Annual Meeting Chairman’s Address

13 December 2019

Sanford Limited 2019 Annual Meeting
Mr Paul Norling
Chairman’s Address


(Slide 1)
On behalf of my fellow Directors I am pleased to personally present to shareholders today our
report for the year ended September 30, 2019.

(Slide 2)
I do trust that you have all had the opportunity to read our Annual Report which continues to
receive acclaim and which provides a relatively extensive account of management’s work and
the company’s progress over this past 12 months. While I will obviously talk about our financial
results and summarize the major accomplishments and issues for the year, following this I also
wish to take some time to retrace our steps over the past 5 years and the changes that have
occurred in the company’s operations, over that time.

Volker Kuntzsch, our CEO, will then cover, in much greater detail, the activities and progress
that management have made (and are continuing to make) with the company’s activities over
these past 12 months in particular, as well as other matters of interest to you

(Slide 3 – Review)
REVIEW OF THE 2019 FINANCIAL YEAR
I will commence with a summary of our financial results and outcomes.

- Our GAAP compliant Net Profit after Tax was $41.7 million, which is slightly down on
our FY18 result of $42.3million, the modest reduction being largely attributable to non-
trading items.

- The Non GAAP compliant methodology of measuring Adjusted Earnings before Interest
and Tax (i.e. the Underlying operating profit) saw this measurement at $64.8 million
which is in line with the FY18 number of $64.7m.

- EBITDA increased by $1.3m to $85.7m from $84.4m in FY18

- Sales Revenue of $545m (or $558m. on a Like for Like basis which was 8% higher than
2018) on sales volume of 115,000 GWT which was 5% less volume than the previous
year – the higher Sales Revenue number on 5% less volume is a very encouraging trend
and underscores the effectiveness of our value add strategy.

- Group borrowings reduced to $139m from $155m in FY18 which will assist fund the
company’s necessary and on-going capital investment programme.

(Slide 4 – Wildcatch, Mussels & Salmon)
As stated in our Annual Report, our overall Underlying Operating Profit (or Adjusted EBIT) was
somewhat disappointing as it again did not meet the expectations of both the Board and
management. The reason for this was largely attributable to matters relating to the
performance outcome of our Wildcatch business which faced challenges, while our Mussel
and Salmon businesses both finished the year with very strong results when compared with
FY18 – Mussel’s operating profit contribution being up 69% and Salmon’s Like for Like
operating profit contribution being up 62%.

Our Wildcatch business is the extremely important core of our extensive fishing and
aquaculture assets and comprise approx. two-thirds of our balance sheet asset value.
Headwinds encountered this past year included a sub-optimal vessel fleet performance, some
effects of climate change - we also encountered some challenges with crewing issues in our
Deepwater fleet. Management have a major focus on operational supply side issues and have
also made valuable progress with product quality and further enhanced processing, as well as
completing a review of our ‘on land’ processing footprint in the South Island.

As shareholders are aware, we are in the challenging but very satisfying process of also
transforming the product supply side of our three differentiated businesses into the provision
of higher value products wherever we possibly can while at the same time moving up the value
chain to get closer to our end consumers i.e. streamlining our supply chain, as we seek to
provide as much of our sales volume in a pristine and value enhancing format and through
less intermediaries. This strategy also involves branding and sales channel strategies as well
as some re-balancing of our international geographic marketing focus. We are pleased with
the results that have been achieved to date but there is a not insubstantial operating cost to
these changes which is also part of the reason for our flat profit performance.

Our reduced debt level and consequential balance sheet gearing is pleasing but necessary as
we enter the second year of two, where we have committed to a capex investment program
of $120m for the 2019 and 2020 financial years – only $38m of that sum was invested during
FY19 so there will be a substantial catch-up spend in FY20 which is already underway.

(Slide 5 – Divestments & Reviews)
MATTERS OF NOTE DURING 2019
During this past financial year, the company also took a number of actions of strategic
significance – they are:

- We completed the sale of our 50% shareholding in Weihai Dong Won Food Company
Limited (WDWF) – a seafood processing company located in Weihai which is situated
in the province of Shandong, China and is the closest Chinese city to South Korea. We

joined the company and its operations in 2004 in partnership with our long standing
and respected charter fishing partners Dong Won Fisheries Co. Limited of South Korea.
With our strategic direction for the future clear, our continuing shareholding in the
company was not of the importance that it once was so we sold our 50% interest to
Plenus Company Ltd of Japan – an extensive seafood restaurant operating company
which has some 2900 locations throughout Japan. As part of the sale terms, we
continue our relationship with WDWF with an on-going supply agreement for our
species supplied to that entity.

- In March of this year, we then sold our Pelagic fishing business based in Tauranga to
another Tauranga based pelagic fishing company. We saw little opportunity to add any
significant value to these pelagic species on an on-going basis and the sale was
therefore appropriate from our viewpoint as it was for the purchaser who was able to
achieve economic scale as a consequence.

- Our Australian operations based in Melbourne have traditionally under-performed
from a strategic and financial viewpoint. Management has therefore undertaken a full
review of the best way forward for Sanford in the Australian marketplace and now has
– either in place or committed – the requirements to greatly enhance our presence
and financial performance in that nearby substantial market.

(Slide 6 – Marine Extracts Facility)
- The final strategic initiative that I wish to highlight is the announced intention to build
a ‘state of the art’ Marine Extracts and Innovation Centre in Blenheim – a $20m Capex
spend and a very progressive initiative which will greatly reinforce Sanford’s move
beyond food into the nutraceutical space and other potentially very lucrative marine
based products. This initiative holds great promise for the future of the company and
we already have a toe-hold in this space with Enzaq which we acquired some two years
ago.

Management are also undertaking a major program (dubbed ‘Sancore’) to comprehensively
up-date the company’s management and financial information systems and IT capability. This
is a well overdue and a necessary infrastructure requirement involving a significant planning
process - that is already well underway - to be followed by a consequential capital investment.

(Slide 7 – Health, Safety & Wellbeing)
HEALTH, SAFETY AND WELLBEING
The company and all of our people are still recovering from the shock of Steffan Stewart’s
accidental death on the San Grant which occurred on November 14 last year. I must say,
however, that the manner in which our staff – from the CEO and his executive management
team right down through the organisation - responded to this tragedy, was truly moving. The
level and extent of care and support provided to all affected by this terrible event – in
particular to Steffan’s family as well as his workmates at sea and at our Deepwater fishing

organisation based in Timaru - was of the highest order. While we all sincerely wished that
this accident had never occurred, we can none-the-less feel proud as to how our people
responded in this darkest of times and is a clear illustration of how our people care about each
other.

The health, safety and wellbeing of our people is our highest priority and the CEO will want to
discuss this with you during his presentation. As a result of its importance and focus in the
business we are not surprised that the number of Near Misses reported over the past year
increased by some 37% - the easier thing for people involved in such instances is to get on
with what they are doing and not take the time to follow the required processes. By doing so,
however, enables the organisation to take whatever steps are appropriate to avoid such
occurrences in the future, not only at that site but right across the company. Having said that
however some of our Health and Safety stats for the year are disappointing and we know that
our Health and Safety people throughout the organisation are already working harder to turn
this latest year’s numbers around and down.

(Slide 8 – Changes 2015)
CHANGES OVER THE PAST 5 YEARS
As already mentioned, I thought it might be of interest to reflect on and summarize some of
the meaningful changes that have occurred in the company’s shape and operations since
adoption of the company’s revised strategy in 2014. I will commence from the FY15 year and
roll forward.

FY15.
- In the 2015 year, the company’s international purse seining (IPS) operation which
focussed on catching skip jack tuna in the Western and Central Pacific was closed down
and sale of the three boat fleet commenced. Operating profitability was problematic,
the catch was commodity and sustainability of the resource was debateable given the
resource management approach adopted by some of the Pacific island nations.

- The year also saw the closure of our Christchurch mussel processing facility and our
mussel processing consolidated on our Havelock plant with its automatic mussel
opening technology. Mussel supply and product pricing being the dominant reasons.

- The introduction of a new logo and tagline represented a clear shift from resource
extraction to food production and customer service – and at a similar time we adopted
the ambitious vision to become ‘The Best Seafood Company in the World”!

(Slide 9 – Changes 2016)
FY16.
- Our South Korean charter fishing partners who collectively operate three vessels in
conjunction with Sanford, successfully reflagged their vessels aligning all of their

practices with New Zealand laws and regulations, and our company policies. These
vessels continue to play an important role in Sanford’s overall catch plan activities.

- We took delivery of the San Granit from its previous Norwegian owners – this
Deepwater factory trawling vessel being the largest in our fleet at 67 metres. After
some not inconsiderable challenges, I am pleased to say that the Granit is now
performing well.

- We also commenced our ‘Focus on Fresh’ product initiative in 2016. This has caused
us to be acutely aware of our supply chain efficiency as we now produce 9% of our
total sales volume in the fresh format delivering it not only throughout NZ but also into
Australia, Hong Kong, Japan and the U.S. In this latter market our opportunity has been
progressively enhanced with direct flights to big population cities of Houston, Chicago
and next year to New York, which are additional to the two Californian destinations of
L.A. and San Francisco and, of course, also to Hawaii. Additional impetus to this
important initiative has come from the 2018 opening of our revitalised Auckland Fish
Market and the great opportunity that this provides to present our pristine fresh
product direct to our consumer customers.

- Spatnz, a Primary Growth Partnership between the Ministry for Primary Industry and
Sanford, had been operating for a year and was developing the selective breeding of
nature’s best specimens of Greenshell mussels with impressive results

(Slide 10 – Changes 2017)
FY17.
- Our Big Glory Bay brand was launched with its major focus on King Salmon from
Sanford’s salmon farm located in that bay on Stewart Island.

- Following the development of a more focussed sales channel and customer strategy,
Sanford delivered a strong performance in the China market driven mainly by high end
species including fresh King Salmon, Toothfish and Scampi.

- Sanford took another step in the Innovation space with the acquisition of a small
Blenheim based company Enzaq as we sought to add further value to our Greenshell
mussel business in the field of nutraceuticals. Simultaneously plans were developed to
markedly increase production (which occurred) and to assess this as a base to push
further into this innovation growth opportunity.

(Slide 11 – Changes 2018)
FY18.
- The phenomenon of Climate Change really started to bite and is now judged to be the
most significant risk facing Sanford – its effects were felt across all three of Sanford’s
major businesses.

- Innovating ‘beyond food’ increasingly became a focus – examples being collagen from
Hoki skins and the November 2018 launch of Sea to Me brand and its nutraceuticals
range as well as extensive market research into demand probabilities.

- A complete revamp of the Auckland Fish Market was initiated in FY18. The substantial
upgrade included eight eateries and a revitalised fresh fish market subsequently
renamed ‘Sanford and Sons – Fishmongers’ – this redevelopment has become a
popular Auckland eating and tourist destination.

- Precision Seafood Harvesting technology was now having a substantial influence on
our fresh fish quality via this innovative new catching method – this was ideally timed
for our redeveloped Fish Market and management’s marketing push into high end
restaurants who embraced the excellent product quality.

(Slide 12 – Changes 2019)
FY19.

The matters of note I highlighted earlier in my report – namely:
- Sale completion of our 50% interest in Weihai Dong Won Food Company Ltd in China.
- Sale of our Tauranga based pelagic fishing business.
- A major refocussing of our Australian business.
- The announced intention to build a Marine Extracts and Innovation Centre facility in
Blenheim.
- As well as the Sancore company-wide major IT upgrade.

(Slide 13 – Broader Changes)
On a wider and more general note of reflection, the company has focussed a very substantial
amount of attention over the past 5 years to the vitally important responsibility of the health
and safety of our people. This has involved extensive attention from the top level of
management (with continual oversight by the Board) right down through the organisation via
training, audits and the hiring of specialists throughout the organisation. We were therefore
pleased to have our employees’ and share fishermen’s affirmation regarding the level of
importance of this issue within Sanford - it is a continuing journey that will never end as we
seek to continually improve.

A further issue of considerable importance relates to the very substantial progress that we
have made in the extent and transparency of information provided in our reporting. This has
been welcomed by our shareholders and the market generally, and Sanford has been
recognised with the receipt of a number of Australasian and international awards for our
Annual Report over recent years.

The one final matter that I wish to reflect on, is the topic of Sustainability. This is extremely
important to Sanford as we, amongst others, have the responsibility of caring for and
enhancing our fished and farmed resources for future generations – we take this responsibility
extremely seriously. In this regard I believe that Sanford – under the leadership of Volker
Kuntzsch our CEO - leads the New Zealand seafood industry in its thinking and actions in this
crucially important space and you all can take a great deal of comfort from that, on behalf of
your children, grandchildren and generations beyond.

(Slide 14 - Broader Changes contd.)
That concludes my reflections – both specific and general – of the more notable changes
undertaken over the past 5 years. There are, of course, a myriad of other important
advancements that management has also instituted which have resulted in the considerable
and planned strengthening of the company’s base of operations. From this base will flow an
acceleration in the company’s profit growth from that of the last 3 years, which however will
require a continuing level of capital as well as operational expenditure as Sanford ambitiously
seeks to become ‘The best seafood company in the world’.

(Slide 15 – History & Future)
Now for a few concluding remarks.

As I have said previously, in New Zealand terms Sanford is a company that has a great history
but, in my opinion, potentially an even greater future. The marine resource accessible by your
company is probably unparalleled globally. NZ’s Exclusive Economic Zone of approx. 4.4
million square kilometres provides a terrific resource that is world leading in its resource
management structure and provides such a wonderful and extensive array of high-quality wild
catch fish species. Add to that our marine environment where we can farm and grow the
outstanding King Salmon species as well as the unique Greenshell mussel with all its qualities.
Then there is the wonderful ‘provenance’ story that backs and enhances our developing
branded and increasingly higher value seafood products. And last – but not least – the
emerging potential of our marine environment to provide ‘beyond food’ products backed by
a bold but well-reasoned innovation focus. This is what Sanford is developing, and in our CEO
Volker Kuntzsch’s words ‘this is exciting’!

And furthermore, if we are successful with our efforts to encourage meaningful industry
collaboration with, for example, catching and processing, that could provide an additional
bonus in these major cost areas.

Yes, there is the emerging real challenge of climate change – and while this has had an effect
on our last couple of years’ results, already we are starting to find or develop ways of
mitigating some of these effects. And as time goes by, I believe that the company and the
industry, will be able to enhance its mitigation strategies and effectiveness further.

(Slide 16 – Distinctions & Recognitions)
RECOGNITIONS AND AWARDS.
As I think it is appropriate, I now wish to take a moment to mention that your CEO, your
incoming Chairman and separately your Board as a whole have all received notable
recognition over the past year:

- Firstly to our CEO Volker - while some of you may already be aware, it gives me great
pleasure to inform you that Volker was recently announced as the winner of
Rabobank’s 2019 Leadership Award for Agribusiness. Rabobank is recognised as the
leading international bank to the global food and agribusiness sectors so this award is
indeed a prestigious one and recognises the pre-eminent leader’s contribution in these
industries across both Australia and New Zealand. Not being satisfied with just one
award, he was then selected as one of only three finalists in the Deloitte’s Top 200
Companies in New Zealand, for the NZ Chief Executive of the Year award. While Volker
was headed off by another outstanding candidate for the Award, his selection as one
of only three finalists from the top 200 NZ companies was certainly a highly
meritorious recognition. So we congratulate Volker on both these achievements which
obviously reflect outstandingly well on him personally but also on your company as a
whole.

- It also gives me great personal pleasure to recognise and acknowledge your incoming
Chairman, Sir Robert McLeod who was appointed a Knight Companion of the New
Zealand Order of Merit for his services to business and Maori in the 2019 New Year’s
Honours List. We congratulate Sir Rob on this exceedingly well deserved public
recognition as he has been a stand-out example in everything he has done in his
professional and other capacities during his business lifetime. He has undertaken so
many roles in business in New Zealand and Australia, on numerous Government
Taskforces as well as leading many Maori entities that there are too many to even
contemplate covering. We were delighted when Sir Rob agreed to join the Sanford
board in 2016 and I know he will do an outstanding job for all stakeholders in his
capacity as Chairman of your company.

- Finally and for completeness, I should mention that your Board was also recognised (in
the early part of the 2019 financial year), again in the Deloitte Top 200 Companies
Awards, with the Excellence in Governance Award. The members of the Board were
understandably pleased with this recognition.

So it is satisfying and very pleasing that your company leadership and governance group has
been recognised in the manner mentioned and in this regard I am sure you would all wish to
join with me and say to Volker and Sir Rob and my Board colleagues, congratulations and very
well done to you all.

(Slide 17 – In Conclusion)
On a more personal note, as I retire from the Board following today’s meeting, I wish to say
that it has been a privilege to be associated with the commencement and progression of the
transformational journey that this iconic New Zealand company is undertaking. In this respect,
however, while we have in place or instigated many of the foundation ‘building blocks’ to
realise this company’s potential, there is still a meaningful part of the journey yet to traverse.
This will require continuing investment in opex and capex to fully realise this potential and, of
course, it is in fact a journey that never ends! It is called continuous improvement!

(Slide 18 – Thank You)
Finally, I would like to thank and wish my successor as Chairman (Sir Rob McLeod) and my
Board colleagues, together with the executive management team (and indeed all the people
in the Sanford team) led by Volker, all the very best for the future success of the good ship
‘Sanford’ and all that sail in or with her.

Thank you.

---

1

Sanford’s 2019 integrated report is available at
https://www.sanford.co.nz/investors/reports-1/company-
reports/
The report outlines Sanford's Business Excellence
Framework –this enables each part of the business to
map out its role in helping to deliver on our goals
We strive to inform in a transparent and open manner
and welcome feedback from our stakeholders throughout
the year
This presentation contains not only a review of
operations, but also some forward looking statements
about Sanford Limited and the environment in which the
company operates. Because these statements are forward
looking, Sanford Limited’s actual results could differ
materially. Media releases, management commentary
and analysts presentations, including those relating to the
previous results announcement, are all available on the
company’s website and contain additional information
about matters which could cause Sanford Limited’s
performance to differ from any forward looking
statements in this presentation. Please read this
presentation in the wider context of material previously
published by Sanford Limited.
2

REVIEW OF THE 2019 FINANCIAL YEAR
¹Like for like views revenue (and gross profit) comparable to 2018 without implementing the new revenue accounting standard (NZ IFRS 15)
² See Appendix for adjusted EBIT and adjusted EBITDA reconciliation to GAAP Reported EBIT$62.6m and NPAT $41.7m
** Including gain on sale of the pelagic business of $5.1m, prior year includes earthquake insurance settlement of $6.8m
-4%
GROUP BORROWING
FROM
$155M IN
2018
$139M
CATCH/HARVEST VOLUME
113kGWT
REVENUE (Like for like¹)
$558M
ADJUSTED EBIT²
$64.8M
Flat
EPS
45C
NPAT
$41.7M**
-1%
ANNUAL DIVIDEND
23CPS
Stable
Flat
+8%
ADJUSTED EBITDA²
$85.7M
2%

WILDCATCH, MUSSELS AND SALMON
4
•WILDCATCH BUSINESS PROFIT CONTRIBUTION DOWN 3% VERSUS
PREVIOUS YEAR
•MUSSELS PROFIT CONTRIBUTION UP 69% VERSUS PREVIOUS YEAR
•SALMON PROFIT CONTRIBUTION UP 62% VERSUS PREVIOUS YEAR

DIVESTMENTS AND REVIEWS IN 2019
5
•Sale of 50% of Weihai
Dong Won Food
Company Ltd
•Sale of Tauranga
based pelagic fleet in
March 2019
•Review of Australian
operations with
commitment to
enhance market
presence

•$20m+ investment
•Planned opening in December 2020
SANFORD MARINE EXTRACTS FACILITY PLANS
6

HEALTH, SAFETY AND WELLBEING
7
•We remember the sad loss of
SteffanStewart but are proud of
how our people responded to this
tragic incident
•Health, safety and wellbeing are
the highest priority at Sanford
•Near miss reporting has increased
by 37% in 2019

FIVE YEARS OF CHANGE -2015
8
•International Purse Seining
operations closed
•Closure of Christchurch mussel
facility
•New logo and vision: to be the
best seafood company in the
world

FIVE YEARS OF CHANGE -2016
9
•Fishing partners reflag their
vessels
•The San Granit arrives
•Focus on Fresh commences
•SPATnzalready showing
impressive results in selective
Greenshell mussel breeding

FIVE YEARS OF CHANGE -2017
10
•Big Glory Bay brand
launched
•China market strong
•Acquisition of Enzaq

FIVE YEARS OF CHANGE -2018
11
•Climate change impacts felt
•Innovating beyond food with
collagen from hokiskins and
Sea to Me mussel powder
•Revamp of Auckland Fish
Market commences
•Precision Seafood Harvesting
improving fish quality

FIVE YEARS OF CHANGE -2019
12
•Sale of 50% Weihai
stake
•Sale of pelagic division
•Refocussing of
Australian business
•Marine extracts
announcement
•SanCorework

FIVE YEARS OF CHANGE –BROADER CHANGES
13
•Focus on health, safety and
wellbeing
•Quality of our reporting
•Importance of sustainability

FIVE YEARS OF CHANGE –BROADER CHANGES
14
Vision: the best seafood company in the world

SANFORD HISTORY AND FUTURE
15
A great history, a potentially greater future

RECOGNITIONS AND AWARDS
16

IN CONCLUSION...
17

THANK YOU
18