Fonterra Co-operative Group Limited · NZX:FCG
Fonterra Co-operative — H1 2012 Earnings Presentation
29 slides from Fonterra Co-operative's earnings presentation, Mar 29, 2012
Slide 1: Fonterra Strategy Refresh & 2012 Interim Results
29 March 2012 FONTERRA STRATEGY REFRESH & 2012 INTERIM RESULTS Fonterra Co-operative Group Ltd
Slide 2: Overview
OVERVIEW • 2012 INTERIM RESULTS • STRATEGY REFRESH • QUESTIONS & ANSWERS Page 2 Fonterra Co-operative Group Ltd
Slide 3: Sir Henry van der Heyden
SIR HENRY VAN DER HEYDEN Fonterra Co-operative Group Ltd
Slide 4: Highlights
HIGHLIGHTS • Net profit after tax up 18% to $346m Normalised EBIT ($m)(1) • Normalised earnings before interest and tax(1) 552 up 8% to $552m • Strong growth in NZ milk production, up 10% season-to-date 509 496 • Sales volume gains of 5%(2) were broad based, reflecting attractiveness of dairy around
Slide 5: Bumper Milk Flows
BUMPER MILK FLOWS NZ Milk Collections (million kgMS) 250 200 +10% 150 2011 100 2012 50 0 Jun Jul Aug Sep Oct Nov Dec Jan Page 5 Fonterra Co-operative Group Ltd
Slide 6: GDT WMP Prices Flat Compared to Last Year
FLAT Fonterra Co-operative Group Ltd COMPARED RELATIVELY GDTTM PRICES TO LAST YEAR USD per metric tonne 2,000 2,500 3,000 3,500 5,000 4,000 4,500 Aug 2010 Sep 2010 Oct 2010 Nov 2010 Dec 2010 Jan 2011 Page 6 Feb 2011 Mar 2011 Apr 2011 May 2011 Jun 2011 Jul 2011 Aug 2011 GDTTM WMP Prices Sep 2011 Oct
Slide 7: Fonterra Co-op Challenges
FONTERRA CO-OP CHALLENGES $8.25 $6.75- $6.85 2011 Final Latest Payout (1) Payout(1) Forecast Note: (1) Payout before retentions assumes a farmer is 100 per cent shared up (owning one share per kg MS of annual milk production). Page 7 Fonterra Co-operative Group Ltd
Slide 8: Theo Spierings
THEO SPIERINGS Fonterra Co-operative Group Ltd
Slide 9: Strong First Half
STRONG FIRST HALF 1H 2012 $m Change % External Volume 1,927 5(1) (thousand metric tonnes) Revenue 10,026 7 Normalised EBIT(2) 552 8 Normalised EBIT Margin(3) 5.5% 7 bps Profit after tax 346 18 Earnings per share(4) 24 14 Dividend per share(4) 12 50 Note: (1) Excludes the sales volumes of the Western
Slide 10: Key Drivers
KEY DRIVERS • Solid growth in total sales volume • Improved margins in Standard & Premium Ingredients • ANZ impacted by challenging trading conditions • Stronger NZD had negative impact on earnings of our Asia/AME & Latam operations Page 10 Fonterra Co-operative Group Ltd
Slide 11: Outlook
OUTLOOK • Stronger global milk production expected in 2012 • Milk powder demand appears robust but dairy commodity prices likely to remain under some pressure through to mid 2012 • Forecast Farmgate Milk Price of $6.35 per kgMS and net profit after tax guidance of 40-50 cents per share equating to $
Slide 12: Milk for Schools
MILK FOR SCHOOLS • Launched Fonterra Milk for Schools programme • Northland pilot – 112 schools, 10,000 children • Test systems and processes • Decision in term 3 on national roll out Page 12 Fonterra Co-operative Group Ltd
Slide 13: Jonathan Mason
JONATHAN MASON Fonterra Co-operative Group Ltd
Slide 14: Standard & Premium Ingredients
STANDARD & PREMIUM INGREDIENTS External • Normalised EBIT growth of 44%(1) Normalised EBIT ($m) Volume Growth(1) • Key performance drivers: 273 - improved margins +7% 231 - swapping long-term contracts to those with Revenue 189 shorter tenure indexed to GDTTM Growth(1)(2) - strong underlying growth
Slide 15: Australia/New Zealand
AUSTRALIA /NEW ZEALAND External • ANZ’s performance after adjusting for the Normalised EBIT ($m) Volume sale of the WA business in 2011 and in Growth(1) constant currency(3): 154 -12% - External volume up 4% 124 Revenue - Revenue up 2% 102 Growth(1)(2) - Normalised EBIT 16% lower - 4% • Despite chal
Slide 16: Asia/Africa & Middle East
ASIA/AFRICA & MIDDLE EAST External • On a constant currency basis, Normalised EBIT ($m) Volume normalised EBIT was 5%(1)(2) lower, due Growth(1) largely to: +4% 97 96 - higher sales & marketing costs 84 Revenue - increased input costs Growth(1) • Core focus is execution of growth +7% strategy: - inv
Slide 17: Latin America
LATIN AMERICA External • On a constant currency basis, Normalised EBIT ($m) Volume normalised EBIT was up 6%(1)(3) Growth(1) 64 62 -6% • Soprole had a strong first half in 55 constant currency terms with Revenue earnings up 15% Growth(1)(2) -5% • Normalised contribution from Dairy Partners of Americ
Slide 18: Strong Balance Sheet
Economic Gearing(1) STRONG 59.6% BALANCE 57.6% SHEET 54.3% 53.0% 48.5% Target 46.9% Range 44.9% 45-50% 41.8% Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Note: (1) Gearing is measured in terms of economic net interest bearing debt over economic net interest bearing debt plus equity (refle
Slide 19: Trading Among Farmers
TRADING AMONG FARMERS AUGUST- MARCH APRIL/MAY JUNE/JULY DECEMBER • Strategy Refresh • Board considers • Shareholders’ • Workshops on the first four pre- Council considers online broker conditions and Board report and system for farmer • Interim Result prepares report to fifth pre-condition sharehold
Slide 20: Theo Spierings
THEO SPIERINGS Fonterra Co-operative Group Ltd
Slide 21: Strengths, Opportunities, Strategic Choices
STRENGTHS OPPORTUNITIES STRATEGIC CHOICES • Access to quality milk • Forecast global volume • Target geographies and • Efficient farms demand growth of at least nutritional needs 100 billion litres by 2020 • Ensure strong alignment • Integrated model • NZ could supply an with vision • Strong, broad
Slide 22: Strategy Sets Platform for Growth
STRATEGIC STRENGTHS OPPORTUNITIES STRATEGY CHOICES SETS PLATFORM FOR GROWTH Drive Return on Improve Shareholder Improve Value Drivers Capital (ROCE) Value • Volume growth • Value growth Farmer Improve Return on Income • Strong operating Capital Employed & investing cash flow Value of Fonterra Page 2
Slide 23: Emerging Markets Are Key
STRATEGIC STRENGTHS OPPORTUNITIES CHOICES Outlook to 2020 EMERGING MARKETS 7% ARE KEY 10% 4% <1% <1% Europe China <1% 1% 2% Nth America 4% India 2% 2-3% 2% MENA <1% 2% LATAM ANZ Demand Growth Milk Supply Growth Source: FAO, Euromonitor, Fonterra estimates Page 23 Fonterra Co-operative Group Ltd
Slide 24: Exciting Growth Forecasts
STRATEGIC STRENGTHS OPPORTUNITIES CHOICES EXCITING GROWTH Formal Dairy Market FORECASTS 500 bn L by 2020 (3% CAGR) Globally Traded Dairy Market 84 bn L by 2020 (5-6% CAGR) New Zealand 375 billion litres 22 bn L by 2020 (2% CAGR) 49 17 billion Bn L litres Source: FAO, UN Comtrade, Euromonitor, Fonter
Slide 25: Consumer Megatrends
STRATEGIC STRENGTHS OPPORTUNITIES CHOICES CONSUMER MEGATRENDS Enabling the aging to Best nutrition for Demand for healthy Demand for better for maintain healthy, mother and child nutrition you convenience food active lifestyles Page 25 Fonterra Co-operative Group Ltd
Slide 26: Strategy Principles
STRATEGIC STRENGTHS OPPORTUNITIES CHOICES STRATEGY PRINCIPLES Our Vision and Objectives New Business Cash Generators Growth Generators Generators What is our source of What will be the sources What are our mould- cash to generate & of our future cash flow? breaking opportunity finance our growth? ar
Slide 27: New Group Portfolio
STRATEGIC STRENGTHS OPPORTUNITIES CHOICES NEW GROUP PORTFOLIO Our Vision and Objectives Cash Generators Growth Generators New Business ‘Must do’ ‘Can do’ ‘Want to do’ New Zealand Milk China India Middle-east & North Africa ASEAN Advanced Nutrition (MENA) Optimise Latin America (LATAM) ANZ Out-of-Hom
Slide 28: Seven Strategic Paths
STRATEGIC STRENGTHS OPPORTUNITIES CHOICES SEVEN 1. Optimise New Zealand milk STRATEGIC PATHS 2. Build and grow beyond our current consumer positions 3. Deliver on foodservice potential 4. Grow our position in mobility 5. Develop selected leading positions in paediatrics and maternal 6. Selectively i
Slide 29: Summary
SUMMARY 1. Growth – volume and value Multiple milk pools Integration back End-to-end business • Global exports of home milk to the farm • B2B Ingredients; and • Local milk pools • B2C Branded 2. Focuses on our strengths P P P P 3. Clear Choices 4. Executable Page 29 Fonterra Co-operative Group Ltd
Fonterra Co-operative Group — H1 2012 Earnings Presentation on 6ix