Fonterra Co-operative Group Limited · NZX:FCG
Fonterra Co-operative — Q1 2023 Earnings Presentation
17 slides from Fonterra Co-operative's earnings presentation, Dec 8, 2022
Slide 1: 8 December 2022
8 December 2022
Slide 2: First quarter highlights
• Strong first quarter with earnings upgraded to 50-70 cents per share, and lowered and narrowed the forecast Farmgate Milk Price range • Continued high volatility from geopolitical and macroeconomic events impacting operating environment ¹ • Recent dairy prices reflect both lower milk supply and va
Slide 3: Reference and non-reference (cheddar) price relativities on GDT
Reference and non-reference (cheddar) price relativities on GDT¹ (USD/MT) (USD/MT) 6,000 6,000 4,000 4,000 2,000 2,000 Q1 FY22 Q1 FY23 31 Jul 21 31 Jan 22 31 Jul 22 31 Jan 23 2017 2018 2019 2020 2021 2022 Reference product shipment price² ,³ , , Reference product shipment price² ³ , , Non-reference
Slide 4: Fonterra's New Zealand milk collections are down 2.9%
Milk supply of key exporting regions for the 12 month milk supply growth year-on-year¹ 12 months to September¹ (billion, litres) 2019 2020 2021 2022 • US production flat with improvement in recent months. • 12 month year-on-year milk supply is down in key Reduction in New Zealand, Australia and Euro
Slide 5: Continued strong prices for our protein portfolio
• Continued strong prices for our protein portfolio including: o casein and caseinate used in food applications for medical nutrition and processed cheese; and o whey protein concentrate, used in products such as high protein beverages • Macroeconomic and geopolitical events resulting in softening o
Slide 6: Monthly Milk Prices
Monthly Milk Prices • USD product prices started the FY23 season higher (NZ$) than prior season, but have subsequently reduced 11.00 • Macroeconomic and geopolitical events resulting in softening of powder prices, with WMP USD prices on 10.00 GDT down on average 22% in the first quarter compared to
Slide 7: Q1 FY23 financial results
million ∆¹ Sales volume (‘000 MT) Revenue ($) • Higher sales volumes reflect catch-up of delayed shipments which impacted FY22 year end inventory Cost of goods sold ($) Gross profit ($) • Gross margin up due to strong product prices, partially offset by higher monthly milk prices increasing cost of
Slide 8: Inventory volume ('000 MT)
Inventory volume (‘000 MT) • As planned, total inventory volume has returned to normal levels • Additional year end inventory of 126,000 MT shipped during the first quarter • Lower milk collections this season have also contributed to inventory level 31 July 31 July 31 October October 30 November No
Slide 9: Capital structure, Soprole sale and sustainability progress
• Flexible Shareholding capital structure to be implemented in late March 2023 • Agreement to sell Soprole announced in November – targeting a significant capital return • Launch of Sustainable Finance Framework – aligning funding strategy with sustainability ambitions • Development of commercially-
Slide 10: Reference product prices (US$/MT)
Reference product prices (US$/MT) 2022/23 2020/21 2021/22 Season Season Season Forecast 5,000 4,000 3,000 per kgMS 31 May 20 31 May 21 31 May 22 31 Oct 22 Reference product shipment price¹, ² Average reference product shipment price for the season • USD product prices started the FY23 season higher
Slide 11: Reference and non-reference product prices (US$/MT)
Reference and non-reference product prices (US$/MT) 6,000 5,000 4,000 3,000 FY22 H1 FY22 H2 FY23 H1 31 Jul 21 31 Jan 22 31 Jul 22 31Jan 31 Jan23 23 per share Non-reference product shipment price¹, ⁴ Reference product shipment price¹, ³ Non-reference product contract shipment price² ,⁴ Reference prod
Slide 12: Appendix
Appendix
Slide 13: Sales volume, revenue, gross profit, opex, EBIT and free cash flow
875 944 783 831 832 801 5.8 746 758 641 661 4.2 4.2 4.4 3.9 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 Sales Volume ('000 MT) Revenue ($ billion) Gross Profit ($ million) ¹ ² 656 368 552 581 523 513 250 178 190 (648) (568) (845) 21 (1,245) (1,168) 2019 2020 2021 2022
Slide 14: Season to date milk collections
• Season to date collections June- Volume (m litres/day) November were 680.8 million kgMS, 2.9% behind last season 90 • Challenging wet weather 80 conditions throughout the 70 North Island combined with a reduction in the number of cows 60 has reduced peak production 50 • Full season forecast is 1,4
Slide 15: Glossary
Means the average price paid by Fonterra for each kilogram of Means kilograms of milk solids, the measure of the milk solids (kgMS) supplied by Fonterra’s farmer shareholders amount of fat and protein in the milk supplied to Fonterra under Fonterra’s standard terms of supply. The season refers to th
Slide 16: 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
Slide 17: Non-GAAP measures
Fonterra uses several non-GAAP measures when discussing financial performance. Non-GAAP measures are not defined or specified by NZ IFRS. Management believes that these measures provide useful information as they provide valuable insight on the underlying performance of the business. They may be use
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