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Jess: Hi I’m Jessica Amir, a market analyst with Bell Direct. One of the world’s largest almond growers Select Harvests (ASX:SHV) has been consistently growing their earnings and cash flow for the past three years and this year it’s already locked away is 70% of its sales.

It’s backed by UBS and Bell Potter as a buy and today the Managing Director and CEO of Select Harvests Paul Thompson joins us.

Paul, thank you so much for your time.

Paul: Thank you Jess, pleasure to be with you.

Jess: So can you start off with an introduction to the business?

Paul: Look our business has two divisions, the primary division or the largest division is our almond division.

We’re one of the world’s largest almond growers, as you said we’ve got 7,000 hectares of almonds growing.

About 75% of those are fully mature and 25% are coming on stream.

We also have several brands, Lucky brand, Renshaw, New Vitality, Soland and the Allinga farms which have marketed in Australia and in domestic supermarkets and also we export them.

About 80% of our almonds are exported globally, key markets are China, India and Europe.

Jess: Paul you’ve just handed down your half-year financial results, just take us through the highlights and what they also mean to investors.

Paul: Investors might know, but our almonds are biannual, so every second year they produce a slightly lower crop.

We’re pleased to see that this year we’ve got a crop the same size as last year.

This is, I describe it as a solid result after a very good result last year.

Pricing has dropped off about $0.40 a kilo which has an impact and our water costs annually are up about $10 million.

One thing I should tell investors is that at the half-year because of the Accounting Standards, estimate the size of our crop and also estimate the price were going to get for that crop.

We’ve currently got commitments as you said from 70% of the crop and we’ve estimated our selling price for the remaining 30%.

Jess: Investors are increasingly favoring quality companies with capital stable positions, so what’s your pitch to investors in this regard?

Paul: Look my pitch is about plant-based food and healthy eating.

Almonds are well known for their health benefits.

You know you’ve got increased levels of diabetes, lactose intolerance, celiacs and all of those sorts of people are attracted to products like almonds and just the general health industry is pushing people to more plant-based foods.

The great thing about almonds is the versatility, you know you can see it, you can have it for breakfast in your muesli, you can have it as a protein ball as a snack, you can have it in your latte as the plant-based milk as the source of the meal, then you can have it just as slivered almonds on top of your dessert in the evening and then of course just as a straight snack.

The advantage Select Harvests offers is at this point in time, we’ve got the trees in the ground, so the capital is invested so shareholders who join us now are going to get the benefit of the capital in our orchards.

Jess: And can you tell us about your operating conditions?

Paul: Look the last 12 months it’s been a bit of a yin and a yen for us, we’ve had really good conditions from a weather perspective but extremely high water prices and we are you know fairly exposed to the water market.

Looking to the future, the water market we’ve had good autumn rains, we’ve forecast winter rains in the forward, we’re seeing that water prices will shift down, we have a strategy where we own a third of our water, we long-term lease a third of our water and a third we buy on the spot market.

So recognizing the risk, we mitigate the risk with a balanced portfolio approach to the water market and we’ll see some benefits of that next year.

Jess: And just lastly, what are the key opportunities for future growth and is there anything else that you’d like to add?

Paul: Look there’s two streams from the opportunities for growth for us.

One is we have a strong balance sheet, so can we expand our almond orchard portfolio, which I think you know there may well be opportunities in the current market for us to do that and publicly there’s been some almond orchards put on the marketplace, which we obviously have an interest in looking at.

And secondly, it’s in our food business to step up from fairly basic food based products to more innovative products, more value-added orientated products where brand has more presence, so that gives us an opportunity to earn a greater margin in that market place.

Jess: Paul Thompson from Select Harvests (ASX:SHV), thank you so much for the update.

Paul: Thank you very much Jess for the opportunity to talk to you.

Jess: And thank you for watching, for more information about Select Harvests, contacts your broker or head to Bell Direct’s website.