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QUANTUM FOODS HOLDINGS LIMITED - Voluntary Trading Update For The 4 Months Ended 31 January 2019

Release Date: 13/02/2019 13:10
Code(s): QFH     PDF:  
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Voluntary Trading Update For The 4 Months Ended 31 January 2019

QUANTUM FOODS HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2013/208598/06)
Share code: QFH
ISIN: ZAE000193686
(“Quantum Foods” or “the Company”)

VOLUNTARY TRADING UPDATE FOR THE 4 MONTHS ENDED 31 JANUARY 2019

An increase in feed raw material costs and a decrease in egg selling prices compared to the
same period in the previous year had a significantly negative impact on earnings for the first
four months of 2019. These factors will also impact earnings to be reported for the six months
ending 31 March 2019.

Earnings in the corresponding period of the previous year were exceptionally high. These
higher level earnings were supported by low feed raw material costs and a significant increase
in egg selling prices, resulting from a national shortage of eggs following the outbreaks of
Avian Influenza (“AI”) in the second half of 2017. The national layer flock has now recovered
to levels above those of the pre-AI period in 2017 and the expected pressure on egg selling
prices resulting from increased supply has started to materialise in the 4 month period as set
out herein.

Below average rainfall in the maize producing areas of South Africa for the current marketing
season is expected to result in a substantial increase in feed costs for the 2019 financial year.
This increase in feed costs will negatively impact margins, especially in the egg business.

South African operations:

Margins in the egg business have decreased materially. Compared to the first four months of
2018, average selling prices per dozen decreased by 13.6%, while egg production costs
increased. Volumes improved by 3.6% for the four months. The Company expects egg selling
prices to further decrease in the remainder of 2019 as the full effect of the expected egg supply
and demand imbalance, in a weak consumer environment, manifests itself.

The feed business performed satisfactorily with stable volumes and profitability compared to
the previous year.

The farming business performed in line with expectation. Volumes increased in all product
categories and contributed to improved profitability. Profitability in the previous year was
negatively impacted by a further outbreak of AI on a layer farm in the Western Cape, while no
such incidents occurred in 2019.

African Operations:

Weaker earnings have been reported by the African operations of the Company for the first
four months of 2019. Feed raw material costs have increased compared to the previous year
and these increases could not be recovered in final product selling prices. The further
devaluation of the Zambian Kwacha negatively impacted the Rand earnings reported from this
business.

Outlook:

Despite the expected further increase in feed raw material costs, it is expected that the feed
and farming businesses will provide a stable contribution to earnings for the remainder of the
year. The egg business, however, will continue to suffer headwinds until the supply and
demand dynamics stabilise and feed costs soften.

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

Wellington
13 February 2019

Sponsor
PSG Capital

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