HOLD DAIRIBORD HOLDINGS LIMITED HALF YEAR RESULTS SIX MONTHS ENDED 30 JUNE 2014 HALF YEAR RESULTS 30 JUNE 2014 RESULTS SUMMARY - HY 2014

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1 Amount - $000 HALF YEAR RESULTS SIX MONTHS ENDED 30 JUNE 2014 PERFORMANCE SUMMARY Revenue declined by 11% to $43.8m (HY 2013: $49.1m) due to a stressed consumer switching to cheaper goods & increased competitor presence in the market 2% increase in liquid milks volumes sales, attributable to a 9% increase in the Zimbabwean segment, however the slump in Malawi s liquid milk sales weighed down the overall growth of the milk portfolio for the Group National raw milk production increased by 1% to 26.8 million litres. However, Dairibord s market share remained unchanged at 40% of total market output. Zimbabwe needs 120 million litres of milk per annum to be self-sufficient, against current output of 56 million litres Foods & Beverages volumes declined by 14% & 11% respectively as consumer spending shifts from non-core products to basic commodities Overhead costs declined by 8% compared to HY 2013, attributable to operational efficiencies arising from the staff & plant rationalisation program which was completed in the first half of The Mutare & Bulawayo processing factories were closed but retained their sales & distribution units. The Group incurred once-off costs of $ on their retrenchment exercise in 2013 Operating loss for the period declined to $0.627m (HY 2013: $3.06m) giving rise to the operating margin improving to -1% (HY 2013: -6%). Successful implementation of the plant rationalisation program, as well as non-recurring costs of $4.264m incurred in FY 2013, account for the improvement in margins Despite a 37% increase in borrowings to $9.7m (HY 2013: $7.09m), finance costs declined 3% to $0.36m (HY 2013: $0.37m) owing to cheaper debt financing. Average borrowing costs were 10.6%. At the end of 2013 a $6m loan facility was secured from PTA Bank with a tenure of 5 years at an all-in cost of 10.3% Gearing increased to 17.6% (HY2013: 13.4%) Loss Per Share of cents (HY 2013: cents) Cash flow from operating activities declined 86% to $0.3m (HY 2013: $1.9m), attributable to increase in working capital requirements to support new products (Pfuko-Udiwo Maheu & Devine Ice-cream sticks) NAV of cents (2013: cents), giving a P/BV of 0.88 times (2013: 1.18 times) HOLD Price at 16 January 2015 (c) week range (c) Market Cap ($m) NAV per share P/BV (x) 0.72 REVENUE AND PROFITABILITY 150, ,000 50, (50,000) Revenue Operating Profit Profit before tax Profit after tax REVENUE BY PRODUCT REVENUE CONTRIBUTION BY UNIT INVESCI RESEARCH TEAM info@invesci.com +263 (4) /9

2 RETURNING TO PROFITABILITY Dairibord is operating in a difficult macro-environment where household disposable incomes are declining. The depreciation of the South African Rand against the USD has made imports cheaper. Additionally, costs of production are rising due to aging equipment against better production efficiencies & lower production costs from South African competitors. As a result, margins have suffered with the GP plunging to 24% for the 2013 financial year down from 30% in 2012 Dairibord has implemented the following measures to defend market share: - Increasing raw milk supply through importing heifers Between 2012 and heifers have been imported. Theoretically each heifer should produce 4,000 litres per year but they are currently achieving 2,570L p.a. With a herd of 430, 1.1m litres is expected, representing 12.6% of DZHL s raw milk intake - Introducing new product lines that are aligned to the consumers shrinking wallets - Pfuko/Udiwo Maheu (a filling, nutritional, sorghum-based health drink) was introduced in May 2014 with revenues exceeding initial estimates. The Pfuko/Udiwo plant has an annual revenue-generating capacity of $3.5m at full capacity (approx. 4% of group revenue) - Capex spend on products with growth potential (i.e. Maheu, Aqualite-water, bulk yoghurt & ice-cream) - Capex of $4.87m (HY 2013: $2.32m) has been incurred in the 2014 fiscal year to enhance the efficiency of manufacturing processes Lyons prospects a significant segment accounting for 36% of the Group revenue in are weak as the entity produces nonessential food-stuffs. Revenues are likely to decline in response to the drop in disposable incomes. Economic instability in the Malawian economy continues to pose operational threats to Dairibord Malawi. As the Kwacha continues to depreciate against the USD, the performance of this segment will remain subdued. 6% of the group s revenue for FY 2013 was generated by this segment Dairibord expects to benefit from the new temporary duty exemption on importing full cream & skimmed milk powder & the modest protection on competing finished milk products through reduced production costs & reduced competition. This is a shortterm measure & the Group will need to continue investment in expanding capacity & improving efficiencies to remain competitive With a debt to equity ratio of 20% the Group has a flexible capital structure which the board can alter in pursuit of revenue growth. 78% of debt is classified as long-term. Dairibord has a healthy interest cover of 6.10x (average borrowing costs for HY %) thus the Group can take on additional debt without increasing credit & liquidity risk to undesirable levels OPERATING PROFITABILITY INVESTMENT RATIOS PER SHARE PERFORMANCE

3 Amount $ 000 The Group last declared a dividend in FY2012 (0.45cents). Owing to the poor cash-flow, losses & Capex spend programs, it is unlikely that the Group will declare a dividend in the current financial year The share price is unattractive from a P/E multiple point of view. The shares are trading at a discount of 29% relative to the NAV. This discount is appropriate considering the Group is currently loss making HOLD - Consider for inclusion in a long-term portfolio when profitability is restored. Potential take-over target - huge historical infrastructure could be attractive to South African dairy companies CASH FLOW, CAPEX & DEBT 10,000 8,000 6,000 4,000 2, Operating Cash Flow Capex Debt FINANCING CAPITAL STRUCTURE

4 INVESTMENT FUNDAMENTALS ($'000) HY Price (USDc) Number of shares (m) Valuation ratios P/E (30.00) (61.11) EV/EBITDA (x) P/BV (x) Dividend Yield 0.00% 0.00% 2.32% 2.14% 0.00% 0.00% Per Share Data (cents) EPS reported (0.50) (0.09) BVPS DPS Profit & Loss ($000) Revenue 43,425 75,187 95, , ,052 43,792 Gross Margin 13,894 23,888 31,141 32,467 24,197 43,792 Operating Profit 4,638 8,622 10,846 9,800 (1,838) (627) Net Finance Costs (550) (605) (879) (379) (479) (257) Pre-tax profit from continuing operations 4,089 8,017 9,967 9,421 (2,317) (884) Tax (expense)/ credit (915) (1,876) (2,780) (2,234) Reported net income Earnings 3,096 6,142 7,074 7,163 (1,753) (481) EBITDA 6,387 10,906 13,389 12,170 2,852 1,516 Growth Rates (%) Sales % 27.66% 11.36% -6.40% % Profit after tax % 17.02% 0.01% % % EBITDA % 22.76% -9.10% % % EPS % 11.93% 0.51% % 90.53% Cash Flow ($000) Operating Cash Flow 39 4,778 8,118 7,956 6, Depreciation 1,748 2,284 2,510 2,263 3,523 2,143 Amortisation of intangible assets , Net changes in working capital (5,774) (4,973) (5,718) (4,678) 2,276 (596) Investing cash flow (199) (3,326) (6,571) (5,813) (4,022) (4,561) Acquisitions (451) (4,256) (5,771) (6,426) (4,683) (4,872) Disposals Financing cash flow 1,363 1,406 1, (1,515) 2,566 Net Borrowings 1,363 1, , ,566 Dividends paid - - (87) (1,586) (1,656) - Change in cash (326) 408 (1,733) Balance Sheet ($000) Total Assets 45,233 54,224 64,525 73,797 67,801 68,823 Cash and Cash Equivalents 1,000 1,678 2,255 2,070 2, Accounts Receivable 4,471 7,327 11,393 10,418 7,687 7,838 Net fixed assets 34,160 35,291 38,412 42,984 40,876 45,257 Total Liabilities 15,129 18,222 20,950 24,281 22,236 23,595 Accounts Payable 5,931 8,139 9,816 12,182 11,672 11,002 Total Debt 4,132 5,379 5,729 7,022 7,094 9,691 Shareholders funds 30,104 36,002 43,574 49,516 45,566 45,228 Profitability/ Solvency Ratios (%) EBITDA/Net sales 15% 15% 14% 11% 3% 3% ROE 11% 17% 16% 15% -4% -1% ROIC 9% 15% 15% 13% -3% -1% Debt to equity 14% 15% 13% 14% 16% 21% Debt to capital 12% 13% 12% 12% 13% 18%

5 DAIRIBORD STATIC INFORMATION MAJOR SHAREHOLDERS Stanbic Nominees (Pvt) Ltd 21.72% Serrapin Investments (Pvt) Ltd 13.28% Old Mutual Life Ass Co Zim Ltd 13.07% SCB Nominees 7.92% Stanbic Nominees (Pvt) Limited Nnr 7.68% Mining Industry Pension Fund 4.93% OPERATING DIVISIONS Dairibord Holdings operates four business units: DAIRIBORD ZIMBABWE (PVT) LTD: Accounts for 57% of the Groups revenue LYONS: Accounts for 36% of revenue DAIRIBORD MALAWI (PVT) LTD: Contributes 6% to Group revenue NFB LOGISTICS: Contributes 1% to Group revenue through hiring out refrigerated trucks, insulated trucks & tankers to third parties in Zimbabwe & Southern Africa Dairibord Holdings operates 5 factories in Zimbabwe: Chipinge, Harare, Chitungwiza, Gweru & Lyons) & 1 in Malawi. Plans are underway to close the Gweru factory. Milk supply is managed through contracts with independent farmers. The company operates a robust & extensive milk collection network. KEY COMPETITORS Delta Corporation Beverages (Maheu, cordials, non-alcoholic drinks) South African Exporters Liquid milk Kefalos, Dendairy Yoghurt, ice-cream, cheese, milk MILK SUPPLY DEVELOPMENT PROGRAMME Low volumes of raw milk production in Zimbabwe have necessitated the Heifer Importation Programme In October 2012, 250 heifers were imported by Dairibord Zimbabwe, which were allocated to 10 (small, medium & large scale) farmers, mainly in Chipinge, under a loan-scheme arrangement While it was expected to yield 1 million litres it yielded 643,311 litres by the end of 2013, amounting to 3% of DZHL s raw milk intake 180 heifers were imported in 2014, bringing the total to 430 heifers