Fonterra Co-operative Group Limited · NZX:FCG
Fonterra Co-operative — FY2010 Earnings Presentation
21 slides from Fonterra Co-operative's earnings presentation, Sep 23, 2010
Slide 1: 2010 Annual Result Media and Analyst Briefing
2010 Annual Result Media and Analyst Briefing 23 September 2010
Slide 2: Result highlights
Result highlights • Second highest payout (before retentions) of $6.70, up 29% on 2009 • Payout (before retentions) comprises: – Milk Price – $6.10 per kgMS ($4.72 in 2009) – Distributable Profit – 60 cents per share • 27 cps of Annual Dividend (19 cps to be paid on 20 October) • 33 cps of Retention
Slide 3: Good result in challenging conditions
Good result in challenging conditions 7.90 $8.00 0.31 $7.00 6.70 0.601 $6.00 5.21 $5.00 0.49 4.46 Distributable Profit 4.10 2 $4.00 0.59 Milk Price 0.25 7.59 $3.00 6.10 4.72 $2.00 3.85 3.87 $1.00 $0.00 2006 2007 2008 2009 2010 1. Following the capital structure changes approved by shareholders Distr
Slide 4: Record milk collected, up 0.4%
Record milk collected, up 0.4% Upper North Island : 7% Central North Island : 4% Milk Collected Litres 14.7bn New Zealand (1,286m kgMS) Global 6.6bn Lower North Island : 4% Total 21.3bn Upper South Island : 4% Central South Island : 12% Lower South Island : 9% Page 4
Slide 5: 2010 financial result snapshot
2010 financial result snapshot 2009 $m Movement Movement 2010 $m (restated1) $m % Revenue 16,726 16,035 691 4% Cost of Milk2 (7,664) (5,793) (1,871) (32%) Other purchases/inventory (6,311) (7,424) 1,113 15% movement/supplier premiums Operating expenses (1,999) (2,036) (37) (2%) Other operating incom
Slide 6: Normalised EBIT
Normalised EBIT 2010 $m 2009 $m Reported EBIT1 1,078 990 Non-recurring items (174) (32) Impairment of equity accounted investees – 61 Normalised EBIT 904 1,019 Page 6 1. Reported EBIT includes non-recurring items and impairment of equity accounted investees.
Slide 7: Revenue and normalised EBIT by business segments
Revenue and normalised EBIT by business segments Segment Revenue Normalised EBIT1 ($m) ($m) Commodities 11,225 339 & Ingredients 10,504 548 2010 2009 Consumer 5,501 565 businesses (combined) 5,531 474 Page 7 1. After excluding non-recurring item and impairment of equity accounted investees. 2009 doe
Slide 8: Strong normalised EBIT growth for consumer businesses
Strong normalised EBIT1 growth for consumer businesses Normalised EBIT $m 600 CAGR 565 19% 500 474 392 400 332 300 200 100 0 2 2007 2008 2009 2010 1. Combined ANZ/AME/Latam segment Normalised EBIT (adjusted for non-recurring items and impairment of equity accounted investees). Page 8 2. 12 month per
Slide 9: Fonterra Australia & New Zealand
Fonterra Australia & New Zealand Normalised EBIT ($m) • 17% increase in normalised EBIT over last year • Market share growth across all major categories 290 • Strategy of leadership in priority categories starting to deliver step change results (e.g. yoghurt 248 acquisition in Australia and divestme
Slide 10: Fonterra Asia/AME
Fonterra Asia/AME Normalised EBIT ($m) • Normalised EBIT up 31% over previous period, up 48% on a local currency basis • Strong revenue growth in nutritional segments driven by marketing 157 120 campaigns and innovation • Operating gross margin improved by 8 percentage points over last year 2009 201
Slide 11: Fonterra Latam
Fonterra Latam Normalised EBIT ($m) • Normalised EBIT up 11% on previous period • Soprole in Chile (the largest investment included under Latam) has 118 a strong year despite the impact of 106 the Chilean earthquake • Earnings in the Dairy Partners Americas JV was impacted by macro factors such as t
Slide 12: Commodities & Ingredients
Commodities & Ingredients Normalised EBIT ($m) • EBIT impacted by the following key drivers: (1) Market volatility meant that prices for some non-powder products, such as cheese and casein, lagged international powder prices 548 (2) Average pricing on some contracts with customers lagged increases i
Slide 13: Non powder prices lagged powder price increases
Non powder prices lagged powder price increases Milk Price Fonterra’s YOY Price Basket of Products Actual Production Movement 8% AMF & BMP Other: Cheese, 10% Butter 26% Casein, Liquid Milk, MPC, Whey etc. Skim Milk AMF & BMP 24% 8% Powder 13% Cream (includes Butter) 17% Skim Milk Powder Whole Milk 5
Slide 14: Strategies to improve flexibility and agility of Fonterra
Strategies to improve flexibility and agility of Fonterra Increased Volatility of Dairy Prices • FY08: globalDairyTrade launched gDT • FY09: Commodity Risk Management launched team established • FY09: Streamlining of supply chain and manufacturing processes begins • FY10: ED4 commences production (i
Slide 15: Gearing is lowest in our history
Gearing1 is lowest in our history The improvement in the gearing ratio is 57.6% due to: • Increase cash receipts through issue of new Co-operative shares 53.0% 52.4% 52.1% • Sale of certain non-strategic assets and restriction of non-essential capital expenditure • Change in capital structure approv
Slide 16: Reduced debt contributed to lower interest costs
Reduced debt contributed to lower interest costs Net Debt ($bn) Net Interest ($m) 5.9 5.2 4.3 4.5 Non current 4.1 Current 448 3.9 (less cash) 318 313 1.4 1.1 0.4 2008 2009 2010 2008 1 2009 2010 Page 16 1. 12 month period (unaudited, sourced from management information).
Slide 17: Currency Hedging
Currency Hedging • Hedging resulted in a 2010 Fonterra Average Conversion Rate (FACR) of US66.7 cents (2009: US66.5 cents) • Average spot USD rate was US70.8 cents for 2010 NZD/USD Spot Price against Fonterra Average Conversion Rate (FACR) 31 May 2007 to 31 July 2010 Page 17
Slide 18: Cash Flow analysis – 2010 against 2009
Cash Flow analysis – 2010 against 2009 Cash Flow ($m) 1,479 (354) (1,154) 542 21 534 Page 18
Slide 19: Strategic priorities for the coming year
Strategic priorities for the coming year • Enhance flexibility and agility in Trade and Operations by continuing to : – expand globalDairyTrade – improve supply chain and manufacturing systems Deliver – invest in technology to improve production flexibility Sustainable – enhance commodity risk manag
Slide 20: Strategic priorities for the coming year (cont)
Strategic priorities for the coming year (cont) • Rapidly expand Global Ingredients and Foodservices by continuing to: Grow Lasting – leverage Fonterra’s technology in overseas markets to Customer build value added ingredients businesses Partnerships – develop customer partnerships for innovative in
Slide 21: Outlook
Outlook • Forecast total payout (before retentions) for 2010/11 season firmed up to $7.00-7.10 – Unchanged forecast for Milk Price of $6.60 – Distributable Profit range narrowed to 40-50 cents per share from earlier guidance of 30-50 cents per share • Board is targeting a dividend range for 2011 of
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