Fonterra Co-operative Group Limited · NZX:FCG
Fonterra Co-operative — Fonterra — Q3 2023 Earnings Presentation
34 slides from Fonterra Co-operative's earnings presentation, May 25, 2023
Slide 1: Fonterra Third Quarter Business Update
Fonterra Third Quarter Business Update
Slide 2: Third quarter highlights and forecasts
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 2 • Current season forecast Farmgate Milk Price range narrowed and reduced to $8.10 - $8.30 per kgMS • Profit after tax is $1,326 million, up $854 million – excluding the net gain from divestments of $248 million, normalised profit after tax is $1,078 mi
Slide 3: Divestment, capital return and farmer updates
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 3 • The divestment of Soprole is complete. We • Transitional buyback of shares to continue • Meetings are underway with farmers on are bringing forward our proposed capital until 9 June 2023 to support liquidity during what an emissions target will look
Slide 4: Key financial metrics versus prior year
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 4 © FONTERRA from $472m from (1,455)m from 28c from 28c from 1,408m from 5.7%
Slide 5: GlobalDairyTrade product shipment prices
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 5 6,000 4,000 US$/MT FY22 YTD Q3 FY23 YTD Q3 2,000 2017 2018 2019 2020 2021 2022 2023 Reference product shipment price3,4 Non-reference (cheese) product shipment price 3,5 Source: GlobalDairyTrade. Data is up to GlobalDairyTrade event 330 on 18 April 202
Slide 6: Group financial results
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 6 ∆ Sales volume (‘000 MT) 2,946 3,000 2% Revenue ($) 16,982 19,737 16% Cost of goods sold ($) (14,547) (16,147) (11)% • Higher sales volumes reflect sell down of additional FY22 Gross profit ($) 2,435 3,590 year-end inventory 47% • Increased sales volum
Slide 7: EBIT contribution by channel
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 7 (‘000 MT) (before unallocated costs & eliminations) Note: Prepared on a continuing operations basis. EBIT contributions in the above table sum to $1,715 million, and do not align to reported continuing operations of
Slide 8: Quarterly EBIT contribution by channel
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 8 (‘000 MT) 598 530 (before unallocated costs & eliminations) 288 313 238 258 129 120 131 28 57 42 23 46 37 46 9 33 71 (46) (127) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Note: Prepared on a continuing operations basis. EBIT contributions in the
Slide 9: Farmgate Milk Price forecast range narrowed and reduced
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 9 2020/21 2021/22 2022/23 Season Season Season Forecast 5,000 per kgMS 4,000 USD/MT $9.30 $8.20 The range has narrowed and reduced, reflecting: 3,000 $7.54 • 95% of milk contracted for the season increasing certainty 2,000 • GDT prices have not recovered
Slide 10: Normalised earnings per share forecast range
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 10 FY22 YTD Q3 FY22 Q4 FY23 YTD Q3 FY23 Q4 6,000 5,000 per share USD/MT 4,000 The increased earnings range reflects: 3,000 ma • ongoing strong margins in protein and cheese portfolio 2,000 Jul-21 Jan-22 Jul-22 Jan-23 Jul-23 • recent margin improvement co
Slide 11: Opening 2023/24 Farmgate Milk Price forecast
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 11 • Midpoint of $8.00 per kgMS reflects: – an expectation demand for whole milk powder, particularly from China, will lift over the medium-term – in the near-term, China’s import demand has been impacted by its in-market whole milk powder levels, which
Slide 12: Footnotes
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 12 1. Includes a $260 million gain on sale of Soprole, and $(12) million in relation to exiting our Hangu China farm 2. Normalisations are comprised of a $260 million gain on sale of Soprole, and $(12) million in relation to exiting our Hangu China farm
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Slide 14: Five-year financial trends
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 14 3,169 3,087 3,053 3,590 2,946 3,000 17.0 19.7 14.9 16.0 15.5 2,229 2,472 2,499 2,435 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 ('000 MT) ($ billion) ($ million) 1,813 2,004 1,989 1,665 1,590 1,632 514 1,644 378 815 959
Slide 15: New Zealand milk collections
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 15 • Fonterra’s New Zealand milk collections for the period 1 June to 30 April was 1,405 90 million kgMS, down 0.2% on last season 80 2020/21 • Challenging wet weather conditions 2021/22 throughout the North Island, combined with a 70 2022/23 reduction i
Slide 16: Continuing operations and normalised EBIT
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 16 ¹ ¹ ¹ ¹ Revenue 15,876 1,106 16,982 18,430 1,307 19,737 Cost of goods sold (13,773) (774) (14,547) (15,207) (940) (16,147) Gross profit 2,103 332 2,435 3,223 367 3,590 Gross margin 13.2% 30.0% 14.3% 17.5% 28.1% 18.2% Operating expenses (1,398) (234) (
Slide 17: Normalisations: gain on sale
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 17 Gain/(loss) on sale 357 (12) 345 EBIT 357 (12) 345 Net finance costs and tax (97) - (97) Profit after tax 260 (12) 248 Profit attributable to non-controlling interests - - - Profit after tax attributable to equity holders of 260 (12) 248 the Co-operat
Slide 18: Ingredients gross profit and EBIT
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 18 $ million 2022 2023 2,095 1,441 1,173 655 297 555 127 545 601 37 (23) 382 Gross Profit EBIT Gross Profit EBIT Gross Profit EBIT Note: Does not add to Total Group as shown on a normalised continuing operations basis and excludes unallocated costs and e
Slide 19: Ingredients channel results
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 19 ∆¹ • Higher sales volumes reflect the sell down of additional inventory held at 2022 financial year-end Sales volume² (‘000 MT) 1,610 1,696 5% • Gross profit improved $922 million due to continuing favourable Revenue ($) 11,146 13,067 17% margins in o
Slide 20: Greater China Ingredients results
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 20 ∆¹ • Higher sales volumes reflect increased demand relative to prior period as lockdown restrictions eased, particularly in Greater China Sales volume² (‘000 MT) 395 411 4% • Gross profit increased $173 million mainly due to: Revenue ($) 2,456 2,900 1
Slide 21: Asia Pacific Ingredients results
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 21 ∆¹ • Lower sales volumes driven by Sri Lanka, as sales volume was limited while ability to access US dollars was constrained Sales volume² (‘000 MT) 486 473 (3)% • Gross profit improved $56 million due to non-reference price Revenue ($) 2,274 2,468 9%
Slide 22: Reference and non-reference products
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 22 • The average product price per metric tonne increased: – 4% for reference products ¹ – 25% for non-reference products Reference products 1,243 1,314 • Cost of milk increased by 11% for reference Non-reference products 642 656 products and decreased b
Slide 23: Foodservice and Consumer gross profit and EBIT
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 23 $ million 2022 2023 1,336 1,383 1,111 826 517 548 491 547 127 388 341 304 Gross Profit EBIT Gross Profit EBIT Gross Profit EBIT Note: Does not add to Total Group as shown on a normalised continuing operations basis and excludes unallocated costs and e
Slide 24: Ingredients results continued
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 24 ∆¹ • Higher sales volumes reflect the sell down of additional inventory held at 2022 financial year-end Sales volume² (‘000 MT) 1,969 2,058 5% • Gross profit up $819 million reflecting strong prices in our non- Revenue ($) 12,483 14,423 16% reference
Slide 25: Foodservice gross profit and EBIT
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 25 $ million 2022 2023 1,203 788 521 205 (18) 77 (66) 22 14 56 (12) 16 Gross Profit EBIT Gross Profit EBIT Gross Profit EBIT Note: Does not add to Total Group as shown on a normalised continuing operations basis and excludes unallocated costs and elimina
Slide 26: Foodservice channel results
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 26 ∆¹ • Higher sales volumes, which includes the sell down of additional inventory held at 2022 financial year-end Sales volume² (‘000 MT) 1,714 1,909 11% • Gross profit up $272 million, mainly due to higher sales volumes and Revenue ($) 10,757 13,976 30
Slide 27: Consumer gross profit and EBIT
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 27 $ million 2022 2023 739 512 521 147 171 326 19 46 452 473 43 (19) Gross Profit EBIT Gross Profit EBIT Gross Profit EBIT Note: Does not add to Total Group as shown on a normalised continuing operations basis and excludes unallocated costs and eliminati
Slide 28: Consumer channel results
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 28 • Lower sales volumes, particularly WMP, due to softer demand ∆¹ • Gross profit increased $56 million, mainly driven by improved Sales volume² (‘000 MT) 808 714 (12)% performance in the Foodservice channel, reflecting: Revenue ($) 5,173 5,274 2% – in-
Slide 29: Greater China gross profit and EBIT
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 29 $ million 2022 2023 255 309 229 154 165 132 174 124 82 73 6 (20) Gross Profit EBIT Gross Profit EBIT Gross Profit EBIT Note: Does not add to Total Group as shown on a normalised continuing operations basis and excludes unallocated costs and eliminatio
Slide 30: Key metrics and scorecard
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 30 Key Metrics FY21 FY22 FY23 Scorecard FY23 Q3 YTD Providing a safe, healthy and inclusive place to work. Able to attract and retain the best talent in the world. Continuously developing people’s skills for meaningful careers within Serious harm 9 8 5 4
Slide 31: Glossary
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 31 Represents ingredients & solutions sold to businesses who cater to Is profit before net finance costs and tax consumers’ health and wellness needs. It addresses three dimensions of wellbeing (Physical, Mental, Inner), extending to meet the nutrition n
Slide 32: Glossary continued
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 32 Represents the Ingredients, Foodservice and Consumer channels outside of Is calculated as normalised profit after tax attributed to equity holders of the Greater China Co-operative divided by the weighted average number of shares on issue for the peri
Slide 33: Forward-looking statements
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 33 This presentation may contain forward-looking statements, financial targets and ambitions (“Forward Statements”), each of which is based on a range of assumptions, including (in the case of our 2030 strategy) the assumptions noted in the Appendix of t
Slide 34: Non-GAAP measures
© FONTERRA THIRD QUARTER BUSINESS UPDATE 2023 34 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 underl