Fonterra announces 2017 Interim Results

Reporting Period Six months ended 31 January 2017
Previous Reporting Period Six months ended 31 January 2016


31 January 2017
(NZD million)
31 January 2016
(NZD million)
Percentage
Change
Revenue from sale of goods 9,241 8,838 4.6%
Net profit attributable to Shareholders
of the company
1

413 404 2.2%
Non-controlling interests 5 5 –
Net profit for the period 418 409 2.2%

1
Net profit attributable to shareholders of the company is equivalent to profit from ordinary activities after tax attributable to
shareholders of the company (as required to be disclosed pursuant to Clause 2.2 of Appendix 1 of the Fonterra Shareholders’
Market Listing Rules, and Clause 2.2 of Appendix 1 of the NZX Main Board/Debt Market Listing Rules).

Interim/Final Dividend
Amount per Security
(NZ cents)
Imputed Amount per Security
(NZ cents)
Interim 20.0 Nil

Record Date Interim: 5 April 2017
Dividend Payment Date Interim: 20 April 2017

Comments On 21 March 2017, the Board of Directors declared an interim
dividend of 20.0 cents per share payable on 20 April 2017 to
Shareholders on the share register at 5 April 2017.

To be followed by the balance of the information required in the report pursuant to Appendix 1.

---

INTERIM
REPORT 2017
INTERIM REPORT 2017
FONTERRA CO-OPERATIVE GROUP LIMITED

INTERIM
DIVIDEND
PER SHARE
FORECAST
FARMGATE
MILK PRICE
NEW ZEALAND
MILK COLLECTION
SEASON TO
31 JANUARY 2017
$
6.00
20
CPS
1,053
OUR
CO-OPERATIVE
M
KGMS
Fonterra uses several non-GAAP measures when discussing
financial performance. Fonterra refers to normalised segment
earnings, normalised EBIT, EBIT, EBITDA, constant currency
variances, normalisation adjustments and payout when
discussing financial performance. These are non-GAAP financial
measures and are not prepared in accordance with NZ IFRS.
Management believes that these measures provide useful
information as they provide valuable insight on the underlying
performance of the business. They are used internally to
evaluate the underlying performance of business units and
to analyse trends. These measures are not uniformly defined
or utilised by all companies. Accordingly, these measures may
not be comparable with similarly titled measures used by
other companies. Non-GAAP financial measures should not
be viewed in isolation nor considered as a substitute for
measures reported in accordance with NZ IFRS. Please refer
to page 47 for the reconciliation of the NZ IFRS measures
to the non-GAAP measures and page 48 for definitions of the
non-GAAP measures used by Fonterra.
CHAIRMAN AND CHIEF EXECUTIVE
OFFICER’S LETTER 2
HIGHLIGHTS 1
OUR CO-OPERATIVE 8
OUR POTENTIAL 10
OUR PERFORMANCE 14
INTERIM FINANCIAL STATEMENTS 28
CONTENTS
NET DEBT DOWN
$0.8 BILLION
FARMER SUPPORT FOR
GOVERNANCE CHANGES
$
6.1B 85.96%
Our collective strength comes from being
a farmer owned and controlled Co-operative.
FONTERRA INTERIM REPORT 2017

GROUP
NORMALISED
EBIT (NZD)
NET PROFIT
AFTER TAX
(NZD)
VOLUME
(LME)
$
607M
$
418M
11.7B
OUR
PERFORMANCE
OUR
POTENTIAL
INGREDIENTS
NORMALISED EBIT
ADDITIONAL MILK
CONVERTED INTO
HIGHER-VALUE PRODUCTS
CONSUMER AND
FOODSERVICE
NORMALISED EBIT
$
510M
$
313M
Fonterra’s purpose is to be the most trusted source
of dairy nutrition, making a difference in the lives
of two billion people by 2025.
Our higher revenue and net profit after tax reflects
improved global prices, more volume into higher-value
products and financial discipline.
M
LME
INCREASE IN CONSUMER
AND FOODSERVICE
NORMALISED EBIT
30% 227
Our volume to value drive
continues with 227m LME
of milk volumes flowing
into higher-returning
product, despite lower
milk collections.
Gold Instant Whole
Milk premium powder
was released in
December following
two years of research
and development.
Trusted Goodness™
launches our world-class
electronic product
traceability system.
FONTERRA INTERIM REPORT 2017
HIGHLIGHTS | 1
FONTERRA INTERIM REPORT 2017

CHAIRMAN AND
CHIEF EXECUTIVE
OFFICER’S LETTER
Our performance shows a Co-operative in good
shape strategically and financially, with our collective
strength coming from our shareholders and our
people. We are confident of our robustness, even
in volatile conditions.
Our increased forecast Farmgate Milk Price of
$6.00 per kilogram of milk solids will put an additional
$3 billion into regional economies this season.
Our half year result confirms again that our strategy
consistently delivers for our farmers whether global
prices are high or low. This consistency is confirmed
in the annual reviews of the Milk Price Manual which
ensure we meet our constitutional requirement
to pay the maximum sustainable Milk Price and
regulatory requirements to pay a competitive price.
Reviews capture improvements such as efficiencies,
improved yields, overhead reductions and lower
interest rates and mean our Farmgate Milk Price
has gained by a total of 36 cents per kgMS since the
2009 financial year.
Our forecast reflects good results across the business
and especially in Consumer and Foodservice where
our volume to value at velocity strategy is building
on the progress we made last year. The Board has
declared a half year dividend of 20 cents per share
which will be payable on 20 April 2017.
OUR NUTRITION-FOCUSED
STRATEGY, WHICH RANGES
FROM MAKING EVERYDAY,
AFFORDABLE PRODUCTS
TO MORE SPECIALISED
ADVANCED PRODUCTS
TO ENHANCE WELLBEING,
REFLECTS THE EXPECTATIONS
OF OUR CUSTOMERS.
Our Co-operative continued our drive to secure
the best returns for our shareholders, with our
volume to value strategy enabling a strong
Ingredients performance and continued growth
in Consumer and Foodservice in the first half of
our 2016/17 financial year. Our increased forecast
Farmgate Milk Price reflects improved global
prices, while our returns from converting even
more milk into higher-returning products flow
into our forecast earnings per share.
2 | CHAIRMAN AND CHIEF EXECUTIVE OFFICER’S LETTER
FONTERRA INTERIM REPORT 2017FONTERRA INTERIM REPORT 2017

We continue to offer a dividend reinvestment plan at
a discount of 2.5 per cent to the strike price. Eligible
shareholders who wish to participate in the dividend
reinvestment plan for the interim dividend need to
submit a notice of participation by 6 April 2017.
The Board has confirmed the forecast Farmgate
Milk Price of $6.00 per kgMS (a 54 per cent increase
compared to last year) and has revised the forecast
earnings per share range to 45-55 cents. Our Co-
operative has a total forecast available for payout
to farmers in the current season of $6.45 to $6.55
before retentions.
Very good rains in autumn has meant higher late
season milk collections than previously anticipated.
The impact of this extra milk, together with more
volatility in product stream returns in our ingredients
business and some tightening of margins in the
coming months could result in some pressure on
earnings in the second half.
We continue to hold to the forecast full year dividend of
40 cents, despite the revised earnings per share forecast,
which reflects our balance sheet strength.
Our farmers have experienced everything from a cold
wet spring across much of the country to droughts in
some regions with the result that total New Zealand
volumes were 54 million kgMS lower at the half year.
The recent good rains across most of the country has
seen us revise our full year milk collection forecast
to 1,515 million kgMS. This is three per cent down
on last season’s milk production.
Lower volumes off farms contributed to lower
volumes across the business at 11.7 billion LME, down
seven per cent on the same period last year. Lower
volumes constrained our returns with normalised
earnings before interest and tax (EBIT) down nine
per cent at $607 million. Our gross margin of 19.1 per
cent compares with 21.1 per cent at the same time
last year, mainly because of higher raw milk costs.
PRICING
As expected, global milk prices took a turn for the
better early in the new financial year and these have
been sustained through the first half. As we came
into the close of the first half on 31 January 2017,
average weighted prices achieved on Global Dairy
Trade (GDT) Events had improved by 32 per cent on
the same time last year.
European production has been easing and volumes
out of New Zealand and Australia are also lower.
Meanwhile, markets we export to are expected
to keep growing their imports of dairy products
for the remainder of the year.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER’S LETTER | 3
FONTERRA INTERIM REPORT 2017FONTERRA INTERIM REPORT 2017

INFANT MILK
FORMULA
Anmum™ volumes up
20 per cent in China.20%
STANHOPE
Our Stanhope
cheese plant
rebuild is on track.
However, volatility has been a constant companion in
recent years and the political landscape is changing,
with potential challenges to free trade. On balance,
we are cautiously positive which is reflected in our
forecasts and our February decision to increase the
Advance Rate we pay to our farmers by more than
we traditionally would at this point in the season.
MORE SALES, HIGHER VALUE
In the first half, we converted an additional 227 million
LME into higher returning products and we are
on target to reach 400 million LME by year end.
This builds on our track record which saw one billion
LMEs turned into higher returning products between
2014 and 2016.
We grew demand, sales volumes and value in our
Consumer and Foodservice business across our eight
strategic regional markets. These include Greater China
where volumes increased by 32 per cent in the first
half and Latin America which achieved a 19 per cent
lift in volumes. These volume lifts have contributed
to gains in profit, despite the higher cost of milk.
In our Ingredients business, we made the most of
our manufacturing capacity and the flexibility and
efficiency it provides to match production to demand,
ensuring we secure the best returns for our farmers’
milk by making the best choices. Even with rises in
the Farmgate Milk Price and lower milk collection,
we maintained good margins.
Full financial details and discussion are in the
Our Performance section on page 14.
STEADY PROGRESS IN AUSTRALIA
We continue to make good progress in ensuring a
stronger Australian business. We are building on
our strengths in cheese, whey, nutritionals, and with
our Consumer and Foodservice brands. Our new
Stanhope cheese plant is on track and we have seen
positive demand in our Ingredients business.
The Beingmate joint venture at Darnum is up and
running with the first products being prepared
for export to China. Our Beingmate partnership
is supporting growth in China where Anmum™
volumes were up 20 per cent in the first half.
We are expanding our reach in Consumer and
Foodservice, launching new Mainland™ products
as well as our Anchor™ Food Professionals
foodservice products.
CHINA FARMS
In China, fresh milk is now fully integrated into the
basket of products our Ingredients business can offer
to our customers.
We have increased volumes in the first half to 156 million
LME and production per cow in China has improved
by nine per cent. Production efficiencies, coupled with
close control of costs have delivered a further 0.26
RMB (NZD 0.05) reduction in cash costs per litre.
CHAIRMAN AND
CHIEF EXECUTIVE
OFFICER’S LETTER
4 | CHAIRMAN AND CHIEF EXECUTIVE OFFICER’S LETTER
FONTERRA INTERIM REPORT 2017FONTERRA INTERIM REPORT 2017

CHINESE
FOODSERVICE
We have seen growth in
demand, sales volumes
and value in our Consumer
and Foodservice business
in Greater China.
This ability to produce good volumes of high
quality milk with a competitive cost structure is an
advantage in the market for fresh dairy in China.
WE’RE IN GOOD SHAPE
We’ve continued to strengthen our balance sheet in
the first half, achieving further reductions in debt and
improved gearing. Operating expenses were down
six per cent, net debt of $6.1 billion was down 11 per
cent and gearing down to 46.6 per cent compared
with 49.2 per cent at the same time last year.
With significant capacity building behind us and the
benefits locked down in efficiency and product mix
flexibility, our spending on capital investment in the
first half was $244 million compared to the $453
million invested in the first half of last year when we
were completing our Lichfield expansion.
We have confidence in our strategy and the results
it is delivering. But it is important to keep testing
our thinking to ensure we maintain a long-term and
sustainable business. As part of our normal planning
cycle we are always looking three, five and 10 years out.
Even in a world which is changing rapidly, the global
dairy market fundamentals of a growing world
population and higher demand for food, including
dairy, remain constant.
Market growth trends reinforce how important it
is that we stay focused on growing our total milk
volume to 30 billion litres by 2025 and ensuring
consumers have dairy protein which is accessible,
affordable and sustainable.
Our nutrition-focused strategy is meeting these
needs. Our purpose, to be the most trusted source
of dairy nutrition, provides full reassurance about the
quality of our products. That is why we are confident
in dairy’s future and our place in it.
DISRUPT
Market disruptions are no longer confined to
politics, climate or economics. They also come
from companies that think faster and smarter in
anticipating what consumers will want, even before
those consumers know it.
USEFUL FACT
Three new ventures
have emerged from our
Disrupt programme.
We want to lead the market here and our own
Disrupt programme, backed by a leadership team
focused on innovation and quick decisions to get
great ideas into markets has made a very good start
with two promising projects underway.
DISRUPT
After the success of
our first Disrupt round
we are now running a
2017 programme.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER’S LETTER | 5
FONTERRA INTERIM REPORT 2017FONTERRA INTERIM REPORT 2017

VELOCITY
Velocity is now our
way of working, so we
are confident the wins
will keep coming.
OUR PEOPLE
Disrupt is an example of how our people are our
key asset, especially when they are engaged in an
opportunity to make a difference.
Another is Velocity. The transformation work over
the past two years has reduced costs and enabled
faster decision making. Velocity is now our way
of working, so we are confident the wins will keep
coming. We have well-thought-through plans,
clear ownership and accountability and a real
focus on action.
USEFUL FACT
Velocity saw more than 4,000
initiatives completed to transform
how we think and work.
Our business transformation process was initially led
by Jacqueline Chow in her role as Chief Operating
Officer Velocity, with our entire leadership team as
champions. Her ability to engage our people and fire
up their energy made a real difference in ensuring
Velocity lived up to its name.
Jacqueline was appointed Chief Operating Officer
Consumer and Foodservice. On her appointment,
we agreed that she would lead the team until
the first half of 2017, as her intention has been
to return to Sydney to pursue a board career,
living closer to family.
We have now created a Velocity and Innovation
business unit headed by Judith Swales. In March
this year, we announced the appointment of
Lukas Paravicini to the role of Chief Operating
Officer Consumer and Foodservice, effective
1 June 2017. He has served as Chief Financial
Officer for the last three years and he will continue
to support our strong financial team as we work
through the second half.
Previously from Nestlé, he brings a wealth of
experience in leading global food businesses
in established and emerging markets and in
international finance. We are currently undertaking
a global search for his replacement in the CFO role.
CHAIRMAN AND
CHIEF EXECUTIVE
OFFICER’S LETTER
6 | CHAIRMAN AND CHIEF EXECUTIVE OFFICER’S LETTER
FONTERRA INTERIM REPORT 2017FONTERRA INTERIM REPORT 2017

BRIGHTER
OUTLOOK
After two challenging
seasons farmers
are rebuilding.
The versatility of our leadership team and their
ability to take on new roles underlines the ability
and experience we have on hand and will ensure
continuity. In volatile markets, a strong stable
leadership team is all the more important. We thank
them and all of our Fonterra people in New Zealand
and around the world for their energy and efforts.
USEFUL FACT
Our balance sheet continues to
strengthen with net debt, gearing
and operating expenses down.
Continuity is equally important at the Board level.
We appreciate the willingness of long-serving former
Director, Ian Farrelly to return to the Board until
the 2017 election, replacing Michael Spaans who
unfortunately had to make the difficult decision to
step down due to ill health.
OUR COMMITMENT
Our increased forecast total available for payout
has been welcomed but we recognise, after two
difficult seasons, it will take time for our farmers
to fully recover financially. They have had to cut
costs significantly so reinvestment in their farms
will be required. Rebuilding herd numbers and debt
reduction will be priorities.
We have gone into the second half with a real
determination to secure the best possible returns
for our farmer owners and investors through close
financial management, converting higher volumes
of milk into higher-returning products and using
our sales network to convert customer demand into
higher margin Ingredients sales.

John Wilson Theo Spierings
Chairman Chief Executive Officer
CHAIRMAN AND CHIEF EXECUTIVE OFFICER’S LETTER | 7
FONTERRA INTERIM REPORT 2017FONTERRA INTERIM REPORT 2017

IN PARTNERSHIP
Our $20m programme
with DoC focuses on
improving biodiversity
and water quality.
FONTERRA INTERIM REPORT 2017
We agree water quality is important and our
farmers are making a significant investment to
protect it, even when farm returns have been lower.
They have put over $1 billion and countless man
hours into fencing waterways, upgrading effluent
systems, riparian planting and managing nutrients.
We launched our Trusted Goodness™ seal,
showing that we and our farmers stand behind the
quality and goodness of the milk we produce and
the products we make from it. Everyone has an
opinion about Fonterra. What matters is that these
opinions are formed with all the facts available.
We know from independent assessments that
we are rising in Kiwis’ estimations in important
areas like trust, fairness, leadership and social
responsibility. We are building better relationships.
GOVERNANCE AND
REPRESENTATION
We completed our Governance and Representation
Review with our shareholders casting 85.96
per cent of votes in favour of the governance
recommendation, well ahead of the 75 per cent
support required under Fonterra’s Constitution.
Participation in the vote exceeded 50 per cent –
an excellent outcome given the heavy demands
on farmers’ time over spring.
The changes include a reduction in Board size from
13 to 11 with seven Farmer Elected Directors and
four Independent Directors. Candidates for the
WE’RE HERE TO
SUPPORT OUR FARMERS,
OUR PEOPLE, OUR
COMMUNITIES AND THE
ENVIRONMENT. WHAT
BRINGS US TOGETHER IS
OUR COMMON GOAL
TO BE A TRUSTED SOURCE
OF DAIRY NUTRITION.
It’s a lot easier to trust someone when you get to
know them. Our #431AM initiative is connecting
the farming families who own us with other Kiwis
through television, print and social media.
We published our Book of Commitments to say
who we are, what is important to us and what we
stand for. These include Fonterra Milk for Schools,
one of the largest social good programmes run
by a New Zealand business, our Living Water
partnership with the Department of Conservation,
and our Grass Roots Fund which supports
regional community initiatives. In each of these
programmes we are honouring our commitments
to our communities – and that includes in the years
when low prices in the global dairy markets impact
our performance and our returns to our farmers.
A STRONG CO-OP
DOING WHAT’S
RIGHT
Our collective strength comes from being
a Co-operative owned and controlled by
farmers and we are made even stronger
by doing what’s right all the way
from the farm to our markets.
8 | OUR CO-OPERATIVE
#431AM
Our #431AM initiative
is connecting the
farming families who
own us with other
Kiwis through television,
print and social media.
FONTERRA INTERIM REPORT 2017

FONTERRA MILK
FOR SCHOOLS
Fonterra Milk
for Schools is one of
the largest social good
programmes run by a
New Zealand business.
FONTERRA INTERIM REPORT 2017
Farmer Elected Director positions now go through an
assessment process, first with an Independent Panel.
Candidates are assessed against a matrix of skills and
attributes required by the Board. The Independent
Selection Panel then makes candidate recommendations
to the Board Nominations Committee.
Candidates may choose to put themselves forward
without going through this assessment process.
They must secure support from 35 shareholders to
stand against the Board nominated candidates in
the Farmer Elected Director elections. We have also
moved to a first-past-the-post majority voting system
where the successful candidates must have secured
at least 50 per cent of the votes cast.
The changes approved as part of the Governance and
Representation Review also enable strengthening
of the Shareholders’ Council, especially in its
cornerstone shareholder role, building in more
accountability and ensuring we have the same high
standards of skills and qualities in our Councillors
that we expect in our Directors.
SMART FARMERS, SMARTER TOOLS
Our farmers use data every day to increase their
productivity and maintain the competitiveness of
their largely pasture-based systems.
The best data is aggregated and accessible, so we
have been working with the Livestock Improvement
Corporation (LIC) in developing Agrigate which has
been tested by 50 of our farmers.
Agrigate combines milk production and quality data, herd
information, pasture data, local weather forecasts, nutrient
management data and more in one place in real time.
Farmers can make comparisons, see trends and make
better management decisions which support higher
productivity, profitability and sustainability. Agrigate
was rolled out in the third quarter.
We know innovative ideas can come from all quarters,
so Farm Source Activate 2.0 is also underway. It links
our Co-operative with entrepreneurs working on
technology which can add to farmers’ smart toolboxes.
Farm Source Activate 2.0 provides the chance for them
to pitch their ideas for solutions which should support
our farmers to easily collect, analyse, and present data
to drive decision-making on farm.
CUTTING FARMERS’ COSTS
Farm Source™ works to help bring costs down for our
farmers, using our collective strength to secure the best
prices for core farming needs including energy and fuel.
Our Farm Source™ benefits have helped farmers
during the low Milk Price period, with a mixture of
discounts of up to 30 per cent, interest free and then
deferred terms and bonus Reward Dollars. This special
help package was taken up by some 8,000 farmers
with 84 per cent of farmers buying products in it.
Our Farm Source™ Rewards Dollars loyalty programme
has seen more than FSD12.8 million redeemed to date
with a further FSD15.9 million available for redemption.
OUR CO-OPERATIVE | 9
OUR CO(OPERATIVE
FONTERRA INTERIM REPORT 2017

FONTERRA
TRUSTED GOODNESS
™
Our new global food quality
seal – Trusted Goodness™ –
was launched this year and
responds to consumers’
desires to know more about
the source of their food.
OUR
POTENTIAL
OUR AIM IS $35 BILLION IN
REVENUE GENERATED BY
CREATING VALUE OUT OF
30 BILLION LITRES OF MILK
FROM NEW ZEALAND AND
OTHER GEOGRAPHIES.
AT THE HEART OF OUR
STRATEGY IS ACHIEVING
THE BEST RETURNS FOR OUR
FARMERS BY CONVERTING
HIGHER VOLUMES OF
MILK INTO HIGHER VALUE
PRODUCTS, AT PACE, TO
MEET THE DEMANDS OF OUR
CONSUMERS AND CUSTOMERS.
BUILDING TRUST
Openly connecting our Co-operative with consumers
and providing reassurance about the quality, safety
and origins of our products are fundamental to being
the most trusted source of dairy nutrition.
Our new global food quality seal – Trusted Goodness™
– was launched this year and responds to consumers’
desires to know more about the source of their food,
how it is produced and where, and the sustainable
practices which surround it. New Zealand products were
first to carry the seal which has been progressively rolled
out on Fonterra-branded products in the US, China and
Malaysia. Ultimately, our entire portfolio will carry it.
Consumers can now access information on Fonterra.com
detailing our pasture-based farming practices, how our
herds are looked after and the care we take at every
step from farm to market to ensure a high quality
and safe product for them.
Through our Trusted Goodness™ quality seal we have
made a promise to all the families who eat and drink
our products and all the customers who use our
products that they can trust us.
Fonterra’s purpose is to be the most
trusted source of dairy nutrition,
making a difference in the lives of
two billion people by 2025.
FONTERRA INTERIM REPORT 2017
10 | OUR POTENTIAL

ANMUM
™

QR CODES
We are rolling out QR
codes for Anmum™
which consumers can
read via a smart phone to
authenticate the products
they have purchased.
Fonterra has always been able to trace products, using
manual and IT systems. What we are aiming for now is
world-leading electronic product traceability by 2020.
Fonterra is on track to have total electronic traceability to
world-class standards by 2020, from the raw milk source
on-farm through every stage of manufacturing
and every ingredient in every product sold in all our
markets. This means that if we have any concerns about
any product we will be able to electronically trace it
anywhere in our supply chain within hours.
Already, all New Zealand and Australian-sourced products,
representing 74 per cent of total global production, can
be electronically traced through the supply chain from
manufacturing sites to customers.
We are also using product authentication, tamper-evident
packaging and anti-counterfeiting technology.
This includes tamper-evident seals on packaging for all
Anmum™ paediatric nutrition products in New Zealand
and Indonesia, giving consumers a visible indication of
product tampering post-packing. We are also rolling out QR
codes for Anmum™ which consumers can read via a smart
phone to authenticate the products they have purchased.
VOLUME TO VALUE
In Ingredients, we are the global leaders. We continue
to grow this position by developing solutions which create
value for our customers. From innovative whey ingredients
for sports nutrition, through to in-market warehouses which
shorten lead times for product deliveries in the Middle East,
our innovation spans the entire supply chain. Our ability to
partner with key customers is enhanced by our strengths in
innovation, R&D, investments and our people’s abilities.
We have the flexibility to switch our manufacturing mix
to the products that are most in demand. Coupled with
our competitive cost structure, we aim to generate the
best margins above the GDT price benchmarks.
We consistently convert more volumes to higher value
products across our entire business and this applies regardless
of global pricing. Our Ingredients sales volumes for the first
half of the financial year were 11 billion LME, a reduction of
seven per cent as a result of lower milk production.
In the first half of the financial year, our Ingredients gross
margin percentage was 11.1 per cent, a reduction of 3.7 per
cent on the same period last year, due mainly to prices
converging across the product range, where last year cheese,
for example, performed more strongly than powders.
Direct sales to customers are a consistent strategy
and accounted for 58 per cent of our 23.7 billion LME
processed in the 2016 financial year, a 19 per cent increase.
INGREDIENTS
In Ingredients, we are the
global leaders. We continue
to grow this position by
developing solutions which
create value for our customers.
OUR POTENTIAL
OUR POTENTIAL | 11
FONTERRA INTERIM REPORT 2017

HIGHER
RETURNING
PRODUCTS
Every additional litre of
milk production that our
farmers achieve each season
goes directly into our
higher returning products.
NEW GOLD
INSTANT
WHOLE MILK
NZMP’s new Gold
Instant Whole Milk
was released in
December following
two years of research
and development.
In Consumer and Foodservice we are aiming to lead
or be second in eight strategic regional markets. We have
category leadership in New Zealand, Australia, Sri Lanka,
Malaysia and Chile. In China, Brazil and Indonesia, we
continue to expand our market and build our consumer
base by investing in innovation to roll out new products.
In this category, our global brands of Anmum™, Anchor™
and Anlene™ underpin the volume and value strategy.
In the last financial year, we shifted 380 million more LME
into Consumer and Foodservice, bringing the volumes
achieved in the past two years to 1 billion LME.
In the first half of this financial year, we’ve shifted a
further 227 million LMEs into higher returning products,
continuing the solid momentum in this business.
MORE MILK, MORE VALUE
OPPORTUNITIES
Every additional litre of milk production that our farmers
achieve each season goes directly into our higher-returning
products. This is exactly how it should be. We can support
this by complementing New Zealand production with milk
sourced internationally. These global volumes use local
production in the most profitable products and generate
more value for our farmers.
Sourcing outside New Zealand is important for our growing
Consumer and Foodservice operations within regional
markets including Sri Lanka, China, Chile and Australia.
We certainly want to grow and meet demand. Currently
we have 21 billion LME flowing into our New Zealand sites.
We know global demand is predicted to exceed 91 billion
litres in the globally traded market and 465 billion in the
total formal dairy market by 2020.
If we want to share in this growth – and we do to protect
and grow our farmers’ returns – we need more milk than
we can produce at home.
THE INGREDIENTS ENGINE
Our Ingredients business represents two thirds of
our earnings.
Value is created at each step in the Ingredients supply
chain from milk collection to the payment for finished
products. There is demand for ingredients products across
the whole portfolio, but we get the most out of every drop
of milk by matching products to demand and prioritising
the highest returning products.
Our competitive cost structure and manufacturing
optionalities help to maximise yields and maintain margins
when prices fluctuate for some products.
Developing new products for our customers helps to
grow our share of their business and our leadership in
the market. Our dairy knowledge enables us to bring
customers these innovative ingredients.
OUR
POTENTIAL
12 | OUR POTENTIAL
FONTERRA INTERIM REPORT 2017

In the first half, for example, NZMP’s new Gold Instant Whole
Milk™ was released following two years of research and
development. The premium powder dissolves quickly and
retains a fresh milk flavour and creaminess.
NZMP Gold Instant Whole Milk Powder™ for UHT enables
longer production runs than standard milk powders, more
consistent shelf-life stability and an end-product with
a rich creamy flavour. We also developed NZMP’s
white butter for applications such as spreadable cheese,
recombined cream cheese and potentially ice-cream. While
our butter is naturally golden, pale blends are favoured
for these applications, so our researchers partnered with
customers in the Middle East to meet their needs.
Our innovation responds to changing dietary demands.
NZMP’s new Low Lactose Whole Milk Powder™ enables the
lactose intolerant to still enjoy dairy by breaking lactose
down into more digestible sugars. Low lactose dairy is one
of the fastest growing sectors in the dairy industry and
forecast to grow six per cent year-on-year.
WINNING OVER CONSUMERS AND
FOODSERVICE CUSTOMERS
Our Consumer and Foodservice business focuses on
our eight strategic global markets where we are using
the strength of our Anchor™, Anlene™ and Anmum™
global brands, as well as strong regional brands like
Mainland™ to gain a bigger share of spending on dairy.
Our flagship brands are using innovation as well as high
quality nutrition to win over more customers, especially
in markets like Asia and China. Our new product launches
are designed to meet growing demand in areas such
as premium nutrition, while in Foodservice we continue
to develop new higher value products which provide
solutions for our customers.
For example, we launched two UHT milk products,
LiveUp™, with 50 per cent more protein than standard
UHT milk and NaturalUp™, made from certified organic
milk. The brands are meeting demand in China for
premium products with high nutritional value.
In advanced paediatric nutrition, Fonterra’s Research
and Development team received a New Zealand
Innovation Award for its work in complex milk lipids which
are packed with many of the minor components found
in breast milk. This work supports our ability to back our
paediatric nutrition products in the Anmum™ portfolio
with sound science.
In Japan, mascarpone developed for this market is
enabling more milk to flow into higher-returning products.
Unlike the typically lower fat, slightly sweet traditional
mascarpone, the product for Japan is richer and sweeter
with a higher proportion of natural dairy fats. Usage
includes ice-cream developed for adult tastes.
PREMIUM
PRODUCTS
Anchor LiveUp™
and NaturalUp™ are
high protein UHT
products appealing
to Chinese consumers.
NZMP
WHITE BUTTER
White commercial
butter specifically
made for the Middle
East market, compared
with the golden
consumer butter.
OUR POTENTIAL
OUR POTENTIAL | 13
FONTERRA INTERIM REPORT 2017

$
9. 2B
SALES
REVENUE
Up five per cent
compared with
the same period
last year.
Our sales revenue for the first six months to 31 January 2017
rose five per cent on the back of improved prices globally
for dairy and growth in our Consumer and Foodservice
business. This increase came despite total sales volumes
declining by seven per cent to 11.7 billion LME, primarily
due to lower milk collections. The prior comparable period
also began with larger inventory levels creating more
sales opportunities for the Ingredients business. Efforts to
maintain lower inventory levels have continued with total
closing inventory by volume down nine per cent on the end
of the first half last year.
In Consumer and Foodservice we saw further volume
growth with an additional 227 million LME sold through
these channels. This demonstrates the continued
execution of our strategy and its ability to deliver in
higher milk price environments.
USEFUL FACT
Global Foodservice sales grew
17 per cent by volume.
GROUP
OVERVIEW
Delivering on our strategy of
producing a strong Ingredients
performance and moving more milk
higher up the value chain.
HIGHLIGHTS
>Strong performance with another half
year result generating normalised EBIT
of over $600 million
>Overall volume in LME down seven per
cent due to reduced milk collections
>Additional 227 million LME in our
Consumer and Foodservice business
driving 30 per cent increase in its
normalised EBIT
>Foodservice volumes grew a further
17 per cent driven by Greater China
>Lower debt and gearing from ongoing
financial discipline
14 | OUR PERFORMANCE
FONTERRA INTERIM REPORT 2017

CONSUMER
FOODSERVICE
GROWTH
Strong growth in
volume and earnings,
led by Greater China.
NZD MILLION
SIX MONTHS ENDED
31 JANUARY 2017
SIX MONTHS ENDED
31 JANUARY 2016CHANGE
Volume (LME, billion)11.712.6(7%)
Volume (’000 MT)2,2482,324(3%)
Sales revenue 9,2418,8385%
Gross margin1,7611,873(6%)
Gross margin percentage19%21%–
Operating expenses(1,232)(1,312)(6%)
Reported EBIT 644752(14%)
Normalised EBIT607665(9%)
Net finance costs(157)(266)(41%)
Tax (expense)/credit(69)(77)(11%)
Net profit after tax4184092%
Earnings per share (cents)26254%
Dividend per share (cents)2020–
Gearing ratio¹46.6%49.2%–
Free cash flow(417)346–
Capital expenditure244453(46%)
1 Gearing ratio is economic interest-bearing debt divided by economic net interest-bearing debt, plus equity, excluding cash flow hedge reserve.
OUR PERFORMANCE
OUR PERFORMANCE | 15
FONTERRA INTERIM REPORT 2017

NORMALISED
EBIT
The Co-operative
delivered another half
year with normalised
EBIT over $600 million.
$
607M
We delivered another half year with normalised EBIT over
$600 million but overall saw a decline of nine per cent.
This was a result of normalised EBIT for the Ingredients business
declining 17 per cent on the back of lower sales volumes and
the impact of WMP prices rising relatively faster than the
rest of our Ingredients portfolio. This was partially offset by
a good performance by the sales force, achieving higher prices
per metric tonne than our price benchmarks.
USEFUL FACT
Greater China grew
normalised EBIT by 41 per cent
to $96 million.
In the Consumer and Foodservice business, we had normalised
EBIT growth of $72 million, a 30 per cent increase on the
previous comparable period. This growth was driven by all four
regions. In particular, Greater China continued to grow earnings
through the strong performance of the Foodservice business,
and our Soprole brand in Chile grew on the back of its successful
relaunch. Also, the benefits of our turnaround in the Australian
business lifted earnings in Oceania.
The decline in the Brazilian economy continued to challenge
our business in Latin America, however we saw profitable
market share growth in Brazil through the results of our
improved operating model.
Our China Farms’ result improved in this half year due
to improved operating performance with all farms fully
operational. Now that the period of significant capital
investment has passed, we are focused on further efficiency
increases. Nonetheless, China Farms still delivered
a loss due to continued low domestic milk prices.
The organisation-wide transformation programme continued
to provide benefits across the business. The focus in the period
was on embedding improvements already delivered and in
identifying and implementing the next round of opportunities.
Net finance costs were 41 per cent lower. This is a result
of less overall debt and the positive impact of movements
in the fair value of our debt and derivatives that are marked
to market for accounting purposes.
GROUP
OVERVIEW
16 | OUR PERFORMANCE
FONTERRA INTERIM REPORT 2017

LOWER NET DEBT
The Co-operative lowered
economic net interest
bearing debt by 11 per
cent to $6.1 billion.
STRONG CO-OPERATIVE
Ongoing financial discipline enabled the Co-operative
to further strengthen its balance sheet. This strengthening
has resulted from both an increase in equity plus a reduction
in debt from ongoing profitability and continued strong financial
discipline. Economic net interest-bearing debt declined
by $0.8 billion to $6.1 billion for the same period last year.
This resulted in improved gearing of 46.6 per cent, down from
49.2 per cent. Gearing is typically higher for the Co-operative
in the middle of the financial year due to the seasonal nature
of our production. We are on target to retain our gearing ratio
between 40 and 45 per cent by year-end.
Operating cash flow in the first six months is typically an out
flow due to the sales profile of the New Zealand Ingredients
business. In this six month period operating cash flow was
an out flow of $167 million, reflecting the higher milk prices
incorporated into the valuation of inventories and receivables
but offset partially by supplier payables moving towards our
standard policy.
Through our strong ongoing financial discipline we have
continued to make improvements in our working capital
performance with working capital days reducing a further
eight days from 76 to 68 days over the comparable period.
Total group inventory levels have reduced by nine per cent
compared to the end of the first half last financial year. This reflects
maintenance of the significant improvements in inventory levels
delivered last year as part of the transformation programme.
USEFUL FACT
Capital expenditure is on track
to remain within the $900 million
forecast for the full year.
During the period, expenditure on capital investments was
$244 million. This is in line with expectations and represents
a significant reduction on the previous comparable period that
included the tail-end of the large investments in additional capacity.
Also, capital expenditure is often lower in the first half as scheduled
maintenance occurs on sites during the winter shut at the end
of the financial year. We are on track to spend the previously
forecast envelope of $900 million that supports our strategy.
The continued strong performance and the strength of the
Co-operative’s balance sheet supports an interim dividend
of 20 cents per share. This is in line with Fonterra’s dividend
policy to pay out 65–75 per cent of adjusted net profit after
tax over time.
11%
OUR PERFORMANCE
OUR PERFORMANCE | 17
FONTERRA INTERIM REPORT 2017

NORMALISED
EBIT
Ingredients
normalised EBIT
of $510 million
was down 17 per cent.
INVENTORY
LEVELS
We maintained gains
in lower inventory levels
from last financial year.
$
510M
VOLUME
Milk collection across New Zealand was down five per cent to
1,053 million kgMS for the 2016/17 season to 31 January 2017.
Lower collections were primarily the result of adverse weather
in the North Island through the peak production months of
October and November. North Island collections for the period
were down seven per cent, with the South Island declining
comparatively less at two per cent down. In Australia, milk
collection for the 2016/17 season to 31 January 2017 was
79 million kgMS, two per cent down on the same period last
year. These volumes include milk collected directly and through
third parties. A decline of two per cent represents significant
gains in market share as overall Australian dairy production
has declined at a higher rate due to climatic impacts.
USEFUL FACT
Our New Zealand daily milk collection
peaked at 80 million litres on 19 October
2016 for the 2016/17 season.
INGREDIENTS
This platform includes the global sales
from our Ingredients businesses in New Zealand,
Australia and Latin America. It also includes
the Fonterra Farm Source™ rural supplies
retail chain in New Zealand.
HIGHLIGHTS
>Sales revenue increased eight per cent
due to higher commodity prices
>Normalised EBIT of $510 million down
17 per cent
>Lower sales volumes in LME due to milk
collections five per cent down on last year
and lower opening inventory levels
>New Zealand product mix shifted towards
higher value liquids and cheese
>Inventory level improvements from last
year held
>Australian Ingredients gross margin stable
18 | OUR PERFORMANCE
FONTERRA INTERIM REPORT 2017

NZD MILLION
SIX MONTHS ENDED
31 JANUARY 2017
SIX MONTHS ENDED
31 JANUARY 2016CHANGE
Volume (LME, billion)11.011.8(7%)
Volume (’000 MT)1,6591,6242%
Sales revenue 7,2286,7098%
Total gross margin801992(19%)
– New Zealand product mix644836(23%)
New Zealand reference products246351(30%)
New Zealand non-reference products398485(18%)
– Australian ingredients99–
– Other gross margin1481471%
Normalised EBIT
1
510617(17%)
Gross margin per MT
– Reference products ($ per MT)253331(24%)
– Non-reference products ($ per MT)1,1781,412(17%)
1 Normalised EBIT for Ingredients excludes unallocated costs.
PRODUCT
MIX
We shifted our
sales mix towards
non-reference
products to
maximise value.
OUR PERFORMANCE
OUR PERFORMANCE | 19
FONTERRA INTERIM REPORT 2017

Total sales were 11. 0 billion LME reflecting a decrease
of seven per cent. This comparative decline reflects the first
half of last year having higher opening inventory levels and
greater milk collections. Opening inventory for the period
was approximately 121,000 MT lower than last year due
to improvements in supply chain processes and the strong
sales performance in the 2016 financial year. These improved
inventory levels have been carried through the period with
closing inventory by volume down 11 per cent.
We continue to leverage the benefits of our global sales
force, increasing sales into the Middle East and Africa to
partially offset lower levels of demand from South East Asia
and for SMP in China. During the first half, we marked the
opening of a new sales office in Nigeria. We also increased
sales of product manufactured for the Consumer and
Foodservice business reflecting Fonterra’s integrated milk
pool strategy. Sales of Australian sourced ingredients were
down slightly due to the lower milk collections in the region.
Global sourcing of products from other milk pools was in
line with last year’s volumes.
VALUE
Ingredients delivered a strong result, despite normalised
EBIT reducing 17 per cent to $510 million. The main driver
of the decline was the relatively rapid rate of increase in Milk
Price reference product prices compared to non-reference.
While our non-reference product portfolio still delivered
attractive margins, this had the effect of reducing their
profitability relative to the previous comparable period.
Offsetting this was a good operational performance and
higher levels of additional margin for customer specific
services, solutions and specifications across all products.
USEFUL FACT
Reference products are dairy products used
in the calculation of the Farmgate Milk Price.
These are Whole Milk Powder (WMP), Skim
Milk Powder (SMP), Buttermilk Powder
(BMP), Butter and Anhydrous Milk Fat (AMF).
Our New Zealand Ingredients business manufactures five
commodity products that inform the Farmgate Milk Price.
These are referred to as reference products, while all other
products are referred to as non-reference products. The relative
difference between reference product and non-reference
product prices can impact our gross margin.
The overall New Zealand Ingredients product mix gross margin,
including both reference and non-reference products, decreased
by 23 per cent to $644 million. This reflected declines in both
non-reference and reference products gross margins. This result
was also impacted by contracts with short-term lagged pricing
underperforming in a rising milk price environment. These tend
to over-perform in a falling milk price environment.

INGREDIENTS
NEW ZEALAND INGREDIENTS
– REVENUE AND VOLUME
1
SIX MONTHS ENDED
31 JANUARY 2017
SIX MONTHS ENDED
31 JANUARY 2016CHANGE
Production volume (’000 MT)
Reference products
1,2921,335(3%)
Non-reference products
457476(4%)
Sales volume (’000 MT)
Reference products
9731,061(8%)
Non-reference products
338343(1%)
Revenue per MT (NZD)
Reference products
3,8733,20921%
Non-reference products
5,2015,0383%
1 Figures exclude bulk liquid milk. The bulk liquid milk volume for the six months ended 31 January 2017 was 37,000 MT
(six months ended 31 January 2016 was 37,000 MT).
20 | OUR PERFORMANCE
FONTERRA INTERIM REPORT 2017

During the period we moved our sales mix towards non-reference
products such as consumer liquids and cheese, reflecting
their relatively higher gross margins. This shift was enabled by
our new WMP plant at Lichfield coming onstream, creating
greater optionality across our business. However, due to the
faster increase in prices of products informing the milk price
(as illustrated by the 21 per cent increase in the average selling
price of Fonterra’s reference products versus a three per cent
increase for non-reference) the gross margin per MT on these
products was 17 per cent lower than in the same period last year.
This resulted in a reduction in gross margin for non-reference
products of $87 million to a still significant $398 million.
Early in the season, the Milk Price Manual was amended
with a revised basis of calculation for the revenue informing
the Farmgate Milk Price. This change was made under the
guidelines requiring a competitive milk price. In the first half
this change contributed an additional six cents per kgMS to
the Farmgate Milk Price on a contracted basis. The higher cost
of milk contributed to the lower gross margin on reference
products of $246 million, down $105 million.
Our New Zealand operations responded to the lower collection
volumes by moving milk between regions in order to best
manage cost and revenue. Previous investments in capacity
and the lower milk production ensured there were no peak costs
again this financial year. We continue to focus on our supply
chain and saw the first arrival of the largest ever container ship
into New Zealand through our Kotahi freight joint venture.
Operationally we also saw a good performance with improved
yields at sites and a reduction in unplanned plant downtime.
Our engineering teams responded quickly to the collapse of
a silo at our Edendale site in the South Island. We have
inspected all similar silos across our operations and will be
conducting a broad review during the off-season.
During the period, we successfully commissioned the new
site at Lichfield, creating capacity to enable optionality and
future growth. Capital investments during the period were
significantly lower than in the first half of last year, in line
with expectations. The focus of expenditure was on quality
improvement and reduced risk, as well as expanding capacity
of non-reference products.
Our Australian ingredients business has benefited from
a strong opening milk price that helped grow milk volumes,
despite a poor start to the season due to adverse weather.
Good progress is being made on the re-build of the Stanhope
cheese plant and the new state-of-the-art centralised
distribution centre that is expected to be completed by the
end of the financial year.
LICHFIELD
EXPANSION
Powders made at Lichfield
will meet demand in key
growth markets including
China and the Middle East.
OUR PERFORMANCE
OUR PERFORMANCE | 21
FONTERRA INTERIM REPORT 2017

HIGHER
VALUE
An additional 227 million
LME moved into higher
value Consumer and
Foodservice.227M
VOLUME
The first half of the year saw continued delivery of our strategy
to move more volume into higher-value Consumer and Foodservice
products. We achieved volume growth of nine per cent to 2.7
billion LME, adding a further 227 million LME. This was driven by
strong growth of Foodservice at 17 per cent and four per cent in
our Consumer business.
• Greater China: additional 143 million LME, largely due to
the continued success of our foodservice model in Mainland
China, but also the growth of our consumer brands
• Oceania: strong underlying growth, but a five per cent
decline in reported volume due to reclassification of some
UHT volumes to ingredients and the divestment of our
yoghurt and dairy desserts business in Australia
• Asia: further strong growth of nine per cent on the back
of strong demand growth in Sri Lanka and the Philippines
• Latin America: volume growth versus last year through
successful re-launch of Soprole offsetting the impact of
challenging economic environments in Brazil and Venezuela
USEFUL FACT
Liquid Milk Equivalent (LME) is a measure
of the quantity of milk used in a processed
dairy product based on the amount of fat
and protein in the product. It does not
consider lactose, minerals and water content.
CONSUMER AND
FOODSERVICE
This platform comprises the Consumer
brands and Foodservice businesses
in Asia, Greater China, Latin America
and Oceania.
HIGHLIGHTS
>Additional 227 million LME moved into
higher-value products
>Normalised EBIT growth of 30 per cent to
$313 million
>Higher earnings in all four regions, led by
Greater China up $28 million
>Foodservice volume growth of 17 per cent
22 | OUR PERFORMANCE
FONTERRA INTERIM REPORT 2017

FOODSERVICE
BUSINESS
Greater China: additional
143 million LME, largely
due to the continued
success of our Foodservice
model in Mainland China.
NZD MILLION
SIX MONTHS ENDED
31 JANUARY 2017
SIX MONTHS ENDED
31 JANUARY 2016CHANGE
Volume (LME, billion)2.7 2.59%
Consumer1.61.54%
Foodservice1.11.017%
Volume (’000 MT)9088872%
Sales revenue 3,2393,2201%
Gross margin9669037%
Gross margin (%)30%28%–
Consumer31%28%–
Foodservice27%28%–
Normalised EBIT31324130%
NORMALISED EBIT: KEY PERFORMANCE DRIVERS
NZD MILLION
SIX MONTHS ENDED
31 JANUARY 2017
SIX MONTHS ENDED
31 JANUARY 2016
Normalised EBIT prior comparable period241116
Volume10237
Price(38)(183)
Cost of goods sold21270
Operating expenses32(1)
Other(45)2
Normalised EBIT313241
OUR PERFORMANCE
OUR PERFORMANCE | 23
FONTERRA INTERIM REPORT 2017

CONSUMER AND
FOODSERVICE
VALUE
The first half delivered a strong result for normalised EBIT
with an increase of 30 per cent to $313 million. This was driven
by all four regions with Greater China growing $28 million
(41 per cent) in the period, and Oceania increasing by
$25 million (76 per cent) reflecting the continued strong
performance of Australia.
Gross margins were robust in both businesses. In Consumer
they have expanded due to lower costs of product in inventory
and our supply chain, despite rising milk prices. This reflects
a strategic focus on improved go-to-market models and price
management across the global business. In Foodservice, gross
margins declined slightly to 27 per cent reflecting the impact
of rising product prices.
• Greater China: normalised EBIT up 41 per cent through
greater volume and tight cost control
• Oceania: 76 per cent increase in normalised EBIT due to
sustained good performance in New Zealand and continued
turnaround in Australia
• Asia: largest contributor to value with $124 million in
normalised EBIT, up 15 per cent
• Latin America: improved performance despite challenging
market in Brazil and Venezuela
REGIONAL UPDATE
Greater China
Our Greater China business continues to grow with volume
up 32 per cent and normalised EBIT up $28 million, an increase
of 41 per cent.
During the first half, we saw another very strong performance
by the Foodservice business, reflective of their successful
business model and value proposition, particularly in Mainland
China. Our Consumer brands businesses in Hong Kong and
Taiwan performed well and we saw overall Anmum™ sales
increase by 20 per cent.
Anchor™ is now the number two imported UHT brand in China
for e-commerce sales, reflecting our strong commitment to this
important sales channel.
USEFUL FACT
Tip Top is now 80 years old
and still one of New Zealand’s
favourite brands.
PERFORMANCE
HIGHLIGHTS
Normalised EBIT
grew strongly in all
of our Consumer and
Foodservice regions.
CONSUMER AND FOODSERVICE PERFORMANCE
LME (BILLION)NORMALISED EBIT ($M)
SIX MONTHS ENDED
31 JANUARY
2017
31 JANUARY
2016CHANGE
31 JANUARY
2017
31 JANUARY
2016CHANGE
Consumer and Foodservice2.72.59%31324130%
Greater China0.60.432%966841%
Oceania0.91.0(5%)583376%
Asia0.90.89%12410815%
Latin America0.40.319%35329%
24 | OUR PERFORMANCE
FONTERRA INTERIM REPORT 2017

SOPROLE
Soprole is one of
the most recognised
brands in Chile and
loved by consumers.
Oceania
Both of our key markets in Oceania performed well, supporting
significantly higher normalised EBIT for the first half of $58 million,
up 76 per cent. Volumes were down five per cent due to the
reallocation of some liquid milk production in New Zealand to the
Ingredients business and the divestment of the underperforming
yoghurts and dairy desserts business in Australia.
Our Australian business is performing very well on the back of a
successful turnaround and the business focusing on its strongest
brands in product categories where we have a clear advantage.
The New Zealand business had a good half, growing market
share. This was supported by marketing campaigns for Anchor™
and celebrating Tip Top’s 80th birthday.
Asia
In our Asia business, we saw volume growth of nine per cent
and a $16 million increase (15 per cent) in normalised EBIT to $124
million. In our key markets in the region, Sri Lanka had good volume
growth on the back of the successful ‘Goodness Feeds Greatness’
marketing campaign. We also had a good result in Vietnam, however
Indonesia is undergoing changes in consumption patterns and
we are adjusting our business model accordingly.
USEFUL FACT
In Ethiopia, Anchor™ milk is sold in single
serve sachets at affordable prices.
The growth opportunity is still very strong in our Asia business,
with our recent successes in the Middle East and Africa
demonstrating this. Our Anchor™ branded milk powder in
Ethiopia is now a leader in this market of over 100 million
people. This success is shared not just by Fonterra, but also
our joint venture partner, and local consumers who gain
access to affordable, high quality nutrition.
Latin America
Overall, we delivered a good result in Latin America with sales
volumes up on last year and normalised EBIT up nine per cent
to $35 million for the period.
Our Soprole business in Chile continues to do well. During
the first half, we had a successful relaunch of the brand and
consumers are recognising the benefits of our new products
that have been reformulated to meet even higher nutritional
standards. This is driving growth.
The economy in Brazil continues to provide challenges,
however we saw profitable market share growth through
the period. This is made possible by the operational changes
made in the last financial year giving us a lower cost base in
order to compete on price and quality through a strong focus
on product innovation.
In Venezuela, our operations have continued to focus on local
sourcing of materials and delivering product when possible in
order to supply food and nutrition for the population.
ANCHOR™
Anchor™ is now the
number two imported
UHT brand in China
for e-commerce sales.
OUR PERFORMANCE
OUR PERFORMANCE | 25
FONTERRA INTERIM REPORT 2017

VOLUME
Our farming operations in China comprise two completed
hubs producing high-quality fresh milk. Yutian is our most
established hub consisting of three single farms and one
double farm, with 18,000 milking cows.
USEFUL FACT
A typical hub consists of three to four
farms in one region, with approximately
16,000 milking cows.
Our second hub, Ying, is now fully operational with all farms
fully stocked with productive livestock. Ying consists of one
single farm and two double farms, with 13,500 milking cows,
and we will see further growth as the herd matures.
Sales volume of fresh milk increased by 22 per cent to
126 million LME compared with the same period last year.
In addition, we sold 30 million LME of milk powder from
inventory. Milk volume will continue to build as our herds
progress to full year round production. When at full capacity,
expected in financial year 2018 for Yutian and by 2020 for
Ying, our farms will be able to produce a combined volume
of around 380–400 million LME.
CHINA
FARMS
This platform comprises the farming
operations in China producing
high-quality fresh milk as part of our
integrated China strategy.
HIGHLIGHTS
>Volume growth continues with all farms
now operational
>Continued improvements in efficiency and
cost management to offset low milk prices
>Milk sales now integrated into global
ingredients sales
CHINA FARMS
Milk from our farms in
China is now sold via
our Global Ingredients
sales team to leading
customers in China.
SALES VOLUME
Sales volume increased
by 26 per cent.
26%
26 | OUR PERFORMANCE
FONTERRA INTERIM REPORT 2017

We are continuing to progress our third hub, a joint venture
between Fonterra and Abbott, which leverages our expertise
in dairy nutrition and farming, and Abbott’s continued
commitment to business development in China. Construction
of the first farm is complete and further development will
follow our rolling plan over coming years.
USEFUL FACT
A single farm can accommodate up to
3,200 milking cows, while a double farm
has capacity for twice that number.
VALUE
Our strategy for China Farms is to produce high quality fresh
milk with scale and efficient operations. This allows Fonterra
to deliver value through integrating the sale of our milk into
our Ingredients business in Greater China. We continue to
investigate opportunities to develop downstream processing
capacity to support our Consumer and Foodservice business.
Cost reductions continue to be delivered through both
scale efficiencies as production increases and reductions
in operating costs.
With the farm development programme now complete, capital
expenditure will remain at low levels. Expenditure in the
six months to 31 January 2017 covered the completion of
our effluent investments and business-as-usual maintenance
and animal rearing costs.
NZD MILLION
SIX MONTHS ENDED
31 JANUARY 2017
SIX MONTHS ENDED
31 JANUARY 2016CHANGE
Volume (LME, billion)0.20.151%
Volume (‘000 MT)13010326%
Sales revenue 1229528%
Normalised EBIT(24)(29)–
OPERATIONAL
EFFICIENCY
Operational savings are
being driven by scale
and cost reduction.
OUR PERFORMANCE
OUR PERFORMANCE | 27
FONTERRA INTERIM REPORT 2017

INTERIM
FINANCIAL
STATEMENTS
For the six months ended
31 January 2017
CONTENTS
DIRECTORS’ STATEMENT 29
INCOME STATEMENT 30
STATEMENT OF COMPREHENSIVE INCOME 31
STATEMENT OF FINANCIAL POSITION 32
STATEMENT OF CHANGES IN EQUITY 33
CASH FLOW STATEMENT 34
BASIS OF PREPARATION 35
NOTES TO THE FINANCIAL STATEMENTS 36
28 | INTERIM FINANCIAL STATEMENTS
FONTERRA INTERIM REPORT 2017

DIRECTORS’ STATEMENT
FOR THE SIX MONTHS ENDED 31 JANUARY 2017
The Directors of Fonterra Co-operative Group Limited (Fonterra) are pleased to present to Shareholders the financial statements
for Fonterra and its subsidiaries (together the Group) and the Group’s interest in its equity accounted investments for the six months
ended 31 January 2017.
The Directors present financial statements for the six months, which fairly present the financial position of the Group and its financial
performance and cash flows for that period.
The Directors consider the financial statements of the Group have been prepared using accounting policies which have been consistently
applied and supported by reasonable judgements and estimates, and that all relevant financial reporting and accounting standards have
been followed.
The Directors believe that proper accounting records have been kept which enable, with reasonable accuracy, the determination of the
financial position of the Group and facilitate compliance of the financial statements with the NZX Listing Rules.
The Directors consider that they have taken adequate steps to safeguard the assets of the Group, and to prevent and detect fraud
and other irregularities.
The Directors hereby approve and authorise for issue the financial statements for the six months ended 31 January 2017 presented
on pages 30 to 46.
For and on behalf of the Board:
JOHN WILSON DAVID JACKSON
CHAIRMAN DIRECTOR
21 March 2017 21 March 2017
INTERIM FINANCIAL STATEMENTS | 29
FONTERRA INTERIM REPORT 2017
OUR PERFORMANCE

The accompanying notes form part of these interim financial statements.
INCOME STATEMENT
FOR THE SIX MONTHS ENDED 31 JANUARY 2017
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
NOTES
31 JAN 2017
UNAUDITED
31 JAN 2016
UNAUDITED
31 JUL 2016
AUDITED
Revenue from sale of goods9,2418,83817,199
Cost of goods sold2(7,480)(6,965)(13,567)
Gross profit1,7611,8733,632
Other operating income90127266
Selling and marketing expenses(329)(363)(703)
Distribution expenses(283)(311)(585)
Administrative expenses(440)(445)(844)
Other operating expenses(180)(193)(396)
Net foreign exchange gains30227
Share of profit of equity accounted investees(5)4254
Profit before net finance costs and tax6447521,431
Finance income17618
Finance costs(174)(272)(517)
Net finance costs(157)(266)(499)
Profit before tax487486932
Tax expense(69)(77)(98)
Profit after tax418409834
Profit after tax is attributable to:
Equity holders of the Co-operative413404810
Non-controlling interests5524
Profit after tax418409834
GROUP $
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2017
UNAUDITED
31 JAN 2016
UNAUDITED
31 JUL 2016
AUDITED
Earnings per share:
Basic and diluted earnings per share0.260.250.51
30 | INTERIM FINANCIAL STATEMENTS
FONTERRA INTERIM REPORT 2017

STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 31 JANUARY 2017
The accompanying notes form part of these interim financial statements.
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2017
UNAUDITED
31 JAN 2016
UNAUDITED
31 JUL 2016
AUDITED
Profit after tax418409834
Items that may be reclassified subsequently to profit or loss:
Hedge reserves:
–Net fair value gains/(losses) on cash flow hedges268(22)439
–Transferred and reported in revenue from sale of goods(194)446396
–Tax expense on cash flow hedges(21)(119)(234)
–Changes in cost of hedging reserve 3––
Net investment hedges:
–Net fair value gains on hedging instruments452593
–Transferred and reported in other operating income––8
–Tax expense on net investment hedges(12)(7)(28)
Available for sale investments:
–Net fair value gains on available for sale investments–35
Foreign currency translation losses attributable to equity holders(159)(171)(376)
Foreign currency translation reserve transferred to income statement(1)(1)(15)
Hyperinflation movements attributable to equity holders4(9)(16)
Share of equity accounted investees’ movements in reserves155
Other reserves movements(2)––
Total items that may be reclassified subsequently to profit or loss(68)150277
Items that will not be reclassified subsequently to profit or loss:
Foreign currency translation gains/(losses) attributable to non-controlling interests1(55)(84)
Hyperinflation movements attributable to non-controlling interests3(6)(10)
Net fair value gains on investments in shares2––
Non-controlling interest other movements(2)––
Total items that will not be reclassified subsequently to profit or loss4(61)(94)
Total other comprehensive (expense)/income recognised directly in equity(64)89183
Total comprehensive income3544981,017
Total comprehensive income is attributable to:
Equity holders of the Co-operative 3475541,087
Non-controlling interests7(56)(70)
Total comprehensive income3544981,017
INTERIM FINANCIAL STATEMENTS | 31
FONTERRA INTERIM REPORT 2017
OUR PERFORMANCE

STATEMENT OF FINANCIAL POSITION
AS AT 31 JANUARY 2017
GROUP $ MILLION
AS AT
NOTES
31 JAN 2017
UNAUDITED
31 JAN 2016
UNAUDITED
31 JUL 2016
AUDITED
ASSETS
Current assets
Cash and cash equivalents348338369
Trade and other receivables 2,2102,2821,625
Inventories4,5664,0712,401
Tax receivable231313
Derivative financial instruments 45443451
Assets held for sale–10787
Other current assets 140117145
Total current assets7,7416,9715,091
Non-current assets
Property, plant and equipment6,1126,0866,172
Equity accounted investments 9161,065960
Livestock317358342
Intangible assets3,0713,1383,142
Deferred tax assets328579410
Derivative financial instruments242483417
Other non-current assets 617396584
Total non-current assets11,60312,10512,027
Total assets19,34419,07617,118
LIABILITIES
Current liabilities
Bank overdraft91512
Borrowings59831,397955
Trade and other payables 2,1761,9832,169
Owing to suppliers2,3591,213719
Tax payable314418
Derivative financial instruments4943143
Provisions474847
Other current liabilities383635
Total current liabilities 5,6925,1673,998
Non-current liabilities
Borrowings55,7686,3145,397
Derivative financial instruments 567429569
Provisions158157152
Deferred tax liabilities26
8344
Other non-current liabilities82111
Total non-current liabilities 6,5277,0046,173
Total liabilities12,21912,17110,171
Net assets7,1256,9056,947
EQUITY
Subscribed equity5,8415,8225,833
Retained earnings1,6381,4581,384
Foreign currency translation reserve(555)(264)(428)
Hedge reserves120(232)64
Other reserves10116
Total equity attributable to equity holders of the Co-operative7,0546,7956,859
Non-controlling interests7111088
Total equity7,1256,9056,947
The accompanying notes form part of these interim financial statements.
32 | INTERIM FINANCIAL STATEMENTS
FONTERRA INTERIM REPORT 2017

STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 31 JANUARY 2017
ATTRIBUTABLE TO EQUITY HOLDERS OF THE CO-OPERATIVE
GROUP $ MILLION
SUBSCRIBED
EQUITY
RETAINED
EARNINGS
FOREIGN
CURRENCY
TRANSLATION
RESERVE
HEDGE
RESERVES
OTHER
RESERVESTOTAL
NON-
CONTROLLING
INTERESTS
TOTAL
EQUITY
As at 1 August 20165,8331,384(428)6466,859886,947
Profit after tax–413–––4135418
Other comprehensive income/(expense)–1(127)564(66)2(64)
Total comprehensive income/(expense)–414(127)5643477354
Transactions with equity holders in their capacity as equity holders:
Dividend paid to equity holders of the Co-operative–(160)–––(160)–(160)
Equity instruments issued8––––8–8
Dividend paid to non-controlling interests––––––(24)(24)
As at 31 January 2017 (unaudited)5,8411,638(555)120107,054717,125
As at 1 August 20155,8141,289(110)(537)176,4731866,659
Profit after tax–404–––4045409
Other comprehensive income/(expense)–5(154)305(6)150(61)89
Total comprehensive income/(expense)–409
(154)305(6)554(56)498
Transactions with equity holders in their capacity as equity holders:
Dividend paid to equity holders of the Co-operative–(240)–––(240)–(240)
Equity instruments issued8––––8–8
Dividend paid to non-controlling interests––––––(20)(20)
As at 31 January 2016 (unaudited)5,8221,458(264)(232)116,7951106,905
As at 1 August 20155,8141,289(110)(537)176,4731866,659
Profit after tax–810–––81024834
Other comprehensive income/(expense)–5(318)601(11)277(94)183
Total comprehensive income/(expense)–815(318)601(11)1,087(70)1,017
Transactions with equity holders in their capacity as equity holders:
Dividend paid to equity holders of the Co-operative–(720)–––(720)–(720)
Equity instruments issued19––––19–19
Dividend paid to non-controlling interests––––––(28)(28)
As at 31 July 2016 (audited)5,8331,384(428)6466,859886,947
The accompanying notes form part of these interim financial statements.
INTERIM FINANCIAL STATEMENTS | 33
FONTERRA INTERIM REPORT 2017
OUR PERFORMANCE

The accompanying notes form part of these interim financial statements.
CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 31 JANUARY 2017
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2017
UNAUDITED
31 JAN 2016
UNAUDITED
31 JUL 2016
AUDITED
Cash flows from operating activities
Profit before net finance costs and tax6447521,431
Adjustments for:
Foreign exchange gains(38)(113)(365)
Depreciation and amortisation289286570
Other (12)(59)(44)
239114161
(Increase)/decrease in working capital:
Inventories(2,161)(1,051)597
Trade and other receivables(561)(67)485
Amounts owing to suppliers1,6411,054560
Payables and accruals78162171
Other movements (6)(9)(42)
Total(1,009)891,771
Cash generated from operations(126)9553,363
Net taxes paid(41)(31)(85)
Net cash flows from operating activities(167)9243,278
Cash flows from investing activities
Cash was provided from:
–Proceeds from sale of business operations–187230
–Proceeds from disposal of property, plant and equipment97626
–Proceeds from sale of livestock412035
–Proceeds from the sale of investments in shares–7878
–Other cash inflows7126
Cash was applied to:
–Acquisition of property, plant and equipment (277)(530)(859)
–Acquisition of livestock(53)(61)(95)
–Acquisition of intangible assets(29)(53)(85)
–Co-operative Support loans–(215)(383)
–Advances to and investments in equity accounted investees(36)–(41)
–Other cash outflows–(11)(26)
Net cash flows from investing activities(250)(578)(1,094)
Cash flows from financing activities
Cash was provided from:
–Proceeds from borrowings2,7882,9364,909
–Interest received657
–Other cash inflows36––
Cash was applied to:
–Interest paid(186)(205)(415)
–Repayment of borrowings(2,058)(2,754)(5,815)
–Dividends paid to non-controlling interests(24)(21)(28)
–Dividends paid to equity holders of the Co-operative(152)(231)(701)
–Other cash outflows–(2)(7)
Net cash flows from financing activities410(272)(2,050)
Net (decrease)/increase in cash and cash equivalents(7)74134
Cash and cash equivalents at the beginning of the year357303303
Effect of exchange rate changes on cash balances(11)(54)(80)
Cash and cash equivalents at the end of the period339323357
Reconciliation of closing cash balances to the statement of financial position:
Cash and cash equivalents348338369
Bank overdraft(9)(15)(12)
Closing cash balances339323357
34 | INTERIM FINANCIAL STATEMENTS
FONTERRA INTERIM REPORT 2017

A) GENERAL INFORMATION
Fonterra Co-operative Group Limited (Fonterra, the Company or the
Co-operative) is a co-operative company incorporated and domiciled
in New Zealand. Fonterra is registered under the Companies Act 1993
and the Co-operative Companies Act 1996, and is an FMC Reporting
Entity under the Financial Markets Conduct Act 2013. Fonterra is also
required to comply with the Dairy Industry Restructuring Act 2001.
These consolidated interim financial statements of Fonterra, as at and
for the six months ending 31 January 2017, comprise Fonterra and its
subsidiaries (together the Group) and the Group’s interest in its equity
accounted investees.
The Group operates predominantly in the international dairy industry.
The Group is primarily involved in the collection, manufacture and sale
of milk and milk-derived products and in fast moving consumer goods
and foodservice businesses.
B) BASIS OF PREPARATION
These consolidated interim financial statements have been prepared in
accordance with International Accounting Standard 34: Interim Financial
Reporting and New Zealand Equivalent to International Accounting
Standard 34: Interim Financial Reporting. They have also been prepared
in accordance with New Zealand Generally Accepted Accounting
Practice (NZ GAAP). They should be read in conjunction with the
consolidated financial statements for the year ended 31 July 2016.
These consolidated interim financial statements are presented in New
Zealand Dollars ($ or NZD), which is Fonterra’s functional currency, and
rounded to the nearest million, except where otherwise stated.
The preparation of interim financial statements requires management to
make judgements, estimates and assumptions that affect the application
of accounting policies and the reported amounts of assets and liabilities,
income and expenses. Actual results may differ from these estimates. In
preparing these consolidated interim financial statements, the significant
judgements made by management in applying the Group’s accounting
policies and the key sources of estimation uncertainty were the same as
those applied to the consolidated financial statements for the year ended
31 July 2016.
C) ACCOUNTING POLICIES
The same accounting policies are followed in these consolidated
interim financial statements as were applied in the Group’s financial
statements for the year ended 31 July 2016 with the exception of the
impact of adopting NZ IFRS 9 Financial Instruments.
Impact of adopting NZ IFRS 9 Financial Instruments
NZ IFRS 9 Financial Instruments addresses the classification,
measurement and de-recognition of financial assets, financial
liabilities, impairment of financial assets and hedge accounting.
The hedge accounting rules in NZ IFRS 9 align hedge accounting
more closely with Fonterra’s risk management activities. Therefore,
Fonterra elected to adopt NZ IFRS 9 from 1 August 2016. The impact
of adopting NZ IFRS 9 is summarised below:
–Fonterra is now able to achieve hedge accounting for certain
interest rate swaps, which was not possible under the accounting
standards previously applied.
–For interest rate swaps in place on transition to NZ IFRS 9, the
hedging relationship for accounting purposes can only commence
on 1 August 2016. This means that these interest rate swaps will
not be perfectly matched to the underlying exposure. Any hedge
ineffectiveness will continue to be reflected in finance costs.
–Option premium costs and the time value of options are now
recognised in other comprehensive income as ‘costs of hedging
reserve’, until the hedged sales transaction is recognised. Under
the accounting standards previously applied, these costs were
recorded in the income statement when they were incurred. This
change is required to be recognised retrospectively, however as it
did not have a material impact on Fonterra’s financial statements
for the year ended 31 July 2016, no change has been made to the
comparative numbers.
–NZ IFRS 9 required changes in classification, measurement
and impairment requirements, none of which were material to
Fonterra’s financial statements.
BASIS OF PREPARATION
FOR THE SIX MONTHS ENDED 31 JANUARY 2017
INTERIM FINANCIAL STATEMENTS | 35
FONTERRA INTERIM REPORT 2017
OUR PERFORMANCE

PERFORMANCE
1 SEGMENT REPORTING
a) Operating segments
The Group has five reportable segments that reflect the Group’s management and reporting structure as viewed by the Fonterra Management Team.
Transactions between segments are based on estimated market prices.
REPORTABLE SEGMENTDESCRIPTION
Global Ingredients
and Operations
Represents the collection, processing and distribution of New Zealand milk, global sales and marketing of
New Zealand and non-New Zealand milk products (including the Quick Service Restaurant businesses in
Asia and Greater China), Fonterra Farm Source™ stores and Group Services.
OceaniaRepresents fast-moving consumer goods (FMCG) businesses in New Zealand (including export to the Pacific
Islands) and all FMCG and ingredients businesses in Australia (including Milk Supply and Manufacturing). It
includes foodservice sales in Australia and New Zealand.
AsiaRepresents FMCG and foodservice businesses (excluding the Quick Service Restaurant business) in Asia
(excluding Greater China), Africa and the Middle East.
Greater ChinaRepresents FMCG, foodservice (excluding the Quick Service Restaurant business) and farming businesses in
Greater China.
Latin AmericaRepresents FMCG and ingredients businesses in South America and the Caribbean.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 JANUARY 2017
36 | INTERIM FINANCIAL STATEMENTS
FONTERRA INTERIM REPORT 2017

a) Operating segments continued
GROUP $ MILLION
GLOBAL
INGREDIENTS AND
OPERATIONSOCEANIAASIA
GREATER
CHINA
LATIN
AMERICAELIMINATIONS
TOTAL
GROUP
Segment income statement
Six months ended 31 January 2017 (unaudited)
External revenue5,9121,233762524810–9,241
Inter-segment revenue900210981233(1,334)–
Revenue from sale of goods6,8121,443860647813(1,334)9,241
Cost of goods sold(6,033)(1,173)(581)(461)(569)1,337(7,480)
Segment gross profit77927027918624431,761
Selling and marketing expenses(82)(52)(82)(52)(61)–(329)
Distribution expenses(104)(73)(18)(5)(83)–(283)
Administrative and other operating expenses(384)(83)(60)(42)(59)8(620)
Segment operating expenses(570)(208)(160)(99)(203)8(1,232)
Net other operating income22532171(5)90
Net foreign exchange gains/(losses)331(2)(2)––30
Share of profit of equity accounted investees25––(32)2–(5)
Segment earnings before net finance costs and tax28911611970446644
Normalisation adjustments5(42)––––(37)
Normalised segment earnings before net finance costs
and tax
29474119
70446607
Normalisation adjustments37
Finance income17
Finance costs(174)
Profit before tax487
Profit before tax includes the following amounts:
Depreciation(176)(25)(6)(13)(20)–(240)
Amortisation(37)(9)(2)–(1)–(49)
Normalisation adjustments consist of the following amounts:
Gain on sale of Darnum manufacturing plant¹–42––––42
Time value of options²(5)–––––(5)
Total normalisation adjustments(5)42––––37
Segment asset information:
As at and for the six months ended 31 January 2017 (unaudited)
Equity accounted investments 201––7069–916
Capital expenditure³1247851819–244
1 The $42 million normalisation adjustment relates to other operating income.
2
Of the $5 million normalisation adjustment, $9 million relates to revenue offset by $14 million of net foreign exchange losses.
3
Capital expenditure comprises purchases of property, plant and equipment and intangible assets, and net purchases of livestock.
INTERIM FINANCIAL STATEMENTS | 37
FONTERRA INTERIM REPORT 2017
OUR PERFORMANCE

a) Operating segments continued
GROUP $ MILLION
GLOBAL
INGREDIENTS AND
OPERATIONSOCEANIAASIA
GREATER
CHINA
LATIN
AMERICAELIMINATIONS
TOTAL
GROUP
Segment income statement
Six months ended 31 January 2016 (unaudited)
External revenue5,4821,232837514773–8,838
Inter-segment revenue78923085134(1,121)–
Revenue from sale of goods6,2711,462922527777(1,121)8,838
Cost of goods sold(5,296)(1,240)(630)(389)(531)1,121(6,965)
Segment gross profit975222292138246–1,873
Selling and marketing expenses(76)(55)(103)(70)(59)–(363)
Distribution expenses(113)(91)(20)(6)(81)–(311)
Administrative and other operating expenses(393)(102)(65)(44)(52)18(638)
Segment operating expenses(582)(248)(188)(120)(192)18(1,312)
Net other operating income102201184(18)127
Net foreign exchange gains/(losses)45–(2)(5)(16)–22
Share of profit of equity accounted investees36––42–42
Segment earnings before net finance costs and tax576(6)1033544–752
Normalisation adjustments(99)12––––(87)
Normalised segment earnings before net finance costs
and tax
4776103
3544–665
Normalisation adjustments87
Finance income6
Finance costs(272)
Profit before tax486
Profit before tax includes the following amounts:
Depreciation(171)(26)(6)(13)(19)–(235)
Amortisation(37)(11)(2)–(1)–(51)
Normalisation adjustments consist of the following amounts:
Gain on sale of DairiConcepts investment
1
68–––––68
Time value of options
2
31–––––31
Impairment of assets in Australia
3
–(12)––––(12)
Total normalisation adjustments99(12)––––87
Segment asset information:
As at and for the six months ended 31 January 2016 (unaudited)
Equity accounted investments 2177–8329–1,065
Capital expenditure
4
30625119318–453
1 The $68 million normalisation relates to other operating income.
2
The $31 million normalisation adjustment relates to net foreign exchange gains.
3
Of the total $12 million, $6 million relates to cost of goods sold and $6 million to other operating expenses.
4
Capital expenditure comprises purchases of property, plant and equipment and intangible assets, and net purchases of livestock.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2017
38 | INTERIM FINANCIAL STATEMENTS
FONTERRA INTERIM REPORT 2017

a) Operating segments continued
GROUP $ MILLION
GLOBAL
INGREDIENTS AND
OPERATIONSOCEANIAASIA
GREATER
CHINA
LATIN
AMERICAELIMINATIONS
TOTAL
GROUP
Segment income statement
Year ended 31 July 2016 (audited)
External revenue10,6362,4251,6301,0081,500–17,199
Inter-segment revenue1,505439171135(2,133)–
Revenue from sale of goods12,1412,8641,8011,0211,505(2,133)17,199
Cost of goods sold(10,343)(2,362)(1,213)(742)(1,042)2,135(13,567)
Segment gross profit1,79850258827946323,632
Selling and marketing expenses(168)(99)(187)(132)(117)–(703)
Distribution expenses(222)(160)(38)(10)(155)–(585)
Administrative and other operating expenses(778)(205)(128)(85)(74)30(1,240)
Segment operating expenses(1,168)(464)(353)(227)(346)30(2,528)
Net other operating income1459732720(26)266
Net foreign exchange gains/(losses)301(3)(5)(16)–7
Share of profit of equity accounted investees591–(10)4–54
Segment earnings before net finance costs and tax8641372356412561,431
Normalisation adjustments(96)23––––(73)
Normalised segment earnings before net finance costs
and tax
768160235
6412561,358
Normalisation adjustments73
Finance income18
Finance costs(517)
Profit before tax932
Profit before tax includes the following amounts:
Depreciation(337)(48)(13)(30)(37)–(465)
Amortisation(72)(27)(4)(1)(1)–(105)
Normalisation adjustments consist of the following amounts:
Gain on sale of DairiConcepts investment¹68–––––68
Disposal and impairment of the Australian yoghurt and
dairy desserts business²–(23)––––(23)
Time value of options³28–––––28
Total normalisation adjustments96(23)––––73
Segment asset information:
As at and for the year ended 31 July 2016 (audited)
Equity accounted investments 188––7639–960
Capital expenditure⁴6321142113146–944
1 The $68 million normalisation adjustment relates to other operating income.
2
Of the total $23 million, $4 million relates to cost of goods sold and $19 million to other operating expenses.
3
The $28 million normalisation adjustment relates to net foreign exchange gains.
4
Capital expenditure comprises purchases of property, plant and equipment and intangible assets, and net purchases of livestock.
INTERIM FINANCIAL STATEMENTS | 39
FONTERRA INTERIM REPORT 2017
OUR PERFORMANCE

b) Strategic platforms
The Group also presents financial information that reflects Fonterra’s strategic platforms. These strategic platforms are organised on a different
basis than the Group’s operating segments presented in section a) of this note. The basis of presentation is explained in the table below.
Fonterra considers this information to be useful as it provides more clarity on the financial performance of the ingredients, consumer and
foodservice, and China Farms businesses.
PLATFORMDESCRIPTION
Ingredients Represents the Global Ingredients and Operations reportable segment, the ingredients businesses in Australia
and South America, and excludes the Quick Service Restaurant businesses in Asia and Greater China and
unallocated costs.
Consumer and foodservice
–Oceania
Represents the Oceania reportable segment, excluding the ingredients business in Australia.
–AsiaRepresents the Asia reportable segment and the Asia Quick Service Restaurant business reported in Global
Ingredients and Operations.
–Greater ChinaRepresents the Greater China reportable segment, excluding China Farms and including the Quick Service
Restaurant business in Greater China reported in Global Ingredients and Operations.
–Latin AmericaRepresents the Latin America reportable segment, excluding the ingredients businesses in South America.
China FarmsRepresents farming operations in China.
GROUP
31 JANUARY 2017 (UNAUDITED)
INGREDIENTS
CONSUMER AND FOODSERVICECHINA FARMS
UNALLOCATED
COSTS AND
ELIMINATIONSTOTAL
OCEANIAASIA
GREATER
CHINA
LATIN
AMERICATOTAL
Volume
1
(liquid milk equivalents, billion)10.980.910.860.580.362.710.16(2.14)11.71
Volume
1
(metric tonnes, thousand)1,659335156112305908130(449)2,248
Sales revenue
1
($ million)7,2289889335677513,239122(1,348)9,241
Normalised EBIT ($ million)510581249635313(24)(192)607
GROUP
31 JANUARY 2016 (UNAUDITED)
INGREDIENTS
CONSUMER AND FOODSERVICECHINA FARMS
UNALLOCATED
COSTS AND
ELIMINATIONSTOTAL
OCEANIAASIA
GREATER
CHINA
LATIN
AMERICATOTAL
Volume
1
(liquid milk equivalents, billion)11.830.960.780.440.302.480.10(1.82)12.59
Volume
1
(metric tonnes, thousand)1,62433914582321887103(290)2,324
Sales revenue
1
($ million)6,7091,0469924657173,22095(1,186)8,838
Normalised EBIT ($ million)617331086832241(29)(164)665
GROUP
31 JULY 2016 (AUDITED)
INGREDIENTS
CONSUMER AND FOODSERVICECHINA FARMS
UNALLOCATED
COSTS AND
ELIMINATIONSTOTAL
OCEANIAASIA
GREATER
CHINA
LATIN
AMERICATOTAL
Volume
1
(liquid milk equivalents, billion)22.391.831.550.870.624.870.23(3.83)23.66
Volume
1
(metric tonnes, thousand)3,0746982921676431,800229(577)4,526
Sales revenue
1
($ million)13,0052,0511,9449161,3856,296183(2,285)17,199
Normalised EBIT ($ million)1,20497244131108580(59)(367)1,358
Capital employed
2
($ million)7,72448912722284922873(127)9,392
Return on capital
3
(%)13.4%10.9%133.4%429.9%23.6%41.7%(6.5)%12.4%
For the year ended 31 July 2016 the Group’s return on capital including intangible assets, goodwill and equity accounted investments, was 9.2 per cent.
1 Includes sales to other strategic platforms. Total column represents total external sales.
2 Capital employed excludes brands, goodwill and equity accounted investments.
3 Return on capital is calculated as normalised EBIT, less equity accounted investees’ earnings, less a notional royalty charge for use of the Group’s brands, less a notional tax
charge, divided by capital employed.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2017
40 | INTERIM FINANCIAL STATEMENTS
FONTERRA INTERIM REPORT 2017

c) Geographical revenue
GROUP $ MILLION
CHINA
REST OF
ASIAAUSTRALIA
NEW
ZEALAND
UNITED
STATESEUROPE
LATIN
AMERICA
REST OF
WORLDTOTAL
Geographical segment external revenue:
Six months ended 31 January 2017 (unaudited)1,5652,4047859776504301,0651,3659,241
Six months ended 31 January 2016 (unaudited)1,3072,3417669646574121,2281,1638,838
Year ended 31 July 2016 (audited)2,3944,8291,4711,9391,3057452,0532,46317,199
Revenue is allocated to geographical segments on the basis of the destination of the goods sold.
d) Non-current assets
GROUP $ MILLION
GLOBAL INGREDIENTS
AND OPERATIONS
OCEANIAASIA
GREATER
CHINA
LATIN
AMERICA
TOTAL
GROUP
NEW
ZEALAND
REST OF
WORLD
NEW
ZEALANDAUSTRALIA
Geographical segment reportable non-current assets:
As at 31 January 2017 (unaudited)5,3763011,2947977231,5401,00211,033
As at 31 January 2016 (unaudited)5,2423381,2866978081,76890411,043
As at 31 July 2016 (audited)5,4593011,2927407791,64898111,200
GROUP $ MILLION
AS AT
31 JAN 2017
UNAUDITED
31 JAN 2016
UNAUDITED
31 JUL 2016
AUDITED
Reconciliation of geographical segment non-current assets to total non-current assets:
Geographical segment non-current assets 11,03311,04311,200
Deferred tax assets328579410
Derivative financial instruments 242483417
Total non-current assets11,60312,10512,027
2 COST OF GOODS SOLD
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2017
UNAUDITED
31 JAN 2016
UNAUDITED
31 JUL 2016
AUDITED
Opening inventory2,4013,0253,025
Cost of Milk:
–New Zealand sourced6,0784,2546,205
–Non-New Zealand sourced521601944
Other purchases3,0463,1565,794
Closing inventory(4,566)(4,071)(2,401)
Total cost of goods sold7,4806,96513,567
INTERIM FINANCIAL STATEMENTS | 41
FONTERRA INTERIM REPORT 2017
OUR PERFORMANCE

DEBT AND EQUITY
3 SUBSCRIBED EQUITY INSTRUMENTS
Co-operative shares, including shares held within the Group
Co-operative shares may only be held by a shareholder supplying milk to the Company (farmer shareholder), by former farmer shareholders for
up to three seasons after cessation of milk supply, or by Fonterra Farmer Custodian Limited (the Custodian). Voting rights in the Company are
dependent on milk supply supported by Co-operative shares¹.
CO-OPERATIVE SHARES
(THOUSANDS)
Balance at 1 August 20161,602,703
Shares issued
2
1,369
Balance at 31 January 2017 (unaudited)1,604,072
Balance at 1 August 20151,599,094
Shares issued
3
1,591
Balance at 31 January 2016 (unaudited)1,600,685
Balance at 1 August 20151,599,094
Shares issued
4
3,609
Balance at 31 July 2016 (audited)1,602,703
1 These rights are also attached to vouchers when backed by milk supply (subject to limits).
2 1, 369,174 shares with a total value of $8 million were issued under the Dividend Reinvestment Plan during the six months ended 31 January 2017.
3
1, 591,062 shares with a total value of $8 million were issued under the Dividend Reinvestment Plan during the six months ended 31 January 2016.
4
3,609,118 shares with a total value of $19 million were issued under the Dividend Reinvestment Plan during the year ended 31 July 2016.
The rights attaching to Co-operative shares are set out in Fonterra’s Constitution, available in the ‘About Us/Our Governance’ section of
Fonterra’s website.
Units in the Fonterra Shareholders’ Fund
The Custodian holds legal title of Co-operative shares of which the Economic Rights have been sold to the Fund on trust for the benefit of the
Fund. At 31 January 2017, 123,422,471 Co-operative shares (31 January 2016: 103,926,303; 31 July 2016: 111,991,937) were legally owned by the
Custodian, on trust for the benefit of the Fund.
UNITS
(THOUSANDS)
Balance at 1 August 2016111,992
Units issued22,222
Units surrendered(10,792)
Balance at 31 January 2017 (unaudited)123,422
Balance at 1 August 2015105,480
Units issued16,375
Units surrendered(17,929)
Balance at 31 January 2016 (unaudited)103,926
Balance at 1 August 2015105,480
Units issued27,137
Units surrendered(20,625)
Balance at 31 July 2016 (audited)111,992
The rights attaching to units are set out in the Trust Deed constituting the Fonterra Shareholders’ Fund, available in the ‘Investors/Our Financials/
Shares and Units’ section of Fonterra’s website.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2017
42 | INTERIM FINANCIAL STATEMENTS
FONTERRA INTERIM REPORT 2017

4 DIVIDENDS PAID
$ MILLION
SIX MONTHS ENDEDYEAR ENDED
DIVIDENDS
31 JAN 2017
UNAUDITED
31 JAN 2016
UNAUDITED
31 JUL 2016
AUDITED
2016 Final dividend – 10 cents per share¹160––
2016 Interim dividend – 10 cents per share²––160
2016 Interim dividend – 20 cents per share³––320
2015 Final dividend – 15 cents per share⁴–240240
1 Declared on 18 August 2016 and paid on 9 September 2016 to all Co-operative shares on issue at 1 September 2016. The Dividend Reinvestment Plan applied to this dividend.
2
Declared on 16 May 2016 and paid on 7 June 2016 to all Co-operative shares on issue at 30 May 2016. The Dividend Reinvestment Plan applied to this interim dividend.
3
Declared on 22 March 2016 and paid on 20 April 2016 to all Co-operative shares on issue at 8 April 2016. The Dividend Reinvestment Plan applied to this interim dividend.
4
Declared on 23 September 2015 and paid on 20 October 2015 to all Co-operative shares on issue at 8 October 2015. The Dividend Reinvestment Plan applied to this dividend.
Dividends declared after balance date
On 21 March 2017, the Board declared an interim dividend of 20 cents per share, to be paid on 20 April 2017 to all Co-operative shares on issue at
5 April 2017.
Fonterra has a Dividend Reinvestment Plan, where eligible shareholders can choose to reinvest all or part of their future dividend in additional
Co-operative shares. The Dividend Reinvestment Plan will apply to this dividend. Full details of the Dividend Reinvestment Plan are available in
the ‘Investors’ section of Fonterra’s website.
5 BORROWINGS
Economic net interest bearing debt
Economic net interest bearing debt reflects the effect of debt hedging in place at balance date.
GROUP $ MILLION
AS AT
31 JAN 2017
UNAUDITED
31 JAN 2016
UNAUDITED
31 JUL 2016
AUDITED
Net interest bearing debt position
Total borrowings6,7517,7116,352
Cash and cash equivalents(348)(338)(369)
Interest bearing advances included in other non-current assets(481)(295)(464)
Bank overdraft91512
Net interest bearing debt5,9317,0935,531
Value of derivatives used to manage changes in hedged risks184(185)(58)
Economic net interest bearing debt6,1156,9085,473
Total borrowings in the table above are represented by:
GROUP $ MILLION
AS AT
31 JAN 2017
UNAUDITED
31 JAN 2016
UNAUDITED
31 JUL 2016
AUDITED
Commercial paper313401454
Bank loans1,2261,879879
Finance leases139154143
Capital notes353535
NZX-listed bonds499500499
Medium-term notes4,5394,7424,342
Total borrowings6,7517,7116,352
Included within the statement of financial position as follows:
Total current borrowings9831,397955
Total non-current borrowings5,7686,3145,397
Total borrowings6,7517,7116,352
INTERIM FINANCIAL STATEMENTS | 43
FONTERRA INTERIM REPORT 2017
OUR PERFORMANCE

LONG TERM ASSETS
6 PROPERTY, PLANT AND EQUIPMENT
GROUP $ MILLION
SIX MONTHS TOYEAR ENDED
31 JAN 2017
UNAUDITED
31 JAN 2016
UNAUDITED
31 JUL 2016
AUDITED
Additions205371797
Disposals(20)(2)(38)
Capital commitments159162127
INVESTMENTS
7 EQUITY ACCOUNTED INVESTMENTS
The Group’s significant equity accounted investments are listed below. The ownership interest in these entities is 50 per cent or less and the
Group is not considered to exercise a controlling interest.
OWNERSHIP INTERESTS (%)
AS AT
EQUITY ACCOUNTED INVESTEE NAME
COUNTRY OF INCORPORATION
AND PRINCIPAL PLACE OF BUSINESS
31 JAN 2017
UNAUDITED
31 JAN 2016
UNAUDITED
31 JUL 2016
AUDITED
DMV Fonterra Excipients GmbH & Co KGGermany505050
Beingmate Baby & Child Food Co., LtdChina18.818.818.8
All investees have balance dates of 31 December.
OTHER
8 CONTINGENT LIABILITIES
In the normal course of business, Fonterra, its subsidiaries and equity accounted investees, are exposed to claims and legal proceedings that may
in some cases result in costs to the Group.
In early August 2013, Fonterra publicly announced a potential food safety issue with three batches of Whey Protein Concentrate (WPC80)
produced at the Hautapu manufacturing site and initiated a precautionary product recall.
In late August 2013, the New Zealand Government confirmed that the Clostridium samples found in WPC80 were not Clostridium botulinum and were
not toxigenic, meaning the consumers of products containing the relevant batches of WPC80 were never in danger from Clostridium botulinum.
In January 2014, Danone formally initiated legal proceedings against Fonterra in the High Court of New Zealand and separate Singapore
arbitration proceedings against Fonterra in relation to the WPC80 precautionary recall. The New Zealand High Court proceedings have been
stayed pending completion of the Singapore arbitration. An initial hearing of the arbitration took place in February 2016 and a final hearing of the
arbitration took place in June 2016. A decision of the arbitration panel is pending.
Based on current information available and the claims made to date in both proceedings, Fonterra will vigorously defend its position in these
proceedings. Uncertainty exists regarding the outcome of the proceedings. Fonterra has provided $11 million (31 January 2016: $11 million;
31 July 2016: $11 million) in respect of the Danone claims, which represents the maximum contractual liability to Danone.
The Directors believe that these proceedings have been adequately provided for and disclosed by the Group and that there are no additional claims
or legal proceedings in respect of this matter that are pending at the date of these financial statements that require provision or disclosure.
The Group has no other contingent liabilities as at 31 January 2017 (31 January 2016: nil; 31 July 2016: nil).
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2017
44 | INTERIM FINANCIAL STATEMENTS
FONTERRA INTERIM REPORT 2017

9 FAIR VALUE
Fair value hierarchy
All financial instruments for which a fair value is recognised are categorised within level 1 or level 2 of the fair value hierarchy. The fair
value of the Group’s livestock is categorised within level 3. These categories are described as follows, based on the lowest level input that
is significant to the fair value measurement as a whole:
–Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;
–Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly (i.e. as prices)
or indirectly (i.e. derived from prices);
–Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
The following table shows the fair value hierarchy for financial instruments and livestock measured at fair value on the statement
of financial position:
GROUP $ MILLION
LEVEL 1LEVEL 2LEVEL 3
AS ATAS ATAS AT
31 JAN 2017
UNAUDITED
31 JAN 2016
UNAUDITED
31 JUL 2016
AUDITED
31 JAN 2017
UNAUDITED
31 JAN 2016
UNAUDITED
31 JUL 2016
AUDITED
31 JAN 2017
UNAUDITED
31 JAN 2016
UNAUDITED
31 JUL 2016
AUDITED
Derivative assets
–Commodity derivatives22351–1–––
–Foreign exchange derivatives–––45349473–––
–Interest rate derivatives¹–––220474389–––
Derivative liabilities
–Commodity derivatives(26)(16)(16)(1)(7)(3)–––
–Foreign exchange derivatives–––(23)(420)(25)–––
–Interest rate derivatives¹–––(566)(417)(568)–––
Investments in shares826––––––
Livestock––––––317358342
Fair value4(11)(5)84(321)267317358342
1 Includes cross currency interest rate swaps.
The following table shows the fair value hierarchy for each class of financial asset and liability where the carrying value in the statement of
financial position differs from the fair value:
GROUP $ MILLION
CARRYING VALUELEVEL 1LEVEL 2
AS ATAS ATAS AT
31 JAN 2017
UNAUDITED
31 JAN 2016
UNAUDITED
31 JUL 2016
AUDITED
31 JAN 2017
UNAUDITED
31 JAN 2016
UNAUDITED
31 JUL 2016
AUDITED
31 JAN 2017
UNAUDITED
31 JAN 2016
UNAUDITED
31 JUL 2016
AUDITED
Financial assets
Long-term advances481295464–––489293466
Financial liabilities
Borrowings
–NZX-listed bonds(499)(500)(499)(490)(499)(510)–––
–Capital notes(35)(35)(35)(33)(35)(33)–––
–Medium-term notes(4,539)(4,743)(4,342)–––(4,780)(4,743)(4,665)
–Finance leases(139)(154)(143)–––(158)(154)(167)
INTERIM FINANCIAL STATEMENTS | 45
FONTERRA INTERIM REPORT 2017
OUR PERFORMANCE

10 NET TANGIBLE ASSETS PER SECURITY
GROUP
AS AT
31 JAN 2017
UNAUDITED
31 JAN 2016
UNAUDITED
31 JUL 2016
AUDITED
Net tangible assets per security¹
$ per listed debt security on issue6.736.256.32
$ per equity instrument on issue2.532.352.37
Listed debt securities on issue (million)603603603
Equity instruments on issue (million)1,6041,6011,603
1 Net tangible assets represents total assets less total liabilities less intangible assets.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2017
46 | INTERIM FINANCIAL STATEMENTS
FONTERRA INTERIM REPORT 2017

NON-GAAP MEASURES
Fonterra uses several non-GAAP measures when discussing financial performance. For further details and definitions of non-GAAP measures
used by Fonterra, refer to the glossary on page 48. These are non-GAAP measures and are not prepared in accordance with NZ IFRS.
Management believes that these measures provide useful information as they provide valuable insight on the underlying performance of the
business. They may be used internally to evaluate the underlying performance of business units and to analyse trends. These measures are not
uniformly defined or utilised by all companies. Accordingly, these measures may not be comparable with similarly titled measures used by other
companies. Non-GAAP financial measures should not be viewed in isolation nor considered as a substitute for measures reported in accordance
with NZ IFRS.
Reconciliations from the NZ IFRS measures to certain non-GAAP measures referred to by Fonterra are detailed below.
Reconciliation from the NZ IFRS measure of profit for the period to Fonterra’s normalised EBITDA
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 201731 JAN 201631 JUL 2016
Profit after tax for the period418409834
Add: Depreciation 240235465
Add: Amortisation4951105
Add: Net finance costs157266499
Add: Taxation expense697798
Total EBITDA 9331,0382,001
Add: Disposal and impairment of the Australian yoghurt and dairy desserts business–1223
Add/(Less): Time value of options5(31)(28)
Less: Gain on sale of Darnum manufacturing plant(42)––
Less: Gain on sale of DairiConcepts investment–(68)(68)
Total normalisation adjustments(37)(87)(73)
Normalised EBITDA8969511,928
Reconciliation from the NZ IFRS measure of profit for the period to Fonterra’s normalised EBIT
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 201731 JAN 201631 JUL 2016
Profit after tax for the period418409834
Add: Net finance costs157266499
Add: Taxation expense697798
Total EBIT6447521,431
Less: Normalisation adjustments (as detailed above)(37)(87)(73)
Total normalised EBIT6076651,358
Reconciliation from the NZ IFRS measure of profit for the period to Fonterra’s normalised earnings per share
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 201731 JAN 201631 JUL 2016
Profit after tax for the period418409834
Less: Normalisation adjustments (as detailed above)(37)(87)(73)
Add: Tax on normalisation adjustments85052
Total normalised earnings389372813
Less: Share attributable to non-controlling interests(5)(5)(24)
Net normalised earnings attributable to equity holders of the Parent384367789
Weighted average number of shares (thousands of shares)1,603,6981,599,8891,600,825
Normalised earnings per share ($)0.240.230.49
INTERIM FINANCIAL STATEMENTS | 47
FONTERRA INTERIM REPORT 2017
OUR PERFORMANCE

GLOSSARY
NON-GAAP MEASURES
Fonterra refers to non-GAAP financial measures throughout the Interim Report, and these measures are not prepared in accordance with NZ
IFRS. The definitions below explain how Fonterra calculates the non-GAAP measures referred to throughout the Interim Report.
Constant currencymeans a measure that eliminates the effect of exchange rate movements. Constant currency variances
are calculated by taking the current period financial measure in local currency less the prior period
financial measure in local currency and dividing this by prior period financial measure in local currency
using the prior period local currency to the New Zealand Dollar exchange rate.
Contribution marginis calculated as segmental gross profit less distribution, selling and marketing expenses.
EBITmeans earnings before interest and tax and is calculated as profit for the period before net finance costs
and tax.
EBIT margin %is calculated as profit for the period before net finance costs and tax and divided by revenue.
EBITDAmeans earnings before interest, tax, depreciation and amortisation and is calculated as profit for the
period before net finance costs, tax, depreciation and amortisation.
Economic debt to debt
plus equity ratio
is calculated as net interest-bearing debt divided by net interest-bearing debt plus equity. Net interest
bearing debt includes the effect of debt hedging, and equity excludes the cash flow hedge reserve.
Farmgate Milk Pricemeans the base price that Fonterra pays for milk supplied to it in New Zealand for a season. The season
refers to the 12 month milk season of 1 June to 31 May.
Net tangible assetsmeans total assets less total liabilities less intangible assets.
Normalisation adjustmentsmeans transactions that are unusual by nature and size. Excluding these transactions can assist users
with forming a view of the underlying performance of the business. Unusual transactions by nature are
the result of a specific event or set of circumstances that are outside the control of the business,
or relate to the major acquisitions or disposals of an asset/group of assets or business. It may also
include certain fair value movements created by required accounting treatments, in particular if they
are non-cash movements, and will have no impact on profit over time. Unusual transactions by size are
those that are unusually large in a particular accounting period. Unusually large is defined as greater
than $30 million or where a transaction or event has previously met the normalisation criteria, and
where costs or income exceed $10 million in a subsequent period.
Normalised EBITmeans profit for the period before net finance costs, tax and after normalisation adjustments.
Normalised EBIT margin %means profit for the period before net finance costs, tax and after normalisation adjustments divided by
revenue.
Normalised EBITDAmeans profit for the period before net finance costs, tax, depreciation, amortisation and after
normalisation adjustments.
Normalised segment earningsmeans segmental profit for the period before depreciation, amortisation, net finance costs, tax, and after
normalisation adjustments.
Payoutmeans the total cash payment to farmer shareholders. It is the sum of the Farmgate Milk Price (kgMS)
and the dividend per share. Both of these components have established policies and procedures in place
on how they are determined.
Retentionsmeans net profit after tax attributable to farmer shareholders divided by the number of shares at 31 May,
less dividend per share.
Segment earningsmeans segmental profit for the period before net finance costs, tax and normalisation adjustments.
48 | INTERIM FINANCIAL STATEMENTS
FONTERRA INTERIM REPORT 2017

FONTERRA BOARD
OF DIRECTORS
John Wilson
Clinton Dines
Ian Farrelly
Leonie Guiney
Simon Israel
David Jackson
David MacLeod
John Monaghan
Nicola Shadbolt
Donna Smit
Scott St John
Ashley Waugh
FONTERRA
MANAGEMENT TEAM
Theo Spierings
Lukas Paravicini
Jacqueline Chow
Miles Hurrell
Robert Spurway
Judith Swales
Kelvin Wickham
REGISTERED OFFICE
Fonterra Co-operative Group Limited
Private Bag 92032
Auckland 1010
New Zealand
109 Fanshawe Street
Auckland Central 1010
New Zealand
Phone +64 9 374 9000
Fax +64 9 374 9001
AUDITORS
PricewaterhouseCoopers
Level 22, PwC Tower
188 Quay Street
Auckland 1142
New Zealand
FARMER SHAREHOLDER AND
SUPPLIER SERVICES
Freephone 0800 65 65 68
SHAREHOLDER INFORMATION
FONTERRA SHARES AND
FSF UNITS REGISTRY
Computershare Investor
Services Limited
Private Bag 92119
Auckland 1142
New Zealand
Level 2, 159 Hurstmere Road
Takapuna
Auckland 0622
New Zealand
CAPITAL NOTES REGISTRY
Link Market Services Limited
PO Box 91976
Auckland 1142
New Zealand
Level 11, Deloitte Centre
80 Queen Street
Auckland Central 1010
New Zealand
INVESTOR RELATIONS ENQUIRIES
investor.relations@fonterra.com
www.fonterra.com

This document is printed on an environmentally
responsible paper produced using elemental
chlorine free (ECF) FSC
®
-certified mixed-source pulp,
sourced from well-managed and legally harvested
forests, and manufactured under the strict ISO14001
environmental management system.

---

APPENDIX 3 – FSM Rules
Number of pages including this one
(Please provide any other relevant
FSM Rule 6.8.2. For rights, Rules 6.6.8 and 6.6.10. details on additional pages)
For change to allotment, FSM Rule 6.8.1, a separate notice is required.
Full name
of Issuer
Name of officer authorised to
Authority for event,
make this notice
e.g. Directors' resolution
Contact phone
Contact fax
numbernumber
Date
Nature of event
BonusIf ticked,
Rights Issue
Tick as appropriate
Issue
state whether:Taxable
/ Non TaxableConversionInterestRenouncable
Rights IssueCapitalCallDividend
If ticked, stateFull
non-renouncable
change
x
whether:
Interim
x
YearSpecialDRP Applies
x
EXISTING securities affected by this
If more than one security is affected by the event, use a separate form.
Description of theISIN
class of securities
If unknown, contact NZX
Details of securities issued pursuant to this eventIf more than one class of security is to be issued, use a separate form for each class.
Description of theISIN
class of securities
If unknown, contact NZX
Number of Securities toMinimum
Ratio, e.g
be issued following eventEntitlement
1 for 2 for
Conversion, Maturity, Call
Treatment of Fractions
Payable or Exercise Date
Tick if
provide an
pari passu
ORexplanation
Strike price per security for any issue in lieu or date
of the
Strike Price available.
ranking
Monies Associated with Event
Dividend payable, Call payable, Exercise price, Conversion price, Redemption price, Application money.
Source of
Amount per securityPayment
(does not include any excluded income)
SupplementaryAmount per security
Currencydividendin dollars and cents
details -
FSM Rule 6.8.5
Total monies
TaxationAmount per Security in Dollars and cents to six decimal places
In the case of a taxable bonusResident
Imputation Credits
issue state strike priceWithholding Tax(Give details)
Foreign
FDP Credits
Withholding Tax(Give details)
Timing
(Refer Appendix 4 in the FSM Rules)
Record Date 5pmApplication Date
For calculation of entitlements -Also, Call Payable, Dividend /
Interest Payable, Exercise Date,
Conversion Date. In the case
of applications this must be the
last business day of the week.
Notice DateAllotment Date
Entitlement letters, call notices,For the issue of new securities.
conversion notices mailedMust be within 5 business days
of application closing date.
OFFICE USE ONLY
Ex Date:
Commence Quoting Rights:Security Code:
Cease Quoting Rights 5pm:
Commence Quoting New Securities:Security Code:
Cease Quoting Old Security 5pm:
EMAIL: announce@nzx.com
Notice of event affecting securities
Fonterra Co-operative Group Limited
Lukas ParaviciniDirectors' resolution
(09) 374 9000(09) 374 900121032017
NZFCGE0001S7
N/A
In dollars and cents
Profit
$0.200
N/AN/A
Enter N/A if not
applicable
N/A
Shares (FCG)
$
NZD
$320,814,374
Date Payable
$
5 April, 201720 April, 2017
N/AN/A

---

22 March 2017
FONTERRA ANNOUNCES 2017 INTERIM RESULTS

Results Highlights

 Forecast Farmgate Milk Price $6.00 per kgMS
 Forecast cash payout $6.40 after retentions*
 Interim dividend of 20 cents per share – to be paid in April
 Revenue $9.2 billion, up 5%
 Normalised EBIT $607 million, down 9%
 Net profit after tax (NPAT) $418 million, up 2%
 Revised forecast earnings per share range of 45 to 55 cents
 Forecast available for payout $6.45 - $6.55*
 Ingredients normalised EBIT $510 million, down 17%
 Consumer and Foodservice normalised EBIT $313 million, up 30%
 Moved an additional 227 million Liquid Milk Equivalent (LME) of milk into Consumer and
Foodservice products

Results Update

Fonterra ended the first half of its 2017 financial year with revenue up 5% on the same period last
year, and net profit after tax up 2%.

Chairman John Wilson said the Co-operative had a strong first half.

“Revenue was higher at $9.2 billion and normalised EBIT was again over $600 million with net
profit after tax of $418 million.

“Our half year dividend of 20 cents per share, payable on 20 April 2017, reflects these strong
results especially in Consumer and Foodservice where we kept up the momentum of our volume to
value strategy.

“The Co-operative continues to get stronger. We have further reduced net debt which is down
$793 million or 11%, and we have a gearing ratio of 46.6% compared with 49.2% in the first half of
2016,” Mr Wilson said.

“Fonterra’s strong balance sheet means we are well placed to develop our markets and position
our Co-operative for the future.”

Milk collection in New Zealand was down 54 million kgMS on the same period last season at 1,053
kgMS.

“The poor spring in New Zealand saw us forecasting milk collection to be down 7% for the season,
but following good rainfall in autumn on-farm conditions are improving which means we are now
expecting New Zealand collections for the season to be down by 3 % on last season,” Mr Wilson
said.

Fonterra Co-operative Group
Confidential to Fonterra Co-operative Group Page 2

The Fonterra Board confirmed that the forecast Farmgate Milk Price of $6.00 per kgMS continued
to reflect global dairy markets with steady demand and relatively stable prices.

“World dairy prices have continued to show signs of volatility, but we believe that the fundamentals
are sound and expect pricing over the balance of the season to remain stable.

“Our Co-operative has a forecast cash payout for this season of $6.40. This is made up of a
forecast Farmgate Milk Price of $6.00 per kgMS and a target full year dividend of 40 cents per
share. Our forecast cash payout reflects a 54% increase in the Farmgate Milk Price compared to
last season and consistent earnings.

“An improved $6.00 Milk Price supported by strong performance will result in an additional $3
billion going into the New Zealand economy this season.

“We see some challenges and opportunities ahead in the second half. The additional milk at the
end of the season is welcome for our farmers and our management team are focused on ensuring
that we get the highest value from this milk.

“The impact of more volatility in product stream returns in our Ingredients business, some
tightening of margins in the coming months, and the potential for extra milk in the autumn could
result in some pressure on our earnings in the second half.

“The Board considered these factors and, while continuing to have confidence in achieving a target
dividend of 40 cents per share, has revised the forecast earnings per share range to 45-55 cents to
reflect the additional volatility.

“We remain positive but cautious, and this is reflected in our interim dividend of 20 cents per share
and our February decision to increase the Advance Cash Rate paid to farmers earlier in the
season,” Mr Wilson said.

Our Business Performance

Chief Executive Theo Spierings said the first half result shows that Fonterra’s strategy of moving
more volume into higher value products is working.

“Our Ingredients business maintained good margins. We made the most of our manufacturing
capacity, and the flexibility it provides to match production to demand and secure the best returns
for our farmers’ milk.

“By the end of the first half, we shifted an additional 227 million LME of milk into higher value
products in our Consumer and Foodservice business, contributing to a 30% increase in normalised
EBIT. We are well on track to achieve our target of an additional 400 million LME to higher value
products by year end.

“This shows us doing what we said we would and how we continue to deliver value even in a
volatile environment,” Mr Spierings said.

“We increased volumes and value across our Consumer and Foodservice business. Greater China
continued to increase its earnings through the strong performance of the Foodservice business,
and key markets like Chile grew on the back of successful brand relaunches. It was also good to
see the benefits of continued improved performance in our Australian business.

“In line with our focus on value in the first half, we are looking to channel as much of our milk into
products that create the most value for our farmers as well as optimising the Farmgate Milk Price.

“We have continued our business transformation work and a continued strong focus on costs
drove operating expenses down a further 6%.

Fonterra Co-operative Group
Confidential to Fonterra Co-operative Group Page 3

“We are well-positioned to take up opportunities and to deal with any headwinds. Our strategy is
working and the Co-operative is strong. I know that our teams are working hard to keep up the
momentum in the second half of 2017,” Mr Spierings said.

Our Outlook

We remain confident in our forecast for the Farmgate Milk Price but continue to advise our farmers
to budget cautiously, Mr Wilson said.

“The fundamentals of dairy are strong but there will be ongoing volatility in our global markets.

“Our strategy to grow volume and value will continue to underpin our performance in the second
half of the financial year,” Mr Wilson said.

The record date for the payment of the dividend is 5 April 2017, and the payment date is 20 April
2017. The Co-operative will continue to offer a dividend reinvestment plan, the strike price at which
shares are issued incorporating a discount of 2.5%. Eligible shareholders who wish to participate in
the dividend reinvestment plan for this dividend need to submit a notice of participation by 6 April
2017.

* Forecast cash payout after retentions and forecast available for payout applies to a fully shared up farmer.

Non-GAAP measures
Fonterra uses several non-GAAP measures when discussing financial performance. For further details and
definitions of non-GAAP measures used by Fonterra, refer to the Glossary in Fonterra’s 31 January 2017
interim financial statements. These are non-GAAP measures and are not prepared in accordance with NZ
IFRS.
Management believes that these measures provide useful information as they provide valuable insight on the
underlying performance of the business. They may be used internally to evaluate the underlying performance
of business units and to analyse trends. These measures are not uniformly defined or utilised by all companies.
Accordingly, these measures may not be comparable with similarly titled measures used by other companies.
Non-GAAP financial measures should not be viewed in isolation nor considered as a substitute for measures
reported in accordance with NZ IFRS.
Reconciliation of normalised earnings to reported profit

GROUP $ MILLION


31 JAN 2017

31 JAN 2016


Profit for the period 418 409
Add: Net finance costs 157 266
Add: Taxation expense

69 77
Total EBIT 644 752
Add: Disposal and impairment of the
Australian yoghurt and dairy
desserts business

- 12
Add / (Less): Time
value of options

5 (31)
Less: Gain on sale of
Darnum manufacturing
plant

(42) -
Gain on sale of DairiConcepts
investment

- (68)
Total normalised EBIT 607 665

ENDS

Fonterra Co-operative Group
Confidential to Fonterra Co-operative Group Page 4

For further information contact:
Simon Till
Director Capital Markets
Phone: +64 21 777 807

---

Interim
Result 2017
22 MARCH 2017
OUR POTENTIAL

© Fonterra Co-operative Group Ltd.
Page 2
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, 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 and projections. Those risks, uncertainties,
assumptions and other important factors are not all within the control of Fonterra Co-operative Group Limited (Fonterra) and its
subsidiaries (the Fonterra Group) and cannot be predicted by the Fonterra Group.
While all reasonable care has been taken in the preparation of this presentation none of Fonterra 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 completeness of any information in this presentation or
likelihood of fulfilment of any forward-looking statement or projection or any outcomes expressed or implied in any forward-looking
statement or projection. The forward-looking statements and projections in this report reflect views held only at the date of this
presentation.
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
update any information in this presentation.
This presentation does not constitute investment advice, or an inducement, recommendation or offer to buy or sell any securitiesin
Fonterra or the Fonterra Shareholders’ Fund.

Page 3
Confidential to Fonterra Co-operative Group
Our Co-operative

© Fonterra Co-operative Group Ltd.
Page 4
Higher forecast payoutfor farmers
Improved FarmgateMilk Price and strong earnings performance
1. For farm budgeting purposes a target full year dividend of 40 cents per share is assumed
Note: FarmgateMilk Price: $ per kgMS; Dividend: $ per share
6.107.606.085.848.404.403.906.00
0.27
0.30
0.32
0.32
0.10
0.25
0.40
0.40
1
20102011201220132014201520162017
forecast
Farmgate Milk PriceDividend
Indicative
payoutlevel
for budgeting
6.37
7.90
6.40
6.16
8.50
4.65
4.30
6.40

© Fonterra Co-operative Group Ltd.
Page 5
10
20
30
40
50
60
70
80
90
100
JunJulAugSepOctNovDecJanFebMarAprMay
Volume (m litres/day)
Lower milk volumes during the peak
Improved weather in late season increasing the forecast
SeasonTotal Milk Solids (kgMS)Peak Day Milk
—2014/151,614m (up 2%)90m litres
—2015/161,566m (down 3%)87m litres
—2016/17F1,515m (down3%)80m litres
•Season forecast
revised to 1,515m
kgMSdown 3% on last
season
•Volume down 5% for
season to 28 February
mainly due to more
rain in central North
Island
–North Island down 7%
–South Island down 1%
•Impacted available
supply and global
prices

© Fonterra Co-operative Group Ltd.
Page 6
Global dairy market –supply-led rebalancing
Note: All 12 month figures are rolling 12 months compared to previous comparable period: Australia (Dec), EU (Dec), United States (Jan), China (Jan), Asia (Nov),
Middle East & Africa (Nov), Latin America (Nov), New Zealand (Feb)
Source: Government milk production statistics; GTIS trade data; Fonterra analysis
Demand
Supply
Russia
EU’s largest dairy
export market
Trade embargo remains
US
12 months
production
+2
%
Australia
12 months
production
-7
%
Fonterra in NZ
12 months
production
Last 3 months
(Dec, Jan, Feb)
-3
%
-4
%
Asia (excl China)
12 months
imports
+5
%
Middle East & Africa
12 months
imports
-4
%
EU
12 months
production
Last 3 months
(Oct, Nov, Dec)
0
%
-4
%
Latin America
12 months
imports
+13
%
China
12 months
imports
Last 3 months
(Nov, Dec, Jan)
+12
%
-1
%

© Fonterra Co-operative Group Ltd.
Page 7
Competitive NZ cash payout
NZ farmers benefiting from higher global prices
Note: All prices are adjusted to a milk composition of 3.5% protein and 4.2% fat and for spot exchange rates
Source: DairyNZ(NZ to May 2014);Fonterra announced payout (milk price and dividend) (NZ from June 2014); USDA;European Milk Market Observatory (Netherlands milk price)
0
0.2
0.4
0.6
0.8
20132014201520162017
NZ
US
EU
Global milk prices (USD / litre)
•Strong NZ payout
•A $6 milk price would put
$3 billion more into the NZ
economy than last season
•Milk Price Manual change
reinforces competitive milk
price
–Sixcents per kgMS
season-to-date
•Volatility in global prices
will continue

Page 8
Confidential to Fonterra Co-operative Group
Our Potential

© Fonterra Co-operative Group Ltd.
Page 9
•Future for dairy remains strong
•Improved prices but volatility will continue
•Increased geopolitical uncertainty
Global
Context
Value
Creation
Trust
•Strategy delivering –strong profit and higher milk price
•Strong Co-op –continuing to invest in our strategy
•Shaping the future –building on existing strategy
•Doing what we said we would do
•Investing in our communities, sustainability and our future
•Fully focused on consistent performance

© Fonterra Co-operative Group Ltd.
Page 10
Ingredients
Volume (LME)
3
11.0B
Gross Margin11.1%
Normalised EBIT$510M
Consumer and Foodservice
Volume (LME)
3
2.7B
Gross Margin29.8%
Normalised EBIT$313M
Continued strong business performance
1.Interim dividend over volume weighted average closing FCG share price ($5.92) across the six month period (annualised)
2. Economic net interest-bearing debt; 3. Includes inter-company sales
$1,761M
$418M
11.7BLME
$506M
$9.2B
INTERIM DIVIDEND
GROSS MARGINVOLUME
NET PROFIT AFTER TAX
REVENUE
20CPS
China Farms
Volume (LME)
3
0.2B
Gross Margin(5.7%)
Normalised EBIT($24M)
6%5%7%
2%Dividend Yield 6.8%
1
$607M
NORMALISED EBIT
9%
$1,232M
OPEX
6%
$6.1B
NET DEBT
2
11%

© Fonterra Co-operative Group Ltd.
Page 11
2%
21%
56%
10%
12%
Delivering our strategy
Volume to higher Value at Velocity
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
Buildandgrow
beyond our current
consumerpositions
3
2
4
5
6
7
•GDT
–Rebalanced volumes in
response to lower production
•Ingredients
–Lower milk collections and
inventory levels
–Strong sales and optionality
to maximise returns:
•Stream returns
•Price achievement
•Consumer & Foodservice
–227madditional LME
–On-target for 400m full year
DIRA
Ingredients
Foodservice
Consumer
Note: Wheel shows percentage of first six months FY17 external sales (LME)
HY
11.7b
LME
GDT
H1 FY17 external sales
volume over H1 FY16
17%
2%
9%
11%
14%

© Fonterra Co-operative Group Ltd.
Page 12
Doing what we said we would in FY17
•Higher price achievement per MT
•11% improvement in inventory levels
•Improving NZ reputation ranking
•227m more LMEs into higher value categories
•$240m mozzarella plant at Clandeboye
•Grown share, lifted prices and reduced costs in
still challenging market
•Well-placed for infant formula regulatory change
•Increasing Anmumvolumes
•7% reduction in operating costs per kg
•Stanhope construction progressing well
•Disrupt businesses already launched
•Launched Disrupt for 2017 globally
•Focus on people & capability
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
Buildandgrow
beyond our current
consumer positions
3
2
4
5
6
7
China Farms –Downstream Value
Australian endgame
Accelerate growth in our 8 strategic
and leadership markets
Brazil transformation
Maximise Beingmate partnership
Optimisation& Price Achievement
Fonterra story
Disrupt
Velocity / Engagement

© Fonterra Co-operative Group Ltd.
Page 13
Aware of long term mega trends
•Food has a massive global
impact:
–40% of global employment
–10% of global consumer spend
•Dairy contributes $12b to the
NZeconomy
•A third of food produced is wasted
•Current food productivity growth is
1% per annum –at 2-3% we
could help alleviate world poverty
•Dairy is 20% of agricultural land
•Resurgence of nationalism
brings uncertainty
•Protectionism threatens
globaltrade
•Volatility in commodity prices
toprevail
•Food production makes up 30% of
global greenhouse gas emissions
•Serious land degradation affects
20% of world’s arable land
Climate
Change
Nationalism
Socio-
Economic
Productivity
Global
Trends

© Fonterra Co-operative Group Ltd.
Page 14
Building a strong Co-op into the future
Our farmers
5-10 years
Sustainable
Long-Term Model
Future consumers
Sustainable production &
Future state operations
Disruption
Digital Transformation
& M&A
3-5 years
Future Growth
Platforms
1-3 years
V3 Strategy

Page 15
Confidential to Fonterra Co-operative Group
Our Performance

© Fonterra Co-operative Group Ltd.
Page 16
Value creation
Strong performance in higher milk price environment
$418M
NPAT
2%
19.1%
GROSS MARGIN
Down from 21.2%
$1,232M
OPEX
6%
$607M
NORMALISED EBIT
9%
$157M
NET FINANCE COSTS
41%

© Fonterra Co-operative Group Ltd.
Page 17
Ingredients
Lower volumes and stream returns impacting overall contribution
•Lower opening inventory and milk collection in NZ
•Held gains in inventory levels from last financial year end
•Shifted mix to non-reference products (UHT and cheese)
Value
•NZ Ingredients: normalised EBIT decreased $125m
–Positive stream returns but down on last year
–Stable price achievement through higher margins
–Good operating and sales performance
•Australia: $37m improvement in normalised EBIT
Velocity
•Improved operating performance with higher yields and
increased plant utilisation
•Capexspend down in line with expectations
Volume
1. Includes intercompany sales
Volume (m LME)¹
Normalised EBIT ($m)
617
510
20162017
11,826
10,981
20162017
(7%)

© Fonterra Co-operative Group Ltd.
Page 18
•227m more LME into higher-value (on-track for 400m
target again this financial year)
•Higher e-commerce sales and foodservice growth in China
•New product launches driving sales in key markets
Value
•Normalised EBIT significantly up by 30%
•Gross margins higher but will be pressured in second half
•Australia performing well
Velocity
•Gaining market share in Brazil to offset category decline
•Focus on point-of-sale execution and improved efficiency
Volume
Consumer and Foodservice
Strong volume growth and significant increase in normalised EBIT
Volume (m LME)
1
Normalised EBIT ($m)
241
313
20162017
2,484
2,711
20162017
9%
1. Includes intercompany sales

© Fonterra Co-operative Group Ltd.
Page 19
Consumer and Foodservice
Strong growth in both channels
ConsumerFoodservice
Volume (m LME)
1
Gross Margin (%)
1,531
1,597
20162017
4%
Volume (m LME)
1
Gross Margin (%)
953
1,114
20162017
28%
27%
20162017
17%
1. Includes intercompany sales
29%
31%
20162017

© Fonterra Co-operative Group Ltd.
Page 20
Asia
Oceania
Greater China
Consumer and Foodservice
Greater China and Oceania driving profit growth
VolumeNormalised EBIT
VolumeNormalised EBIT
VolumeNormalised EBIT
Latin America
VolumeNormalised EBIT
108
124
20162017
33
58
20162017
68
96
20162017
3235
20162017
301
358
20162017
960
912
20162017
440
583
20162017
783
857
20162017
Note: Volume shown is million LME (includes intercompany sales) and normalised EBIT is million NZ $
32%
(5%)
19%
9%

© Fonterra Co-operative Group Ltd.
Page 21
Financial discipline
Lower debt further strengthening balance sheet
1.Gearing ratio is economic net interest bearing debt divided by economic net interest bearing debt plus equity excluding cash flow hedge reserve
2.Economic net interest-bearing debt
68 DAYS
WORKING CAPITAL
Down 8 days
46.6%
GEARING
1
Down from 49.2%
AA-
CREDIT RATING
Fitch
$6.1B
NET DEBT
2
11%
S&P
STABLESTABLE
$244M
CAPEX
46%

© Fonterra Co-operative Group Ltd.
Page 22
Outlook for second half of FY17
Strong Co-op with strong balance sheet
•Target full year gearing ratio of 40-45% and solid working capital
•Farmers restoring the financial strength of their businesses
Increased confidence in forecast FarmgateMilk Price of $6.00 per kgMS
•Global supply and demand more balanced
•Increased late-season production focused into higher value products
Targeting full year dividend of 40 cents per share and cash payout of $6.40
•Adjusting forecast earnings range to 45-55 cents per share
–Ingredients business impacted by product stream returns
–Tighter margins in the second half for Consumer and Foodservice
–Impact of possible extra autumn milk in NZ

Page 23
Confidential to Fonterra Co-operative Group
Supplementary Information

© Fonterra Co-operative Group Ltd.
Page 24
Normalised EBIT reconciliation
$ million
Six months ended
31 January 2017
Six months ended
31 January 2016
Profit after tax418409
Add: Net finance costs157266
Add/(Less): Taxation expense(credit)6977
Total reported EBIT644752
Add: Impairment of assets in Australia-12
Less: Gain on DairiConceptssale-(68)
Less: Gain on Darnumsale (part share to JV)(42)-
(Less)/Add:Time value of options5(31)
Total normalisation adjustments(37)(87)
Total normalised EBIT607665

© Fonterra Co-operative Group Ltd.
Page 25
NZ Ingredients product mix
Six months ended
31 January 2017
Six months ended
31 January 2017
Six months ended
31 January 2016
Six months ended
31 January 2016
$ million$ per MT$ million$ per MT
Sales volume (000 MT)
Reference products973-1,061-
Non-reference products338-343-
Revenue
Reference products3,7683,8733,4053,209
Non-reference products1,7585,2011,7285,038
Cost of milk
Reference products2,9012,9822,1972,071
Non-reference products1,0132,9977992,329
Gross margin
Reference products246253351331
Non-reference products3981,1784851,414
Note: Reference products are products used in the calculation of the FarmgateMilk Price –WMP, SMP, BMP, Butter and AMF; Milk solids used in the products sold were 547
million kgMSreference and 190 million kgMSnon-reference (previous comparable period 602 million kgMSreference and 203 million non-reference)

© Fonterra Co-operative Group Ltd.
Page 26
Bank
Facility
47%
Diversified profile¹
At 31 January 2017
Prudent liquidity
At 31 January 2017
Bank facility maturity profile
At 31 January 2017 ($ billion)
DCM maturity profile²
At 31 January 2017 ($ billion)
Diversified and prudent funding position
0.0
1.0
2.0
3.0
0.0
1.0
2.0
3.0
Undrawn
Facilities
$3.7b
75%
Drawn Facilities
$1.2b
25%
AUD DCM 9%
CNY DCM 6%
GBP DCM 6%
NZD DCM 13%
USD DCM 14%
1.Includes undrawn facilities and commercial paper
2.Excluding commercial paper
3.WATM is weighted average term to maturity
WATM³: 2.5 yearsWATM³: 6.2 years
EUR DCM 5%