Annual Meeting Chairman’s Address

16 December 2020

Sanford Limited 2020 Annual Meeting
Sir Robert McLeod
Chairman’s Address


1st slide
Ladies and Gentlemen, fellow shareholders, as I mentioned in my welcome to you, this is
Sanford's 116th annual meeting. This time last year, I was deputy chair of Sanford and you
were addressed at this meeting by Paul Norling, ahead of his retirement.

2nd slide
It has been a tumultuous year and one that few could have predicted. The Covid-19 global
pandemic has created waves of damage and chaos around the world, to both people and
businesses.

The rapid downturn in global tourism saw sharp declines in demand for high-value foodservice
products. The contraction in aviation disrupted supply chains. Global and local market activity
declined in response to lockdowns, ushering in economic uncertainty and cautionary health
practices.

Despite the promise of vaccines, these global challenges remain.

3rd slide
The pandemic dramatically affected Sanford's performance. Our net profit after tax was $22.4
million – 46% lower than the prior year at $41.7 million.

Our adjusted earnings before interest and tax of $38.3 million was 41% lower than last year
at $64.8 million.

Our revenue declined 14% in 2020 – a reduction of $76.3 million. In these circumstances, your
directors consider it imprudent to pay a final dividend in 2020.

4th slide
The charts on the screen provide a snapshot of how Sanford was affected by Covid-19.

Although the map shows we have diverse markets which have been an historical strength of
Sanford in not having all its eggs in one basket, Covid-19 had a broad adverse impact across
much of the sector with minimal offsetting gains against the general downturn.

The pandemic has emphasised the importance of identifying opportunities for more effective
diversification. For example, developing and expanding domestic online sales further
diversifies our customer base and our channels to market.

5th slide
“Navigate” is the theme and title of the 2020 Sanford annual report. The group has had to
carefully navigate through all aspects of its business this year in terms of which projects to
implement or defer, which wild catch species to pursue, the extent of inventory build, and the
timing of harvesting mussels.

These choices provide Sanford with an opportunity to diversify across the supply and demand
conditions of our buyer markets. Despite our economic challenges, Sanford remains strongly
supported by its stakeholders. There is no doubt that long-term customer demand for Sanford
products is assured; Covid-19 drove a wedge into a number of those markets that is temporary
rather than permanent.

Sanford people remain highly committed and engaged. Despite this year's challenges with
financial performance including share price performance, our ongoing discussions with
shareholders reflect their belief that Sanford can meet their expectations.

The community stakeholder, which is partly represented by government and regulators, gives
Sanford its license to operate, and has a significant effect on our brand.

Last but not least, our suppliers have worked hard throughout this year to support the
company. Sanford's performance can be assessed in terms of adding value to all these
stakeholders, which engenders their commitment to and support for the company.

6th slide
Under the leadership of Volker Kuntzsch, Sanford has pursued a value added strategy. That
will not change in the future. Value-added products can be sold for higher margin.

Sanford has traditionally measured normalised EBIT across kilograms sold to track the
progress of this value-added journey. In 2020 that measure was also impacted by Covid-19,
contracting 20 cents to 36 cents per greenweight kilogram.

Sanford’s value added products can be thought of as one side of a coin, the other being
commodity products which depend on volume for profit in mainly price taking markets.

Given the substantial quota owned by Sanford and the nature of many of the company’s
species and products, it is important to recognise the significance of its revenue and products
devoted to volume based business.

A value add strategy does not disenfranchise our large volume and commodity business.
Indeed, Covid-19 showed how important our commodity base is to our overall performance.
Many of our products have both value-add and commodity elements to them. Mussels in the
half shell format is a commodity product, whereas mussel powder is not. Hoki can be sold as
a commodity in block format that can be also sold as fillets for higher margin. Hoki skin
produces collagen beauty products in a value-added category.

7th slide
The pandemic has highlighted the importance of managing complexity through simplicity,
with clear prioritisation and focused execution. At a macro level, Sanford comprises
harvesting, processing and selling businesses. At a micro level, Sanford comprises a complex
array of multiple species, vessels, factories, products, markets and customers. The paradox is
Sanford must manage this complex business in a way that is understandable to its people and
customers.

The 2020 year has seen a fall off in profitability, raising its priority. The balancing of financial
security and profitability requires a calibration of the company’s CAPEX programme.

We are keeping a careful eye on cash flows and are more selective in the sequencing of the
CAPEX programme. Our balance sheet shows debt at 20% of total assets which is strong.

Sanford will prioritise CAPEX that has a high probability of strong financial performance.
Examples include scampi boat upgrades and expanding our new marine extract centre.

It should be noted that a prudent approach does not imply any compromise on safety. The
safety and wellbeing of our people continues to be a top priority.

8th slide
Sanford follows the customer. Proximity to the customer affects margins. Sanford must
strategically select these best proximity settings by product and customer category. One
position does not fit all.

Most of our customers are not the final consumer. For example, selling to restaurants puts
Sanford close to the consumer who is still one-removed. The fact that final consumers are
almost always indirect customers means that Sanford must develop multiple supply channels.

In those channels, Sanford is supporting its customer to maximise their business rather than
competing with that customer.

We have restructured our sales function to reflect the above realities. We are maintaining
strong relationships with key distributors and global markets and in some cases concentrating
those customer relationships.

During the pandemic, customer demand pivoted away from eating out to in-home dining and
Sanford responded by developing opportunities in our domestic and global markets to satisfy
dining at home. Those responses include product diversification, digital platforms and
rejigging our commodity offerings.

The key theme running through the above realities is to mix and match to optimise particular
channels and relationships. We cannot apply single formulas and approaches. Andre Gargiulo
will provide more detail on this.

9th slide
The New Zealand fishing sector continues to be newsworthy. This year saw a lot of interest in
cameras on boats. Sanford welcomes cameras on boats and has participated in trials. For
example, we placed cameras on vessels fishing off the West Coast of the North Island, even
though that was not compulsory.

A major event for Sanford this calendar year was the resignation of Volker Kuntzsch, our CEO
for the past 7 years. Volker made a significant contribution to Sanford and is as an important
member of the Sanford family: now a Sanford alumnus. Volker gave his all to Sanford, for
which we are extremely grateful. We continue to have access to him, and we will follow the
strategic directions that he has set. We wish him and his family all the best for a successful
future.

The Board is continuing to manage the process to appoint Volker’s replacement as the
permanent CEO, which we are endeavouring to conclude as soon as possible. The Board is
very pleased with the quality of candidates that have applied, including the internal
candidates.

10th slide
To conclude, 2020 has placed major demands on Sanford and its stakeholders. We continue
to take steps to mitigate the adverse impacts of the pandemic. Sanford, as with many other
companies in New Zealand and around the world, is in a state of high alert seeking to be
responsive and nimble in the face of this ongoing adversity.

I want to thank Sanford people for their resilience throughout 2020. Thank you also to the
management team and the executive who have had to work incredibly hard through an
extremely demanding year. I also thank my director colleagues who have shouldered a
significantly higher workload this year in support of the company through its challenges.

Finally, I thank you, our shareholders, for your support of the company through these difficult
times. I acknowledge the decision to withhold the final dividend denies a short run benefit to
you, however your directors believe that decision is in your long-term best interests. Your
directors and the management are working hard to return the company to the business as
usual format of paying annual dividends.

I extend on behalf of my colleagues our best wishes to all of you as well as to other Sanford
stakeholders, people, customers, suppliers and communities.

Please join me in wishing all New Zealanders a happy, safe and successful 2021.

---

1
SANFORD
ANNUAL SHAREHOLDER
MEETING 2020
CHAIRMAN’S ADDRESS

2
•Global impact of Covid-19 felt in
waves
•Tourism downturn, lockdowns and
fear impacted foodservice
2020 IN RETROSPECT

1
Excluding the pelagics business which was sold in March 2019
REVENUE
$469M
ADJUSTED EBIT
$38.3M
EPS
24CPS
NPAT
$22.4M
ANNUAL DIVIDEND
5CPS
No final dividend
-14%
-41 %
Like-for-Like
1
-11 %
Like-for-Like
1
-34 %
-21c
-46%
FY20: RESULTS SNAPSHOT
Toothfish and impacts of Covid-19 pandemic drove a disappointing result

GLOBAL MARKETS AND SALES CHANNELS –FY20
4
Note: channel split figures are estimates and are drawn from 12-month revenue to February 2020 data.
Market proportion figures are for FY20.

5
•Scale of Covid-19 challenge substantial
•Global markets remain volatile
•Skilled navigation required
•Speedy return to improved profitability sought
NAVIGATING TURBULENT WATERS
To achieve a return to more robust profitability

6
Getting closer to the consumer
and increasing our ability to
create value
+
maintaining our strong
commodity base
ARTICULATING OUR STRATEGY
Value creation ANDa strong commodity base

7
Simplicity and focus:
•Reflected in clear prioritisationand
shared understanding of Sanford’s
business across stakeholders
•Increased profitability
•Risk management
•Balance value creation and commodity
•Balance investing for future with
protecting balance sheet
SIMPLICITY AND FOCUS
To achieve a return to more robust profitability

8
Proximity to Customers:
•Partnering with our customers
•Sales function restructure
•Strengthening distributor
relationships
•Focus on retail
•Product diversification
VALUING OUR RELATIONSHIPS
Getting closer to customers and consumers

9
ACKNOWLEDGEMENTS

10
ACKNOWLEDGEMENTS