Patties Foods Ltd ABN 62 007 157 182

Operations 161-169 Princes Highway Bairnsdale VIC 3875 PO Box 409 Bairnsdale VIC 3875 Phone: 03 5150 1800 Admin Fax: 03 5152 1135 Sales Fax: 03 5152 1054 info@patties.com.au www.patties.com.au

Corporate Office Chifley Business Park Level 2, 1 Joseph Avenue Mentone VIC 3194 PO Box 115 Dingley VIC 3172 Phone: 03 8540 9100 Fax : 03 9551 3393 Info@patties.com.au www.patties.com.au

25 February 2013 Announcements Officer Company Announcements Office Australian Stock Exchange Limited South Tower Rialto 525 Collins Street MELBOURNE VIC 3000 Patties Foods Limited (PFL) - Half Year Results Market Briefing Please find attached, the market briefing regarding PFL’s half year results ended 31 December 2012 to be presented during the coming weeks. The information contained in this announcement should be read in conjunction with the announcement on 25 February 2013 of PFL’s half year report and PFL’s most recent annual financial report. Yours faithfully

MICHAEL KNAAP Company Secretary

For further information refer to www.patties.com.au or contact:

Greg Bourke, Managing Director 03 8540 9100

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FULL YEAR RESULTS 2012

Market Briefing

C.E.O. GREG BOURKE

C.F.O. MICHAEL KNAAP

HALF YEAR RESULT 2013

Market Briefing – February 2013

CEO Greg Bourke

CFO Michael Knaap

Leading Australian Owned Branded Frozen Food Company

Investing In Growth

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H1F08 H1F09 H1F10 H1F11 H1F12 H1F13

EPS

cent

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EBIT

$m

EBIT underlying EPS Reported

Soft earnings whilst investing in brands and strategic initiatives

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Key Points

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• Reported NPAT down 16.5% on the previous corresponding period (pcp) to $9.1m with underlying NPAT earnings down 12.7% on pcp to $9.5m.

• Strong cash flow from operations due to improved working capital management.

• Strong increase in Out of Home sales from: • Growth of category and market share in Petrol & Convenience channel.

• New supply contracts.

• Growth of Chef’s Pride in restaurant channel .

• Increased investment in growth initiatives including: • New Product Development and Marketing,

• Export business development.

• Global sourcing resources.

• Expanding sales of savoury products into new OOH channels.

• Effective cost control with operating expenses flat, and logistics expenses in line with volume growth.

• Growth of Four n Twenty, Patties and Herbert Adams brands.

• Pressure on margins mainly in Frozen Fruit category with increased private label offers, and Nanna’s Fruit Pie category from increased discounts.

• Maintained market leadership in all categories.

• Delays in commissioning of robotic packing equipment.

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($m) Dec-12 Dec-11 +/- %

Net Sales Revenue 125.5 119.4 +6.1 +5.1%

Cost of Good sold 80.1 72.7 +7.4 +10.3%

Gross margin 45.4 46.8 -1.4 -3.0%

Operating expenses 26.6 25.8 +0.8 +3.1%

EBITDA (underlying) 18.8 21.0 -2.2 -10.4%

Depreciation & Amort. 3.6 3.3 +0.3 +8.9%

EBIT (underlying) 15.2 17.7 -2.5 -14.0%

Interest 2.2 2.6 -0.3 -12.7%

NPBT (underlying) 13.0 15.1 -2.1 -14.2%

Tax 3.5 4.3 -0.8 -18.5%

NPAT (underlying) 9.5 10.8 -1.4 -12.5%

NPAT (reported) 9.1 10.8 -1.8 -16.2%

Underlying EPS (cents) 6.5 7.8 -1.3 -16.7%

Underlying ROE 13.3% 15.1% -1.8% -11.7%

Net Asset Backing (cents) 100 96 +4.0 +4.2%

DPS (cents) 3.2 3.8 -0.6 -15.8%

• Revenue growth of 5.1% driven by Out-of-home growth (through the P&C channel and new corporate contracts) and maintaining In-Home branded market leadership.

• Gross margin reduced to 36.2% from 39.2% impacted by capturing value segment opportunities, increased competitor activity, In Home supermarket channel margin pressure and manufacturing performance inhibited by commissioning of automation.

• Underlying EBIT margin to sales reduced to 12.1% whilst in a challenging economic environment.

• Effective cost control with flat base operating expenses, notwithstanding an increase in logistics costs to support revenue growth, increase in marketing brand spend and investment in developing the various strategic initiatives.

• Underlying effective tax rate of 28.6% versus last year, 29.5%

• Reduced interest costs as the average cost of funds improved through both margin and general interest rate reductions.

• The reported profit of $9.1m includes a significant item of $411k (post tax) resulting from the administration of Australian Convenience Foods P/L.

• Reduced ROE at 13.3% versus last year, 15.1%.

Good increase in revenue offset by margin pressure and investment in growth initiatives

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Balance Sheet and Capital Management

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Balance Sheet ($m) Dec-12 Jun-12 +/-

Current Assets 83.3 91.2 -7.9

Total Assets 243.8 248.3 -4.5

Current Interest Bearing Securities 2.1 2.1 +0.0

Other Current Liabilities 26.8 33.6 -6.8

Non Current Interest Bearing Securities 67.5 68.5 -1.0

Total Liabilities 104.5 112.2 -7.7

Net Assets 139.3 136.1 +3.2

Total Equity 139.3 136.1 +3.2

Capital Management ($m) Dec-12 Jun-12 +/-

Net Debt 67.1 70.5 +3.4

Leverage Ratio (Net Debt to underlying EBITDA) 1.87x 1.82x -0.1

Interest Cover (EBIT/Interest) 6.5x 6.5x 0

Net Debt to Equity Ratio 48.1% 51.8% 3.7%

Cash Flow ($m) Dec-12 Dec-11 +/-

Cash flow from operations 15.7 6.4 +9.3

Net cash flow from investing activities -6.3 -5.8 -0.5

Net cash flow from financing activities -7.1 -3.1 -4.0

Net cash flow movement 2.3 -2.5 +4.8

Closing cash balance 0.2 1.2 -1.0

Free cash flow 9.4 0.6 +8.8

• Strong Balance Sheet and Conservative Gearing with an improved Net Debt to Equity ratio of 48.1% (51.8% at 30 June 12), stable leverage ratios and interest cover.

• Finance facility renewed in Jan 13 with key facets being: – 3 year term expiring Jan 2016.

– Comfortable covenants with headroom to support future investment.

– Interest rate hedge on 50% of total debt.

• Reduction of Net Debt by $3.4m to $67.1m at 31 December 2012.

• Improved working capital position as we continue to focus on effective working capital management whilst ensuring profit optimisation.

• Strong increase in cash flow from operations to $15.7m (pcp $6.4m), whilst investment continues in core manufacturing assets.

• FY13 fully franked interim dividends of 3.2cps is in line with profit and a continuing prudent dividend payout ratio at 60%.

Balance sheet remains an enabler to support strategic growth initiatives.

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In-Home Savoury and Fruit Pie PFL maintains market leadership

SOURCE: Aztec retail scan data by value (ex Aldi) MAT Dec 2012 6

48.3

23.6

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6.5 4.4

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National Excl Aldi Value Share of Frozen Savoury

Patties Foods Competitor #1Private Label Other ManufacturersCompetitor #2 Competitor #3

51.8 37.1

10.9

National Excl Aldi Value Share of Fruit Pies

Patties FoodsCompetitor #1Private Label

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In-Home Savoury - Multi brand strategy continues to provide growth opportunities

SOURCE: Aztec retail scan data by value (ex Aldi) MAT Dec 2012 7

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Four'n Twenty Patties Herbert Adams PFL Other Brands

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In Home Frozen Fruit Category remains challenging

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• Patties remains the market leader with a multi-brand strategy.

• Reduced consumer prices of private label products is driving volume growth.

• Our premium Creative Gourmet brand lost market share against private label.

• Nanna’s value range increased share, but at lower margins.

• Branded margins continue to be under pressure.

• Strong category volume growth: 13% MAT.

• Category consolidating with the sale of Sara Lee

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32.7 28.5

17.9 19.5

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Market share by brand

Other Mfrs

Competitor #2

Competitor #1

Private Label

Patties Nanna's

Patties CreativeGourmet

SOURCE: Aztec retail scan data by value (ex Aldi) MAT Dec 2012

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Out-of-Home Strong branded growth in Petrol & Convenience

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0%10%20%30%40%50%60%70%80%90%

100%

Dec-11 Dec-12

17.5% 20.2%

30.5% 39.6%

43.4% 35.4%

Patties Corporate Patties Branded

All other manufacturers

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Strong growth

Category Patties

Increasing market share through brands

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New Products Update – Savoury Four’n Twenty

Aussie Classics Angus Extensions

Objective Category Growth Enter new category Category Growth

Launch May 2012 In Home (IH) August 2012 Out Of Home (OOH)

April 2012

Marketing support

in-store promotional program with existing Angus varieties

radio, digital, point of sale, sampling, in-store activation

radio, digital, point of sale, consumer sampling

Status Sales volumes meeting expectations

Positive consumer feedback Sales volumes slow but building

Chicken Parma SKU performing well.

Wraps

New category and new occasion

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New Products Update – Savoury Herbert Adams

King Island Party

Objective Category Growth (trade up to higher price point)

Category Growth (create centre of plate solution)

Launch May 2012 IH May 2012 IH Marketing support

in-store promotional program Digital marketing program

Magazine and Digital marketing program In Store sampling

Status Sales volumes exceeding expectations Good sales in target demographic areas

Parcels

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New Product Concepts – Donuts and other Sweet products

Objective Enter new category and increase brand penetration

Launch IH & OOH

Marketing support radio, digital, point of sale, sampling

Status Consumer and customer feedback very positive

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Operations Improvements

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Automation • Commissioning and optimisation of packing robotics on the main pie line has taken significantly longer

than planned. Six months after installation the equipment is performing at break even to prior operating cost levels. Achievement of full benefits from the packing automation remains the target and together with our supplier partners we have work in progress to complete this project successfully during H2.

• The delay in achieving higher performance and returns from this project has diluted the otherwise good performance of the remaining production lines.

Continuous Improvement Projects • CI projects totalling $600K of annualised cost improvements have been implemented by December 31.

These projects included efficiency improvements across a number of our production lines. Input Costs • Meat and flour costs are expected to rise in the short term. Safety • There has been a significant improvement in safety at the Bairnsdale site. Lost Time Injuries reduced by

70% from the previous corresponding period. Safety is the first item discussed at meetings at all levels within the business. Safety is measured as KPI at all levels of the business and included as a major responsibility for Managers, Line Managers and Supervisors.

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Strategic Intent: Broaden our offer for tasty, convenient and value-for-money food products and grow the Out of Home business

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Mix of business by customer channel

Mix of business by product category

Dessert Pastry, 6.7%

Frozen Fruit, 15.4%

Other, 4.3%

Pastry Combination,

9.1%

Pies, 43.8%

Pasties & Sausage

Rolls, 20.7%

In Home, 63.7%

Out of Home, 36.3%

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Strategy

With a history of strong underlying financial performance, we plan to further build shareholder value with a stable management team creating revenue streams from three new areas utilising our

strengths of brand management and operational capability.

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In FY13 we will expand with our Strategic Growth Initiatives REVENUE Expected outcomes from Growth Initiatives

Export strategy

Execute export plan during 2013 capturing UK and US opportunities.

Customers

Drive category and channel growth through sharing consumer insights and leveraging strong business relationships.

New Products

Create excitement in the categories to drive category growth. Nanna’s donut and sweet range, Four n Twenty Wraps for the P&C channel.

Brand

Build on brand loyalty and consumer awareness to increase demand using targeted communications with an increased focus on electronic communication especially in social media. Leverage our multi-code football sponsorship to promote Four n Twenty as “Australia’s Footy Pie”.

New Channels

Increased sales of Chef’s Pride specialised products in Restaurants and Premium food outlets.

Expand sales of unbaked sausage rolls into the local bakery market. Pie offer in development.

Consumer

Increased understanding of consumer behaviour in our categories to develop demand creation projects.

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OPERATIONS Expected outcomes from Cost Initiatives Operational improvements

• Reduce unit costs through fractionalisation of fixed costs by

building revenues with minimal incremental indirect costs. • Reduce direct costs through Continuous Improvement projects.

Capital Works

• Complete commissioning of Packing Automation. • Develop and execute projects providing ROI >20% p.a.

Minimise and mitigate input cost increases

• Continue robust procurement procedures to minimise impact of commodity cost increases.

• Work with customers to recover cost increases through price increases.

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In FY13 we will expand with our Strategic Growth Initiatives F

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M&A Expected outcomes

New Businesses Adding shareholder value by acquiring suitable businesses that leverage PFL’s competencies of:

• Manufacturing excellence • Customer relations • Account management, especially Out of Home, and • Category leadership and provides:

• Ongoing growth opportunities, • Positive earnings to PFL, • Prudent capital structure, • ROI in excess of Weighted Average Cost of Capital.

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In FY13 we will expand with our Strategic Growth Initiatives F

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4 year history of PFL’s ASX performance

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OUTLOOK

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We remain committed to driving earnings growth and building shareholder value through: • Continuing to invest in our strategic growth initiatives, particularly the

development of new channels and regions. These initiatives are an investment in the future and we expect to see the financial benefits over the next 2 to 3 years.

• Supporting and growing our strong brands through new products and innovative consumer promotions;

• Disciplined control of costs, and

• Improved manufacturing efficiencies, including the benefit of the completed robotic packing equipment project during this calendar year.

Based on current trading projections, we expect NPAT for the second half to be at or above the NPAT for the previous corresponding period.

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Background information

Patties Foods Limited

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History

• In 1966, immigrant baker Peter Rijs and his wife Annie bought Patties Cake Shop in Lakes Entrance. Over time, their 6 sons came to work in the business.

• Patties Foods is now one of the largest Australian food manufacturing companies and as a public company listed on ASX has 3,500 investors, with annual revenue over $235m.

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Brand Architecture Brand Products and Occasion Typical Consumers

Broad single serve range – In Home and Out of Home Quick lunch (and “smoko”)

Men 16-45 Blue collar, skilled and unskilled

Range of quality single serve and finger food products Great for back up Tuesday night dinner and entertaining

Older Singles and Couples Empty Nesters

Broad range of finger food products Popular treat for sharing and snacking Keep on hand for pop ins Source for specific occasion (eg kids party) Foodservice – popular platter pleaser, high quality

Families with 2+ kids Caterers, Pubs/Clubs, Events

Range of Fruit Pies, Crumbles and Frozen Berries Popular sweet “filler” – keep on hand

Families with 2+ kids Older Men and Women 55+

Broad range of quality berries and smoothies. “go to” for baking and recipes.

Foodies – skew to Women 30-55+ White Collar Take pride in food and ingredients

Range of components, ingredients, solutions Always available Always reliable Specialty “centre of plate” products

Pubs/Clubs, Resorts, Function Centres Time poor Chefs and Caterers looking for solutions & meal components

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Frozen savoury industry

• Resilient category in uncertain times.

• Attractive to consumers as “Australia’s favourite meal” – the meat pie.

• Our customers expect innovation to increase consumer demand.

• Our consumers want market leading brands to confirm quality proposition.

• Consumers continue to support their favourite iconic brands when new products are launched.

• PFL is the only national supplier servicing all channels and provides a complementary sweet offer.

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