Thank you for standing by, and welcome to the Ridley Corporation Limited OMP Acquisition briefing. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the star one again. For operator assistance throughout the call, please press star zero. And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Quinton Hildebrand, Managing Director and CEO, to begin the conference. Quinton, over to you. Thank you, Paul, and good morning. Thank you for joining us at short notice and in this, the last week before Christmas. I'm very pleased to announce today that Ridley's entered into an agreement to acquire Oceania Meat Processors, and I'll be taking you through the slides that we loaded up on the ASX website this morning if you wish to follow along. If we can start with the second page of the presentation. Ridley entered into the sale and purchase agreement yesterday, which will see Ridley paying NZD 57 million or AUD 52.8 million for OMP. This is a 5.4x multiple on the NZD 10.5 million earned by the business in the 12 months to September 2023, and Ridley will fund this acquisition through debt. OMP is a premium producer of mechanically deboned meat, or MDM, as we abbreviate it within the industry, and this product is sold through to global pet food customers. OMP has operations in Australia and New Zealand, as well as a well-established supply chain into North America, and I'll go through a bit more detail in a later slide on the operations of OMP. The transaction is subject to key milestones and conditions, all of which we expect will be completed by the 28 March 2024, and we don't expect that this transaction requires any formal regulatory approvals. Importantly, the transaction is expected to be positive, financially, with our expectation that it'll be EPS accretive in the first year after acquisition. With the transaction being debt-funded, we expect Ridley's core debt, core net debt to EBITDA to be 0.7 times at completion, which is well below the 1x to 2x target that we've outlined in our capital allocation models. If we move to page three, and importantly, I wish to guide you through the strategic alignment of this transaction. You'll note... You will have seen the illustration that's on the left-hand side of that slide, and we've been putting that up in our results presentations for the last 18 months. But as part of the FY 2023 to FY 2025 growth plan, for our Ingredient Recovery business unit, that is our strategy, the strategy of climbing the Wall of Value. This means investing in processing capability to produce bespoke, higher value ingredients from our existing raw material, so that we deliver higher margins to Ridley and to our suppliers. This is the emergence of that strategy through the focus that we've brought to the Ingredient Recovery business unit over the last 18 months. As you can see on that Wall of Value, the next step is frozen block MDM products, and that's exactly the business that OMP is. This acquisition extends the scope of our raw materials that we buy from the suppliers. We'll buy both for our rendering business and for the OMP business, and it gives us frozen block capability to produce premium products for the customers and meet their expectations and demands. It extends, for us, our range of offering as Ridley into the, into the pet food market. We are already supplying meals and oils, but now we'll also be adding frozen block MDM to that product range to pet food customers globally. With this acquisition comes a ready-made business that, Ridley can leverage, rather than us having to invest in the capability from scratch. It gives us a flying start for our, further development of this business unit. If we move to slide four, which is an overview of the OMP business. OMP is a supplier to the global pet food industry. It's got contractual supply arrangements, both domestically in Australia and New Zealand, and internationally, with a particular strength in North America. The business provides multi-species products to these pet food customers, but the real strength is in the novel proteins. Again, this is a pet sector term for the specialized products. For example, the US has a lot of beef and chicken supply, much in the way of lamb or grass-fed beef or venison or kangaroo. So these are novel proteins, albeit abundant in Australia and New Zealand, but they're novel to these international pet food companies that OMP supplies in North America. The OMP operations are in two production sites, one in Laverton, Melbourne, which produces two-thirds of their product. And fortuitously, this is co-located next to the Ridley Laverton Ingredient Recovery plant. So fantastic cohabitation opportunities for us there. And the second production facility is in the South Island of New Zealand at Timaru, producing one-third of OMP's product. The business has a well-established channel through to the North American market with a 3PL office in Arizona and storage facilities in Houston and Philadelphia. Importantly, this gives the servicing arrangements to customers, such that all customers can be serviced within three days of order. I think that's a competitive advantage of this business in these novel proteins. So if we move to slide 5, and summing up the rationale for the acquisition, I hope on this brief call that we've demonstrated that this acquisition is on strategy. That it puts us at the premium end of novel pet food ingredients. It gives Ridley access to blue-chip customers and the ability for us to co-sell our meal and oils to these customers. While also giving us the opportunity to optimize our raw material from suppliers, particularly with the co-location of the plants in Laverton, Melbourne. And finally, the acquisition is expected to be EPS accretive in the first year. With the completion of this transaction expected at the end of March, we'll have just three months of benefit in Ridley's FY 2024 financial year. And as a result, we'd expect to have roughly AUD 2 million worth of earnings within FY 2024 from the OMP business. And this is more or less in line with the transaction costs of approximately AUD 2 million that have been incurred in this acquisition. So within FY 2024, we're expecting the earnings to net off the transaction costs. And obviously, we'll be calling those out to give you visibility as non-recurring matters. But, nevertheless, within the first year of acquisition, we expect this acquisition to be earnings per share accretive. So I'll stop there, and Richard and I are available to take any questions that you may have. Thank you. I'll hand back to you, Paul. Thank you, Quinton. And at this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad to raise your hand and join the queue. In the interest of time, we do request to please keep to one question and one follow-up. Again, to ask a question, please press star one. And your first question comes from the line of James Ferrier from Wilsons. Your line is open. Thank you. Morning, Quinton and Richard. Thanks for your time this morning, and congratulations on the transaction. Can I first of all ask you about the supply arrangements you have, the contractual commitments you have there? Just thinking back to the recent full year results, where you talked about the renewal of some of the key raw material supply contracts, and putting some of them onto multi-year agreements. Can you perhaps compare or contrast that position in the existing business with what OMP has with their supply commitments? Morning, James. Thanks for that question. The typical pattern for OMP has been in line with the demand from these blue-chip customers, has been a calendar contracting cycle. So what OMP typically does is, you know, participate in a tender process, whereby they would lock in for the 12 months, calendar months, sometime in sort of November, December. And at the time of contracting the sales, they would go to the raw material suppliers and lock in. So they typically had a back-to-back contracting arrangement. At Ridley, we have had longer term contracts with a number of some of them being the same suppliers in Australia. And so, you know, as a result, these higher value raw materials have been excluded from some of the, some of the red meat contracts that we've had. In poultry, we're taking 100% of the product, and we've locked that in for the long term, so that remains an opportunity. So I would, I would say that this is quite complementary, as it, it means we've got established arrangements with some of the raw material suppliers, where we have multi-year contracts. And we will have the confidence to make offerings to some of these multinational companies to, to see if we can extend beyond the calendar year contracting cycle that they currently have. Now, I dare say that'll take a little while to you know come into effect, and you know we may not convince all of them to go to longer-term supply patterns. But I think you know with Ridley now becoming involved in this supply chain and the you know the counterparty benefits that we would provide to these these pet food majors, I think that there could well be an opportunity for us to extend the contracting arrangements to longer term and allow us to really hone in on the optimizing the supply chain. So I think there lies some opportunity there for us. I hope that's answered the question. It has. Thank you. That sounds encouraging. Second question was around the Laverton location, and you mentioned sort of the adjacency of OMP... Mm. To the Laverton rendering facility that Ridley's been operating for some time. How are you thinking about the opportunity, the synergies there? You know, whether it's co-location of shared facilities or the opportunity to actually expand capacity. Whatever it might be, how are you thinking about the opportunities and the synergistic opportunities that might come from this situation? Well, you know, it's still early days for us, but I see, you know, straight off, the ability to support with some of the shared resources through maintenance and project teams, and some of those shared services may be of benefit to the Oceania team just across the fence. I think in terms of optimizing raw material flows, there will be opportunities there for us to optimize between the two sites and make sure the freshness of the material and all the rest is optimized. So I think there are some operational gains there. Longer term, you know, the opportunity for additional proteins sources to go through that site and expansion. I think we probably want to just do a bit more work on that. But you know, ultimately, with our raw material partnerships that we have with the different abattoirs, you know, I think we can look to expand that facility, but it's probably too early to speculate on that. Yep. Understood. Thanks, Quinton, much appreciated. Thank you, James. Your next question comes from the line of Apoorv Sehgal from UBS. Your line is open. Hey, morning, guys. Just a quick follow-up to the synergies question. Just some other sort of thoughts I was having on maybe where the synergies could be and just sort of your thoughts on that. I was sort of thinking, one, access to a US supply chain, does that sort of help the broader rendering business you've already got to access that US market better? Anything on maybe transportation costs in Australia as well, and just buying power on key inputs with suppliers? Any of those sort of areas make sense as well? Yes. You know, I would say the primary areas of opportunity are Ridley's selling meals and oils. You know, a lot of our product does find its way to the US and Europe, but through intermediaries. So, definitely into the US with an established supply chain direct into the likes of Nestlé and Mars and other significant pet food producers in the US and North America. You know, they are also needing meals and oils, so the ability to be a one-stop shop and to leverage off that, you know, that established supply chain, I think presents good co-selling opportunities for our Ingredient Recovery business. So that's one key area. The second key area would be, would be on the raw materials supply. So, you know, having established relationships with the suppliers, having, you know, vehicles going in and out, collecting the different raw materials, and, you know, being able to adapt to dynamic production facilities in these abattoirs, I think, you know, gives... will be a good value proposition for our suppliers as well. And obviously, you know, when, when needing to pay competitive prices for the raw materials, we've now got more optionality with this capability. So, you know, I think, strategically this is good alignment for Ridley and our suppliers... And thirdly, the last opportunity would probably just be around the sort of generic corporate costs. You know, Richard's already looking at funding benefits and insurance benefits and all those other sort of more corporate overhead benefits. Hmm. Okay. Thanks, Quinton. Second question, are you able to give any detail on what the earnings growth trajectory of OMP has been in the last few years, and maybe anything on EBITDA margins as well? Yeah, Apoorv, we're not putting that information out at this point. You know, I think we probably want to establish our own understanding of this business in more detail and get more, you know, more-- get closer to how we're gonna drive it. And then, we do look to give you updates as we go, as to how we're tracking with this acquisition. And I think, when we get more confidence in what our trajectory looks like, then we'd be more comfortable to provide some of those indicators as, you know, obviously anything we quote on the past may be interpreted as views of ours in the future. Got it. And one final quick question: if I within the ingredients recovery business, if I had to split the, the earnings contribution, sort of, by end customer, like your, your biofuel end customer, you've got your pet food end customer, is there a simple way to kind of split that? As in, you know, a value of our product going into these different sectors? Yeah, in terms of earnings contribution, like, is Ingredient Recovery... Yeah. 70% biofuel, 30% pet food, or something like that? Yeah. I would, I don't have a specific split for you today, but, you know, the biofuels portion is really tallows, and it's not that significant a percentage of the Ingredient Recovery. You know, bulk of the product going, you know, the majority of the earnings are, you know, meals and oils through to pet food, aqua feed, et cetera. So, you know, pet food would be our highest value demand sector and would be a relatively high portion of that already. You know, as Ridley Ingredient Recovery, pre this acquisition. With this acquisition, I would say, this will bring pet food to the top of our sectors, supplied out of combined Ingredient Recovery. And then you're probably into the rest of animal feed and aqua feed, et cetera. And then you've got the benefits of biofuel customers. So that's sort of the size of the different sector exposures. Understood. Thanks for the detail. Great. Thank you Apoorv. Your next question comes from the line of Richard Barwick from CLSA. Your line is open. Hi, good morning, gentlemen. Just wanted to touch on the supplier to global pet food and just sort of what that means. And ask, you know, how much of OMP's business goes to North America versus is domestic. You know, can you sort of provide a flavor of whether, you know, it's the majority or if it's less than majority or sort of flesh that out... Yeah. a bit for us? Yeah. So, the majority of OMP's business is into the North American market, US, Mexico, Canada. And, you know, it's a, it's a high proportion of their business. The real, you know, the benefits there are, they've been growing strongly with some blue chip customers there, and and meeting the demand as, as pet food's grown strongly, as well as, you know, being the novel proteins into that market. You know, Australia and New Zealand have a very strong, you know, proposition in terms of sheep, given that, they're not as predominant in other parts of the world. So, that's, that's the current situation. I think if we look at the business going forward, and we see the growth in pet food in the Asian market, and the fact that that market is, you know, is also got a number of these same blue chip customers, the Nestlés, Marses, et cetera, we do see the opportunity to expand and, you know, diversify our product range into different geographies. So, you know, a very strong footprint into the US, Canada, and Mexico. But no reason why, you know, over 5, 5 years, 10 years, we can't expand that into, you know, Asian growth as well. Very good. Very good. Just to follow up on that one, in your DD, just be a matter of curiosity, OMP is about 20 years old. How long have they been tackling the North American market? Is that, you know, is it relatively new, or is it sort of 10 years old, 10 years old? Or just a bit of flavor around that. Yeah. 2002, the business was established by a Kiwi called Peter Cowan and two partners in the US, who... And they established this supply chain link between New Zealand and the US market. And so that was the origins of the business. The two US investors, you know, have retired over this period and sold out. The company, up until, you know, well, up until the 28 March 2024 next year, is owned by three New Zealand entities, the original founder, Peter Cowan, as well as two others. And they've expanded into Australia and continued this supply chain into North America. So the North American link, the Nestlé, Mars, and others, has been from early origins of OMP, and it's built over this period of time. You'll also, you know, expect that we've secured the services of the likes of Peter Cowan going forward as well to assist us in positioning this business. Okay. That's helpful context. Thank you. If I may, just a couple of quick financial questions. Are you able just to give us a broad revenue scale of the business? Is it AUD 70 million, AUD 90 million? Just, you know, to help us out, you know, with our forecast for, you know, fiscal year 2025, really. Yeah, look, I mean, I guess a bit, sorry, Richard, switch your bits. But, you know, those sorts of relativities are, are not, not out of the ballpark. But I will say that, again, this is one of those businesses that, has a very heavy link to input costs to, to final sales values. So, you know, again, we've, we've not spent a lot of time, and we've not deliberately not put a revenue number out there because margins are, are more fixed to a, a dollar margin than they are to a, a percentage of revenue. So, but, but, you know, the, the range of sort of, AUD 70 to 80 million in the current environment is, is appropriate. But as I said, I do just caution that, you know, this business is very heavily tied to a dollar margin rather than a percentage margin. Understood, and that's consistent with you guys' business, so I accept where you're coming from on that. Thank you, though. Just so, OMP, the site in Melbourne and the site in New Zealand, do they own that outright like you guys? No, those are leasehold facilities. Leaseholds. Okay. Yeah. Um. So they own the... And the... Obviously, the plant and equipment, but not the land and the buildings. Given the nature of the works, you know, nature of the business and, you know, up in the Laverton, you know, is there an opportunity to buy those just to sort of lock it up or not then, just not, not contemplated at this time? It's not contemplated at this time. I think, you know, we're comfortable with the contractual arrangements that we have and the runway. So we, you know, the capital light model is, you know, working for us as it stands. Okay. Okay. I think that's it for me. But that's very helpful. Thank you, guys. Thanks, Richard. Before we continue on to the next question, just a reminder, if you would like to join the queue, please press star one on your telephone keypad. Your next question comes from the line of Anthony Kavanagh from Chester Asset Management. Your line is open. Good day, guys. Hi. Congratulations on the deal. Hi, how you going? Congratulations on the deal. It's very much in line with your strategy. I was just interested in kind of the motivations behind the selling, whether or not Oceania was an active process. I presume, given how on point with your strategy, it was a Ridley-led acquisition, and you approached them, but I was just looking for clarification there. Also, whether there's any scrip offered as part of the deal. It reads as if it's straight cash, but it's not definitive in the announcement. And also, kind of the earn-out that you've got with the vendor, just a lockup period and any KPIs that they've got to hit. Right. Thank you. So just to say, notwithstanding that it was on our radar, the vendor did run a sale process, and it's been a pretty protracted one. But we you know maintained our patience and our value expectations and are pleased to have ultimately been successful. The fifty-seven million New Zealand dollar price tag is the full price and is in cash. There is no scrip, and there is also no earn-out in this transaction. So the timing of this transaction is linked to some you know to what I explained in terms of the contracting pattern of the business. And, you know, we did want to get visibility and visibility on the OMP calendar year 2024 contracting outcomes. And having achieved, you know, we've negotiated and agreed a fixed price for the business. Gotcha. One more follow-up from me then. You, you mentioned in the intro that, it will contribute AUD 2 million of earnings, and then they'll net, net off, in financial year 2024, which is three months. Are you referring to, NPAT? 'Cause, I mean, EBITDA of AUD 10 million, kind of should suggest 2.5+ NPAT. I'd, I'd assume if it's NPAT, it's, it's a pretty good result in the, in the quarter. No, it's actually, it's actually, EBITDA. There is a level of seasonality attached to this business, Anthony. Okay. Yeah. Particularly the New Zealand business, which is obviously very heavy from a beef and a lamb perspective over the summer and spring months. Yep. So, this lines up with their normal seasonal patterns at the EBITDA line for that particular quarter. And then obviously, the other number that we were talking about was just the transaction cost, which Quinton spoke about, which, you know, we're expecting will be in the range of sort of circa AUD 2 million, which we'll separately call out as significant items, so that you guys can understand the impact in this financial year. Gotcha. Thank you very much, guys. Have a Merry Christmas. Hopefully, this doesn't disrupt any holiday plans you've got, but, well done. Thanks, Anthony. See you, bye. You have a follow-up question from Apoorv Sehgal from UBS. Your line is open. Oh, thanks for taking the follow-ups, guys. Appreciate it. We can keep it brief. No problem. Just a quick one on the, on the EBITDA SKU. Richard, first half EBITDA SKU for this business, can you give us any feel for what that percentage might be, roughly? Yeah, look, it is, it's about 55% to 60% first half versus, you know, versus the second half. And as I said, more as a result of just the farming seasons in New Zealand from particularly sheep and cattle, that's all. Great. And while I've got you, can you tell us what the depreciation and amortization expense is within OMP? Just will help us through working out like, the EPS accretion. Yeah. So, that number's about... Sorry, just over AUD 1 million a year. Just over AUD 1 million? Yeah. Perfect. Thanks, guys. Appreciate it. No, thanks, Apoorv. You have an additional follow-up question from James Ferrier from Wilsons. Your line is open. Thanks. I'm gonna follow up, if I may. Mm-hmm. That depreciation number you quoted, Richard, does that include the lease depreciation cost as well, or is that purely the plant and equipment depreciation? That's purely the plant and equipment, James. Okay. On an all-in basis, given you have some lease depreciation to wash through, I think you mentioned earlier that there were leased facilities. What's the all-in D&A expense likely to be? Can I come back to you on those numbers? Just, I just wanna make sure that I've, I've got a number in my head, but I wanna be completely clear. I, I know I'm catching up with you guys later today, so I'll give you those numbers then. Yep. Terrific. Thank you. And then, lastly, sort of, I guess, forward looking here, and you know, noting the timing of this settlement, or this announcement in December, and Quinton, you referenced the timeliness of now having visibility on the calendar 2024 contractual arrangements. The capacity of the business in its assets to actually grow volumes, is that an expectation in the year ahead, or is it a sort of a steady-state type business that's already running at full capacity? Yeah, the Laverton plant is operating on two shifts, and so there is capacity there to, you know, to adopt an additional shift. In Timaru, in New Zealand, currently the facilities, you know, hasn't got a lot of spare capacity, but we are reviewing some options around the, you know, opportunities that OMP have on the table, and we'll review those. But there could be some expansion opportunities in the New Zealand operation. Okay, great. Thanks, Quinton. Thanks, Richard. Great. Thanks, James. That concludes today's Q&A session, and I would like to turn the call back over to Quinton for closing remarks. Great. Thank you, Paul, and once again, thanks to everybody for their interest in joining this call today. We see this as highly exciting for Ridley. For those in our business, it's the culmination of quite a long period of pursuing this outcome. And we're very pleased that this will augment our strategy and give us what we need within the Ingredient Recovery business to take our offering to the next level for customers and to underpin our supplier value proposition. So very pleased with this outcome and you know, look forward to updating the market as we digest this acquisition. If I can just take the opportunity to wish everybody a good Christmas and thank you for your support to Ridley over the last calendar. We look forward to seeing you in 2024. Thank you. This concludes today's conference call. Enjoy the rest of your day. You may now disconnect.