ANNUAL RESULTS PRESENTATION FOR THE YEAR ENDED 30 SEPTEMBER 2016
CONTENTS 2 Annual Results Presentation 8 Financial Performance 19 Divisional Performance 19 Essential Foods 26 Groceries 35 International 45 Outlook 2017 II PIONEER FOODS
ANNUAL RESULTS PRESENTATION 2016 1
ANNUAL RESULTS PRESENTATION for the year ended 30 September 2016 2 PIONEER FOODS
What a year!! Salient Features: Massive discontinuities Drought Rand volatility Wheat duty So Portfolio and brand strength matters (size counts) Cost and efficiency management must be a given Invest always and above all in people Sustain momentum with a big dream Africa stumbles Consumer weakness Political instability ANNUAL RESULTS PRESENTATION 2016 3
Highlights Acquisition of Streamfoods Excellent raisin exports Refurbishment of UK facility Investment in growth capex Groceries margin expansion Bakeries sustained momentum Cost and efficiency extraction 4 PIONEER FOODS
Fast facts: Sept 2012 Sept 2016 Sept 12 Sept 16 Revenue (R bn) 18.6 20.6 EBIT (R bn) 1.15 2.27 EBIT % 6.2 11.0 RONA % 16.1 29.1 ROE % 12.5 22.1 EVA generated (R m) 38 704 Debt equity (exclude RMB) % 9 6 Market cap (R bn) # 12.2 40.0 # Share price of R173.87 (30.09.2016) 2012 numbers include Quantum Foods (R3.1 bn for revenue) ANNUAL RESULTS PRESENTATION 2016 5
Financial Highlights For the 12 months ended 30 September 2016 Revenue# Operating profit* for continuing operations 10% to R20.6 bn 6% to R2 273 bn Operating margin* from 11.5% to 11.0% HEPS* Final dividend declared Total dividend declared for year 6% to 883 cents 10% to 260 cents 10% to 365 cents * Adjusted for the Phase I B-BBEE gain/(charge) and hedge and for items of a capital nature # 12% excluding biscuits, Pepsi & Maitland Vinegar 6 PIONEER FOODS
Market share performance - TEG Corporate share 1 %, 12 mm 4 to Sept 2016 12 mm 4 October 2015 to September 2016 Value share Pioneer Foods Share Pts change Category growth (%) 31.8 Sasko 30.4-0.9 3 11.0 31.2 Weet-Bix 17.3 0.6 8.3 Safari 40.1 1.7 7.3 2 Mat Sept2016 Spekko 21.5 3.9 10.0 White Star 32.6 1.2 31.3 2015 2016 Liqui-Fruit 28.7-1.8 16.6 1 Measured as weighted average of Pioneer's share in 18 categories in which it operates. TEG only. Including DOB s. 2 All other categories 12 mm to Sept 2016 3 Flat on a category basis (incl. Futurelife) 4 Value share ANNUAL RESULTS PRESENTATION 2016 7
FINANCIAL PERFORMANCE Cas Lamprecht Acting CFO 8 PIONEER FOODS
Revenue analysis Strong volume growth in cereals, LLJ and export dried fruit Twelve months to 30 September 2016 Rm Change Essential Foods 12 855 +13% Groceries 4 695-2%* International 3 050 +17% Total Revenue 20 600 +10%** INTERNATIONAL 15% * 7% growth before biscuits, Pepsi & Maitland Vinegar **12% growth before biscuits, Pepsi & Maitland Vinegar GROCERIES 23% ESSENTIAL FOODS 62% ANNUAL RESULTS PRESENTATION 2016 9
Income statement summary Twelve months to 30 September 2016 Rm Change Revenue 20 600 +10% Cost of goods sold (14 517) +14% Gross profit 6 083 +2% Gross margin 29.5% F15: 31.9% Net other operating expenses * (3 810) -0.3% Adjusted * operating profit 2 273 +6% Operating margin 11.0% F15: 11.5% * Adjusted for the Phase I B-BBEE gain/(charge) and hedge and for items of a capital nature 10 PIONEER FOODS
Segmental Analysis Operating Profit * Operating Margin * 2016 % 2016 2015 Rm Change % % Group 2 273 +6 11.0 11.5 Essential Foods 1 249-2 9.7 11.3 Groceries 542 +25 11.5 9.0 International 484 +9 15.9 17.0 Other -2 * Adjusted for the Phase I B-BBEE gain/(charge) and hedge and for items of a capital nature ANNUAL RESULTS PRESENTATION 2016 11
Income statement summary Twelve months to 30 September 2016 Rm Change Adjusted* operating profit 2 273 +6% Investment income 47 +21% Finance costs (167) +18% Share of profit of joint ventures & associates 100 +41% Adjusted* profit before income tax 2 253 +6% Income tax (616) +5% Income tax per income statement (629) Income tax on BEE hedge 6 Income tax related to items of a capital nature 7 Adjusted* profit for the year from continuing operations 1 637 +7% Effective tax rate 27.3% * Adjusted for the Phase I B-BBEE gain/(charge) and hedge and for items of a capital nature 12 PIONEER FOODS
Operating profit analysis Twelve months to 30 September (Rm) 2016 2015 Change Net operating profit as reported 2 339 1 797 +30% Adjustments (66) 356 Phase I B-BBEE transaction and hedge (45) 307 Items of a capital nature (21) 49 Adjusted operating profit 2 273 2 153 +6% Adjusted operating profit margin 11.0% 11.5% ANNUAL RESULTS PRESENTATION 2016 13
Group earnings Twelve months to 30 September (Rm) 2016 2015 Change Adjusted* headline earnings - total 1 637 1 534 +7% Adjusted* HEPS 883 cents 832 cents +6% Phase I B-BBEE gain/(charge) and hedge 39 (307) Headline earnings - total 1 676 1 227 +37% Capital items from continuing operations (post tax) 14 (52) Earnings from continuing operations 1 690 1 175 +44% EPS from continuing operations 912 cents 637 cents +43% Capital items from discontinued operations (post tax) - (45) Earnings - total 1 690 1 130 +50% Total EPS 912 cents 613 cents +49% * Adjusted for the Phase I B-BBEE gain/(charge) and hedge 14 PIONEER FOODS
Cash flow analysis Twelve months to 30 September (Rm) 2016 2015 Change Cash profit from operating activities 2 668 2 512 +6% Change in working capital (775) (546) Inventory (490) (268) Debtors (49) (289) Creditors (240) 12 Other 4 (1) Cash effect from commodity hedging (175) 16 Cash generated by operations 1 718 1 982-13% ANNUAL RESULTS PRESENTATION 2016 15
Cash flow analysis Twelve months to 30 September (Rm) 2016 2015 Net cash flow from investment activities (983) (423) Additions of PPE and intangible assets (469) (186) Replacements of PPE and intangible assets (340) (466) Proceeds on disposal of PPE and intangible assets 69 176 Net proceeds on disposal of subsidiary (Maitland Vinegar) 62 - Interest and dividends received 71 61 Business combinations (UK Streamfoods) (147) - Investment in joint ventures (Futurelife) (200) (126) Proceeds on disposal of available-for-sale assets & loans (29) 118 16 PIONEER FOODS
Group net debt and debt equity ratio Net Debt Equity Ratio Rm excl RMB 9% 15% 3% -1% 6% Rm 1,200 1,000 978 800 600 509 501 400 200 166 - (200) 509 978 (97) 2012 2013 2014 2015 2016 * Excludes B-BBEE (third party) debt ANNUAL RESULTS PRESENTATION 2016 17
Dividend per share and cover* Dividend cover 2.9 2.5 2.2 2.0 Cents per share 450 400 350 332 +50% 365 +10% 300 250 200 150 100 50 0 221 +67% 132 +16% 260 237 46 156 105 95 86 65 46 46c 2013 2014 2015 2016 Final Interim * Adjusted headline earnings divided by total dividend (inclusive of treasury shares) nal 18 PIONEER FOODS
DIVISIONAL PERFORMANCE Tertius Carstens Essential Foods ANNUAL RESULTS PRESENTATION 2016 19
Divisional performance: Essential Foods Multiple discontinuities Volume -2% Revenue +13% Operating Profit -2% Margin 9.7% (F15: 11.3%) Weak demand and continuing inflation Maize price breached R5 000/ton Wheat import duty increased to R1 592/ton Bakeries delivered operating leverage Double digit operating margin maintained Maize volume claw back in second half Profitability impacted by inflation and lower volumes White Star brand leadership strengthened Operating costs contained 20 PIONEER FOODS
Divisional performance: Essential Foods Category overview Wheat consumption growth at industry level muted at +1%* Sasko brand growth delivered share gain in TEG Category profitability maintained Bread volume growth in TEG improved by +3.1%** Muted volume growth due to refurbishments Good operating leverage White maize consumption declined at an industry level by -4.5%* Category inflation accelerated to 38%*** in the short term White Star brand leadership strengthened Category profitability declined Rice volume growth in TEG marginally positive at +0.8%** Volume growth ahead of category, but tempered in 2H as competition responds Profitability enhanced * SAGIS: 12 months Aug 2016 ** Iri: 12 months - Sept 2016 *** Iri: 3 months - Sept 2016 ANNUAL RESULTS PRESENTATION 2016 21
Divisional performance: Essential Foods Outlook Wheat ITAC review of import duty regime in process Ample international supply Raw material deflation evident, but exchange rate and duty dependent Bakeries TEG short term volume growth (as proxy for category) positive Aeroton expansion coming on stream Category remains a critical growth vector Rice Spekko brand will increase competitive stature 22 PIONEER FOODS
Divisional performance: Essential Foods Outlook - Maize Short crop harvested - limited volume non-gm imports available La Nina weather pattern anticipated High probability of increased plantings Anticipation of early deliveries in Feb - Apr 2017 high risk? Early, and sufficient rain? Market pricing under pressure due to: Supply risk management through imports Short crop availability Speculative positions liquidated Risk too much good news priced in too early? Margin/volume pressure likely in 1H2017 with anticipated respite in 2H ANNUAL RESULTS PRESENTATION 2016 23
Divisional performance: Essential Foods Investment outlook Commitment to focussed brand investment sharpened Building on White Star leadership credentials White Star Instant Sasko execution Baking together since 1930 Spekko share gaining strategy Capital expenditure for long term growth Weighted towards bakeries Value enhancement in maize 24 PIONEER FOODS
Performance overview: Essential Foods At a glance Division Volume Revenue EBIT Rm Maize Wheat Bread Pasta Rice Legumes EBIT % Market share * * ** ** ** ** * SAGIS: 12 months Aug 2016 ** Iri: 12 months Sept 2016, volume ANNUAL RESULTS PRESENTATION 2016 25
DIVISIONAL PERFORMANCE Felix Lombard Groceries 26 PIONEER FOODS
Strong overall growth: Groceries Volume +2%* Revenue +7%* Operating Profit +25% Margin 11.5% (F15: 9.0%) Performance summary Good performance in challenging environment Major input inflation Increased competitive environment Solid volume growth in cold cereals and 100% juice Operating costs very well managed Second half impacted by severe cost push * Adjusted for biscuits, Pepsi & Maitland Vinegar ANNUAL RESULTS PRESENTATION 2016 27
Performance in context: Groceries Revenue Growth as reported -2.1% Growth excl. biscuits, Pepsi & Vinegar +7.5% Operating profit margin Operating margin 2015 as reported * 9.0% Elimination of businesses sold 1.0% Adjusted operating margin 2015 10.0% Cost elimination 0.7% Other margin improvement initiatives 0.8% Operating margin 2016 11.5% 28 PIONEER FOODS
Cereals Sustaining the growth momentum Breakfast cereals: Total category Category reflects strong volume growth Consumer inflation below producer inflation Strong growth in wheat biscuits, corn flakes and porridges Pioneer Foods performance Value growth tracks ahead of the market Weet-Bix, South Africa s No. 1 cereal brand gains further share 8% volume growth GP% maintained despite high input inflation Double digit operating profit growth Weet-Bix capacity Dec. commissioning 10.5% 10.0% 9.5% 9.0% 8.5% 8.0% 7.5% Breakfast Cereal Market in Value 10.3% 9.9% 9.6% 8.9% 8.8% 8.9% 12 MM 6 MM 3 MM Category Pioneer Foods Source of share data: Aztec MAT Aug 2016 ANNUAL RESULTS PRESENTATION 2016 29
Long Life Fruit Juice Strong category growth Total category Excellent volume growth Niche new products and brand activity drive growth Further wave of concentrate inflation Pioneer Foods performance Good volume growth but lagged the market Major raw material inflation compressed the margin Deleverage at an EBIT level as brand and innovation investment steps up Price increases into the season 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Long Life Juice Market in Volumes 12.3% 8.1% 9.4% 3.7% 16.0% 14.7% 12 MM 6 MM 3 MM Category Pioneer Foods Source of share data: Aztec MAT Aug 2016 30 PIONEER FOODS
Snacks, treats & spreads Profitability ratchets up Category Low single digit growth in most categories Desserts and rusks the exception Pioneer Foods Excellent volume performance 60.0 50.0 Share of Market in Value Sustained progress: Focused marketing initiatives 40.0 Rationalisation of SKU s 30.0 20.0 10.0 0.0-10.0 Rusks Bakings Aids Desserts Nuts Spreads Dried Fruit Salads Formulation re-engineering Consolidation of facilities Material improvement in profitability Category Pioneer Foods Source of share data: Aztec 3MM Aug 2016 ANNUAL RESULTS PRESENTATION 2016 31
Ice tea & dilutables Optimise and grow Ice Tea Deceleration in category growth Lipton gained further market share Summer flavours well accepted Dilutables Strong category growth in current year Driven by dairy blends and squashes Pioneer Foods: Good volume growth by Wild Island and Fruitree Squash 32 PIONEER FOODS
Groceries The Year Ahead Further opportunities to unlock value: Consolidation of factories Logistics cost benefits Increased brand focus defend heartland Deepened innovation focus Opportunities for bolt-on acquisitions Rationalisation of the portfolio Sugar tax readiness Well positioned for future growth ANNUAL RESULTS PRESENTATION 2016 33
Performance overview: Groceries At a glance Division Volume Revenue EBIT Rm EBIT % Market share Cereals Beverages Baking aids & desserts Spreads Snacks & treats 34 PIONEER FOODS
DIVISIONAL PERFORMANCE Thushen Govender International ANNUAL RESULTS PRESENTATION 2016 35
Performance overview Volume +4% Revenue +17% Operating Profit +9% Margin 15.9% (F15: 17.0%) Solid performance despite economic volatility Record year for vine fruit exports UK contribution pleasing despite facilities move & Brexit Nigerian turnaround continues to gain traction African markets remain challenging Acquisitive growth strategy on track 36 PIONEER FOODS
Exports Food and Bev Portfolio management Fruit Juice & 1 Food Focus on credit risk management Alignment of brand and product portfolio strategy Increased brand investment to drive penetration Basket selling gains traction Beverage sales in Asian markets makes progress Renewed focus on the Middle East, delivers results ANNUAL RESULTS PRESENTATION 2016 37
Exports Dried Fruit Managing volatility 2 Dried Fruit 2015 record crop delivers a stellar first half performance Rand weakness in the first half well leveraged Second half performance muted Growing demand in Europe for SAD quality Investment into facilities to improve efficiency and quality Innovation of value added fruit products 38 PIONEER FOODS
In-country operations - UK Building scale 3 United Kingdom Peterborough factory relocation & upgrade completed Wheat biscuit line upgrade Streamfoods integration well on-track Focused innovation in breakfast cereals and fruit snacking ANNUAL RESULTS PRESENTATION 2016 39
In-country operations - Nigeria Business turnaround 4 Nigeria Business integration and turnaround delivers profitability Facilities optimization program enhances margins Bread product re-engineering delivers consistent quality Investment into distribution hubs and vehicles Baked goods innovation as Phase 2 40 PIONEER FOODS
East African partnership Acquisitive growth strategy Kenya Weetabix East Africa Company overview Largest Breakfast Cereals producer in East Africa Strong double digit operating margin High levels of brand equity Strategic rational Strong breakfast category growth Access to high growth COMESA/EAC region Local management and expertise Develop leading breakfast proposition Offers a route to market solution ANNUAL RESULTS PRESENTATION 2016 41
Management focus Outlook Tough 1 st half - 2017 Smaller raisin crop New market development in Africa & Asia Capitalize on Streamfoods acquisition Develop East African breakfast opportunity Accelerate Nigeria, FCPL profit growth 42 PIONEER FOODS
Performance overview: International Division Volume Turnover Rm EBIT Rm EBIT Margin SA Exports Fruit Beverages Foods UK Nigeria (FCPL) ANNUAL RESULTS PRESENTATION 2016 43
JV Performance Division Volume Turnover Rm EBIT Rm EBIT Margin Heinz Future Life Alpen Foods Bokomo Botswana Bokomo Namibia Bowman Ingredients 44 PIONEER FOODS
Outlook: 2017 SA and balance of continent remain under pressure Essential Foods hiatus will correct in the 2 nd half Growth capex will enable a step change Self help initiatives remain robust Power Brands poised for defence and growth Newly acquired ventures must deliver Acquisitive growth remains a focus ANNUAL RESULTS PRESENTATION 2016 45
Thank you This document contains forward looking statements that, unless otherwise indicated, reflect the company s expectations as at 21 November 2016. Actual results may differ materially from the company s expectations if known and unknown risks or uncertainties affect the business, or if estimates or assumptions prove to be inaccurate. The company cannot guarantee that any forward looking statement will materialise and, accordingly, readers are cautioned not to place undue reliance on these forward looking statements. The company disclaims any intention and assumes no obligation to update or revise any forward looking statement even if new information becomes available as a result of future events or for any other reason, save as required to do so by legislation and/or regulation. 46 PIONEER FOODS