SUSTAINABLE
VALUE
GENERATION
JUNE 2015, EUROPE AND US
THEO SPIERINGS (CEO)
LUKAS PARAVICINI (CFO)
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Forward Looking Statements
This presentation contains forward looking statements, and forecasts, including statements of current intention, statements of opinion
and predictions as to possible future events. Such statements are not statements of fact and there can be no certainty of outcome in
relation to the matters to which the statements relate. These forward looking statements involve known and unknown risks,
uncertainties, assumptions and other important factors that could cause the actual outcomes to be materially different from the events
or results expressed or implied by such statements. Those risks, uncertainties, assumptions and other important factors are not all
within the control of the Fonterra Group and cannot be predicted by the Fonterra Group and include changes in circumstances or
events that may cause objectives to change as well as risks, circumstances and events specific to the industry, countries and markets
in which the Fonterra Group operates. They also include general economic conditions, exchange rates, interest rates, regulatory
environments, competitive pressures, selling price, market demand and conditions in the financial markets which may cause objectives
to change or may cause outcomes not to be realised.
None of Fonterra Co-operative Group Limited or any of its respective subsidiaries, affiliates and associated companies (or any of their
respective officers, employees or agents) (Relevant Persons) makes any representation, assurance or guarantee as to the accuracy or
likelihood of fulfilment of any forward looking statement or forecast or any outcomes expressed or implied in any forward looking
statement or forecast. The forward looking statements and forecasts in this report reflect views held only at the date of this report.
Statements about past performance are not necessarily indicative of future performance.
Except as required by applicable law or any applicable Listing Rules, the Relevant Persons disclaim any obligation or undertaking to
publicly update any forward looking statements or forecasts, whether as a result of new information or future events.
No offer of securities
This presentation does not constitute investment advice, or an inducement or recommendation to acquire or dispose of any securities in
Fonterra or the Fonterra Shareholders’ Fund, in any jurisdiction.
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Fonterra at a glance Working to become the world’s most trusted source of dairy nutrition,
making a difference in the lives of two billion people by 2025
Farmer Shareholders
~10,500 in New Zealand
Unit Holders
~8,500 global investors
Milk volumes
~22 billion litres
- New Zealand
- China
- Australia
- Chile
NZ Farmgate Milk Price¹
2014 $8.40
2015F $4.40
2016F $5.25
Processing Capacity
96 million litres per day
by 2016
Global Reach
Exporting to more
than 100 countries
Sales Volume (000)
3,965 MT²
Global Partnerships
Nestlé
Beingmate
A-ware
Dairy Crest
FrieslandCampina
Abbott
Sales Revenue
$22 billion²
1. Per kgMS
2. 2014 financial year
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Global Ingredients and Operations
22
17 14
13 13 12 10 9
8 8
Fo
nte
rra
DF
A
La
cta
lis
Nestle
Arl
a F
oo
ds
Dea
n F
oo
ds
Fri
esla
nd
Cam
pin
a
Da
no
ne
Ca
lifo
rnia
Da
irie
s
Kra
ft F
oo
ds
Inta
ke
(m
illi
on
to
nn
es
)
17%
48%
15%
41%
To
tal M
ark
et S
ha
re
Wh
ole
milk p
ow
de
r
Skim
milk p
ow
de
r
Bu
tte
r
% g
lob
al e
xp
ort
s
1. Source: PM Food & Dairy Consulting, 2013.
2. Source: Fonterra, Global Trade Information Services. Note: Excludes intra-European trade, information for 2013/2014 season.
Scale and Leadership
The world’s largest milk processor¹ The world’s largest dairy exporter²
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Strong Foodservice and Consumer businesses
1. Asia comprises Fonterra’s consumer and foodservice businesses in Asia, Africa, the Middle East and Greater China.
2. 2014 financial year
Revenue² Volume²
Asia¹ $2.2b 419k MT
Oceania $3.6b 832k MT
Latin America $1.2b 387k MT
Asia
excluding
Greater
China
Greater China
Latin
America
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OVERVIEW OF
GLOBAL DAIRY
MARKET
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Challenging situation – key dairy markets
Source: Government milk production statistics / GTIS trade data / Fonterra analysis
New Zealand (supply)
• Production +11% in
2014
• Forecast for
2015/16: 0-2%
European Union (supply)
• 2014 production +4%
• 2015 forecast of +1%
• April 2015: Milk quota
removed
China (demand)
• Demand growing 4%
average per annum
• Largest buyer on GDT
• Local milk production
easing
US (supply)
• Production +2%
in 2014
• Forecast +1%
in 2015
Middle East & Africa
(demand)
• +11% in 2014 and strong
growth forecast in 2015 Australia (supply)
• Production +4% in 2014
• High local milk prices
Russia (demand)
• EU’s largest dairy
export market
• Trade bans remain
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Price volatility in dairy commodities
0
1
2
3
4
5
6
7
8
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
EU
& U
S S
tock
s (m
illion
ton
ne
s)
WM
P P
ric
e (
US
D/M
T)
Total EU & US Stocks Milk Equivalent WMP Price Average WMP Price
1990-2005
Volatility: +/- ~30%
2006-2015
Volatility: +/- ~60%
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Global trade in dairy – key dairy markets Net trade in 2014
Note: Trade expressed in terms of tonnes of Liquid Milk Equivalent (milk standardized to 4.2% fat and 3.5% protein)
0
5
10
15
20
25
New
Zeala
nd
EU
27
United S
tate
s
Bela
rus
Arg
entina
Austr
alia
Uru
guay
India
Ukra
ine
Sw
itzerl
and
Vie
tnam
Philip
pin
es
Venezuela
Indonesia
Saudi A
rabia
Alg
eri
a
Japan
Me
xic
o
Russia
Chin
a
Milk E
qu
ivale
nt
(millio
n t
on
nes)
Net Exporters Net Importers
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STRATEGIC UPDATE
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Drive performance
1. Liquid milk equivalent
2. % change is CAGR from FY14 to FY18
Deliver on Foodservice potential
Selectively invest in milk pools
Grow our Anlene™ business
Develop leading positions in
paed & maternal nutrition
Optimise NZ milk
1
Align our business and organisation
Build and grow beyond our current
consumer positions
3
2
4
5
6
7
To improve earnings & dividend
Turning the Wheel FY14 FY18
Consumer/Foodservice 17% 23%
Consumer/Foodservice
(LME)
3.9bn 5.9bn
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NEW ZEALAND
• Drive efficiency and optionality
GLOBAL BRANDS
• 5 global brands
• 8 key markets
• Foodservice potential
• Beingmate investment
MULTI-HUB STRATEGY
• Global partnerships
• Australia asset footprint
VELOCITY
• Drive free cash flow
Strategic priorities
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0
20
40
60
80
100
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
Vo
lum
e (
m lit
res/d
ay) 2012/13
2013/14
2014/15
New Zealand – drive efficiency and optionality
1. Relative to 2013/14 season.
2. Forecast.
Season Increase¹
2016/17² 10%
2015/16² 5%
2014/15 2%
Peak day
processing
capacity
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New Zealand – drive efficiency and optionality
2001 Clandeboye dryer 2 2009 Edendale dryer 4 2016 Lichfield dryer 1
PAHIATUA
• WMP dryer
• $235m investment
• Daily capacity up 2.4m L
• Completion: Aug 2015
EDENDALE
• AMF, MPC and reverse
osmosis plants
• $167m investment
• Daily capacity up 1.4m L
• Completion: Aug 2015
LICHFIELD
• WMP dryer
• $390m investment
• Daily capacity up 4.4m L
• Completion: Aug 2016
Lichfield
Pahiatua
Edendale
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Global brands aligned to key platforms
and markets
Strategic Cash Seeding Leadership
Self-funding
expansion B2B and B2C
beach-heads
Dairy
Farming Systems
Dairy
Food Design
Dairy
Processing
Dairy
Nutrition
Technology Platforms
Natural
Energy
Growth and
Development
Mobility
Cognition Un
co
mp
rom
isin
g T
as
te, T
ex
ture
an
d S
tab
ilit
y
Benefit Platforms
Deliver on Foodservice potential
Selectively invest in milk pools
Grow our Anlene™ business
Develop leading positions in
paed & maternal nutrition
Optimise NZ milk
1
Build and grow beyond our
current consumer positions
3
2
4
5
6
Strategic Platforms Global Brands
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Foodservice ambition
260
1,100
0
200
400
600
800
1,000
1,200
FY14 FY23
Volu
me (
000 M
T)
Grow to $5bn in sales by financial year 2023
17% of milk pool
>5 billion LME
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• Fonterra has acquired 18.8% of Beingmate at 18 RMB per share
• Post the Partial Tender Offer the Beingmate stock price increased to
~23-30 RMB¹ per share
• Beingmate has significant growth potential
• Extensive distribution and sales network
– 30 branches across China
– 80,000 retail outlets
– 20,000 maternal service consultants
Beingmate investment
1. Based on trading from 1 June to 19 June 2015
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Global multi-hub strategy
Milk Powder /
Foodservice
Whey Cheese / Whey /
Infant Formula
UHT / Foodservice
EUROPE 600-800m litres
CHILE 500m litres
NEW ZEALAND 18 bn litres
AUSTRALIA 1.5 bn litres F
or p
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Neutral (Invest if returns significantly
exceed cost of capital over
time)
Accelerate
Investment
Solve
Grow with Market
Australia – asset footprint Multi-Hub strategy in action – Australia Ingredients
High Low
High
Cheese
Infant Formula
Yoghurt SMP
UHT
Supports Earnings
Stability/Growth
Support
s V
3 S
trate
gy
Australia Ingredients
Milk Powder /
Foodservice
Whey
Cheese / Whey /
Infant Formula
UHT / Foodservice
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Global partnerships Multi-hub – strategy in action
Europe
• A-ware/Dairy Crest
partnerships to grow whey
specialty ingredients
• Higher whey exports to
Asia/China
China
• Global Fonterra and
Beingmate partnership
• Anmum™ distribution
agreement
New Zealand
• Higher Anmum™ infant
formula exports to China
Australia
• Fonterra and Beingmate
JV to acquire Darnum
• Higher infant formula
exports to China
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CAPITAL INVESTMENT
AND BALANCE SHEET
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12 13 14 15 16 17 18 19 20
M&A Capital spend
Litres of milk (000s)
Invest in optionality and growth Financial year 2015
Essential
$400m
Net Beingmate
Investment
$650m
Consumer &
Foodservice
$300m
International
Farming
$350m
Capacity
$500m
42,500 60,000
110,000 225,000
1,000,000
Deliver on Foodservice potential
Selectively invest in milk pools
Grow our Anlene™ business
Develop leading positions in
paed & maternal nutrition
Optimise NZ milk
1
Align our business and organisation
Build and grow beyond our current
consumer positions
3
2
4
5
6
7
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Balance sheet – gearing
• Higher gearing levels due to:
– Lower equity retentions in 2014
– Higher capital expenditure
– Increased investment in growth
– Higher advance payment as a
proportion of the Farmgate Milk
Price
1. Gearing is measured in terms of economic net interest bearing debt over economic net interest bearing debt plus equity (reflecting the effect of debt hedging in place at balance date) and
equity excludes the cash flow reserve.
2. First half 2013 gearing benefited from a temporary injection of $493 million capital from seeding Fonterra Shareholders’ Fund for the launch of Trading Among Farmers.
Economic debt to debt plus equity¹
48.5% 46.9%
40.0%² 44.6%
50.7%
31 Jan 2011
31 Jan 2012
31 Jan 2013
31 Jan 2014
31 Jan 2015 F
or p
erso
nal u
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nly
© Fonterra Co-operative Group Ltd. Page 24
Credit Rating
Fitch AA-
(stable outlook)
S&P A
(stable outlook)
Weighted Average
Term to Maturity As at 31 May 2015 4.4 years
Strong fundamentals Prudent liquidity
DCM maturity profile¹ At 31 May 2015
Bank facility maturity profile² At 31 May 2015
1. Excluding commercial paper
2. Includes subsidiaries’ short term working capital facilities
Balance sheet strength
Undrawn Facilities
$1.98bn
40%
Drawn Facilities
$2.97bn
60%
0
500
1,000
1,500
2,000
2015 2016 2017 2018 2019 2020 2021 2022 2023
$ m
illi
on
0
500
1,000
1,500
2,000
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2026 2029
$ m
illi
on
F
or p
erso
nal u
se o
nly
© Fonterra Co-operative Group Ltd. Page 25
DRIVING
PERFORMANCE
CULTURE
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Costs
Growth
Cash
Volume = Scale
Value = Gross
Margin
Higher EBIT
Lower Working Capital
Lower Capex
Owners
Velocity = Cash
Cash is king
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Revenue
EBIT
Gross Margin
Return on Capital
Free Cash Flow
~$1bn 20-50% uplift
11% 13% +
Incremental $500m - $1bn¹
15% 20% +
0.9 $/LME 1.2 $/LME
3 - 5
years
5+
years
From (TAF) Ambition
Sustainable value generation Based on clear, focused strategy
1. Prior to Velocity
Based on a weighted average Farmgate Milk Price of $6.50
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Due diligence to establish
full potential
Mid-April
8-10 weeks
Bankable transformation
plan owned by line
leaders
Early June
6-8 weeks
Driving value to bottom-
line and iterating to add
new ideas
~12-18 months
Create bottom up plan Top-down diligence Implementation
Velocity – drive free cashflow
What
How
1 2 3
Change management
Performance infrastructure Ensure execution and bottom line impact
Tactical action to establish leadership, mindsets and
behaviors to drive and sustain the transformation 4
5
Execution
Quick
wins
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Velocity workstreams
Central workstreams BU workstreams
Commercial
Manufacturing
Procurement
Working Capital
Capex
Overheads
Change Management
Velocity Transformation Office (VTO)
Planning & Delivery
Consumer
4
5
6
3
2
7
Global
Operations
8
Farm
Source
Farm Source
13
New
Zealand
9
Australia
10
LATAM
11
Greater
China, Asia
& MEA
12
Global
Ingredients
1A
Ingredients
1B
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