Annual Meeting 2024 Presentations

Sanford Ltd
22 Jellicoe Street, Auckland 1010
PO Box 443, Shortland Street, Auckland 1140
www.sanford.co.nz
Chair Address

Welcome
Kia ora tatau

Welcome to the Sanford 2024 Annual Shareholders Meeting. Thank you for attending, including
those of you that are online. I would like to introduce my five co-directors, David Mair, Craig Ellison,
John Strowger, Tom McClurg and Jo Curin. Paul Alston, Sanford's Chief Financial Officer, is also
joining us at the main table.

Our Strategy
As you know, David Mair was appointed Managing Director on 01 May this year, a little under 8
months ago. We were very pleased to report Sanford’s highest ever normalised annual earnings
result to 30 September this year. I am very grateful to our wider stakeholders for enabling that result.
The Board has mandated David to review the Group's operations and strategy, which is a critical
work in progress. David will therefore speak in more detail than me about Sanford’s strategy and our
operations.

At a macro level, the Board remains focused on maximising total shareholder return measured in
share price and dividend performance over time. I believe we can maximise total shareholder returns
while also benefiting other Sanford stakeholders. Sanford still requires significant reform, but that
change is aimed at making the company financially stronger and less risky. Sanford faces the
standard challenges of an exporting and agricultural company with volatility in catch, consumer
demand and prices. Two of our biggest export markets are China and the USA, and both destinations
are likely to impose more challenges on us in the short term. That said, we have choices about which
pathways we take, which also reflects opportunity.

Our Board
Four directors are standing for re-election at this ASM: Tom McClurg, Jo Curin, Craig Ellison, and
myself. Because Tom and Jo were appointed by the Board after the last ASM, they must stand for
election at this ASM. Craig and I have each served a prior 3-year term so must also stand for election
at this ASM.

The Board is presently comprised of six directors. Of these six directors, three are independent: Jo,
Tom and myself. John Strowger is not independent because of his relationship with a substantial
product-holder. David Mair is not independent because of being the MD. Similarly, Craig is not
independent because he was recently an interim MD.

Sanford's Board must have at least two Independent Directors, which it does. Both the NZX
Corporate Governance Code and Sanford’s Charter recommends that most of the Board be
independent. Sanford does not meet this majority test, with three in each category. The NZX Code is
a best practice recommendation and is not mandatory. The Board is satisfied that the current
position of three directors in each category is an acceptable balance between accommodating
shareholder-nominated directors and the alternatives of appointing an additional independent
director to achieve a four/three split within seven directors or removing a non-independent director
to achieve a three /two split within five directors. Furthermore, if David were just CEO and not MD,
the Board would have three of five independent directors with substantially the same composition as
the status quo in the boardroom.

The Board does not trivialise director independence. But we also respect the role played by non-
independent directors in the governance of public companies where non-independent directors
bring uniquely valuable attributes to the Board. Non-independent directors are commonplace in
public company boards and Sanford has had a long history of having them. The issue requires
balance rather than prejudice. The legal and commercial role of the Board is to represent the
interests of all shareholders and not just a subset of them.

My Chairman's Address in this year's Annual Report said that the mix of skills, cohesion, and
teamwork are very positive around the board table. I believe our directors are business-savvy, sector-
relevant and shareholder-oriented.

Climate Reporting Disclosures
The new disclosure regime is being phased in over time. Reporting against the latest climate
reporting standards is required from the financial year beginning on or after 01 January 2023, being
01 October 2023 for Sanford. In the second phase (the accounting periods ending on or after 27
October 2024), the disclosures relating to greenhouse gas emissions must be independently audited.
It will take time to develop the capability to produce high-quality climate-related disclosures; some
disclosure requirements may require an initial exemption. Therefore, not all requirements in the
Aotearoa New Zealand Climate Standards are mandatory immediately. This regime imposes
significant compliance obligations and costs on Sanford.

Customers, Our People and Shareholders
I would like to thank our customers for their invaluable support. We can't serve customers without
our people, so the Board is grateful to our hard-working teams. Thank you to our shareholders for
investing in Sanford. Last but not least, thank you to the senior leadership team and my fellow
directors. All your contributions are revealed in the bottom-line result this past financial year.

Recent Questions from some Shareholders
A number of shareholders have asked me questions in the run-up to this ASM, some of which I have
addressed in my above remarks. Many shareholders have commented favourably on the shortened
annual report. This is a topic where some shareholders have different views. The key reason why the
Leadership adopted the change was to communicate more simply, directly and economically.

Another shareholder has asked that we provide more details on the targeted skills of board members
in future Annual Reports.

There were also several questions about the MD's LTI share option scheme. The key clarifications
here are that the options over 1.8m shares are the full amount granted in respect of the next three
years – there will be no other annual or other grants during that period. Further, the options can only
be exercised in a brief window at the end of this period.

The formula for the exercise price are provided on page 7 in the Notice of Meeting as [(a*b)-c] where
a is $4.0063 (the weighted average traded price of our shares at the time of the grant of the option),
b is 1.259 (being the compounding effect of a cost of capital adjustment at 8% (4*1.08*1.08*1.08)) -
in other words, the application of a hurdle rate of share price growth before the options are “in the
money” - , and c is the cash dividends per share paid from the commencement date of the scheme of
01 May 2024. I note that a*b in this formula amounts to just over $5 per share.

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Sanford Ltd
22 Jellicoe Street, Auckland 1010
PO Box 443, Shortland Street, Auckland 1140
www.sanford.co.nz
Managing Director Address

Greetings
I’ll begin by introducing some of my team. You have already been introduced to our CFO Paul Alston.
Vaughan Wilkinson is in charge of sales and innovation. Debra Lumsden is Chief People Officer and
has done a great job of negotiating our collective employment agreements this year. Stuart Houliston
is GM Finance and will be our moderator for online questions. Roberto Magaraggia is our legal
counsel and together with Paul Alston visited London to ensure that we got a better deal on
insurance costs. Emma Croft is Group Marketing Manager and works with Vaughan. Danae Smith is
our executive EA and yes, she’s the boss! Emma and Danae will have microphones for question time.
I have been Managing Director of Sanford from 01 May 2024. Since taking over, I have spent most of
my time reviewing the existing strategy and plans, and focused hard on capital allocation and
cashflow. More later.

FY24
A quick update on growth and progress in FY24. Revenue increased slightly (~5%) mainly due to
consistent pricing and solid volumes across the business.
I have been focused on reducing spend on IT, cash donations, subscriptions and consultants. I
obviously need a lot of help! [my wife would agree]. I have been overwhelmed by offers of help from
various consultants. I have thanked them.
Some of the growth in revenue dropped straight through to EBIT and combined with the other areas
of improvement, these were the main reasons that we had a record adjusted EBIT result of $74.2m.
Previously, there was a strategy to move up the chain and closer to the customer ‘From sea to me.’ As
you move closer to the customer, you may get a better price, but there are additional costs and risks.
You must know that you are making more money before you make these channel changes. One
change of direction has been to move back to re-establishing our relationships with major
wholesalers in key markets. This has been effective particularly in both the US and China markets. The
effect of this simplification of channels is highlighted in the graph of gross margin.
NPAT of $19.7m was an improvement on pcp so why such a relatively poor result given the EBIT
improvement? First, there was the one-off sale of crayfish quota that positively impacted FY22. Then
in FY24, we had a round of significant asset impairments (including NI Mussels Limited [NIML], the
Auckland site and a lot of assets related to the Bioactives plant in Blenheim).
In 1H24, we had operating cashflow of $8.3m so to finish the year with $73.0m is a fantastic result.
From May, with board support, we focused on turning inventory into cash. The sales team have done
an excellent job of selling through that inventory and collecting our cash. There is a useful expression
– “you only sell inventory once!” Obviously, that performance is unlikely to be repeated in FY25, but it
is still an area of focus.

I have been concerned at the level of debt and the associated interest costs. In FY25, we expect our
interest costs to go up ~2m even as interest rates appear to be coming down. This is because our
favourable interest cover is rolling off. We must work harder to stand still!
My view is our total debt is too high, but it is not just the quantum; it is the ability to move quickly as
growth opportunities become available, usually at short notice.

Capital Allocation
A fundamental role for any business leader is capital allocation. I see capital as people and $. We
want the best people working on the most important projects, and those projects are one part of
realising any strategy.
• We should fund strategies, not isolated projects
• We should have zero tolerance for bad growth
• We should assume a zero-based capital allocation each year
• There is ample capital ($), but it is expensive
• No capital rationing – know the value of assets, assets vs price
Of course, we need to agree strategy but also, we need to hold people accountable to the investment
case. I think it is fair to say that this has not been done well in the past. We need a disciplined
approach!
I have changed our capital review process – all capex comes to the CFO and me for review. We have
been investing heavily in assets over the last few years and we need to align our spend with our
strategies.

Cash Allocation
This is a simple diagram of how we are thinking about cashflow. On the LHS we have operating
cashflow. In FY24, that was $73.0m. Going forward, we believe we can properly maintain assets for
less than $46.0m (FY24). There is then a trade-off between debt repayments and dividends. These
factors are for organic growth, but if we have a strategic investment opportunity, we either need to
get finance from somewhere, increase debt or reduce dividends. For me debt reduction is a priority.

The Future
Economic value, such as sustained high profitability and a healthy financial standing is the most
important foundation. Without securing economic value, we cannot take on other challenges. If we
don’t recognise this fact and consider the other contributors to corporate value from the same
perspective, our existence as a company will be diminished. In creating corporate value, we must not
forget it is shareholders that evaluate our efforts.
I started this address reflecting on what was achieved in FY24, what we learnt through that period,
and what needs to be achieved going forward. This business is in turnaround mode and so we are
reviewing all aspects of the business ‘bottom up.’ We must review every process and commit to
continuous improvement processes to mitigate any further cost increases. The objective is to simplify
and optimise standardised business processes and tools enabling access to more insightful
information, a more secure environment, and ultimately better outcomes for our customers and our
people.

Sanford has a significant tangible and intangible asset base, measured using a mixture of book and
fair value. As part of the strategic review of each part of the business, rigor will be applied to
determining if sufficient value is being achieved from these assets. This review will encompass both
the short and medium-term use and profitability attained from those assets. A particular focus will be
on our, in some cases, aged assets and whether the required maintenance and upkeep is
commensurate with attainable and incremental profit achievement. Additionally, we own fishing
quota and licensed water space that needs to be reviewed.

Sustainability
Addressing climate change continues to be a critical issue for all businesses. As identified in the
Chair’s Review, high emphasis is being placed on understanding future climate impacts on Sanford’s
business. We are investing resources into completing the complex work of investigating different
climate scenarios to understand the potential impacts on our physical assets and manage transition
risks (which will vary from one jurisdiction to another). This work will, in turn, inform future
investment decisions and help with mandatory reporting obligations in FY25 and beyond. The
sustainability report is now a separate document and will be available before 31 January 2025.

People
I would like to thank the senior leadership team and all staff for their contributions during FY24.
Finally, I appreciate the support of both the Directors and shareholders.

David Mair
Managing Director

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Sanford FY24
Results Presentation
Annual Shareholders’ Meeting
18 December 2024

Directors
David Mair
Managing Director
Joined the Board in November 2022.
Appointed MD 01 May 2024.
Sir Robert McLeod
Chair, Independent Non-Executive Director
Joined the Board in January 2016.
Chair of the Nomination Committee
Tom McClurg
Independent Non-Executive Director
Joined the Board in February 2024.
Chair of Audit, Finance and Risk
Committee
Joanne Curin
Independent Non-Executive Director
Joined the Board in August 2024.
Craig Ellison
Non-Executive Director
Joined the Board in December 2021.
John Strowger
Non-Executive Director
Joined the Board in December 2023.
Chair of People, Health and Safety
Committee
2

Order of Events
•Chair’s Address, Sir Robert McLeod.
•Managing Director’s Address, David Mair.
•Resolutions
•Election of Tom McClurg.
•Election of Jo Curin.
•Re-election of Craig Ellison.
•Re-election of Sir Robert (Rob) McLeod.
•Auditor remuneration.
•Issue of Options to David Mair.
•General Business.
3

Chair’s Address
Sir Rob McLeod
4

Managing Director’s Address
David Mair
5

•Revenue of $582.9m up 5% on FY23.
•Earnings per share increase from 10.7c to 21.1c.
•Final dividend of 5.0c per share; full year
dividend of 10.0c per share.
450.3
463.5
477.9
515.0
545.1
468.8468.8
531.9
553.4
582.9
0
100
200
300
400
500
600
700
FY15FY16FY17FY18FY19FY20FY21FY22FY23FY24
Revenue $m
47.5
63.2
63.4
64.7
64.8
38.3
23.3
40.2
49.4
74.2
0
10
20
30
40
50
60
70
80
FY15FY16FY17FY18FY19FY20FY21FY22FY23FY24
Adjusted EBIT $m
FY24 Growth and Progress
•A record adjusted EBIT of $74.2m.
•Prices were consistent with solid demand across
the business.
•Reduction in head office costs.
6

Improved Profitability
Improvement in Gross Margin.
•Channel simplification.
•Firm prices throughout FY24 for most products in all markets.
•Reduction in freight costs and more favourable fx rates (USD).
NPAT of $19.7m, up 97% on PCP.
•Improved performance impacted by significant asset impairments (including North Island Mussels, Auckland
site and other assets).
•FY23 NPAT impacted by the high abnormal costs of our Sancore system investment. Implementation now
complete but increased ongoing licensing and maintenance costs.
13.8
34.7
37.4
42.3
41.7
19.4
16.2
55.8
10.0
19.7
0
10
20
30
40
50
60
FY15FY16FY17FY18FY19FY20FY21FY22FY23FY24
NPAT $m
26.5%
24.3%
23.5%
22.1%
19.7%
17.6%
14.6%
18.2%
19.6%
21.6%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
FY15FY16FY17FY18FY19FY20FY21FY22FY23FY24
Gross Margin %
7

Operating Cashflow improvement, increased interest costs
Operating cashflow of $73.0m.
•Improved operating cashflow from increased profitability and one-off inventory rationalisation in 2H.
•Operating cashflow funded $46.0m of capital expenditure, a 10c dividend and a reduction in debt of
$8.7m.
Net debt of $185.5m, increasing interest costs.
•Reduction in net debt to below $200m.
•Increased interest costs from higher rates and increased debt throughout the year.
•Interest rate swaps at lower levels rolling off.
55.0
34.4
50.3
72.4
48.7
14.6
32.2
44.9
41.1
73.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
FY15FY16FY17FY18FY19FY20FY21FY22FY23FY24
Operating Cashflow $m
0.0
5.0
10.0
15.0
20.0
0
50
100
150
200
250
HY19FY19HY20FY20HY21FY21HY22FY22HY23FY23HY24FY24
Interest ($m)
Net debt ($m)
Sanford Net Debt and Interest
Net DebtInterest (incl hedging)
8

Five Principles of Capital Allocation
Capital is people + $$
•Fund Strategies, not Projects
• Zero tolerance for bad growth
•Zero-based allocation
•What is the right amount of capital (and the right number of people) to have in this business to support
the strategy that will generate the most wealth?
•(Note – no reference to historical investment)
•No Capital Rationing
•“Scarce but Free”
•Plentiful but expensive
•Know the value of your assets
9

Cash Allocation
Operating
Cashflow
(FY24 $73.0m
incl net interest
paid $16.2m)
Finance for
Strategic
Investment
Capex plan less than $46.0m
(FY24)
Debt repayments $3.0m
Shareholder returns/dividends
$10.3m (FY24)
Strategic investment
Organic growth
Debt reduction a priority - enabling focused growth investment.
10

Looking forward to F25
•Sanford does not give guidance due to inherent variability of the business.
•Business simplification and focus on overhead costs.
•Review of all assets.
•Increasing costs such as fuel, feed, freight and wages and salaries.
•Price pressure on some species, particularly products to China.
•Need to mitigate these cost increases with productivity plans.
•Targeting further reduction in debt for FY25.
11

Questions
Sir Rob McLeod, Chair
12

Resolutions
Sir Rob McLeod, Chair
13

Resolution 1
Election of Tom McClurg
Resolution 2
Election of Jo Curin
Resolution 3
Re-election of Craig Ellison
Resolution 4
Re-election of Sir Rob McLeod.
Motion put forward by John Strowger
14

Resolution 5
Auditor remuneration
Resolution 6
Issue of Options to David Mair
15

General Business
Sir Rob McLeod, Chair
16

Thank you
17