SUSTAINABLE GROWTH ANNUALßREPORTß pg02 Australia is currently one of the top Highlights & achievements three almond growers in the world and Select Harvests manages over 60% of Australia’s almond orchards. pg04 Our business at a glance at a glance Contents Mission Statement 1 Our Social and Community Our Year in Brief 2 Involvement 19 Our Board 20 pg09 Summary of Achievements 3 Our Business at a Glance 4 Our Management 21 Our brands Milestones 5 Statistical Summary 22 From the Chairman and Financial Contents 23 Managing Director 6 Financial Reports 24 Our Brands 9 Auditor’s Declaration 32 Review of Operations 10 Directors’ Declaration 73 Maintaining Quality 16 Independent Audit Report 74 pg10 Environmental Sustainability 17 ASX Additional Information 75 OurReview operations of Operations Our People 18 Shareholder Information Annual General Meeting 2005/06 Calendar pg17 The Annual General Meeting will be held on Feb Announcement of interim results Monday 24 October 2005 at the ASX Theatrette, Apr Payment of interim dividend Environmental Sustainabilityiniti 530 Collins Street Melbourne Victoria, Aug Announcement of preliminary atives commencing at 2pm. A separate notice of full year results meeting has been posted to all shareholders. Sept Annual Report to shareholders Oct Payment of final dividend Oct Annual General Meeting pg 19 Social & Community Our mission To continue to develop and expand our business model to generate sustainable earnings growth into the future thereby delivering increased value to shareholders. Our strategy Our outlook Through an ongoing process of We are one of the largest growers of diversification and expansion of our almonds in Australia and globally, and our income stream by leveraging our core food products division has a significant footprint in the Australian market. strengths of almond growing and Increasing nut consumption domestically knowledge of edible nuts and their and internationally, the existence of markets, we will continue to develop strong fundamentals in the international a fully integrated food company with almond market, and increasing investor sustained earnings growth and reduced interest in almonds as a mainstream volatility from agricultural risk. horticultural investment, are expected to contribute to a positive future outlook for the company. As a result of these key drivers, we are planning a further 6,000 Our activities acres of new almond projects in 2006, and From origins as a commodity-based scaling up our nursery and development almond grower, Select Harvests has resources to facilitate further projects successfully transformed itself into a into the future. We are targeting sales, significant integrated agri-food business market, and distribution growth from with a diversified income stream. our food products division with a focus Our activities now include managing on our branded products, which are well orchards for investors, marketing positioned to continue to capitalise on almonds in the domestic and export the growing trend towards healthier diets markets, and processing and marketing and an increasing awareness of the health an extensive range of nut and fruit based benefits associated with the regular products to retailers, distributors and consumption of nuts. food manufacturers. Select Harvests Annual Report 2005 1 Highlights • Increased acres of new almond • Increased yields from company developments by 15% owned orchards by 24% • Expanded the total acres under • Almond price achieved per kilogram management by 29% increased by 11% • Increased production from investor • Acquisition of the Nibbles business owned orchards by 124% and branded product sales growth increased food products sales by 48% Our year in brief 4OTAL3HAREHOLDERS%QUITY %ARNINGS"EFORE)NTEREST %ARNINGS0ER3HARE%03 AND4AX%")4 CENTS $IVIDEND0ER/RDINARY .ET0ROFIT!FTER4AX.0!4 4OTAL3ALES 3HARE$03 CENTS 2 Select Harvests Annual Report 2005 Summary of our achievements for the 2004/2005 financial year Almond Operations Our strategic objectives • Total production up to 6,036 metric Our objectives for 2005/06 tonnes from 3,538 in 2004 Maintain our position as a low • Continue to extract efficiency • Expansion of processing capacity to cost almond producer and develop gains from additional acres under cater for increased crop levels. additional investor owned orchards management and the processing of • Costs per kilogram decreased by operated by Select on a fee basis increasing crop levels 6% on the previous year from our to deliver long term stable income • Plan the further expansion of owned orchards streams, economies of scale, and processing capacity • These efficiency gains consolidate guaranteed supply to meet increasing • Anticipate further plantings the cost savings achieved in previous market demand. totalling 6,000 acres of investor years and make us one of the most owned orchards for 2006 Our achievements during 2004/05 efficient producers in the world • Scale up nursery and development • Planted 4,108 acres of new • Crop from company owned orchards resources to support future orchards in 2005, totalling 15,773 up 24% to a record 2,350 metric developments. acres of investor owned orchards tonnes in 2005 representing 87% of total acreage • Investor owned crop increased under management. from 1,643 tonnes in 2004 to 3,686 tonnes in 2005 Food Products Our strategic objectives Our achievements during 2004/05 Our objectives for 2005/06 Grow distribution and market share to • Increased sales revenue by 48% over • Continue to build our branded enhance our position as the leading the prior year to $131 million. products in the cooking, health, and processor, marketer, and distributor of • Acquired the Chiquita Nibbles muesli categories almonds, other nuts, and dried fruits, business, contributing to revenue • Expand domestic distribution for and add value to the marketing and and EBIT together with improved our products outside the grocery distribution of almonds harvested from distribution in the fresh produce channel our almond operations division. category • Continue to develop and expand our • Increased market share in the export business in Asia and Europe branded cooking and muesli • Utilise our competencies in product categories of Australian supermarkets. sourcing, processing, marketing and distribution to maximise our retail and industrial business. Earnings Our strategic objectives Our achievements during 2004/05 • Total EBIT increased by 39% to $33.3 million Earnings growth, improved quality of • Total sales revenue increased by • Net profit after tax increased by 43% earnings, diversification of earnings 40% to $178 million to $21.7 million. streams, with less dependency on • EBIT contribution from activities almond pricing. other than company owned orchards Our objectives for 2005/06 increased during 2004/05 further • Continue to deliver earnings growth. reducing exposure to agricultural risk Shareholders Equity Our strategic objectives • Total shareholders’ equity increased Our objectives for 2005/06 by 15% to $91.5 million Enhance shareholder value. • Continue to increase shareholder • Return on shareholders’ equity value through investment in the Our achievements during 2004/05 increased to 23.7% p.a. existing business • Share price increased by 45% to • Total dividends increased by 62% to • Identification and evaluation $9.70 at 30 June 2005. 42 cents per share of appropriate expansion • Earnings per share increased by 40% opportunities. to 55.9 cents per share Select Harvests Annual Report 2005 3 Sustained growth during 2005 saw the expansion of total acres under management by 29% and increased acres of new almond developments by 15%. Our Business at a glance Select Harvests Limited, Australia’s largest almond grower, manages in excess of 60% of Australia’s almond orchards, and is one of the largest almond growers globally. It is Australia’s leading manufacturer, Almond Operations Food Products processor and marketer of a range of nuts, fruit based, and associated • Owns/leases 2,375 acres of almond • Produces an extensive range of products to the Australian retail and orchards in the Robinvale area of packaged nuts and associated industrial markets, and exports almonds north-west Victoria. products (snacks, cooking to several countries in Asia, Europe and ingredients, mueslis, natural health • Manages on a fee for service basis, the Middle East. foods, dried fruits, etc). 15,773 acres of almond orchards Through a focused diversification and on behalf of a number of external • Australia’s leading supplier of growth strategy, Select Harvests has investors. These services include processed and packaged nuts delivered an increase in profit after tax orchard establishment, tree supply, to Australian supermarkets. The of 314% over the last six years. farm management, harvesting, Company markets product through processing, and marketing. the Lucky, Sunsol, Nu-Vit, Meriram, Select Harvests’ business streams are and Soland brands. as follows: • Currently processes approximately 6,000 metric tonnes of almonds • Manufactures a range of nut-based representing approximately 40% ingredients for food manufacturers of Australia’s crop. Future tonnage will and distributors. exceed 20,000 metric tonnes as new orchards come into full production. Pesticide Products • Exports approximately 40% of its • This business will be divested in almond production to a range of the first half of the 2006