2016 AGENDA Business Overview [# 03] Industry Trends [# 20] - - PowerPoint PPT Presentation

2016

annual results presentation

for the 12 months ended 30 September 2016

• Business Overview

[# 03]

• Industry Trends

[# 20]

• Financial Overview

[# 28]

• Industry Matters

[# 39]

• Outlook

[# 41]

• Additional Information

[# 44]

2

AGENDA

business overview 2016

4

• Revenue
• Operating profit
• Earnings per share
• Headline earnings per share

52%

• The period under review reflects a significant decrease in profitability over the prior

year, on the back of higher feed prices and the inability to recover input costs

Fina Financ ncial ial Ind Indica icator tors

52% 50% 6%

THE PERIOD IN PERSPECTIVE

5

• Increased poultry sales volumes despite production cutbacks
• Record high poultry imports ≈ 43% of local production
• Drop in poultry selling prices due to supply and demand imbalance
• Severe drought as a result of the strongest El Niño on record
• Rand depreciation impacting the cost of raw material imports
• Increase in the live bird cost due to record high feed prices
• Operating expenses increase year-on-year below inflation

THE PERIOD IN PERSPECTIVE

1,101

• 500
• 300
• 100

100 300 500 700 900 1,100 1,300

PBIT F2015 Internal Feed Cost Broiler Selling Price Other PBIT F2016

6

• PBIT reconciliation

(R million)

709 549 207 50

THE PERIOD IN PERSPECTIVE

poultry division 2016

8

Operating profit - R million

• Operating profit down 91.1%
• Net margin 0.7% F2015: 7.6%
• Feed costs up 17.4%

Revenue - R million

• Revenue up 4.5%
• Broiler volumes up 4.2%
• Broiler selling prices down 0.6%

8,740 9,129

• 1,000

2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 F2015 F2016 661 59

• 100

200 300 400 500 600 700 F2015 F2016

POULTRY DIVISION - OVERVIEW

9

• Broiler sales volumes increased due to sales out of higher opening stock

levels despite planned broiler production cutbacks during the period

• Broiler selling prices decreased marginally on the back of an imbalance

in supply and demand leading to heightened promotional activity

• Continued high level of poultry imports - avg. past twelve months ≈

8,2 million bpw (43%) with an increase in bone-in-portions from the EU

• Broiler feed prices increased significantly (17.4%) for the period

adversely impacting the live bird production cost

• Improved broiler production efficiencies – feed conversion efficiency

and weight for age

POULTRY DIVISION - OVERVIEW

10 10

53% 3% 11% 8% 4% 21% F2016 478 027 Tons

Volume increase ≈ 4.2%

53% 3% 12% 8% 3% 21% F2015 458 881 Tons

Product Mix POULTRY DIVISION - SALES

11 11 70% 80% 90% 100% 110% 120% 130% 140% 150% F2010 F2011 F2012 F2013 F2014 F2015 F2016

Mortality Feed conversion (FCR) Efficiency factor (PEF)

Key indicators base-lined to 100% in 2010

BROILER PRODUCTION PERFORMANCE

12 12 94% 96% 98% 100% 102% 104% F2010 F2011 F2012 F2013 F2014 F2015 F2016

Slaughter age Live weight Processing yield

Key indicators base-lined to 100% in 2010

BROILER PRODUCTION PERFORMANCE

feed division 2016

14 14

Operating profit - R million

• Operating profit up 14.7%
• Net margin 6.8% F2015: 6.8%
• Standerton – good contribution

Revenue - R million

• Revenue up 15.3%
• Sales volumes down 2.3%
• Average selling prices up 18.1%

6,236 7,190

• 1,000

2,000 3,000 4,000 5,000 6,000 7,000 8,000 F2015 F2016 423 485

• 100

200 300 400 500 F2015 F2016

FEED DIVISION - OVERVIEW

15 15

• Feed volumes decreased due to poultry production cutbacks and credit

risk management in the external market

• SAFEX Yellow Maize – F2016 avg. R3 354 per ton (F2015: R2 367) up

R987 per ton year-on-year

• Increased raw material costs - successfully recovered in the selling price
• f animal feed
• Rand per ton expense increases well below inflation
• Opportunity to optimise feed volumes amongst the three feed mills in the

central region has benefited production costs

• Standerton feed mill contributed significantly to the division’s results with

production now at 73% of rated capacity

FEED DIVISION - OVERVIEW

16 16

60% 7% 20% 13%

Meadow Feeds - Sales Mix

60% 6% 20% 14% 605 066 Tons F2015 1 429 772 Tons F2016 1 396 301 Tons

Volume decrease ≈ 2.3%

FEED DIVISION - SALES

• ther africa division

2016

18 18

Operating profit - R million

• Operating profit down 70%
• Net margin 1% F2015: 3.4%
• Power outages
• Exchange rate impact

Revenue - R million

• Revenue up 4.4%
• Sales volumes down 5%
• Average selling prices up 9.9%

494 515

• 100

200 300 400 500 600 F2015 F2016 17 5

• 2

4 6 8 10 12 14 16 18 F2015 F2016

OTHER AFRICA DIVISION - OVERVIEW

19 19

Zambia

• Profitability at Tiger Animal Feeds improved for the period although

negatively impacted by high diesel costs due to power outages

• Tiger Chicks – sales realisations under sever pressure impacted by an
• versupply in the market and depressed demand

Mozambique

• Profitability at Meadow Mozambique severely impacted by currency

exchange movements

• Mozpintos sales volumes decreased due to weak demand under hyper-

inflationary environment Swaziland

• Acceptable performance from National Chicks Swaziland

OTHER AFRICA DIVISION - OVERVIEW

industry trends 2016

21 21

Source: CJA Strategic Risk Brokers

SAFEX YELLOW MAIZE PRICE

22 22

Source: CJA Strategic Risk Brokers

SAFEX YELLOW MAIZE vs. CBOT IN RAND TERMS

23 23

Source: CJA Strategic Risk Brokers

SAFEX SOYA BEANS PRICE

• 5,000

10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000 60,000

Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16

Total poultry imports 6 per. Mov. Avg. (Total poultry imports) 24 24

Source: SAPA

Tons

POULTRY IMPORTS PER MONTH

25 25

Source: SAPA 12.33 12.83 13.51 13.34 13.42 13.20 13.38 13.46 13.18 12.79 12.86 13.56 13.91 14.90 15.53 14.51 13.66 13.21 13.42 13.15 12.67 12.51 13.40 15.03 15.79 15.55 14.82 13.85 14.08 15.53 15.35 15.24 15.07 15.42 15.44 16.01 16.27 16.26 17.05 16.15 16.60 16.88 16.97 17.13 17.23 15.94 16.96 16.74 17.44 18.48 18.68 17.69 17.93 18.32 18.65 19.18 18.82 18.23 18.00 17.88 18.28 19.26 19.15 18.02 18.33 18.05 18.27 18.90 18.57 17.93 18.47 18.29

11.00 11.50 12.00 12.50 13.00 13.50 14.00 14.50 15.00 15.50 16.00 16.50 17.00 17.50 18.00 18.50 19.00 19.50 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16

Broiler selling price Six month average Rand per kilogram

INDUSTRY BROILER SELLING PRICES

26 26

Source: SAPA & CJA Strategic Risk Brokers 70 75 80 85 90 95 100 105 110 115 120 125 130 135 140 145 150 155 160 165 170

70 75 80 85 90 95 100 105 110 115 120 125 130 135 140 145 150 155 160 165 170 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

Index (October 2009 = 100) Broiler selling price index SA food price index

• Poly. (Broiler selling price index)
• Poly. (SA food price index)

BROILER PRICE vs. FOOD PRICE INFLATION

27 27

Source: SAPA & Own Data

• 30%
• 20%
• 10%

0% 10% 20% 30% 40% Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16

% Change in feed price % Change in broiler selling price

CHANGE IN BROILER PRICE vs. FEED PRICE

financial overview 2016

29 29

Year ended 30 September 2016 R million 2015 R million % change Revenue 11 954 11 266 Operating profit 549 1 101

Operating profit margin 4.6% 9.8%

Net finance costs (22) (10) Share of profit in associates (1) 3 Profit before tax 526 1 094 Tax (154) (314) Profit for the period 372 780 Headline earnings 373 780 EPS – Cents 964 2 013 HEPS – Cents 965 2 016

6% 50% 52% 52% 52% 52% 52%

ABRIDGED STATEMENT OF COMPREHENSIVE INCOME

1.3 1.7 2.2 2.3 3.3 3.6 4.4 4.6 5.1 5.0 5.3 5.8 6.0 7.0 8.7 9.1 2.0 2.7 2.7 2.7 2.5 2.7 3.5 5.1 4.0 3.6 3.5 4.3 4.9 5.5 6.2 7.2 2.8 3.7 3.9 4.1 4.8 5.2 6.3 6.9 7.4 7.0 7.2 8.2 8.5 9.6 11.3 12.0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Poultry Feed Other Africa External revenue 30 30

(R billion)

GROUP ANNUAL REVENUE

124 90 174 238 383 494 476 163 282 262 353 137

• 112

104 661 59 79 130 153 151 214 272 333 385 261 281 282 289 329 354 423 485 203 220 328 389 597 766 809 548 581 585 674 477 262 493 1,101 549

7.3% 5.9% 8.3% 9.6% 12.3% 14.8% 12.8% 6.7% 6.6% 8.4% 9.3% 5.8% 3.1% 5.1% 9.8% 4.6%

• 120

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Poultry Feed Other Africa 31 31

(R million)

GROUP ANNUAL OPERATING PROFIT

134 128 229 124 140

• 3
• 117

5 45 59 351 310 194

• 135

151 130 133 149 154 135 156 173 157 197 186 237 233 252 304 281 375 299 324 153 59 203 213 280 550 551 429 120

• 0.1

• 140
• 40

1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 Poultry Feed Other Africa Change in feed price Change in poultry selling price 32 32

(R million)

GROUP SIX MONTHLY OPERATING PROFIT

Source: SAPA & Own Data

33 33

September 2016 R million September 2015 R million % change Non-current assets 2 230 2 234 Assets held for sale 25

• Net working capital

1 003 776 Current assets (excl. cash) 2 588 2 261 Current liabilities (excl. borrowings) (1 585) (1 485) Non-current liabilities (excl. borrowings) (646) (582) Net assets 2 612 2 428 Net debt 240 57

• Loans

35 83

• Cash and cash equivalents

205 (26) Equity 2 372 2 371 Total 2 612 2 428

8% 8% 29% 7% 14%

ABRIDGED STATEMENT OF FINANCIAL POSITION

34 34

For the twelve months ended 30 September 2016 R million 2015 R million Variance R million Current assets 2 588 2 261 327 Biological assets 735 668 67 Inventory - Poultry 314 425 (111)

• Feed

362 245 117

• Other Africa

41 32 9 Trade receivables 998 786 212 Other 138 105 33 Current liabilities (1 585) (1 485) (100) Trade payables (1 390) (1 156) (234) Other (195) (329) 134 Net working capital 1 003 776 227

WORKING CAPITAL

35 35

For the twelve months ended 30 September 2016 R million 2015 R million Cash operating profit 546 1 436 Working capital movement (46) (441) 500 995 Tax paid (122) (344) Net interest paid (22) (10) Capital expenditure (174) (203) 182 438 Dividends paid (373) (321) Other cash flow items 10 10 (181) 127 Loans (repaid) / received (49) (120) Movement in cash equivalents (230) 7 Effect of exchange rate changes (1) (13) Opening balance 26 32 Closing balance (205) 26

ABRIDGED STATEMENT OF CASH FLOW

36 36

Twelve months ended 30 September 2016 R million 2015 R million Depreciation 144 153 Total capex 168 203 Commitments 105 Total spend and committed 273

CAPITAL EXPENDITURE

272 326 487 631 958 1286 1381 840 890 960 1148 787 434 864 2016 965 90 108 168 230 380 585 700 700 700 760 810 656 222 440 1150 490

500 1000 1500 2000 2500

F2001 F2002 F2003 F2004 F2005 F2006 F2007 F2008 F2009 F2010 F2011 F2012 F2013 F2014 F2015 F2016

Headline earnings per share Dividend per share 37 37

(cents per share)

HEADLINE EARNINGS & DIVIDEND PER SHARE

38 38

• Two major variables that negatively impacted profitability:
• Feed – drought related maize cost increases
• Poultry – no movement in selling prices
• Net debt to equity ratio of 10.1% (30 Sep 2015: 2.4%)
• Final dividend of 100 cps (2.0x cover), within the Group’s liquidity

capability

IN SUMMARY

industry matters 2016

40 40

• AGOA / sanitary & phytosanitary measures

[# 63]

• ITAC safeguard duty against the EU

[# 64]

• Impact of new brining regulations

[# 65]

• Industry consolidation and contraction

[# 66] INDUSTRY MATTERS

• utlook

2016

42 42

• The weakened state of consumer spending is unlikely to improve due to poor

economic growth and higher unemployment which will continue to constrain an increase in the per capita consumption of poultry.

• The new brining regulations will negatively impact total kilograms sold at the

revised brining level of 15% on IQF product.

• High maize and feed prices will continue for at least the first half of 2017 on

the back of the severe drought.

• The safeguard duty recommended by ITAC against the EU is not expected to

significantly curb poultry import levels.

• The consensus amongst weather forecasters is that normal rainfall can be

expected over the next South African maize growing season, which should lead to lower SAFEX maize prices from May 2017.

• Poultry production efficiencies are expected to remain good on the back of

the inherent genetic potential of the Ross 308 breed.

• Contraction in local production due to cutbacks, resizing and closures could

result in an improved balance between supply and demand.

OUTLOOK

7 April 2016

additional information 2016

45 45

• It is expected that the demand for poultry will continue to

be constrained due to limited consumer discretionary spend and weaker seasonal poultry consumption patterns.

• High maize and feed prices will continue until at least

rainfall patterns normalise, with some mid-size industry producers already showing signs of financial distress.

• Rand weakness will continue to negatively impact input

costs on imports of poultry genetics, maize and soya.

• The high level of poultry imports and the potential AGOA

impact of US poultry will see local broiler production cutbacks due to an imbalance in supply and demand.

• A weakening of the El Niño weather event could favour

better planting conditions for maize in the coming season as normal rainfall is predicted.

• World raw material stocks are exceptionally healthy.

WHAT WE SAID IN MAY 2016

46 46

37 36 48 48 51 65 55 31 31 30 34 23 12 20 41 19 31 33 39 39 46 49 45 25 26 26 29 21 13 19 36 16 8.9 7.5 10.0 11.4 13.9 16.5 14.5 9.3 9.3 9.9 11.0 7.4 4.5 6.5 11.1 5.8 7.3 5.9 8.3 9.6 12.3 14.8 12.8 8.0 7.8 8.4 9.3 5.8 3.1 5.1 9.8 4.6 5.5 5.5 6.1 4.7 4.1 4.4 4.3 4.7 4.8 3.6 3.7 4.0 3.8 3.9 4.2 4.1

• 5.0

10.0 15.0 20.0 25.0 30.0 10 20 30 40 50 60 70 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16

RONA ROE EBITDA margin PBIT margin Asset turn

KEY FINANCIAL RATIOS

47 47

8.53 10.79 14.34 17.36 23.83 28.28 33.47 34.24 35.38 37.43 41.36 41.65 44.16 49.95 61.05 61.07 23 20 21 29 17 9 19 12 15 11 10 16 21 18 24 34 26 22 21 12 14 14 9 3 7 15 9 2 10

10 20 30 40 50 60 70 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16

NAV share Working capital days Net Debt / Equity

KEY FINANCIAL INDICATORS

143 134 119 142 168 192 229 207 17.4% 15.7% 13.5% 16.4% 17.7% 19.6% 23.9% 20.3%

12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25 50 75 100 125 150 175 200 225 250 2010 2011 2012 2013 2014 2015 2016 2017E

End stock STU 48 48 Million Tons

• Maize carry out on the international markets highest since 1987 / 88

Source: CJA Strategic Risk Brokers

WORLD CORN ENDING STOCKS vs. STU

49 49 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17E 2016/18F Actual Actual Actual Actual Actual Estimate Forecast Carry In (1 May) 2,336 991 1,414 589 2,074 2,270 813 Crop Estimate 10,360 12,121 11,811 14,250 9,955 7,537 13,001 Retentions 433 330 330 550 Sagis Delivery 10,394 11,972 11,072 13,817 9,625 7,207 12,451 Minus early deliveries 740 Imports 421 11 80 65 1,968 2,539 360 Total Supply 13,151 12,973 12,566 14,471 13,685 12,015 13,624 Domestic Usage Food 4,512 4,499 4,583 4,840 4,695 4,752 4,740 Domestic Usage Feed 4,362 4,378 4,715 5,041 5,520 5,336 5,161 Gristing, withdrawn & released 693 674 480 376 319 341 330 Total Domestic Usage 9,567 9,551 9,777 10,257 10,535 10,428 10,231 Exports & Sundries 2,590 2,008 2,122 2,153 880 774 1,463 Plus early deliveries 740 Carry Out (30 Apr) 994 1,414 590 2,062 2,270 813 1,931 No of days usage 38 54 25 73 79 28 69 STU 8.17% 12.23% 4.96% 16.62% 19.89% 7.26% 16.51%

Marketing year (May to April) '000 tons

Source: CJA Strategic Risk Brokers

SOUTH AFRICA – TOTAL MAIZE SUPPLY & DEMAND

19.7% 8.2% 12.2% 5.0% 16.6% 19.9% 7.3% 16.5% 0% 5% 10% 15% 20% 25% 500 1,000 1,500 2,000 2,500 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17E 2017/18F

Carry out Maize stock to use ratio 50 50 ‘000 Tons

Source: CJA Strategic Risk Brokers

RSA MAIZE CARRY OUT & STOCK TO USE RATIO

51 51

Source: International Research Institute for Climate and Society (IRI) – Columbia University

EL NIÑO SOUTHERN OSCILLATION (ENSO) - FORECAST

52 52

VHI of previous year VHI of current year SOUTH AFRICA – VEGETATION HEALTH INDEX

Source: NOAA - National Environmental Satellite, Data, and Information Service (VHI)

53 53

67.0 44.6 65.9 42.5 64.9 40.0 66.2 42.7 65.0 45.7 63.3 43.6

17.0 26.8 18.9 29.2 16.5 25.0 14.7 20.4 11.4 14.9 15.6 20.3 7.0 6.8 6.0 5.7 7.5 7.4 7.4 7.5 9.1 8.6 6.4 5.6 0.4 1.1 0.9 2.4 0.3 0.9 0.4 1.3 0.2 0.9 0.4 1.2

3.1 5.4 2.5 3.9 4.3 6.8 4.8 7.1 7.5 10.3 7.3 10.3

0.3 4.1 0.4 5.5 0.3 4.2 0.4 6.2 0.3 4.7 0.3 5.0 5.2 11.2 5.4 10.8 6.2 15.6 6.1 14.9 6.4 14.9 6.7 14.0

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1H14 Incl. 1H14 Contr. 2H14 Incl. 2H14 Contr. 1H15 Incl. 1H15 Contr. 2H15 Incl. 2H15 Contr. 1H16 Incl. 1H16 Contr. 2H16 Incl. 2H16 Contr. Maize Soya Bean Meal Sunflower Meal Fish Meal Full Fat Soya Vitamins, Minerals and Medication Other

BROILER FEED INGREDIENT INCLUSION & COST CONTRIBUTION

Source: Own Data

54 54 Ex BRAZIL – November 2016 FROZEN LEG QUARTERS BULK PACKED CIF DBN US$ per ton TON 1 100.00 1 100.00 1 100.00 SA COST R/$ exchange rate R$ 13.50 14.00 14.50 Rand per ton TON 14 850.00 15 400.00 15 950.00 25 680.00 Rand per kg KG 14.85 15.40 15.95 25.68 Duty per kg KG 37% 37% 37%

• Clearance costs

KG 0.65 0.65 0.65

• COST INTO STORAGE

KG 20.99 21.75 22.50 25.68 Storage KG 0.50 0.50 0.50

• Distribution

KG 0.70 0.70 0.70 0.81 Marketing, Administration, Finance KG 0.80 0.80 0.80 0.66 TOTAL COST KG 22.99 23.75 24.50 27.15 Ex NETHERLANDS – November 2016 FROZEN LEG QUARTERS BULK PACKED CIF DBN US$ per ton TON 1 140.00 1 140.00 1 140.00 SA COST R/$ exchange rate R$ 13.50 14.00 14.50 Rand per ton TON 15 390.00 15 960.00 15 960.00 25 680.00 Rand per kg KG 15.39 15.96 16.53 25.68 Duty per kg KG 3.86% 3.86% 3.86%

• Clearance costs

KG 0.65 0.65 0.65

• COST INTO STORAGE

KG 16.63 17.23 17.82 25.68 Storage KG 0.50 0.50 0.50

• Distribution

KG 0.70 0.70 0.70 0.81 Marketing, Administration, Finance KG 0.80 0.80 0.80 0.66 TOTAL COST KG 18.63 19.23 19.82 27.15

BRAZIL, EU & USA PRODUCT COST BENCHMARK

Source: Own Estimates

55 55 Ex EUROPE NON-TARIFF COUNTRIES – November 2016 FROZEN LEG QUARTERS BULK PACKED CIF DBN US$ per ton TON 1 180.00 1 180.00 1 180.00 SA COST R/$ exchange rate R$ 13.50 14.00 14.50 Rand per ton TON 15 930.00 16 520.00 17 110.00 25 680.00 Rand per kg KG 15.93 16.52 17.11 25.68 Duty per kg KG 0.00% 0.00% 0.00%

• Clearance costs

KG 0.65 0.65 0.65

• COST INTO STORAGE

KG 16.58 17.17 17.76 25.68 Storage KG 0.50 0.50 0.50

• Distribution

KG 0.70 0.70 0.70 0.81 Marketing, Administration, Finance KG 0.80 0.80 0.80 0.66 TOTAL COST KG 18.58 19.17 19.76 27.15 Ex USA – November 2016 FROZEN LEG QUARTERS BULK PACKED CIF DBN US$ per ton TON 800.00 800.00 800.00 SA COST R/$ exchange rate R$ 13.50 14.00 14.50 Rand per ton TON 10 800.00 11 200.00 11 600.00 25 680.00 Rand per kg KG 10.80 11.20 11.60 25.68 Duty per kg KG 37.00% 37.00% 37.00%

• Clearance costs

KG 0.65 0.65 0.65

• COST INTO STORAGE

KG 15.45 15.99 16.54 25.68 Storage KG 0.50 0.50 0.50

• Distribution

KG 0.70 0.70 0.70 0.81 Marketing, Administration, Finance KG 0.80 0.80 0.80 0.66 TOTAL COST KG 17.45 17.99 18.54 27.15

BRAZIL, EU & USA PRODUCT COST BENCHMARK

Source: Own Estimates

56 56

Local broiler production ≈ 19,2 million birds per week

26% 22% 8% 6% 5% 33% Astral RCL Country Bird Daybreak Sovereign Other

Source: Own Estimates

LOCAL BROILER PRODUCTION & MARKET SHARE

57 57

• Avg. poultry imports ≈ 8,2 million birds per week (past 12 months)

18% 16% 5% 4% 4% 23% 30% Astral RCL Country Bird Daybreak Sovereign Other Imports

Source: Own Estimates & SAPA

TOTAL POULTRY MARKET PARTICIPATION

58 58

F2015 42,363 38,807 27,504 28,896 31,305 40,372 38,335 37,860 41,648 48,437 41,710 42,828 F2016 37,789 45,469 43,608 38,736 34,859 57,673 48,251 54,514 54,048 45,151 42,040 49,071 % Var

• 10.8

17.2 58.6 34.1 11.4 42.5 25.9 44.0 29.8

• 6.8

0.8 14.6 bpw* 6,7 8,1 7,7 6,9 6,2 10,3 8,6 9,7 9,6 8,0 7,5 8,7

*bpw ≈ million birds per week

Source: SAPA Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep F2013 47,942 89,095 117,712 145,426 172,727 207,148 243,623 282,790 316,047 343,913 371,741 409,158 F2014 28,250 66,647 99,050 124,194 148,092 179,811 216,947 253,490 294,102 320,603 346,582 383,710 F2015 42,363 81,170 108,674 137,660 168,965 209,337 247,672 285,532 327,180 375,537 417,247 460,075 F2016 37,789 83,258 126,866 165,602 200,461 258,134 306,385 360,899 414,947 460,098 502,138 551,209

100,000 200,000 300,000 400,000 500,000 600,000

F2013 F2014 F2015 F2016

TOTAL POULTRY IMPORTS (CHICKEN, TRUKEY

, MDM)

59 59

Brazil 50.4% EU 41.7% Argentina 5.8% US 0.1% Other 2.0%

Country of origin for poultry imports - 2015

Brazil 43.3% EU 46.6% Argentina 3.4% US 4.6% Other 2.1%

Country of origin for poultry imports - September 2016 YTD 478 447 tons 424 342 tons

TOTAL POULTRY IMPORTS – COUNTRY OF ORIGIN

Source: SAPA

60 60 Country Imports (tons) 2013 2014 2015 2016 YTD Brazil 188 084 168 666 241 180 183 621 Netherlands 66 512 73 987 61 995 79 936 United Kingdom 39 190 43 009 15 985 34 419 Spain 1 080 10 356 27 090 28 819 United States 11 076 5 022 331 19 249 Belgium 1 797 11 994 35 613 18 904 Argentina 28 479 21 586 27 718 14 536 Hungary 3 889 7 758 10 547 11 230 Ireland 5 241 8 286 13 336 11 109 Denmark 7 422 6 133 9 508 7 533 Canada 8 854 5 255 131 6 386 Germany 23 271 21 821 554 5 338 Thailand 2 547 347 7 616 1 951 Poland

• 551

Chile 111 928 408 336 France 1 624 7 294 24 895 78

Poultry imports according to main country of origin for 2013 to 2015 and 2016 YTD

TOTAL POULTRY IMPORTS – COUNTRY OF ORIGIN

Source: SAPA

61 61

5 10 15 20 25 30 35 40 5 10 15 20 25 30 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 RSA broilers (slaughtered / week) Poultry imports (birds / week) Broiler selling price (Rand / kg) Per capita consumption (kg) Million birds per week / Rand per kg kilograms

Source: SAPA & DAFF

LOCAL BROILER PRODUCTION, IMPORTS & PER CAPITA CONSUMPTION

62 62

1000 2000 3000 4000 5000 6000 7000 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16

Cents per kg Chicken Pork Beef Mutton Feed Conversion Rate 1.60 2.2 5.5 5.0 Per Capita Consumption 40.3 kg 4.8kg 18.8kg 3.6kg

Source: SAPA, FNB, Red Meat Industry Forum

SOUTH AFRICAN PROTEIN PRICE COMPARISON

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• The Government is to be approached to apply equal standards to

poultry imports in terms of:

• Enforcement of sanitary and phytosanitary standards
• Veterinary inspection at port of entry
• Carcass grading standards / quality
• Brining certification / legislation
• Restricting reworking
• A court challenge by SAPA to the Salmonella testing standards which

were lowered to suit the US poultry imports under AGOA is in progress

• The SA pork industry is also in the process of challenging the pork

import standards on product from the US

AGOA & SPS MEASURES

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• The investigation for safeguard measures in terms of Article 16 of the

TDCA against the EU was initiated by ITAC on 19 February 2016

• These measures take the form of a safeguard duty on EU imports which

are zero rated besides the anti-dumping duties against 3 EU countries

• ITAC have presented their decision in this matter to Min. Rob Davies for

his approval or further action

• It is anticipated that provisional measures will be implemented during

November 2016

• Any safeguard duty other than the maximum bound rate of 82% under

the WTO rules may not have a material impact on EU poultry imports

• US imports under AGOA are currently lower than the set quota and the

US blame the tariff free imports from the EU as a causal factor

POULTRY IMPORTS

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• The new brining regulations set at 85 : 15 for individually quick frozen

(IQF) portions became effective on 22 October 2016

• Astral was granted a dispensation to clear all product brined at 70 : 30

by the end of January 2017

• Based on the new brining percentages sales volumes will be negatively

impacted in the new financial year

• However selling price levels for the traditional 2 kg and 5 kg IQF pack

sizes will be adjusted to compensate for the higher cost of these products

• New IQF pack sizes have also been introduced at 1,7 kg [replacing

2 kg] and 4,2 kg [replacing 5 kg] with the same price point

• The full impact of lower volumes, higher prices and new product lines

can only be assessed in at least six months time

BRINING REGULATIONS

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• Intentional short term cutbacks during 2016 due to an imbalance in

supply and demand

• RCL indicates in September 2016 cutback plans which could impact ≈

1 000 jobs

• Mike’s Chickens (Polokwane) closed in July 2016 shedding ≈ 600 jobs
• Country Bird Holdings much publicised takeover bid of Sovereign

Foods

• Some contract broiler producers consider converting broiler sheds to

house laying hens producing table eggs

• Astral will pursue consolidation opportunities as they present

themselves

INDUSTRY CONSOLIDATION & CONTRACTION

67 67

Chris Schutte Chief Executive Officer Tel : +27 (0) 12 667 5468 Fax : +27 (0) 86 504 2002 email: Chris.Schutte@astralfoods.com

www.astralfoods.com

Daan Ferreira Chief Financial Officer Tel : +27 (0) 12 667 5468 Fax : +27 (0) 86 504 1602 email: Daan.Ferreira@astralfoods.com