop, which gives us an estimated crop profit which is, I think, it's on the financial summary slide, and we take 75% of that number and book-to-profit. That does not include -- so we booked that in the first half, 25% in the second half. In the second half, we expect to get all the gains from the third-party processing, which has been booked in the second half, along with the wholesales, which are all timing phased in that second half. And also, we flagged an uplift in our value-added margins in that second half as well.

All right. But can you -- has it an estimate for your full year guidance then?

We don't put out a specific number for the full year guidance, Paul.

Okay. You're keeping us on a job. That's good. Second is on just the cost base versus the Californian cost base, which is pointing to the medium term. So your confidence as a team of that being a sustainable difference going forward?

Yes, very confident about it. I think there's no reason -- we don't see any evidence that would support an increase in yield through. So I was really saying the cost -- the difference is a function of both yield actual operation. So if I start with the yield piece, there's no evidence to suggest that yields are going to increase out of California. In fact, one of the challenges that they still have, and there is variability that you've got some farmers putting on a full fertilizer in water and biogene practice model and some doing a greatly discounted one because they have not been making money for a period of time. So you've got that overlay on the illness and the other overlay that you have on here, which is very unquantifiable is that they talk in California about as their trees tend to age, they tend to see a drop-off in the yield of those trees. We don't see that when we look at Select Harvests by the way, when we look at our 3 profiles. We've got some trees that are old that still yield very, very well. So anyway, you've got a yield issue. And then when you look at the cost base drivers, we don't see anything that would immediately drive a shift in that. And in fact, again, the pressure for things like water in the U.S. has continued. So there's nothing that would lead me to think that there's going to be a change in the cost relativity at a dollar operation at gross level.

And then the replanting cost, just a final question for you maybe, David or Liam, is what replant cost estimate does Select have for both Select and California because that would be in addition, I would imagine, to those numbers.

Well, I think, first, we don't have -- we don't have -- for California, we don't have a particular view on the amount that's going to be replanted. In fact, we expect at the 50 -- 20...

Maybe I can reframe it, David. So to maintain that acreage of 1.3 million acres or so, so not increasing, but as the trees mature, have you got that factored into the 9.69? Or do you think that's in addition as I think it is?

So what's your 9.69? Sorry?

In your Slide 7, you're saying 9.69 costs per kilogram.

Sorry, yes. Sorry. Yes.

And if California wants to maintain -- and as the trees mature, and they need more trees to replace the existing ones? What do you say is the cost base for that?

So that 9.69 is based on what we think the operational cost of farming is. It is not really -- it's not really a consideration that goes through the cost of replants or otherwise. It's direct operational comparison.

We'll see you later in the week.

David, we are right on time for our next meeting, so we're going to have to wind up. I'll hand over to you to that and thank everyone for participating.

All right. Well, thank you all. We greatly appreciate you listening to the Select Harvests story. We hope there's some good news in there, and that you're excited about the future as the company is. And so thank you very much for attending, and we look forward to speaking to several of you later on in the week. Thank you. Bye.