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REVIEW ON FINANCIAL STATEMENTS

MANAGEMENT DISCUSSION & ANALYSIS

QUARTER ENDED 30 SEPTEMBER, 2017
CONSOLIDATED STATEMENTS OF COMP. INCOME
(IN MILLIONS OF RUPIAH)
Description 9M 2017 9M 2016 Variance % Q3 2017 Q2 2017 Variance % Q3 2017 Q3 2016 Variance %
Sales 4,057,805 3,960,194 97,611 2%1,350,503 1,438,557 (88,054) -6% 1,350,503 1,210,380 140,123 12%
COGS (3,590,004) (3,224,749) 365,255 11% (1,223,847) (1,263,039) (39,192) -3% (1,223,847) (979,750) 244,097 25%
Gross Profit 467,801 735,445 (267,644) 126,656 175,518 (48,862) 126,656 230,630 (103,974)
Less:
SG&A * (335,389) (288,755) 46,634 16% (115,049) (123,238) (8,189) -7% (115,049) (93,258) 21,791 23%
Others (2,535) 2,567 (5,102) -199% (241) 527 (768) -146% (241) 924 (1,165) -126%
EBIT (ex-FX) * 129,877 449,257 (319,380) -71% 11,366 52,807 (41,441) -78% 11,366 138,296 (126,930) -92%
Forex Gain/(Loss) (13,922) (30,933) (17,011) -55% (6,551) (3,793) 2,758 73% (6,551) (20,632) (14,081) -68%
EBIT * 115,955 418,324 (302,369) -72% 4,815 49,014 (44,199) -90% 4,815 117,664 (112,849) -96%
EBITDA (ex-FX) * 293,006 596,143 (303,137) -51% 66,347 107,678 (41,331) -38% 66,347 188,663 (122,316) -65%

GP margin 11.5% 18.6% 9.4% 12.2% 9.4% 19.1%

EBIT margin (ex-FX) 3.2% 11.3% 0.8% 3.7% 0.8% 11.4%
EBITDA margin (ex-FX) 7.2% 15.1% 4.9% 7.5% 4.9% 15.6%

* 9M 2017 & Q2 2017 res ul ts a re a djus ted for non-recurri ng ta x rel a ted expens es of IDR10.5 bi l l i on
Comments:
 Q3 2017 Sales:
1) decreased by 6% QoQ mainly due to: Feed segment (decrease by 6%) and Breeder segment (decrease by 11%)
2) increased by 12% YoY mainly due to: Feed segment (increase by 20%) and Consumer Foods segment (increase by 87%)
3) Consumer Foods segment recorded sales growth of 87% YoY & 8% QoQ and volume growth of 71% YoY & 14% QoQ
 The decrease in Q3 2017 EBIT (ex-FX) by Rp41.4 billion QoQ is mainly due to:
- Feed, Breeder and Broiler divisions EBIT (ex-FX) declined by Rp19.1 billion, Rp29.0 billion and Rp1.7 billion respectively. The Feed division was
affected by an increase in cost of raw materials, the Breeder division was affected by higher depletion/culling costs and the Broiler division
was affected by a slightly higher Feed input cost (Feed ASP increased by 1.5% in Q3 2017)
- Partially offset by Consumer Foods division’s EBIT (ex-FX) loss decreasing by Rp8.3 billion
 Q3 2017 SG&A costs is lower by Rp8.2 billion QoQ mainly due to higher Q2 2017 SG&A costs for Staff costs (13th month bonus payment in June
2017) and A&P costs for the Consumer Foods division (TV commercial & promotion costs)
 Forex losses in Q3 2017 is mainly due to hedging cost and settlement of USD bank borrowings; USD bank borrowings as at 30 September, 2017
amounted to USD8 million (or 5.6% of total bank borrowings) and have been fully hedged at average rate of 13,492
1
 CONSOLIDATED STATEMENTS OF COMP. INCOME
(IN MILLIONS OF RUPIAH)

Feed 9M 2017 9M 2016 Variance Q3 2017 Q2 2017 Variance Q3 2017 Q3 2016 Variance

Sales 2,649,364 2,559,334 3.5% 882,053 933,632 -5.5% 882,053 733,916 20.2%

EBIT (ex-FX) * 231,544 437,615 (206,071) 62,097 81,167 (19,070) 62,097 113,288 (51,191)

EBIT margin 8.7% 17.1% 7.0% 8.7% 7.0% 15.4%

ASP 6,160 6,330 -2.7% 6,170 6,080 1.5% 6,170 6,230 -1.0%

Quantity Sold 436,000 396,000 10.1% 145,000 155,000 -6.5% 145,000 120,000 20.8%

* 9M 2017 & Q2 2017 results are adjusted for non-recurring tax related expenses of Rp9.354 billion

Comments:
 The decrease in Q3 2017 EBIT (ex-FX) YoY is mainly due to:
1) an increase in overall cost of raw materials (in Rp) – Corn cost was higher by 24%, while SBM was lower by 6%
2) a decrease in Feed ASP by 1.0% (mainly due to decrease in layer feed ASP by 9%)
3) partially offset by an increase in quantity sold by 20.8%
 The decrease in Q3 2017 EBIT (ex-FX) QoQ is mainly due to:
1) an increase in overall cost of raw materials (in Rp) – Corn cost was higher by 7%, while SBM was lower by 5%
2) a decrease in quantity sold by 6.5% due to Lebaran seasonality in Q2 2017
3) partially offset by an increase in feed ASP by 1.5% (mainly due to increase in Broiler & Breeder feed ASP by
1.2%)
 Feed ASP for in October 2017 ranged between Rp6,150 – Rp6,250 /kg
2
TREND ANALYSIS – FEED DIVISION
18.7%
17.0% 16.9%
15.4%
13.4%
12.1% 11.5%
10.6%
8.7%
5.5% 7.0%
162.9 161.4
140.0
109.4 113.3
95.2 94.5 88.3 81.2
62.1
43.7

Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17

EBIT (ex-FX) - IDR bn EBIT (ex-FX) margin (%)

6,220 6,250 6,440 6,320 6,230 6,260 6,230

6,100 6,180 6,080 6,170

144 155 145

131 136 135 133 132 129 136
120

Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17

Quantity sold ('000) ASP (Rp)

3
 CONSOLIDATED STATEMENTS OF COMP. INCOME
(IN MILLIONS OF RUPIAH)
Breeder 9M 2017 9M 2016 Variance Q3 2017 Q2 2017 Variance Q3 2017 Q3 2016 Variance

Sales 863,444 885,986 -2.5% 274,556 306,872 -10.5% 274,556 296,043 -7.3%

EBIT (ex-FX) * (75,672) 44,097 (119,769) (48,368) (19,397) (28,971) (48,368) 24,683 (73,051)

EBIT margin -8.8% 5.0% -17.6% -6.3% -17.6% 8.3%

ASP 4,500 4,700 -4.3% 4,300 4,600 -6.5% 4,300 5,000 -14.0%

Quantity Sold (mn) 158.7 156.2 1.6% 52.0 54.0 -3.7% 52.0 49.2 5.7%

* 9M 2017 & Q2 2017 results are adjusted for non-recurring tax related expenses of Rp1.160 billion

Comments:
 Sales revenue for Q3 2017 decreased by 7.3% YoY and 10.5% QoQ, respectively. The YoY decrease is mainly due to a
decrease in ASP by 14.0%, while the QoQ decrease is mainly due to a decrease in ASP by 6.5% and a decrease in quantity sold
by 3.7%
 EBIT (ex-FX) in Q3 2017 reported a negative YoY swing of Rp73.1 billion and an increased QoQ loss of Rp29.0 billion,
respectively. The YoY swing and increased QoQ loss were mainly due to:
1) higher depletion/culling costs from reduction of Parent Stock & hatching eggs in July & September 2017
2) a decrease in ASP by 14.0% (YoY) and by 6.5% (QoQ)
 To address potential oversupply in the market during the Suro-Safar religious observance (October-November), the
Government has instructed producers to reduce hatching eggs by 6% per week in September & October 2017
 On the decision by the Business Competition Supervisory Commission (“KPPU”) against the 12 major poultry integrators, on
allegations of cartel practices, the appeal is currently being heard in the High Court
 DOC ASP in October 2017 ranged between Rp4,000 – Rp4,700 /DOC
4
TREND ANALYSIS – BREEDER DIVISION
4,700 5,000 5,000 4,600
4,000 4,200 4,300 4,400 4,300
3,600 3,800
7.2% 8.3%
0.4% 2.3%

-0.9% -2.8% -6.3%

-15.9% -17.6%
-24.7%

-37.3% EBIT (ex-FX) margin (%) ASP (Rp)

3,600 3,800 4,000 4,200 4,300 4,700 5,000 5,000 4,400 4,600 4,300

54.2 54.0
53.5
52.7 52.7
52.0
50.1 50.5 50.3
49.7 49.2

Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17

Quantity sold (mn) ASP (Rp)

5
CONSOLIDATED STATEMENTS OF COMP. INCOME
(IN MILLIONS OF RUPIAH)
Broiler 9M 2017 9M 2016 Variance Q3 2017 Q2 2017 Variance Q3 2017 Q3 2016 Variance

Sales 438,731 453,878 -3.3% 152,969 160,268 -4.6% 152,969 158,526 -3.5%

EBIT (ex-FX) 8,364 4,795 3,569 6,404 8,123 (1,719) 6,404 10,732 (4,328)

EBIT margin 1.9% 1.1% 4.2% 5.1% 4.2% 6.8%

ASP 16,900 17,600 -4.0% 17,300 17,000 1.8% 17,300 18,400 -6.0%

Quantity Sold (mn kg) 23.0 22.5 2.2% 7.9 8.5 -7.1% 7.9 7.6 3.9%

Comments:
 Sales revenue for Q3 2017 decreased by 4.6% QoQ, mainly due to a decrease in quantity sold (per kg) of 7.1% as a
result of Lebaran seasonality in Q2 2017
 Sales revenue for Q3 2017 decreased 3.5% YoY, mainly due to a decrease in ASP by 6.0%, partially off-set by an
increase in quantity sold (per kg) of 3.9%. The lower ASP in Q3 2017 is mainly due to a combination of softer
consumer purchasing power and moderate oversupply of broilers; the oversupply issue is being addressed by the
culling in PS DOC numbers & hatching eggs (see discussion in Breeder segment)
 EBIT (ex-FX) decreased slightly by Rp1.7 billion QoQ, which is mainly due to the decrease in quantity sold (per kg)
by 7.1% and higher production cost due to the increase in Feed ASP by 1.5%
 Broiler ASP in October 2017 ranged between Rp14,000 – Rp17,000 /kg

6
TREND ANALYSIS – BROILER DIVISION
17,800 17,000 16,600 17,600 18,400 17,100 16,300 17,000 17,300
15,600 15,800
6.8%
5.1% 4.2%
3.5% 2.7%
0.8%

-1.1%
-4.2% -4.9%

-9.5%
-12.4% EBIT (ex-FX) margin (%) ASP (Rp)

17,800 17,000 16,600 17,600 18,400 17,100 16,300 17,000 17,300

15,600 15,800

8.5 8.5 7.9

7.1 7.6 7.6
6.6 6.4 6.7
6.0 5.9

Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17

Quantity sold (mn kg) ASP (Rp)

7
CONSOLIDATED STATEMENTS OF COMP. INCOME
(IN MILLIONS OF RUPIAH)
Consumer Foods 9M 2017 9M 2016 Variance Q3 2017 Q2 2017 Variance Q3 2017 Q3 2016 Variance

Sales 106,266 60,997 74.2% 40,925 37,785 8.3% 40,925 21,895 86.9%

EBIT (ex-FX) (34,358) (37,250) 2,892 (8,766) (17,086) 8,320 (8,766) (10,407) 1,641

EBIT margin -32.3% -61.1% -21.4% -45.2% -21.4% -47.5%

ASP 43,000 40,100 7.2% 42,100 44,300 -5.0% 42,100 38,600 9.1%

Quantity Sold (MT) 2,471 1,522 62.4% 972 854 13.8% 972 567 71.4%

Comments:
 Sales revenue for Q3 2017 increased by 86.9% YoY and 8.3% QoQ. The increase in sales revenue is mainly due to
increases in sales volume of 71.4% YoY and 13.8% QoQ and an increase in ASP by 9.1% YoY. The increase in sales
volume in Q3 2017 is mainly due to:
1) sales promotions in the traditional and modern market channels and via greater brand awareness through
social media and launch of nationwide Sunny Gold TV commercial in April 2017. The TV commercial can also
be viewed on YouTube at https://www.youtube.com/watch?v=X7fdIK5gkZU
2) for the period 9M 2017, 200 additional new distribution channels were added (1H 2017: 130)
 The decrease in EBIT (ex-FX) QoQ loss in Q3 2017 of Rp8.3 billion is mainly due to higher A&P expenses in Q2
2017 for the cost of the Sunny Gold TV commercial of Rp8.3 billion (Q3 2017: Rp3.0 billion)

8
TREND ANALYSIS – CONSUMER FOODS DIVISION
-65.4% -72.8% -63.0% -91.2% -83.1% -57.5% -47.5% -40.3% -30.9% -45.2% -21.4%

972
854
649 645
531 567
392 395 370 351 424

Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17

Quantity sold (MT) EBIT (ex-FX) margin (%)

41,300 40,600 41,100 40,100 41,500 40,800 42,700 44,300 42,100

39,200 38,600

972
854
649 645
531 567
392 395 370 351 424

Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17

Quantity sold (MT) ASP (Rp)