Boundary Bend Limited – Harvest and profit update

Sent by email

Dear Shareholders

HARVEST

We are pleased to inform you that this year’s harvest was completed on the 25th June with approximately 55,000 tonnes of fruit being harvested, producing 9.7 million litres of oil. This was slightly behind our internal forecast of 10.2 million litres. The crop was expected to be lower (as outlined in previous correspondence) due to the biennial nature of the production cycle of olive trees which usually deliver a large crop one year followed by a smaller crop the following year (this year). For comparison, in 2014 and 2015 we produced 7.9 million and 13.7 million litres of oil respectively. Pleasingly, the overall oil quality is again very high this year.

PROFIT

Once we have finalised year end management accounts in early August, we will send through a comprehensive report including expected full year profit and a more detailed operational update. In the meantime, we would like to advise the following that will, or has influenced the FY16 profit:

• The final valuation of the oil at 30 June in accordance with Accounting Standards is yet to be finalised;
• Production costs are materially higher than last year due principally to the price of irrigation water which was $4.2 million higher than forecast as a result of extremely low rainfall in the catchments for the last 2 years, driving up the price of annual allocations;
• Costs associated with our four stated future growth strategies reduced FY16 profit by circa $12 million. These growth costs are consistent with our budgets.
  • Research, commercial trials and new product development with regards to value adding existing olive waste streams,
  • Branded sales and market development to drive increased returns per litre at farm gate,
  • Operating costs related to recently planted non-producing groves in Australia, and
  • Our investment in establishing Boundary Bend’s business in the USA (circa A$4.7 million).

Taking all this into account it is likely that full year trading profit (pre tax) will be in the vicinity of $2 million and an operating cashflow surplus of approximately $12 million.

Please feel free to contact me at any time if you have any questions.

Kindest regards

Rob McGavin