Cobram Estate Olives Ltd
ASX:CBO
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Cobram Estate Olives Ltd
Earnings Call Analysis
Summary
Q4-2023
The company reported a 21% surge in sales, reaching $169 million, with robust growth across markets, bolstered by a 63% jump in statutory EBITDA to $40.8 million, though two-year rolling EBITDA dipped due to crop variances. Record operational cash flow at $54.1 million and capital expenditures of $56 million position the company for growth. With $56.4 million in accessible funds and a gearing shift from 25% to 30%, the firm is poised for future success. Packaged goods and U.S. sales climbed by 14.9% and 46%, respectively. EBITDA guidance for the next year is set between $35 and $45 million.
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Okay. Welcome, everyone, to the Cobram Estate Limited full year results presentation. [Indiscernible] as a public company, but third as an ASX listed company. Thanks so much for your interest in Cobram and for your attendance today. There's approximately 200 who are zooming in for a meeting, which is fantastic. I'm Rob McGavin one of the co-founders and the Non-Executive chair of Cobram Estate Olives. I'd like to introduce or joining us today is our Co-CEO, Sam Beaton, who really heads up Finance and Commercial; and Leandro Ravetti, who heads our Technical and Production; and we're also joined by our CFO, Russell Dmytrenko.The presentation will take around 30 minutes. And after that, we encourage questions, and we'll take questions at the end of the presentation. [Operator Instructions] So I hope you enjoy today and over to Sam Beaton, our Co-CEO, who is Head of Finance and Commercial.
Thank you, Rob, and thanks to everyone for joining us. I'm pleased to present the financial results for the 12 months to 30 June 2023. This financial year has been a strong year for the company. We reported sales growth of 21% for the year, up to $169 million. Pleasingly, we reported growth in both the USA and the Australian businesses. And we also reported growth in Cobram Estate both in Australia and the USA and our Red Island brand. From an EBITDA perspective, we reported statutory EBITDA of $40.8 million, up 63% on the prior year. This was expected because this year is a higher cropping year. And as a lot of you know, the majority of the profit is recorded in the year of harvest, not the year of sale under accounting standards.We also saw a turnaround in USA business reporting an EBITDA profit which contributed to that increase in profitability. From a 2-year rolling EBITDA perspective, we reported $30.1 million average EBITDA, down from $47.9 million. The reason behind this is that our last on crop in year, we produced over 16 million liters of oil in Australia, this year producing 12.5. So Leandro will talk more around the climatic conditions that affected this year, but that did decrease our 2-year rolling average EBITDA, which takes into account both the high and the low cropping year. Pleasingly, we reported a record operating cash flow of $54.1 million, up 60% on the prior year, and this was really driven by the increase in sales turnaround in the USA business and stabilizing costs. At 30 June 2023, we had available cash and ongoing debt facilities of $56.4 million.Moving on to the detail of our profit or loss. Pleasingly, we reported growth in profitability across all our business segments, the Australian Olive Oil business, USA Olive Oil business and Innovation and Value Add. The Australian Olive Oil business, our EBITDA was $38.1 million, up from $32.4 million. The drivers of these were the higher Australian crop increasing from 9.5 million to 12.5 million liters. It was offset slightly in the first half of the year where more was sold through Red Island and private label than plant, which affected our margin. This was rectified in the second half of the year and particularly after we put through our price increase on Red Island product range in February 2023 and [Cobram 10s]. We also sold some of our low value bulk oil through the USA operations. So some of that profit is taken through the USA division and some through the Australian division.Our USA operations, we're very pleased with the result here where we've recorded a EBITDA profit of $2.9 million. This was up from a loss of $4.7 million in the prior period. The turnaround in this profitability has been driven by an increase in sales. Sales increased from $29 million up to $42 million and also an increase in gross margin particularly after the price increase that we put through in October-November 2022 across our package range in the USA.Our Innovation and Value Add, a small loss of 800,000 up from a loss of $2.6 million in the prior year. We continue to focus this business on B2B around continuing to add value to our waste streams. For example, we sell our pit and [poms] likely this year as a biofuel as through B2B channels. And we also move into next year with a continued lean cost structure. Probably the only other item to point out here, our interested increase, a portion of our interest is flooding. We do have a $60 million fixed interest element we did in our core debt, but the balance is variable. So of course, we've seen a rising in interest costs up to $8.4 million this year.From a cash flow perspective, I think this business really demonstrates the ability for the company to manage variability of oil between an on and off year and we do that because we need to be our customers purchase or for consistently month in, month out. So we see operating cash flow much more consistent than our statutory profit. This year, we reported the cash flow from operation of $54.1 million up from $3.8 million. This was driven by a few factors. The increase in sales levels around in the USA business, and of course, [indiscernible], but stabilizing cost.On an after interest tax basis, we recorded cash flow of $39 million, up from $27.4 million. Capital expenditure, so our cash invested in capital expenditure was $56 million, the majority of this was invested into a large scale projects, which we expect to add material value to the company in the medium term. Particularly Leandro will cover more on these, but particularly investment in growth assets in both Australia and in the USA and also expanding our milling capacity.At the end of the financial year of 30 June '23, we had available cash in available cash in debt facilities of 56.4, which will allow us to fund growth CapEx in the coming 12 months. And of course we paid a dividend of $11.5 million and that's net of dividend re-investment plan.From a balance sheet perspective, net assets of $288 million, it's probably a couple key points I would like to highlight here. Tress and irrigation infrastructure recorded at written down cost, not at fair values. There is $121 million of value, fair value that sits outside our balance sheet relating to those items. Our brands recorded at acquisition cost of $6.3 million within that intangible assets line. And also from a -- sorry the brands are not recorded at fair value just to re-emphasize that on our balance sheet.From a liability perspective. Just one thing to point out there the majority of the $80 million tax liability relates to the historical write up or accounting right up an asset values particularly around the land and building that would only be payable if we sold the assets outside of the group. Gearing increased from 25% to 30%, by debt ratio. This was expected as we drew down the facilities to fund major growth capital projects during the year.Now, this slide shows our asset values compared to borrowings. We've got a table on the right hand side which reconciles the amounts from our balance sheet to this chart. We deduct intangible assets and the right-of-use assets. Then we're adding in the external valuation that's not on our balance sheet. As you can see, our asset value is increased to just under $720 million this year against borrowings of $191 million. Really important to note here, this does not include any value relating to the brands despite now having global sales of $117 million.Moving on to sales. This is Australian packaged goods sales. Pleasingly, we reported a good growth within the Australian business. Packaged goods sales up 14.9% year-on-year, and we reported growth in all our different segments. So Cobram Estate, Red Island and private label during the year. We did put through a price increase on the Red Island range and the [Cobram 10s] in February this year, and our Cobram Estate bottle range is currently under review.The Cobram Estate brand accounted for 50% of the total sales and 25% Red Island and about 10% private label and 8% bulk. Again, pleasingly, a lot of this growth came from volume. So we sold an additional 1 million liters this year at a higher net return. From a market perspective, so this is the total olive oil category with 35% market share. Our Cobram Estate remains the #1 Olive Oil brand and Red Island, the #3 Olive Oil brand. Cobram Estate at supermarket grew 6.8% in value and 6.4% in liters.From a marketing perspective, we continue to invest heavily in marketing. Most of our marketing dollars is invested through Cobram Estate brand. This year, we tried to emphasize the quality of our product through our marketing campaigns and of course, the health benefits and usage of extra-virgin olive oil. You may have seen us on mainstream media and TV, some outdoor advertising, and we've also have a strong digital presence. We've continued to do innovative marketing, such as our online tasting which has been a real success.Moving to the U.S. The U.S. sales returned to growth, which was very pleasing for us. Our sales increased 46% for the year up to $42.6 million. Probably most pleasing for us is the growth was driven by Cobram Estate, which grew 69.3% year-on-year. And private label did decrease, and that's due to really due to olive oil availability and our prioritization towards our Cobram Estate brand. Our bulk did increase the majority of that bulk relates to low-value Australian Olive Oil that we sell through our U.S. customers.At a supermarket level, so this is some supermarket data, it doesn't include all supermarkets. The likes of Costco and WholeFoods don't provide data, but this just shows the growth at supermarket level based on what [indiscernible]. We reported 22.8% year-on-year growth at the grocery and a 19% store count. Pleasingly, we had some big wins in the USA towards the end of the financial year, where we've been accepted into the public chain and public chains and Kroger, which accounts for almost 1,900 stores. In terms of marketing, again, the marketing in the USA, we use very similar messages to Australia around local quality, freshness and health. More of our marketing spend is in store and really trying to increase the consumer awareness, and we're very strong in the digital channels.In terms of our financial outlook, we've had a good start to the financial year from a sales perspective, albeit very early on. The sales outlook remains positive, and we certainly are benefiting from the global shortage of olive oil and record high prices of European oil, which we're starting to see flow through to the Australian and USA markets. Despite a lower-than-expected crop this year in Australia, we do have sufficient oil to meet our packaged goods sales plan. From a USA perspective, Leandro will talk more around this, but we're expecting a significantly higher crop in the USA. Just as a reminder, the USA harvest in October-November '23, and we anticipate that this will help us continue to drive sales into the FY '24 in the USA. The Australian input costs remain soft for areas like water, which still trades below long-term average and other major costs such as fertilizer and electricity remain contained, and we expect that to continue into the financial year '24.From a dividend perspective, the Board currently intends to pay a dividend of $0.033 per share in December '23. The formal announcement and details around this dividend will be announced at our AGM, which is scheduled for the 3rd of November 2023. We'll also announce payment dates and DRP details and level of franking.And before I hand to Leandro, I'd just like to thank our wonderful employees. You're a great team to work with, and there's been some outstanding efforts over the last 12 months, and I'm really looking forward to the next 12 months. So I'll hand over to Leandro and I'll be back at the end for question time.
Thank you, Sam, and thank you very much to all of you for joining us today for this presentation. I will provide you now with a brief update on our operations in Australia and the USA. And probably we can flip to the next slide and how we continue actually to makeup progress strengthening the company's 4 growth pillars. I won't go through the figures of this slide in detail because Sam has already spoken about some of them, and the rest will be covered throughout my presentation. But fundamentally, they show the consolidation of Cobram Estate Olive as one-off, if not the largest fully vertically integrated olive oil company in the world.We can move to the next slide now. From the operations point of view, this financial year 2023, so arguably some of the most challenging environmental conditions, not just to our business, but to many other agricultural companies across the eastern CBO's of Australia with well above average rainfall conditions, particularly during winter and spring that led to widespread flooding, for example. That's why the overall positive results that I'm about to deter are so encouraging and reflect the resilience of our business model and the extraordinary group of women and men within our staff that makes it possible.As we previously announced on the year, the higher-than-average spring rainfall and sharply cooler than average spring and autumn temperatures, led to a 10-day delay in flowering and a shortened growing season overall that produced smaller than average olives with lower-than-normal oil accumulation that ultimately impacted in our olive oil yields. The achieved volume of 12.5 million liters was 32% higher than our 2022 harvest, but 24% lower than our original projections.This production, combined with the 1 million liters of third-party growers, we processed was a really, really good quality. And it guarantees our supply to meet the company's packaged goods sales plan for this financial year. Although it is far too early to call, good growing conditions during summer and the lighter crop in 2023, have resulted in pleasing levels of vegetative growth and good productive potential across our growth as we head into the 2024 harvest year.We can change the slide now. Sam touched this, a positive aspect of the water [WAP] average year has been its impact on water prices. As you can see from the graph on the right-hand side of the screen, we have paid a weighted average price of $38 per megaliter, for all our water requirements in this past financial year, which is approximately 20% of our long-term historical average price. We anticipate that water prices are likely to remain below that long-term average for this financial year as the water storages across the Murray Darling Basin at 94% capacity, very similar level than last year. We also expect that the prices of olive key grow input costs such as fertilizer and electricity will also remain contained over the coming 12 months.Move to the next slide. Look, weather conditions have been certainly more favorable for our American operations, significant rain and snowfall during the Northern Hemisphere winter and spring provided a welcome relief for Californian users in general, including the irrigation district where our growth are located, resulting in full water allocations for the growing season.California growth typically harvested between October and November with all the growth having been through the peak flowering period and having already started the oil accumulation phase. Flowering was favorable, and we are hopeful of a materially larger harvest than in 2021 or in 2022. And this is the consequence of a few things. On one hand, our maturing orchards, also more acres under contract and the fact that it is largely an on year for California, although as usual, obviously, final results will always be subject to the weather conditions over the coming months.Move to the next slide. And just to wrap up the presentation, I'll touch on the key developments related to our 4 growth pillars. These pillars are quite simple and focus on producing more oil from our Australian Olive groves through maturing trade and efficiency gains, growing our fully vertically integrated business in the United States, growing branded product sales with a focus on improving the net price per liter for oil and capitalizing on our sustainable position and upcycling of our olive oil by product.So let's start with the first growth pillar. With our modern production system, Olive trees reach maturity and maximum production levels when there are approximately 8 years old. Given the significant investment that the company has done over the past decade in new growth, our mature area in Australia is set to increase by 64% over the next 9 years. As 28% of our trades are still immature and 11% are not yet productive. This is extremely relevant in terms of the future as many of our production costs are fixed. And this first growth pillar is directly related to the improvement of the company's financial performance with the value of the additional oil to come, mostly flowing directly as profit. It is also relevant in terms of the limited world supply that Sam mentioned, and also considering that Australian grown olive oil still accounts for less than 50% of the total domestic consumption.We move to the next slide. Two main capital projects took place in this past financial year in relationship with this very important growth pillar. The first one has been the upgrade of our on-site mill at the Boort groves, and you can see some follows there on the screen. This great engineering project was completed on time for the start of the past harvest in late April, increasing our future capacity by over 160%, making this mill one of the largest in the world.Our sincere thanks to all our staff and contractors involved as the tight time frame of having it completed between the end of the 2022 harvest. And the beginning of this one made even worse by the excessive spring rainfall was certainly no easy task. In particular, to Ruth Sutherland, our Head of Horticulture, who led the project from the beginning until the end.Move to the next slide. The second large scale capital project in Australia has been the completion of a greenfield 407-hectare olive growth, planted between March and April in 2023. At our Boort grove in Victoria, just to the southeast of the existing growth. And as a result, our total olive planning at Boort have increased by 13%. It is worth highlighting that after the 270-hectare redevelopment of our women growth plan for this financial year, no other significant capital project will be required in Australia in the near future to support the organic growth of production expecting from the maturing [indiscernible] that I explained before.Move to the next slide. As we heard from Sam, we've seen in the slides, and we've seen it in the past, oil supply continues to be our main growth limitation in the USA. Consequently, I just want to highlight some key operational achievements aiming at improving this situation. As you can see from the graph and table in this slide, we are expecting a significant boost to our California supply from the maturing profile of olive growth given that over 80% of the currently planted area of 558 hectares is either immature or yet to start bearing fruit. And almost equally important in terms of securing future olive oil supply, we have increased our third-party grower area under contract to 2,500 to 2,100 hectares, which is up from less than 1,300 hectares that we had in the financial year 2021. There is a growth in contracted area of more than 60% over the past couple of years.Move to the next slide. Regarding this growth pillar, we have other 2 key capital projects on the grove. Firstly, we have the execution of the Phase 1 of what we call the Dunnigan Hills Ranch development with 205 hectares of olive planted in May and June 2023. There is a further 158 hectares of the Phase 2, which are planned for development in this financial year.Secondly, we are currently undertaking, and you can see the photos on the right-hand side, the much needed the expansion of our mill, oil storage, bottling and warehousing operations in Woodland, in California. The expansion will double our milling capacity and will increase our olive oil storage capacity from 2.9 million to 4.5 million liters. And we will be also installing a new bottling line and expanding our finished goods warehouse in line with the projected growth, both in oil availability and in sales as well.Move to the next slide. In terms of our third growth pillar, focus on increasing the return per liter on each liter of olive oil sold. There were several concurrent initiatives that included using innovative marketing and education strategies to grow higher-margin packaged goods sales, such as our virtual tasting for example, or the ongoing health care professionals, educational campaign. Also developing and launching higher-value items across grocery and online sales channels, such as our direct-to-consumer recyclable pouches shown on the left photo or our ultra-premium collection listed in major supermarkets to the right of the screen. And finally, obviously, optimizing the actual selling price through the management of depth and frequency of promotions and regular pricing reviews.We move to second last slide. In terms of the fourth pillar, 2023 have been another very active year in our sustainability and value-add area. We are very pleased with the results of the strategic change, we adopted regarding this area of the business a couple of years ago. And we're moving, as Sam touched on into this new financial year with a lean cost structure for this division, mainly focusing on selling our byproducts directly to food manufacturers, hospitals, nurseries and other businesses as ingredients and as renewable energy sources for heat and electricity production.A total of 7.4 million kilograms of olive biomass was sold to external parties in this past financial year alone. The nearly $2 million performance improvement of this division in financial year '23 would have been even higher if it hadn't been for the necessary provision of the obsolete stock of $1.1 million linked to the decision to discontinue retail size of our wellness products in Australia and the USA, since a couple of years ago.And last slide. Finally, I would like to highlight that we have submitted our Australian Carbon sequestration project with [Vera] as a first step to potential certification of our olive growth-driven carbon credits. Please remember that based on independent studies we commissioned, carbon sinks on our growth, both in the below and above ground biomass entirely offset the emissions associated with growing and marketing deliver leading to a net removal of approximately of 4 kilograms of carbon dioxide per liter of olive produced and so.Pleasingly, all these efforts and a few more that you can see listed there on the screen. We're independently recognized by the Australian financial review and Boston Consulting Group by naming us as a sustainability leader in agriculture and environment for second year in a row. And we were also declared winners of the 2022 Woolworths Better Tomorrow Award formerly known as sustainability supplier of the Year, and winner of the 2023 Coles Sustainability Award. So it's great recognition from our main partners.This is all what I have for today. So happy now to hand it back to Rob for any closing remarks that Rob may have and to help us coordinate any questions you may have. Thank you very much.
Thank you very much, Sam and Leandro. What a got a wonderful company we have and how lucky to have such a resilient business that's in such a wonderful space with regards to health and nutrition, owning the grove, so many tangible assets, such a sustainable position, great people, strong brands. And I think just a lot of tailwinds in an environment that we're sort of going into where people are going to be looking at [indiscernible] spend more and more. So great credit to you both, doing a wonderful job leading this company. Thanks to all of our staff who led by you both and there's so much work here in the USA. Obviously, to our Board and, of course, our shareholders for their ongoing interest and support, we greatly appreciate it. And I should mention also our loyal customers that turn up every single day and buy our product and recognize its quality and its held benefits due to that quality.On a sad note, the unexpected passing of one Executive Director, Professor Jonathan West, was a real shock in mid-July. Jonathan was a really highly intelligent man. He was forthright, but so practical. Most importantly, it was just a wonderful man of impeccable integrity and he'll certainly be sadly missed by all of us, including [Suzan and Eric].
[Operator Instructions] So [Charles Penguin].
It's [Charles Penguin] here from Tribeca Investment Partners. First like to say congratulations for the year given the tough growing conditions. In regards to storage, once you harvest the Olives, as I remember you used the example but once you open a bottle of olive oil, you've got to go through it within 6 weeks. How long can you store the olive oil for, so you can use it throughout other seasons compared to on and off years?
I will hand that to Leandro.
Yes. The olive oil stored in our stainless steel tanks and the nitrogen and temperature control could last within that category of extra version somewhere between 24 to 36 months, which is way more than what we normally store them. Think about in an on-year at the most, we would use the oil within 14 to 15 months from production. So there's still plenty of shelf life left in the oil, giving those really, really good storage conditions that we have in our facility.
Yes. So the trick there is to have really fresh olives and crush them quickly because when you pick them from the tree, they start to deteriorate because the tree is not looking after them. So the light heat oxygen, any damage is what starts to deteriorate. The olives once you cross them and turn it into oil, it's stored in just pristine conditions where it's hugely stable as Leandro said away from heat temperature control rooms, nitrogen blanket over the top. So there's no oxygen comes in contact with it. And because there aren't any oxygen in it of what drives the health benefits and the freshness, they're not having to sacrifice themselves or any oxidize the oil, if that makes sense. So they stay there in number and freshness, which makes it hugely stable.And we also bottled just in time, so we don't hold more than about 4-week stock. So that oil is super fresh when it gets to the customer because when you bought it and put in a smaller vessel away from a larger sort of vessel with stainless steel and temperature control, obviously, it starts to deteriorate a bit quicker. And each bottle has a best before date on it, which is scientifically calculated by our laboratory. In fact, the guys in our lab wrote the global recognized standard for how to calculate best before date accurately. And then once you open it, obviously, you have some oxygen any [indiscernible] to sacrifice themselves, keep the oil fresh. So 4 to 6 weeks after you open it is a reasonable guide and how quickly that it goes off.So maybe if we go to Jonathan Snape.
Can I ask 2 questions? One, around the Australian division, your EBITDA was 38.5, and the cigar contribution, I'm assuming all the second half was the Australian business, so little bit about $42 million, which kind of says that there was a loss in the sell-through on the branded side of the business. And it looks like it was quite large in the second half, like up near like $6 million. Is there any particular reason why that happened? Like when I've gone back, I can't see that ever having occurred before, was there like some low-quality stuff that you have taken impairment on and just clear? Or is there something else going on in there? Or am I missing something?
No, you're not missing something. I think the majority of that would be the low-value bulk oil that we sell for our U.S. So most of the profit margin is taken through the U.S. division. We also, as you know, we value our oil at the prior 30 June based on expected sales mix. And we had more of our sales mix to Red Island and private label than planned. Now that certainly started to reverse in the second half of the financial year, particularly in the last few months once the Red Island price rise was implemented. But a lot of it's to do with the sale of the bulk oil and recognizing some of that profit where it's sold through the U.S. and to our U.S. customers.
So if I'm looking into kind of next year, obviously, you made a crop valuation on this year's expectation. I shouldn't expect to see that, again, should I? Probably, should it be reversing back to kind of those historical levels it was doing, which is high single digit?
Yes, that's the correct assumption.
And the second one. On capital expenditure for next year, I think in the accounts, you had committed CapEx of somewhere around $24 million for next year. I think at this time last year, it was about $11 million. How should I be thinking about the CapEx? Because I think you said that Australia will come back a bit, but there's still some catch-up in the U.S. How should I be thinking about next year's CapEx number given it was over $50 million this year?
Yes. I think we talk about maintenance type CapEx of around $10 million for the Australian business. The majority of that committed CapEx is in the USA relating to our milling plant and plantings where we're halfway through on both of those projects. So yes, and as we said during the presentation, a lot of our capital expenditure going forward will be around increasing production in the USA. But we'd expect it to come off this year as an aggregate.
[Peter Parker]. We're just not getting your question, Peter, if you can try again, please.
It seems I muted, but we are not hearing anything.
No. Maybe we'll go to Mark [indiscernible], and we can come back to better at the end, just not sure what the issue is there.
Just 2 questions. Just, I guess, in terms of consumer spending here in Australia, we're seeing, obviously, areas of weakness. I'm just wondering, from your point of view, what you're seeing in sort of the consumer, is there some shifting down? Or how do you read the consumer overall? Or is it the case that people are [indiscernible] at home more and maybe consuming more product, just to get a sense of how you might see things in the next year?
Yes. Just to answer that, we've certainly seen really strong demand both here and in the USA over the last 8 months. So the assumption there that there is more eating at home. It certainly hasn't impacted our composition of [indiscernible]. And having said that, we have been -- we are benefiting from a global shortage of olive oil and record high prices for our competitors. But we have, overall, we've seen really strong demand up until today, particularly over the last 8 months.
So no trading down then -- yes. Sorry, Rob.
Yes, sorry. Obviously, there was a bit of a movement to Red Island, which Sam discussed in the first half where we then put the price up of Red Island and also [indiscernible]. But historically, in the GFC is a good example and maybe someone has called to you remember that, but it was pretty scary time for a number of years, and that was probably the strongest sales growth we'd ever had. And I think that as people weren't eating at restaurants as much, they were also not compromising as much on what quality of food they're buying for the house.And I think the other thing that's good for us is that most of our customers are buying it for health and quality. And when they get tough, they will probably ditch quality or something to a certain extent. But when they know how much better for the health or the health and their families, [indiscernible] extra version is compared to normal or average or poor. I think it really reinforces those buying habits of -- it's an important thing to spend your money on them. So yes, we're optimistic, but of course, you don't know but signs at the moment are really terrific.
And would you see Red Island as being a fighting brand? Or like I suppose a lot of companies are trying to put that value kind of proposition to consumers how do you see that? Or is it just about promoting your own brand like on massed some of the other promotions that you did the brand strength is putting you through?
Sam, do you want to...
Yes. I think probably just going back a step, that we -- which is really important to us. We only put the very best half of our olive oil into Cobram Estate, the next best goes into Red Island, which is good oil and plays at a lower price point and then into private label. So each of those brands plays a very important role to us. And of course, Red Island been a lower price. It does typically compete with the imported brands on a price level.
In terms of price inflation, I guess we're hearing from most food companies that inflation is starting to moderate or all of the sort of price increases they might have put through. Is that that the way you sort of see that 24 now?
Yes. I think we put through a major price rise in the USA across all our packaged goods in October, November '22. Red Island and Cobram [indiscernible] in February. And as I said during the presentation, our bottle range is under review.
And then just lastly, just on competitor behavior. Obviously, with the sort of slipping of the [indiscernible] against the euro. And as you mentioned, the sort of global conditions, what do you think in terms of imports that you've seen some competition there, but do you think that strengthens your position there on the shelf or the likelihood of less imports?
I mean, in there, it should. I mean the cost of importing olive oil with the global prices of European oil and the weakening Australian dollar has made it obviously a lot more expensive for our competitors to import oil. So you think that would naturally benefit us.
[Ben Rodney].
And apologies if I missed this. Can you just talk through the dynamics of that big increase in the bulk oil sales in the USA from Australia? Why was that? And it's not particularly profitable business. Yes, what's the kind of rationale behind that?
Yes. We always have an element of our oil that we sell in bulk and certainly, they are profitable channels. And we always have a certain amount of low-value oil that we sell mainly B2B. Again, these are predominantly long-term customers where we have good relationships with them, and we make good money out of it. So we've got some very strong relationships with some of the customers in the U.S., it's obviously a much bigger economy. So there's much more scale there. But it's been a real benefit also of having the U.S. business because we can store that oil over there and sell it progressively through the year. So it's about really about us assessing where we're the best return for that excess bulk kits.
And so just what's the use of that oil, if it's not private label? Is it more food services? And why is it so variable year-to-year?
Well, we sold more this year through the USA. So it really depends on our quality and demand. In terms of usage, it's typically used as either food service or as an ingredient for a product.
Anything else, Ben?
No, that's so good.
[Alex Milton].
Just a follow-up question with to imports and maybe for you Leandro. You talked about the potential harvest for North America. But regards to Europe and Spain, is there already a view forming with regards to their harvest for this year? Will it be as bad as the last couple of years or it's going to be bad, but not as bad? What are the prospects there for the harvest for 2023?
Yes. Obviously, they passed the flowering period, which was not a bad flowing period. However, as you probably have read in the news, pretty significant heat waves throughout the flowering period and immediately after that, that reduced the prospects significantly. Obviously, it is very difficult to have an accurate projection, but most of the views of the most recognized government agencies in Spain are talking about clearly below average crop again, most likely not as bad as the one of last year, which was a record low, but still very much on the low side. And this is coming into a year where there's virtually no leftover stocks on storage. So we expect that the tension and pricing and the tightness of the market will remain at least for another 14, 15 months.
They had and notwithstanding there's a headway, but I know in Northern Italy, there are a lot of floods back in probably spring or early summer. Has there been any rainfall to help them for the next couple of years or not?
Yes. It certainly has been a more recent rainfall in Southern Spain. Obviously, you know the Italy where they have the flood, there's no olives growing. They call the part of Italy, but in the Southern Spain, they had some rainfall. In some cases, it got a bit too late, too risky this crop. But most likely, we'll have a potential benefit for the next year's crop. So we're talking about 2024-'25 season.
Is there any other questions? I can't see Peter Parker with his hand up, but more than happy to give that another crack if you still have your question, Peter. Not hearing you, sorry Peter.
The government's decision or talking about volume back water rights. Do you think that will get up and how would that affect because obviously, waters are big important cost for you guys?
Yes, terrific question. Peter, I might have a go at that. Look, obviously, any water that's bought back by the government is less water for irrigation. Victoria, I see have said that they're not participating in that. I mean nothing is finalized, but we are in Victoria, even though the water grades between states in certain places. Probably the key is that there's still an enormous amount of water. It's just when it gets dry who can afford to buy it, if that makes sense. So it comes down to probably price because long term, it will all adjust, I suppose what gives us confidence is that we've got such a brilliant business that with strong brands and we lowest cost, highest quality producers that we don't know of any other mainstream crop that can even come close to us for what they can afford to paper and [indiscernible].Now, of course, we don't want to give it away to someone else has got the water on [indiscernible] that's farmers. Because if they're growing annual crops and the price goes high and they're only getting a percentage of their allocation, they like to trade their water off for someone else because they can be more profitable and growing our crop. And if they're only getting half an allocation, there's no point in planting it often. So we've got every confidence [indiscernible] water the prices is very much unknown. But it goes without saying that if there's more water moved out of the system, it will, over time, lead to higher prices.So the underlying assumption is that it will be better if that wasn't from purely price point of view. There's also some other, I suppose, benefits of that makes sense is that there's less people set up to irrigate when those adjustments take place in wet years, the price is lower. So maybe more volatility, it would be what happens cheaper in the flood years, because [indiscernible] demand disappeared because the dryer use put too much pressure on producers and then higher prices when the drought hit. So a few years intend or who knows, you would expect reasonably higher prices.But again, being able to adjust your price, we're having real pricing power and not having almost any currency risk is an absolutely wonderful place to be, which is our business. So we're not particularly worried about it, but we know that it's a cost. And when we do our normalized EBITDA, we put in the long-term average price of water at $200 [indiscernible] or whatever it is rolling average because that gives a better -- just takes out the water equation of how the underlying business is performing.So obviously, the 2-year rolling EBITDA would have been higher this year. If we had $38 [indiscernible] what we paid for water but we used $200 million and that analysis because that's the long-term average. So it negatively impacted this year. But if the price goes to 500 in 1 year, we'll still put 200 as far as that I suppose non-accounting standard analysis to try to normalize the accounts and then make them more understandable.
Talking about water. Yes, a very big order event in U.S. and California, the other day that affect at the crops [indiscernible] over there?
Leandro?
No. Most of that cyclone really impacted Southern California, and all our growth are more in Central Northern California. Actually, we didn't have any rain at all during that event. So it's a big difference in that big state. But so no, it had no impact at all on our growth.
But the water situation, Leandro is very good from huge rains during the winter. These summaries were unseasonal rains during winter, there was a terrific rain. So allocations are really good. Do you want to touch on that Leandro?
Yes, and a lot of snow as well, which really in California plays a pretty significant role in terms of feeding the different -- both aquifers, but also the surface water systems.
And probably the last question. We see every night on the TV people under pressure in supermarkets and buying things. Are you finding the supermarkets are putting a lot of pressure on you to discount the product? You go in, you see a 50% offered [indiscernible]. Do find any more pressure coming on the company?
They always have -- I'll have a bit of a crack. But the retailers have always wanted to look after their customers, the discounts they contribute to and it's a negotiation, but I wouldn't say it's I mean it's any more than normal although you never know. But we're in a in a very good position with the amount of olive oil that we produce as a global shortage. The supply doesn't [indiscernible] on it. We're really reliable producer, both Coles and Woolworths, we won their sustainability of water across all suppliers this year. I think we're worse supplier of the year across the 30,000 suppliers on time in full deliveries, terrific relationship that they value and everyone's under cost pressure. So we can just do it best. But I wouldn't say it's any more impact, I'd say that their relationship is probably better than ever.But again, Sam, do you want to make any comments?
Yes. No, that's a fair fair comment. I think we've got a good promotional program that rewards our customers at different price points. And I think it's a really good balance.
And probably the final one about the share price. I know did you get a bill part of there an agricultural thing or something a forum that you went to? Are you starting at some institutional interest in the company now?
Sam?
Well, the institutional shareholding is still relatively small. But yes, no, we do have good interest in the company. And Leandro and I have regularly speak to institutions, but yes, don't know more than sort of the last 12 months.
Well, actually, with this good result, we see a bit of a [indiscernible] projection like the olive oil price.
Yes. We hear you there. We won't disagree with that statement.
Perhaps like we did with olive oil, we have to do a [indiscernible] of education with this one as well, training the market to understand that our business is best different than most other agricultural businesses. Particularly as Rob said, with the ability not to be exposed to currency risk or commodity risk and very strong brands that allow us to control the pricing to some extent. But also, unlike most of the other oil brands to control supply as well, especially like this one where the shortages, having that secure our supply shows that how important it is to be fully vertically integrated.
Yes. And it's not really -- doesn't seem to be valued greatly that we own hundreds of millions of dollars worth of tangible assets and on the farm land and there's just appreciation every day over a period of time in farm lend [indiscernible] better investment. As well as having control in that cost of import is not like we've just got to go and pay the spot price in the market for our imports and get slammed and up and down. But I think the market will start to understand and it's our job to communicate that better. But I think as we move forward, the results will speak for themselves, and our effort will be differentiated on shore over time.So I can't see any other questions. Put your hand up if I am or Sam, Leandro, I'm not missing anything.Well, now also thank you very, very much, everyone. Really appreciate your interest. Your [indiscernible] level is fantastic. And again, thanks to the team for all they do every day to make this company such a wonderful company.
Thank you very much.
Thank you, everyone.