Ridley Corporation Limited (RIC) Earnings Call Transcript

Good morning, everyone, and welcome to the 38th Annual General Meeting of Ridley Corporation Limited. My name is Mick McMahon, I'm pleased to address this meeting as your Chair. I declare the meeting open and confirm we have a quorum. [indiscernible] to be able to extend a warm welcome to our shareholders today, and thank you for joining us, either in person here in the room or via our webcast for our AGM and Midas been a significant year for your company with the acquisition of Incitec Pivot Fertilisers, Australia's leading fertilizer distribution business to add to our market-leading position in stock feed and ingredients. Those of you who are here in the room, in the event of an emergency, please follow the emergency exit signs and the instructions of the venue staff. In addition to being webcast, this meeting is being recorded for the purposes of taking notes. And for those in the room, we ask that you ensure any devices are on silent or turned off. I'd like to take the opportunity to introduce our Board to you: Managing Director, Quinton Hildebrand, Rhys Jones, Melanie Laing; and Julie Raffe, who is presenting for reelection today. and Daniel Masters. I also welcome Richard Betts, our CFO and Company Secretary, Kirsty. The minutes of the last Annual General Meeting held on 19th of November 2024 have been signed by myself as Chair of that meeting. Our company secretary has a copy of the minutes available for inspection by any member. Copies of the notice of meeting have been made available to all members and can be found in the Investors section of the [ Ridley ] website. I'll now [indiscernible] off on some procedural matters. We will begin the meeting with a short presentation and then go to the formal proceedings, which this year will comprise of 9 items to be decided by poll in accordance with release constitution. Results of the poll will be released shortly after the meeting on the ASX announcement platform and on the Ridley website. All virtual meeting participants voting on the resolutions is now open and you can vote at any time until I declare the balloting closed. You can also change your vote at any time throughout the proceedings. I'll give you a clear prompt later in the meeting to warn you of the close. For those attending virtually, if you are eligible to vote, once voting opens, press the Vote icon and all resolutions will be activated with voting options. To cast your vote, simply select one of the options for each resolution. There is no need to hit a submit or enter button because that is automatically [indiscernible]. You will receive a vote confirmation notification on your screen. You can change your vote up until the time I declare voting closed. Please note that only shareholders, proxy holders or authorized shareholder representatives may vote. Any directed proxies given to you by a shareholder will automatically be cast as directed when the poll is closed. For those joining us in person will have been issued with voting card on registration. When the poll is closed, our share registrar, Computershare will collect your voting cards. After introducing each item, I will take questions from those in the room first, and from those participating online. For those in the room, please first range your red or yellow shareholder admission card. So I can see you, and please say you on name when asking the question. Online attendees can submit questions at any time. To ask a question, select the Q&A icon and [indiscernible] relates to and type your question into the text box. Once you finish typing, please hit the Send button. While you can submit questions from now on, I won't address them until the relevant time in the meeting. Your questions may be moderated or represent multiple questions on 1 topic and amalgamated together. We will also address any questions received prior to this meeting at the relevant item of business on general questions prior to those of meeting. Online attendees can ask a verbal questions by following the instructions written below the broadcast. You have any difficulties voting or submitting questions, please refer to the user guide located on the right-hand side of the webcast screen, [indiscernible] instructions with more [indiscernible]. In the event we experience technical difficulties during the meeting, we will assess next steps and update you by our posted message on the webcast. In the unlikely event of the compute failure technology, our share register Computershare will contact shareholders via email, if you promoted one to advise of any adjournment. We may also provide an update on the [indiscernible] 6. For the finalities of the meeting, each resolution and the valid proxy details in respect of that resolution will appear on the screen. As Chairman, I intend to vote any proxies in my favor in support of all motions put, including any undirected proxies in relation to Items 2 or 6 will relate to remuneration issues. I will now hand over to our CEO and MD, Mr. Quinton Hildebrand, to provide a brief business update. Over to you, Quinton

Thank you, Mick, and good morning, everyone. Thanks for your attendance today. We really do appreciate your support. I intend to use the address today to frame up Ridley's opportunity to make a meaningful contribution to the success of Australian agriculture or providing a business update and outlook. The Australian agricultural sector has grown strongly in recent years, demonstrating resilience and growth through commodity cycles and political upheavals. According to ABS, the gross value of production is expected to exceed $100 billion again in FY '26. This is primarily driven by cropping and livestock sectors. Ridley now participates in both. There is demand for high-quality Australian exports. However, we need to maintain our relative competitiveness to secure our place in global markets. To exploit this opportunity, the Australian agricultural sector needs efficient and scalable supply chains. Ridley's success has been built on applying our technical expertise and operational scale to deliver a competitive offering to our customers so that they can expand their production. And it is this approach that we intend to bring to the newly acquired Incitec Pivot Fertilisers. By leveraging Ridley's platform, the partnership with suppliers and customers, we are leading together from fertilizer to feed. Today, Ridley has 3 growth pillars: bulk stock feeds, packaged and ingredients and fertilizer. Each is a market leader in its sector with respected brands, privileged assets and technical competency. In order to be responsive to the needs of our customers, we'll operate each one of these as a separate business unit and they will be supported centrally by effective shared service teams, instilling a culture of performance and commerciality. The expectation is that each of these business units has their own growth agenda. The bulk stock feeds business is steadily growing by winning customers and expanding capacity and adding concentrates to the pellets, mash and bail blends in our current product range. Ridley Direct to servicing customers that were previously outside of our supply footprint. This momentum is expected to continue as further debottlenecking and expansion opportunities are being considered. The packaged feeds business is the leading animal feed supplier in the rural retail sector and is broadening this offering as a house brand supplier in specialty and grocery. Extrusion operation is completing the transition to being a pure-play pet food producer. And I'm pleased to report that by the end of FY '26, we will have successfully secured pet food contracts to bring this operation back to high utilization. The Ingredients business has secured additional volumes to achieve high asset utilization for our existing rending facilities. We are currently commissioning the greenfield OMP facility in Timaru New Zealand to support new market opportunities. Further expansion opportunities will be considered to support the growth aspirations of the packaged and ingredients businesses. On new growth pillar, the fertilizer business only commenced 7 weeks ago with the acquisition of Incitec pubic Fertilizers. This business is the market leader in its sector with the benefit of a strong brand, well-located port and distribution assets and technical competence It is off this solid foundation that we see the opportunity to streamline operations and enhance customer service. We're midway through conducting a thorough review of the Incitec Pivot Fertilisers business and have a dedicated project management office to accelerate this process. This involves the transition of the business from a manufacturing business into a distribution-only business and the migration on to ride systems, which we are calling integration. Within these changes, we have the opportunity to drive efficiency and greater customer orientation. A combination of these 3 agricultural businesses, each with different commodity cycles, by security exposures and weather responses will create a diversified corporate portfolio with enhanced resilience. We intend to continue managing the business within our capital allocation framework, to ensure the sustainability of our assets, a strong balance sheet, the ability to participate in attractive growth opportunities and ultimately deliver shareholder returns in the fourth quartile of the market. As we are still working through the review of the fertilizer business and developing the 3-year plan, we've chosen to delay the presentation of the Ridley FY '26 to '28 growth plan. we now expect that this will take the form of an Investor Day and site visits sometime after the reporting of our first half results. We'll schedule this in due course to facilitate planning and you're planning to attend this event. I would now like to provide you with a business update and outlook. But before I do, as this is the Annual General Meeting following the FY '25 financial year, it's appropriate that I summarize our financial performance for FY '25 just for the record. The FY '25 EBITDA from continuing operations was $97.8 million, up 8.6% on FY '24, reflecting growth across both segments. Well stock Feed segment grew 8% year-on-year off the back of market share gains and the benefits of dry season feeding in the ruminant sector, along with a return to growth in the monogastric sector, [ genetic ] issues in the broiler industry resolved. The Packaged Feeds & Ingredients segment increased earnings by 5% year-on-year associated with the inclusion of the full year of OMP operations, offsetting the lower market prices for tallows and rented protein meals. Our packaged products business benefited from the higher supplement sales in the drier conditions and increased contract packing volumes in extruded pet food. As a result of our underlying performance, the Board declared a progressive dividend of $0.0975 per share. Strategically, a number of key initiatives came to fruition in FY '25, a significant reset of the organizational structure to support the next phase of our growth. Sale of the Wesley Sweet mill in South Australia, the acquisition of the [indiscernible] mill in Tasmania, the commencement of the construction of a leased OMP facility in to Tomarron, New Zealand, contracting of and new pet food customers for the extrusion facility and the announcement of the acquisition of the Incitec Pivot Fertilisers distribution business. We completed the FY '25 year with an underlying net debt-to-EBITDA ratio on fixed ties. In acquiring Incitec Pivot Fertilisers. We've sought to maintain a strong balance sheet while offering shareholders participation in 125 million equity is resulting in a projected net debt-to-EBITDA ratio of 1.4x, and well within our capital allocation framework of 1 to 2x. I'll now provide an update on our year-to-date trading performance. In the past 4 months, the bulk stock feeds segment has grown earnings, more than offsetting the impact of the Wasley feed mill sale. This has been through continued supplementary feeding of beef and sheep broiler and layer volumes returning to historical growth rates and ongoing contributions from Ridley Direct. In the packaged and Ingredients segment, convenient recovery has endured margin pressure from continuing low protein meal prices and short-term supply constraints impacting OMP ovine or supplier into industry slaughter rates being lower as evidenced by the graph. Incitec Pivot Fertilisers is contributing in line with the expectations following a strong first month of trading in a low seasonal demand period. Moving now to our outlook. In FY '26, Ridley expects continued earnings growth from its diversified portfolio, driven by especially modest growth in its underlying business despite first half headwinds in ingredient recovery. And secondly, the investment case earnings for the fertilizer segment in the seasonal period October to June. Ridley intends to continue its existing capital allocation framework, targeting a 50% to 70% dividend payout ratio. I'd just like to make a few acknowledgments in closing. The last 12 months has been extremely busy and productive period for Ridley. And I want to thank the Chair and the Board for their significant commitment to the company during this period for their collective wisdom in navigating our strategic agenda. To the leadership team, thank you for stepping up to the challenge of our growth agenda and for your professionalism and drive for performance. this will be Richard Betts' last AGM as CFO as he will be retiring before the next AGM. I want to make special mention of Richard and acknowledge the contribution he's made to the company over the past 5 years. I also want to thank all our employees for their commitment to Ridley and the execution day in, day out for our customers. Thank you to our customers for trusting Ridley with your business and to our suppliers for their continued support. And finally, to our shareholders, thank you for supporting the equity raise and for enabling the growth of our business. Please be assured that we are highly focused on meeting your expectations. Thank you.

Thanks, Quinton. I will now move to the formal business of the meeting. The first item of business is the consideration of Ridley's financial report for the year ended 30 June 2025, which are available on our website. There's no requirement for shareholders to vote. I want to approve or adopt these reports. So the shareholders may ask questions regarding the financial statements of the company. The company's auditors are present to answer any questions relating to the conduct of the audit. I invite shareholders to ask any questions regarding the item of business. Kirsty will advise if we have any questions, any online questions?

We do have one that's just coming through.

Are there any questions from shareholders in the room while that one is coming through?

Yes. [indiscernible]. Could I please ask what's the possible future options for the North Shore along property?

Yes. Well, that's -- we're probably working through that at the moment. Quinton, do you want to comment on that?

Thanks for your question, [indiscernible]. We're only 7 weeks in since the acquisition and our analysis has been on defining the requirements are ongoing operational requirements. As you may know, Incitec Pivot has a lease for another facility in Geelong, Oyster Cove. And we're seeing to the degree to which the North Shore and Oyster Cove operations are required. And how else we could more efficiently operate that business. So we do not expect to take ownership of North Shore for a few years. given that Dyno Nobel is obligated to remediate the industrial manufacturing part of that site. We're just doing preliminary work to assess its term requirement and thereafter, whether we need that facility or not.

And in addition to that, Quinton has said, we've got some years to work through that, and we would expect to work with all stakeholders, including local councils and government as to the future use of that site if it's not to be used by now.

Just one more question. Will the announced possible closure of Phosphate Hill in Queensland by Dyno Nobel have any adverse effect on Ridley's distribution business for [indiscernible].

As we disclosed at the time of announcing the acquisition of Incitec fertilizers on the 12th of May, in our equity raising documentation, we foreshadowed that the contribution to the fertilizer distribution business from having access to the Phosphate Hill production was about $8 million per annum. And so if the Phosphate Hill facility was to shut, we would have an impact of $8 million per annum. Our modeling at this point and the basis on which we went to the market for an equity raise was that we were assuming that we only had access to Phosphate Hill until September 2026, which is the minimum period. Kirsty?

We do have a question online from Harry Albert, a volunteer for the Australian Shareholders' Association, holding proxies for shareholders [indiscernible] in shares. Question is in your recent -- may I ask if you feel that we can tell shareholders were treated equally to the large institutional investors.

Yes, I do believe that the retail shareholders were treated equally with the large shareholder investors. So that was an important part of the way we wanted to structure the capital raise. Obviously, it's a complicated process flying with various rules, regulations and all the things you would expect. But we certainly did our best to make sure that retail share was could participate any of them did.

We have no more questions on the financial statements.

No more questions in the room. We may move on. Thank you. Now moving to item 2 on the Ridley remuneration report. I ask members to consider and adopt the REM report as set out on Pages 22 to 34 of the 2025 really annual report. Corporations Act requires remuneration report to be put to the vote. Please note that the vote on this item is advisory only and does not bind the directors or the company. REM report sets out the policy for the remuneration of the directors, the CEO and other designated senior executives, and details how their remuneration is structured. We also contains remuneration details for the directors and senior executives themselves for the 30 June 2025. Noting that each director has a personal interest in their own remuneration from the company, as set out in the report, the directors recommend that shareholders vote in favor of adopting the remuneration report. [indiscernible] votes may be cast on this resolution by key management personnel, details of his remuneration are included in the report and their closely related parties. As Chair, I will be voting as proxy only and only where I'm entitled to do so. The resolution and the summary of the proxies are displayed on the screen. Any shareholders in the room who would like to ask a question or make a comment on the remuneration report. Kirsty, are there any questions online?

We have 1 question online from the Australian Shareholders Association. Will the Chair and the Board outline any recommendations which you have actioned in the past year to strengthen your company's internal structures internal control structures and reporting.

Thank you. Well, I think Ridley is pretty well placed to start with, with the control structures and reporting in general and including around remuneration. I'd probably say that the being challenged in the normal course of business now for us will be to ensure that we integrate Incitec Pivot Fertilisers that we met that same disciplined structure and systems around that new business division for us. And would we want to comment on anything else we've done pretty [indiscernible]. I don't think there's anything further to go in there.

There's no further questions on the REM report.

And moving to item 3, the reelection of a director in this case, Julie Reff. Julie was appointed to the Board in September 2022. Julie has held significant executive and nonexecutive positions across multiple sectors over the last 40 years of her professional period. Julie is currently a Non-Executive Director of the Latitude Group Holdings Limited, any Chair and Treasurer of Entertainment Assist and sits on the Advisory Committee for [indiscernible]. Prior to Julie's current role, she held the position of Finance Director and Company Secretary for Village Roadshow Limited. Resolution and a summary of the proxies are displayed on the screen. Are there any questions on this item from shareholders in the room?

No questions.

Thank you. We'll move on then for Item 4, entry of performance rights to Quinton as CEO and Managing Director. Ridley Corporation Limited long-term incentive plan is the company's REM policy providing long-term incentives and rewards linked to shareholder returns. ASX Listing Rule 10.14 requires shareholder approval for the issue of new securities to a director under an employee incentive study. Quinton is a director of the company. Subject to the receipt of shareholder approval under this resolution, the Board has resolved to offer the Managing Director for 498,459 performance rights. These rights will convert in fully paid ordinary [indiscernible] shares subject to the achievement of all [indiscernible] performance criteria over a 3-year period from 1 July 2025 to 30 June [indiscernible]. A detailed summary of the terms and conditions of the proposed offer is provided in the minutes of meeting. The resolution and a summary of the proxies are displayed on the screen. Are there any questions on this item or shareholders in the room? Kirsty, online?

No questions online.

We'll move on to Item five. Special performance rights for issue under special purpose retention incentive plan for the company's CEO and Managing Director, Quinton. [indiscernible] is a component of special retention arrangement announced in February 2025. The special arrangement facilitates 3-year retention incentives for the Managing Director, which was reviewed and recommended by the Remuneration, Nomination and People Committee approved, in ASX Listing Rule 10.14 requires shareholder approval for the issue of equity securities to certain persons, including the Managing Director, Quinton is the Managing Director of the company. Subject to the receipt of shareholder approval under this resolution, the Board has resolved to offer the Managing Director 1 million special purpose rights. These rights will convert the fully paid ordinary Ridley shares subject to the achievement of all relevant performance criteria over a 3-year period from 1 July 2025 balance in June 2028. The resolution and a summary of the proxies are displayed on the screen. Any questions on this from shareholders in the room? -- excuse me, Kirsty, online?