Fonterra Co-operative Group Limited · NZX:FCG

Fonterra Co-operative — Q1 FY18 Earnings Presentation

15 slides from Fonterra Co-operative's earnings presentation, December 2017

  1. Slide 1: Business Update

    Business Update OUR POTENTIAL DECEMBER 2017

  2. Slide 2: Disclaimer

    Disclaimer This presentation may contain forward-looking statements and projections. There can be no certainty of outcome in relation to the matters to which the forward-looking statements and projections relate. These forward-looking statements and projections involve known and unknown risks, uncer

  3. Slide 3: Low spring volumes – improved peak collection

    Low spring volumes – improved peak collection Milk collection forecast for the season maintained 100 90 • Wet conditions have 80 Volume (m litres/day) impacted milk production 70 volumes through spring 60 • Volumes recovered in October with the quarter 50 in line with last season 40 • Forecast reduc

  4. Slide 4: Global dairy market – continued strong demand

    Global dairy market – continued strong demand Supply EU Russia China Demand 12 months EU’s largest dairy 12 months production 0% export market – trade imports +13% US Last 3 months +5% embargo remains Last 3 months (Aug, Sep, Oct) (Aug, Sep, Oct) +30% 12 months production +2% Asia (excl China) Middl

  5. Slide 5: Dairy prices at higher levels

    Dairy prices at higher levels Currently neutral outlook for stream returns Products informing the milk price Other key products Whole Milk Powder Cheddar 5,500 6,000 5,000 +42% +4% 4,500 +38% -4% 3,500 4,000 2,500 3,000 1,500 2,000 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Aug Sep

  6. Slide 6: Continued focus on more volume to higher value

    Continued focus on more volume to higher value 1 Optimise DIRA NZ milk Consumer • Ingredients – Lower sales due to low 2 Build and grow GDT beyond our current opening inventory and consumer positions Foodservice production phased to the end 3 of the first quarter Deliver on Foodservice potential – A

  7. Slide 7: FY18 Q1 performance summary

    FY18 Q1 performance summary VOLUME (LME) REVENUE GROSS MARGIN OPEX CAPEX 3.9B $4.0B 16.7% $636M $142M 20% 4% FROM 21.9% 2% 22% Ingredients Consumer & Foodservice China Farms Volume (LME) 3.6B Volume (LME) 1.3B Volume (LME) 0.1B DOWN 19% DOWN 3% UP 6% Gross Margin 8.1% Gross Margin 24.0% Gross Margin

  8. Slide 8: Ingredients

    Ingredients Challenging first quarter Volume (B LME)¹ Volume 4.5 (19%) • Sales volumes lower due to low product levels 3.6 – Record low opening inventory – Delayed product availability due to lower milk collection volumes early in the quarter Q1 FY17 Q1 FY18 Value • Lower margin percentage due to hi

  9. Slide 9: Consumer & Foodservice

    Consumer & Foodservice Solid first quarter Volume (B LME)¹ Volume (3%) • Slight decline for the period with higher prices affecting 1.3 1.3 consumer behaviour • Greater China and Asia volumes both up • Full year target of moving an additional 400m LME into higher value products remains Q1 FY17 Q1 FY

  10. Slide 10: Consumer and Foodservice

    Consumer and Foodservice Continued growth in Greater China and Asia Asia Greater China Volume Gross Margin Volume Gross Margin 3% 1% 414 427 271 273 23% 29% FROM 33% FROM 39% Q1 FY17 Q1 FY18 Q1 FY17 Q1 FY18 Oceania Latin America Volume¹ Gross Margin Volume Gross Margin (12%) (1%) 469 412 184 181 18%

  11. Slide 11: Australian growth plans to meet strong global demand

    Australian growth plans to meet strong global demand Growing volume and value in Australia Our growth plans ROC (%) • Fonterra Australia has reached full milk 16 processing capacity at 2 billion litres 12 Future Today • Invest initial $100m immediately to de- 8 bottleneck plants in Australia 4 Milk

  12. Slide 12: Outlook

    Outlook Confidential to Fonterra Co-operative Group Page 12 Page 12 © Fonterra Co-operative Group Ltd.

  13. Slide 13: Outlook for balance of 2018

    Outlook for balance of 2018 • Forecast Farmgate Milk Price of $6.40 per kgMS – Global demand remains stable – Increased global supply placing pressure on prices, as reflected in GDT events since September – NZD weakening against USD, has provided some offset – Full year NZ milk collection forecast s

  14. Slide 14: Glossary

    Glossary Acronyms and Definitions AMF Fluid and Fresh Dairy Farmgate Milk Price, which are currently WMP, SMP, Anhydrous Milk Fat The Fonterra grouping of skim milk, whole milk and BMP, butter and AMF BMP cream – pasteurised or UHT processed, concentrated Regulated Return Butter Milk Powder milk pro

  15. Slide 15: Glossary

    Glossary Fonterra Strategic Platforms Ingredients The Ingredients platform comprises bulk and specialty dairy products such as milk powders, dairy fats, cheese and proteins manufactured in New Zealand, Australia, Europe and Latin America, or sourced through our global network, and sold to food produ

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