Operationally, it was a strong production year with the number of pearls harvested exceeding 540,000. Improved profits were as a result of the strong market demand, where average price increased, coupled with a lower cost of goods sold for the year vs FY22.

This profit result was aided by a reduction in aggregated capitalised costs of oysters across the four-year growth cycle. This current four-year cycle included the period of COVID-19, during which our Company implemented a low-cost model to ensure we were as lean as possible. While we recognise that this necessary approach is not a sustainable long-term strategy, it is important to note that the combination of higher average prices and reduced production costs contributed significantly to gross margin, and consequently, our profit result. 

As indicated in last year’s report, the quality of pearls produced in the second half of FY22 trended downwards. This trend has persisted throughout the current year, primarily driven by a decline in the average pearl size in H1. This reduction in size significantly impacts our perception of quality and how it is measured. 

Although we have seen a stabilisation and modest improvement in this measure over H2 FY23, there remains work to be done. During the year the uptick in global demand for pearls has resulted in price increases. These price increases have more than offset the reduction in average size, leading to the attainment of our highest average price for pearls in many years. 

As foreshadowed in last year’s report, we have repaid the last of our outstanding debt of $1.125M, concluding the year in a strong financial position, with cash in the bank of $7.8M. Furthermore, we have successfully secured an increase of our overdraft facility to $2.5M to provide us with working capital flexibility to better manage our sales cycles and to maximise opportunities.

In view of the improved results in FY23 the Board has resolved to declare a special dividend of 0.35 cents per share (franked to 100%) and payable on 26 September 2023. 

Atlas’ Pearls performance over the year is largely attributable to the ongoing work and dedication of the entire team across all facets of the business. Their collective efforts were instrumental in executing the initiatives that we identified from an operational and sales perspective. This year, we held two impactful workshops convening senior leaders from operations, sales, and finance. These sessions were pivotal in determining the strategic focal points essential for realising our operational budget goals, whilst also aligning with our longer-term strategy, and are now a permanent fixture in our annual calendar of events.

Sales initiatives

Atlas Pearls is committed to building and executing a strategy that positions us as a multi-channel distribution company, that looks to maximise the value of every pearl that we grow and harvest. This includes our traditional auctions, which have been refined to now be hybrid auctions, allowing customers to physically inspect goods, whilst also allowing remote participants to engage through our online platform. Beyond auctions, pearls are made available for purchase online between events, which has increased customer reach and created competitive tension. This online visibility has generated opportunities to new markets and customers. Furthermore, over the course of the year, we re-engaged with our Australian and international wholesale customers to offer a range of value-add products comprising matched pairs, pearl strands, and a selection of loose pearls. 

We have reopened our farm retail operations at North Bali and Alyui. To further expand our retail presence, we eagerly anticipate the reopening of the Pungu retail store in early FY24. Additionally, we are developing a ‘Farm Tour’ experience for our customers that will provide them with invaluable insights into the intricacies of pearl farming and granting a glimpse into our operations. Beyond the technical aspects, this tour also serves as a conduit to highlight the sustainability of pearls and our operations, showcasing our commitment to the environment, our workforce, and all stakeholders. This immersive experience will epitomise our aspiration to foster a connection between our customers, our pearls, and our collective vision for a sustainable future. 

Operations Initiatives

Over the year, progress has been made in a series of pivotal improvements and strategic initiatives aimed at achieving consistency in pearl quality, and improving operational efficiency and productivity. They align with our long-term growth strategy and include: 

Genetics Audit

We have a genetics program to understand the breadth of diversity within our broodstock. This initiative commenced with the sampling of approximately 3,500 oysters to enable genetic sequencing of the oysters. This data will be used in a breeding matrix to maximise the diversity of our broodstock to strategically optimise crosses on an individual basis. While this is a long-term project, spanning five to eight years before it will drive substantial change and improvement, it will enrich our understanding and enhancement of oyster genetics. The outcomes of this initiative will pave the way for tangible benefits for our business going forward in the short and longer term. 

Conditioning System

In pursuit of better gamete conditioning during spawning, we have embarked on trials for an advanced ‘conditioning system’. Through these trials, we aim to establish robust processes that facilitate enhanced control over our spawning cohorts’ physical condition. This will empower us to select oysters from specific families for targeted crossbreeding, thereby further leveraging the benefits of the genetic audit. This initiative underscores our commitment to staying at the forefront of technological and genetic innovation. 

Data Capture

We’ve initiated a data capture project to centralise, in a cloud-hosted database, almost 250 unique data fields over the four-year life cycle of each production cohort. The aim is to consolidate all the data points that we have across multiple farms and hatcheries into the centralised database. This concerted effort will enable us to extract actionable insights to facilitate informed decisions going forward. In addition to capturing real-time data, we’ve embarked on the tedious but necessary step of inputting historical data. This will equip us with the means to monitor trends and outcomes in certain key areas of our operations, ushering in data-driven precision to our endeavours. 

ESG/Sustainability and Community Engagement (CSR)

Atlas Pearls has a longstanding commitment to supporting our villages, stakeholders, and communities around our farms. Recognising our role as both neighbours and key employers in our operational areas, we have embarked on the early stages of an ESG (Environmental, Social, and Governance)/sustainability initiative. This will build on the foundation of existing data concerning our environmental impact and ongoing environmental initiatives. The initiative’s scope includes the establishment of a centralised co-ordination and measurement system for our already substantial Corporate Social Responsibility (CSR) programs, as well as our continuous improvement in the realms of ESG and sustainability.

New Operations Vessel

Following preliminary Board approval, we will start shortly construction of a steel vessel that will replace some of our aging fleet. This new vessel is designed to replace existing vessels responsible for transporting seeded shell from our hatcheries and nurseries to our designated grow-out sites. Beyond transportation, it is engineered to facilitate on-board oyster harvesting and seeding activities, within an enhanced 

operating environment. The vessel will also offer accommodations for our technical team who go from site to site performing crucial harvest and seeding operations. This investment underscores our dedication to leveraging technology for improved efficiency, operational excellence, and a heightened working environment. It will also reduce the capital intensity at new sites as the mobile infrastructure can service multiple sites due to our staggered harvesting schedules. 

New site discussions

We are currently engaged in discussions regarding a potential new farming site. Although our discussions have yielded promising results thus far, there remain some governmental and administrative approvals to be navigated before the finalisation of this endeavour. Our commitment to rigorous due diligence is evident as we work to secure all necessary approvals and pave the way for this exciting new venture. Once approvals are received, we will start to build seeded oyster stocks at this grow-out site, but we will not see harvested pearls from this operations until FY26.

We acknowledge the hard work and dedication from our committed management team who have demonstrated exceptional commitment in executing the strategy into tangible actions, and deftly navigating through periods of change. It is important to emphasise that Atlas Pearls thrives on a culture of continuous improvement and evolution, not just in terms of the perspective of our standard operating procedures related to our oysters, but also in how we view and measure the key aspects of our business.

Our focus remains on the production and distribution of the highest quality, ethically produced, and luxurious pearls in the world, a testament to our commitment to both uncompromising luxury and responsible practices that safeguard our environment and the communities we touch.

Michael Ricci 
CEO - 30 August 2023