Fonterra Co-operative Group Limited · NZX:FCG
Fonterra Co-operative — Corporate Update (May 2018)
16 slides from Fonterra Co-operative's corporate update, May 2018
Slide 1: Business Update
MAY 2018 Business Update OUR CO-OPERATIVE OUR POTENTIAL OUR PERFORMANCE
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
Slide 3: Higher forecast pay-out for farmers
Higher forecast pay-out for farmers Improved Farmgate Milk Price, lower forecast dividend range Indicative 8.50 payout for 7.90 budgeting¹ 0.10 6.90-6.95 6.37 0.30 6.40 6.16 6.52 Range 5.20 0.27 0.32 0.40 0.32 4.65 0.15 4.30 to 0.48 0.20 0.25 0.40 4.72 6.10 7.60 6.08 5.84 8.40 4.40 3.90 6.12 6.75 7.
Slide 4: Strong late season collections
Strong late season collections But lower overall volumes this season 100 90 80 • Season forecast increased Volume (m litres/day) 70 to 1,500 million kgMS, from 1,480 million kgMS 60 50 • Driven by favourable late season conditions 40 • Full season forecast down 30 Season Total Milk Solids (kgMS) Pea
Slide 5: Strong dairy demand continues
Strong dairy demand continues Supply EU Russia China Demand 12 months +3% EU’s largest dairy 12 months +17% production export market – trade imports US Last 3 months +3% embargo remains Last 3 months (Jan, Feb, March) (Jan, Feb, March) +15% 12 months production +2% Asia (excl China) Middle East & Af
Slide 6: Strength in commodity prices supports a higher milk price
Strength in commodity prices supports a higher milk price Continued margin pressure from higher prices, particularly for fat products Whole Milk Powder Butter 6,000 8,000 9M 2018 5,000 9M 2017 9M 2018 9M 2017 Avg price $5,359 6,000 Avg price $3,026 Avg price $3,067 Avg price $4,203 4,000 4,000 3,000
Slide 7: Continued focus on Volume to higher Value
Continued focus on Volume to higher Value Growth in Q3 but revised full year target for additional LME 1 DIRA • Volumes down 5% to 16.0b Optimise Consumer LME comparable year-to-date NZ milk 2 Build and grow GDT • Ingredients beyond our current consumer positions – Lower collections and Foodservice
Slide 8: FY18 nine-month performance summary
FY18 nine-month performance summary Strong commodity prices continue to put pressure on margins 1 VOLUME (LME) REVENUE GROSS MARGIN OPEX CAPEX 16.0B $14.8B 16% $1.9B $584M 5% 7% FROM 18% 2% 35% Ingredients Consumer & Foodservice China Farms Volume 14.8B Volume 4.0B Volume2 0.2B DOWN 5% UP 4% Gross M
Slide 9: Ingredients
Ingredients Strengthening commodity prices tightened margins in Q3 Volume (B LME)¹ Volume 15.9 (5%) • Q3 volumes up 9% on last year 15.0 • Year-to-date volumes down 5% compared to last year due to: – Lower opening inventory and collections – Product mix Value 9M FY17 9M FY18 • Year-to-date margins i
Slide 10: Consumer & Foodservice
Consumer & Foodservice High input costs for fats continue to put pressure on volumes and margins Volume (B LME) Volume • Volume growth in three regions (up 3%) but down in Oceania 0% 4.0 4.0 (8%). Oceania impacted by NZ performance challenges • Continued growth in Greater China, Q3 volumes up 12% bu
Slide 11: Consumer and Foodservice
Consumer and Foodservice Continued growth in Greater China, Asia and LATAM Asia Greater China Volume Gross Margin Volume Gross Margin 2% 6% 884 936 1,284 1,306 24% 22% FROM 29% FROM 32% 9M FY17 9M FY18 9M FY17 9M FY18 Oceania Latin America Volume Gross Margin Volume Gross Margin (8%) 1,318 2% 1,219
Slide 12: Beingmate update
Beingmate update Progress but challenges continue • CEO appointment progressing • Q1 result announced: – A small profit, including a one-off government grant – Lower sales, partly due to market-wide clearing of unregistered products as new regulations apply 1 Strategic rationale continues 2 Way forw
Slide 13: Financial strength and discipline
Financial strength and discipline Solid credit rating reflects strong fundamentals Financial discipline continued A Fitch • Strong cash flow and liquidity (stable outlook) Credit Rating A- • Full year capex forecast range of $800 - 850M S&P (stable outlook) • Year-end gearing likely to be above 40-4
Slide 14: Summary and outlook for balance of 2018
Summary and outlook for balance of 2018 Farmgate Milk Price to rise to $6.75 per kgMS • Strong dairy demand continues Operating performance impacted by higher commodity prices • Ingredients’ lower margins in the third quarter are expected to continue due to pricing lags and lower price achievement •
Slide 15: Glossary
Glossary Acronyms and Definitions AMF Fluid and Fresh Dairy Regulated Return Anhydrous Milk Fat The Fonterra grouping of skim milk, whole milk and The earnings component of Milk Price generated cream – pasteurised or UHT processed, from a WACC return on an assumed asset base BMP concentrated milk pr
Slide 16: 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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