Fonterra Co-operative Group Limited · NZX:FCG
Fonterra Co-operative — Q1 FY2019 Earnings Presentation
21 slides from Fonterra Co-operative's earnings presentation, December 2018
Slide 1: Business Update December 2018
Business Update DECEMBER 2018
Slide 2: Disclaimer
Disclaimer This presentation may contain forward-looking statements and projections. There can be no certainty of outcome in relation to the matters to which the forward-looking statements and projections relate. These forward-looking statements and projections involve known and unknown risks, uncer
Slide 3: Business update summary
Business update summary • Forecast Farmgate milk price range is $6.00 - $6.30 per kgMS and is based on firming global dairy prices over the balance of the season • Maintaining earnings guidance – Q1 margins in-line with last year – Solid New Zealand Ingredients performance and growth in Consumer – C
Slide 4: Forecast Farmgate Milk Price of $6.00 - $6.30
Forecast Farmgate Milk Price of $6.00 - $6.30 Forecast based on global dairy prices firming over the balance of the season • Forecast Farmgate Milk Price has declined this season reflecting lower global dairy prices. Since June – GDT index has declined 20% – Butter prices have declined 33% – AMF is
Slide 5: FY19 Q1 performance summary
FY19 Q1 performance summary Volume LME Revenue Gross Margin Opex Capex 3.6 billion $3.8 billion $646m 17.0% $656 million $188 million 6% 4% $14m from 16.6% 3% $46 million Ingredients Consumer & China Foodservice Farms Volume LME 1 Volume LME1 Volume LME1 3.5b 4% 1.2b 4% 56m 20% Gross Margin1 Gross M
Slide 6: Outlook for 2019
Outlook for 2019 Forecast Farmgate $6.00 Forecast Earnings Milk Price - 25-35 $6.30 cents per share per kgMS • Forecast Farmgate Milk Price has been lowered to $6.00 • Earnings per share range of 25-35 cents maintained - $6.30 from $6.25 - $6.50 per kgMS, based on: • Key drivers of earnings include:
Slide 7: Plan to lift performance
Plan to lift performance Take stock, get back to basics, ensure more accurate forecasting Commitments Q1 FY19 Update • Reduce debt by $800 million by year-end • Processes underway for three assets: – Beingmate • Anmum distribution returned to Fonterra • Full ownership of Darnum plant to return to Fo
Slide 8: Appendix
a Dairy for life APPENDIX
Slide 9: Milk collections forecast maintained for the season
Milk collections forecast maintained for the season Strong start to the season but risk of a hot, dry summer New Zealand Milk Collection 90 2016-17 80 2017-18 • New Zealand milk collections forecast maintained at 2018-19 1,550 million kgMS, up 3% compared to last season Volume (m litres/day) 70 • A
Slide 10: Global Dairy Market
Global Dairy Market Russia Higher supply expected to moderate Europe EU’s largest dairy export +2% market 12 months China +0.3% Trade United embargo Rest of +17% July to Global States September remains Asia 12 months Supply1 +1% +4% 12 months 12 months New Zealand Global +2% Demand2 12 months Austra
Slide 11: Ingredients
Ingredients Improved margins even with challenges in Australia Gross Performance Volume¹ Margin • Q1 volumes are down 4% on last year due to: 9.1% – A slower start but has now picked up 8.0% – Lower government tender volumes • Q1 margins are up on last year: – Lower input costs – Improved mix – Posi
Slide 12: Consumer and Foodservice
Consumer and Foodservice Volumes and margins softening due to Foodservice Gross Performance Volume¹ Margin • Q1 volumes are down 4% on last year: 24.0% – Consumer volumes are up 5% 22.9% – Foodservice volumes are down 15% • Q1 margins are down on last year with Consumer margins flat and Foodservice
Slide 13: Consumer and Foodservice by region
Consumer and Foodservice by region Asia and Greater China Foodservice offset stronger Consumer performance Greater Latin Asia Oceania China America Volume¹ 364 349 273 222 412 422 181 191 FY18 FY19 FY18 FY19 FY18 FY19 FY18 FY19 Growth -4% -19% +2% +5% Gross Margin $103m $4m $75m $25m $105m $12m $107
Slide 14: Consumer
Consumer Higher growth and stable margins underpin a strong Q1 Gross Performance Volume¹ Margin • Q1 volumes are up 5% on last year with growth in all regions 26.4% 26.1% • Q1 Consumer margins are largely flat on last year, with higher margins in Asia and Oceania offset by softer margins in Greater
Slide 15: Consumer by region
Consumer by region Growth registered in every region, softer margins in Greater China Greater Latin Asia² Oceania China America Volume¹ 211 222 306 318 157 163 39 41 FY18 FY19 FY18 FY19 FY18 FY19 FY18 FY19 Growth +5% +6% +4% +4% Gross Margin $91m $14m $38m $1m $82m $7m $99m $9m from from from from 2
Slide 16: Foodservice
Foodservice Asia and Greater China cause lower volumes and profits Gross Volume¹ Margin Performance • Q1 volumes are down 15% on last year due to Asia 19.2% and Greater China performance – Follows strong Q4 volumes 15.4% • Q1 Foodservice margins are down on last year, with higher margins in Oceania
Slide 17: Foodservice by region
Foodservice by region Value over volume drive Asia and Greater China volumes down Greater Latin Asia Oceania China America Volume¹ 154 127 235 181 106 104 24 28 FY18 FY19 FY18 FY19 FY18 FY19 FY18 FY19 Growth -18% -23% -2% +17% Gross Margin $12m $10m $37m $24m $23m $5m $8m $2m from from from from 8.8
Slide 18: Living within our means
Living within our means Committed to strong financial discipline Opex reducing to FY17 Capex set at levels $650 over next million two years • Higher opex in Q1 versus last year was largely due to • We are on track to reduce capex from $861 million to higher spend in Consumer and Foodservice. The inc
Slide 19: New Zealand Ingredients product mix
New Zealand Ingredients product mix Change Q1 FY18 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18 Q1 FY192 to Q1 FY19 Production Volume (000 MT) Reference 583 683 481 103 633 9% Non-Reference 237 246 208 70 227 (4)% Sales Volume (000 MT) Reference 287 614 455 439 247 (14)% 3,608 3,469 $245 Non-Reference1 130 180 1
Slide 20: Glossary
Glossary Acronyms and Definitions AMF Fluid and Fresh Dairy Reference Products Anhydrous Milk Fat The Fonterra grouping of skim milk, whole milk and The dairy products used in the calculation of the cream – pasteurised or UHT processed, concentrated Farmgate Milk Price, which are currently WMP, SMP,
Slide 21: Glossary
Glossary Fonterra Strategic Platforms Ingredients The Ingredients platform comprises bulk and specialty dairy products such as milk powders, dairy fats, cheese and proteins manufactured in New Zealand, Australia, Europe and Latin America, or sourced through our global network, and sold to food produ
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