Select Harvests Limited (ASX:SHV) Asia Investor Briefing January 2014 For personal use only 1 Disclaimer & Basis of Preparation This presentation is provided for information purposes only and has been prepared using information provided by the company. The information contained in this presentation is not intended to be relied upon as advice to investors and does not take into account the investment objectives, financial situation or needs of any particular investor. Investors should consider their own individual investment and financial circumstances in relation to any investment decision. Certain statements contained in this presentation may constitute forward-looking statements or statements about future matters that are based upon information known and assumptions made as of the date of this presentation. These statements are subject to risks and uncertainties. Actual results may differ materially from any future results or performance expressed, predicted or implied by the statements contained in this presentation For personal use only 2 Rationale - Why Select Harvests? 1. Excellent Industry Fundamentals 4. Competitive Advantage: Quality Assets . Supply/Demand . 88% of SHV orchards will mature in 1 year . Counter-cyclical to USA . State of Art Carina West processing facility . Market leading brands 2. Integrated Business Model . Orchards 5. Market Environment . Processing & Packaged goods . Price and currency favourable . Large nut, seed and dry fruit trader . SHV FY13 volumes up 106% (inc. acquisitions.) 3. Culture for Improvement 6. Growth . Refreshed Leadership . Business positioning itself to grow . One Select An integrated agribusiness that controls almonds - positioned to deliver For personal use only 3 Why Almonds? - Sustainable Positive Fundamentals . Tight Supply . Long lead time to mature production (7 years) . 18-21 years of subsequent mature production . Strong Demand . Developed Economies - healthy eating . Developing Economies - affluence shift from carbohydrate to protein . World’s most versatile nut . Agronomics . Efficient economic converters of water compared to other potential agricultural land uses . Australia counter cyclical to the ROW For personal use only Growth: Global almond demand 8% Compound Annual Growth Rate (“CAGR”) 4 Why Almonds? - Demand - Drivers & Facts . What is Driving Demand? . Developed Economies - Healthy eating & the movement to proteins . Developing Economies - Increased wealth & the movement to proteins based Westernize diet . Australian & Californian Almond Boards - Opening new markets and supporting health platform . Innovation - More ways of eating almonds . Demand Facts . Not just developing markets - 52% of all almonds are consumed in US & Europe . US Domestic shipments - 11 out of the last 12 Months have been records . US exports to Western Europe - up 25% YTD on last year . US exports to Middle East/Africa - up 37% YTD on last year . Asian middle class population growth - 525 million in 2009 => 1.7 billion in 2020 => 3 billion in 2030 . Growth - China has grown from low levels 5 years ago to 50% of the USA (largest market) For personal use only Demand is being driven by multiple motivations across a range of global markets 5 Why Almonds? - Supply - Drivers & Facts . What is Driving Supply? . Concentrated Supply - 83% of the global almond supply is from California USA . 2nd & 3rd Largest Producers - Australia and Spain each represent a month’s supply . Substitute nuts - Similar agronomic challenges & insufficient supply available to replace almonds . Drought - US currently in the grip of a serious drought, which just exacerbates the situation . Supply Facts . US average non-bearing acres down - 2005-08 (125,000 acres) vs. 2009-12 (83,000 acres) . Yields - US yields per acre plateauing @ 1.2 tonne per acre . Current US crop - is equal to 2nd largest crop ever . Carry in - crop 5% down on last year . Alternatives - US almond farmers have alternate annual crops For personal use only 2nd largest crop in history is struggling to keep up with demand 6 Why Almonds? - Supply & Demand – High Growth World Almond Supply vs Demand . Global market worth an estimated Carry-out Global Production Total Supply Consumption 1,600,000 US$4.5 billion 1,400,000 . Supply and demand have grown at 8% CAGR over past decade 1,200,000 . Current demand growth trending 1,000,000 above average growth rate; average supply growth cannot be 800,000 Tonnes maintained due to slow-down in recent planting activity 600,000 400,000 . Annual consumption has exceeded production over past two years 200,000 . Post GFC carry-over stock has - 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 softened upward price pressure so far Source: Almond Insights 2012-13, Almond Board of Australia For personal use only Global almond market fundamentals are compelling 7 Why Almonds? - Concentrated Supply, Broad Demand Global Almond Production (2013/14) Global Almond Consumption (2013/14) 1% 1% 1% 2% USA 2% 2% EU China 3% 3% India 31% UAE United States 3% Japan 7% Australia 4% Turkey European Union 83% Canada Turkey 6% Australia 6% Chile South Korea China Russia 2% India 1% 11% Mexico 1% Algeria 0% Taiwan 30% Switzerland Source: USDA PSD Online Chile Source: USDA PSD Online . The USA dominates the global almond production industry with 83% of the market, followed by Australia with 7% AustraliaFor personal use only (counter cyclical to USA) became the 2nd largest global Almond producer in 2013 8 Why Almonds? - High & Diverse Demand Growth 800 Top 5 US Almond Import Growth Markets (2007/8 - 2011/12) CHINA GROWTH compared to Australian Almond Production Volume(M lbs): 190 700 Gross %: 407% - millions lbs CAGR %: 50% USA GROWTH Volume(M lbs): 152 Gross %: 38% 600 CAGR %: 8% 500 UAE GROWTH Volume(M lbs): 49 Gross %: 109% CAGR %: 20% 400 INDIA GROWTH Volume(M lbs): 46 300 Gross %: 63% CAGR %: 13% TURKEY GROWTH 200 Volume(M lbs): 43 Gross %: 267% CAGR %: 39% 100 0 China/Hong Kong USA United Arab Emirates India Turkey Australian est. 2013 Almond Production 2007/08 (million lbs) 2008/09 (million lbs) 2009/10 (million lbs) 2010/11 (million lbs) 2011/12 (million lbs) AustralianFor personal use only production (Global No. 2) is dwarfed by global demand growth of last 5 years 9 Price hasremained strong despite substantial A$ appreciation production increases and Why Almonds Why Source: Company Data Company Source: ? - Almond Price Long Term Almond Price (NPS 23/25) and Exchange Rate $14.00 $1.5000 $1.3000 $12.00 $1.1000 $10.00 $0.9000 $8.00 $0.7000 $6.00 $0.5000 AUD/USDExchange Rate Almond Price (A$/Kg, US$/Kg, US$/lb) $4.00 $0.3000 $2.00 $0.1000 $- -$0.1000 94 01 08 93 00 07 99 06 97 04 11 97 04 11 99 06 13 96 96 03 03 10 10 94 01 08 12 98 05 95 02 09 93 00 07 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Jul Jul Jul Jan Jan Jan Jun Jun Jun Oct Oct Oct Apr Apr Apr Feb Sep Feb Sep Feb Sep Dec Dec Dec Aug Aug Nov Nov Nov Mar Mar Mar May May May that Select Select at. Harvestssells that price average as the construed be not should It grades. almond across common which is generally trend the price and almond current historical the relativity of the of understanding an reader the give is to for inclusion reason sole sell) its and and produce HarvestsSelect many that the (of premium grade almond one only purposes Note: A$/Kg (LHS) US$/Kg (LHS) US$/lb (LHS) AUD/USD Exchange Rate (RHS) this chart is for indicative chartindicative for this is For personal use only – it it represents 10 Why Almonds? - Historical Farm Gate Pricing (US) Source: Almond Board of California, August 2013 Almond Industry Position Report. Note: Volumes in millions of pounds, Prices in US$/pound Almond pricing has steadily increased in recent years, despite the production of For personal use only record crops of increasing magnitude 11 Why Almonds? - Annual Almond Cycle Dormancy Nuts Mature Adverse weather is biggest threat Almond Trees are Formation of dormant between Fruit/Kernel, Hull, •Pollination – Wet weather & Wind impacts May-July Leaves •Petal fall to early nutlet development – Frost impacts Blossom Hull Split Bees used for Hull opens & Nut •Harvest – Wet weather impacts pollination in Aug splits from stem Can impact Volume & Quality May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun FY2012 FY2013 FY2014 Harvest shakers drop nuts to ground, Sweepers pick up nuts, Truck nuts to Processing Facility Primary Processing – removal of hull (In-shell) or hull & shell (kernel), prior to Value Added Processing Value Added Processing – blanching, slicing, slivering, meal, pastes, roasting, blending For personal use only Almond Sales Program 12 Why Almonds? - Long Life & Lead Time to Maturity . Almond trees take 7 years to mature, then produce at that level for approx. 18 more years before tapering 1.60 1.50 1.40 1.30 1.20 1.10 1.00 0.90 0.80 0.70 0.60 0.50 Yield (Tonnes/Acre) Yield 0.40 0.30 0.20 0.10 0.00 Year 3 Year Year 1 Year 2 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year Year 15 Year 27 Year Year 10 Year 11 Year 12 Year 13 Year 14 Year 16 Year 17 Year 18 Year 19 Year 20 Year 21 Year 22 Year 23 Year 24 Year 25 Year 26 Year 28 Year 29 Year 30 Year Average Yield - Tonnes /acre Top Quartile Yield - Tonnes /acre SelectFor personal use only Harvests secure supply chain & yield opportunities - average tree age is 10.1 years 13 Why Almonds? Why Almonds are Almonds one of the most affordable protein sources across all food types Source: Protein Data Protein Source: - Australian Institute of Sport (AIS) .