Fonterra Co-operative Group Limited · NZX:FCG
Fonterra Co-operative — H1 2014 Earnings Presentation
42 slides from Fonterra Co-operative's earnings presentation, 2014
Slide 1: Fonterra Interim Results 2014 Market Briefing
FONTERRA INTERIM RESULTS 2014 Market Briefing © FONTERRA CO-OPERATIVE GROUP LIMITED
Slide 2: Overview
Working Area—Safe Copy Frame. This denotes working area and must be deleted before final print. © Fonterra Co-operative Group Ltd. Overview John Wilson – Chairman 2
Slide 3: On-track for record forecast Cash Payout
On-track for record forecast Cash Payout 8.75 This denotes working area and must be deleted before final print. 0.10 7.90 0.30 6.37 6.40 6.16 Working Area—Safe Copy Frame. 0.27 0.32 0.32 6.10 7.60 6.08 5.84 8.65 2010 2011 2012 2013 2014F Farmgate Milk Price Dividend 1. Dividend: cents per share. 2.
Slide 4: Key highlights
Key highlights Forecast Farmgate Milk Price Forecast Full Year Dividend Forecast Final Cash Payout This denotes working area and must be deleted before final print. $8.65kgMS 10cps $8.75 Working Area—Safe Copy Frame. Milk Production Revenue Interim Earnings per Share 1.1bn kgMS $11.3bn 13cps 4 © Fon
Slide 5: Strong rebound in milk collection in New Zealand
Strong rebound in milk collection in New Zealand 90 This denotes working area and must be deleted before final print. 80 2013/14 2012/13 70 2011/12 Volume (m litres/day) Working Area—Safe Copy Frame. 60 50 40 30 20 10 0 Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Source: Fonterra Co-operative Gr
Slide 6: Prudent approach to dealing with extreme volatility
Prudent approach to dealing with extreme volatility Extreme Volatility Prudent Approach This denotes working area and must be deleted before final print. $800m Negative impact 1. Full confidence in underlying basis of Product Mix Farmgate Milk Price Manual Working Area—Safe Copy Frame. 2. Manual ena
Slide 7: Co-operative priorities – How we can grow profitably and sustainably
Co-operative priorities – How we can grow profitably and sustainably This denotes working area and must be deleted before final print. • Profitable, Working Area—Safe Copy Frame. resilient farmers • Sustainable natural resources • Enhanced community value 7 © Fonterra Co-operative Group Ltd.
Slide 8: Performance Summary
Working Area—Safe Copy Frame. This denotes working area and must be deleted before final print. © Fonterra Co-operative Group Ltd. Theo Spierings – CEO Performance Summary 8
Slide 9: Interim 2014 performance summary
Interim 2014 performance summary Total sales Total Group Normalised Net profit EPS volume¹ revenue EBIT after tax This denotes working area and must be deleted before final print. 2m MT $11.3bn $403m $217m 13cps -3% +21% -41% -53% -54% Working Area—Safe Copy Frame. • Strong ingredients demand – driv
Slide 10: Regional performance
Regional performance NZ Milk Products Total Group Revenue² This denotes working area and must be deleted before final print. Global Ingredients sales Latin America Asia $570m NZ Manufacturing footprint $1.1bn Group Functions Oceania Oceania $1.8bn Working Area—Safe Copy Frame. Australia/NZ Consumer
Slide 11: Normalised EBIT by segments
Normalised EBIT by segments Ingredients Consumer and Foodservices 800 $(176) million Businesses $(116) million This denotes working area and must be deleted before final print. 700 683 600 Working Area—Safe Copy Frame. 500 (176) NZD million (52) 4 12 403 400 (68) 300 200 100 0 H1 2013¹ NZMP Oceania
Slide 12: Whole Milk Powder and cheese prices
Whole Milk Powder and cheese prices Weighted average USD GDT cheese prices vs. WMP prices This denotes working area and must be deleted before final print. 5,500 Cheese WMP 5,000 Working Area—Safe Copy Frame. 4,500 USD (MT) H1 2014 4,000 H2 2013 3,500 3,000 H1 2013 2,500 Aug-2011 Jan-2012 Jun-2012 O
Slide 13: Staying on Strategy
Staying on Strategy Five Priorities Turning the Wheel This denotes working area and must be deleted before final print. 1. Optimise our global ingredients sales and operations footprint 2. Grow significantly in everyday nutrition Working Area—Safe Copy Frame. 3. Continue our foodservice growth momen
Slide 14: Financial Review
Working Area—Safe Copy Frame. This denotes working area and must be deleted before final print. © Fonterra Co-operative Group Ltd. Lukas Paravicini – CFO Financial Review 14
Slide 15: Protecting the Co-operative and staying on strategy
Protecting the Co-operative and staying on strategy Normalised EBIT (NZD million) This denotes working area and must be deleted before final print. Protect the Co-operative Peak Stay on Strategy 1,400 Constraints 519 1,200 Working Area—Safe Copy Frame. 1,000 800 683 600 (560) (75) (64) 61 403 400 (7
Slide 16: NZ Milk Products review
NZ Milk Products review SALES VOLUME This denotes working area and must be deleted before final print. • 4% growth in NZ milk collection 1.4m MT • Sales volume in first quarter impacted by low start of season stock due to drought last year -2% • Record volumes shipped in second quarter Working Area—
Slide 17: NZMP – key performance drivers
NZMP – key performance drivers Normalised EBIT (NZD million) This denotes working area and must be deleted before final print. 519 1,200 1,000 (75) Working Area—Safe Copy Frame. (560) 800 Product Gross Milk Price Liquid Milk Margin Adjustment 600 412 400 21 236 200 (116) (76) (5) 0 H1 2013¹ Product
Slide 18: Oceania review
Oceania review SALES VOLUME This denotes working area and must be deleted before final print. • Australia impacted by lower exports, nutritionals and yoghurt 411,000 volumes MT • NZ volumes up 4% -9%¹ Working Area—Safe Copy Frame. NORMALISED EBIT • EBIT impacted by: $46m – Australia brands – high in
Slide 19: Oceania – key performance drivers
Oceania – key performance drivers Normalised EBIT (NZD million) This denotes working area and must be deleted before final print. 120 98 100 28 Working Area—Safe Copy Frame. 80 60 (34) 46 40 (42) (4) 20 0 H1 2013 Australia Australia NZ Other H1 2014 Brands Ingredients 19 © Fonterra Co-operative Grou
Slide 20: Reshaping our Australian business
Reshaping our Australian business IN PROGRESS This denotes working area and must be deleted before final print. Stage 4 IN PROGRESS Stage 3 Working Area—Safe Copy Frame. Transform the Business Stage 2 Improve the • Strategic Portfolio partnerships & Stage 1 investments • Strengthen retail relationsh
Slide 21: Asia review
Asia review SALES VOLUME This denotes working area and must be deleted before final print. • Asia volume growth impacted by Sri Lanka 192,000 • Excluding Sri Lanka volume growth was up 10% MT • Increase in Foodservice, Anlene™ and China Farms +3% Working Area—Safe Copy Frame. NORMALISED EBIT • EBIT
Slide 22: Asia – key performance drivers
Asia – key performance drivers Normalised EBIT (NZD million) This denotes working area and must be deleted before final print. 150 Gross Margin (excluding China) $(63) million 30 2 120 Working Area—Safe Copy Frame. 100 (17) 90 60 2 (63) 32 30 (15) (7) 0 H1 2013 Price Volume/ Volume/ Input Cost FX Ot
Slide 23: Latin America review
Latin America review SALES VOLUME This denotes working area and must be deleted before final print. • Volume growth driven by Soprole in Chile 188,000 – Significant growth in retail cheese category MT – Higher milk powder sales to Government Health +1% programme Working Area—Safe Copy Frame. NORMALI
Slide 24: Latin America – key performance drivers
Latin America – key performance drivers Normalised EBIT (NZD million) This denotes working area and must be deleted before final print. 80 5 71 70 67 9 (1) Working Area—Safe Copy Frame. 60 (9) 50 40 30 20 10 0 H1 2013 Soprole DPA Southern Cone Other H1 2014 24 © Fonterra Co-operative Group Ltd.
Slide 25: Working capital and cash flow
Working capital and cash flow Working capital days¹ Free cash flow (NZD million) This denotes working area and must be deleted before final print. 0 104 104 103 (200) Working Area—Safe Copy Frame. (400) 603 54 (600) (541) (84) 97 97 (800) (861) (1,000) (253) (1,200) H1 2010 H1 2011 H1 2012 H1 2013 H
Slide 26: Financing
Financing Debt to Debt plus Equity¹ • $5.4 billion net debt position after hedging This denotes working area and must be deleted before final print. • Higher gearing levels due to: 48.5% – Lower earnings this period 46.9% 40.0%2 44.6% – Return of capital through Supply Offer Working Area—Safe Copy F
Slide 27: Strategy Update
Working Area—Safe Copy Frame. This denotes working area and must be deleted before final print. © Fonterra Co-operative Group Ltd. Theo Spierings – CEO Strategy Update 27
Slide 28: Strategic Review
Strategic Review “100,000 foot view” “10,000 foot view” “1,000 foot view” This denotes working area and must be deleted before final print. Approximate Dec-Jan Feb Mar-Jun timing Working Area—Safe Copy Frame. Approach Strategic Analysis Strategic Choices Strategic Implications Review Answer Review A
Slide 29: Demand growth is driven by China and Russia
Demand growth is driven by China and Russia • China and Russia are the two top importers of dairy by a significant margin This denotes working area and must be deleted before final print. – China imports 1.5 MT of dairy products, or 13.4% of global imports – Russia imports 1.4 MT of dairy products,
Slide 30: China supply gap widens
China supply gap widens Chinese dairy consumption – by product origin This denotes working area and must be deleted before final print. 50 Domestic Production 100% 45 Net Imports 90% Billion Litres Milk Equivalent Import Market Share 40 80% Working Area—Safe Copy Frame. 35 70% Market Share 30 60% 25
Slide 31: Global structure for global growth platforms
Global structure for global growth platforms Strategic Choices Global Opportunities This denotes working area and must be deleted before final print. Strategic Analysis Strong Demand 1. Greater Ingredients EVERYDAY 1 Optimise NZ milk China 13.4% Optionality Russia Mexico 12.5% NUTRITION Global Ingre
Slide 32: Outlook
Outlook • In the short-term earnings will continue to be impacted by: This denotes working area and must be deleted before final print. – Higher input costs which make it harder to drive value growth in brands and foodservice – Negative impact on product mix margins which is unlikely to be recovered
Slide 33: Supplementary Information
Working Area—Safe Copy Frame. This denotes working area and must be deleted before final print. © Fonterra Co-operative Group Ltd. Information Supplementary 33
Slide 34: Annual results summary
Annual results summary 6 months ended 6 months ended This denotes working area and must be deleted before final print. NZD million 31 January 2014 31 January 2013 Change Total volume (billion MT) 1.99 2.07 (4)% Working Area—Safe Copy Frame. Revenue 11,292 9,334 21% Normalised EBIT¹ 403 683 (41)% Net
Slide 35: Normalisation adjustments
Normalisation adjustments 6 months ended 6 months ended This denotes working area and must be deleted before final print. NZD million 31 January 2014 31 January 2013 Time value of options (13) (10) Costs associated with closure of Cororooke Working Area—Safe Copy Frame. – 24 plant in Australia Total
Slide 36: NZ Milk Products
NZ Milk Products 6 months ended 6 months ended This denotes working area and must be deleted before final print. NZD million 31 January 2014 31 January 2013 Change Total volume¹ (‘000 MT) 1,441 1,474 (2)% Revenue 9,117 6,762 35% Working Area—Safe Copy Frame. Gross margin 617 797 (23)% Gross margin p
Slide 37: NZMP contribution margin
NZMP contribution margin 6 months ended 6 months ended This denotes working area and must be deleted before final print. NZD million 31 January 2014 31 January 2013 Sales volume (‘000 MT) 1,441 1,474 Working Area—Safe Copy Frame. Gross margin 617 797 Selling, marketing and distribution expenses (137
Slide 38: Oceania
Oceania 6 months ended 6 months ended This denotes working area and must be deleted before final print. NZD million 31 January 2014 31 January 2013 Change Total volume¹ (‘000 MT) 429 471 (13)% Revenue 1,825 2,018 (10)% Working Area—Safe Copy Frame. Gross margin 344 423 (19)% Gross margin percentage
Slide 39: Asia
Asia 6 months ended 6 months ended This denotes working area and must be deleted before final print. NZD million 31 January 2014 31 January 2013 Change Total volume¹ (‘000 MT) 192 186 3% Revenue 1,054 1,049 Working Area—Safe Copy Frame. Gross margin 280 362 (23)% Gross margin percentage 26.6% 34.5%
Slide 40: Latin America
Latin America 6 months ended 6 months ended This denotes working area and must be deleted before final print. NZD million 31 January 2014 31 January 2013 Change Total volume¹ (‘000 MT) 188 187 1% Revenue 570 559 2% Working Area—Safe Copy Frame. Gross margin 148 148 Gross margin percentage 26.0% 26.5
Slide 41: Balance sheet strength
Balance sheet strength Strong Fundamentals Diversified Funding Sources This denotes working area and must be deleted before final print. A+ S&P (stable outlook) Offshore DCM Credit Rating 32% AA- Fitch Bank Facilities (stable outlook) 48% Working Area—Safe Copy Frame. Weighted As at 31 January 2014
Slide 42: Capital expenditure
Capital expenditure NZD million This denotes working area and must be deleted before final print. 427 417 13 18 21 Working Area—Safe Copy Frame. 328 91 91 24 282 10 22 6 56 57 81 302 252 209 201 H1 2011 H1 2012 H1 2013 H1 2014 NZMP Oceania Asia Latin America 42 © Fonterra Co-operative Group Ltd.
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