Costa Group Holdings Ltd (CGC) FY 2021 Earnings Call Transcript

Costa Group Holdings Ltd (ASX : CGC) FY 2021 earnings call dated Feb. 22, 2022

Corporate Participants:

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Wayne Kenneth Johnston — Chief Financial Officer

Analysts:

Larry Gandler — Credit Suisse — Analyst

Michael Peet — Goldman Sachs — Analyst

Jason Palmer — Taylor Collison — Analyst

Ben Gilbert — Jarden — Analyst

James Ferrier — Wilsons — Analyst

David Pobucky — Macquarie Group — Analyst

Alex Paton — Citi — Analyst

Evan Karatzas — UBS — Analyst

Rod Sleath — Rimor Equity Research — Analyst

Jonathan Snape — Bell Potter — Analyst

Craig Woolford — MST Marquee — Analyst

Kurt Gelsomino — Morgans — Analyst

Presentation:

Operator

Thank you for standing by, and welcome to the Costa Group Full Year 2021 Results Call. [Operator Instructions] I would now like to hand the conference over to Mr. Sean Hallahan, Managing Director and CEO. Please go ahead.

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Good morning, everyone, and welcome to the Costa Group Holdings Limited results presentation for the full year CY ’21. My name is Sean Hallahan, and I’m the CEO and Managing Director of the Costa Group. Joining me in this presentation is Wayne Johnston, Costa Group’s Chief Financial Officer. I would like to start with an acknowledgment of country. In the spirit of reconciliation, Costa acknowledges the traditional custodians of country throughout Australia; and their connections to land, sea and community. We pay our respects where we live, work and grow and across all Costa locations to elders past and present; and extend that respect to all First Nations people today. Now on to the presentation, and I’d like to begin with the key highlights covering the year. Firstly, I’m very pleased to report continued earnings momentum over the period. And to illustrate the growing importance of our international customers, 27% of our group sales are now generated from these sources. Costa also delivered a full year underlying CY ’21 results in line with our guidance. This included 10.6% EBITDA-S growth, compared to the previous year; and an increase in NPAT-S of 16.2%.

The numbers include the contribution from our 2PH Farms acquisition. Our international segment delivered a record result with 30% revenue growth. CY ’21 was a transformative year for our citrus category, which included the successful 2PH Farms integration and other quality citrus asset acquisitions. Finally, I’m also pleased to report that our successful management of COVID-19 across both our domestic and international operations further enhanced our customer value proposition. Our business model is designed to deliver increased earnings and return on invested capital over the long term. This includes leveraging our competitive advantages driven by scale and geographical diversity, both domestic and international; increased production capacity through organic growth and acquisitions; IP and proprietary variety breeding program; lower costs of production at key sites; expanding contribution to revenue growth from international and export activity; and an unrelenting focus on our customer and consumer needs supported by the quality and consistency of our product offering. Moving to the financial headlines. Revenue over the year was $1.22 billion, a 4.9% increase on CY ’20. EBITDA-S was $218.2 million, up 10.6% on CY ’20. This also includes the 2PH contribution of $12.9 million.

NPAT-S of $64 million was plus 16.2% on the CY ’20 number, and statutory NPAT was $41.4 million. At the end of CY ’21, net debt was $299.2 million with leverage of 1.85 times. A dividend of $0.05 per share fully franked will be paid, bringing the full year dividend to $0.09 per share. Our vision for Costa is to be the leader in sustainable commercial farming of premium-quality fresh produce. We must continue to find ways in which to make our business more productive and efficient. Agricultural technology in particular is advancing rapidly, and Costa is well placed to capitalize with a variety of external partners across the group. In addition, working at the forefront of technology acts as a powerful attraction mechanism for the best and broadest graduates, who we are steadily investing in and growing into our future leaders. Our objective can be summarized as driving long-term return on invested capital whilst maintaining a strong balance sheet. We believe the capital we have invested over recent years and that which we will invest in the future will maximize returns for shareholders, and we are highly focused on executing against our goals. Sustainable commercial farming is at the heart of our business model.

And we continue to sharpen our focus on the fundamentals that will drive our success: using data to better understand our crop performance at the most granular level and building this IP into our own proprietary farm management system. Likewise, technical superiority in agronomy, growing and breeding has positioned us as a leader in the development of protected and substrate cropping, delivering superior product offerings to our customers. Finally, our ambition drives us relentlessly forward, particularly in international markets. Whether it is expanding our China berry footprint, building out our third-party growers in Africa, opening new territories or finding new export markets, we will continue to service a growing number of international customers, leveraging our unique abilities to win their business. Now to our segment performance for the period. Second half CY ’21 saw positive domestic momentum across the portfolio, but this was overshadowed by a disappointing avocado year. Our berry category saw sales and earnings improve significantly over the prior year. Arana continued to deliver a plus 20% price premium.

The first commercial planting of our purpose-bred tropical Delight blueberry variety in Far North Queensland was completed in late 2021, with the initial crop to be harvest in CY ’22. In avocados, the record industry volumes over the full year combined with foodservice lockdowns and low retail price points resulted in a disappointing performance from the category. Our own production was up 11%. And this contributed positively to higher export volumes with key markets, including Singapore, Hong Kong, Malaysia and Indonesia. Product was also successfully exported from WA to Japan over the second half of the year. Research on a fruit fly protocol for the export of east coast grown avocados to Japan has been completed and is now with the federal government to negotiate access. Costa, together with all other east coast avocado growers and Avocado Avocados Australia Limited, calls on the government to conclude this negotiation with the Japanese government as soon as possible. In mushrooms, production was up 11% in the second half CY ’21 versus pcp. And there was strong demand momentum, especially for prepacked product which contributed 59% of our total sales.

As noted, CY ’21 was a transformative year for our citrus category, with the 2PH acquisition executed exceptionally well with 100% customer retention. The 2PH season was in line with expectations with 77% of product exported. In the southern production regions, namely the Riverland and Sunraysia, early- and mid-season citrus performance was positive. However, the latest season proved significantly more challenging. COVID-19-related supply challenges, including shipping delays and reduced vessel and container availability, exacerbated existing quality issues. The second half CY ’21 tomato category performance has laid a strong base for a full year CY ’22 contribution from our new Glasshouse four glasshouse. Over the second half, there was strength in both demand and pricing, supported by 10% production growth in the second half. In the international segment, record profit growth outpaced excellent revenue growth as both markets strengthened. Our China berry production volumes were up 40% on the prior year, and this was accompanied by excellent demand and pricing over the season. Jumbo Arana sales consistently delivered over a 30% price premium, contributing to year-on-year revenue growth of 48%.

In Morocco, production volumes were up 21% year-on-year, supported by steady demand and pricing. There was also improved pricing in the key margin windows for the North and South farms. Emerging regions saw revenue down slightly due to delayed crop timing in the U.S., while there was solid progress with third-party growers building out our European 52-week supply offering. Our Costa logistics and farms segment delivered a strong performance in challenging conditions, supported by excellent execution. COVID-19 lockdowns impacted the foodservice market industry. However, excellent management delivered a strong result whilst also integrating our Select Fresh WA acquisition. I now hand over to our CFO, Wayne Johnston, to talk through the financial slides.

Wayne Kenneth Johnston — Chief Financial Officer

Thanks, Sean. And good morning to everyone on the call today. As Sean has already covered the various segment performances, I will briefly concentrate on the consolidated group result. As highlighted in the slide, group revenue for the full year ending 26th December was $1.22 billion. This represented a 4.8% increase on calendar year 2020. The international segment recorded the majority of this increase with an AUD40 million increase in reported sales. This was a 30% improvement over the prior year and in constant currency 40% increase. As discussed at the half year results, China and Morocco benefited from an increased footprint and strong demand and pricing. The Australian produce segment was flat versus last year, although improvements in the second half were offset by the mixed results in the first half calendar year 2021. This result included the first sales contribution for 2PH, with sales for the first five months since acquisition totaling $48 million.

As discussed at the half year, the underperformance in the first six months sales results was largely explained by the impact of the storm damage at our Colignan, Sunraysian citrus property in early January 2021. EBITDA before SGARA and material items was 10% or $21 million higher versus last year. This includes a five-month contribution from 2PH of $12.9 million. Adjusting for this acquisition, the result was 4% above last year; and as Sean discussed earlier, in line with our market guidance provided in August, up marginally ahead of CY ’20. In constant currency, the result was 14% above last year. And excluding 2PH earnings, it was 7% above in constant currency. As highlighted today, there was a strong result from the international businesses. The domestic produce segment second half was assisted by 2PH, as discussed. And despite some late-season challenges in the citrus category, overall the segment showed positive momentum after a disappointing first half being impacted by the storm at Colignan, as discussed. Given significant growth projects in the last 24 months, amortization and depreciation expense increased versus prior period by 12% to $108.5 million. This includes additional D&A from the CY ’21 acquisitions of approximately $4 million.

Total interest expense of $25 million was below last year, as the benefits of rate and volume reductions offset increased lease expense from our expanding portfolio. I will discuss cash flow performance shortly. Similar to the prior year’s, tax expense of $10.4 million for the group represents a relatively low effective tax rate given the benefit of tax efficiency in both China and Morocco for agricultural companies. Even CY ’22 should include a full year contribution from 2PH, noting although these adopted for that, for that region; and I guess, other improvements in the produce segment, I’m expecting an increase in tax expense to approximately $21 million next year. Net profit before SGARA and material items of $64 million represents an improvement over last year of 16%; and when excluding 2PH, 6%, also in line with market guidance. Transaction and integration costs for CY ’21 business acquisitions have been expensed in the profit and loss statement. CY ’21 includes a net impact of $17 million from this item. The largest individual item was stamp duty of $13 million.

These have been disclosed as material items and excluded from the EBITDA-S and NPAT-S results. After adjusting for SGARA and material items, the group’s statutory net profit was 41.1 — $41.4 million, sorry. The current year SGARA adjustment of $7.5 million expense was significantly different to prior year. This almost solely relates to the acquisition accounting impact of 2PH given we’re required for statutory purposes only to recognize the acquired fruit produce at market value regardless of whether it had been harvested or not. Given our expanding footprint and the benefits of additional maturity tree profile from citrus and avocado trees in CY ’22, I would expect that CY ’22 will report a positive SGARA outcome, although we still believe it appropriate to report our underlying results prior to this adjustment regardless of the amount. Included in the appendices to this presentation are our forecasts for D&A, interest and tax for CY ’22. Obviously these are our best estimates at this point in time and subject to change. The most significant increases for next year are due to the impacts of the Vitalharvest lease renegotiation as announced in December. In relation to cash flow for the year.

I’m pleased to report another strong operating cash flow for the year. After adjusting for tax payments that were well below tax expense in CY ’20 given the impacts of CY ’19, the result was in line with CY ’20. Net working capital outflow of $6.9 million is a solid result given delays in our cash cycle due to supply chain delays in quarter four and also consistent with prior years where we saw a reasonable solid inflow in the second half given the seasonality of the citrus export program. Operating capex of $43.2 million was above prior year, but the comparative year was managed lower in the early days of COVID-19 and particularly in the first half of that year. As highlighted on this slide, given recent acquisitions, I’m expecting CY ’22 to be in a range of $55 million to $60 million. I’ve included in the appendices a summarized breaking up both CY ’21 and our current best estimate for CY ’22. Growth capex of $84 million was influenced by international expansion programs in both China and Morocco and the final installments of the Glasshouse four completion project. At this point, we expect CY ’22 to be lower at around $62 million and again heavily weighted towards the international segment.

Total business acquisition cost payments were $291 million. No material payments are required for — CY ’22 related to these acquisitions. And as previously disclosed at the time of the acquisition, a further 210-hectare development for 2PH is expected to be completed and settled in CY ’23 for approximately $31 million. Briefly, with regard to the balance sheet. I’m pleased to report that the balance sheet remained in a strong position. Total assets increased by nearly $700 million given the impact of the acquisitions and also the increased lease assets relating to the Vitalharvest lease renegotiation. Net debt did increase year-on-year given the funds allocated to the business acquisition and growth projects. On capital and debt management. As discussed, net debt increased by $155 million, but key metrics continue to represent a strong balance sheet position. Our leverage ratio of 1.85 times is within the company’s preferred levels of 1.5 times to two times.

During the period, the company extended the largest tranche of the Australian debt — syndicated debt facility for another 12 months to give senior debt maturity out until second half of CY ’23. I would like to thank our syndicated banks for their continued support to Costa. Our international businesses utilize local facilities to fund not only their harvest period but also to support growth capex. We continue to have strong banking relationships in both China and Morocco, and they’re supporting our exciting growth plans. The recent signing of a new five-year commitment from a local bank in Morocco will sit with the current redevelopment activities in that country. As discussed, the company declared a fully franked $0.05 per share interim dividend. Whilst in line with prior period, the overall cash limit to this dividend is up 16% given the issue of new shares in the July equity raise. I’ll now pass it back to Sean.

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Thank you, Wayne. Moving on to our growth plan update and focusing on China first. Planting of the Baoshan 50-hectare berry development was completed on time during CY ’21, with the first harvest from this crop beginning at the end of October ’21. Planting of the 100-hectare agri park berry development which is also in Baoshan was also completed as planned as of mid-February ’22. Over the past year, total planted China hectares increased by 150 hectares to a total of 396 hectares. Costa has consistently shown our ability to plan and execute our growth objectives on time and on budget in the Chinese market, creating an outstanding platform for future growth. In Morocco, we are progressing our Northern farms replanting with Costa VIP purpose-bred, superior genetic blueberry varieties. This includes substituting soil for substrate plantings, with an initial 16 hectares of substrate blueberry plantings in Baytar. New plantings have included 14 hectares at Massa, which is in Agadir, Southern Morocco, commencing in November ’21. The plantings are on schedule to be completed by the end of February.

Works are also progressing on tunnel installation and irrigation infrastructure. Our domestic growth projects include the tomato category’s new 10-hectare glasshouse and 2.5-hectare nursery at the New England Highway site, which is in Guyra, New South Wales, both now fully commissioned and operational. Our commercialization program to plant 40 hectares of protected, trellised, high-density substrate avocado trees is also 75% complete and on track to harvest a first crop from CY ’23, ’24. I mentioned earlier the importance of sustainable commercial farming to our business. It is integral to our business model and our ability to consistently deliver on our growth strategy and produce superior returns for shareholders. It includes being at the forefront of agricultural innovation; having the agility to manage and mitigate risks associated with climate change; embracing opportunities to improve our productivity and efficiency; reducing all forms of waste in our supply chain; and deploying leading agronomic knowledge through our skilled and passionate workforce, where we increasingly solidify our lead as an industry employer of choice.

We will be releasing our 2021 sustainability report to the market in early March, which will provide a detailed overview of our progress across a number of fronts. I’m also pleased to announce that we have committed to net zero carbon emissions by 2050, and we plan on utilizing the science-based target initiative to validate our progress. Whilst we have earnings growth drivers across the group in CY ’22, a few stand out in importance. These include the commencement of harvesting at our new 50-hectare berry farm in Baoshan, China; full year contributions from both our 2PH citrus farms and our new 10 hectares of tomato glasshouse; increased volumes of our premium-quality blueberry varieties Arana and, excitingly, Delight; and the rebound in our Colignan, Sunraysia grape volumes. The business is committed to maximizing these outcomes built on our ability to continue to manage any COVID-19-related challenges, including sourcing necessary labor to harvest crops and maintaining consistency of supply to customers. I now conclude the presentation with the outlook for CY ’22.

As many of you would be aware, our international segment undertakes the bulk of its harvest and sales activity over the first half of the year. Early China season performance has been above expectation in both yields and demand, setting us up for a good performance. In Morocco, the harvest has been steadily building against a strong demand backdrop. Industry avocado production is forecast to be below CY ’21, while foodservice markets are returning strongly, which should contribute to more favorable pricing outcomes. CY ’22 is a citrus off year, particularly in the Southern production regions of the Riverland and Sunraysia. A rebound from the Colignan farm hail event of first half CY ’21 is expected. And the farms will also benefit from a maturing tree age profile. As mentioned, we will also deliver a full year contribution to earnings from 2PH Farms. Berry volumes to date have been higher than forecast, with pricing favorable across all four berry types. Our Far North Queensland varieties are progressing well, and we look forward to our first commercial harvest of the new Delight variety.

Tomato production volumes have been ahead of pcp and expectation, helped by good light conditions contributing to improved overall yield. In addition, our new 2.5-hectare nursery is already providing improved plant outcomes, which will benefit the full 40-hectare production footprint. Our mushroom production volumes to date have continued the CY ’21 second half momentum and are significantly improved versus pcp. The focus for CY ’22 remains on maximizing production outcomes. That concludes Costa Group’s full year CY ’21 results presentation. Detailed commentary on segment performance over the most recent period can be found in the appendices. I now invite any questions on the presentation.

Questions and Answers:

Operator

[Operator Instructions] Our first question today comes from Larry Gandler with Credit Suisse. Please go ahead.

Larry Gandler — Credit Suisse — Analyst

Thank you. HMH. My question is about berry pricing. It looked like I can deduce that it was up very strong in the second half, almost 20%. I’m just wondering, Sean, if you can help me understand how much of that is due to mix that might be sustainable. And how much was due to sort of seasonal factors that may reverse? And just in broad terms, if you can give me a hand with that.

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Sure, Larry, and thanks for coming on the call. Thanks for the question. Look. I think there are a few things going on. We had particularly strong performance from our main blueberry-growing region, which is Corindi. And we had really good-quality outcomes from that as well. Overall, as well, I think we managed labor with a COVID backdrop better than our competitors did. And so I think we had more consistency of supply into a market that might have been a little bit short at times. So that would contribute. And then also, of course, as you know, although we didn’t get as much Arana this year as we would have liked because we didn’t get the crop volume that we wanted out of FNQ in particular, the actual performance of Arana in the market just continued to stay very, very strong, with the average for the year being above 20%, as we said. So I think it’s a combination of all those things really, Larry.

Larry Gandler — Credit Suisse — Analyst

Okay, probably difficult to actually quantify the amount that might be mix related, but I’ll give it a stab just in terms of the new Delight variety. I imagine it will not contribute significantly in ’22, but can you talk to the attributes of that berry and its — when it’s delivered into market?

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Yes, yes. No, it’s exciting times. We’ve been talking about Arana being at the forefront of a new premium blueberry segment within blueberries. And Arana has continued to deliver on that, but as you probably know, it tends to be a later-season variety, so we’ve always looked particularly out of FNQ to try and close that early season timing. And what I’m talking there is primarily March, April, May. Certainly April, May would be the sweet spot. We know that Delight, formerly known as 051, which is the first actually of quite a few new varieties all in the same segment, if you like, has got a size that’s similar, even occasionally at times larger than Arana. It’s got a flavor profile that’s around the same and it’s got an overall sort of quality. And the benefits of harvest costs and picking are all there the same for us as Arana. And the timing window, particularly in the second year, second commercial year, is firmly within that April, May period. And we’re certainly hoping that more of it will be in that period this year. The tonnage for Delight this year, we think, is around 200 tonnes, Larry, so like you said, not hugely material but very material in terms of the future path for that whole berry segment. And really I think that, over time, you will see us progressively change that FNQ footprint towards varieties like-for-like; and of course, Arana, which will always be important.

Larry Gandler — Credit Suisse — Analyst

And are you delivering that to an exclusive retailer? And will it be packaged in the same way Arana, distinguished packaging?

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Yes, I think that, as you know, we have — well, the best way to answer that really is that you know that we market our barriers through the Driscoll’s brand. Driscoll’s have a labeling, if you like, called Sweetest Batch which they reserve for the most premium varieties with the best flavor characteristics. And also, as you pointed out, Arana in particular has that distinctive yellow punter in Woolworths. I think we will have to judge the performance of this berry itself and then see where it best fits. Certainly in my mind, I think, ongoing, what we’d like consumers to see is that there is normal everyday blueberries, but then there is this premium segment, which they’re obviously prepared to pay more for. So we’re certainly hoping that’s where Delight will end up.

Larry Gandler — Credit Suisse — Analyst

Excellent, Thanks Guys.

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Thanks, Larry.

Operator

The next question comes from Michael Peet with Goldman Sachs. Please go ahead.

Michael Peet — Goldman Sachs — Analyst

Good morning, Sean. And, and thanks for taking my questions.First one, just on Monarto. Just could you give us an update, obviously the issues you had earlier last year with the staffing side of things? Just trying to get a sense of where you’re at with all of that; and production costs versus where you’d like them to be; and production, I guess, overall and volume.

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Sure. And thanks, Michael. Look. It’s a good story for us with Monarto. Mushroom growing is hard, as I always try and remind people, so it’s never smooth sailing. Things go up and things go down, but we’ve certainly been cycling the numbers at Monarto more and more consistently that we need to. And pleasingly, what we also do is we track very carefully the percentage of premium-quality mushrooms that are coming through all our mushroom facilities actually. And there’s certainly been really pleasing progress there. Those labor issues that you mentioned, yes, we had that. And it was particularly pointy, let’s say, well over a year ago now; and I just commend the team for managing through that. And really they’ve managed the farm beautifully for in particular, let’s say, the last three or four months, so it’s a good story at Monarto. We’ve always seen the cost benefits that we knew were there once we get the tonnage at the right spot. So all those factors are in place. And can I say, in nearly five years now that I’ve been doing this game with mushrooms in particular at Costa, I’ve never seen such a strong demand backdrop at this point in the year. And plainly we know that, yes, there’s strong consumer demand there, but I know that quite a few of our competitors have not been able to manage those COVID challenges, particularly with harvesting labor, as well as the Costa team have done that, so really commend the whole team for the way they’ve managed through a very challenging environment.

Michael Peet — Goldman Sachs — Analyst

Just on China. I think, from memory, you were sort of thinking maybe this year was going to be tough to cycle on pricing, particularly given maybe some limited entry from competition, but it sounds as though that expectations on price is still pretty solid in China. Is that the way to read that? And maybe you could actually hold. Or where is pricing going to be this year versus last year, I guess?

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Yes. Well, look. I mean forecasting pricing is always fraught with danger, as we all know, but what I can say factually is the pricing is above expectation at the moment. Much as we’re seeing and everybody is seeing supply chain issues, container issues, vessel issues, going from anywhere around our part of the world, into the U.S., certainly for South American like Chile or whatever, they’re certainly seeing issues getting back into China the other way. And I think that there’s definitely less fruit on the market, which is contributing to that pricing. So as always, what we’re going to do is just concentrate on the things we can control, which is the yield and the percentage of jumbo fruit within that yield. Both those things are tracking ahead of our expectation at the moment. And like I said, we’ve got a great demand backdrop, which is great.

Michael Peet — Goldman Sachs — Analyst

Final one for me, just on the $23 an hour piece rate or rate per hour piece rate included in labor for picking. Can you just sort of give us a sense of impact for you with that in mind?

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Yes. So it’s certainly a change for the industry. I think, as we’ve said consistently, we certainly have regarded ourselves as a great employer in this space. And we pay people fairly and we’ve always prided ourselves on that. The way that we see this is probably for those unscrupulous operators in the industry who have been getting away with those practices. Then we think that they would be steadily pushed out of the industry, which is good for everybody. We don’t pay piece work across all of our group or all of our crops. And so in reality I think what the team is working through now is that — whereas previously with a piece rate methodology in some of our crops we would in essence let the piece rate manage the workers almost in a way. I think the clear outtake for us is that we will need to step up our supervision efforts and manage that more carefully, but overall I think it’s a good thing for Costa in particular and certainly good for the industry.

Michael Peet — Goldman Sachs — Analyst

Great, thanks for that.

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Thank you.

Operator

Your next question comes from Jason Palmer with Taylor Collison. Please go ahead.

Jason Palmer — Taylor Collison — Analyst

Thanks, good morning. Shown mine. Well, I, just a quick one for you, please, if I could start with just in terms of the 2PH acquisition. I think you called out the revenue contribution and the EBITDA contribution as well as the NPAT contribution as well. I appreciate that purchase price accounting has driven reasonable reductions in what the earned otherwise would have been. Are you able to sort of quantify what the contribution to the business would have been at the revenue, EBITDA and NPAT-S line if you owned that asset for the entire year, please?

Wayne Kenneth Johnston — Chief Financial Officer

Yes. Look. It’s anything on that would be pro forma. And I think we stand by original disclosures we made around June and August which was sort of high 20s around EBITDA. So no real change from that, Jason, at all…

Jason Palmer — Taylor Collison — Analyst

Okay. And then two more, if I could, please. Just in respect of the outlook you’ve gone to, as far as with the exception of providing an NPAT line, you’ve given us the EBITDA — or sorry. You’ve given us a depreciation number step-up, which is much appreciated. You’ve given an interest and you’ve given an effective tax in absolute dollar value. I’m just wondering why we haven’t taken for the next step and put down a formal NPAT number.

Wayne Kenneth Johnston — Chief Financial Officer

I think — with regards to those items, which are probably outside of tax but more fixed in nature, I think we’ve seen varying, I guess, levels of forecasts in the market in relation to these numbers. And I think the company has taken an attitude that, for where there is probably a bit more fixed component to it, we’ve disclosed that, but we certainly aren’t in a position to recommence full guidance to the market at this point in time. And — but we’re just hoping that better disclosure will help the market be better informed.

Jason Palmer — Taylor Collison — Analyst

Okay, I appreciate that. And just the last one, for Sean, if I could, please, just in respect of those aspirational international growth sort of regions you’ve spoken about in the presentation. And you’ve put that dot on the page in respect of India. Are you able to sort of elaborate a bit more on sort of where you’re at in exploring India as a JV destination for blueberries, please?

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Yes, sure, Jason. And thanks for coming on the call. Look. We’ve got probably a few avenues open to us in India. The thing that stopped us progressing those is quite simply, as you know, we’ve got some of the most highly regarded blueberry horticulturists or agronomists in the world and they’ve been stuck in Australia and plainly unable to travel. And so we can’t make any decisions about what we may or may not do in India until we get boots on the ground. And literally, as of this week, we’ve got a couple of people over in Morocco for the first time in a couple of years, which is fantastic. And then we’ll very quickly start spreading out into other areas of the world that we’re interested in. So really it just comes down to ability to execute on that at the moment.

Jason Palmer — Taylor Collison — Analyst

Okay. And it’s great to see the ag conditions have been a bit kind to start the year with as well.

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Yes. Thank you for that.

Operator

The next question comes from Ben Gilbert with Jarden. Please go ahead.

Ben Gilbert — Jarden — Analyst

I have my guys. Just first question for me, just touching on the appendix again, just in terms of the costs. You obviously announced a Vitalharvest cost last year, but your net interest around the leases looks like it’s gone up a bit more than I would have thought. Is that all Vitalharvest? And if so, should we still be thinking about a $5 million EBITDA impact from the Vitalharvest leases so the numbers are still same set last year?

Wayne Kenneth Johnston — Chief Financial Officer

Yes, thanks, Ben. The — so I think we announced $6.4 million was the impact — around $6 million, the impact to the — on NPAT-S from the leases. The vast majority of the lease interest increase is Vitalharvest. And as you probably know, the way that accounting standard works, it’s given such a large commitment 20 years on really high-value leases. It’s a significant interest in D&A. So vast majority of that interest is relating to Vitalharvest leases. As disclosed in the D&A, whilst not — there is some D&A component as well.

Ben Gilbert — Jarden — Analyst

But I think, from memory, you said $5 million at the EBITDA line were positive, so would that suggest that we need to be thinking about the EBITDA impact probably closer to 10 or 11 based on the delta?

Wayne Kenneth Johnston — Chief Financial Officer

Well, the impact on EBITDA is actually again because we have less variable rent under the…

Ben Gilbert — Jarden — Analyst

Yes, yes, that’s what I’m saying, but should it be higher? Because I think you announced and you put out — pre Christmas, you said it was about $5 million, but should it be closer to 10 or 11.

Wayne Kenneth Johnston — Chief Financial Officer

Yes, yes. I think the combination of increase in D&A — I think I’ll back — go over that presentation again, but I think sort of $14 million or $15 million, so…

Ben Gilbert — Jarden — Analyst

Yes, okay, cool. And then just a second one, sort of the point on the tax. You’ve effectively given us an NPAT sort of figure in the, call it, mid- to low 80s. Just in terms of what you’ve assumed around that tax, have you assumed you sort of get 60% of your categories working well this year? Have you assumed a couple of one-off events, etc? I’m just trying to — how you sort of thought about putting that tax number together. Obviously you haven’t given an NPAT or any number, but have you thought about putting that tax number together in terms of categories?

Wayne Kenneth Johnston — Chief Financial Officer

Yes. We obviously arguing will determine our budget for the year, which obviously I’m not going to give that up, but…

Ben Gilbert — Jarden — Analyst

[Indecipherable]…

Wayne Kenneth Johnston — Chief Financial Officer

–, yes.

Ben Gilbert — Jarden — Analyst

I mean we would might leave that question but it number which you can back out the NPAT, but it’s — with that, when you put that together, you’ve assumed, I suppose, you have a better year in terms of performance. You’ve obviously had a very strong start. You probably still assume that there’s normal challenges that can come year-to-year, right?

Wayne Kenneth Johnston — Chief Financial Officer

Well, any horticulture company, forecasting the future is difficult, but well, I mean, Sean did call out that there’s a number of positive opportunities in next year. And I think there’s a particular slide on four particular points. So there’s no doubt that, from where we sit today, we’re expecting an improved result, but can that it is horticulturists. So the various, as I said, increases in Baoshan around production levels; Glasshouse four; obviously no repeat of the problems we had in Colignan; and a full year contribution of 2PH. I mean those four factors are significant on this result — or the forecasts.

Ben Gilbert — Jarden — Analyst

Maybe just final one for me. What are you thinking around some of the freight challenges you’ve had in the last year, particularly around citrus, with your export business? Like could you talk to maybe how you’re seeing the growth season start; and how you’re thinking about the ability to mitigate that, either putting up price, and the fact that it’s an off season, to specifically get some better or bigger fruit coming through? Do you think it’s still going to be a decent headwind for you through this year in terms of costs in citrus?

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Yes, Ben, I’ll take that one, if you like. And thanks for coming on the call. It’s probably, I think, that — and you’re right. We’re thinking about it and working through it at the moment. And also we’ve learnt a lot about what we went through last year, in the second half particularly. I think there’s definitely still going to be headwinds. That’s the understanding we’ve got. There’s been some loosening of port delays, particularly off U.S., but there still are pretty significant delays there. And I think we will certainly adjust the level of volume that we might send into that market. On the other side, though, primarily our Asian customers, if you like, I think overall we’re finding that it’s started pretty well. And it’s a bit better, a bit easier than it was last year. So there’s moving parts in it as there always is, but we’ll increasingly determine this as we get — as we obviously start and get closer and closer to the crop.

Ben Gilbert — Jarden — Analyst

That’s Helpful. Thanks, sir.

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Thanks a lot. Pressure. Thanks, Ben.

Operator

The next question comes from James Ferrier with Wilsons. Please go ahead.

James Ferrier — Wilsons — Analyst

Good morning, Sean mine. Thanks for your time. Can you give us some insights into how the table grape season has performed thus far this year?

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Yes. It’s — to be honest: It’s been a bit mixed. We’re finding different quality performance according to variety, some of them exceptional. And I’m talking mainly out of Colignan. We haven’t done much export as of yet. Most of it’s been going into the domestic market. And pricing there has been above expectation to date, anyway, but yes, from a crop point of view we’re literally finding, as we work through the rows, dependent on variety, we’re seeing quite mixed outcomes. And of course, what that means then is it’s mixed outcomes in terms of what we’ll export versus what will end up in domestic, but like I said, the pricing in domestic being a bit elevated at the moment gives us some comfort. So not one clear narrative there, James, sorry, but that’s where we’re at.

James Ferrier — Wilsons — Analyst

No, that’s good color. Secondly, there’s a couple of instances in the presentation where you’ve referenced return on invested capital and about an expectation that you’ll see it improve. And it’s part of your strategic focus, but I haven’t seen any reference to what the return on capital actually is today and sort of how you define that metric given all the noise around SGARA and lease accounting. Perhaps you could shed some light on that topic.

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

I think we’ll both have a crack at it. I’ll give some overall comments. We’ve absolutely recognized and we recognize it ourselves and we’ve had pretty consistent feedback. Plainly, a lot of capital was invested into this business and there weren’t sufficient returns being seen. And we think there were some good reasons for some of that and the whole thing of Glasshouse four in particular being a standout, and the extra investment we had to put into water security as a result of the 100-year drought that occurred in Guyra. Monarto has been in a longer journey than we would have ideally liked as well, but I think you’re right. You’re seeing the focus in the presentation because that’s exactly what the executive team is very focused on is delivering on that investment that’s occurred. And I’m really confident that we will do that if we get a fair crack at it, but maybe to some of the specifics, I’ll let Wayne…

Wayne Kenneth Johnston — Chief Financial Officer

Yes, I don’t think it’s probably appropriate to add too much to that, but obviously we have made public comments previously that, new acquisitions or at least new capital projects, we expect high-teens pretax return on those investments. Clearly the challenge for us has been we have a very large existing cost base and trying to maximize that across the entire portfolio, but I think Sean’s point is quite valid. The point of our message we’ve got a lot of work to improve on return on invested capital, making sure we do hit those, I guess, good returns for the various investments we’ve made in the last three to four years.

James Ferrier — Wilsons — Analyst

Wayne, maybe just a follow-up there. So do you calculate it on a pre- or post-AASB 16 basis?

Wayne Kenneth Johnston — Chief Financial Officer

We do it on a — we include lease payments in our ROICs, yes.

James Ferrier — Wilsons — Analyst

Yes, okay. And then last question for me, just looking at the tax disclosures. If I think back a few years ago, when there was probably a — probably more normal, if I can use the word normal, mix of earnings between domestic and offshore, the group tax rate was sort of in that low 20s. And based on your outlook commentary for calendar ’22, I’m sitting here thinking that probably a low-20s tax rate blended across the group is a realistic assumption for calendar ’22.

Wayne Kenneth Johnston — Chief Financial Officer

Yes, if I answer that question, I’m giving you guidance, but reality is I think we — what we’ve disclosed is we’re expecting improved Australian returns and hence at a $0.30 in a dollar. That’s why we’ve got an increased tax expense. So we don’t pay tax in China. And on average, given export concessions to Morocco, we have another two years of that. And that’s around 20%, but most of the increase we’re getting in tax expenses, clearly given that, is coming out of Australia.

James Ferrier — Wilsons — Analyst

Yes. And sorry, just one more little one tacked on the end there. You haven’t given disclosures around expectations in calendar ’22 for the minority interests. We can form our own assumptions on the quantum, but just to clarify: Has there been any change in the proportional ownership in either Morocco or China? Or any planned changes there?

Wayne Kenneth Johnston — Chief Financial Officer

No change in China. I think early — I mean it might have been at the end of the prior year, there’s a slight adjustment on Morocco as the put and call option was closed out. In relation to your last question, no. I mean not at this stage. No change around the JVs working.

James Ferrier — Wilsons — Analyst

Good one. Thanks.

Operator

Next question today comes from David Pobucky with Macquarie Group. Please go ahead.

David Pobucky — Macquarie Group — Analyst

Good morning, Sean and Wayne, congratulations on the pleasing results. Just first one for me, are you able to walk us through the one-off impacts that you faced over FY ’21? I think there was a hailstorm impacting, etc, some slight costs and COVID-related costs as well. Any color around the quantum there that you may provide, please?

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Yes, thanks, David. Thanks for coming on the call. Look. I think the way we’re thinking about this, anyway, is that we’re not seeing those COVID-related costs as a one-off. I think they’re basically baked in now, the hygiene standards that we have, the PPE, even expectations around workers and travel, etc, so I’m not seeing any benefit coming back from that. You’re right. The Colignan hailstorm, I think we’ve previously quoted sort of low $20 million in revenue. And the season is not done yet, but certainly we’re hoping that there won’t be a repeat of that hailstorm.

David Pobucky — Macquarie Group — Analyst

And then just on your first and second half’s EBITDA skews, changed over the years to reflect international growth and citrus, etc. I appreciate it’s early in the year, but do you have an expectation of what that might look like in calendar year ’22?

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Yes, you’re right. It’s early in the year…

Wayne Kenneth Johnston — Chief Financial Officer

Yes. No, it’s a dangerous call and particularly given citrus in — right in the middle — 30 June is right in the middle of both our Southern Citrus and our new 2PH season, but I think this year, the numbers are 57, 43 first half, second half. And again a lot of things could go right and wrong, and — but it’s — it won’t be too dissimilar to that is probably our internal projections, yes.

David Pobucky — Macquarie Group — Analyst

That’s helpful. And just last one: The balance sheet is in good shape. I mean, how much capacity would you say you’ve got for further growth initiatives? And is there anything meaningful in size that you’re targeting or looking at, at the moment?

Wayne Kenneth Johnston — Chief Financial Officer

Yes. Look. The business continues to throw us really solid operating cash flows. I mean the CY ’21 was a big year, clearly we — KW Orchards, the Select Fresh. And also we used our balance sheet for — in part for 2PH and also growth capex. So certainly around capacity, that was — we wouldn’t be sort of looking at that again. We’ll probably — when we do a refinancing, we probably will look at limits, but at this stage, if there was to be a repeat of that level of expenditure, we wouldn’t be — probably it wouldn’t be all on balance sheet. But we feel comfortable about where we’re at. It’s been those acquisitions were all very solid on strategy projects, so it made sense to put them on balance sheet, but each project is assessed on its merits. And not all of them give us the optionality in relation to cash versus leasing, for example, so — but to answer your question: I mean we certainly used up a bit of our capacity last year. And we’ll just have to see how it plays out this year but, again, good, solid operating cash flows, which is really, really great outcome.

David Pobucky — Macquarie Group — Analyst

All right, great, thank you very much.

Wayne Kenneth Johnston — Chief Financial Officer

Good luck with the rest of the year. Thanks David

Operator

The next question comes from Alex Paton with Citi. Please go ahead.

Alex Paton — Citi — Analyst

Morning away. just a couple for me. You mentioned you’d shipped some avocados out of WA to Japan in the second half. Just keen to get a sense of the market opportunity there and maybe what you might expect to ship over there this calendar year.

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Yes. So thanks, Alex. Thanks for coming on, and good question. It — look. The economics of this are pretty simple. About 60% of Australia’s total avocados — so forget Costa, but total avocados have grown in Queensland, on the east coast, if you like. And they don’t currently have access to Japan simply because of a fruit fly protocol. That protocol has now been completed. WA does have access to Japan, and yes, you’re right. We did ship some containers on behalf of a grower there that we market their fruit for. The fruit traveled exceptionally well, was received exceptionally well. We have existing customers in Japan who have gone on record saying that they would like to receive more avocados, which would obviously need to come from Queensland, so it’s really not so much about the commercial impact of however many more containers we might do in CY ’22, bearing in mind that we’re not growing it.

We’re just taking the marketing hit on it, but basically the bigger question here is really the federal government doing the bolt-on negotiation, if you like, to the existing trade agreement from WA to make sure that the Queensland avocado growers aren’t being kept out while the WA avocado growers can access. The reason all of this is so important is that Japan is about an 18 million trade market which significantly dwarfs any other Asian market around it. So it really is a game changer for the entire Australian avocado industry, and we’ve been doing a lot of work in the background to sort of raise the profile of this. And we think it really needs a conclusion to the negotiation. So thanks for giving me the opportunity to get on my bandwagon about that one, Alex. So I appreciate that.

Alex Paton — Citi — Analyst

All right. You’ve touched on the logistics costs, but just wondering how you guys are navigating some of the inflationary pressures for crop inputs. So on your fertigation, etc.

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Yes, you’re right. We’ve certainly seen some cost increases primarily in that sort of area of fertilizers. I put in a comment in the presentation about how COVID-19 has really proved our customer value proposition. And what I meant by that was we have, the team has really done an outstanding job in managing labor through COVID; and keeping consistent supply into major retailers, whether they’re here or overseas. Many of our competitors have fallen over. They haven’t been able to get through those challenges. Like we’ve really used our scale and our ability to move people around really well. What that means, I believe, is that our customers value that consistency of supply. And I think we’re better placed than most others to be able to pass on these inflationary costs. Now I’m not naive about it, but so far, we’re not seeing an impact and we are managing to do that. I guess, like everybody else, we’re just going to have to see what happens across the year, but I think we’re in a good place.

Alex Paton — Citi — Analyst

Thanks guys. That’s all from me. Thank you.

Operator

The next question comes from Evan Karatzas with UBS. Please go ahead.

Evan Karatzas — UBS — Analyst

Good morning in line, I just want to circle back to citrus, if I can. I just wanted just a bit more color on what your volume expectations are maybe, I guess, in comparisons of the 130,000 tonnes you just delivered in ’21 just given, I guess, all the moving parts on that citrus category, whether it’s off year, the nonrepeat of the great hailstorm and then also the full year of 2PH coming in as well.

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Evan, Sean here. I thought you might have opened by acknowledging that we hit our guidance and congratulating us on that, so we’re really happy to have done that. Thank you. With regards to citrus, look. I’m going to shy away from doing that, to be quite honest. And I think it’s fair enough because this is the first year that we’ve got 2PH under our control. We called out an indicative tonnage which we saw, which is in the appendices, but the reality is that it’s all theoretical at the moment and we really need to manage that farm ourselves. And we’ll know a lot more by the end of this season. So I think you’ll see from the history that there’s been various on, off years with Southern and Sunraysia. And the differences in volume there are pretty well known. And then obviously 2PH for us is going to be the swing factor, but at this stage in the year, we don’t tend to talk tonnages because, to be honest, we wouldn’t — we can’t see the flower set. We can’t see what the crop is going to look like. There are so many things that can change between now and then. We do progressively tend to update those forecasts, though, as we get closer.

Evan Karatzas — UBS — Analyst

Yes. That’s fair enough. No, it’s just there. And then maybe just on tomato as well, just on Glasshouse 4. Firstly, I guess, congrats on getting that commissioned and operational. You’re obviously talking about capacity of 20 million kilos there. Is the expectation to reach that level of volume this year? Is that the message we should be taking away there as well?

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Yes. Look. There’s two parts to that. The 2.5-hectare nursery, I think it’s been missed a little bit by some of the people who follow us. That nursery actually improves production outcomes for the full 40 hectares, not just the new 10 hectares, so we’re certainly looking to see better outcomes from that. And then, yes, you’re right. We called out that circa 20 million. And the new glasshouses are operational. We had some of the Glasshouse four operational even in last year, and so yes, we’re looking for that contribution in CY ’22.

Evan Karatzas — UBS — Analyst

Okay, great. Awesome. Thanks, peter.

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Thank you.

Operator

The next question comes from Rod Sleath with Rimor Equity Research. Please go ahead.

Rod Sleath — Rimor Equity Research — Analyst

Hi guys. Thanks very much for taking my. Couple of questions. But Just a quick question on avocado volumes. Obviously I take note of your comments that you’re expecting industry volumes to be lower. And obviously, when we look at what happened to your volumes versus avocado revenues, there was a very large shift to prices, as we know, which would have translated into a large shift to the profitability of avocado, but what are your expectations with regard to your volume production as we look forward? And my memory is that you didn’t really have the same level of volume growth that the industry had because of where your farms are located. Is that right?

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Yes. I mean I think we were — someone is going to correct me. We’re about 11% Yeah. And we didn’t have a — we had a great FNQ season. We had a pretty good Central Queensland. Northern New South Wales, I think, was down a little bit on expectation. The reason for the industry volume being up more is we don’t grow in WA. And the big driver of the industry growth was the WA season, which was massive. So I think that explains that. We were pretty happy, to be honest, overall with our production outcomes. How it’s going to look this year, look. Once again, it’s almost the same comment as citrus. It’s too early to say, but what I can say is FNQ to us looks a bit down on last year, which is what we would expect the entire industry to be. I remember explaining many times basically the way the trees work is the energy, the carbohydrate goes into fruit one year and then goes into vegetative growth the next year. So we didn’t expect either FNQ or WA to repeat and I think that’s what we’re seeing. And my early read on it from the industry is that’s what most people are seeing from an FNQ point of view. And so we’ll have to see how this plays out across the year, but I don’t think it’s an unreasonable expectation to say that the entire industry will be down on CY ’21. And then yes, as you correctly point out, the factor that everybody is waiting to see how this plays out is going to be the return of foodservice and those famous smashed avo breakfast in cafes.

Rod Sleath — Rimor Equity Research — Analyst

Sure, but structurally you should have some, I don’t know what’s the right wording, additional capacity effectively from further maturing of trees…

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Yes, yes, no, very fair, yes. We said that our trees are on track to achieve 2.1 million trays over the next few years. And so that growth profile for us, as for the rest of the industry, is certainly in place, yes.

Rod Sleath — Rimor Equity Research — Analyst

Terrific. And the other question, really easy one, is 20 million kilograms of capacity in the 40 hectares of glasshouses. Before the latest glasshouse, was that effectively around 15 million kilograms of capacity, if I got the right number there?

Wayne Kenneth Johnston — Chief Financial Officer

You smashed the math there, Rod. Thank you

Rod Sleath — Rimor Equity Research — Analyst

Yes, well done.

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Even I could get that one. Yes, that’s right.

Rod Sleath — Rimor Equity Research — Analyst

Well, that’s great, thank you very much.

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Thanks, Mike.

Operator

The next question comes from Jonathan Snape with Bell Potter. Please go ahead.

Jonathan Snape — Bell Potter — Analyst

Yeah, thanks. Can you hear me okay?

Wayne Kenneth Johnston — Chief Financial Officer

We can, Jonathan.

Jonathan Snape — Bell Potter — Analyst

Hi, thanks. Look,. Look, just a couple questions. One, just on the production volumes, particularly the mandarins, can you just confirm? In that 56,000-odd tonnes, what was the 2PH number in there?

Wayne Kenneth Johnston — Chief Financial Officer

So we’ve only included the 2PH volumes from when we took the business over. So that’s important. So it’s not the full 2PH volume. I don’t know if we’ve got — do we have a — exact…

Jonathan Snape — Bell Potter — Analyst

So the move from 31 to 56, I think it was. I think, when you bought it, it was — you were talking 30, but you obviously haven’t brought all that in. But I’m just trying to figure out how much of it is 2PH volume versus just a normal biannual…

Wayne Kenneth Johnston — Chief Financial Officer

Yes. I think you can use about 24,000 tonnes was what’s included in our numbers during our ownership period.

Jonathan Snape — Bell Potter — Analyst

Okay. So if you have a look at those production volumes in citrus. I mean that kind of suggests the mandarins on the existing farms didn’t really grow much at all year-on-year. The navels are up about 10%. That kind of seems right for an on year. Was there — am I — is there something in there — I think you said the hail earlier, but is there anything in there that kind of would have explained that?

Wayne Kenneth Johnston — Chief Financial Officer

Yes. So we had a — we did have some of that hail damage as we initially called out. It was on both table grape and citrus, so yes, you’re correct in saying that. And then overall for us, just due to climatic factors really, yes, it was a reasonably disappointing sort of mandarin crop. So we overall had sort of smaller fruit size than we ideally would have wanted. And we had some quality issues as well, which was basically exacerbated by the supply chain issues.

Jonathan Snape — Bell Potter — Analyst

Okay, so if I’m looking at an off year this year, I mean, how much is the swing down? Because it kind of looks like you didn’t get the benefit much of the on year at all in those numbers. So I’m just trying to figure out how much that it’s going to drop down given the age profile getting better, given that you seem to have under-shocked an on year, anyway. I guess I’m trying to piece together some of the machinations in New York. Up with it. for the year.

Wayne Kenneth Johnston — Chief Financial Officer

Yes, I can’t guide you too much. And they’re only forecasts, anyway. And it’s very early in the year to be calling a citrus crop, so I’m sorry about that, but yes, you’re right. Overall for us, as an on year, it was a disappointing year, which I think we called out pretty explicitly. Like early- and mid-season varieties overall were good, but those late-season varieties and particularly the late-season navels, were really pretty disappointing.

Jonathan Snape — Bell Potter — Analyst

Okay. And look. On the Arana berries and I just put the volumes in there this year, and I’m showing about ’21 initially. Is there any reason you shouldn’t be doing 2,100 tonnes of that stuff this year?

Wayne Kenneth Johnston — Chief Financial Officer

No, that’s what we’re aiming for. The reason we came in under — like we were happy with Arana definitely from a pricing outcome, but we were happy with it from a growing outcome essentially everywhere, except for FNQ which is the early-season volume, early-year volume, if you like, in Arana. We didn’t have a good season in ’21. It’s too early to say exactly what’s going to happen in ’22, but so far, it’s looking good. So yes, certainly we would expect to get back up around that 2,100-tonne level. an extra couple of hundred tonne of the new variety Delight. That’s also what we’re aiming for, so…

Jonathan Snape — Bell Potter — Analyst

Thank you.

Wayne Kenneth Johnston — Chief Financial Officer

Thanks, Jonathan.

Operator

The next question comes from Craig Woolford with MST Marquee. Please go ahead.

Craig Woolford — MST Marquee — Analyst

Good morning, Sean, apologies if some of these questions have been asked. I’ve been juggling two calls. So firstly, just on 2PH, do you expect — there was a guidance previously of, I think, 29 million of EBITDA for that business. Is — what you’ve seen in the business now and all the comments you just made just before there about the off-year versus on-year performance, do you still think that’s a fair guide for 2PH’s contribution on a pro forma basis?

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Look. I’ll just say one overall comment on 2PH and then hand it to Wayne, but we’re learning, right? Like so we haven’t grown in this sort of region before. Our understanding is the on-off disparity that occurs in the Southern regions is not as pronounced in the 2PH Farms, but we’re just going to have to learn that over time. But that’s why we haven’t been as explicit about calling out on-off timings, but in — with regards to the numbers there, Wayne?

Wayne Kenneth Johnston — Chief Financial Officer

Yes. No, it was asked, Craig, before, but that’s fine. It’s we did do a pro forma number when we announced the acquisition of — I think it was 28 million, high 28 million, 29 million. And I think that’s large played out, again pro forma because our ownership period was post mid-July. And clearly there’s obviously — when you take on acquisitions, there’s various other issues going on around acquisitions accounting, but next year, I mean, we’re clearly set off here. And we just have to see how that plays out. This year was a good year. We do believe still that — given where the sales fall around the period, that it is a — predominantly a second half earnings period than a first half, so — but it — around that 29 million is where we felt CY ’21 is a good pro forma number, anyway, yes.

Craig Woolford — MST Marquee — Analyst

Okay, great. One more, just on the international earnings for 2022. It’s been a great performance and growth in that business over the last couple of years. It does feel like there’s just been — everything has gone right with pricing as well as production, which is always good, but you’ve obviously got a few less tonnes in Morocco. Do you expect earnings growth in international in ’22?

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Look. We would say that we would, but various things need to go right. So obviously we’re a believer, right? So I think the fact that we’ve been able to execute on the Chinese growth plans so well is the team should be really commended for that. It’s no small feat to get, especially in ’21, to get that extra 100 hectares in and planted. And you’re right. The demand backdrop, as you hear me talk about all the time, just continues to be stunning. Of course, one day, hopefully, in the very distant future, I’m sure that we won’t continue to grow volume and keep growing price, but at the moment we’re enjoying that there is — as you’ll see in the appendices, in those slides there, there’s plenty of growth to come from the emerging middle class in China. So feeling really good about that. The Moroccan story is a little bit more complicated, and you’re right. We’ve called out that there’ll be a small volume decline probably in CY ’22 as we cycle out the old varieties.

You’ve got to remember some of these varieties have been there now for 12 — 10, 12, 13 years, which is incredibly old in the life of blueberries. And plainly, just like in Australia, what’s happened in Europe is consumers prefer larger, better-tasting blueberries of the yield curve and Arana, right? So we’re very confident in doing the replanting, but we’ve just got some short-term issues that we’ve got to deal with in terms of volume. What does all that add up to CY ’22? What I can say is, look, we’re off to a good start like we are. We’re really happy with how it’s going in China. Morocco, the harvest doesn’t come on as quick, but the early signs are it’s looking good. And we’ve got a very good customer backdrop in terms of demand and pricing, so yes. But yes, we would hope that it would get over the last year, but we need plenty of things to go right, as you would know.

Craig Woolford — MST Marquee — Analyst

Yeah, understood. Excellent. Thanks, john.

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Thank you.

Operator

The next question comes from Kurt Gelsomino with Morgans. Please go ahead.

Kurt Gelsomino — Morgans — Analyst

There are harsh on wine and thanks for taking my questions and Also apologies. I sort of jumped on a bit late, but maybe just back to Morocco there, could you maybe just talk through, I guess, how sort of maybe pricing, demand for that initial Agadir season has been; and just how the outlook for maybe the crop timing of both the Moroccan season season is progressing at this stage?

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Yes. Kurt, thanks for coming on. Look. It — honestly, the volumes have been very low just at the moment, so I can’t make massive predictions on this, but we have good relationships with the customers. They’re very in tune with the plan. They know about the replanting schedules. And we certainly know that we’ve got a backdrop of demand for new varieties as they increasingly come on. Initial pricing and demand looks solid, as I think we’ve said. And the crop is coming on steadily. So there’s a long way to go, and a lot happens in a short space of time, over the next few months, but so far, we’re in a good place with Morocco. I hope that helps.

Kurt Gelsomino — Morgans — Analyst

That helps. Probably just to build that out a little bit: Is it still your expectation that you get the majority of that crop off by sort of mid I think he is until the Spanish volume comes online?

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Yes, that’s always our goal, mate, exactly. We will still always receive a premium, but plainly when a great bulk of volume comes in of lower-quality blueberries, it drops the overall market and our premium is not as valuable. So yes, exactly that pricing window is the perfect spot for us to be.

Kurt Gelsomino — Morgans — Analyst

And is it just the Northern farms where the volumes seem slower to come off? Or it has been Agadir started a bit slower…

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Yes, it’s always Agadir that’s early. Look, a couple of dribs and drabs perhaps from the Northern farms but nothing even worth mentioning, let alone material.

Kurt Gelsomino — Morgans — Analyst

Awesome. And then just on Monarto. Apologies again if this has been covered, but I think you made that comment there where you do expect a significantly improved outcome in ’22. I guess, how are you going with sort of that facility sort of hitting its, I guess, maximum capacity as you plan? Are you sort of getting there on a run rate basis now?

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Yes. Look. I think I’ve been on the hot seat about Monarto now for years, so I’m certainly not going to be the one to say it’s all done and dusted and on we go. Growing mushrooms is hard, really hard. And it is influenced by a lot of things that are outside of our control, but the team really genuinely has been doing a sensational job with a lot of challenges. The improvement is showing up in the volumes and the consistency and the quality, so everything that you’d want to see. And the costs have always been there, everything you would want to see, but this is the year when we would really look forward to the entire mushroom category just steadily delivering because, like I’ve said before, the demand conditions are the best I’ve seen. And undoubtedly that’s been influenced a bit by our competitors not handling those problems as well as we have.

Kurt Gelsomino — Morgans — Analyst

And what are you sort of seeing just in terms of the retail pricing in that sort of mushroom category? I think maybe — is it Coles, I think, who sort of observed sort of price increases for prepacked? Are you sort of seeing a pretty supportive, yes, pricing environment as you do look to bring on maybe a little bit of extra volume this calendar year?

Sean Hallahan — Chief Executive Officer, Chief Operating Officer, Managing Director

Yes. So look. As you may recall, we heavily concentrate on prepack because we’ve invested in that area. And we also actually firmly believe in it, particularly in a COVID-19 backdrop. And we enter into tendered volumes with our retailers. And I think that the outcomes we’ve received there have been fair, to date, which is good. And then exactly, as you would say, in terms of pricing backdrop, what we’ve seen is short supply from our competitors in particular into the markets, which has led to increased pricing there and overall, I guess, provides a bit of a favorable backdrop, but as I’ve said many times, we’re a very different beast to our competitors in mushrooms. We’re the only multisite operator. And we’re firmly focused on major retail, where I think fair to say, to the others, without being disrespectful they’re more focused on that wholesale market and more about bulk and whereas for us the sweet spot is prepack into retail.

Operator

[Operator Closing Remarks]