Fonterra Co-operative Group Limited · NZX:FCG
Fonterra Co-operative — CLSA Asia Conference 2011
23 slides from Fonterra Co-operative's conference presentation, September 2011
Slide 1: Strategic Update
Strategic Update September 2011 Fonterra Co-operative Group Ltd CLSA ASIA Conference
Slide 2: Introducing Fonterra
Introducing Fonterra Revenue - 2010 Sales by Geography Europe 6% • Fonterra is the world’s largest Rest of the World 27% China 9% Consumer processor of milk in the world 33% • Leader in consumer branded dairy foods in Australia, New USA 8% Asia 29% Zealand, Chile and selected Standard & NZ 8% Asian
Slide 3: World's largest exporter of whole milk powder (WMP)
World’s largest exporter of whole milk powder (WMP) Page 3 Confidential to Fonterra Confidential to Fonterra Co-operative Group
Slide 4: Worldwide locations
Worldwide locations Joint venture to produce whey proteins for Fonterra JV with Royal Friesland Partnership with DFA in manufacturing Campina for the supply of assets within North America (9 pharmaceutical lactose manufacturing sites & approx.1 billion litres of milk) Dairy America – valued relation
Slide 5: Market leading businesses
Market leading businesses Standard & Premium Ingredients ANZ Asia/AME Latam Standard dairy ingredients Leading consumer dairy Leading market positions in Leading integrated dairy (e.g. milk powders, cheese, food brands in Australia adult nutrition and other business in Chile (Soprole). butter) and N
Slide 6: Sales & underlying EBIT by business segment
Sales & underlying EBIT by business segment Segment Revenue ($m) Underlying EBIT ($m) STANDARD & 12,757 316 PREMIUM INGREDIENTS 12,006 548 3,803 299 ANZ 3,818 248 1,537 166 ASIA/AME 1,705 120 738 119 LATAM 798 106 FY10 FY09 Page 6 Confidential to Fonterra Co-operative Group
Slide 7: Fonterra's growth model
Fonterra’s growth model Customer Centric Processing of NZ Breadth and scale advantages Milk to dairy Mature Emerging ingredients Markets Markets Accelerate growth in emerging markets Flexibility and growth options GlobalDairy Trade Page 7 Confidential to Fonterra Co-operative Group
Slide 8: Snapshot of global milk production and consumption
Snapshot of global milk production and consumption 88 88 74 76 149 135 135 135 Rest of Europe USA/Canada 29 32 32 43 China 48 58 EU 27 Middle East & India Rest of Asia North Africa 70 73 18 21 Rest of Africa Latin America 29 7 ANZ Milk Production 2009 (million MT) Milk Consumption 2009 (million MT)
Slide 9: Emerging markets key driver of export demand
Emerging markets key driver of export demand Net Trade in Dairy, 2010 14.6 3.4 17.8 12.1 Russia 4.1 0.7 3.4 0.6 Canada 2.2 Other Europe 0.9 Japan China USA 0.1 India South Korea 2.5 3.2 8.5 0.4 EU27 Mexico Other Middle East Brazil North Africa Africa 1.4 1.0 2.8 1.8 Uruguay Other Other Asia New Zeal
Slide 10: Emerging markets demand expected to grow over next decade
Emerging markets demand expected to grow over next decade +13 +11 USA/Canada +10 -0.4 Rest of Europe +5.8 +6.3 +35 +36 EU 27 +42 +45 China +8.5 +13 +12 +19 Middle East & Rest of Asia North Africa India +5.6 +8.0 +16 +18 Rest of Africa Latin America +5.8 +1.5 ANZ Milk Production Growth to 2019 (milli
Slide 11: Becoming the natural source of premium ingredients for global food companies
Becoming the natural source of premium ingredients for global food companies Cultured foods Beverages Bars and snack foods Medical beverages Paediatric nutrition Ingredients for cheese Cheese for meals Organics Page 11 Confidential to Fonterra Co-operative Group
Slide 12: Well balanced portfolio of brands and emerging/mature market exposure
Well balanced portfolio of brands and emerging/mature market exposure Page 12 Confidential to Fonterra Co-operative Group
Slide 13: Consumer operations have strong track record
Consumer operations have strong track record Normalised EBIT $m 700 CAGR 19% 600 584 500 474 392 400 332 300 200 100 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). 2. 12 month period (unaudite
Slide 14: Capital Structure Evolution
Capital Structure Evolution • At a special meeting in June 2010, shareholders voted in favour to changes to the Co- operative’s constitution that allow steps to be taken to implement Trading Among Farmers • Under Trading Among Farmers, farmers will be able to buy and sell shares from one another rat
Slide 15: Summary
Summary • Breadth and scale advantages – investing to achieve unmatched efficiencies – largest and most efficient milk powder plants in the world – streamlining our global supply chain • Accelerate growth in emerging markets – milk consumption expected to outstrip local production in emerging market
Slide 16: Supplementary Information
Supplementary Information Page 16 Confidential to Fonterra Co-operative Group
Slide 17: FY10 financial result snapshot
FY10 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 18: FY10 Normalised EBIT
FY10 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 1. Reported EBIT includes non-recurring items and impairment of equity accounted investees. Page 18 Confidential to Fonterra Co-operati
Slide 19: 27 sites around New Zealand
27 sites around New Zealand • Annual milk volume of: – 15 billion litres • Over 70 million litres of milk per day at peak: • 2.4 million tonnes of product made per year in New Zealand • New greenfields site in the South Island under construction Page 19 Confidential to Fonterra Co-operative Group
Slide 20: GlobalDairyTrade trade weighted index
GlobalDairyTrade trade weighted index 1,750 Price Index (March 2010 = 1000) 1,500 1,250 1,000 750 500 250 GDT-TWI™ Real GDT-TWI™ 10 Year Average Real GDT-TWI Sources: GlobalDairyTrade, Global Trade Atlas, USDA DMN, USDL BLS Page 20 Confidential to Fonterra Co-operative Group
Slide 21: GDT TWI compared to other commodities
GDT TWI compared to other commodities Page 21 Confidential to Fonterra Co-operative Group
Slide 22: Milk Price Calculation
Milk Price Calculation • Sample of Fonterra’s actual sales prices of Reference Commodity Products scaled up to reflect milk price volumes for period (moving to increasing/sole reliance on globalDairyTrade) REVENUE • Key inputs include product streams and sales phasing • Operating costs calculated as
Slide 23: Gearing has improved substantially
Gearing has improved substantially 60% 59.6% • 48.5% at 31 Jan 11 vs 54.3% at 57.6% 31 Jan 10 • Half year comparison more relevant than full year because 55% 54.3% of seasonality factors 53.0% KEY DRIVERS 50% 48.5% • Share issues 44.9% • Dividend Policy 45% • Interim profit recorded 40% Jul-08 Jan-0
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