Increases in the price of raw materials and inputs is a perpetual fact of life in many industries across the board and AFGRI Poultry has not been able to escape this either. Packaging increases are one thing, but a business has to be mindful of the impact on the product when this price is passed onto the consumer. In the case of AFGRI Poultry this was not an option.

23 October 2014 – Johannesburg – Over the past year or so, the flexible packaging industry has been hard hit by sustained increases in the price of polymers, which in turn adversely affected the price of polymer and packaging alike.

Polymer is sold in South Africa at Import Parity, which means that it is sold at the same price as the import alternative. Despite the base polymers such as LDPE and LLDPE being manufactured locally by Sasol.

With polymer being sold at Import Parity, the prices are very much influenced by the Rand / Dollar Exchange rate, oil price and of course the international polymer prices too. The Rand has been steadily declining in value against the dollar and has lost around 36% of its value over the past two years.

These two primary influencers then directly influence the price of polymer sold locally and all producers and re-sellers follow these trend prudently to ensure levels are maintained close to these indicators.

Approximately 75% of the delivered price of flexible packaging is directly linked to polymer raw materials. As a result, local pricing from packaging producers had to follow the trend. The impact has been felt in extremely high packaging cost due to raw materials having reached record levels.

Supply and demand dynamics are caused to ebb and flow as international polymer prices are strongly influenced by the oil price. Alternative application of gas for heating fuel in the northern hemisphere usually reduces the supply of polymer conversion, resulting in an annual increase in the price. World economic pressure since 2008 has put continual pressure on the dynamics of polymer prices, resulting in the extremely high prices of this vital raw material.

The knock-on effect of polymer prices supplied to South African, as surprising as it may seem, shows a 63% increase over the past two years through the culmination of rate of exchange, oil price and supply and demand dynamics.
The impact on AFGRI Poultry
AFGRI Poultry has to devise a savings strategy as a solution to these raw material price increases, without passing any additional pricing onto an already cash-strapped consumer. The solution had to maintain all integrity and standard required of packing for this vital protein source.
Together with suppliers, innovative and creative thinking was implemented to come up with a solution to packaging sustainability even with this exponential increase in raw material prices. The solution is a process called down gauging.

Down gauging is a procedure where product material film is strengthened and the thickness of the film is altered (reduced). This process ensures two primary benefits; firstly cost saving and secondly better production efficiency for the supplier as more film metrics per hour can be blown. Greater yields in packaging usage has been immediately realised with:

• less meters used to cover a greater square area of palletized stock for the same price,
• modification from a 35 micron non slip film to a 25 micron none slip film again provides better yield and
• printed and unprinted bags were modified by means of down gauging and size efficiencies
  to existing product specifications, bring about sustainable packaging prices

In conclusion Chris Venter, CEO of AFGRI, said that, “For the past 36 months the poultry market has been an extremely difficult environment. The additional pressure from packaging is not always welcome, but trends to come with the territory. Times like this call for innovative thinking. We are extremely pleased with the result.”

It is expected that polymer prices may show reduction in 2015, however not to levels as low as experience in 2008. As international and local economic uncertainties prevail, price pressure and increases are expected to be the new-normal.

Issued for: AFGRI Limited
Contact: Chris Venter, Chief Executive Officer (CEO)
Tel: 011-063-2007
Email: chris.venter@34.255.249.49
Website: new.afgri.antsneversleep.com
Account: Keyter Rech Investor Solutions
Contact: Vanessa Rech Lynne van der Schyff
Tel: 087-351-3814 or 083-307-5600 087-351-3815 or 082-920-4395
Date: October 2014

AFGRI the leading agricultural solutions and industrial foods company has launched a successful entrée into collateral management across Africa. So successful has been the drive that Collateral Management International (“CMI”) (an AFGRI owned company) has more than 100 sites under collateral management and more than 400 sites to which stock monitoring and inspection services are provided across 14 African countries.

Just what is collateral management? Collateral management includes on site stock management (similar to acommodity exchange storage function) as well as independent control of commodities in third party facilities on behalf of a financier or trader.
Just what is stock monitoring and inspections? Stock monitoring is a function which monitors movements, actions and controls on a site, and includes on-site stock movements, vessel discharge supervision and logistics monitoring between locations. Inspection services is a function usually undertaken between sellers and buyers of commodities, where the two parties are not physically present at the loading site or port and requires independent verification such as grade, quantity, container seals, rail cars, trucks or vessel holds. The inspection report or certificate is then used as part of the transaction to control payment and risk between the buyer and seller.

The collateral management structure can be explained as follows. Banks wanting to take commodities as collateral to finance against an instrument (i.e. warehouse receipt), require an independent, reliable third party with impeccable people, commodity handling and storage knowledge, systems, governance and ethics to guarantee quality and/or quantity of a particular commodity via a warehouse receipt in order for the bank to finance against this instrument. Normally commodities in a collateralised storage facility, are either imported to or exported from his location. Once the commodity leaves the storage facility or before it arrives at the storage facility, stock
monitoring or inspection services compliment the collateral management discipline and gives clients (such as banks and traders) an all-inclusive service throughout the supply and logistics chain.
CMI is just such a third party operator which has accreditation from all local South Africa banks as well as most African banks and the most prominent large international European banks. CMI is further accredited by large commodity trading houses such as Louis Dreyfuss, BTG, Ameropa,Olam, METL etc.
AFGRI has, as a dedicated focus area, the grain value chain and this is another example of how AFGRI, with more than nine decades of agricultural experience, is harnessing its knowledge and expertise to offer a viable solution to clients at third party storage facilities. Not only can CMI manage sites on behalf of a third party, it can also store commodities in AFGRI’s extensive storage capacity in Africa in locations such as Zambia and Uganda.

CMI has an impeccable record of confidentiality, maintaining integrity between third party clients and AFGRI operations, diligence, accuracy and corporate governance and with strict compliance in place has gained the trust of large international and local banks and traders. In addition to CMI’s ability to provide collateral management to its clients for commodity funding purposes, it is able to assist clients throughout the value chain with storage and inspection related services associated with port and logistics activities required, an all-encompassing service offering making transaction flow easy and less complicated for banks and traders.

Sadly much of the downfall of agriculture in Africa hinges on the lack of storage, stock finance, guarantees and the ability to market and sell maize and other commodities when and where producers decide to sell. AFGRI, again through CMI, has joined forces with African Exchange Limited (“AFEX”) and its subsidiary in Rwanda, East African Exchange (“EAX”) and signed an agreement to work together with the Rwandan Ministry of Agriculture and Animal Resources to provide storage and warehousing services to support farming cooperative across Rwanda. Through the exchange, CMI will manage 13 warehouses, set up by the Rwandan Government in strategic production areas. Aside from storage solutions and management CMI will include all aspects of commodity management. In Nigeria CMI will be managing an initial seven Nigerian Government storage facilities sites in five states, namely Kanu, Kaduna, Katsina, Zamfara and Kebbi for AFEX, located within the grain belt of Nigeria.

AFGRI is a leader in silo or warehouse inventory management with the ability to provide electronic silo (warehouse) receipts which can be used as collateral. This technology is in use in CMI and electronic warehouse receipts can then be used by the farmers to trade their grain on the exchange on world class NASDEQ trading platforms.

Chris Venter, AFGRI’s CEO says, “AFGRI has a vision of food security for Africa. We are passionate about helping people and this solution drives directly to the heart of the problem many farmers face, the inability to store and market the grain they have worked hard to harvest. Together with Government, the EAX and the AFEX, CMI is able to help with the warehousing function, verify quality and quantity and help the farmer market the commodity and in this way, earn the money they have worked hard for. We are extremely proud of this solution that has been successfully implemented in Rwanda.”

CMI focuses not only on grains but also on fuel, ground nuts, vegetable and palm oil, cotton, sugar, rice and coffee, to name a few commodities.

Issued for: AFGRI Limited
Contact: Chris Venter, Chief Executive Officer (CEO)
Tel: 011-063-2007
Email: chris.venter@34.255.249.49
Website: new.afgri.antsneversleep.com
Account: Keyter Rech Investor Solutions
Contact: Vanessa Rech Lynne van der Schyff
Tel: 087-351-3814 or 083-307-5600 087-351-3815 or 082-920-4395
Date: September 2014

4 June 2014, Pretoria – AFGRI Limited (“AFGRI”), South Africa’s leading agricultural services and diversified foods group, has increased storage capacity by building five new bunkers in strategic locations within South Africa.

Chris Venter, CEO of AFGRI, said that, “Our silo infrastructure is well distributed in our traditional area of operation and with the additional bunker facilities we are able to assist the farmers store grains closer to their farms which is a
huge advantage to the farmer as it reduces transportation costs and the grain is stored in accordance to strict criteria. AFGRI guarantees quantity and quality at all our Grain Management sites and this is extremely beneficial to the farmer in mitigating the risk associated with the storage of grain.”

Two new stand alone bunkers have been built at Sandspruit and Bergville. After consultation with farmers in the area, followed by a feasibility study the decision was taken to construct a bunker at Sandspruit. The area around Bergville traditionally had a shortage of storage capacity as a result of both summer grain and wheat cultivated in the area. “Grain producers are very excited about the bunkers as they can now participate in all the technology AFGRI has on offer in the storage facilities.” said Venter.
All AFGRI bunkers are SAFEX registered (except Sandspruit which is awaiting final approval) and therefore attract the same benefit as silo’s. Bunkers are much cheaper to construct and the main advantage is that a bunker can be constructed in the correct production location. The silo technology AFGRI makes use of can separate grades as well as other unique characteristics. Electronic certificates issued at the storage location are recognised by SAFEX. Bunkers furthermore provide an element of risk reduction to AFGRI capital and should production areas change; the bunker can easily be relocated and erected at a relevant site.

The remaining three bunkers were constructed at Afrikaskop and Eeram, both in the Free State, and Amersfoort in Mpumalanga. The bunkers have been placed close to AFGRI silo’s in the area in order to deal with increased capacity and storage demand. The Eeram bunker will be used to store summer grain due to the increased wheat stored at Harrismith as a result of the wheat mill commissioned by AFGRI Milling.
AFGRI manages a total of 15 stand alone bunkers and 8 temporary bunkers currently located on silo properties in South Africa, with a total storage capacity in the bunkers of 568 000 tonns.

Although this bunker technology can easily be erected in Africa, the market is structured differently in that bags and warehouse storage is more common as farmers are smaller and in most instances grain management has not moved to bulk handling yet. One bunker and eight warehouses are operated in Zambia, three warehouses in Uganda and one silo bag facility is managed in Congo Brazzaville.
“AFGRI is a leader in all facets of grain management and therefore the roll out of the service and facilities into Africa is a focus area for us. As we assist farmers in Africa with mechanisation and a greater variety of input options, they are scaling up and our bunkers will offer a sorely needed storage solution and access to markets for these farmers. In turn this puts AFGRI one step closer to our mission of being a functional player in ensuring food security for our continent,” concludes Venter.

Issued for: AFGRI Limited
Contact: Chris Venter, Chief Executive Officer (CEO)
Tel: 011-063-2001
Email: chris.venter@34.255.249.49
Website: new.afgri.antsneversleep.com
Issued by: Keyter Rech Investor Soloutions
Contact: Vanessa Rech
Tel: 011- 447-8656 or 083-307-5600
Email: vrech@kris.co.za
Date: 4 June 2014

AgriGroupe completes acquisition of AFGRI
AFGRI to delist and go private

31 March 2014 – Centurion, AFGRI Limited (“AFGRI”), a leading South African agricultural services and foods group, and AgriGroupe are pleased to announce the conclusion of the privatisation transaction and the start of a new chapter for AFGRI as a private company.

AgriGroupe Investments will be the majority shareholder in AFGRI, holding 60% through an offshore structure, with the remaining 40% held by South African shareholders including the Public Investment Corporation (PIC), the Black Empowerment consortium Bafepi Agri (Pty) (Ltd) and AFGRI management. “AgriGroupe celebrates the consummation of the acquisition of AFGRI and looks forward to sustaining the company’s role as a preeminent agricultural services player in South Africa. We will support management’s strategic vision for African food security through development of critical supply chain infrastructure, logistics solutions and financial services for both smallholding and commercial farmers in Africa. AgriGroupe is determined to maintain AFGRI’s commitment to farmers, employees and communities in South Africa, and to participating in the ongoing consolidation of the sector” said AgriGroupe’s Michael Wilkerson.

“Investors in AgriGroupe will benefit from AFGRI’s strong cash-flow generative grain management business, the largest John Deere franchise on the continent, long-term growth into Africa (which potential has been demonstrated by AFGRI’s successful recent entries into attractive growth markets including Congo Brazzaville, Nigeria, Uganda, Zambia and Zimbabwe), and a ‘hidden gem’ financial services business poised for expansion in offering credit, insurance and trade finance solutions to an increasingly broad set of agricultural and corporate clients” Wilkerson concluded.

“Fairfax, as the largest investor in AgriGroupe Investments, is pleased to make its first investment in South Africa. We are aligned with the strategic vision of AFGRI through our common goal to profitably support food security and stimulate the agricultural sector in Africa” said Prem Watsa, Chairman and CEO of Fairfax Financial Holdings. Fairfax, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and investment management. Fairfax is based in Toronto, Canada and has been under present management since September 1985.

“For AFGRI it is an exciting evolution into the next 90 years. The collaboration with AgriGroupe, Fairfax and the PIC provides an opportunity to expand across Africa and to drive forward our vision of food security for Africa where we can make a meaningful contribution,” said Chris Venter, CEO of AFGRI.

Venter reiterated that current services and support structures to farming clients will remain unchanged. “We will continue to support, finance and provide technical services, products and storage solutions to our clients to the same standard as in the past. The transaction provides AFGRI with the necessary tools to expand our service offering into Africa, which AFGRI has identified as the largest growth prospect. Our base in South Africa is our history and
legacy and we are always mindful of that,” he concluded.

AFGRI will delist from the Main Board of the JSE on 1 April 2014. Additional information on AFGRI’s business, including its 2013 Annual Report and investor presentations, can be found at new.afgri.antsneversleep.com

Issued for: AFGRI Limited and AgriGroupe
Contact: Chris Venter, Chief Executive Officer (CEO)
Tel: 011-063-2007
Email: chris.venter@34.255.249.49
Website: new.afgri.antsneversleep.com
Account: Keyter Rech Investor Solutions
Contact: Vanessa Rech or Lynne van der Schyff
Tel: 011-447-8656 or 083-307-5600 or 011-447-2993 or 082-920-4395