Fonterra Co-operative Group Limited · NZX:FCG
Fonterra Co-operative — FY2013 Earnings Presentation
39 slides from Fonterra Co-operative's earnings presentation, Sep 25, 2013
Slide 1: Fonterra Annual Results 2013
FONTERRA ANNUAL RESULTS 2013 © FONTERRA CO-OPERATIVE GROUP LIMITED © © Fonterra Fonterra Co-operative Co-operative Group Group Ltd. Ltd. 1
Slide 2: John Wilson – Chairman
John Wilson – Chairman © © Fonterra Fonterra Co-operative Co-operative Group Group Ltd. Ltd. 2
Slide 3: Key highlights
Key highlights FARMGATE MILK PRICE DIVIDEND FINAL CASH PAYOUT $5.84kgMS 32 cps $6.16 NET PROFIT EARNINGS PER SHARE DEBT TO DEBT PLUS EQUITY $736m 44 cps 39.6% © © Fonterra Fonterra Co-operative Co-operative Group Group Ltd. Ltd. 3
Slide 4: Cash payout
Cash payout 8.62 7.90 0.32 0.30 6.37 6.40 6.16 0.27 0.32 0.32 (1) 6.10 7.60 6.08 5.84 8.30 2010 2011 2012 2013 2014F (1) (2) Dividend Farmgate Milk Price (1) Cents per share (2) $ per kgMS © © Fonterra Fonterra Co-operative Co-operative Group Group Ltd. Ltd. 4
Slide 5: Drought impact on NZ milk supply
Drought impact on NZ milk supply 2012/13 milk supply Drought Impact Source: Fonterra Co-operative Group Limited © © Fonterra Fonterra Co-operative Co-operative Group Group Ltd. Ltd. 5
Slide 6: Stronger Capital Structure
Stronger Capital Structure Nov 2012 Trading Among Farmers launched Mar 2013 More flexible contracts for new and growing, farmers Apr 2013 1:40 Bonus Issue May 2013 Second Supply Offer No drought related capital outflows – confirming redemption risk has been removed © © Fonterra Fonterra Co-operative
Slide 7: Theo Spierings – CEO
Theo Spierings – CEO © © Fonterra Fonterra Co-operative Co-operative Group Group Ltd. Ltd. 7
Slide 8: Results highlights
Results highlights Volume GROUP SALES VOLUME • Volume up in all segments, excluding ANZ • Asia/Africa & Middle East - up 11% • NZ Milk Products - up 1% 4m MT • Latin America - up 6% • Australia/New Zealand - down 2% (excluding Norco) GROUP NORMALISED EBIT Value • NPAT of $736m - up 18% • Normalised
Slide 9: NZ Milk Products – highlights
NZ Milk Products – highlights Normalised EBIT ($m) Volume • 1% increase to 2.8 million MT 501 494 • Record volumes in first half, slowed in +1% 72 second half as drought impacted milk supply 246 Value 422 • Strong performance in the 1st half 255 • 2nd half impacted by the extreme -2% drought • Negat
Slide 10: NZMP – key performance drivers
NZMP – key performance drivers Normalised EBIT ($m) 26 107 49 43 18 501 494 2012 Price Product Quality Global Other/Cost 2013 Premiums Mix Issues Sourcing Savings © © Fonterra Fonterra Co-operative Co-operative Group Group Ltd. Ltd. 10
Slide 11: Volatility in prices of powder and non-powder products
Volatility in prices of powder and non-powder products NZ Milk Products profit impact ($m) 150 100 50 0 -50 -100 -150 -200 -250 -300 -350 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 Aug-13 © © Fonterra Fonterra Co-operative Co-operative Group Group Ltd. Ltd. 11
Slide 12: Australia and NZ – highlights
Australia and NZ – highlights Normalised EBIT ($m) Volume1 • Lower volumes in Australia due to less private label sales and -2% consolidation of brands 227 Value • NZ brands earnings up slightly 142 -37% • Australian brands margins impacted by competitive pressure from retailers 2012 2013 • Strong c
Slide 13: ANZ – key performance drivers
ANZ – key performance drivers EBIT ($m) 37 53 5 30 227 19 142 93 Normalised Australia Australia NZ Brands Normalised Plant Right Reported EBIT 2012 Brands Ingredients & Rural EBIT 2013 Closure Sizing EBIT 2013 Services © © Fonterra Fonterra Co-operative Co-operative Group Group Ltd. Ltd. 13
Slide 14: Reshaping our Australian business
Reshaping our Australian business Tough environment Five key priorities Intense retailer 1. Streamline brands portfolio Retailers pressure 2. Grow everyday nutrition 3. Expand high-value nutritionals Processors Strong rivalry 4. Drive foodservice business Aggressive 5. Reduce cost and complexity Sup
Slide 15: Asia/Africa/Middle East – highlights
Asia/Africa/Middle East – highlights Normalised EBIT ($m) Volume • Growth driven by Greater China, Indonesia, Malaysia and Vietnam +11% Value 209 • Asia/AME now our largest 182 consumer business +16% • Up 22% in ASEAN/MENA1 • Up 21% in Greater China1 2012 2013 Note 1: Normalised EBIT measured by con
Slide 16: Asia/AME – key performance drivers
Asia/AME – key performance drivers Normalised EBIT ($m) +44%2 +20%2 +6%2 +21%2 209 182 2012 Everyday Advance Foodservice 1 Greater 2013 Nutrition 1 Nutrition1 China Note 1: ASEAN/Mena only Note 2: Year on year percentage change for the category © © Fonterra Fonterra Co-operative Co-operative Group G
Slide 17: Latin America highlights
Latin America highlights Normalised EBIT ($m) Volume • Soprole volumes up 4% 132 137 +7% • DPA volumes up 2% 25 54 Value • Soprole’s normalised EBIT up 31% – Improved earnings from yoghurts 109 +4% – Growth in liquid milk and cheese 75 • DPA normalised EBIT down 54% – Last year included a $19m benef
Slide 18: Latam – key performance drivers
Latam – key performance drivers Normalised EBIT ($m) 26 25 5 9 132 137 2012 Soprole DPA Southern Other 2013 Cone © © Fonterra Fonterra Co-operative Co-operative Group Group Ltd. Ltd. 18
Slide 19: Working Capital and Cash Flow
Working Capital and Cash Flow Working Capital Days1 Operating & Investing Cash Flow 696 688 105 106 564 98 129 2011 2012 2013 2011 2012 2013 Impact of advance rate change Average working capital days improved by 8 days to 98 days ($400m cash benefit) Note 1: excluding supplier payables © © Fonterra
Slide 20: Strong Balance Sheet
Strong Balance Sheet Debt to Debt Plus Equity1 • The new capital structure has addressed redemption risk 41.8% • No drought related capital outflows during the year 39.6% 39.1% • Change in advance rate schedule had a small impact on the Balance Sheet • Capital expenditure was $925m 2011 2012 2013 No
Slide 21: Strategy Update & Outlook
Strategy Update & Outlook © © Fonterra Fonterra Co-operative Co-operative Group Group Ltd. Ltd. 21
Slide 22: Global trends driving demand for dairy
Global trends driving demand for dairy Continued rise of Nutrition for emerging the old markets Commodity price Sustainability volatility Nutrition for Disruption the young © © Fonterra Fonterra Co-operative Co-operative Group Group Ltd. Ltd. 22
Slide 23: Good progress on strategy
Good progress on strategy STRATEGIC PATHS PROGRESS Darfield investment & Studholme acquisition EVERYDAY 1 Optimise NZ milk Optimise and drive value add products NUTRITION Strong quality improvement and food safety focus Build and grow beyond our Reshape Australia brands 2 current consumer positions
Slide 24: Adding value to our NZ milk pool
Adding value to our NZ milk pool © © Fonterra Fonterra Co-operative Co-operative Group Group Ltd. Ltd. 24
Slide 25: Everyday Nutrition
Everyday Nutrition • Focus: Fewer, bigger brands • Build from the core: butter and cheese • Build more FMCG-oriented culture Global Everyday Nutrition Brand Portfolio Italian Culinary Everyday Crafted Quality Taste Dairy Expert Affordable & Natural Taste Enhancement Accessible Local Jewel Emerging F
Slide 26: Foodservice
Foodservice • Grow our leading positions in key target markets • Significant year-on-year growth • Annual sales now over $1.3bn • Continue to drive growth through: – Greater investment in supply capacity – Distinctive chef-led solution selling model – Product/technology leadership © © Fonterra Fonte
Slide 27: Advanced Nutrition
Advanced Nutrition • Key focus to develop Anmum in selected markets – Market leader in Malaysia – Top 3 in Indonesia – Build on Anmum’s success in Hong Kong and extend further into China • Continue to grow Anlene in high calcium category • Expand Anlene in China and growth regions in South East Asia
Slide 28: Strategy shifts portfolio to higher value add
Strategy shifts portfolio to higher value add ILLUSTRATIVE ONLY © © Fonterra Fonterra Co-operative Co-operative Group Group Ltd. Ltd. 28
Slide 29: Outlook
Outlook • 2014 Forecast Cash Payout of $8.62 – Forecast Farmgate Milk Price of $8.30 – Estimated dividend of 32 cps • Headwinds for Fonterra – Higher input costs make it harder to drive value growth in brands and foodservice in first half – Negative impact on product mix margins as milk powder price
Slide 30: Supplementary Information
Supplementary Information © © Fonterra Fonterra Co-operative Co-operative Group Group Ltd. Ltd. 30
Slide 31: Annual results summary
Annual results summary Year ended Year ended Million Change 31 July 2013 31 July 2012 Total Sales Volume (million MT) 3.96 3.94 0% Revenue 18,643 19,796 (6%) Normalised EBIT (NZD million) 1,002 1,028 3% Net Profit After Tax (NZD million) 736 624 18% Earnings per share (cents) 44 41 7% Dividends per
Slide 32: Normalisation adjustments
Normalisation adjustments Year ended Year ended 31 July Million 31 July 2013 2012 Costs associated with planned closure of Cororooke site (30) – Costs associated with the Group’s Strategy Right- sizing (38) – Restructuring costs associated with the Group Strategy Refresh – (30) Other items 3 (3) Imp
Slide 33: Reconciliation to Prospective Information
Reconciliation to Prospective Information $ Million NZMP ANZ Asia/ Latam Inter- TOTAL AME Segments Prospective EBIT 517 201 223 125 (12) 1,054 Adjustments: Changes in Org structure 17 12 (2) 6 1 - Prospective EBIT – 500 213 221 131 (11) 1,054 adjusted Prospective normalisation - 25 - - - 25 adjustme
Slide 34: NZMP contribution margin
NZMP contribution margin $million Year ended Year ended 31 July 2013 31 July 2012 Sales Volume (000MT) 2,824 2,790 Gross Margin 1,251 1,285 Selling, marketing and distribution expenses (277) (269) Contribution margin 974 1,016 Contribution margin per MT ($) 345 364 Growth (5%) © © Fonterra Fonterra
Slide 35: Whole milk powder and cheese prices
Whole milk powder and cheese prices Weighted Average USD GDT Cheese Prices vs WMP Prices 5,200 H2 2013 4,900 4,600 4,300 4,000 Cheese H1 2013 WMP 3,700 3,400 3,100 2,800 2,500 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Jul-13 © © Fonterra Fonterra Co-operativ
Slide 36: NZ Milk Products Sales Volume by Product
NZ Milk Products Sales Volume by Product 2,824 MT 2,790 MT 454 452 72 66 309 301 469 477 489 464 1,031 1030 2013 2012 Whole Milk Powder Skim Milk Powder Cream Cheese Casein Other © © Fonterra Fonterra Co-operative Co-operative Group Group Ltd. Ltd. 36
Slide 37: Balance sheet strength
Balance sheet strength Strong Fundamentals Diversified Funding Sources A+ S&P Offshore DCM (stable outlook) Credit 30% Rating Bank Facilities AA- Fitch 50% (stable outlook) Weighted As at 31 July Average 2013 3.41 years Term to (Drawn debt) Maturity NZ DCM 20% 3,500 Debt Maturity Profile Strong Liqu
Slide 38: Capital Expenditure
Capital Expenditure 1000 925 888 28 900 53 70 800 57 644 144 700 192 22 17 600 492 LATAM NZD m 135 Asia/AME 27 500 13 ANZ 74 400 NZMP 683 300 586 470 200 378 100 0 2010 2011 2012 2013 © © Fonterra Fonterra Co-operative Co-operative Group Group Ltd. Ltd. 38
Slide 39: Final dividend declared
Final dividend declared • Board declared final dividend of 16 cps Dividend Per Share 32 32 32 • Full year dividend is 32 cps 30 • Record Date of 10 October 2013 • Payment Date of 18 October 2013 2011 2012 2013 2014 (estimate) © © Fonterra Fonterra Co-operative Co-operative Group Group Ltd. Ltd. 39
Fonterra Co-operative Group — FY2013 Earnings Presentation on 6ix