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Frost Causes Crop Loss at Boundary Bend Groves

Frost Causes Crop Loss at Boundary Bend Groves

Dear Shareholders,

I am very disappointed to inform you that the Boundary Bend groves were recently hit with frost which burnt off a significant number of developing flowers.  It is the worst frost damage at our groves since 2006 and we expect that the total 2018 crop will be about 30% lower than initially anticipated.  As you would expect, this frost will have a material negative impact on the FY 2018 profit, and in all probability will reduce profitability to around a break-even position for the full year.  All things being equal we should see higher than expected production the following year (FY19). This is because the olive trees will compensate with excessive growth this year due to the lower crop load, and olives produce fruit on 1-year old wood, so all growth that they put on this year will be cropping potential for next year.

Apart from the cropping potential, we do not expect any medium or long-term impact on the trees from the frost.  The actual damage to the crop could only be assessed at flowering (full bloom) which finished a couple of weeks ago, and it took the technical team many days to crunch the numbers after thousands of observations and measurements were collected over a ten-day period.  This is a very difficult job as frosts affect different areas of the groves and varying sizes of trees differently. For example, due mainly to the undulating nature of the groves, it is common to have sections of individual rows with no damage at all and other sections on the same row with 100% loss which makes the assessment extremely difficult.

Depending on which way you look at it, we were fortunate that the 2018 crop had a lot lower potential (due to the biennial bearing nature of the trees) so our actual net loss from the frost was a lot lower than if we were in an on-production year.  In fact, if no other adverse climatic event occurs, the aggregate oil production of 2018 and 2019 crops could still be similar to what was initially anticipated prior to the frost event. We will also be able to manage our oil supply position to enable us to continue to support the ongoing growth of our packaged goods business.

Again, I am very sorry to have to deliver this disappointing news.

Kindest regards

Rob McGavin

Executive Chairman