ANNUAL RESULTS PRESENTATION FOR THE YEAR ENDED 30 SEPTEMBER 2018 - PowerPoint PPT Presentation

ANNUAL RESULTS PRESENTATION FOR THE YEAR ENDED 30 SEPTEMBER 2018

AGENDA • Year under review • Financial performance • Group performance • Divisional performance • Essential Foods • Groceries • International • Sustainability • Outlook • Questions

YEAR UNDER REVIEW TERTIUS CARSTENS

SALIENT FEATURES Frail SA economic conditions prevailed, deepened Bread and wheat flour disappoints ● ● Currency weakness, accelerated input inflation UK Brexit uncertainty remains ● ● Key category participation and volume growth Lizi’s (UK), Wellington’s and Today’s on board ● ● pleasing Capital investments enabling, curtailed ● African beverage exports resilient Cash generation strong, lean debt position ● ● Dried fruit export performance step changed Financing structure successfully renegotiated ● ●

FINANCIAL REVIEW Twelve months to 30 September 2018 Volume +4% Revenue +3% to R20.2 billion Adjusted operating profit 1 +26% to R1 603 million Operating margin From 6.5% to 8.0% Adjusted HEPS 1 +25% to 553 cents Net cash profit from operating activities +25% to R2.1 billion Dividend for the year (Final 260 cents) 365 cents 1 Adjusted for Phase I B-BBEE share-based payment charge and the related hedge, as well as items of a capital nature and, in 2017 only, once-off M&A costs

TOTAL SA FOOD PERFORMANCE Muted value gain, volume recovery off very weak base YTD Sep 2018 12MM 6MM 3MM ASK’d Value 0.7% 0.3% 1.7% ASK’d Volume 3.7% 4.4% 5.5% Source: ASK’d September 2018

BRAND PERFORMANCE Value Share by Brand Corporate Share 1 12MM OCT 2017 – SEP 2018 Value Share points Category Power Brands Share change growth Bakery 27.8% -1.1% 6.4% Flour 31.2% 0.3% 3.4% 15.5% -0.3% 7.8% 30.7% -0.8% -12.6% 21.8% -1.3% 1.3% -0.2% 22.1% 4.5% 2.0% 12.6% 25.8% 1 Measured as weighted average of Pioneer Foods’ share in 18 categories in which it operates and reads. Nielsen Trade Desk, excluding DOB’s (New categories added include defined frozen prepared meals, defined cold sauces).

GROUP PERFORMANCE FINANCIAL REVIEW FELIX LOMBARD

FINANCIAL REVIEW Year ended September 2018 4% 3% 26% 8.0% VOLUME REVENUE ADJUSTED OPERATING OPERATING MARGIN to R20.2 million PROFIT from 6.5% to R1 603 million 25% 25% ADJUSTED HEPS NET CASH PROFIT DIVIDEND DECLARED NET DEBT (excl. BEE) to 553 cents FROM OPERATING maintained at 365 cents Down to R442 million ACTIVITIES to R2 073 million

GROUP OPERATIONAL INCOME STATEMENT Breakfast cereals (SA and UK), 2018 2017 % long life juice and export fruit Rm Rm Change the major volume performers (Acquisitions + 0.5%). Volumes (‘000 ton) 2 286 2 197 4 Sales price deflation, mainly Revenue 20 152 19 575 3 related to maize commodity deflation (Acquisitions + Cost raw materials and packaging 11 420 11 845 4 1.5%). Naked margin 8 732 7 730 13 Naked margin % 43.3% 39.5% - Margin recovery related to maize performance recovery. Gross profit % 28.8% 26.3% - Operating cost contained. Per Operating cost 7 129 6 453 (10) unit sold, inflation of 5%. Energy and distribution Adjusted operating profit 1 1 603 1 277 26 challenges (Acquisitions + 2%). Adjusted operating margin 8.0% 6.5% - 1 Adjusted for Phase I B-BBEE share-based payment charge and the related hedge, as well as items of a capital nature and, in 2017 only, once-off M&A costs

SEGMENTAL PERFORMANCE 2018 2017 % Essential Foods Rm Rm Change Volume growth and significant deflation. Revenue Maize major contributor to improvement in Essential Foods 11 859 12 470 (5) performance, wheaten value chain significantly weaker. Groceries 5 120 4 403 16 Groceries International 3 173 2 702 17 Group 20 152 19 575 3 Excellent growth in volumes from major categories. Gross margin maintained. Adjusted operating profit 1 Essential Foods 915 800 14 International Groceries 419 357 17 Major improvement in fruit profitability. International 285 121 136 Excellent growth in UK cereal volumes. Other (16) (1) - Immediate profit contribution from Lizi’s. Group 1 603 1 277 26 1 Adjusted for Phase I B-BBEE share-based payment charge and the related hedge, as well as items of a capital nature and, in 2017 only, once-off M&A costs

UNDERSTANDING ADJUSTMENTS 2018 2017 % Rm Rm Change Adjusted operating profit 1 603 1 277 26 Pioneer Foods share price performance. Hedge 100% Once-off merger and acquisition costs - (18) - valued while liability is phased over time. Phase I B-BBEE share-based payment charge and (30) (103) - related hedge Sale of properties, captive listed Items of a capital nature 73 (57) - shares and Heinz Foods SA JV to subsidiary. Operating profit 1 646 1 099 50 Investment income 28 22 27 Finance costs (198) (196) (1) Share of (loss)/profit of investments accounted for - 60 - Heinz Foods SA performance. using the equity method Profit before income tax 1 476 985 50 Income tax expense (399) (259) (54) Profit for the year 1 077 726 48

PERFORMANCE OF JOINT VENTURES AND ASSOCIATES Very good performance from food coating business driven by Turnover - PFG share Share of PAT 1 strong volume growth. Botswana major overhaul of 2018 2017 % 2018 2017 % milling operations. Two months Rm Rm Change Rm Rm Change out of commission. Strong run rate thereafter. Other 193 179 8 26 20 30 Namibia encountered challenging economic Bokomo Botswana 464 555 (16) 19 18 6 circumstances. Bokomo Namibia 272 279 (3) 1 8 (88) Once-off adjustments of certain items on the Heinz Foods SA Heinz Foods SA 180 375 (52) (70) (27) (159) balance sheet as well as poor operational performance. Food Concepts Pioneer Ltd - 70 - - 3 - Became a subsidiary during Future Life Health Products 142 148 (4) 17 17 - 2017. Weetabix East Africa 90 42 114 14 5 180 Acquired March 2017. 1 341 1 648 (18) 7 44 (84) Performed well notwithstanding political challenges and liquidation of Nakumatt. 1 Before items of a capital nature

CASH FLOW ANALYSIS Continued strong cash generation 2018 2017 % Rm Rm Change Improved operating performance. Net cash profit from operating activities 2 073 1 661 25 Change in working capital 281 752 Major contributors: ● International debtors management step Inventory (38) 178 changed. ● Accounts payable performance enhanced Debtors (20) 271 by Sunday year-end. ● Further opportunity in: Creditors 339 303 ○ Inventory - Investment in S&OP. ○ Accounts payable - Interest rate Cash effect from hedging activities 2 166 differentials. Net cash generated by operations 2 356 2 579 Cash effect B-BBEE share-based payment charge and the related hedge (1) (28) Settlement of forward purchase contract on own equity - (493) Income tax paid (364) (288) Net cash flow from operating activities 1 991 1 770 12

GROUP NET DEBT AND DEBT EQUITY RATIO Excellent cash conversion: ● Growth in cash profit ● Improved working capital management ● Contained capital spend ● Cash conversion ratio of 67% ○ Highest in 6 years Increased syndicated debt facilities at very competitive rates

1 DIVISIONAL PERFORMANCE ESSENTIAL FOODS RIAAN HEYL

ESSENTIAL FOODS Performance summary • Improved EBIT performance lead by maize • Wheaten value chain underperformed ○ Industry capacity and competitive landscape • Balance of portfolio satisfactory • Continued deflation vs. cost pressure All 6 main categories (Trade Desk) 1 ○ ○ Essential Foods lower deflation than category (5 out of 6 including maize and bread) 1 Maize category sustained volume growth 2 • ○ Significant down-trading observed • Bakeries H2 traction encouraging 1 Source: Nielsen Trade Desk 12MM Sep 2018 2 Source: SAGIS

ESSENTIAL FOODS Performance summary – 12 months ended 30 September 2018 VOLUMES EXTERNAL OPERATING OPERATING +2% -5% +14% REVENUE MARGIN +1.3pp PROFIT R11.9BN R915M 7.7% Rice & maize, but all Strong full year maize Marginal inflation 2017: 6.4% categories positive performance bread and rice only Wheat milling & baking Generated R1.6bn cash Bakeries +1% (Q4: +5%) Maize deflation 22% remained under pressure from operations Balance of Grains lost momentum in H2

ESSENTIAL FOODS Maize Industry milling all time high September 2018 1 • ○ Raw material, consumer value, capacity • Category down-trading accelerated ○ Fuel/transport cost impact on consumer Deflation despite raw material inflation 2 ○ DOB volume share of Trade Desk: 26% → 34% 3 ○ • White Star maintained value share leadership ○ White Star value/volume share ratio: 1.11 → 1.25 3 White Star RSP deflation 11% vs. category 25% 3 ○ • White Star Instant Porridge gained further traction Trade Desk Q4 volume leadership established 3 ○ 1 Source: SAGIS ○ Enhanced overall category performance 2 Source: SAFEX WM near month, STATS SA Food Price Monitor 3 Source: Nielsen Trade Desk 3MM Sep 2017 vs. Sep 2018