MEETING: SAT: Chairman's Speech, 2010 Annual Shareholders Meeting

30 Apr 2010 11:01 am

SAT 30/04/2010 MEETING

REL: 1101 HRS Satara Co-operative Group (NS)

MEETING: SAT: Chairman's Speech, 2010 Annual Shareholders Meeting

Chairman's Speech, 2010 Annual Shareholders Meeting, 29th April 2010

Overview of 2009

2009 was identified as the start of a period of positive change for Satara. We had significant changes to the composition of the Board of Directors and the Management teams, and had embarked on an absolute company focus on performance.

Cultural change and operational turnaround has taken the initial time focus with company profit drivers still to be aggressively executed.

Significant change has occurred in the operational side of the business, we are now poised to see the financial benefits flow from these initiatives.

Our focus on driving both operational and financial performance across 2009 saw us address a number of areas of the business.

Fruit loss was an obvious one and hence orchard gate returns. We also reviewed business efficiency and profitability - profitability for growers and company profitability - and put in place a number of initiatives.

Let's look at our current position as having 'turned the corner'.

I am pleased to report that the company has made inroads to achieving our objectives and whilst we are well on the road to delivering increased returns to our growers and profitability and value for our shareholders, we still have a way to travel.

As detailed in the 2009 Annual Report, we have significant achievements to acknowledge, particularly in light of a continued tough economic environment and a changing industry landscape.

Firstly, and most importantly to our Investor and Transactor shareholders is that we were in a stronger financial position in 2009 and able to declare a $1.8 million rebate. Broken down, this translates to a rebate of 20 cents per Transactor Class I tray.

In addition a fully imputed dividend of 2.0 cents per Investor share has been paid.

These are clear and confident signals for the future performance of this organisation and the horticulture industry as a whole.

Contributing to the stronger position, the initiatives put in place across 2009 to improve operating efficiencies, enhance productivity and reduce costs, delivered cost savings for the business, strengthened our balance sheet and allowed us to reduce debt.

The decision to exit from unprofitable leased orchard arrangements and consolidate the value in the higher performing orchards has been realised in 2009 with a $200,000 profit. The Orchard Division is well placed to continue to add value to the organisation across this and future financial years.

Most significant of the 2009 results is the much celebrated record low GOLD fruit loss. A 1.47% result placed us well ahead of our competitors and the industry standard, and drove value and returns for our GOLD growers.

Satara's ORGANIC fruit loss result was close to the industry average.

This result, coupled with a 50% reduction in fruit loss on GREEN fruit over last year (excluding the impact of hail damaged fruit) clearly demonstrates the benefit of the operational initiatives put into place across the year and the investments that have been made to enhance efficiency and performance.

We continue to set ourselves strong, yet achievable fruit loss targets for GREEN, GOLD and ORGANIC. Improving OGRs for GREEN growers continue to be a priority for us.

The reduction in base packing price for the 2010 season will further enhance grower profitability.

Our avocado pack results were extremely strong for 2009. The industry experienced more than a 40% increase in volume across 2009. Satara volumes more than doubled and we increased our industry share from 8.3% to 11.9%. A brilliant result for growers, Satara and the industry as a whole.

Operating environment

We continue to work closely with industry partners, suppliers and ZESPRI to map the future path for the industry and hence our own business.

Staying closely in tune with market demand, international and domestic financial indicators, and innovative industry initiatives, allows us to maintain a strong, clear vision for the future of Satara.

We operate in a competitive and rapidly evolving industry. The complexity of working across both regulated and deregulated industry structures ensures that we maintain the ability to react, respond and adapt quickly.

We firmly support the Single Point of Entry as the preferred structure for the kiwifruit industry and will continue to work closely with ZESPRI and industry partners to drive value for all kiwifruit growers.

We remain committed to delivering the highest quality kiwifruit to meet, and exceed, industry standards and consumer expectations.

The prospect of new kiwifruit cultivars offers both challenges and opportunity for Satara. We will have a much clearer picture of the future landscape following ZESPRI's June meeting at which the ZESPRI Board will announce their decision regarding commercialisation of new cultivars.

On one hand we fully expect, and are prepared for a reduction in crop volumes as growers graft over to new varieties.

On the other, once fruit production from graft-over vines begins, significant increases in volume per hectare will benefit the company. We see the immense value in new kiwifruit cultivars and have made early moves to position ourselves strategically to benefit from this industry milestone.

In 2009, Satara entered into an agreement with ZESPRI to be the coolstore of choice for the new cultivars - providing all coolstore and inventory management services for new cultivar blocks harvested in 2010.

This is a significant recognition of the quality of our systems and processes as well as our ability to add value to the New Cultivars Programme. This stands us ahead of our competitors.

We aim to leverage this position strongly as we move forward in order to drive additional value into the business.

Confidence for the future

The Board and Executive Team have set the strategic direction for Satara's future - in terms of organisational and financial performance goals.

We are firmly focussed on driving value and increasing returns for our growers and shareholders.

Satara is focussed on the fundamentals of the business, delivering consistent and improved results (OGR, fruit loss), continuing to invest in people and technology in order to be the best in our industry. Reinvestment in new grader technology and reduction in bank debt will also be considerations in front of the board.

A more professional communication process is being put in place to allow the company to effectively relate to you our shareholders.

I am confident that we have the right combination in the Board and with the ongoing development of the Executive Team, have a group of people to steer Satara through a period of continued positive change.

Early indicators show that the 2010 season will challenge us and we must continue to adapt and respond to market forces and a reduced crop volume.

Your Board is not satisfied with the current share price. There are still significant profit enhancements to be achieved.

By the end of the 2010 financial year, the board will have initiated and effected a rigorous review of our company cost structure and asset use to make sure they are in line with volume throughput.

Our aim is to grow shareholder value through this process.

In tandem, we will fully consider whether merger options will drive greater value for our growers and shareholders.

We will also continue to rationalise our asset base and is still our intention to sell Totara Street but as I said last year it would not be at any price. We are currently in discussion with potential buyers.

Governance

Part of our responsibility as a Board is to determine the level of distributions to our Transactor and Investor shareholders.

Historically, the Company has used a formulaic approach to calculating rebates and profit attributed to shareholders. In the 2009 financial year the Board has, in the best interests of shareholders, adjusted the application of that policy and increased the 2009 rebate.

The underlying value of our business is built by the supply from Transactor shareholders and this adjustment to secure that supply is creating value for all shareholders.

As has been outlined in the Annual Report, and communicated to the NZX, the way in which the Board determines distributions will change for the 2010 financial year and beyond. This Board remains very aware of the duty of fairness it holds towards both Transactor and Investor shareholders and the interests of both of those groups of shareholders.

I, and my fellow Directors, believe that the new policy provides the freedom for this Company's Board of Directors to determine the appropriate levels of distributions that both maximises this Company's future value and drives value for all shareholders.

From a governance perspective, I wish to make a few comments regarding the Satara Board of Directors - first and foremost to thank them all for their continued contributions and to recognise the valuable role they serve in charting the course for Satara.

I would also like to extend our thanks and appreciation to Don Thwaites. Don has served as a Grower Director on the Satara Board for 8 years and today resigns his position from the Board by rotation. We sincerely thank you for your contributions.

Moving on to Board elections, today we will also ask you to vote on resolutions to both re-elect and elect Directors to the Board. I wish the candidates the best of luck.

The responsibility for good governance, accountability and transparency is carried by each and every member of the Satara Board. This is a duty and responsibility that we take seriously. The decisions that are made regarding the strategic direction of the organisation are aligned with the vision and strategic objectives that have been established.

As your Chairman and on behalf of your Board members, we are here to serve you, our shareholders. We are here to listen, to take your comments on board and to make strategic business decisions that drive the organisation forward, strongly.

Our overarching objective is to continue to build value for our growers and shareholders.

We are committed to achieving on the goals and objectives set in place for the coming year.

Although 2010 will bring with it some challenges, we are well placed to act swiftly and turn these into opportunities as we focus on efficiency gains and a stronger competitive offering.

I look forward to working with you all across 2010.

Thank you End CA:00194356 For:SAT Type:MEETING Time:2010-04-30:11:01:39

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