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Half yearly Financial Reports to 31 December 2014

Half yearly Financial Reports to 31 December 2014

12th March 2015                                                                                                                                   Annexure A

Sent by email

Dear Shareholders

Please find below a link to our half-yearly financial report for the six months to 31 December 2014 as well as an update below.

http://www.boundarybend.com/wp-content/uploads/2013/11/BBL-Half-Year-Report-Signed-31-Dec-2014.pdf

Half-yearly results

The result for the period is an after tax loss of $2,722,000 (2013: $3,926,000 after tax loss).  It is important to note that we do not recognise the net value of the 2015 olive crop in our half yearly accounts, therefore the net value of the crop will not be realised until after we harvest and mill the olives in the June quarter. The loss for the period is slightly better than budget. In the first half we generated a positive operating cash flow from operations of $1,570,000, compared to a net operating cash surplus of $1,965,000 for the same period last year.  The variance primarily relates to the lower 2014 harvest, which significantly reduced the bulk oil sales compared to the corresponding period.

Forecast full year result

Our full year profit will be largely dependent on the results of harvest between April and June. This is always difficult to forecast, with over 2.2 million trees across 6,060 hectares of olive groves. However, barring any unforeseen events we are still forecasting a profit before tax of approximately $25.0 million. Please note that this forecast is also subject to other variables including currency, world olive oil prices, and the retail pricing environment at the time.

Sales Update

Oil sales are tracking slightly ahead of budget for the financial year to 28 February 2015.  Sales of packaged goods (olive oil sold in bottles and tins) are tracking approximately 5% above the same time last financial year, and are forecast to exceed $75 million this financial year.  As a consequence of the smaller crop in 2014, our bulk sales are down approximately 40% year to date versus the same period in the 2013/14 financial year.

Cobram Estate remains the major driver of our finished goods sales, accounting for almost 70% of finished goods sales year to date.  Over the past 12 months, Cobram Estate has consolidated its position as the market leading brand of Extra Virgin olive oil sold in Australian supermarkets, and is currently the number one Extra Virgin olive oil by dollars, litres and units sold.  Red Island is currently the number three Extra Virgin olive oil by dollars, litres and units sold.  The following chart summarises the sales in revenue and volume of leading brands of Extra Virgin olive oil in Australian supermarkets.

Source: Aztec scan data (2015).  Note: data excludes Aldi Stores.

Export sales

BBL’s export sales of packaged goods continues to develop, with sales to South East Asia and Japan up 209% (from a low base) on the prior year.  The Chinese market for olive oil, traditionally dominated by gifting, is in an adjustment stage, resulting in substantial decline in sales to China versus the prior year.

European Crop/Global Prices

In recent months, the price of European olive oil has risen substantially as the impact of severe drought and a fruit fly infestation dramatically impacted the 2014/15 crop.  The price of Extra Virgin olive oil from Spain, the world’s largest producer, is currently 60% above the same time last year after olive trees across the Mediterranean suffered from drought and extreme heat in May and June, their peak blooming period when moisture is vital to develop a good crop.  Overall, global production in 2014/15 fell 24% to 2.5 million tonnes, at a time when global demand continues to grow driven by health and wellness trends which favour the consumption of Extra Virgin olive oil.

New bottling line at Lara

After 18 months of careful planning the new bottling line was recently commissioned at our Lara site. The new line increases our capacity from 4,000 bottles per hour to in excess of 12,000 bottles per hour.

US Operations

The US strategy continues to gain momentum. We are currently upgrading the commercial building on our 8.8 acre site in Woodlands (California), in readiness for the California olive harvest later this calendar year. The USA also remains a major focus for olive oil sales, with substantial research and development work currently underway.

2015 Australian harvest

Harvest is due to commence on 14 April at Boundary Bend Estate.  Harvest usually starts at Boort Estate about 2 weeks after Boundary Bend Estate due to its location being further south. We expect harvest to be complete in early June and will send shareholders a full update shortly thereafter.

Strategic planning

The board and key executives have just completed our annual two day strategic planning retreat. We continue to assess new opportunities for Boundary Bend both here and abroad.  If any of these come to fruition we will certainly keep shareholders informed.

We thank you for your continuing support.  Should you have any questions please feel free to contact me at any time on mobile 0418 955 363 or via email r.mcgavin@boundarybend.com

Kindest regards

Rob McGavin

Executive Chairman