Fonterra Co-operative Group Limited · NZX:FCG
Fonterra Co-operative — Shareholder Meeting (November 2019)
39 slides from Fonterra Co-operative's shareholder meeting presentation, Nov 11, 2019
Slide 1: Annual Meeting 11 November 2019
ANNUAL MEETING 11 NOVEMBER 2019
Slide 2: Chairman, FSF Management Company
Chairman FSF Management Company
Slide 3: Meeting speakers and order
John Shewan John Shewan John Monaghan, Miles Hurrell John Shewan Kim Ellis John Shewan 2
Slide 4: Fund result summary: disappointing result, no distribution
• Disappointing and unsatisfactory result • Significant decline in unit price • No distribution • Fonterra progressing its business reset • The role of the board of the Manager of the Fund 3
Slide 5: Unit price performance
$5.50 Quarter • FY19 balance date One Interim $5.00 Down 26%, from $5.12 to $3.77 Quarter Full Three Year (1 August 2018 – 31 July 2019) $4.50 Balance Date $4.00 • Release of FY19 results Down 32%, from $5.12 to $3.50 $3.50 (1 August 2018 – 26 September 2019) $3.00 • As at 25 October $2.50 Down 19%,
Slide 6: Units on issue and market capitalisation
Units on Issue¹: 0.6m Fund Market Capitalisation¹: 70m Fonterra Market Capitalisation¹: 1.7b Fund Size¹,²: 0.04% Unit Price 12-month High/Low³: (26 Oct 18) / (28 Aug 19) 1. At 25 October 2019, relative to 25 October 2018. 2. Fonterra Shareholders’ Fund units on issue as a percentage of Fonterra Co-o
Slide 7: Register composition by investor type and country
• Reduction in institution and private wealth holdings picked up by retail investors and farmer shareholders • Majority of register held in New Zealand, with further reduction in offshore holdings 2019 2018 2019 2018 66% 83% Retail New Zealand 52% 72% 15% Institution 12% 25% Australia 18% Farmer 12%
Slide 8: Normalised EBIT and FY20 and FY21 targets
(Normalised) ¹ ¹ EBIT $819m $950m $1,100m NPAT² $269m $650m $800m Capital Expenditure $600m $500m $500m Free Cash Flow³ $699m $900m $1,050m Debt/EBITDA 4.3x 2.5-3.5x 2.5-3.5x Return on Capital 5.8% 8.5% 10% Earnings per Share 17c 40c 50c 1. There can be no certainty of outcome in relation to the mat
Slide 9: Chairman, Fonterra Co-operative Group
Chairman Fonterra Co-operative Group
Slide 10: Significant challenge
signi ficant challenge
Slide 11: Our Purpose guides everything we do
Our Purpose guides everything we do T_ re a _ oOvR PURPOSE
Slide 12: Strengths and challenges
OUR PEOPLE INCREASING COMPETITION INNOVATION, RESEARCH & DEVELOPMENT CONSTRAINED CAPITAL SCALE & EFFICIENCY LARGE ASSET BASE PASTURE BASED FARMING MODEL HIGH DEBT LEVEL LOW GREEN HOUSE GAS EMISSIONS LACK OF TRUST & CONFIDENCE GLOBAL SUPPLY CHAIN BIG PART OF NEW ZEALAND PRODUCT & MARKET OPTIONALITY E
Slide 13: Debt, capex and gearing reduction targets
Reduce debt by $800 million Reduce capex by $200 million Gearing within 40-45% range $160 million decrease in by year-end operating expense by FY20 Down 0.2% 12
Slide 14: Business review timeline and divestments
May 2019 September 2018 • Sale of Tip Top July 2018 • Portfolio Review November 2018 • Decision to close Dennington site in Australia • John becomes Chair • 3 point plan • Board announces full review of strategy • Strategic review of China Farms investment • Review options of DPA Brazil JV September
Slide 15: Sustainable value strategy
wié) alt “eo i ” i SUSTAINABLE VALUE CORE // on //pasoiarnics\ SPORTS. MEDICAL DAIRY SERVICE & ACTIVE & AGEING ‘ * Innovation Sustainability Efficiency 14
Slide 16: Consumer nutrition products
inspired by breast milk High protein 33% of an adult’s daily calcium needs in Kiwi kids’ diets healthy drinks and snacks 15
Slide 17: Global milk production and consumption
Russia Europe (ex. Russia) China US India Rest of Asia Middle East and Africa Production (LMEs bn) 2018¹ South America2 New Consumption (LMEs bn) 2018¹ Australia Zealand 1. Volumes represented by the relative size of the circles displayed. 2. Includes all 12 South American countries including Brazil
Slide 18: Board priorities for 2020
Deliver on Milk Price Board priorities for 2020 Implement Our strategy Improved earnings Capital Structure 17
Slide 19: Chief Executive Officer, Fonterra Co-operative Group
Chief Executive Officer Fonterra Co-operative Group
Slide 20: FY19 milk price, dividend, net loss and return on capital
FARMGATE DIVIDEND MILK PRICE Cents per per kgMS share From $6.69 From 10 cps NET LOSS RETURN AFTER TAX ON CAPITAL million per cent From $196m From 6.3% 19
Slide 21: Normalised NPAT to net loss bridge
DPA Brazil China Farms Venezuela FY18 FY18 FY19 FY19 Normalised 5 cent Milk Lower Operating Normalised Fonterra NZ NPAT Price Change Earnings After NPAT Australia Tax Ingredients Beingmate Other FY19 FY19 Impairments Net Loss Net Loss FY19 and One-off After Tax Attributable to Reported Net Items Non
Slide 22: Revenue, gross margin, operating expenses, EBIT
REVENUE GROSS OPERATING EBIT DIVIDEND MARGIN EXPENSES billion million million million cps From $20.4 bn From $3,152m From $2,496m From $902m From 10 cps 21
Slide 23: Net debt drivers FY18 to FY20
Key drivers • Lower capex • Divestment of Tip Top • No dividend Key drivers Offset by • Improved earnings • Lower earnings • DFE Pharma • Lower capex • foodspring™ • Other divestments FY18 Year-End Change in FY19 FY19 Year-End Announced FY20 Change in FY20 Year-End Divestments¹ FY20 (Forecast) (Fore
Slide 24: Our Strategy
Our * 8 Strategy Sal alt “eo ‘ei SUSTAINABLE VALUE CORE FOOD //pasoiatics \ SPORTS. MEDICAL DAIRY SERVICE & ACTIVE & AGEING Innovation Efficiency 23
Slide 25: 24
24
Slide 26: Great food from great business
V) FINDING" PERFC IN YO BUS =o —a é GREAT FOOD F GREAT B FUTURE CONSUMER ~~ Dairy for life
Slide 27: Forecast milk price, collection and earnings per share
Forecast Forecast Farmgate Milk Collection Milk Price million kgMS per kgMS Forecast Earnings per Share cents 26
Slide 28: Our four priorities for 2020
Our four priorities for 2020 Hit our financial targets Support regional New Zealand Improve our environmental footprint 27
Slide 29: Confidential to Fonterra Co-operative Group
Confidential to Fonterra Co-operative Group 28
Slide 30: Questions
Questions
Slide 31: Re-election of Kim Ellis
RE –ELECTION OF KIM ELLIS
Slide 32: Resolution to re-elect Kim Ellis
• To re-elect Kim Ellis, who retires by rotation and stands for re-election, as a director of the Manager of the Fund. 31
Slide 33: Proxy votes: for, against, discretionary
FOR AGAINST DISCRETIONARY As at 10am Saturday 9 November 2019 32
Slide 34: Director, FSF Management Company
Director FSF Management Company
Slide 35: Resolution to re-elect Kim Ellis
• To re-elect Kim Ellis, who retires by rotation and stands for re-election, as a director of the Manager of the Fund. 34
Slide 36: Voting instructions
• In respect of the resolution, please tick the “for”, “against” or “abstain” box. • Once you have completed your voting, please place your vote in a ballot box. • Please raise your hand if you require a pen. • Results will be announced to the NZX and ASX as soon as they are available. 35
Slide 37: Annual Meeting 11 November 2019
ANNUAL MEETING 11 NOVEMBER 2019
Slide 38: General business
General business
Slide 39: Thank you, meeting closed
Thank you, meeting closed i AOTER MARSK
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