PIONEER FOOD GROUP LIMITED - Trading Update For The 4 Months Ended 31 January 2017

Trading Update For The 4 Months Ended 31 January 2017

Pioneer Food Group Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1996/017676/06)
(Share code: PFG)
(ISIN code: ZAE000118279)
(“Pioneer Foods” or “the Company”)

TRADING UPDATE FOR THE 4 MONTHS ENDED 31 JANUARY 2017

Pioneer Foods increased group turnover by 5.1% for the four months to 31 January 2017, mostly as a
consequence of inflation. Contracting volumes were evident in a number of categories for varying reasons.
The South African business increased turnover by 7.6%, whilst International turnover declined by 10.3%.

The 2016/17 financial year, as previously indicated, will be a tale of two halves for Pioneer Foods. The first
half margin and profitability will be materially impacted by non-recurring raw material vagaries.

The Company, amidst the worst drought in decades, made a conscious decision to guarantee supply for South
Africa’s leading premium maize meal brand, White Star, notwithstanding high raw material costs and rand
volatility. Whilst value growth and market share are positive, a significant profit impact can be expected from
the expensive procurement position relative to market pricing for the first half.

The balance of Essential Foods performed satisfactorily given a sustained and pleasing performance from
bakeries.

The International Division encountered strong headwinds. The raisin crop shortfall, significant juice
concentrate cost push, volatile currencies and weak consumer demand on the African continent have
significantly impacted profitability to date. The 2017 raisin crop looks reasonable, which may bolster the
second half performance. Final approval from the Kenyan competition authorities for the Weetabix East
Africa transaction remains outstanding.

The Groceries Division was negatively affected by lower volumes consequent to softer trading conditions,
increased competition and significant cost push inflation. The high base-effect of beverages in the prior year,
due to the extremely hot summer season, was not repeated this year. Pleasingly, the new Weet-Bix capacity
expansion has been commissioned which bodes well for accelerated growth. Manufacturing consolidation,
cost and an efficiency focus continues to make progress.

The outlook for the second half of the financial year to 30 September 2017 should reflect an improved
performance due to:

    -   anticipated improvement of maize profitability;
    -   satisfactory raisin crop;
    -   new Weet-Bix capacity coming on-stream;
    -   the commissioning of the Aeroton bakery upgrade;
    -   bakeries in the Western Cape regaining momentum; and
    -   cost respite on key inputs.

The Company remains committed to the planned fixed capital investment program, acquisitive growth,
sustained cost and efficiency focus and investing in its power brands. This is in keeping with the Strategy of
Realising Potential towards 2020. Pioneer Foods is set to recover from the external vagaries experienced in
the first half and will endeavour to perform satisfactorily for the full year, abnormal circumstances
notwithstanding.

The financial information on which this trading update is based, has not been reviewed or reported on by the
Company’s external auditors.


Tyger Valley
10 February 2017

Sponsor
PSG Capital

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