IN INTE TERIM RIM R RES ESUL ULTS TS PRES PRESENT ENTATION - - PowerPoint PPT Presentation

IN INTE TERIM RIM R RES ESUL ULTS TS PRES PRESENT ENTATION TION

FOR THE SIX MONTHS ENDED 31 MARCH 2018

AGENDA

2

• Business Overview – Page 3 / Slide 3
• Industry Trends – Page 11 / Slide 20
• The Period in Perspective – Page 15 / Slide 28
• Financial Overview – Page 16 / Slide 30
• Industry Matters – Page 22 / Slide 41
• Outlook – Page 23 / Slide 43
• Additional Information – Page 25 / Slide 47

BUSINESS OVERVIEW

BUSINESS OVERVIEW

• Results for the six months ended March 2018 are a significant

improvement on the prior comparable period, which was one of the lowest reported profits in history

• Feed input costs reduced significantly due to lower maize prices on the

back of a bumper maize crop for 2017

• Supply and demand balance gave pricing support, imports during the

period remained high but stable, whilst lower brine levels and industry cutbacks resulted in a firmer market

• Further improvements in on-farm poultry production efficiencies were

recorded

• No further incidents of bird flu and related costs were experienced during

the period

4

BUSINESS OVERVIEW

• Revenue
• Profit before interest and tax
• Earnings per share @ 1 973 cps
• Headline earnings per share

455%

Key ey Fina Financ ncial ial Ind Indica icator tors

460% 393%

5

15%

BUSINESS OVERVIEW

6

Poultry

• Feeding cost decreased
• Bird performance improvement
• Sales volumes up (3 contributors)
• Average sales realisations up
• No impact from HPAI (bird flu)

Feed

• Maize price significantly down
• General market improvement
• Higher internal feed required
• Sales volumes up
• Rand per ton margin up

Other Africa

• Higher profits – improved performance from all three countries

“ ”

POULTRY DIVISION - OVERVIEW

Operating profit - R million

• Operating profit up
• Feed price down 11.2%
• Selling price contribution
• Net margin 15.2% 1H2017: 0.5%

Revenue - R million

• Revenue up 23%
• Broiler sales volumes up 12.6%
• Broiler sales realisations up 11.2%

4 456 5 481

• 1 000

2 000 3 000 4 000 5 000 6 000 1H2017 1H2018 22 836

• 100

200 300 400 500 600 700 800 900 1H2017 1H2018 8

POULTRY DIVISION - OVERVIEW

• Broiler feed prices decreased by 11.2%, after significantly lower raw material

costs offset the implementation of a further enhanced feeding programme

• Improved broiler production efficiencies with a better feed conversion achieved
• n a new feeding programme resulting in a lower cost of feeding
• Broiler sales volumes increased by 12.6% (≈ 26 000 tons) due to increased

placements, higher bird weights and sales out of stock offsetting lower brine levels

• Broiler sales realisations increased impacted by a change in the product offering

due to the brine impact and recovery above inflationary costs on strong demand

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

January 2017 and then replaced with 15% brined IQF at a higher cost

• Additional Listeria counter-measures with increased costs of R9.7 million for the

period

9

POULTRY DIVISION - OVERVIEW

51% 2% 3% 14% 7% 23% 1H2018 230 710 Tons

Volume increase ≈ 12.6%

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

Product Mix

10 10

BROILER PRODUCTION PERFORMANCE

11 11 94% 96% 98% 100% 102% 104% 106% 108% F2012 F2013 F2014 F2015 F2016 F2017 1H2018

Average daily gain Slaughter age Live weight

Key indicators base-lined to 100% in F2012

BROILER PRODUCTION PERFORMANCE

12 12

Source: Own Data

85% 90% 95% 100% 105% 110% 115% 120% 125% 130% 135% 140% F2012 F2013 F2014 F2015 F2016 F2017 1H2018

Broiler feed price index Feed conversion efficiency index Feeding cost index

Key indicators base-lined to 100% in F2012

BROILER PRODUCTION PERFORMANCE

13 13 75% 80% 85% 90% 95% 100% 105% 110% 115% 120% 125% F2012 F2013 F2014 F2015 F2016 F2017 1H2018

Mortality Feed conversion efficiency Efficiency factor (PEF)

Key indicators base-lined to 100% in F2012

“ ”

FEED DIVISION - OVERVIEW

Operating profit - R million

• Operating profit up 3.8%
• Net margin 6.2% 1H2017: 5.3%
• Improved trading conditions

Revenue - R million

• Revenue down 10.2%
• Raw material costs down
• Average selling prices down 16.3%
• Sales volumes up 7.3%

3 448 3 097

• 1 000

2 000 3 000 4 000 1H2017 1H2018 184 192

• 100

200 1H2017 1H2018 15 15

FEED DIVISION - OVERVIEW

• SAFEX yellow maize prices decreased significantly for the period under review

1H2018 avg. R1 981 per ton (1H2017: R2 973) down R992 per ton year-on-year

• Feed volumes increased due to both higher internal feed requirements and higher

external feed sales

• Internal feed sales increased by 7.2% due to an increase in broiler production

numbers in 1H2018 off cutbacks in the comparable period of the prior year

• External feed sales increased by 7.4% as livestock sectors recovered following

the high feed costs associated with the 2016 drought

• Margins improved in the period under review with an increase in the net rand per

ton margin achieved

16 16

FEED DIVISION - SALES

59% 7% 21% 13%

Meadow Feeds - Sales Mix

59% 7% 21% 13% 1H2017 656 169 Tons 1H2018 703 827 Tons

Volume increase ≈ 7.3%

17 17

“ ”

OTHER AFRICA DIVISION - OVERVIEW

Operating profit - R million

• Operating profit up
• Net margin 9.1% 1H2017: 2.4%
• All countries improved performance

Revenue - R million

• Revenue down 14.4%
• Raw material costs down
• Average selling prices down 9.6%
• Sales volumes down 5.0%

216 185

• 50

100 150 200 250 1H2017 1H2018 5 17

• 5

10 15 20 1H2017 1H2018 19 19

INDUSTRY TRENDS

SAFEX YELLOW MAIZE PRICE

Source: CJA Strategic Risk Brokers

21 21

SAFEX YELLOW MAIZE PRICE vs. CBOT IN RAND TERMS

Source: CJA Strategic Risk Brokers

22 22

DURBAN SOYA MEAL PRICE

Source: CJA Strategic Risk Brokers

23 23

POULTRY IMPORTS PER MONTH

Source: SAPA

24 24

• 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-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 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18

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

Tons

BROILER SELLING PRICES

Source: Own Data

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 80% 90% 100% 110% 120% 130% 140% 150% 160% 170% 180% 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 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18

Broiler selling price index Six month average

IQF cost recovery on new legislated brine levels

25 25

BROILER PRICE vs. FOOD PRICE INFLATION

Source: Own Data & CJA Strategic Risk Brokers

26 26 70% 80% 90% 100% 110% 120% 130% 140% 150% 160% 170% 180% 70% 80% 90% 100% 110% 120% 130% 140% 150% 160% 170% 180% 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 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18

Broiler selling price index SA food price index

IQF cost recovery on new legislated brine levels

CHANGE IN BROILER PRICE vs. FEED PRICE

Source: Own Data

27 27

• 30%
• 20%
• 10%

0% 10% 20% 30% 40% 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 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18

% Change in feed price % Change in broiler selling price

20

months

THE PERIOD IN PERSPECTIVE

THE PERIOD IN PERSPECTIVE

• Operating profit (PBIT) reconciliation

29 29

443

• 176
• 138

212 1 044

97 554 52

• 200

400 600 800 1 000 1 200 1 400 PBIT 1H2017 Broiler Volumes Broiler Prices Feeding Cost Processing Cost Incentive Bonuses Other PBIT 1H2018

(R million)

FINANCIAL OVERVIEW

INCOME STATEMENT

Six months ended 31 March 2018 R million 2017 R million Revenue 6 666 5 795 Operating profit (PBIT) 1 044 212 Operating profit margin 15.7% 3.7% Net finance income / (costs) 22 (16) Profit before tax 1 066 196 Tax (300) (60) Profit for the period 766 136 Headline earnings 765 138 EPS – Cents 1 973 353 HEPS – Cents 1 974 356

15% 393% 463% 456% 460% 455%

% change

31 31

444%

GROUP SIX MONTHLY REVENUE AND PROFITABILITY

32 32

4 039 4 122 4 219 4 290 4 700 4 902 5 755 5 511 5 823 6 131 5 795 6 556 6 666 324 153 59 208 213 280 550 551 429 120 212 866 1 044

1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17 1H18 External revenue Operating profit (PBIT) Margin %

(R million)

15.7% 3.7% 13.2%

FEED SIX MONTHLY REVENUE

33 33

2 175 2 152 2 397 2 519 2 550 2 956 2 961 3 275 3 461 3 729 3 448 3 405 3 096

0,0 0,2 0,4 0,6 0,8 1,0 1,2 1,4 1,6 1,8 1000 1500 2000 2500 3000 3500 4000 4500

1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17 1H18

Revenue Change in volumes Change in feed price

(R million)

POULTRY SIX MONTHLY REVENUE

34 34

2 878 2 956 2 952 3 049 3 317 3 650 4 503 4 237 4 436 4 693 4 456 5 394 5 480

1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17 1H18

Revenue Change in poultry selling price Change in volumes

(R million)

GROUP SIX MONTHLY OPERATING PROFIT (PBIT)

35 35

Source: Own Data

140

• 3
• 117

5 45 59 351 310 194

• 135

22 608 836 154 135 156 173 157 197 186 237 233 252 184 207 191 324 153 59 203 213 280 550 551 429 120 212 867 1 044

• 0,1

• 120

1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17 1H18

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

(R million)

36 36

March 2018 R million September 2017 R million % change Non-current assets 2 302 2 228 Net working capital 813 862 Current assets (excl. cash) 2 610 2 461 Current liabilities (excl. borrowings) (1 797) (1 599) Non-current liabilities (excl. borrowings) (598) (610) Net assets 2 517 2 480 Net cash (934) (553) Equity 3 451 3 033 Total 2 517 2 480

BALANCE SHEET

6% 6% 12% 2% 1% 1% 14% 3%

WORKING CAPITAL

March 2018 R million September 2017 R million Variance R million Current assets 2 610 2 461 149 Biological assets 759 658 101 Inventory - Poultry 288 316 (28)

• Feed

271 185 86

• Other Africa

35 50 (15) Trade receivables 1076 1049 27 Receivables – investment sold 16 56 (40) Other receivables 165 147 18 Current liabilities (1 797) (1 599) (198) Net working capital 813 862 (49)

37 37

STATEMENT OF CASH FLOWS

For the six months ended 31 March 2018 R million 2017 R million Cash operating profit 1 102 282 Working capital movement (50) (39) 1 052 243 Tax paid (259) (50) Net interest received / (paid) 25 (14) Capital expenditure (136) (69) 682 110 Dividends paid (339) (39) Other cash flow items 2 6 Proceeds on investment sold – prior year 40

• Loans repaid
• (23)

Movement in cash equivalents 385 54 Effect of exchange rate changes (4)

• Opening balance

553 (205) Closing balance 934 (151)

38 38

CAPITAL EXPENDITURE

Six months ended 31 March 2018 R million 2017 R million Depreciation 78 73 Total amount capitalised to PPE 162 65 Net movement in advance / outstanding payments (26) 4 136 69 Commitments 144 Total spend and committed 280

39 39

IN SUMMARY

• Improvement in profits in 1H2018 with a profit margin at 15.7% (1H2017: 3.7%)
• Cash positive throughout the period
• Net surplus cash at end March 2018 (R934 million)
• Astral is well positioned for investment in future growth
• Interim dividend of R10.00 per share (2x cover) within the Group’s liquidity

capability

40 40

INDUSTRY MATTERS

INDUSTRY MATTERS

• Poultry imports – Page 32 / Slide 62
• Highly Pathogenic Avian Influenza (HPAI) – Page 33 / Slide 63
• Listeriosis– Page 34 / Slide 65

42 42

OUTLOOK

INVESTMENT IN FUTURE GROWTH

44 44

• Capital projects amounting to R1.3 billion over the next three years

have been approved by the Astral board that support our stated strategy, as well as organic growth and efficiency improvement opportunities.

Project Description New state of the art feed mill for Zambia Silo expansion at the Standerton feed mill Expansion of Festive poultry operation: Expansion phase 1 Expansion phase 2 Expansion of Mountain Valley poultry operation Existing Capacity 5 000 tpm 24 000 tpm 1 450 000 bpw 190 000 bpw Added Capacity 20 000 tpm 16 000 tpm 400 000 bpw 400 000 bpw 200 000 bpw

OUTLOOK

45 45

• General business confidence improved as well as the prospect for foreign

direct investment following the election of a new President for the country

• A bumper maize crop in 2017 and the country set to harvest an above average

maize crop in 2018 will stand us in good stead over the next period from a feed input cost point of view

• Further unlocking the inherent genetic potential of the Ross broiler breed

through optimised broiler nutrition therefore cementing Astral’s best cost strategy

• Higher level of competitiveness as producers have expanded broiler

production numbers, and the pork industry has been forced to sell product at lower prices following the listeria outbreak

• Continued high levels of poultry imports especially from the United States of

America and Brazil, equivalent to over 40% of local poultry production

• HPAI remains a threat and major concern for the poultry industry with the

upcoming winter season

“ ”

ADDITIONAL INFORMATION

WHAT WE SAID IN NOVEMBER 2017

48 48

   

• The negative political landscape and policy uncertainty has contributed to a weak

economic environment that could lead to a further downgrade by the credit rating

• agencies. Record unemployment levels and lower levels of disposable income are

unlikely to improve due to a poor economic outlook for the foreseeable future.

• Continued high level of poultry imports with weak tariff protection, has allowed

foreign produced poultry to become further entrenched in the local market leading to a contraction in production amongst South African producers.

• On a positive note and key to local protein production, both global and local coarse

grains (maize and soybeans) exhibit healthy stock-to-use ratios. Current consensus points towards the promise of another year where at least average local grain production is predicted.

• Numerous supply constraints influenced by the past drought, production cutbacks

and the devastating bird flu could result in further inflation in the food basket.

• Further unlocking the inherent genetic potential of the Ross broiler breed

through optimised broiler nutrition, and the cementing of Astral’s best cost strategy.

• The threat of further spread of the highly pathogenic bird flu virus (H5N8) is a

major contributor towards uncertainty around the sustainability of certain sectors of the local poultry industry. The role of vaccination of high value breeding stock as a preventative measure, together with the concept of compensation for losses incurred is paramount to managing this highly virulent avian disease.



?

125 132 167 222 215 228 191 186 12,6% 13,58% 15,40% 19,85% 19,37% 18,99% 15,51% 15,23%

11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25 50 75 100 125 150 175 200 225 250 2012 2013 2014 2015 2016 2017 2018E 2019F

End stock STU

WORLD CORN ENDING STOCKS vs. STU

Million Tons

Source: CJA Strategic Risk Brokers

49 49

SOUTH AFRICA – TOTAL MAIZE SUPPLY & DEMAND

Source: CJA Strategic Risk Brokers

2012/13 2013/14 2014/15 2015/16 2016/17 2017/18E 2018/19F Actual Actual Actual Actual Actual Estimate Forecast Carry In (1 May) 991 1,414 589 2,074 2,471 1,093 3,969 Crop Estimate 12,121 11,811 14,250 9,955 7,779 16,820 12,827 Retentions 433 163 309 841 641 Sagis Delivery 11,972 11,072 13,817 9,794 7,469 15,979 12,185 Minus early deliveries 450 Imports 11 80 65 1,964 2,237 Total Supply 12,973 12,566 14,471 13,831 11,727 17,072 16,154 Domestic Usage Food 4,499 4,583 4,840 4,698 4,808 4,812 4,908 Domestic Usage Feed 4,378 4,715 5,041 5,520 5,004 5,499 5,410 Gristing, withdrawn & released 674 480 376 293 278 358 343 Total Domestic Usage 9,551 9,777 10,257 10,512 10,090 10,670 10,661 Exports & Sundries 2,008 2,122 2,153 848 993 2,434 2,337 Plus early deliveries 450 Carry Out (30 Apr) 1,414 590 2,062 2,471 1,093 3,969 3,156 No of days usage 54 25 73 86 40 136 108 STU 12.23% 4.96% 16.62% 21.75% 9.87% 30.29% 24.28%

Marketing year (May to April) '000 tons 50 50

12,23% 4,96% 16,62% 21,75% 9,87% 30,29% 24,28%

• 4%

1% 6% 11% 16% 21% 26% 31% 500 1 000 1 500 2 000 2 500 3 000 3 500 4 000 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18E 2018/19F

Carry out Maize stock to use ratio

RSA MAIZE CARRY OUT & STOCK TO USE RATIO

Source: CJA Strategic Risk Brokers

‘000 Tons 51 51

EL NIÑO SOUTHERN OSCILLATION - FORECAST

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

52 52

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

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

53 53

BROILER FEED – INGREDIENT INCLUSION & COST CONTRIBUTION

Source: Own Data

54 54

64,9 40,0 66,2 42,7 65,0 45,7 63,3 43,6 61,4 39,6 61,1 38,0 55,6 29,8

16,5 25,0 14,7 20,4 11,4 14,9 15,6 20,3 16,8 22,3 14,0 18,6 14,0 17,9 7,5 7,4 7,4 7,5 9,1 8,6 6,4 5,6 6,9 5,4 6,2 4,0 6,1 3,3 0,3 0,9 0,4 1,3 0,2 0,9 0,4 1,2 0,5 1,7 0,4 1,5 0,5 1,7 4,3 6,8 4,8 7,1 7,5 10,3 7,3 10,3 6,6 9,1 9,9 13,8 14,6 19,8 0,3 4,2 0,4 6,2 0,3 4,7 0,3 5,0 0,4 4,7 0,5 5,4 0,5 6,0 6,2 15,6 6,1 14,9 6,4 14,9 6,7 14,0 7,3 17,2 7,8 18,8 8,6 21,5

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1H15 Incl. 1H15 Contr. 2H15 Incl. 2H15 Contr. 1H16 Incl. 1H16 Contr. 2H16 Incl. 2H16 Contr. 1H17 Incl. 1H17 Contr. 2H17 Incl. 2H17 Contr. 1H18 Incl. 1H18 Contr. Maize Soybean Meal Sunflower Meal Fish Meal F/Fat and Extr Soy Vitamins, Minerals and Medication. Other

BRAZIL, EU & USA PRODUCT COST BENCHMARK

Source: Own Estimates

Ex BRAZIL – May 2018 FROZEN LEG QUARTERS BULK PACKED CIF DBN US$ per ton TON 1 050.00 1 050.00 1 050.00 SA COST R/$ exchange rate R$ 12.00 12.50 13.00 Rand per ton TON 12 600.00 13 125.00 13 650.00 19 209.00 Rand per kg KG 12.60 13.13 13.65 19.21 Duty per kg KG 37% 37% 37%

• Clearance costs

KG 0.65 0.65 0.65

• COST INTO STORAGE

KG 17.91 18.63 19.38 19.21 Storage KG 0.50 0.50 0.50

• Distribution

KG 0.70 0.70 0.70 0.91 Marketing, Administration, Finance KG 0.80 0.80 0.80 0.88 TOTAL COST KG 19.91 20.63 21.35 21.00 EUROPE Ex NETHERLANDS – May 2018 FROZEN LEG QUARTERS BULK PACKED CIF DBN € per ton TON SA COST € exchange rate R$ Rand per ton TON 19 209.00 Rand per kg KG 19.21 Duty per kg KG

• Clearance costs

KG

• COST INTO STORAGE

KG 19.21 Storage KG

• Distribution

KG 0.91 Marketing, Administration, Finance KG 0.88 TOTAL COST KG 21.00 55 55

BRAZIL, EU & USA PRODUCT COST BENCHMARK

Source: Own Estimates

EUROPE Ex Denmark with Safeguard Duty @ 0% – May 2018 (Safeguard Duty expired on 3 July 2017) FROZEN LEG QUARTERS BULK PACKED CIF DBN € per ton TON 1 250.00 1 250.00 1 250.00 SA COST R/€ exchange rate R$ 15.00 15.50 16.00 Rand per ton TON 18 750.00 19 375.00 20 000.00 19 209.00 Rand per kg KG 18.75 19.38 20.00 19.21 Duty per kg KG 0% 0% 0%

• Clearance costs

KG 0.65 0.65 0.65

• COST INTO STORAGE

KG 19.40 20.03 20.65 19.21 Storage KG 0.50 0.50 0.50

• Distribution

KG 0.70 0.70 0.70 0.91 Marketing, Administration, Finance KG 0.80 0.80 0.80 0.88 TOTAL COST KG 21.40 22.03 22.65 21.00 Ex USA – May 2018 FROZEN LEG QUARTERS BULK PACKED CIF DBN US$ per ton TON 900.00 900.00 900.00 SA COST R/$ exchange rate R$ 12.00 12.50 13.00 Rand per ton TON 10 800.00 11 250.00 11 700.00 19 209.00 Rand per kg KG 10.80 11.25 11.70 19.21 Duty per kg KG 37% 37% 37%

• Clearance costs

KG 0.65 0.65 0.65

• COST INTO STORAGE

KG 15.45 16.06 16.68 19.21 Storage KG 0.50 0.50 0.50

• Distribution

KG 0.70 0.70 0.70 0.91 Marketing, Administration, Finance KG 0.80 0.80 0.80 0.88 TOTAL COST KG 17.45 18.06 18.68 21.00 56 56

LOCAL BROILER PRODUCTION & MARKET SHARE

Local broiler production ≈ 19.0 million birds per week

Source: Own Estimates

27% 20% 8% 7% 8% 4% 4% 22% Astral RCL Country Bird Daybreak Sovereign Grainfields Chubby Chick Other

57 57

LOCAL BROILER PRODUCTION & MARKET SHARE

Source: Own Estimates

• Avg. poultry imports ≈ 8.3 million birds per week (6 months ending March 2018)

19% 14% 6% 5% 5% 3% 3% 15% 30% Astral RCL Country Bird Daybreak Sovereign Grainfields Chubby Chick Other Imports

58 58

TOTAL POULTRY IMPORTS (CHICKEN, TURKEY

, MDM)

F2017 50,324 50,955 34,533 37,375 39,212 65,658 41,876 47,173 42,451 44,424 45,971 51,915 F2018 46,348 45,875 48,600 47,242 40,230 52,807 % Var

• 7.9
• 10.0

40.7 26.4 2.6

• 19.6

bpw* 8.2 8.1 8.6 8.4 7.1 9.4

*bpw ≈ million birds per week

Source: SAPA

59 59

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 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 50 324 101 279 135 812 173 187 212 399 278 057 319 933 367 106 409 557 453 981 499 952 551 867 F2018 46 348 92 223 140 823 188 065 228 295 281 102

100 000 200 000 300 000 400 000 500 000 600 000 F2015 F2016 F2017 F2018

Tons

TOTAL POULTRY IMPORTS – COUNTRY OF ORIGIN

Source: SAPA Brazil 60,6% EU 14,0% Argentina 5,9% US 15,6% Other 3,9%

Country of origin for poultry imports - 2017

Brazil 59,9% EU 9,5% Argentina 7,3% US 19,5% Other 3,8%

Country of origin for poultry imports - March 2018 YTD 556 878 tons 140 279 tons

60 60

TOTAL POULTRY IMPORTS – COUNTRY OF ORIGIN

Source: SAPA

61 61

Country Imports (tons) 2015 2016 2017 2018 YTD Brazil 241 180 233 787 337 476 84 038 Netherlands 61 995 110 344 112 105 United Kingdom 15 985 45 647 1 366 75 Spain 27 090 39 620 11 138

• United States

331 26 573 87 059 27 343 Belgium 35 613 24 256 23 451 23 Argentina 27 718 18 713 32 816 10 230 Ireland 13 336 15 556 24 746 6 270 Hungary 10 547 13 174

• Denmark

9 508 9 779 16 884 6 820 Canada 131 8 884 14 431 1 582 Germany 554 6 073 134 57 Poland

• 4 773

72

• Thailand

7 616 2 078 4 019 2 302 Chile 408 360 1 770 1 099 Australia 264 254 984

• France

24 895 105 4 2 Uruguay 182 25 332

POULTRY IMPORTS

• Provisional safeguard duties against the EU of 13.9% that were implemented

during December 2016 at 13.9% expired on 3 July 2017

• A decision on a permanent safeguard duty against the EU is still awaited

following efforts made by an industry, DTI and DAFF work group to secure better trade terms to support local industry jobs and reinvestment

• Avian Influenza outbreaks caused temporary trade bans with some EU countries

and with this a switch to Brazilian and US imports

• Total poultry imports remain high at average 46 850 tons (≈ 8.3 million bpw) and

equivalent to 44% of local production for the six months ending March 2018

62 62

HIGHLY PATHOGENIC AVIAN INFLUENZA

• South Africa reported its first case of H5N8 infection in domestic poultry in June

2017 in Mpumalanga

• From that date H5N8 has caused wide spread damage to the local poultry

industry and in particular significantly affected commercial laying hens and broiler breeders

• Surveys indicated that as much as 5.4 million birds were culled on commercial

poultry production units to date

• A biological loss of just over R317 million was reported for the local South

African poultry industry split between the table egg / commercial laying industry (76%) and the broiler industry (24%)

• The estimated income foregone for the local industry is estimated at just over

R1.5 billion and spread out over a period of between 18 and 24 months

63 63

64 64

• Vaccination / Compensation progress:
• Vaccine challenge studies underway as requested by DAFF
• Only one out of five vaccines tested so far (100% liveability)
• Virus shedding data awaited from this one trial
• Expected to be completed late autumn or early winter 2018
• Public participation / comment process also required by DAFF
• Could take up to 3 months
• Challenges
• Vaccinated birds cannot be sold live at depletion
• Culling of vaccinated flocks infected with H5N8 (affected house)
• Industry Task Team in place engaging with DAFF (Astral active participation)
• The compensation guidelines published by DAFF in December 2017 are, based on legal

advice obtained, fundamentally flawed in terms of the relevant legislation contained in the Animal Diseases Act, and are being challenged by certain industry participants

HIGHLY PATHOGENIC AVIAN INFLUENZA

LISTERIOSIS

• World’s worst outbreak of Listeriosis with 1 019 cases reported from 1 January

2017 to 17 April 2018 with 199 deaths confirmed, representing 28.5% of incidents with known outcomes.

• Sovereign Foods Hartebeespoort operations shut down on 22 December 2017 for

3 days following the detection of Listeria monocytogenes on product from this facility and subsequently from the facility itself. This was later confirmed not to be the ST 6 outbreak strain.

• Enterprise (Tiger Brands) On 4 March 2018 the Minister of Health announced that

the outbreak strain (ST 6) had been detected at the Enterprise facility in Polokwane leading to the large scale recall of polonies and other processed meats from this

• facility. Independent testing has verified the presence of the ST6 at the facility.
• RCL On 4 March 2018 the Minister of Health announced that Listeria had been

detected at the RCL facility in Wolwehoek, leading to the recall of Rainbow’s Chicken Polonies. It was subsequently confirmed that this was not related to the

• utbreak strain.

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LISTERIOSIS

• Primary Impact on the Poultry Market - chicken products were incorrectly

implicated on various occasions prior to the identification of the source. Health

• fficials did little to address this misconception but the sales of chicken products

remained largely unaffected prior to the minister’s announcement on 4 March 2018 that the source had been found. The sales of raw chicken products were however adversely affected after the announcement, as stores incorrectly started to remove raw chicken and further processed products from the shelf. Astral products were not implicated and the company managed to retain its presence on shelf.

• Secondary Impact on the Poultry Market - companies directly implicated by the

minister’s announcement are reported to have experienced an impact on the sale of all poultry products. By implication the supply chain of live chickens to abattoirs could not be stopped at short notice, which lead to a disproportionately high production of frozen chicken products that could be held in stock. This additional stock pile is now being released to the market, temporarily increasing the relative supply of IQF products and leading to pressure on selling prices resulting in some disruption to the market.

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LISTERIOSIS

• Impact on the Pork Industry the sale of pork products has been more heavily

impacted than poultry by the identification of the source of the Listeriosis outbreak, due to the association of pork with processed meats in general and the Enterprise brand in particular. The resultant slow down in the demand for pork across all product ranges, including products and producers that were not implicated in the DOH’s findings, has resulted in a backlog throughout the supply chain. Pork prices are reported to have dropped by 50% since December 2017 due to this disruption in

• demand. This drop in price at consumer level is expected to have a limited impact
• n poultry demand directly since non-pork eaters will not be enticed to switch to

poultry products, but pork eaters may well consume more pork at the expense of

• chicken. The extremely low price of pork is however disrupting the conventional

relative value of chicken, with some impact on price being experienced.

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SOUTH AFRICAN PROTEIN PRICE COMPARISON

Source: FNB, Red Meat Industry Forum, Own Data

Chicken Pork Beef Feed Conversion Rate 1.55 2.2 5.5 Per Capita Consumption 38.9 kg 4.6 kg 17.8 kg 68 68 1000 1500 2000 2500 3000 3500 4000 4500 5000 Cents per kg

CONTACT DETAILS

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