A Glimpse Into Select Harvests’ AGM Presentation

On 22 February 2019, Select Harvests Limited (ASX:SHV) released a presentation of 2018 Transition Period Annual General Meeting. The company belongs to food consumer staples industry and is into the almond business and other food snack variety and muesli.

The presentation was given by the Managing Director of the company, Paul Thompson, which highlighted the increasing demand for plant-based foods globally. The increase in the global demand has been driven by an increase in the wealth of the middle-class in the developing countries and the healthier plant-based diets adopted by the consumers.

Based on this, Select Harvests Limited is capitalizing the Almond and Food Division through its brands like Lucky, Sunsol, Soland, Nuvitality, Renshaw and Allinga Farms. The products under these brands are produced keeping in mind the product to be highly nutritious with plant-based protein for consumers.

The presentation also covered the strategy of the company, where Mr Paul Thompson highlighted the company’s vision. He stated that the values of the company depend on Trust and Respect, Integrity and Diversity, Sustainability, Performance, and Innovation. He stated the almond business is the cornerstone of the business and the company will optimize its almond base. Adding value from the orchard to plate, utilizing the competitive advantage of the company in horticulture, processing, sales and marketing are a part of the strategic priorities of the company.

In the presentation, he also stated that the company’s operational focus is exceeding their customers' expectations. For this, the company will ensure a sustainable and efficient supply chain along with highly engaged partners who will be supporting the business to flourish and also in generating capital returns to either meet or exceed the shareholder expectations.

He also stressed on the growing favorable condition of the crops in 2019. The company is working continuously to evaluate the ways to mitigate risk. Recently, the company had invested in frost fans. The horticultural program resulted in excellent tree health across the orchard. With an increase in the volume, the company got benefitted from the increased volume and thus cost per kilo as the orchards mature. With a favourable weather forecast, Mr Thompson is hopeful to have a trouble-free harvest.

In the Almond division, the company is actively engaged in the marketing program, focusing on Asian markets like India and China. India is a long-established customer of Select Harvests, and the Chinese market is also growing. This has increased the almonds export up to 11 times as compared to the previous corresponding period. Mr Thompson, also highlighted that as a result of significant investment in the greenfield orchards which spreads in 2,679 acres of land, FY2019 is the first year where its benefits were seen.

In the Food Division, there was a strong demand from both domestic and export markets. The sales in China for both Consumer as well as the Industrial segments increased, where Parboil value-added facility provided support in case of increased demand in Asia. In this segment, China is a critical market. The company is stepping towards growing its Pepsico partnership as planned.

For the full year ended 30 September 2018, the company reported its balance sheet to be strong with a net debt to equity ratio of 15.9%. The company was able to reduce its debt, invested capital in water entitlement tree development and technology upgrades on the orchards and processing facilities. The company incurred $13 million expenditure during the transition phase

In the last six months, the stock has generated a positive return of 4.78%. By the closure of the trading session, the closing price of the share was A$6.160. The stock has a market capitalization of A$586.19 million and approximately 95.47 million outstanding shares and a PE ratio of 26.47x.

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