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” or the “Group”)


                                 TRADING STATEMENT AND OPERATIONAL UPDATE


TRADING STATEMENT

In terms of the JSE Limited Listings Requirements, a listed company is required to publish a trading statement as soon
as it is satisfied that a reasonable degree of certainty exists that the financial results for the period to be reported on
next will differ by at least 20% from the financial results for the previous corresponding period.

Shareholders of Quantum Foods are hereby advised that for the financial year ended 30 September 2022 (“Current
Reporting Period”) a reasonable degree of certainty exists that:

•   headline earnings per share (“HEPS”) of the Company will be at least 63%, or 32.9 cents per share, lower than the
    52.2 cents per share reported for the financial year ended 30 September 2021 (“Previous Corresponding Period”);
    and
•   earnings per share (“EPS”) of the Company will be at least 63%, or 34.0 cents per share, lower than the 53.9 cents
    per share reported for the Previous Corresponding Period.

A further trading statement will be published as soon as there is a reasonable degree of certainty as to the likely range
within which the Company’s HEPS and EPS is expected to decrease.

OPERATIONAL UPDATE

The Group experienced challenging trading conditions during the Current Reporting Period. Company performance was
principally impacted by a number of industry level factors including, inter alia, (i) a significant increase in feed raw material
costs; (ii) curtailed egg selling prices in a weak consumer environment resulting in lower margins for the egg business
and lower demand for layer livestock; (iii) further outbreaks of highly pathogenic avian influenza (“HPAI”) in South Africa;
(iv) significant increases in the cost of electricity, gas, fuel and Eskom loadshedding cycles; and (v) extreme weather
conditions experienced in the Western Cape.

In addition to the abovementioned industry level factors, performance was also negatively impacted by the labour unrest
during the Current Reporting Period at the Kaalfontein layer farm in Gauteng (“Kaalfontein Farm”), as detailed in the
announcement published on SENS on 24 February 2022 (“Announcement”), partially offset by improved operational
efficiencies from the Group's South African operations.

Feed business

The combination of a substantial increase in raw material costs, financial pressures being felt by customers, and
customers investing in their own feed milling capacity, resulted in a decrease in external sales volumes compared to the
Previous Corresponding Period.

The negative financial effect of lower sales volumes was partially offset by well-executed operational efficiencies and
the increase in volumes transferred to the internal poultry business. The negative impact of increased hours under
loadshedding had a significant effect on the feed business, leading to above targeted cost increases and higher
production costs due to, inter alia, the restricted availability of some previously planned raw material components.




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Farming business

Layer farming business

Operational efficiencies in the hatcheries improved. The number of day-old pullets sold to external customers was
marginally lower in the Current Reporting Period when compared to the Previous Corresponding Period.

Point-of-lay volumes sold to external customers were, as planned, much lower in the Current Reporting Period compared
to the Previous Corresponding Period, which contributed to lower earnings from the layer livestock business. The effect
of more challenging egg industry conditions resulted in lower demand from layer livestock customers which culminated
in the Group’s inability to recover increased production costs in product selling prices and some customers either
postponing or cancelling orders for point-of-lay hens. This resulted in point-of-lay hens being retained on the Company’s
farms for increased periods resulting in a higher cost of production and reduced margins.

Production efficiencies on commercial egg farms improved when compared to the Previous Corresponding Period. The
labour unrest at the Kaalfontein Farm and the HPAI outbreak at the Lemoenkloof farm, as detailed in the Announcement,
resulted in significant increases in overhead costs. Egg production from the Lemoenkloof farm was much lower in the
Current Reporting Period given that the majority of the farm was not stocked with birds in the second half of the Current
Reporting Period due to the HPAI outbreak, leading to the under recovery of overhead costs and reduced egg volumes
being made available for sale.

The second half of the Current Reporting Period also saw additional costs being incurred by the egg business to supply
customers from the Western Cape with eggs produced in both Gauteng and the North-West.

The Company’s insurance for the HPAI outbreak experienced on the Lemoenkloof farm was limited to the risk associated
with direct losses resulting from the culling of infected flocks and did not cover the further effect of lost production and
lower sales volumes experienced. A payment of c. R20m from the insurance provider was received by the Company in
the Current Reporting Period.

Following a review by the Company of the layer farming business, a decision has been made to close the Tongaat layer
rearing farm in the first quarter of the 2023 financial year. This impending closure has resulted in once-off exit costs
being incurred by the Group in the Current Reporting Period.

Broiler farming business

Operational efficiencies in the hatcheries improved during the Current Reporting Period. Despite the closure of a major
Western Cape abattoir customer in the Previous Corresponding Period, the Group experienced increased day-old chick
volumes in the Current Reporting Period, with solid growth in day-old chick sales from the Hartbeespoort hatchery. The
Company benefited, to a limited extent, from improved trading conditions in the broiler industry, where supply volumes
were reduced and the levels of consumer demand remained adequate, culminating in a higher demand for day-old
broiler chicks being experienced by the Company.

The majority of the revenue from the broiler farming business is generated from long-term supply agreements entered
into whereby the Company is compensated for the production risk it undertakes and therefore does not experience the
associated broiler meat market margin fluctuations. Live bird sales volumes for the Current Reporting Period were stable
compared to the Previous Corresponding Period whilst margins were negatively impacted by continuous increases in
the cost of production and a slight reduction in efficiencies achieved on broiler farms.

Progress on the project to increase production capacity at the Hartbeespoort hatchery is on track, with the project
expected to be completed by June 2023. The project to repurpose the Bulhoek farm, previously used for broiler
grandparent farming, to a broiler parent farm is progressing well and has provided the Group the opportunity to purchase
parent stock, as opposed to importing grand-parent stock, as the starting point of the Company’s broiler value chain.
This process has a long lead time due to the genetic cycle of bird stock.

Egg business

Higher production costs, arising from the increase in feed raw material costs and increased overhead costs, could not
be recovered in final product selling prices in the Current Reporting Period. Volumes stabilised compared to the Previous
Corresponding Period. Packing station efficiencies improved from the Previous Corresponding Period and cost
management was well executed.


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The relatively large South African layer flock together with the current depressed consumer environment has created an
imbalance in the supply and demand of eggs. The resultant pressure on egg selling prices together with higher
production costs resulted in significant margin pressures and losses incurred in the egg business.

Following a review of the egg business, a decision was taken to close the East London packing station in August 2022,
resulting in the exit of some unprofitable distribution routes and the incurrence of once-off exit costs in the Current
Reporting Period.

Other African businesses

Trading conditions remained favourable for the egg businesses in Zambia. Compared to the Previous Corresponding
Period, feed raw material costs were higher and production efficiencies were weaker due to a disease challenge in the
Copperbelt province, resulting in lower volumes of eggs available for sale. These factors contributed to lower earnings
in local currency. The strengthening of the Zambian Kwacha against the Rand during the Current Reporting Period
resulted in increased earnings in Rands, the Group's reporting currency.

The Ugandan business was negatively affected by record high raw material costs and subdued egg prices following
restrictions on the normal export trading pattern of eggs, which resulted in an imbalance in the local supply and demand
for eggs. These factors also resulted in much lower demand for, and earnings from the sales of, layer livestock.

Production efficiencies in the Mozambican business improved, however, this business is similarly exposed to the profit
drivers experienced by the South African egg business and margins remained under pressure during the Current
Reporting Period.

No HPAI outbreaks were experienced in the other African businesses.

The financial information contained in this announcement is the responsibility of the directors of Quantum Foods, and
such information has not been reviewed or reported on by the Company’s external auditors.

The financial results for the Current Reporting Period are expected to be published on SENS on or about
Friday, 25 November 2022.


Wellington
14 October 2022

Corporate advisor and Sponsor
One Capital




Attorneys
Webber Wentzel




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