Interim Results Presentation - Astral Foods...Interim Results Presentation for the six months ended 31 March 2014 2 AGENDA Business Overview Poultry Industry Trends Financial Overview

1

Interim Results Presentation for the six months ended 31 March 2014

2

AGENDA

Business Overview

Poultry Industry Trends

Financial Overview

Industry Matters

Prospects

Q & A

3

Business Overview Poultry Industry Trends Financial Overview Industry Matters Prospects Q & A

4

THE PERIOD IN PERSPECTIVE

The past six months to end March 2014 reflects an improved performance compared to one of the worst trading periods experienced by the poultry industry in the prior year

Financial Indicators

Revenue

Operating profit

Headline earnings

Interim dividend of 200 cps

11%

260%

308%

5


Key factors that impacted the business:

• Continued high total poultry imports, increasingly from Europe (October 2013

to March 2014 ≈ 5.1 million birds per week which equals approximately 26% of

local production – refer slides 31 and 32)

• Record high local maize prices in February, March and April 2014 not in line

with CBOT corn prices (refer slide 52)

• Record high local soya bean prices for February, March and April 2014 (refer

slide 27)

• The Rand remained weak against the US Dollar negating any benefits of lower

CBOT corn prices during 1H2014

6


A solid performance from the Feed division and an improved performance from the

Poultry division have contributed positively to the Group’s earnings

The Group’s integrated best cost business model proved its value with the

business remaining profitable versus an industry that has in general struggled over

the same period

Further contraction in the poultry industry has been experienced with the

closure of small-sized producers followed by consolidation of distressed assets

Astral’s balance sheet remains healthy with a net debt to equity ratio of 12.5%

(30 September 2013: 15.5%)

7

Poultry Division

8

2 952 3 317

-

1 000

2 000

3 000

1H2013 1H2014

(Revenue - R million)

Revenue up 12%

Broiler volumes up 6.2%

Broiler realisations up 5.9%

(117)

45

(120)

(70)

(20)

30

1H2013 1H2014

(Operating profit - R million)

Operating profit up

Profit margin 1.4%

Feed costs down 3.2%

POULTRY DIVISION - OVERVIEW

9

Average broiler feed prices decreased by R150 per ton (down 3.2% vs 1H2013)

Broiler sales volumes increased on the comparable period by 6.2%

Broiler selling prices increased on the comparable period by 5.9%

High total poultry imports during the period ≈ 5.1 million birds per week

Improved broiler production performances (refer slides 11 and 12)

Improvement in product mix with our exposure to IQF decreasing by 2% (slide 10)

No industrial / strike related action impacting the division

POULTRY DIVISION - OVERVIEW

10

Product Mix

55%

2% 10%

8%

3%

22%

IQF Mixed Portions IQF Single Portions FreshValue Added Frozen Tertiary

POULTRY DIVISION – SALES

202 386 tons

11

70%

75%

80%

85%

90%

95%

100%

105%

110%

115%

120%

F2009 F2010 F2011 F2012 F2013 1H2014

Mortality Feed conversion (FCR) Efficiency factor (PEF)

BROILER PRODUCTION PERFORMANCES

Key indicators base-lined to 100% in 2009

12

94%

96%

98%

100%

102%

104%

106%

F2009 F2010 F2011 F2012 F2013 1H2014

Slaughter age Live weight Processing yield

(35.4 days)

(34.1 days)

BROILER PRODUCTION PERFORMANCES

Key indicators base-lined to 100% in 2009

13

Projected lower feed costs into 2H2014 (versus 1H2014)

Continued realignment of poultry production capacity to reduce costs

Reduced heating / energy costs at County Fair with LPG replacement project

Bedding down of major capital expenditure and acquisitions (KZN & WC)

Provisional anti-dumping duties against EU expected in June / July 2014

County Fair / Tydstroom agreement will enhance Astral’s Western Cape footprint

POULTRY DIVISION - PROSPECTS

14

Feed Division

15


Operating profit unchanged

Profit margin at 6.2%

Good Rand / ton margin


Revenue up 6%

Volumes up 4.1%

Avg. realisations up 2.3%

2 397 2 550

-

1 000

2 000

3 000

1H2013 1H2014

156 157

-

50

100

150

200

1H2013 1H2014

FEED DIVISION - OVERVIEW

16

FEED DIVISION - OVERVIEW

Higher in-house feed volumes (up 7%) due to higher broiler placements

External feed volumes increased by 1%

Positive improvement in sales mix with higher Dairy and Pig feed sales

Maintained good Rand per ton margin despite a competitive landscape

Maintained cost increases in line with inflation

Closure of non-performing Welkom feed mill

17

Meadow Feeds - Sales Mix

23%

50%

10%

17%

Dairy Poultry Integrated Poultry External Other

FEED DIVISION – SALES

605 066 tons

18

FEED DIVISION - PROSPECTS

Increased acreage and good rainfall should lead to crop in excess of 13 mil tons

Lower local price for current maize harvest will benefit feed prices

International maize balance sheet remains healthy

Continued focus to implement new cost saving technologies

Focus on Rand per ton margins to continue

New Standerton feed mill margin contribution in Q4 of F2014

19

NEW STANDERTON FEED MILL

20

Delays in the commissioning of the feed mill have been experienced due to rain

(8 weeks) experienced over the project duration

Recent unforeseen late equipment deliveries have impacted the commissioning

Commissioning process scheduled for June 2014

Forecast total project costs are in line with approved budget of R200 million

Broiler feed volumes of 15 208 tons per month will fully accrue in Q4 of F2014

Official opening ceremony set for 17 July 2014

NEW STANDERTON FEED MILL

21

Other Africa Division

22


Operating profit down 44%

Zambian performance down

Moz operations performed well

20

11

-

10

20

1H2013 1H2014


Revenue up 22%

Feed volumes unchanged

Hatchery volumes up 18%

203

248

-

100

200

300

1H2013 1H2014

OTHER AFRICA DIVISION - OVERVIEW

23

OTHER AFRICA DIVISION - OVERVIEW

Zambia

Feed sales from Tiger Animal Feeds decreased 8% for the period due to increased market competition

Profitability at Tiger Animal Feeds impacted negatively by unfavourable raw material positions and stock mismanagement

The double up of the Tiger Chicks broiler breeder and hatchery operation has been successfully concluded and producing up to 200 000 DOC in March 2014

Mozambique

Feed sales increased by 43% and profitability by 70% following improved market penetration

The first Indian River broiler breeders were placed in January 2014 at Mozpintos, with the hatchery increasing capacity from 65 000 to 152 000 DOC per week by July 2014

24

OTHER AFRICA DIVISION - PROSPECTS

Zambia

Current harvest maize and soya prices are lower with Tiger Animal Feeds well positioned to take advantage of these

Increased sales of day old chicks from the double up of the hatchery and broiler breeder operation

The continued expansion of feed and day old chick outlets will improve product availability and competitive feed prices direct to farm

Mozambique

The production of hatching eggs in Mozambique at a lower cost than imported hatching eggs will improve profitability

Expanding into further feed and day old chick outlets will further improve market penetration and sales of both DOC and feed

25


26 Source: CJA Strategic Risk Brokers

F2010 F2013 F2011 F2012

SAFEX YELLOW MAIZE PRICE

F2014


F2010 F2011 F2014 F2012 F2013

SAFEX SOYA BEANS PRICE

28 Industry trends and statistics | Source: SAPA

Rand per kilogram

INDUSTRY BROILER SELLING PRICES 15

.44 15

.81 16

.28

13.9

5 13

.78

14.0

6 14.6

0 14

.04

13.4

1 13.8

1 13

.09

13.1

2 13

.22

13.4

7 13

.41

12.7

0 11

.96

11.9

5 11

.75 12

.22

11.7

5 11

.76 12

.29

11.8

3 12.3

3 12.8

3 13

.51

13.3

4 13

.42

13.2

0 13

.38

13.4

6 13

.18

12.7

9 12

.86

13.5

6 13.9

1 14

.90

15.5

3 14

.51

13.6

6 13

.21

13.4

2 13

.15

12.6

7 12

.51

13.4

0 15

.03

15.7

9 15

.55

14.8

2 13

.85

14.0

8 15

.53

15.3

5 15

.24

15.0

7 15.4

2 15

.44 16

.01

16.2

7 16

.26

17.0

5 16

.15 16

.56 16.8

7

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

Oct

-08

Dec

-08

Feb-

09A

pr-0

9Ju

n-09

Aug

-09

Oct

-09

Dec

-09

Feb-

10A

pr-1

0Ju

n-10

Aug

-10

Oct

-10

Dec

-10

Feb-

11A

pr-1

1Ju

n-11

Aug

-11

Oct

-11

Dec

-11

Feb-

12A

pr-1

2Ju

n-12

Aug

-12

Oct

-12

Dec

-12

Feb-

13A

pr-1

3Ju

n-13

Aug

-13

Oct

-13

Dec

-13

Feb-

14

Broiler selling price Six month average

29

Source: SAPA & CJA Strategic Risk Brokers

BROILER PRICE VS. FOOD PRICE INFLATION

65707580859095100105110115120125130135140145

65707580859095

100105110115120125130135140145

Oct

-08

Dec

-08

Feb-

09A

pr-0

9Ju

n-09

Aug

-09

Oct

-09

Dec

-09

Feb-

10A

pr-1

0Ju

n-10

Aug

-10

Oct

-10

Dec

-10

Feb-

11A

pr-1

1Ju

n-11

Aug

-11

Oct

-11

Dec

-11

Feb-

12A

pr-1

2Ju

n-12

Aug

-12

Oct

-12

Dec

-12

Feb-

13A

pr-1

3Ju

n-13

Aug

-13

Oct

-13

Dec

-13

Feb-

14

Broiler selling price index SA food price index

30

Source: SAPA & Own Data

CHANGE IN BROILER SELLING PRICE VS. FEED PRICE

-30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

Oct

-08

Dec

-08

Feb-

09A

pr-0

9Ju

n-09

Aug

-09

Oct

-09

Dec

-09

Feb-

10A

pr-1

0Ju

n-10

Aug

-10

Oct

-10

Dec

-10

Feb-

11A

pr-1

1Ju

n-11

Aug

-11

Oct

-11

Dec

-11

Feb-

12A

pr-1

2Ju

n-12

Aug

-12

Oct

-12

Dec

-12

Feb-

13A

pr-1

3Ju

n-13

Aug

-13

Oct

-13

Dec

-13

Feb-

14

% Change in feed price % Change in broiler selling price

31

Tons

Source: SAPA

TOTAL POULTRY IMPORTS PER MONTH

-

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

45 000

50 000

Oct

-08

Dec

-08

Feb-

09A

pr-0

9Ju

n-09

Aug

-09

Oct

-09

Dec

-09

Feb-

10A

pr-1

0Ju

n-10

Aug

-10

Oct

-10

Dec

-10

Feb-

11A

pr-1

1Ju

n-11

Aug

-11

Oct

-11

Dec

-11

Feb-

12A

pr-1

2Ju

n-12

Aug

-12

Oct

-12

Dec

-12

Feb-

13A

pr-1

3Ju

n-13

Aug

-13

Oct

-13

Dec

-13

Feb-

14

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

32

F2013 47 492 41 153 28 617 27 714 27 301 34 421 36 475 39 190 33 194 27 896 27 962 37 518

F2014 28 334 38 588 32 403 25 144 23 898 33 942

% Var -40.3 -6.2 13.2 -9.3 -12.5 -1.4

bpw* 4,7 6,4 5,4 4,2 4,0 5,6

Industry trends and statistics |

Tons

Source: SAPA

TOTAL POULTRY IMPORTS (CHICKEN, TURKEY, MDM)

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug SepF2011 24 684 48 108 76 511 103 474 127 429 156 795 182 871 215 684 250 081 286 051 320 321 349 364F2012 33 348 67 819 100 540 135 614 170 194 204 560 244 296 278 914 305 472 326 520 353 296 387 173F2013 47 942 89 095 117 712 145 426 172 727 207 148 243 623 282 813 316 007 343 903 371 703 409 286F2014 28 334 66 922 99 325 124 469 148 367 182 309

0

50 000

100 000

150 000

200 000

250 000

300 000

350 000

400 000

450 000

F2011 F2012 F2013 F2014

*bpw ≈ million birds per week

33


34

ABRIDGED STATEMENT OF COMPREHENSIVE INCOME

Six months ended 31 March 2014

R million 2013

R million % change

Revenue 4 700 4 219

Operating profit 213 59

Operating profit margin 4.5% 1.4%

Profit on sale of interest in associate - 47

Profit before interest and tax 213 106

Net finance costs (12) (12)

Share of profit of associates 2 5

Profit before tax 203 99

Tax (58) (25)

Profit for the period 145 74

(Profit for the period : previously reported) - 107

EPS – Cents (restated) 376 192

(EPS – Cents: previously reported) - 278

HEPS – Cents 386 94

11%

260%

101%

105%

95%

96%

35%

308%

35%

35

GROUP SIX MONTHLY REVENUE

(R billion)

1.999 2.383 2.441 2.138

2.741 2.408 2.581 2.449 2.606 2.652 2.878 2.956 2.952 3.049 3.317

1.629 1.901 2.194

2.944

2.238 1.750

1.847 1.730 1.708 1.770 2.175 2.152 2.397 2.519

2.551 2.900

3.429 3.800

4.384 4.500 4.334

3.591 3.415 3.552 3.675

4.039 4.122 4.219 4.290

4.700

0.000

1.000

2.000

3.000

4.000

5.000

6.000

7.000

1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14

Poultry Feed Services & Ventures Other Africa Net Revenue

36

POULTRY – SIX MONTHLY REVENUE

(R million)

2741 2408

2581 2449 2606 2652

2878 2956 2952 3049 3317

0.00000

0.20000

0.40000

0.60000

0.80000

1.00000

1.20000

1.40000

1000

1500

2000

2500

3000

3500

4000

1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14

Revenue Change in realisations (SAPA) Change in volumes

37

FEED – SIX MONTHLY REVENUE

(R million)

2238

1750 1847

1730 1708 1770

2175 2152

2397 2519 2551

0.00000

0.20000

0.40000

0.60000

0.80000

1.00000

1.20000

1.40000

1.60000

1000

1200

1400

1600

1800

2000

2200

2400

2600

2800

3000

1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14

Revenue Change in volumes Change in feed price

38

GROUP SIX MONTHLY OPERATING PROFIT

(R million)

137 145 134 128 229 124 140

-3 -117 8 45

126 135 151

130

133

149 154

135 156

175 157

279 302 304 281

375

299 324

153

59

208 213

-0.1

0.1

0.3

0.5

0.7

0.9

1.1

1.3

-120

-20

80

180

280

380

1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14

Poultry Feed Services & Ventures

Other Africa Change in feed price Change in realisations (SAPA)

39

ABRIDGED STATEMENT OF FINANCIAL POSITION

Mar 2014 R million

Sep 2013 R million

% change

Non-current assets 2 060 1 983 (Sep 2013 restated: previously R2 016 million)

Net working capital 427 486

Current assets (excl. cash) 1 996 1845

Current liabilities (excl. borrowings) (1 569) (1 359)

Non-current liabilities (excl. borrowings) (520) (511)

Net assets 1 967 1 958

Net debt 218 263

Structured debt 234 185

Cash and cash equivalents (16) 78

Equity 1 749 1 695

(Sep 2013 restated: previously R1 725 million)

Total 1 967 1 958

4%

12%

8%

15%

2%

0.5%

17%

0.5%

3%

40

CASH FLOW

For the six months ended 31 March 2014

R million 2013

R million

Cash operating profit 287 122

Working capital requirement 58 (89)

345 33

Tax paid (52) (15)

Net interest paid (19) (15)

Capital expenditure (150) (104)

Finance received - loans 49 85

Other cash flow items 5 -

Cash flow before financing activities 178 (16)

Dividends paid (85) (128)

Movement in cash equivalents 93 (144)

Disposals (PPE and investments) 1 67

Opening balance (78) (77)

Closing balance 16 (154)

41

CAPITAL EXPENDITURE

Six months ended 31 March 2014

R million 2013

R million

Depreciation 69 60

Replacement capex 74 36

Expansion capex - other 41 14

- new feed mill 41 58

Total capex spent 156 108

Commitments - other 148

- County Fair expansion 81

- new feed mill 31

Total spent and committed 416

42

IN SUMMARY

Improvement in Poultry division performance continued

Cash flow for the period positive

Net debt to equity ratio of 12,5% (30 September 2013: 15,5%)

Substantial reinvestment in business for future benefit (R1,2 billion over past three years including commitments)

Interim dividend of 200 cents per share declared

43


44

INDUSTRY MATTERS

Market contraction continued with the closure of further small sized poultry producers

Liquidation sales of distressed assets has resulted in consolidation

Astral supports the requirement for regulatory control around brining, however the 15% brining level should be debated

Provisional EU anti-dumping measures are expected in June / July 2014

Approval has been granted by DAFF for the importation of maize from Argentina as an alternative source during local shortages

45


46

PROSPECTS

The slowing level of growth in the economy and higher unemployment levels will continue to depress consumer spending. This, coupled with other factors like industrial action in the mining sector, will continue to impact profit margins in the industry. There will be a good maize crop in South Africa with an expected softening in grain prices in the coming six months off the highs of the past reporting period. This will benefit feed prices and broiler production costs. If the SAPA application to ITAC for anti-dumping duties against the EU is successful, this will go some way to improving the imbalance in the supply and demand of chicken.

47

48


49

Additional Information


2008/09 2009/10 2010/11 2011/12 2012/13 2013/14E 2014/15FActual Actual Actual Actual Actual Estimate Forecast

Carry In (1 May) 1 049 1 581 2 131 2 336 991 1 414 496Crop Estimate 12 700 12 050 12 815 10 360 12 121 11 811 13 545Sagis Delivery 11 929 11 697 12 092 10 394 11 972 11 353 12 988Minus early deliveries 0 0 0 0 0 -842 -530Imports 27 27 0 421 11 80 0Total Supply 13 005 13 305 14 224 13 151 12 973 12 005 12 953

Domestic Usage Food 4 524 4 471 4 513 4 512 4 499 4 615 4 700Domestic Usage Feed 4 020 4 101 4 271 4 362 4 378 4 550 4 600Gristing, withdrawn & released 562 755 866 693 674 672 664Total Domestic Usage 9 106 9 327 9 650 9 567 9 551 9 837 9 964

Exports & Sundries 2 318 1 847 2 238 2 590 2 008 2 203 1 886Plus early deliveries 0 0 0 0 0 530 580Carry Out (30 Apr) 1 581 2 131 2 336 994 1 414 496 1 683No of days usage 63 83 88 38 54 18 62STU 17.37% 22.85% 24.20% 10.38% 14.81% 5.04% 16.89%

Marketing year (May to April) '000 tons

SOUTH AFRICA - TOTAL MAIZE SUPPLY & DEMAND


RSA MAIZE CARRY OUT AND STOCK TO USE RATIO

17.37%

22.85% 24.20%

10.38%

14.81%

5.04%

16.89%

0%

5%

10%

15%

20%

25%

0

500

1 000

1 500

2 000

2 500

2008/09 2009/10 2010/11 2011/12 2012/13 2013/14E 2014/15F

Carry out Maize stock to use ratio

‘000 tons


SAFEX YELLOW MAIZE VS. CBOT CORN IN RAND TERMS

F2010 F2011 F2014 F2012 F2013

53

Million birds per week / Rand per kg kg

Source: SAPA

LOCAL BROILER PRODUCTION, IMPORTS & PER CAPITA CONSUMPTION

20

24

28

32

36

40

10.0

12.0

14.0

16.0

18.0

20.0

22.0

24.0

26.0

28.0

Oct

-08

Dec

-08

Feb

-09

Ap

r-0

9

Jun

-09

Au

g-0

9

Oct

-09

Dec

-09

Feb

-10

Ap

r-1

0

Jun

-10

Au

g-1

0

Oct

-10

Dec

-10

Feb

-11

Ap

r-1

1

Jun

-11

Au

g-1

1

Oct

-11

Dec

-11

Feb

-12

Ap

r-1

2

Jun

-12

Au

g-1

2

Oct

-12

Dec

-12

Feb

-13

Ap

r-1

3

Jun

-13

Au

g-1

3

Oct

-13

Dec

-13

Feb

-14

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

54

48%

7% 17%

10%

6%

12%

Brazil Argentina Netherlands

UK Germany Other

46%

7% 16%

10%

10%

12%

2014 YTD (March)

TOTAL POULTRY IMPORTS – COUNTRY SPLIT

2013

Source: SAPA

55

1000

1500

2000

2500

3000

3500

4000

4500

5000

5500

Mar

-08

Jun-

08

Sep-

08

Dec

-08

Mar

-09

Jun-

09

Sep-

09

Dec

-09

Mar

-10

Jun-

10

Sep-

10

Dec

-10

Mar

-11

Jun-

11

Sep-

11

Dec

-11

Mar

-12

Jun-

12

Sep-

12

Dec

-12

Mar

-13

Jun-

13

Sep-

13

Dec

-13

Mar

-14

Industry trends and statistics |

Sheep

Beef

Pork

Chicken

Chicken Pork Beef Sheep

Feed Conversion Rate 1.7 2.2 5.5 5.0

Per Capita Consumption 36.4 kg 4.6 kg 17.2 kg 3.2 kg

Source: SAPA & FNB

PRODUCER PRICE COMPARISON – RSA PROTEIN Cents per kg

56

DRAFT BRINING LEGISLATION

Draft Brining Regulations – impact on consumer if we do nothing

Unit Size 2 kg

70:30

R40.00 / 2 kg

185g / piece

10.8 pieces

Live Mass 1.784 kg

Age 34.1 days

Unit Size 2 kg

85:15

R47.24 / 2 kg

153g / piece

13.1 pieces

Live Mass 1.784 kg

Age 34.1 days

57

Tel: +27 (0) 12 667 5468 Fax: +27 (0) 86 504 2002

Astral Foods Corporate Office

92 Koranna Avenue, Doringkloof Centurion, 0157,

Gauteng, South Africa

Chris Schutte Chief Executive Officer

Tel : +27 (0) 12 667 5468 Fax : +27 (0) 86 504 2002 Email: [email protected]

Website: www.astralfoods.com

Daan Ferreira Group Financial Director

Tel : +27 (0) 12 667 5468 Fax : +27 (0) 86 504 1602 Email: [email protected]

Astral Foods Limited

CONTACTS

Documents

Interim Results Presentation - Astral Foods...Interim Results Presentation for the six months ended 31 March 2014 2 AGENDA Business Overview Poultry Industry Trends Financial Overview