2017 AGENDA Business Overview [# 03] Industry Trends [# 21] - - PowerPoint PPT Presentation

2017

interim results presentation

for the six months ended 31 March 2017

• Business Overview

[# 03]

• Industry Trends

[# 21]

• Financial Overview

[# 29]

• Industry Matters

[# 40]

• Outlook

[# 42]

• Additional Information

[# 46]

2

AGENDA

business overview 2017

4

THE PERIOD IN PERSPECTIVE

“The period under review includes a number of factors that distort year-on-year comparisons and trends”

• Impact of brining legislation
• Sales volume / tonnage
• Average sales realisation and product mix
• IQF cost (15% brine cap)
• Impact of revised poultry feeding program
• Feed cost
• Feed conversion efficiency
• Live cost focus
• Lower feed volumes
• Planned poultry production cutbacks
• Marked improvement in feed conversion
• External market contraction

5

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

54%

Fina Financ ncial ial Ind Indica icator tors

55% 51% 1%

THE PERIOD IN PERSPECTIVE

6

THE PERIOD IN PERSPECTIVE

Feed

• Volumes down
• Market contraction
• Smallest maize crop on record
• Maize import program
• Old / New season crop swing
• Rand per ton margin down

Other Africa

• Improvement in profitability but contribution relatively low

Poultry

• Volumes down
• Average realisations up
• Record high feed costs
• Planned production cutbacks
• Enhanced feeding program
• Improved poultry efficiencies

poultry division 2017

8

Operating profit - R million

• Operating profit down 88.5%
• Net margin 0.5% 1H2016: 4.4%
• Feed costs up 16.8%; where
• Feed program cost 4.9%

Revenue - R million

• Revenue up 0.4%
• Broiler volumes down 10.5%
• Avg. broiler realisations up 15.1%
• IQF brine & mix distortion

4,436 4,456

• 1,000

2,000 3,000 4,000 5,000 1H2016 1H2017 194 22

• 50

100 150 200 1H2016 1H2017

POULTRY DIVISION - OVERVIEW

9

• Broiler sales volumes decreased by 10.5% (≈ 24 000 tons) mainly on the

back of the new brine regulations

• Broiler production cutbacks equalling 4,6 million birds over the period
• Broiler selling prices increased in an effort to recover higher feed and

inflationary costs

• IQF realisations were higher as the lower priced 30% IQF was

discontinued and replaced with IQF brined at 15% with a higher cost

• Continued high level of total poultry imports – avg. 8,2 million bpw for

the six months ended March 2017 ≈ 45% of local production

• Broiler feed prices increased by 16.8% for the period on the back of

higher raw material costs (11.9%) and a feed specification change (4.9%)

• Improved broiler production efficiencies – FCR improvements partially
• ffset increased feeding costs (live cost up 9.1%)

POULTRY DIVISION - OVERVIEW

10 10

47% 4% 5% 14% 7% 23% 1H2017 204 887 Tons

Volume decrease ≈ -10.5%

52% 3% 5% 13% 5% 22% 1H2016 228 907 Tons

Product Mix POULTRY DIVISION - SALES

11 11

POULTRY DIVISION - SALES

• Poultry Production Volume Growth

Poultry Sales Volume Variance Reconciliation

Consignment stock adjustment = 1.2% Lower meat sales = 4.1% Brine = 5.2%

Sales volumes 1H2017 (decrease of 24 020 tons ≈ 10.5%) 1H2016 = 228 907 t 1H2017 = 204 887 t

12 12

BROILER PRODUCTION PERFORMANCE

80% 85% 90% 95% 100% 105% 110% 115% 120% 125% 130% 135% 140% 145% 150% F2011 F2012 F2013 F2014 F2015 F2016 1H2017

Mortality Feed conversion (FCR) Efficiency factor (PEF)

Key indicators base-lined to 100% in 2011

94% 96% 98% 100% 102% 104% 106% F2011 F2012 F2013 F2014 F2015 F2016 1H2017

Slaughter age Live weight Average daily gain Processing yield

13 13

BROILER PRODUCTION PERFORMANCE

Key indicators base-lined to 100% in 2011

80 90 100 110 120 130 140 150 160 170 180 190 F2011 F2012 F2013 F2014 F2015 F2016 1H2017

Broiler feed price index Live cost index Feed conversion efficiency index 14 14

BROILER PRODUCTION PERFORMANCE

Key indicators base-lined to 100% in 2011

feed division 2017

16 16

Operating profit - R million

• Operating profit down 21.0%
• Net margin 5.3% 1H2016: 6.7%
• Difficult trading conditions

Revenue - R million

• Revenue down 0.4%
• Sales volumes down 8.0%
• Average selling prices up 10.4%

3,461 3,448

• 1,000

2,000 3,000 4,000 1H2016 1H2017 233 184

• 50

100 150 200 250 1H2016 1H2017

FEED DIVISION - OVERVIEW

17 17

• Feed volumes decreased due to internal poultry production cutbacks and

a drought affected external feed market

• Broiler feed conversion efficiency improvements in the poultry division

further contributed to the lower internal feed sales

• Record high feed prices on back of raw material positions due to limited

procurement opportunities on worst maize crop on record (7,7 million tons)

• The increase in raw material costs were partially recovered in the selling

price of animal feed

• Total expenses were well contained however the lower volumes

negatively impacted margin contribution

FEED DIVISION - OVERVIEW

18 18

60% 7% 20% 13%

Meadow Feeds - Sales Mix

59% 7% 21% 13% 605 066 Tons 1H2016 712 962 Tons 1H2017 656 169 Tons

Volume decrease ≈ 8%

FEED DIVISION - SALES

• ther africa division

2017

20 20

Operating profit - R million

• Operating profit up 284%
• Net margin 2.4% 1H016: 0.5%
• Zambia improved performance
• Mozambique country risk

Revenue - R million

• Revenue down 16.5%
• Sales volumes down 15.5%
• Average selling prices down 1.3%

258 216

• 50

100 150 200 250 300 1H2016 1H2017 1 5

• 1

2 3 4 5 6 1H2016 1H2017

OTHER AFRICA DIVISION - OVERVIEW

industry trends 2017

22 22

Source: CJA Strategic Risk Brokers

SAFEX YELLOW MAIZE PRICE

23 23

Source: CJA Strategic Risk Brokers

SAFEX YELLOW MAIZE vs. CBOT IN RAND TERMS

24 24

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 65,000 70,000 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 Oct-16 Dec-16 Feb-17

Total poultry imports 6 per. Mov. Avg. (Total poultry imports) 25 25

Source: SAPA

TOTAL POULTRY IMPORTS PER MONTH

Tons

65 658 tons

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 18.49 18.43 18.91 21.23 21.92 21.47 21.35

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 20.00 20.50 21.00 21.50 22.00 22.50 23.00 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 Oct-16 Dec-16 Feb-17

Broiler selling price Six month average 26 26

Source: SAPA

INDUSTRY BROILER SELLING PRICES

Rand per kilogram

27 27

Source: SAPA & CJA Strategic Risk Brokers

BROILER PRICE vs. FOOD PRICE INFLATION

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 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 Oct-16 Dec-16 Feb-17

Broiler selling price index SA food price index

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

• 15%
• 10%
• 5%

0% 5% 10% 15% 20% 25% 30% 35%

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 Oct-16 Dec-16 Feb-17

% Change in feed price % Change in broiler selling price 28 28

Source: SAPA & Own Data

CHANGE IN BROILER PRICE vs. FEED PRICE

financial overview 2017

30 30

ABRIDGED STATEMENT OF COMPREHENSIVE INCOME

Six months ended 31 March 2017 R million 2016 R million % change Revenue 5 795 5 823 Operating profit 212 429

Operating profit margin 3.7% 7.4%

Net finance costs (16) (4) Profit before tax 196 425 Tax (60) (124) Profit for the period 136 301 Headline earnings 138 299 EPS – Cents 353 777 HEPS – Cents 356 774

51% 54% 55% 54% 54% 55% 1%

3744 3663 3591 3415 3552 3675 4039 4122 4219 4290 4700 4902 5755 5511 5823 6131 5795 279 302 304 281 375 299 324 153 59 208 213 280 550 551 429 120 212

1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17

External Revenue Operating Profit Margin %

31 31

GROUP SIX MONTHLY REVENUE AND PROFITABILITY

(R million)

2,581 2,449 2,606 2,652 2,878 2,956 2,952 3,049 3,317 3,650 4,503 4,237 4,436 4,693 4,456

1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17

Revenue Change in poultry selling price Change in volumes

32 32

POULTRY - SIX MONTHLY REVENUE

(R million)

Source: SAPA & Own Data

1,847 1,730 1,708 1,770 2,175 2,152 2,397 2,519 2,550 2,956 2,961 3,275 3,461 3,729 3,448

1000 1500 2000 2500 3000 3500 4000 4500

1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17

Revenue Change in volumes Change in feed price

33 33

FEED - SIX MONTHLY REVENUE

(R million)

134 128 229 124 140

• 3
• 117

5 45 59 351 310 194

• 135

22 151 130 133 149 154 135 156 173 157 197 186 237 233 252 184 304 281 375 299 324 153 59 203 213 280 550 551 429 120 212

• 0.1

• 150
• 50

1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17

Poultry Feed Other Africa Change in feed price Change in poultry selling price

34 34

(R million)

GROUP SIX MONTHLY OPERATING PROFIT

Source: SAPA & Own Data

35 35

ABRIDGED BALANCE SHEET

March 2017 R million September 2016 R million % change Non-current assets 2 221 2 230 Assets held for sale 25 25 Net working capital 1 025 1 003 Current assets (excl. cash) 2 574 2 588 Current liabilities (excl. borrowings) (1 549) (1 585) Non-current liabilities (excl. borrowings) (631) (646) Net assets 2 640 2 612 Net debt 163 240

• Loans

12 35

• Cash and cash equivalents

151 205 Equity 2 477 2 372 Total 2 640 2 612

1% 4% 1% 2% 2% 2% 32%

36 36

March 2017 R million September 2016 R million Variance R million Current assets 2 574 2 588 (14) Biological assets 719 735 (16) Inventory - Poultry 401 314 87

• Feed

409 362 47

• Other Africa

23 41 (18) Trade receivables 886 998 (112) Other 136 138 (2) Current liabilities (1 549) (1 585) 36 Net working capital 1 025 1 003 22

WORKING CAPITAL

37 37

For the six months ended 31 March 2017 R million 2016 R million Cash operating profit 282 559 Working capital movement (39) (353) 243 206 Tax paid (50) (100) Net interest paid (14) (3) Capital expenditure (69) (73) 110 30 Dividends paid (39) (222) Other cash flow items 6 8 77 (184) Loans (repaid) / received (23) (24) Movement in cash equivalents 54 (208) Effect of exchange rate changes

• (1)

Opening balance (205) 26 Closing balance (151) (183)

ABRIDGED STATEMENT OF CASH FLOW

38 38

Six months ended 31 March 2017 R million 2016 R million Depreciation 73 75 Total capex 69 73 Commitments 108 Total spend and committed 177

CAPITAL EXPENDITURE

39 39

IN SUMMARY

• Profits significantly down in both divisions
• 1H2017 profitability improved over 2H2016
• Cash flow positive due to limited working capital increase
• Net debt to equity ratio 6.6% (30 Sep 2016: Net debt to equity 10.1%)
• Interim dividend of 180 cps, within the Group’s liquidity capability

industry matters 2017

41 41

• DTI, DAFF and industry working group

[# 65]

• Poultry imports

[# 66]

• Impact of new brining regulations

[# 67]

• Industry consolidation and contraction

[# 68] INDUSTRY MATTERS

• utlook

2017

43 43

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

economic growth and higher unemployment.

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

expected to significantly curb poultry import levels (March 2017 USA spike).

• The new brining regulations will continue to negatively impact total kilograms

sold at the revised brining level of 15% on IQF product.

• The risk of permanent power cuts by Eskom to Astral’s operations in

Standerton has been negated through an order of the High Court.

• Record local maize crop is expected for the current harvest season at

14,5 million tons which historically is the largest change in the crop size year-

• n-year (2016: 7,7 million tons).
• Poultry production efficiencies are expected to remain intact on the back of

superior nutrition optimising the genetic potential of the Ross 308 breed.

OUTLOOK

44 44

NEW OPERATIONAL STRUCTURE

FEED

MICHAEL SCH ICHAEL SCHMITZ ITZ

30 0 YEA YEARS RS

AGRICULTURE

GARY ARNOLD ARY ARNOLD 20

20 YEAR EARS

COMMERCIAL

ANDY CROCKE NDY CROCKER

19 9 YEA YEARS RS

April 2017

additional information 2017

47 47

• 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.

WHAT WE SAID IN NOVEMBER 2016

134 119 142 168 233 236 203 188 14.2% 11.9% 14.80% 15.60% 21.50% 21.70% 16.80% 15.50% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24%

25 50 75 100 125 150 175 200 225 250 2011 2012 2013 2014 2015 2016E 2017F 2018F

End stock STU 48 48 Million Tons

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 2017/18F Actual Actual Actual Actual Actual Estimate Forecast Carry In (1 May) 2,336 991 1,414 589 2,074 2,270 1,102 Crop Estimate 10,360 12,121 11,811 14,250 9,955 7,765 14,536 Retentions 433 330 328 775 Sagis Delivery 10,394 11,972 11,072 13,817 9,625 7,438 13,761 Minus early deliveries 740 Imports 421 11 80 65 1,968 2,531 Total Supply 13,151 12,973 12,566 14,471 13,685 11,498 14,862 Domestic Usage Food 4,512 4,499 4,583 4,840 4,695 4,850 4,860 Domestic Usage Feed 4,362 4,378 4,715 5,041 5,520 5,182 5,220 Gristing, withdrawn & released 693 674 480 376 319 296 390 Total Domestic Usage 9,567 9,551 9,777 10,257 10,535 10,327 10,470 Exports & Sundries 2,590 2,008 2,122 2,153 880 811 2,260 Plus early deliveries 740 Carry Out (30 Apr) 994 1,414 590 2,062 2,270 1,100 2,132 No of days usage 38 54 25 73 79 39 74 STU 8.17% 12.23% 4.96% 16.62% 19.89% 7.26% 16.75%

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% 16.8% 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)

BROILER FEED INGREDIENT INCLUSION & COST CONTRIBUTION

53 53

Source: Own Data

67.0 44.6 65.9 42.5 64.9 40.0 66.2 42.7 65.0 45.7 63.3 43.6 61.4 39.6

17.0 26.8 18.9 29.2 16.5 25.0 14.7 20.4 11.4 14.9 15.6 20.3 16.8 22.3 7.0 6.8 6.0 5.7 7.5 7.4 7.4 7.5 9.1 8.6 6.4 5.6 6.9 5.4 0.4 1.1 0.9 2.4 0.3 0.9 0.4 1.3 0.2 0.9 0.4 1.2 0.5 1.7

3.1 5.4 2.5 3.9 4.3 6.8 4.8 7.1 7.5 10.3 7.3 10.3 6.6 9.1

0.3 4.1 0.4 5.5 0.3 4.2 0.4 6.2 0.3 4.7 0.3 5.0 0.4 4.7 5.2 11.2 5.4 10.8 6.2 15.6 6.1 14.9 6.4 14.9 6.7 14.0 7.3 17.2

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. 1H17 Incl. 1H17 Contr. Maize Soybean Meal Sunflower Meal Fish Meal F/Fat and Extr Soy Vitamins, Minerals and Medication. Other

54 54 Ex BRAZIL – May 2017 FROZEN LEG QUARTERS BULK PACKED CIF DBN US$ per ton TON 1 200.00 1 200.00 1 100.00 SA COST R/$ exchange rate R$ 13.30 13.50 13.80 Rand per ton TON 15 960.00 16 200.00 16 560.00 23 720.00 Rand per kg KG 15.96 16.20 16.56 23.72 Duty per kg KG 37% 37% 37%

• Clearance costs

KG 0.65 0.65 0.65

• COST INTO STORAGE

KG 22.52 22.84 23.34 23.72 Storage KG 0.50 0.50 0.50

• Distribution

KG 0.70 0.70 0.70 0.87 Marketing, Administration, Finance KG 0.80 0.80 0.80 0.89 TOTAL COST KG 24.52 24.84 25.34 25.48 EUROPE Ex NETHERLANDS – May 2017 FROZEN LEG QUARTERS BULK PACKED CIF DBN US$ per ton TON SA COST R/$ exchange rate R$ Rand per ton TON 23 720.00 Rand per kg KG 23.72 Duty per kg KG

• Clearance costs

KG

• COST INTO STORAGE

KG 23.72 Storage KG

• Distribution

KG 0.87 Marketing, Administration, Finance KG 0.89 TOTAL COST KG 25.48

BRAZIL, EU & USA PRODUCT COST BENCHMARK

Source: Own Estimates

55 55 EUROPE Ex Belgium, Denmark with Safeguard Duty @ 13.9% – May 2017 FROZEN LEG QUARTERS BULK PACKED CIF DBN US$ per ton TON 1 400.00 1 400.00 1 400.00 SA COST R/$ exchange rate R$ 13.30 13.50 13.80 Rand per ton TON 18 620.00 18 900.00 19 320.00 23 720.00 Rand per kg KG 18.62 18.90 19.32 23.72 Duty per kg KG 13.90% 13.90% 13.90%

• Clearance costs

KG 2.16 2.16 2.16

• COST INTO STORAGE

KG 23.37 23.69 24.17 23.72 Storage KG 0.50 0.50 0.50

• Distribution

KG 0.70 0.70 0.70 0.87 Marketing, Administration, Finance KG 0.80 0.80 0.80 0.89 TOTAL COST KG 25.37 25.69 26.17 25.48 Ex USA – May 2017 FROZEN LEG QUARTERS BULK PACKED CIF DBN US$ per ton TON 950.00 950.00 950.00 SA COST R/$ exchange rate R$ 13.30 13.50 13.80 Rand per ton TON 12 635.00 12 825.00 13 110.00 23 720.00 Rand per kg KG 12.64 12.83 13.11 23.72 Duty per kg KG 37.00% 37.00% 37.00%

• Clearance costs

KG 0.65 0.65 0.65

• COST INTO STORAGE

KG 17.96 18.22 18.61 23.72 Storage KG 0.50 0.50 0.50

• Distribution

KG 0.70 0.70 0.70 0.87 Marketing, Administration, Finance KG 0.80 0.80 0.80 0.89 TOTAL COST KG 19.96 20.22 20.61 25.48

BRAZIL, EU & USA PRODUCT COST BENCHMARK

Source: Own Estimates

56 56

Local broiler production ≈ 18.1 million birds per week

Source: Own Estimates

LOCAL BROILER PRODUCTION & MARKET SHARE

27% 20% 8% 7% 5% 33% Astral RCL Country Bird Daybreak Sovereign Other

57 57

• Avg. poultry imports ≈ 8,2 million birds per week (6 months ending March 2017)

19% 14% 6% 4% 4% 22% 31% Astral RCL Country Bird Daybreak Sovereign Other Imports

Source: Own Estimates & SAPA

TOTAL POULTRY MARKET PARTICIPATION

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 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 81,170 108,674 137,660 168,965 209,337 247,672 285,532 327,180 375,717 417,427 460,255 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 F2017 50,324 101,279 135,812 173,187 212,399 278,057

100,000 200,000 300,000 400,000 500,000 600,000 F2014 F2015 F2016 F2017

58 58

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 F2017 50,324 50,955 34,533 37,375 39,212 65,658 % Var 33.2 12.1

• 20.8
• 3.5

12.5 13.8 bpw* 8,9 9,1 6,1 6,6 7,0 11,7

*bpw ≈ million birds per week

Source: SAPA

TOTAL POULTRY IMPORTS (CHICKEN, TRUKEY

, MDM)

Tons

59 59

Brazil 41.7% EU 48.1% Argentina 3.3% US 4.7% Other 2.1%

Country of origin for poultry imports - 2016

Brazil 46.3% EU 19.7% Argentina 4.1% US 24.9% Other 5.0%

Country of origin for poultry imports - March 2017 YTD 560 155 tons 142 425 tons

TOTAL POULTRY IMPORTS – COUNTRY OF ORIGIN

Source: SAPA

60 60

Poultry imports according to main country of origin for 2014 to 2016 and 2017 YTD

TOTAL POULTRY IMPORTS – COUNTRY OF ORIGIN

Source: SAPA

61 61

TECHNICAL EFFICIENCY SA PRODUCERS

Source: LEI – Wageningen Univeristy in the Netherlands

62 62

GLOBAL BROILER PRODUCTION COSTS

Source: LEI – Wageningen Univeristy in the Netherlands

5 10 15 20 25 30 35 40 5 10 15 20 25 30 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 Oct-16 Dec-16 Feb-17

RSA broilers (slaughtered / week) Poultry imports (birds / week) Broiler selling price (Rand / kg) Per capita consumption (kg) 63 63

Million birds per week / Rand per kg kilograms

Source: SAPA & DAFF

LOCAL BROILER PRODUCTION, IMPORTS & PER CAPITA CONSUMPTION

1000 2000 3000 4000 5000 6000 7000 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 Oct-16 Jan-17

Cents per kg 64 64 Chicken Pork Beef Mutton Feed Conversion Rate 1.6 2.2 5.5 5.0 Per Capita Consumption 39.1 kg 4.7 kg 19.5 kg 3.4 kg

Source: SAPA, FNB, Red Meat Industry Forum

SOUTH AFRICAN PROTEIN PRICE COMPARISON

65 65

DTI, DAFF AND INDUSTRY WORKING GROUP

• On the back of the crisis in the industry and resultant job losses a task

team was set up to deal with the critical issues at hand

• The brief from Government was to determine / implement steps and

actions to stabilise the industry over the short term; and

• Determine / implement steps and actions to revitalise the industry over

the medium to long term

• Min. Rob Davies is on record having said that Government is going to

defend the industry and jobs using all tools at its disposal

• The first practical measure is expected before end May when ITAC will

pronounce on the permanent EU safeguard duty

• The task team is currently engaged with various measures and

initiatives by which it hopes to “revitalise” the industry

• The next meeting of the task team is 16 May 2017

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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 presented their decision in this matter to Min. Rob Davies for his

approval or further action

• A provisional measure was implemented during December 2016 at

13,9% which would apply to all frozen bone-in portions from the EU

• Avian Influenza outbreaks caused temporary trade bans with some EU

countries and with this a spike in US imports was recorded in March 2017

• A record level of total poultry imports at 65 658 tons (≈ 11,7 million bpw)

and equivalent to 65% of local production was reported for March 2017

POULTRY IMPORTS

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• The new brining regulations set at 85 : 15 for IQF portions was

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 continue to be

negatively impacted in this financial year

• Selling price levels for the traditional 2 kg and 5 kg IQF pack sizes have

been 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

IMPACT OF NEW BRINING REGULATIONS

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• Intentional short term cutbacks during 1H2017 due to an imbalance in

supply and demand

• RCL introduced permanent cutbacks from March 2017 which saw the

company shedding approximately 1 500 jobs and reducing production by some 700 000 bpw in their Hammarsdale operation (KZN)

• Mike’s Chickens (Polokwane) closed in July 2016 shedding ≈ 600 jobs
• Country Bird Holdings hold a 34.1% stake in Sovereign Foods and

the Takeover Regulations Panel has ruled that CBH cannot make any further offers in their takeover bid until September 2017

• Some contract broiler producers converted broiler sheds to house

laying hens producing table eggs

• Astral will consider consolidation and synergistic opportunities as

they present themselves

INDUSTRY CONSOLIDATION & CONTRACTION

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GROWTH HORMONE MYTH Do chickens grow so fast because they are injected with growth hormones? No, definitely not! No chickens produced by any of Astral’s poultry operations are injected, fed or in any way whatsoever subjected to hormones. In

• rder to obtain the desired growth and weight targets, a perfect

combination of superior genetics, scientific nutrition and best farming practices are ethically applied. Be assured, eating our chicken products is perfectly safe for you!

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B-BBEE SCORECARD (CURRENT CHARTER)

32.03 45.62 51.83 55.57 62.72 60.84 69.77 68.05

30 35 40 45 50 55 60 65 70 75 2010 2011 2012 2013 2014 2015 2016 2017 Score

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

www.astralfoods.com

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