Annual Meeting presentations

2017
ANNUAL
MEETING
2NOVEMBER 2017
FONTERRA
CO-OPERATIVE
GROUP LIMITED

© Fonterra Co-operative Group Ltd.
Page 2
JOHN WILSON
Chairman

Good season for our farmers
Return to solid results after two seasons of unusually low milk prices
1. Total available for payout = Forecast Farmgate Milk Price + Forecast Earnings Per Share (EPS) of 45-55 cents; For farm budgeting purposes the likely
dividend will be calculated in accordance with Fonterra policy of paying out 65-75 per cent of adjusted net profit after tax over time
Note: Farmgate Milk Price: $ per kgMS; Dividend: $ per share
6.107.606.085.848.404.403.906.126.75
0.27
0.30
0.32
0.32
0.10
0.25
0.40
0.40
201020112012201320142015201620172018
forecast
Farmgate Milk PriceDividend
Total
available for
payout
1
6.37
7.90
6.40
6.16
8.50
4.65
4.30
6.52
7.20-7.30

Solid business performance
1. Return on Capital (ROC) excludes goodwill, brands and equity accounted investments; Group ROC including these items was 8.3% in FY17 (FY16: 9.2%)
2. FY17 dividend over volume weighted average FCG price of $5.96 across the year; 3. Includes sales to other strategic platforms.
ANNUAL DIVIDEND YIELD
2
40CPS 6.7%
Stable
22.9BLME
VOLUME
3%
$19.2B
REVENUE
12%
$1,155M
NORMALISED EBIT
15%
11.1%
RETURN ON CAPITAL
1
Down from 12.4%
Ingredients
Volume (LME)
3
21.3 B
Gross Margin (%)9.7%
Normalised EBIT$943M
Return on Capital
1
10.3%
Consumer and Foodservice
Volume (LME)
3
5.5 B
Gross Margin (%)26.8%
Normalised EBIT$614M
Return on Capital
1
47.2%
China Farms
Volume (LME)
3
0.3B
Gross Margin (%)8.6%
Normalised EBIT$1M
$745M46C
NPAT EPS
11%

Enhanced digital offering & apps
•Launch of Agrigate in partnership with LIC
Tiaki: Farm Source™ sustainable dairying
•Tiaki brings together our Co-op’s on-farm
sustainability tools and services, tailored to
individual farm needs.
Business support on the ground
•Regional model and technical assistance
Benefits from a strong Co-operative
Farm Source™ rewards & benefits
•Delivered more than $50 million in value of
dollars, discounts and deals to farmers.
1. Fonterra Farmgate Milk Price Statement 2017
Competitive Milk PriceComplemented by Co-op Initiatives
Farmgate Milk Price put in place in 2009
•Changes to approaches used since
then have resulted in increase
Additional 45c to the Farmgate Milk
Price
1
•2017 milk price would have been 45
cents lower using model assumptions
from 2009
–$600m additional to milk price

---

© Fonterra Co-operative Group Ltd.
Page 1
THEO SPIERINGS
Chief Executive Officer

Solid business performance
1. Return on Capital (ROC) excludes goodwill, brands and equity accounted investments; Group ROC including these items was 8.3% in FY17 (FY16: 9.2%)
2. FY17 dividend over volume weighted average FCG price of $5.96 across the year; 3. Includes sales to other strategic platforms.
ANNUAL DIVIDEND YIELD
2
40CPS 6.7%
Stable
22.9BLME
VOLUME
3%
$19.2B
REVENUE
12%
$1,155M
NORMALISED EBIT
15%
11.1%
RETURN ON CAPITAL
1
Down from 12.4%
Ingredients
Volume (LME)
3
21.3 B
Gross Margin (%)9.7%
Normalised EBIT$943M
Return on Capital
1
10.3%
Consumer and Foodservice
Volume (LME)
3
5.5 B
Gross Margin (%)26.8%
Normalised EBIT$614M
Return on Capital
1
47.2%
China Farms
Volume (LME)
3
0.3B
Gross Margin (%)8.6%
Normalised EBIT$1M
$745M46C
NPAT EPS
11%

2%
20%
36%
19%
10%
12%
More volume to higher value
1 billion LMEs shifted to Consumer, Foodservice and Advanced Ingredients
Deliver
on Foodservice potential
Selectively invest
in milk pools
Grow
our active living business
Develop
leading positions in paediatric
& maternal nutrition
Optimise
NZ milk
1
Align
our business and organisation
Buildandgrow
beyond our current
consumerpositions
3
2
4
5
6
7
DIRA
GDT
Advanced
Ingredients
Foodservice
Consumer
Note: Wheel shows percentage of total FY17 external sales (LME); Consumer, Foodservice and Ingredients growth rates include intercompany sales
27%
3%
7%
5%
9%
FY17
22.9b
LME
%
FY17 sales volume
growthover FY16
•GDT
–Volumes aligned with
lower production
•Ingredients
–Lower NZ milk
collections and record
low closing inventory
–473m LMEs shifted to
higher margin Advanced
Ingredients
•Consumer & Foodservice
–Added 576m more LMEs
–Normalised EBIT up 6%
Base
Ingredients
11%

Value creation
Solid profit with ongoing financial discipline
Note: Return on Capital (ROC) excludes goodwill, brands and equity accounted investments; Group ROC including these items was 8.3% (2016: 9.2%)
17.0%
GROSS MARGIN
$1,155M
NORMALISED EBIT
Down from 21.1%
15%
$851M
CAPEX
10%
11.1%
RETURN ON CAPITAL
Down from 12.4%
75 DAYS
WORKING CAPITAL
2days
$2,370M
OPEX
6%
NPATEPS
$745M46C
11%

Ingredients
Return on capital of 10.3%
•Challenging NZ milk collection profile
•Lower closing inventory carried into this year
•Growth in Advanced Ingredients of 9% (473m LME)
Value
•NZ Ingredients margins impacted by rising reference product
prices relative to non-reference
–Stream returns down significantly from last year
•Australia: $62m normalised EBIT from recurring business
•China milk: ($38m) impact of ongoing lower domestic prices
Velocity
•Targeted capex with Foodservice focus and Stanhope rebuild
•Optionality used to prioritise higher value production
•Yield improvements and efficient peak management
Volume
1. Includes sales to other strategic platforms
Note: Return on Capital (ROC) excludes goodwill, brands and equity accounted investments
Volume (m LME)¹
Normalised EBIT ($m)
1,204
943
20162017
22,391
21,304
20162017
(5%)

Asia
Greater China
Consumer and Foodservice
Solid performance led by Greater China
244
201
20162017
97
101
20162017
108
103
20162017
623
735
20162017
1,834
1,7
42
20162017
1,549
1,7
03
20162017
1. Sales volume growth of (1%) when excluding impact of discontinued businesses
Note: All volumes include intercompany sales
Oceania
Volume
1
Normalised EBIT
Latin America
VolumeNormalised EBIT
(5%)
18%
VolumeNormalised EBITVolumeNormalised EBIT
10%
46%
131
209
20162017
876
1,278
20162017

–Fonterra Australia has reached full milk
processing capacity at 2 billion litres
–Invest initial $100m immediately to de-
bottleneck plants in Australia
–Unlock 500 million litres of milk
processing capacity
–Evaluating opportunity to introduce co-
op model to Fonterra
–Strongly aligned with our integrated
cheese/whey/nutritionals milk pool
strategy
-12
-8
-4
0
4
8
12
16
11.522.533.5
ROC (%)
Milk pool
(billion litres)
Today
Future
FY15
Growing volume and value in Australia Our growth plans
Australian growth plans to meet strong
global demand

China opportunity
Fonterra well positioned in every segment
Deliver
on Foodservice potential
Selectively invest
in milk pools
Grow
our active living 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
TODAYFonterra Milk Source (%)
3
8b
3.7b
31b
1.3b
3b
0.2b
1
30-35b
2
0.34b
5.5b
LME b
Ingredients
Consumer & Foodservice
Advanced Nutrition
Domestic Milk Pool
2013
8b
3.5b
28b
0.4b
2b
0.02b
0.06b
4b
77
50
90
80
10
50
10
10
7
10
6
100
NZAUEUChina
1. Based on April-2017 external data and analysis
2. Includes Beingmate sales of ~180m LME
3. Indicative share of sourcing
Source: Euromonitor; Fonterra analysis
Total Fonterra China
b LME Fonterrab LME China market
2

Financial discipline
Strength of the balance sheet underpins our Co-op
1.Gearing ratio is economic net interest bearing debt divided by economic net interest bearing debt plus total equity excluding hedge reserves
2.Economic net interest-bearing debt
3.Debt payback ratio is economic net interest bearing debt divided by EBITDA. Both debt and EBITDA are adjusted for the impact of operating leases
3.5
DEBT / EARNINGS
3
Up from 2.8x
44.3%
GEARING
1
Stable
AA-
CREDIT RATING
Fitch
$5.6B
NET DEBT
2
Up 2%
S&P
STABLESTABLE
$7.2B
TOTAL EQUITY
Up 4%

BUILDING THE WORLD’S LEADING
SUSTAINABLE DAIRY CO-OP

Growth
STRONG V3 CO-OP
INNOVATIVE CO-OP
SUSTAINABLE CO-OP
3 years
5 years
10+ years
NOW
•Demand-led strategy to
optimise NZ milk,
supported by milk pools
•Investing in
technology and
people for the future
•Creating sustainable
value for all
stakeholders
Competitive advantage of Cost Leadership through Scale Efficiency
Strategy focused on achieving our ambition
Three strategic horizons

Protect market share of NZ milk
Deliver sustainable value creation in NZMP
Deliver Everyday Nutrition focused growth path
Target positions in Affordable Nutrition
Deliver double-digit Foodservice diversified growth
Revitalise the Anlenebrand (Healthy Living)
Build an Active Living portfolio
Deliver China and Beingmate partnership at full potential
Develop cheese / whey supply options
Grow Australian milk pool share
Invest to deliver future-oriented capabilities
FY18 strategic priorities driving value
Deliver
on Foodservice potential
Selectively invest
in milk pools
Grow
our active living business
Develop
leading positions in paediatric &
maternal nutrition
Optimise
NZ milk
1
Align
our business and organisation
Buildandgrow
beyond our current
consumerpositions
3
2
4
5
6
7

We are embracing tomorrow’s innovation
in what we do today
AGTECHENERGY & CLEAN
TECH
ROBOTICS
HYPER-
PERSONALISATION
DIGITAL
LIVING
DIGITAL ARTIFICIAL INTELLIGENCE BIG DATABEHAVIOUR ECONOMICS
SUSTAINABLE
FARMS
SUSTAINABLE
OPERATIONS
FUTURE
CONSUMERS
GAMIFICATION
AR/VR
PRECISION
FARMING
DIGITAL
MANUFACTURING
ENERGY &
W ATER
EFFICIENCY
GENOMICS
SOIL &
CROP TECH
NEW
RETAIL
FOOD SAFETY &
TRACEABILITY
BLOCKCHAIN
3D PRINTING
CONNECTED
LIFE
SHARING
ECONOMY
ENABLERS
CONSUMERS OF
THE FUTURE

We have already begun the innovation journey
Growth
STRONG V3 CO-OP
SUSTAINABLE CO-OP
3 years
5 years
10+ years
NOW
INNOVATIVE CO-OP
NEW INNOVATION
DIGITAL
TRANSFORMATION
DISRUPTIVE
BUSINESS MODELS
PARTNERSHIPS
EXPONENTIAL
TECHNOLOGIES

Sharing our story

Innovation and Global Reach
#431
Innovative farmers
16
April 2016
212932
35
26
16
19
11
45
March 2017FY18 Objective
Purest Dairy
Milk for schools
December 2016June 2016
In the last year, the Co-op has shifted its reputation from 9
th
to 5
th
and
changed the minds of 1.5 million New Zealanders.
35
17
July 2017
Building collective pride
among New Zealanders
#431
Innovation and Global Reach
Innovative farmers
Purest Dairy
Milk for schools

---

© Fonterra Co-operative Group Ltd.
Page 1
DUNCAN COULL
Chairman
Fonterra Shareholders’ Council

© Fonterra Co-operative Group Ltd.
Page 2
Statement of Intentions
for the year ending 31 July 2017
KPIFY2017 TargetFY2017 Actual
Available for Payout$4.75 -$4.85$6.52
Consumer and Foodservice
Volume
5.0 billion5.0 billion
Farmgate Milk Price$4.25$6.12
Earningsper Share$0.50 -$0.60$0.46
GearingRatio44.0%44.3%
Working Capital Days7775
Return on Capital13.2%11.1%
Milk Solids (Retain and Grow)82.2%82.4%
EmployeeTRIFR5.25.2

© Fonterra Co-operative Group Ltd.
Page 3

© Fonterra Co-operative Group Ltd.
Page 4

© Fonterra Co-operative Group Ltd.
Page 5
FY2016 Actual
$000
FY2017 Budget
$000
FY2017Actual
$000
FY2018 Budget
$000
Total Operating
Costs
2,4732,4592,557
2,435
Total Co-operative
Culture Committee
Costs
626611357
602
Total Governance
& Ethics
Committee Costs
9330
0
Total Performance
Committee Costs
525037
55
Governance
Development
Programme
105171129
146
Total
3,2653,3243,080
2,238
Proposed Budget FY2018

© Fonterra Co-operative Group Ltd.
Page 6
DUNCAN COULL
Chairman
Fonterra Shareholders’ Council