Annual Results Presentation for the 12 months ended 30 September 2018

Transcription

1 Annual Results Presentation for the 12 months ended 30 September 2018

2 AGENDA Business Page 3 / Slide 3 Operational Page 5 / Slide 8 Industry Trends Page 12 / Slide 21 Financial Page 16 / Slide 29 Outlook Page 22 / Slide 42 Additional Information Page 24 / Slide 46 2

3 BUSINESS OVERVIEW

4 Business Operational Industry Trends Financial Outlook HIGHLIGHTS A majority of the key drivers of profitability were in Astral s favour stars were aligned Feed input costs reduced notably due to lower maize prices on the back of a bumper maize crop for 2017 Supply and demand balance during the year gave pricing support Further improvements in on-farm poultry production efficiencies were achieved No further incidents of bird flu and related costs were experienced during the period under review Contribution to profitability from an improved performance across all business units 4

5 Business Operational Industry Trends Financial Outlook KEY FINANCIAL INDICATORS Revenue 5% Profit before interest and tax 79% Earnings per cps 88% Headline earnings per cps 94% Total dividend for the cps 94% 5

6 Business Operational Industry Trends Financial Outlook DIVISIONAL HIGHLIGHTS Poultry Feeding cost decreased Feed Maize prices notably down Bird performance improvement General market improvement Sales volumes flat Higher internal feed required Sales realisations up External sales volumes up No impact from HPAI (bird flu) Rand per ton margin up Other Africa Higher profits improved performance from Mozambique and Swaziland 6

7 PBIT F2017 Raw material cost Feed conversion efficiency Broiler sales volumes Broiler selling price Bird flu cost 2017 Other PBIT F2018 Business Operational Industry Trends Financial Outlook THE YEAR IN PERSPECTIVE (R million) R855 million - 7

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9 Business Operational Industry Trends Financial Outlook POULTRY DIVISION Revenue - R million Operating profit - R million F F F F2018 Revenue up 6.9% Operating profit up 127.7% Broiler sales volumes up 0.2% Broiler sales realisations up 7.1% Feed price down 4.0% Selling price contribution Net margin 13.7% F2017: 6.4% 9

10 Business Operational Industry Trends Financial Outlook POULTRY DIVISION Results for the year ended September 2018 are a significant improvement on the comparable period Feed input costs reduced due to lower maize prices on the back of a record maize crop for 2017 and an above average crop for 2018 Supply and demand balance gave pricing support in the first half of the reporting period, whilst the second half reflected a weaker market and softer selling prices Imports during the period were higher than the comparable period, averaging tons ( 8,6 million birds per week) Further improvements in on-farm poultry production efficiencies, benefitting broiler live cost through an improved feed conversion efficiency No further incidents of bird flu and related costs were experienced during the period 10

11 Business Operational Industry Trends Financial Outlook POULTRY DIVISION PRODUCT MIX 22% 23% 7% F Tons 49% 7% F Tons Volume increase 0,2% 49% 14% 4% 4% 14% 4% 3% 11

12 Business Operational Industry Trends Financial Outlook BROILER PRODUCTION PERFORMANCE 108% 106% 104% 102% 100% 98% 96% 94% 92% Key indicators base-lined to 100% in F2013 F2013 F2014 F2015 F2016 F2017 F2018 Slaughter age Live weight Average daily gain 12

13 Business Operational Industry Trends Financial Outlook BROILER PRODUCTION PERFORMANCE 130% 125% 120% 115% 110% 105% 100% 95% 90% 85% 80% 75% 70% 65% Key indicators base-lined to 100% in F2013 F2013 F2014 F2015 F2016 F2017 F2018 Mortality rate Feed conversion rate Efficiency factor (PEF) 13

14 Business Operational Industry Trends Financial Outlook BROILER PRODUCTION PERFORMANCE 125% 120% 115% 110% 105% 100% 95% 90% 85% Key indicators base-lined to 100% in F2013 F2013 F2014 F2015 F2016 F2017 F2018 Broiler feed price index Feed conversion index Feeding cost index 14

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16 Business Operational Industry Trends Financial Outlook FEED DIVISION Revenue - R million Operating profit - R million F2017 F F2017 F2018 Revenue down 5.8% Raw material costs down Average selling prices down 11.2% Operating profit up 16.7% Net margin 7.4% F2017: 5.9% Improved trading conditions Sales volumes up 6.1% 16

17 Business Operational Industry Trends Financial Outlook FEED DIVISION SAFEX yellow maize prices decreased notably for the period under review F2018 avg. R2 098 per ton (F2017: R2 464) down R366 per ton year-on-year Internal feed sales increased by 6.0% due to an increase in broiler production numbers in F2018 External feed sales increased by 6.1% as all livestock sectors benefitted from lower feed costs Expense increases were contained to 4.7% year-on-year across all seven feed mills The average net margin increased (on a Rand per ton basis) for the period under review 17

18 Business Operational Industry Trends Financial Outlook FEED DIVISION SALES MIX 13% 12% 21% F Tons 60% 22% F Tons Volume increase 6.1% 60% 6% 6% 18

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20 Business Operational Industry Trends Financial Outlook OTHER AFRICA DIVISION (Zambia, Mozambique & Swaziland) Revenue - R million Operating profit - R million F2017 F F2017 F2018 Revenue down 3.7% Raw material costs down Sales volumes up 4.0% Average selling prices down 7.4% Operating profit up 20.2% Net margin 7.8% F2017: 6.3% Mozambique & Swaziland improved performance 20

21 INDUSTRY TRENDS

22 Business Operational Industry Trends Financial Outlook SAFEX YELLOW MAIZE PRICE Source: CJA Strategic Risk Brokers 22

23 Business Operational Industry Trends Financial Outlook SAFEX YELLOW MAIZE PRICE vs. CBOT IN RAND TERMS Source: CJA Strategic Risk Brokers 23

24 Business Operational Industry Trends Financial Outlook DURBAN SOYA MEAL PRICE Source: CJA Strategic Risk Brokers 24

25 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 Apr-18 Jun-18 Aug-18 Business Operational Industry Trends Financial Outlook Tons POULTRY IMPORTS PER MONTH Total poultry imports 6 per. Mov. Avg. (Total poultry imports) Source: SAPA 25

26 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 Apr-18 Jun-18 Aug-18 Business Operational Industry Trends Financial Outlook BROILER SELLING PRICES 160% 150% 140% 130% 120% 110% 100% 90% 80% Broiler selling price index Six month average Source: Own Data 26

27 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 Apr-18 Jun-18 Aug-18 Business Operational Industry Trends Financial Outlook BROILER PRICE vs. FOOD PRICE INFLATION 170% 160% 150% 140% 130% 120% 110% 100% 90% 80% 170% 160% 150% 140% 130% 120% 110% 100% 90% 80% Broiler selling price index SA food price index Source: Own Data 27

28 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 Apr-18 Jun-18 Aug-18 Business Operational Industry Trends Financial Outlook CHANGE IN POULTRY SELLING PRICE vs. FEED PRICE 40% 30% 20% 10% 0% -10% -20% -30% % Change in broiler feed price % Change in poultry selling price Source: Own Data 28

29 FINANCIAL OVERVIEW

30 Business Operational INCOME STATEMENT Year ended 30 September Industry Trends 2018 R million 2017 R million Restated Financial 2017 R million Revenue Operating profit Operating profit margin 15.0% 8.5% 8.5% Profit on sale of investment Profit before interest and tax PBIT margin 15.0% 8.7% 8.7% Net finance income / (cost) 52 (15) (15) Profit before tax Tax (560) (311) (309) Profit for the period Outlook % change 5% 84% 79% 86% 89% Headline earnings EPS Cents HEPS Cents % 94% 30

31 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0,000 Business Operational Industry Trends Financial Outlook GROUP ANNUAL REVENUE (R billion) 3,7 3,9 4,1 2,8 2,7 2,7 2,7 2,0 1,3 1,7 2,2 2,3 4,8 5,2 2,5 2,7 3,3 3,6 6,3 6,9 3,5 5,1 4,4 4,6 7,4 7,0 7,2 4,0 3,6 3,5 5,1 5,0 5,3 8,2 8,5 4,3 4,9 5,8 6,0 9,6 5,5 7,0 12,0 11,3 7,2 6,2 8,7 9,1 12,4 6,6 9,9 13,0 6,2 10, Poultry Feed Other Africa External revenue 31

32 Business Operational Industry Trends Financial Outlook GROUP ANNUAL OPERATING PROFIT (R million) 14,8% 15,0% ,16 12,3% 12,8% 457 0,14 0,12 9,8% 8,7% 9,6% 9,3% ,3% 8,4% 7,3% ,7% 6,6% ,8% ,1% 549 5,9% ,1% ,6% Poultry Feed Other Africa Profit on Sale of Investment 0,1 0,08 0,06 0,04 0,

33 Business Operational Industry Trends Financial Outlook GROUP SIX MONTHLY OPERATING PROFIT (R million) H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17 1H18 2H18 Poultry Feed Other Africa Change in feed price Change in broiler selling price 33

34 Business Operational Industry Trends Financial Outlook BALANCE SHEET September 2018 R million September 2017 R million Restated % change Non-current assets Net working capital Current assets (excl. cash) Current liabilities (excl. borrowings) (1 754) (1 599) Non-current liabilities (excl. borrowings) (650) (610) Net assets % 37% 19% 10% 7% 19% Net (surplus cash) (789) (552) Equity Total % 23% 19% 34

35 Business Operational Industry Trends Financial Outlook CAPITAL EXPENDITURE Twelve months ended 30 September 2018 R million 2017 R million Depreciation Total capex spend Commitments Total spend and committed

36 Business Operational Industry Trends Financial Outlook CAPITAL EXPENDITURE F R million Processing plant equipment 113 Breeder farm refurbishment 22 Water augmentation project Western Cape 16 HPAI mitigation project 42 Listeria mitigation project 17 Sub-Total 210 Other: normal on-going capex 146 Total capex spend F

37 Business Operational Industry Trends Financial Outlook CAPITAL EXPENDITURE COMMITMENTS R million Total commitments Major projects: Festive expansion (Phase 1 & bpw) 875 Mountain Valley expansion ( bpw) 203 Meadow Feeds Standerton silo complex 53 New feed mill Zambia

38 Business Operational Industry Trends Financial Outlook WORKING CAPITAL For the twelve months ended 30 September 2018 R million 2017 R million Variance R million Current assets Biological assets Inventory - Poultry Feed Other Africa Trade receivables Receivables investment sold (40) Other receivables (31) Current liabilities (1 754) (1 599) (155) Trade payables (1 324) (1 151) (173) Other payables (430) (448) (18) Net working capital

39 Business Operational Industry Trends Financial Outlook STATEMENT OF CASH FLOWS For the twelve months ended 30 September 2018 R million 2017 R million Cash operating profit Working capital movement (425) (71) Tax paid (516) (310) Net interest received / (paid) 58 (11) Capital expenditure (358) (180) Dividends paid (729) (108) Government grant received - 29 Other cash flow items 45 7 Loans (repaid) - (35) Movement in cash equivalents Effect of exchange rate changes 6 - Opening balance 552 (205) Closing balance

40 F2001 F2002 F2003 F2004 F2005 F2006 F2007 F2008 F2009 F2010 F2011 F2012 F2013 F2014 F2015 F2016 F2017 F2018 Business Operational Industry Trends Financial Outlook HEADLINE EARNINGS & DIVIDEND PER SHARE (cents per share) Headline earnings per share Dividend per share 40

41 Business Operational Industry Trends Financial Outlook IN SUMMARY Record profits in F2018 with profit margin at 15.0% (F2017: 8.7%) Cash flow generated from operations R1 731 million in F2018 Net surplus cash at year-end of R789 million Final dividend of cps within the Group s liquidity capability Full year dividend of cps at 1.8 times cover (up 94%) 41

42 OUTLOOK

43 Business Operational Industry Trends Financial Outlook POTENTIAL NEGATIVE INFLUENCES Raw material prices are on an upward trend and will impact Astral s largest input cost, namely feed making up 67% of broiler live cost The impact of international trade wars and geopolitics on key input costs, including coarse grains and fuel The negative impact of high fuel prices on consumer disposable income and continued pressure on poultry selling prices The impact of the new minimum wage will increase production costs however could lead to higher levels of consumer discretionary spend High levels of poultry imports from Brazil and the USA, expected to continue The on-going risk of bird flu, however prevention strategies to manage this threat are in place, albeit at additional associated costs Policy uncertainty around land expropriation without compensation and the impact on property rights and capital investment 43

44 Business Operational Industry Trends Financial Outlook POTENTIAL POSITIVE INFLUENCES Improved political situation in South Africa and the region Indications of a more business friendly environment in South Africa, with key government departments engaging with the poultry industry The European Partnership Agreement (EPA) safeguard duty finally imposed on poultry imports into South Africa from the EU Progressive genetic improvement of the Ross broiler breed will continue to support the group s best cost strategy Sufficient international and local coarse grain stocks Expansion in Astral s poultry processing capacity (up 20%) over the next three years (capex of R1.1 billion) supports the President s investment drive and stimulus plan announced during the year 44

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46 ADDITIONAL INFORMATION

47 WHAT WE SAID IN MAY 2018 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? 47

48 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 Sep-17 Sep-18 KEY FINANCIAL RATIOS , , ,9 7,5 7,3 5,5 5, ,4 10,0 9,6 8,3 6,1 4, ,5 13,9 14,5 14,8 12,3 12,8 4,1 4,4 4, , , ,0 11,1 9,9 23 9,9 9, ,4 9,3 6,5 9,8 8,0 8,4 13 8,7 7,8 12 5,8 5,1 4,7 4,8 3,6 3,7 4,0 3,8 3,9 4,2 4,6 4,1 4,1 4,1 20,0 15,0 10,0 5,0 0 - RONA ROE EBITDA margin PBIT margin Asset turn 48

49 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 Sep-17 Sep-18 KEY FINANCIAL INDICATORS , , ,05 61, ,79 8, ,34 17, ,28 23, ,47 34, ,36 41,65 44,16 37,43 35, , NAV share Working capital days Net Debt / Equity 49

50 WORLD CORN ENDING STOCKS Million Tons 28,73% 27,80% 27,61% 25,00% 23,85% 19,82% 19,86% 14,81% 12,30% E 2020F 30% 25% 20% 15% 10% End Stock Maize stock to use ratio Source: CJA Strategic Risk Brokers 50

51 SOUTH AFRICA TOTAL MAIZE SUPPLY & DEMAND Marketing year (May to April) '000 tons 2013/ / / / / /19E 2019/20F Actual Actual Actual Actual Estimate Estimate Forecast Carry In (1 May) Crop Estimate Retentions Sagis Delivery Minus early deliveries Imports Total Supply Domestic Usage Food Domestic Usage Feed Gristing, withdrawn & released Total Domestic Usage Exports & Sundries Plus early deliveries Carry Out (30 Apr) No of days usage STU 4,96% 16,62% 21,75% 9,87% 25,42% 17,41% 9,16% Source: CJA Strategic Risk Brokers 51

52 SOUTH AFRICA TOTAL MAIZE SUPPLY & DEMAND Tons 28,31% 30% 25% ,62% 21,75% 17,41% 20% 15% ,23% 9,87% 9,16% 10% ,96% / / / / / / /19E 2019/20F 5% 0% Carry out Maize stock to use ratio Source: CJA Strategic Risk Brokers 52

53 EL NIÑO SOUTHERN OSCILLATION - FORECAST Source: International Research Institute for Climate and Society (IRI) Columbia University 53

54 SOUTHERN AFRICA - VEGETATIVE HEALTH INDEX VHI of previous year VHI of current year Source: NOAA - National Environmental Satellite, Data, and Information Service (VHI) 54

55 BROILER FEED INGREDIENT INCLUSION & COST CONTRIBUTION 100% 90% 80% 70% 60% 50% 40% 0,3 7,5 0,2 6,4 9,1 11,4 4,7 10,3 0,9 14,9 8,6 14,9 0,3 7,3 0,4 6,7 6,4 15,6 5,0 10,3 1,2 14,0 5,6 20,3 0,4 6,6 0,5 7,3 6,9 16,8 4,7 9,1 1,7 17,2 5,4 22,3 0,5 9,9 0,4 7,8 6,2 14,0 5,4 13,8 1,5 18,8 4,0 18,6 0,5 14,6 0,5 8,6 6,1 14,0 6,0 19,8 1,7 21,5 3,3 0,4 16,6 0,7 9,1 5,7 13,2 5,4 22,2 2,3 21,3 4,1 30% 17,9 17,9 20% 10% 0% 65,0 45,7 63,3 43,6 61,4 39,6 61,1 38,0 55,6 29,8 54,3 26,7 1H16 Incl. 1H16 Contr. 2H16 Incl. 2H16 Contr. 1H17 Incl. Maize Sunflower Meal Fish Meal Vitamins, Minerals and Medication. 1H17 Contr. 2H17 Incl. 2H17 Contr. 1H18 Incl. Soybean Meal Other F/Fat and Extr Soy 1H18 Contr. 2H18 Incl. 2H18 Contr. Source: Own Data 55

56 BRAZIL, EU & USA PRODUCT COST BENCHMARK Ex BRAZIL December 2018 FROZEN LEG QUARTERS BULK PACKED CIF DBN US$ per ton TON SA COST R/$ exchange rate R$ Rand per ton TON Rand per kg KG Duty per kg KG 37% 37% 37% - Clearance costs KG COST INTO STORAGE KG Storage KG Distribution KG Marketing, Administration, Finance KG TOTAL COST KG EUROPE December 2018 FROZEN LEG QUARTERS BULK PACKED CIF DBN per ton TON SA COST exchange rate R$ Rand per ton TON Rand per kg KG Duty per kg KG - Clearance costs KG - COST INTO STORAGE KG Storage KG - Distribution KG 0.92 Marketing, Administration, Finance KG 0.96 TOTAL COST KG Source: Own Estimates 56

57 BRAZIL, EU & USA PRODUCT COST BENCHMARK EUROPE Ex Belgium, Ireland, Spain, Poland with Safeguard 35,3% December 2018 FROZEN LEG QUARTERS BULK PACKED CIF DBN per ton TON SA COST R/ exchange rate R$ Rand per ton TON Rand per kg KG Duty per kg KG 35.3% 35.3% 35.3% - Clearance costs KG COST INTO STORAGE KG Storage KG Distribution KG Marketing, Administration, Finance KG TOTAL COST KG Ex USA December 2018 FROZEN LEG QUARTERS BULK PACKED CIF DBN US$ per ton TON SA COST R/$ exchange rate R$ Rand per ton TON Rand per kg KG Duty per kg KG 37.00% 37.00% 37.00% - Clearance costs KG COST INTO STORAGE KG Storage KG Distribution KG Marketing, Administration, Finance KG TOTAL COST KG Source: Own Estimates 57

58 LOCAL BROILER PRODUCTION & MARKET SHARE 23% 27% 4% 4% 8% 19% 7% 8% Astral RCL Country Bird Daybreak Sovereign Grainfields Chubby Chick Other Local broiler production 19.1 million birds per week Source: Own Estimates 58

59 LOCAL BROILER PRODUCTION & MARKET SHARE 31% 18% 13% 6% 16% 2% 3% 6% 5% Astral RCL Country Bird Daybreak Sovereign Grainfields Chubby Chick Other Imports Avg. poultry imports 8.6 million birds per week (12 months ending September 2018) Source: SAPA & Own Estimates 59

60 TOTAL POULTRY IMPORTS (CHICKEN, MDM, TURKEY) Tons F2015 F2016 F2017 F Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep F F F F F F % Var -7,9-10,0 40,7 26,4 2,6-19,6 11,4-0,2-11,0 9,9 34,3 8,7 bpw* 8,2 8,1 8,6 8,4 7,1 9,4 8,3 8,4 6,7 8,7 11,0 10,0 *bpw million birds per week Source: SAPA 60

61 TOTAL POULTRY IMPORTS COUNTRY OF ORIGIN Country of origin for poultry imports Country of origin for poultry imports - September 2018 YTD US 15,6% Other 3,9% US 16,8% Other 3,6% Argentina 5,9% Brazil 60,6% Argentina 6,5% Brazil 62,1% EU 14,0% EU 11,0% tons tons Source: SAPA 61

62 TOTAL POULTRY IMPORTS COUNTRY OF ORIGIN Country Imports (tonnes) YTD Brazil Netherlands United Kingdom Spain United States Belgium Argentina Ireland Hungary Denmark Canada Germany Poland Thailand Chile Australia France Uruguay Switzerland Swaziland Source: SAPA 62

63 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 SOUTH AFRICAN PROTEIN PRICE COMPARISON cents / kg Chicken Pork Beef Mutton Feed Conversion Rate Per Capita Consumption 38,9 kg 4,6 kg 17,8 kg 3.2 kg Source: SAPA, FNB, Red Meat Industry Forum 63

64 INDUSTRY MATTERS

65 POULTRY IMPORTS The EPA (SADC-EU Economic Partnership Agreement) safeguard for poultry imports from the EU was published on 28 September 2018 Under the provision the safeguard duty on EU frozen bone-in portions will be as follows: 35.3% from 28 September 2018 up to and including 11 March % from 12 March 2019 up to and including 11 March % from 12 March 2020 up to and including 11 March % from 12 March 2021 up to and including 11 March 2022 This duty levels the playing field somewhat with imports from Brazil and the US that are subject to the 37% import duty currently in place for those exporting countries (plus an anti-dumping duty on the US - for which the AGOA ton annual quota is exempt) Imports from the EU over the past 18 months have been substantially lower than historical levels, from a time where record EU imports were received in November This is due to the prevalence of highly pathogenic bird flu in many EU countries affecting EU trade with South Africa Import volumes previously supplied by the EU have simply been switched to Brazil, which is currently the largest exporter of poultry products to South Africa 65

66 HIGHLY PATHOGENIC AVIAN INFLUENZA (HPAI) HPAI remains a global challenge, however, world-wide cases of HPAI in 2018 were much lower when compared to 2017 In South Africa, 193 cases of HPAI H5N8 have officially been reported across 8 provinces (Mpumalanga, Limpopo, Gauteng, KwaZulu Natal, Free State, North West, Eastern Cape and Western Cape) over a 14 month period from the 21 st of June 2017 to the end of September 2018 The number of HPAI H5N8 outbreaks in South Africa has been reported as 33 in commercial chickens (broiler breeders, commercial layers and commercial ducks), 47 on ostrich farms, 80 in wild bird (finches, sparrows, yellow-billed ducks, penguins, terns, white-faced duck, gannets and black swans), 23 cases in birds kept for hobby (and zoos) purposes and 10 in backyard chickens No reported outbreaks of HPAI were experienced by the local poultry industry since May

67 LISTERIOSIS On 5 December 2017 the Minister of Health announced a Listeriosis outbreak in South Africa. This was ultimately declared the worlds worst Listeriosis outbreak on record with the death toll exceeding 200 people. Through SAPA the poultry industry engaged with the DOH, NICD, DAFF and DOA throughout the process, to counter the misrepresentation of the poultry industry as the primary cause for concern, and to ensure pragmatic reaction to the crisis. Production was suspended at one poultry abattoir near Hartebeespoort, but this was not linked to the outbreak strain. The outbreak strain (ST6) was identified in a processed meat facility in Polokwane, as announced on 4 March One of South Africa s largest poultry producers was also implicated at the time because the outbreak strain was detected on polony casings, however this could not be traced to their manufacturing facilities. Both businesses experienced severe disruptions to the relevant supply chains, which also had a delayed secondary impact on both pork and poultry supply. 67

68 LISTERIOSIS Astral was not implicated with the outbreak at any stage. Review of the company s food safety management system, the internationally benchmarked FSSC accreditation, proved that the Astral s management of the risk of food borne pathogens is both world class, and robust in execution. This review included three independent evaluations of Astral s Listeria readiness. Astral did take additional precautionary steps during this period, which have been adopted as the new normal going forward. These included: increased testing and analysis for Listeria revised cleaning and sanitation protocols revitalization of the company s hygiene campaigns, improvements in processing based on HACCP methodologies Renewed and on going staff training. 68

69 SOUTH AFRICAN POULTRY ASSOCIATION (SAPA) SAPA has over the past year undergone a restructuring exercise reflecting a better organised association more reflective of the industry Both the broiler and layer organisations in this structure will be independently headed up by newly appointed General Managers spearheading specific interests in both areas of the industry Both organisations are managed by appointed boards consisting of member representatives, the General Manager and a nominated Chairman SAPA is governed by an appointed board comprising members of both organisations and led by an appointed Chairperson Membership of both organisations has improved markedly following the restructure, with the broiler membership representing approximately 73% of the local weekly broiler production numbers A statutory levy has been approved for the table egg industry, and together with the improved membership of both organisations SAPA is in a better position to lead important matters of industry interest 69

70 Chris Schutte Chief Executive Officer Tel : +27 (0) Fax : +27 (0) Chris.Schutte@astralfoods.com Daan Ferreira Chief Financial Officer Tel : +27 (0) Fax : +27 (0) Daan.Ferreira@astralfoods.com