Fonterra Annual Results 2018

Page 1



Reporting Period 12 months to 31 July 2018
Previous Reporting Period 12 months to 31 July 2017


Amount
(m’s)
Percentage
Change
Revenue from ordinary activities NZ$20,438 6%
Profit (loss) from ordinary activities after tax attributable to
security holder
1

NZ$(196) (126)%
Net profit (loss) attributable to security holders NZ$(221) (130)%

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 1.2 of Appendix 1 of the Fonterra Shareholders’
Market Listing Rules, and Clause 1.2 of Appendix 1 of the NZX Debt Market Listing Rules).

Interim/Final Dividend
Amount per Security
Imputed Amount
per Security
No final dividend to be paid $0.00 $0.00

Record Date -
Dividend Payment Date -

Comments -

To be followed by the balance of the information required in the report pursuant to Appendix 1 – Including
the Net Tangible Asset amount per security for the current and previous reporting period.

---

13 September 2018
FONTERRA ANNOUNCES FY18 ANNUAL RESULTS AND OUTLOOK FOR FY19

• Total Cash Payout for 2017/18 season: $6.79
o Farmgate Milk Price $6.69 per kgMS
o Dividend of 10 cents per share
• New Zealand milk collections: 1,505 million kgMS, down 1%
• Sales volumes: 22.2 billion Liquid Milk Equivalents (LME), down 3%
• Normalised sales revenue: $20.4 billion, up 6%
• Net loss after tax: $196 million
• Normalised EBIT: $902 million, down 22%
• Normalised gross margin: 15.4%, down from 16.9%
• Return on capital: 6.3%, down from 8.3%
• Normalised earnings per share: 24 cents
• Gearing ratio: 48.4%, up from 44.3%
• FY19 forecast Farmgate Milk Price: $6.75 per kgMS
• FY19 forecast earnings per share range: 25-35 cents

* Non-GAAP measures. Information on the non-GAAP financial information used by Fonterra are found at the
end of this document.

Today Fonterra announces its FY18 annual results, the plan to improve its business performance
and the outlook for FY19.

The Co-operative reports a Net Loss After Tax of $196 million. Normalised EBIT was $902 million,
down 22%, the Co-operative’s gearing ratio was up from 44.3% last year to 48.4% and return on
capital was 6.3%, down from 8.3%.

Fonterra CEO Miles Hurrell says the Co-operative’s business performance must improve.

“There’s no two ways about it, these results don’t meet the standards we need to live up to. In
FY18, we did not meet the promises we made to farmers and unitholders,” says Mr Hurrell.

“At our interim results, we expected our performance to be weighted to the second half of the year.
We needed to deliver an outstanding third and fourth quarter, after an extremely strong second
quarter for sales and earnings – but that didn’t happen.”

Mr Hurrell says that in addition to the previously reported $232 million payment to Danone relating
to the arbitration, and $439 million write down on Fonterra’s Beingmate investment, there were four
main reasons for the Co-operative’s poor earnings performance.

“First, forecasting is never easy but ours proved to be too optimistic. Second, butter prices didn’t
come down as we anticipated, which impacted our sales volumes and margins. Third, the increase
in the forecast Farmgate Milk Price late in the season, while good for farmers, put pressure on our

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

margins. And fourth, operating expenses were up in some parts of the business and, while this was
planned, it was also based on delivering higher earnings than we achieved.
“Even allowing for the payment to Danone and the write down on Beingmate, which collectively
account for 3.2% of the increase in the gearing ratio, our performance is still down on last year.”

Mr Hurrell says when looking at the underlying performance of the business, which you can see in
the normalised EBIT of $902 million, progress has been made in moving more milk into higher
value products.

“While sales volumes were down 3% in FY18, a larger proportion of milk was sold through
Consumer and Foodservice and Advanced Ingredients. In fact, 45% of our sales volumes were
through these businesses and this is up from 42% in FY17, despite the higher input-price
environment.

“Our Consumer and Foodservice business grew in all regions, except Oceania, with our strongest
growth in Greater China. Of particular note, our Consumer business in China broke even this year,
two years ahead of schedule. A big contributor to this success is the popularity of Anchor, which is
now the number one brand of imported UHT milk in both online and offline sales in China.

“Despite this progress, performance across the Co-operative was below our expectations. Based
on this, the Board has decided to limit our dividend to just the 10 cents paid in April and has
confirmed the final Farmgate Milk Price for the 2017/18 season at $6.69 per kgMS,” added Mr
Hurrell.

Plan to lift Fonterra’s business performance

Mr Hurrell says these results are not just numbers – they’re the livelihoods of the Co-operative’s
farmers and their families and the investment of unitholders.

“There are people depending on us – farmers, unitholders and employees who want to be part of a
successful Co-operative. We are putting in place a clear plan for how we are going to lift Fonterra’s
performance. It relies on us doing a number of things differently.

Fonterra’s Board and Management has outlined a plan based on three immediate actions:

1. Taking stock of the business – Fonterra will re-evaluate all investments, major assets and
partnerships to ensure they still meet the Co-operative’s needs today. This will involve a
thorough analysis of whether they directly support the strategy, are hitting their target return on
capital and whether it can scale them up and grow more value over the next two-three years.
This will start with a strategic review of the Co-operative’s investment in Beingmate.

2. Getting the basics right – Fonterra has already begun taking action and fixing the businesses
that are not performing. The level of financial discipline will be lifted throughout the Co-
operative so debt can be reduced and return on capital improved.

3. Ensuring more accurate forecasting – the business will be run on more realistic forecasts
with a clear line of sight on potential opportunities as well as the risks. It will also be clear on its
assumptions, so farmers and unitholders know exactly where they stand and can make the
decisions that are right for them and their businesses.

Outlook for 2019

The forecast Farmgate Milk Price for the 2018/19 season is held at the $6.75 per kgMS Fonterra
announced at the end of August and the Co-operative’s forecast earnings per share range for FY19
is 25-35 cents.

At $6.75 per kgMS the forecast Farmgate Milk Price for the 2018/19 season is the third consecutive
year of strong milk prices. That’s good for farmers and for rural economies where farmers spend 46
cents of every dollar they earn.

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

Chairman John Monaghan says the Co-operative is being clear with farmers and unitholders on
what it will take for the Co-operative to achieve the forecast earnings guidance.

“For the first time we are sharing some business unit specific forecasts. Among others, these see
the Ingredients and Consumer and Foodservice businesses achieving an EBIT of between $850
million and $950 million, and between $540 million and $590 million, respectively.”

“FY19 is about lifting the performance of our Co-operative.

“We are taking a close look at the Co-operative’s current portfolio and direction to see where
change is needed to do things faster, reduce costs and deliver higher returns on our capital
investments.

“This includes an assessment of all of the Co-operative’s investments, major assets and
partnerships against our strategy and target return on capital. You can expect to see strict discipline
around cost control and respect for farmers’ and unitholders’ invested capital. That’s our priority.”

Click here to view Fonterra’s Annual Results presentation and Annual Report.

Visit the Annual Results multimedia page to access B-roll and five short, downloadable audio grabs
of Chairman John Monaghan, CEO Miles Hurrell and CFO Marc Rivers talking about aspects of this
announcement.

Non-GAAP financial information

Fonterra uses several non-GAAP measures when discussing financial performance. These
measures include normalised segment earnings, normalised EBIT, EBIT, normalisation
adjustments and payout. These are non-GAAP financial measures and are not defined by 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. These non-GAAP measures are not subject to audit unless they are included in Fonterra’s
annual financial statements.

Definitions of the non-GAAP measures used by Fonterra, and reconciliations of the NZ IFRS
measures to the non-GAAP measures can be found on page 106 and 107 of Fonterra’s Annual
Report that is available on Fonterra’s website.


For further information contact:

Fonterra Communications
24-hour media line
Phone: +64 21 507 072

About Fonterra
We’re a global dairy nutrition company owned by 10,000 farmers and their families. We’ve built our expertise
on the legacy of the thousands of farmers who’ve made New Zealand a world leader in dairy. With a can-do
attitude and a collaborative spirit, we’re a world leading dairy exporter. Our 22,000 people share the
goodness of dairy nutrition with the world through our innovative consumer, foodservice and ingredient
solutions brands, and our farming and processing operations across four continents.
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---

FONTERRA
ANNUAL REPORT
2018

THE YEAR AT
A GLANCE 2018
NZ Milk Collection
for the 2017/18 season
Farmgate Milk Price
Normalised EBIT
Free Cash Flow
1
,
505
$
6.69 kgMS
$
902 million
$
600 million
1 Includes Intangibles and Equity Accounted Investments
million
kgMS
Normalised
Earnings Per Share
24
cents
Return
on Capital
1
6.3
%
per

02
Day in the
life of our
Co-operative
Page 02
14
Letter from
our Chairman
Page 14
Letter from our CEO
Page 16
Making change,
with purpose
Page 18
Our Ambition
Page 20
Where they know us
Page 22
Our year in review
Page 24
26
Healthy
environments and
strong communities
Page 26
Nutrition –
what we sell
Page 28
Environment
Page 30
Community
Page 32
34
Co-operative
solutions
Page 34
Working for
our farmers
Page 36
Farmer spotlight
Page 38
Honour Roll for
Milk Quality
Excellence
Page 40
CONTENTS
Our StoriesOur Co-operativeOur SustainabilityOur Farmers
Fonterra uses several non-GAAP measures when discussing fi nancial performance. These measures include normalised segment earnings, normalised EBIT, EBIT, normalisation adjustments and payout. These are non-GAAP fi nancial measures and are not defi ned by 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 defi ned or utilised by all companies. Accordingly, these
measures may not be comparable with similarly titled measures used by other companies. Non-GAAP fi nancial measures should not be viewed in isolation nor considered as a substitute for measures reported in accordance with NZ IFRS. These non-GAAP measures are not subject to audit unless they are included in Fonterra’s annual fi nancial statements.Please refer to page 106 for the reconciliation of the NZ IFRS measures to the non-GAAP measures and page 107 for defi nitions of the non-GAAP measures used by Fonterra.

42
Employee
spotlight
Page 42
Our Board
Page 44
Our Management
Team
Page 46
48
Group fi nancial
metrics
Page 48
Group Overview
Page 50
Ingredients
Page 54
Consumer
and Foodservice
Page 56
China Farms
Page 60
Historical Financial
Summary
Page 62
70
Corporate
Governance
Page 70
84
Summary
Financial
Statements
Page 84
108
Directory
Page 108
Our PeopleOur PerformanceOur Corporate GovernanceOur DirectoryOur Financial Summary

OUR STORY STARTS HERE
FONTERRA ANNUAL REPORT 2018
02

PRODUCTION
1,505m kgMS
Our home is New Zealand, where we’ve
been dairy farming for almost 150 years.
Our location makes us unique. We’re
the first country to see the sunrise
every morning and we’re one of the best
places to produce dairy in the world.
Our grass fed farming model puts
New Zealand dairy in high demand
around the world. This year, our 10,000
farming families produced 1,505 million
kilograms of milk solids (kgMS).
FARM 40931

STRATFORD, TARANAKI
Matt and Kathryn Roberts

Farmer owners since 2008
FONTERRA ANNUAL REPORT 2018
03

About half of
every dollar a
farmer earns is
spent in their
local community.
HELPING THE COMMUNITY
Our farmers’ hard work makes a
significant contribution to regional
New Zealand and to the national
economy. This year, our farmers
earned $6.69 for every kilogram
of milk solids they produced.
FARMGATE MILK PRICE
$6.69 kg MS
46cents
per
FARM 34410

SOUTHERN SOUTHLAND
Scott McKenzie, Greenbush Farm

Farmer owners since July 2008
FONTERRA ANNUAL REPORT fi150
04

FARM 71284

PUKEKOHE
Steve and Catherine Liefting, farmer owners since 2012,

their son Drew is pictured here
FARM 79149

REPOROA
Luana and AJ Axtens

Farmer owners since 1999
FONTERRA ANNUAL REPORT 2018
05

Our country’s environment is precious
and a big part of our national identity.
Along with our farmers, Fonterra
wants to leave things better than we
found them for generations to come.
That’s why we’ve signed a pledge,
committing to make New Zealand
rivers swimmable for our children
and grandchildren. It’s also why we
have a pathway mapped out with
the New Zealand Government to
achieve net zero emissions across
our manufacturing sites by 2050
and climate neutral growth for
on-farm emissions in New Zealand
by 2030 from a 2015 baseline.
% OF FONTERRA FARMERS
WHO REPORT ON NITROGEN
2018
2017
2016
2015
2014
2013
34
59
76
86
95
97
FONTERRA ANNUAL REPORT 
06

LIVING WATER
TARANAKINowell’s Lakes in Taranaki are a signifi cant wetland on one of our Whareroa farms and are managed as a joint Fonterra/Community project
FARM 47870PATOKA, HAWKES BAY
Nick Dawson Farmer owner since 2004
FONTERRA ANNUAL REPORT 
07

We add the most value possible to our
farmers’ milk. Since the 2016 financial year,
we’ve invested in eight new, resource-
efficient plants and lines that have increased
our ability to process more volumes of milk
into consumer and foodservice products.
COMMISSIONED /
DUE TO BE COMMISSIONED
FY16
New sliced cheese at Eltham
FY17
New UHT line at Waitoa
FY18
New cream cheese and mini dish butter at Te Rapa
Two new UHT lines at Waitoa
FY19
New cream cheese plant at Darfield
Third mozzarella line at Clandeboye
New butter line commissioned at Edgecumbe
to meet global demand
DARFIELD PLANT

CANTERBURYOur advanced plant at Darfield started production this year and is set to manufacture 24,
000 MT of cream cheese annually
FONTERRA ANNUAL REPORT fi150
08

WAITOA UHT PLANT
WAIKATOWaitoa UHT can pack 14 containers per day which are shipped to China, Taiwan and the Philippines
FONTERRA ANNUAL REPORT 
09

We provide
great nutrition
through well-known
brands like Anchor
TM

and Mainland
TM
.
At Fonterra we really
do believe that dairy
makes a difference
to people’s lives.
Our Fonterra
Milk for Schools
programme operates
in more than 70%
of all New Zealand
primary schools.
FONTERRA
MILK FOR SCHOOLS
70%
FONTERRA ANNUAL REPORT fi150
10

TAUWHARE SCHOOL
HAMILTONRichie McCaw helping with recycling Fonterra Milk for Schools packs
FONTERRA ANNUAL REPORT 
11

About 95% of our farmers’ milk is
exported from New Zealand. It’s
used by customers and consumers
in so many ways.
By taking New Zealand milk to
the world our farmers are helping
contribute about $8 billion back
into the New Zealand economy
every year.
MILK EXPORTS
95%
FONTERRA ANNUAL REPORT 
12

SHANGHAI
Our Anchor
TM
UHT milk
is a popular everyday nutritional drink in China
NIGERIA
Our aff ordable, vitamin-enriched milk powder is ideal for markets such as Nigeria where daily income is low and aff ordability is paramount
FONTERRA ANNUAL REPORT 
13

We haven’t met all of the commitments we’ve made to
our farmers and unit holders this year. It’s not the fi rst
time, but we’re determined to make sure it is the last.
Before we talk about the future, let’s look at the
commitments we have met.
The $6.79 total payout is the third highest in the last
decade. It represents more than $10 billion paid to our
farmers and a much-needed cash injection into our
rural communities.
Our Consumer business in China broke-even for the fi rst
time, two years ahead of expectation.
This year, 45% of our farmers’ milk went into higher-value
products, such as medical nutrition products, cooking
creams and fl avoured milk with 40% less added sugar.
With the support of our Co-op’s Sustainable Dairying
Advisors, 1,011 farms now have a Farm Environment Plan
to help improve environmental outcomes.
Our Global Operations business has committed to net
zero emissions across our manufacturing sites by 2050 to
help New Zealand meet its climate change commitments.
More than 140,000 primary school children received
free milk through our Milk for Schools programme every
school day this year.
We can be proud of those achievements, while
acknowledging that we didn’t get everything right.
The previously reported $232 million in payments
related to our arbitration with Danone, following the
2013 WPC80 precautionary recall, took 10 cents off our
earnings guidance.
Beingmate’s unacceptable performance over the year has
been frustrating.
The value of our Beingmate investment is now $204 million.
Beingmate has recently appointed a new, independent
General Manager and announced a modest net profi t at
its half year fi nancial result. We know our farmers and
unitholders expect a return on capital on every investment
and we continue to work closely with the team in China to
get the best possible result for the Co-op.
Our farmers rely on accurate forecasting when planning
within their own businesses. Our decision to update
our earnings guidance and reduce our 2017/18 forecast
Farmgate Milk Price late in the year was frustrating but
necessary to protect the balance sheet.
In hindsight, our second half year earnings forecast
was too bullish. We had just completed one of our best
single quarter performances and your Board and senior
management pushed the business to repeat that eff ort
in the last two quarters. We simply didn’t deliver across
almost every part of the business.
Better accuracy in our earnings forecasts is an obvious
priority for us in 2019.
Leadership changes
In March, we announced that CEO Theo Spierings would
leave the Co-op. It’s a conversation that the Board had
been having with Theo for a few months and we agreed
that after seven years it was the right time for Theo to
move on.
LETTER FROM THE CHAIRMAN
There’s a saying in sport that you’re only as good
as your last game. This year’s result tells us we
have plenty to work on to make the grade.
Meeting our
commitments
John Monaghan
Chairman
FONTERRA ANNUAL REPORT 
14

Theo leaves us as a friend of Fonterra. Under his
leadership we have a built a China business with an annual
revenue of $4 billion, our Foodservice business - which
was in its infancy when Theo took over - is now in total a
$2 billion a year operation, and we have new partnerships
with the world’s biggest online sellers, including Alibaba.
John Wilson’s decision to stand down as Chairman after
a health scare and to retire from the Board in November
was unexpected, but ultimately the right decision for John,
Belinda and their family.
John has made an important contribution to the
New Zealand dairy industry over more than 20 years. He’s
worked tirelessly on behalf of his fellow farmers within the
Co-op and defended our corner on regular trade missions
and policy discussions across the fi elds of science,
innovation, and environmental sustainability.
Looking ahead to FY19
These changes in leadership have given us cause to take
stock of where we are as a Co-op. At its core, our business
is in good heart. But we can always do better and it’s time
for a refresh in a number of areas.
We are taking a close look at the Co-op’s current portfolio
and direction to see where change is needed to do things
faster, reduce costs, and deliver higher returns on our
capital investments.
This includes an assessment of all of the Co-op’s
investments, major assets and partnerships against our
strategy and target return on capital. An investment we
are currently looking at all options on is Beingmate
in China.
We have reduced the number of Board working groups to
focus our eff ort on guiding, challenging and mentoring the
senior management team. They in turn will be taking more
accountability for the day-to-day delivery of performance.
Our $6.75 per kgMS forecast Farmgate Milk Price for the
2018/19 season is the third consecutive year of strong milk
prices. That’s good for farmers and for rural economies
where farmers spend 46 cents of every dollar they earn.
For our business, it means another year of higher input
costs and that is refl ected in our FY19 earnings guidance
of 25 – 35 cents.
We will continue to focus on our strategy of moving more
milk into higher value products. You can also expect to see
strict discipline around cost control and more respect for
our farmers’ and unitholders’ invested capital.
Our Co-op has a proud history. It’s built off the back of
the hard graft and quality milk of the farming families that
own it, and by the team of people that turns up to work
each day to do its best by those families, maximising the
value of their milk.
Your Board and Management know that we need to do a
better job at holding up our end.
That’s our priority.
John Monaghan
This year's key results
Total cash payout for 2017/18 season
$
6.79 per kgMS
New Zealand milk collection for 2017/18 season
1
,
505 million kgMS
$
43m
Fonterra Farm
Source
TM
rewards
and benefi ts
1
,
011
Farms have
Environment Plans
45% of our farmers’
milk went into
value-added
products this year.
Value-added
products
45
%
FONTERRA ANNUAL REPORT 
15
FONTERRA ANNUAL REPORT 
15

LETTER FROM THE CEO
There’s no two ways about it, these results are
disappointing and they simply don’t meet the promise
we made. I would like to briefl y answer three questions
to help explain what went wrong, highlight where
things are going well and, most importantly, step
through what we will be doing diff erently in FY19.
Where did we get it wrong?
We entered the second half of this year expecting our
performance to be weighted to the second half. The reality
is, for this to have happened we needed to deliver an
outstanding third and fourth quarter after what had been
an extremely strong second quarter for sales and earnings.
Unfortunately, this didn’t eventuate.
Forecasting is never easy, but ours wasn’t on the mark and
proved to be optimistic. Butter prices didn’t come down
as we anticipated, which impacted our sales volumes and
margins. The increase in the forecast Farmgate Milk Price
late in the season, while good for farmers, put pressure on
our margins. And our operating costs went up because of
higher costs in our Ingredients business, including some
one-off s. We also had additional costs for new category
growth and higher costs in Australia as we expanded
our business. In addition, we had higher IT and R&D
expenditure to support future development. While we
had planned for these costs to be up in FY18, we had also
planned for our earnings to be higher.
All of this happened in a year which was already challenging
because of the $232 million payment to Danone and the
$439 million write down of our investment in Beingmate.
If we hadn’t had these one-off events our performance
would still have been down on last year but not
by as much. It’s for this reason we look at our
normalised EBIT of $902 million – it gives us a
more meaningful comparison of our operating
performance to compare one year to another.
Where did we get it right?
When we look at our normalised EBIT and the underlying
performance of our business we can see progress has
been made in putting more of our farmers' milk into
higher value products. Not as much as we wanted but still
defi nite progress.
Sales volumes were down 3% in FY18 but what is
promising is that a larger proportion was sold in
Consumer, Foodservice and Advanced Ingredients – our
value-add businesses where we get higher gross margins.
In fact, 45% of the milk we sold was through these
businesses and this is up from 42% in FY17.
Consumer volumes were broadly fl at, but Foodservice
volumes were up 6% and across the two we added an
additional 131 million litres of Liquid Milk Equivalent
(LME). The slowdown in growth we saw in FY18 was
mainly due to higher prices, selling less butter and more
cream in Foodservice and the underperformance of our
New Zealand Consumer business.
We grew our businesses in all other regions with our
strongest growth in Greater China. In fact, our Consumer
business in China broke even this year, two years ahead of
our original seven-year target.
I’m going to get straight to the point, we have not
delivered on the commitments we made to farmers
and unitholders in the 2018 fi nancial year (FY18).
The headline fi nancial numbers speak for themselves.
Improving our
performance
Miles Hurrell
Chief Executive Offi cer
FONTERRA ANNUAL REPORT 
16

A big contributor to this success is the sheer popularity
of Anchor
TM
, both online and offl ine, as a trusted brand of
premium dairy.
Higher ingredient prices saw Consumer and Foodservice’s
input costs increase by $626 million. Through our
pricing strategies and brand strength we were able to
pass through $551 million of these costs in our products’
prices – so, while it was not the full amount, it was still
signifi cant. We always need to be mindful in our pricing
that there is a limit to what customers and consumers
are prepared to pay before they start looking at cheaper
alternatives to dairy and other supply sources.
What’s next?
I’ve had a hard look at our performance from the last fi ve
years. While our Farmgate Milk Price has improved, many
of our measures are not tracking in the right direction.
You can see this on page 48 and 49 in this report.
One of the reasons I took on this job is because I understand
these results aren’t just numbers – they’re the livelihoods of
our farmers and their families. There are people depending
on us and I want to contribute to their lives.
I’m committed and energised to turn these results
around – and so too is my team. I’ve set out a clear plan
for how we are going to lift our performance. It relies on
us doing the following:
1. Taking stock of the business – We will re-evaluate all
investments, major assets and partnerships, including
our Beingmate investment, to ensure they still meet
the Co-operative’s needs today. This will involve a
thorough analysis of whether they directly support the
strategy, are hitting their target return on capital and
whether we can scale them up and grow more value
over the next two to three years.
2. Getting the basics right – We have already begun
getting on and fi xing the businesses that are not
performing. The level of fi nancial discipline will be lifted
throughout the Co-operative so debt can be reduced
and return on capital improved.
3. Ensuring more accurate forecasting – The business
will be run on realistic forecasts with a clear line of
sight on potential opportunities as well as the risks.
We will also be more transparent in our assumptions
so farmers and unit holders know exactly where they
stand and can make the decisions that are right for
them and their businesses.
We have a lot of work ahead of us and a lot of ground to
make up. But that is my job for 2019 and I, along with my
team, will do everything in my control to make that happen.
Miles Hurrell
Key performance metrics
China Consumer
broke even this
year, two years
ahead of original
seven-year plan.
Net Loss After Tax
$
196 million
Normalised EBIT
$
902 million
Net Debt/EBITDA ratio
4.5 up from 3.5
Normalised operating expenses
$
2,496 million
22%
7%
down from
16.9%
Normalised
gross margin
15.4
%
down from
8.3%
Return
on Capital
6.3
%
FONTERRA ANNUAL REPORT 
17

“ We do not have a purpose statement that
expresses our reason for being and the
diff erence we make. We need a true north that
connects and provides a sense of belonging
and inspiration for the diverse people that
make up our Co-operative.” – Duncan Coull
From many angles – shareholder, council, board and management –
it became clear we needed to take stock on the future direction of our
Co-op. So we have been working hard, together, to define our purpose
and vision for Fonterra’s next stage, focussing on a simple challenge:
OUR CO-OPERATIVE
Farmer Shareholders
Richard Cookson, Waikato
Paul Marshall, Fiordland
Richard Stalker, North Canterbury
Judy Garshaw, Pukekohe
Sheree Ditchfield, Southland
Rachel Haddrell, Maungaturoto
(also a Fonterra employee)
Fonterra Employees
Tui Williams,
Team Leader, Farm Source
™ Stores
Rachel Irwin,
Farmer Engagement Specialist
Teresa Smyth,
Group Marketing Manger, Identity
Wendy Paul,
Director, Advocacy
Tom Newitt,
Manager, Sustainable Transformation
Alison Brewer,
General Manager, Shareholders' Council
Who’s making
this happen for us
Making change,
with purpose
18

Who we have spoken to
People we have engaged with to gain
insights into "why we exist".
• My Connect
Conference
• Online survey
• 200+ regional
meetings all
around the country
• Young Farmers
Forum
• Understanding
Your Co-operative
• Dairy Women's
Network (SI)
• Ma
-
ori shareholders
Over 2,000 farmers via:
• An online global survey
Over 3,300 global
employees via:
+ industry bodies and other key stakeholders
customers
160+
NZ Public via RepZ
700+
Plus previous insights from:
• We have tested our initial six Purpose
Themes with 235 diverse people
• We have narrowed down to a few options
• These will be tested widely in
September and October
• We plan to launch our new Purpose
before the end of 2018
Process and key
milestones from here
• Shareholders' Council
• Board
Governance:
• Fonterra
Management
Team
What gets you up in the morning?
What makes you feel inspired?
What makes you feel you belong
somewhere or to something?
What is the legacy that you want Fonterra to create?
• Togetherness
• People
• Land
• Care
• Future
We exist to:
1. Support our farmers and rural communities.
2. Create a sustainable dairy industry.
3. Contribute to a better world for
myself, my family, my children.
4. Be part of successfully taking New Zealand
dairy to the world.
Questions we asked
We heard our new
Purpose must refl ect
Top answers we heard
19
FONTERRA ANNUAL REPORT 

Sustainable
Co-op
Improving health and
nutrition, creating prosperity
for our farmers and
communities, and achieving
a healthy environment.
Innovative
Co-op
Preparing to lead in the face
of fast-moving trends, sudden
swings in customer behaviour
and unprecedented changes
in technology.
Focussed on
achieving our
ambition
We do this through
our strategy of converting
more milk into higher
returning products.
We are working towards
three horizons and have
made progress on all
three this year.
GROWTH
OUR CO-OPERATIVE
Strong
Co-op
Continuing our eff orts
to remain a Strong Co-op.
This earns us the right
and means to invest for
our future.
paid to farmers for
the 2017/18 season,
includes Farmgate
Milk Price and
Dividend.
$
10.3
billion
FONTERRA ANNUAL REPORT 
20

one of Europe’s
fastest growing sports
nutrition companies.
Investing in
foodspring
TM
,
Launched the Disrupt
10-Day Challenge
to focus our brightest talent on some
of our biggest business problems.
3 Communities of
Expertise established
in Robotic Process Automation,
Advanced Analytics and Digital
Activation to grow capabilities,
improve process and capture
value in new ways.
Launch of a dedicated
medical nutrition division
focussed on selling advanced
ingredient solutions to help
people suff ering from malnutrition
and other diseases, as well as
helping people age in good health.
New target to
increase ethnic
diversity in senior
leadership to
20% by 2022.
20%
1 9.3%
Energy effi ciency improved by 19.3%
in NZ manufacturing sites since FY03.
20152050
Net
Zero
2030
30%
Reduction
Manufacturing emissions target
Stock excluded
from 99.6%
of permanent
waterways on
our dairy farms
in New Zealand.
Volume to
higher value
Normalised EBIT
902m
Return on Capital
6.3
%
of the milk sold
in FY18 was
in Consumer,
Foodservice
and Advanced
Ingredients.
45
%
Building on indicative
fi ndings that one of our
probiotic strains reduces
gestational diabetes
by 68% and postnatal
depression by 50%, we’re
exploring with New
Zealand universities their
impact on pre-diabetes.
Disrupt helped us win the
Diversity and Inclusion Award
at the 2017 Deloitte Top 200 Awards.
68%
99.6
%
FONTERRA ANNUAL REPORT 
21

92
Employees
$793 Million
Revenue
United States
4,003
Employees
$2.27 Billion
Revenue
7
Manufacturing Sites
Latin America
(Chile, Brazil, Venezuela)
$
793m
OUR CO-OPERATIVE
Where they
know us
From the South
Pacifi c, we sell
dairy products and
ingredients to 138
markets around
the world.
To stay ahead on the global
stage we need our farmers' high
quality milk, kiwi ingenuity,
breakthroughs in dairy nutrition,
a great team and the scale to
punch above our weight. It can
be tricky from New Zealand to make
it internationally but we’ve managed
to do it and this means we can
take our farmers’ milk to the world
and bring the value back home.
$
2.27b
Markets we export to.
$
20.4b
Total Revenue
22,358
Total Employees
FONTERRA ANNUAL REPORT 
22

12,298
Employees
$2.08 Billion
Revenue
30
Manufacturing Sites
New Zealand
1,697
Employees
$3.98 Billion
Revenue
7
Farms
China
1,432
Employees
$1.84 Billion
Revenue
7
Manufacturing Sites
Australia
2,392
Employees
$5.68 Billion
Revenue
4
Manufacturing Sites
Rest of Asia
136
Employees
$681 Million
Revenue
1
Manufacturing Site
Europe
$
1.84b
$
2.08b
$
3.98b
$
5.68b
$
681m
5.68
$
3.12b
Rest of World
308
Employees
$3.12 Billion
Revenue
2
Manufacturing Sites
FONTERRA ANNUAL REPORT 
23

OUR CO-OPERATIVE
Our year in review
Looking back at some of
the big moments across our
business over the last year.
November 2017
New UHT line in
Waitoa opens
Joint venture establishes
Columbia River Technologies
in the US to meet growing
demand for whey protein
Three new fi nancial tools for
farmers launch
July 2017
2017/18 forecast Farmgate
Milk Price announced
at $6.75 per kgMS
September 2017
Our Australian fl agship cheese
plant in Stanhope re-opens
after a fi re in 2014
August 2017
Tiaki, our Sustainable Dairying
Programme, launches
Spring
Wet conditions impact NZ milk production volumes
FONTERRA ANNUAL REPORT 
24

February 2018
Number of properties impacted
by the spread of Mycoplasma
bovis increases
Hema Dairy Fresh Milk hits the
shelves of Alibaba’s retail stores
in China to meet rising demand
for premium fresh products
Partnership with the a2 Milk
Company forms the basis of
our fi rst commercial production
of a2 milk™
May 2018
Construction begins on new
Brightwater co-fi red wood
biomass burner
2017/18 forecast Farmgate Milk
Price raised to $6.75 per kgMS
August 2018
2017/18 forecast
Farmgate Milk Price
revised down to
$6.70 per kgMS and
indicated full year
dividend likely to
be the 10 cents
already paid
July 2018
New butter line at
Edgecumbe to meet global
consumer demand
March 2018
Investment in Beingmate
downgrade and 10 cent interim
dividend announced
Fonterra Milk for Schools
celebrates its fi fth year and
100 million packs of milk enjoyed
December 2017
Danone arbitration result
Farmers participate in Open
Gates event and our fi rst
Sustainability Report launches
2017/18 forecast Farmgate
Milk Price revised down to
$6.40 per kgMS
Foodservice business tops
$2 billion in annual revenue to
become New Zealand’s sixth
biggest export business
SummerAutumn
Dry summer in some regionsGood autumn leads to a surge in
production at the end of the season
100
m
FONTERRA ANNUAL REPORT 
25

OUR SUSTAINABILITY
We want to be a sustainable business. That’s why we’re
facing up to our challenges as a food producer.
Many of the world’s sustainability challenges are around
food. With a billion more people to feed by 2030, we need
to take urgent action.
The growing, making and distribution of food across the
world has a massive environmental, social and economic
footprint. Globally, food represents 30% of Greenhouse
Gas (GHG) emissions, 40% of employment and 10% of
consumer spending.
Fonterra supports the United Nations’ Sustainable
Development Goals and we work with others to make
signifi cant positive changes. We have prioritised ten goals
– these are the ones where we believe we can make the
most diff erence.
Our portfolio of products can help reduce hunger,
obesity and defi ciencies of key vitamins, thanks to
specifi c and improved formulations, aff ordable options
and nutritional guidance.
But we also know we need to improve our productivity,
reduce our impact on waterways and lower GHG
emissions. This sees us continuing to focus on resource
effi ciency, minimising waste right across the supply chain
and protecting and restoring freshwater ecosystems.
At the same time we contribute to decent and fair work
and economic growth for communities and reducing
poverty. We do this by providing good employment
opportunities along our value chain, paying a good income
to our farmers and sharing expertise with countries in the
early stages of developing their dairy industry.
Last year we published our fi rst annual Sustainability
Report covering our economic, social and environmental
impacts in accordance with the Global Reporting Initiative
Standards: Core Option. We will continue to include
summary information in our Annual Report but if you
are interested in fi nding out more please read our full
Sustainability Report.
This is what sustainable dairy farming
is all about and why sustainability is
core to our strategy.
Healthy environments
and strong communities
SUSTAINABILITY REPORT
FONTERRA 2017
FONTERRA ANNUAL REPORT 
26

Launched
Anmum
TM

Materna
Eliminated single-use
plastic bags
From Farm Source
TM
stores
(see page 34)
Promoting a healthy
and safe working
environment
Total recordable injury
frequency rate (TRIFR) is
6.1 per million hours worked
(see page 81)
New diversity targets,
50% women in senior
leadership by 2022
Developing a diverse,
skilled and agile workforce
(see page 72)
No added sugars
formulation
in Malaysia
Nutrition
Improving health and
wellbeing through the products
and services we deliver
Environment
Achieving a healthy environment
for farming and society
Community
Delivering prosperity for our
farmers and wider communities
Improved water
effi ciency at
Pahiatua by
64% since FY15
(see page 30)
64%
FONTERRA ANNUAL REPORT 
27

Nutrition – What we sell
Malaysia has launched a new
Anlene with MoveMax
TM
and
MFGM-Active
TM
for bone,
joints and muscle health.
Now with no added sugars
and more protein.
Movemax ready-to-drink.
Our total Anlene
TM
brand relaunched in
Thailand with upgraded formulation for
bones, joints and muscle health.
NZMP was awarded eight
medals at the International
Cheese Awards, one of the
world’s most prestigious cheese
competitions. Gold medals went
to NZMP’s Epicure cheese, made
at Lichfi eld and its Mild Cheddar,
made at Wynyard in Tasmania.
NZMP also won two silver and
four bronze awards.
Anchor
TM
Blue Top milk continues to
be New Zealand’s favourite branded
milk – with Kiwis drinking around
55 million litres in the last year.
The number of experts we
employ at our world class
Research and Development
Centre to make the best
and most innovative
products possible.
Dairy is packed full of goodness. It provides energy and
high-quality protein which helps grow and repair muscles.
It also helps meet the body’s needs for calcium, phosphorus, potassium and
vitamin B2, B12 and Vitamin A. Our farmers’ milk is helping improve health
and wellbeing for people around the world. Here’s a snapshot of how we
helped this year.
55
m
litres
310
8
OUR SUSTAINABILITY
Bodiology
Our new All-In-One
Supplement helps support,
rebuild and repair joints,
muscles and bones together
as one system to help keep
adult bodies active.
FONTERRA ANNUAL REPORT 
28

88%
More
Choice
 less added
sugar Primo’s
new formula is
helping Kiwis
consume less
added sugar.
Anchor
TM
Anchor
TM
Anchor Life
Forti ed Low Fat
Milk Powder
First specialised milk
powder in Sri Lanka
with added plant sterols
to focus on blood
cholesterol reduction.
a Milk™
by Anchor
TM
is giving
consumers
more choice.
Our Anchor
TM
Protein+
increased Anchor
TM
yoghurt
sales by 88% in New Zealand.
Launched our Red Cow
Rasa Padama in Sri Lanka, an
aff ordable skimmed milk mix.
Our innovative SureProtein
TM
Fast Milk Protein is an
advanced milk protein that
helps maximise the benefi ts
of exercise to keep people
active and healthy.
Going Digital
In the spirit of going digital, Anchor
TM

Full Cream Milk Powder was launched in
conjunction with World Milk Day as our
fi rst Anchor
TM
milk off ering for consumers
in Indonesia in an exclusive partnership
with Lazada, Southeast Asia’s number one
e-commerce marketplace.
Anmum Materna
TM
Launched no added sugars formulation in
Malaysia. It is the only maternal milk to be
fortifi ed with probiotic DR10
TM
to support
good gut health.
FONTERRA ANNUAL REPORT 
29

Environment
Healthy freshwater and ecosystems are essential to the
long-term success of our business, and to the communities
where we live, work and farm.
Farming
In New Zealand our commitment to keep cows out of
waterways on dairy farms has been delivered.
Our focus now is on Farm Environment Plans (FEPs) and
at the end of FY18 there were 1,011 Fonterra farms with
an FEP. Read more about our Tiaki Sustainable Dairying
programme in the Our Co-op section.
Manufacturing
Our Pahiatua site is in a sensitive water zone, both for the
availability of groundwater and the discharge of wastewater.
By capturing the water evaporated as steam from milk as it
is dried into powder, we can condense it and use it instead
of using ground water. Since FY15 we have improved water
effi ciency at Pahiatua by 64%. With changes made this year, we
expect savings of about 500,000 litres per day during the peak
season for FY19.
Sustainable Catchments
Our Living Water partnership with the Department of
Conservation is focussed on fi ve catchments to identify
game-changing and scalable solutions that demonstrate
dairying and freshwater can thrive together. Living Water is
currently working with 39 other groups and organisations
and 92 Fonterra dairy farms.
We are now extending our involvement to support farmer
and community action across a further 50 catchments in
New Zealand.
Water
Our farmers have fenced .
of permanent waterways and
installed bridges or culverts at
. of regular crossings
enhanced through
protection,
restoration and
pest control
99.6%
5
,
823ha
OUR SUSTAINABILITY
FONTERRA ANNUAL REPORT 
30

Fonterra recognises climate change as a signifi cant
environmental, economic and social challenge and we
support a transition to a low emissions global economy.
Farming
Based on recently completed analysis, the average carbon
footprint of our New Zealand milk (excluding land-use
change) has been trending down since the 2010/11
season. This improvement has been driven primarily by
increased cow productivity and supported by a reduction in
supplementary feed imported onto farm.
This year, as part of the New Zealand Dairy Action for
Climate Change Plan, in conjunction with Dairy NZ, we
have also completed a pilot with more than 100 farmers to
provide them with individual GHG reports. This will allow
them to monitor their own progress over time.
Climate change
Achieve climate neutral
growth for on-farm GHG
emissions in New Zealand by
2030 from a 2015 baseline
Achieve net zero emissions
for our global manufacturing
operations by 2050
Manufacturing
Through our long-running focus on energy effi ciency in
New Zealand we have achieved a 19.3% reduction in energy
intensity since 2003, against a target of 20% by 2020.
That is equivalent this year to saving enough energy to
power over 220,000 households in New Zealand.
We are also progressing changes to alternative energy
sources and we have committed to divesting any coal
mining interests by 2025. Renewable alternatives are not
readily available but we are investigating a combination
of wood biomass and more use of electricity.
At our Brightwater site, we are converting the boiler to
co-fi re wood biomass with coal, due to go live in October
2018. The co-fi ring is estimated to reduce factory emissions
by about 2,400 tonnes CO
2
-e per year or the equivalent of
taking about 530 cars off the road.
FONTERRA ANNUAL REPORT 
31

We are supporting farmers
in key markets around the
world to produce dairy more
sustainably, by improving
feed production, animal
health and milk quality, and
facilitating demand.
Dairy
Development
In-school Programmes
Indonesia
In addition to our dairy scholarship
programme, we have launched a dairy
cluster in West Sumatra. Supported
by local government and working
in partnership with the local dairy
co-operative, we are training farmers
on good practices and training local
catering staff on using fresh milk as
an alternative ingredient.
Farmers open their gates to New Zealanders
In December, nearly 40 Fonterra farmers opened their gates
so New Zealanders had the opportunity to learn about how
Fonterra farmers care for waterways and what happens on
a dairy farm. Over 4,000 New Zealanders came and got a
fi rst-hand look at how a dairy farm operates.
KickStart
Breakfast
This year, KickStart
Breakfast grew
to 976 clubs and
served more than
125,000 breakfasts
every school week.
Chile
Our fi rst group of nine
young Chilean farmers have
completed one year of paid,
hands-on experience in
New Zealand, learning skills
from leading farmers.
Fonterra Milk
for Schools
With more than 1,420
schools and 140,000
children taking part, we
had a lot of fun this year
celebrating our fi fth birthday
and our 100 millionth serve.
Sri Lanka
In addition to providing development
support for farmers we launched
exciting variants to our fl avoured
milk and yoghurts range to increase
demand for their local milk.
Community
OUR SUSTAINABILITY
FONTERRA ANNUAL REPORT 
32

To help create vibrant communities around the world, we
provide fi nancial support through the Fonterra Grass Roots
Fund and other activities in the countries where we operate.
This year in New Zealand, Australia and Sri Lanka,
the Fonterra Grass Roots Fund helped 696 initiatives,
contributing $770,000 through grants and equipment
donations. In New Zealand, we have provided fi nancial
grants, and by buying in bulk, we have also been able to
provide at lower cost more than 10,000 high visibility vests
and 25 defi brillators directly to local communities.
Fonterra Grass Roots Fund
and other community
development
Since 2017 in Australia, we have supported 95 initiatives
across Victoria and Tasmania. This year recipients
included primary schools, volunteer fi re brigades, surf
lifesaving and sports clubs.
Helping provide access to clean water and sanitation has
remained our focus in Sri Lanka. This year it is estimated
that more than 8,500 people, mainly children, have
benefi ted from upgraded infrastructure.
In Greater China, we have introduced a new scholarship scheme
to help with the further education of children of workers at our
China farms. This year 14 scholarships were awarded.
For 18 years, Soprole
TM
has supported school sports
across the full length of Chile. An estimated 1.5 million
people benefi t from the support and a further education
scholarship is also awarded for the top participant
in each discipline.
In Australia, we support Foodbank, Australia’s largest
hunger relief organisation and in 2017 we donated over
260,000 meals. We also support other similar food bank
initiatives throughout the world.
1. Children at Moragahahena Maha
Vidyalaya school celebrate the
upgrade of clean water facilities
in Sri Lanka.
2. Paeroa Land Search and Rescue in
New Zealand used their grant to
buy rescue equipment including
10 torches with a 350-metre range.
3. Top participant in volleyball,
Camila Gómez receives Soprole
TM

educational scholarship from
Gustavo Rencoret, Senior Corporate
Counsel, Soprole, in Chile.
1.2.
3.
4.
6.
5.
4. Kamo Volunteer Fire Brigade in
New Zealand used their grant
to buy more powerful saws.
5. Laga Haitong, manager of
our Cowbell Farm, in China,
presents scholarships to the
fi rst successful applicants at
the farm.
6. The Fonterra Australia
team helping at FareShare
food kitchen.
FONTERRA ANNUAL REPORT 
33

OUR FARMERS
There’s lots of competition for milk off
farms and we never take our farmers’
loyalty for granted. We work hard every
day to deliver them more value beyond
the milk cheque.
Co-operative
solutions
We all want a strong and enduring Co-op, for us and
future generations. To achieve that, we must all have a
stronger sense of belonging to our Co-op and a clearer
direction for the future. Farmers have told us this is
what they want.
More than 5,300 of our farmers and employees have
provided their thoughts to a working group of the Fonterra
Shareholders’ Council, with support from the Board, to
review Fonterra’s purpose. This spring, the Co-op will
review that feedback and test some new concepts so a
renewed purpose can be introduced across the Co-op
before the end of the year.
We have asked our farmers how can we make things better.
We've heard that it’s important we provide fl exible supply
options for young farmers, growth farmers and farmers
nearing retirement who are working towards succession.
This work falls under three main areas: supporting farm
fi nancial performance, connecting people with our Co-op,
and on-farm advice and support. We have good progress
to report.
Farm Source
™
Every year we aim to provide the most competitive pricing
for farming supplies and reward farmers for their loyalty
to our Farm Source
™ stores through deals and discounts.
This year our farmers earned $12.6 million Farm Source
™
Rewards Dollars.
We provided $19.3 million in discounts for everyday
farming supplies and used our buying power to save
farmers $6.7 million on fuel and another $1.5 million on
power. A deal with Mazda saw 208 vehicles purchased
with a combined discount of $2.9 million.
Our stores are working to become more sustainable,
eliminating the use of approximately 365,000 plastic bags
annually and are looking at other initiatives such as selling
fence posts made from recycled plastic.
New fi nancial tools
Flexible fi nancial tools are one way we encourage new
farmers into our Co-op and provide fi nancial fl exibility
for our existing farmer owners.
We made more progress this year, introducing four new
fi nancial tools to help make it easier for farmers to share-
up and run their farms. These include providing fi nancing
to help with compliance which frees up other money for
purchasing shares.
These new tools are in addition to Invest as you Earn,
Dividend Reinvestment Plan and Share-up Over Time.
FONTERRA ANNUAL REPORT 
34

Farm Source
™
Financial fl exibility
Provided in
discounts for
everyday
farming supplies.
Saved on power
Saved on fuel
We have four new fi nancial tools
to help our farmers
Our buying power is making savings
for farmers
$
6.7m
$
19.3m
$
1.5m
The Strike
Price Contract
Allows farmers to buy more
shares only when the
Farmgate Milk Price goes
over the Strike Price.
Smart Finance
Provides low-interest
fi nancing to farmers
wanting to make their
farms more sustainable.
Rewards Dollars
for Shares
Will allow farmers to use their
Rewards Dollars accrued at
the Farm Source™ store to
purchase shares.
Contract Fee for Units
Recognises that farmers
supplying under a Share-up Over
Time contract are on their way
to becoming shareholders and
defers the contract fee to a
Trust. The Trust will invest in
Units and these will be returned
to the farmer when they
transition to a shareholder.
FONTERRA ANNUAL REPORT 
35

Supporting sustainable dairying
Milk is the life blood of our Co-op. It is vital we maintain our farmers’
ability to operate profi table, productive farms which meet rising
community expectations and more demanding regulations.
Through our Tiaki programme, Fonterra farmers have access to
world-class technology, reporting and a range of services to support
sustainable farming.
This includes our Sustainable Dairying Advisors (SDAs) who support
our farmers in implementing good environment practice on farm.
This year we have grown our number of SDAs to 23, with a goal
to expanding the number to 29 by 2020. This growth is driven by
demand, as our SDAs work closely with farmers and support their
environmental sustainability. At the end of FY18, 1,011 farms had
Farm Environmental Plans (FEPs).
These plans assess the environmental eff ects and risks associated
with farming activities and provide strategies to help individual farms
meet their regional requirements, and business and sustainability
goals. The FEPs delivered by our SDAs are at no additional cost to
Fonterra farmers, saving each an average of $3,500.
Regional councils have recognised the value of the Co-op’s FEP
template. For example, Environment Canterbury (ECan) approved it
for farmers to use to meet the requirements of the Canterbury Land
& Water Regional Plan (LWRP).
When the going got tough
Among other on-farm challenges this year, farmers
faced fl oods, droughts, Cyclone Gita and Mycoplasma
bovis (M.bovis). Our regional teams rolled up their sleeves
to help our farmers and local communities. Here are a
few examples:
• When fl ood waters rose in the Lower South Island
at the end of winter, our Emergency Response Team
(ERT), crews from the Edendale site and the Farm
Source
TM
team pitched in to help farmers clean up and
get ready for calving which was rapidly approaching.
• The ERT was deployed in Taranaki to ensure farms had
water and helped to clear farm races, remove fallen
trees and repair sheds after Cyclone Gita brought
gale-force winds.
• After major slips on Takaka Hill cut off access to
Golden Bay, the Co-op organised an emergency barge
to get additional tankers to the Takaka site to transport
cream out and bring in emergency food, fuel, and
essential supplies.
• While M.bovis poses no risk to milk quality or food
safety, the Co-op worked with Government, sector
groups, and other dairy companies to minimise the
serious animal and farmer welfare implications. With
signifi cant eff ort by the Farm Source™ network and
tanker operators, the Co-op coordinated the testing
of every herd supplying milk and organised more than
60 farmer meetings. We placed a number of employees
directly into the national response and we also lead
an Industry Working Group to coordinate and support
industry eff orts to help farmers.
Working for our farmers
OUR FARMERS
Farm Environment Plans
Sustainable Dairying Advisors
23
1,011
Saved on service fees
$
3.3m
Our tanker on the barge heading for Golden Bay
FONTERRA ANNUAL REPORT 
36

Face-to-face
with farmers
Our regional network is
designed to ensure we
have face to face contact
with our farmers
Farmers visited the
Fonterra head offi ce
More than 70
farmers participated
in our off shore
study programmes
to China
Site tours attended
by farmers and our
neighbours from
rural communities
Water
Fat Evaluation
Index Grading
System
On-farm
technology
Interim results
Webinars viewed
over 3,300 times:
1,200
50
Connecting with our farmers
More digital, more convenient
Our farmers are fast digital adopters with our smartphone apps being
used to help run operations on more than 90% of our farms. We continue
to enhance the off ering and this year launched the digital version of the
Dairy Diary farmers use to help track food safety and quality compliance.
More than 2,500 Fonterra farms have already downloaded the app, opting
for the digital version instead of the paper-based system. The digital version,
available in the hand and on the spot, makes compliance easier.
On average,
farmers that
access our apps
or website on
their mobile
device do so fi ve
days a week
Of our farmers use our
smartphone apps
90%
Farmers attended the
inaugural My Connect
Conference
630
Events, including Interim Results
meetings, M.bovis town halls,
nitrogen pages drop-in days and
Farm Source™ store supplier nights
850
FONTERRA ANNUAL REPORT 
37

OUR FARMERS
Farmer
spotlight
New Zealand Share
Farmer of the Year
Dan and Gina Duncan
Northland’s Dan and Gina Duncan were
declared NZ Share Farmer of the Year.
New Zealand Dairy
Manager of the Year
Gerard Boerjan
Gerard Boerjan from Takapau was named
NZ Dairy Manager of the Year.
Responsible
Dairying Award
Wynn and Tracy Brown
Wynn and Tracy Brown from Matamata
took home the new “Responsible Dairying
Award” which recognises dairy farmers
who are demonstrating leadership in their
approach to dairying, have proven results
and are respected by their farming peers
and their community.
Regional New Zealand
Dairy Industry Awards
won by Fonterra farmers
Regional Ballance Farm
Environment Awards
won by Fonterra farmers
Our Co-op takes
huge pride in the
achievements of
our farmers
Our farmers have
outdone themselves,
winning two of three
national titles of the NZ
Dairy Industry Awards.
29 of

33
6
of

11
FONTERRA ANNUAL REPORT 
38

Dairy Woman
of the Year
Loshni Manikam
All three fi nalists in the Dairy Woman
of the Year Award were Fonterra
farmers and the title was taken home
by Southland farmer and dairy leadership
coach Loshni Manikam. Other fi nalists
were Tracey Collis from Eketahuna and
Rachel Baker from Hawke’s Bay.
Māori Excellence
in Farming Award
Onuku Māori Lands Trust
Bay of Plenty-based Onuku Māori Lands
Trust won the 2018 Ahuwhenua Trophy
for Māori Excellence in Farming —
Moyra Bramley, Chairwoman, was
on hand to accept the award.
Young Māori
Farmer Award
Harepaora Ngahea
Farm Manager Harepaora Ngahea from
Te Teko won the Ahuwhenua Young
Māori Farmer Award.
FONTERRA ANNUAL REPORT 
39

Legend
Achievement
Gold
Farming entities that
achieved grade free
for at least the last
four seasons.
5 M Trust
A & D Milne
A & G Martelli Family Trust
A & N Harvey Family Trust
A A & L J Edward Trust
A H & A C Webster
A Holten & N Brown
A J & K L Murdoch
A J & K M West
A J Dodds & Sons Ltd
A K & M E Tyler
A M Flanagan
A P & C Knibbs
A R Mills
Abacus Dairy Ltd
Abbey Farm Partnership
Abbott Brothers
Abbott Trusts Partnership
ABH Trust
AGC Farms Ltd
Ahipaipa Farms Ltd
Airlie Lodge (Walton) Ltd
Allison Family Farms Ltd
Alton Pastures Ltd
Amberhay Ltd
Ararata Holdings Ltd
Armer Farms (N I) Ltd
Arnold Farming Ltd
Ashgrove Dairy Farms Ltd
Avon Downs Ltd
Awapuketea Farming
Company Ltd
B & D Dodunski
B & E V Blake
B & J Kelly P/Ship
B C & K A Keller
B D Mead
B J & P Brisco
B J Laing
B L & D J Haylock
B M & B C & JH Geddes
B N & P A Jones
B P & P N Kennedy
B R Dinnington Ltd
Barmac Dairies Ltd
Barneyco Trust Partnership
Barriball Farms Ltd
Beechbank Dairies Ltd
Bell Farm 2008 Ltd
Bellevue Enterprises Ltd
Bent River Farms
Benvale Ltd
Berkhout Holdings Ltd
Berwick Holdings Ltd
Bibberne Farms Ltd
Birchland Partnerhip
Black & White Cow Company Ltd
Farming entities that
achieved grade free
for at least the last
ten seasons.
A M Flanagan
B L & Estate R J Mohring
B S & P J Strang
C & H Mabey
C J & K L Ladd
C M & K M O’Donoghue
C R & A K Spence
Est of M F Blake & M Blake
F A & R C M Smits Ltd
G B & J S Coulter
Golden Mile Farms Ltd
Inishbul n Farm Ltd
J A & Estate of KJ Jolly
K & S MacKenzie Farms
Limited
K F Wallace
Kemra Farm Ltd
L J & L M Still
Lakeland Farms Ltd
M J & L M Van Tiel
Miroc Limited
Owhango Farms Limited
P T & V M Youngman
R & P Woods Farms Ltd
R J & E F Madsen
R S & R D Gordon
Romill Partners
Rye Downs Ltd
Schorn Trust
Serendipity Trust
Takitimu Trust
Thomag Ltd
Willowbank Estate Ltd
BM & GI Watson Ltd
Bogaard Farms NZ Ltd
Borrowdale Trust
Boswell Dairy Ltd
Bothwell Farms Ltd
Bremna Farms Ltd
Briley Farm Trust
Bullot Family Trust
Burnside Farms Ltd
Burton Trust
C & B Jensen Family Trust
C & D Padrutt Trust
C & M Tippett
C & R M Moir
C B Farms Ltd
C E & D L Rogers
C F & M T Muller
C J & C J McKenzie Ltd
C T & K M A McLean
C W & J Redshaw
C W & M Y Matthews
Family Trust
C.D. Farms Ltd
Carnarvon Farms Ltd
Casey Coxhead Ltd
Caskey Farms
Chislehurst Farms Ltd
Claremont Trusts Partnership
Clinton & Pamela Smeath
Clutha Lea Ltd
CM Farming Ltd
Colhaven Ltd
Collins Family Trust
Cotlands Ltd
Cowley Dairies Ltd
CPX Ltd
Cranief Clifton Ltd
Creekside Pastures Ltd
Cross Dairies Ltd
D & D Alexander Trust
D & E Cole
D & I Edward Ltd
D & S Farms
D A & M A Mullan
D C & V F Frew
D Crofskey
D E & M E Hines
D J & E A Turner
D J & G M Hooper
D J & J A Veen
D J & R E G Goodwin
D J & S A McMillin
D L & S J Deeming
D P & T G Schumacher
D P & T M Stephens
D R & E M Henman
D R & L M Locke Ltd
D S & L R Wilson Ltd
D T & K L Picard
D W & M E Kidd
Dacre Milk Ltd
Dacre Milk Partnership
DairyNZ Ltd
Dawn Dairies Ltd
DDB Dairy Enterprises Ltd
Derrys Farm Ltd
DR & PJ Hannah Ltd
Drumblade Farm Ltd
Drylands Trust
Drysdale Holdings Ltd
Dugald McKenzie Family Trust
E F & J A Allcock
E J & S M Smeath
E L & D J Brook
Eichler Farms Ltd
England Trusts Partnership
Estate E A Bonner
Estate of Elizabeth Paretuarangi
Ormsby
Euro Land Ltd
Excel Dairying Ltd
F B Bonenkamp & J B Cunningham
F W G & J P Stanbridge
Fairview Trust
Falcon Farms Trust
Far South Farms Ltd
Fardale Dairies Ltd
Farmer Fred Ltd
Farming Tee Jay Ltd
Farview Farms Ltd
Fonterra - O’Brien Farm
Forest Hill Downs Ltd
Four Roads Farms Ltd
Fowler Family Prosperity Trust
Frisia Farm Trust
G & C Came Ltd
G & M Gloyn
G A & J M Fox
G A & K T Lynch
G A & V M Weir
G A Knight
G B & D G Hodges Trust
G C & J M Knowles
G E & J Porteous
G E & V E Cooper
G E Sutherland Trust
G J Farms Ltd
G K & D J Landon Family Trust
G L & G F Bell
G P & C A Whiteman
G R J & R J Saddleton
Garn Farms Ltd
Gee ‘N’ Tee Ltd
Given Family Trust
Glen Eden Otago Ltd
Glen Oroua Dairies Ltd
Glengarry (Dvke) Farming Co Ltd
Golden Key Trust
Grat Farms Ltd
GRC Farms Ltd
Gregory Farms Ltd
Gydeland Farm Ltd
H G & C K Meijer
Hall Family Farms Ltd
Haresfi eld Farms Ltd
Hayden and Korina Brown
Partnership
Hayley Buckman Family Trust
Henderson Partnership Farm
Heyland Farms Ltd
Highpines Ltd
Hillcrest at Fairfax Ltd
Hillcrest Farms Ltd
Hillgrove Trust
OUR FARMERS
Honour Roll for
Milk Quality Excellence
Top  farming entities
with the lowest somatic
cell count.
 G L & G F Bell
 Le Emari Trust TA
Willowbridge Dairies
 K J & H Chalmers Ltd
 B G & S L A Butler Family Trust
 M C & J P Fisher
 J C & F M Henchman
 Kydz Contracting Ltd
 M A & S A Anderson
 Owen & Robyn Ruddell
Partnership
 Ruthe Farms Ltd L A Ruthe
FONTERRA ANNUAL REPORT 
40

To qualify, farms must have supplied 45 days or more in each season.
Hines Family Trust
Hoogeveen Farms Ltd
Howard Farm Ltd
Huntly Road Dairies Ltd
Hutton Farm Holdings Ltd
I Hampton & A Golvin
I J Sutherland Partnership
Interlaken Farms Ltd
J & J Anderson Family Trust
Partnership
J & LM Van Burgsteden
J A & J H Hine
J B & L M Suisted Ltd
J B & S M Duynhoven
J E & C T Brien
J E & D M Cooper
J H & H R Smyth
J L & H M Coatsworth
J L & K S Gwerder Family Trust
J L & M A Cooke
J L Hooper & A L Robertson
J M & T M Van Hout
J M De Renzy
J P & M J Horgan
J R & A T M Hale
J W & A M Steeghs
J W Prictor
James Lyttle
James Martelli
Janssen NZ Ltd
Jascas Trust
Jaska Farm Trust
Jayland Partnership
JC Beattie Trust
JDQ Ltd
Jerzey Rock Farm Ltd
JJ & AB Roskam Ltd
JM Cross & LA Hazelton
Johnson Farm Co. Ltd
K B & K R Whiteman
K B Olesen & R J Stephens
K J & H Chalmers Ltd
K J & J B Argyle
K J & M T Dwyer Trusts P/S
K R & S M Rooney
K W & D M Blackstock
K W & D R Lowe Family Trust
Kaimai Dairy Ltd
Kainui Peatlands Ltd
Kaipara View Farming Ltd
Kalman Farms Trusts P/Ship
Kauri Falls Investments Ltd
Kerenui Ltd
Kevin Fleming Ltd
Kieran McErlean Trust
Kim Steff ert Family Trust
King’s Junction Ltd
Knockinnon Farm Trust
Kywaybre Farms Ltd
L J & M Prictor
L J Hodges
L.G. & J.M. Morris Ltd
Laing Dairy Ltd
Lawson Road Farm Ltd
Lesdale Friesians Ltd
Lizlyn Dairies Ltd
Lockerbie Farms 2001 Ltd
Longacre Properties Ltd
Lord & Veltman Ltd
Ludell Ltd
Ludimac Dairying Ltd
Lutz Farming Company Ltd
Lynton Dairy Ltd
M & A Schrader Family Trust
M & C O’Grady Ltd
M & J Barker Trust
M C & J P Fisher
M E Hunt & Son Ltd
M G & A M Hurley
M I & P M Stevenson
Family Trusts P/ship
M J & A S Taylor Family Trust
M J & S D Hopson
M J & T M Davies
M J & W P Van Veen
M J Diprose Ltd
M J McDowall
M J Murray & Estate of
A B Murray
Maken Milk Ltd
Malandra Downs Ltd
Manuka Ridge Ltd
Mark A Mullan Trust
Marua Partnership
Mary Allen Farm Ltd
Matricksen Ag Holdings Ltd
Mattajude Family Trust
Maude Peak Farm Trust
Mavora Farms Ltd
Maxlands Farms Ltd
McCullough Family 2008 Ltd
McFetridge Farms Ltd
McGee Partnership
McGowan-Weake Partnership
Mead Family Farm Ltd
Membury Oak Farm Ltd
Meyer Family Trust
Milestone Trust
Milkwell Ltd
Mitchells Milky Way Ltd
MJ & KL Family Trust
Molehill Farm Ltd
Morrison Farms Ltd
MR & TJ Frost Ltd
Mu Kau Ltd
Mudspring Farms Ltd
N A & K M McColl
N R & K L Gaskin
N R & L A Fox
NB & LJ Crosbie Ltd
Ngahape Valley Farm Ltd
Ngutunui Dairies Ltd
North Star Farming Ltd
NR Ensor Ltd
Ohtawa Farms Ltd
Okapua Farming Company Ltd
O’Reilly Family Trust
Otira Farm Ltd
Otu Creek Farm Ltd
P & T & S & Y Thompson
P A Hoogeveen
P D & J M Bish
P D & S S Sharpe
P G & D J Collins
P G & D M Dombroski
P H & W F Iorns
P H S & P C Byford
P J & M L Cotter
P L & R E Berryman
P R & V P Dawson
P V & P G Mullin Trust
Parkhill Farms Ltd
Perlow Dairies Ltd
Pharlee Trust
Phimister Farming Ltd
Piwakawaka Farm Trust
PJ Nelson Farming Ltd
Placement Services Ltd
Port Molyneux Dairies Ltd
Puketi Farming Enterprises Ltd
Puniho 606 Partnership
Quirke Family Trust
R & A Tait T/A Black Cow Dairies
R & K Houghton Family Trust
R & S Singh
R A & J L Hamilton
R A F & J R Clubb
R F & C L Lansdaal Ltd
R J Troughton
R N Cornes
R T & E A Brown Ltd
R W & R R O’Brien
R W & W J Cudby Family Trust
R.L. Mathis Ltd
Rainbowcreek Farms Ltd
Relyt Farm Ltd
Rich Feet Ltd
River Heights Ltd
Riverside Farms (Taranaki) Ltd
Riverview Farms 2001 Ltd
Riverview Trust
RK & A Hines Ltd
RKW Partnership
Rodney G & S J Joblin
Rogers Farming Ltd
RV & LH Kokich Farms Ltd
Ryelands Farm Company Ltd
S & S Iorns
S A & J L England
S B & Y M Thompson
S England & P Walker
S G & B L Thirkell
S G McKenzie
S L & J P Vincent
S M Shead
Sabin & Co Ltd
Sean McErlean Trust
Seven of Nine Ltd
Shabict Ltd
Shawlink Ltd
Shenandoah Trust
Silvacrest Farms Ltd
Silverdene Farms (2000) Ltd
Sim Brothers Ltd
Sim Family Farms Ltd
Sisley Farms Ltd
Slatz Trust
Somerset Trust
Springpark Farms 2008 Ltd
Steff ert Farms Ltd
Stephen Zink
Steven Bennett Family Trust
Stoneyburn Dairy Ltd
T & C Brown Ltd
T & K Rae Family Trust
T D & J A Rhind
T R D Reesby
Tamatea Farms Ltd
Tawa Land Company Ltd
Tayco Farm Ltd
Te Ngutu Land Holding Co Ltd
Te Repo Farms Ltd
Teaghlach Trust
Telesis Trust
The Adare Company Ltd
The D & A Roberts Family Trust
The Goble 2000 Trust
The Herewahine Trust
The Hyjinks Trust
The Red Cow Company Ltd
The Taieri Dairy Company Ltd
Trimor Ltd
Trinity Lands Ltd
Trustees Kokako Station
Tuki Tuki Awa Ltd
TW Langford Family Trust
Two Name Farming Ltd
Up At 5 Ltd
V E & D M Grant
Vale Green Services Ltd
Van Rossum Ltd
VBI Ltd
Ventura Dairies Ltd
W & C Candy Trust
W B Scott Family Trust
W B Wouters
W Dreadon & K Barnett-Dreadon
W G & M D Orr
W J & J G Pile Family Trust
W R & Z W Kite
W.A & H.R Simpson Farming Ltd
Waicola Holdings Ltd
Wainui Dairies
Waiotu Farms Ltd
Waiparu Farm Ltd
Waiparu Holdings Ltd
Waipiata Trust
Waituna Investments Ltd
Wallace Johnstone Ltd
Walters Holdings (2008) Ltd
Wards Schrader Trusts Partnership
Webber & Maxwell Partnership
Webber Farm Ltd
West Mains Farm Ltd
Westmeath Trust
Whakahora Farm Ltd
Whakanui Farms Ltd
Whakanui Stud Ltd
Whenuakura Farm Ltd
Wichland Farms Ltd
Willcox Farms Ltd
Willowfi elds Ltd
Willowhaugh Enterprises Ltd
Windy Ridge (Fleming) Ltd
WP & A Moore
Wylam Dene Farms Ltd
Our farmers are committed to milk quality excellence, year-after-year,
ensuring that we collect the best possible milk. In addition to the honour
roll below, we also acknowledge the eff ort of all Grade Free, Merit and
Achievement recipients. Our farmers are our greatest assets.
FONTERRA ANNUAL REPORT 
41

OUR PEOPLE
Employee spotlight
Palatasa Havea
Principal Research Scientist
Fonterra Research and Development Centre,
Palmerston North
As a 17-year-old student attempting to pass Year 10 for the third
year in a row, Palatasa (Tasa) Havea never imagined that one day
he’d be granted one of New Zealand’s top honours.
Fast forward a few decades and Tasa’s work, both as a scientist and
as a leader in his community, was recognised when he was made a
member of the New Zealand Order of Merit for his services to the
Pacifi c community and the dairy industry.
It’s believed Tasa is Tonga’s fi rst food science PhD. His work as a
principal research scientist at Fonterra’s Research and Development
Centre has resulted in ten patents for the Co-op.
He’s played a vital role in pioneering the use of whey protein in a
range of products that is returning hundreds of millions of dollars
to the New Zealand economy.
Deeply involved in his local community, Tasa has also worked
alongside the New Zealand Government for many years bringing
about policies and funding to support Pacifi c Island people to reach
their potential.
10
Tasa’s research
has resulted in
ten patents for
the Co-op.
Tasa is now a
member of the
New Zealand
Order of Merit.
It is believed Tasa
is Tonga’s fi rst
food science PhD.
Tasa’s work with whey protein
is returning hundreds of
millions of dollars to the
New Zealand economy.
FONTERRA ANNUAL REPORT 
42

Stirling team
South Otago
A site at the bottom of the South Island but on
top of their game, Stirling is focussed on being
the most productive site in the country.
The 110-person South Otago team has been
working hard to deliver sustainable change
over many years across all parts of the site,
from transport and health and safety to people
and customers.
Stirling is one of the most effi cient and productive
sites in the country. The team has put every
part of its business under a spotlight to deliver
increased value. The results are impressive – the
site is running for longer, breakdowns are reduced
and 1.8 million litres of milk each day during the
peak of the season is being turned into some of
the world’s most-loved cheeses.
The site boasts a state-of-the-art biological
treatment plant which uses natural organisms to
treat waste water – the only one of its kind in the
Southern Hemisphere. Stirling will also transition
from coal to renewable energy as part of our goal
to achieve net zero emissions across our sites
by 2050.
In light of the team’s hard-won gains, Stirling
was awarded two prestigious awards at our 2018
Best Site Cup Awards. These awards recognise
the team’s long-term commitment to excellence
and creating sustainable change over many years.
They also won a silver award with a score of 99.15
out of 100 at the Wisconsin Cheese Awards.
Hema Daily Fresh
Milk team
China
Staying ahead of the curve is a tough challenge in
fast-changing China. But the launch of Hema Daily
Fresh Milk in Shanghai has put our Co-op at the
forefront of product innovation.
One step ahead, teams from our Consumer and
Foodservice business in China and Food Safety
Quality and Technical teams in New Zealand
partnered with Alibaba’s innovative retailer Hema
Fresh to launch our Co-op’s fi rst fresh milk product
in China. From concept to launch in just over three
months, the product was developed with incredible
speed and relentless focus on food safety and quality.
Each bottle is on sale for just a day and delivered to
the consumer within 30 minutes of an order.
Hema Daily Fresh is the fi rst step in our Co-op selling
fresh milk in China. Sourced directly from the Co-op’s
farm hub in Hebei province, the range capitalises
on rising domestic demand for higher-quality fresh
products, as part of the ‘premiumisation’ of China’s
consumer market.
FONTERRA ANNUAL REPORT 
43

John WilsonAshley WaughScott St JohnDonna SmitNicola ShadboltAndrew MacfarlaneSimon IsraelBruce HassallBrent GoldsackClinton DinesJohn Monaghan
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.










OUR PEOPLE
Board of Directors
FONTERRA ANNUAL REPORT 
44

. John Monaghan
Board Responsibilites Farmer-elected Director,
Chairman, Chair of the Co-operative Relations
Committee, Member of the People, Culture and
Safety Committee and the Nominations Committee
Term of Offi ce Elected , last re-elected 
John Monaghan was elected to the Fonterra Board in
2008 and became Chairman in 2018. Prior to joining
the Fonterra Board John was Chairman of the Fonterra
Shareholders’ Council and the inaugural Chair of the
Governance Development Programme. He is also
a director of Centre Port Limited and Centre Port
Properties Limited. He holds a number of farming
directorships and is a trustee of the Wairarapa
Irrigation Trust. John has dairy farming interests in
the Wairarapa and Otago regions. John has taken a
lead role in representing Fonterra’s interests on global
trade issues and has strong networks domestically
and internationally with key stakeholders.
. Clinton Dines
Board Responsibilites Appointed Director, Member
of the People, Culture and Safety Committee, Risk
Committee and the Nominations Committee
Term of Offi ce Appointed 
Clinton was appointed to the Fonterra Board in
2015. Clinton lived and worked in China for 36
years, 21 of which as President of BHP Billiton’s
China business. He has extensive experience as
an executive in China and Asia businesses and
has had an active career as a Non-Executive
Director, currently serving on the Boards of North
Queensland Airports and Zanaga Iron Ore. He
was Executive Chairman of Caledonia Asia from
2010 to 2013, an investment group in Asia, and
is a Partner in Moreton Bay Partners, a strategic
advisory fi rm based in Brisbane. He is an Adjunct
Professor at Griffi th University’s Asia Institute and
is a Member of the Griffi th University Council.
Clinton has extensive experience as a senior
executive in China and Asia businesses, including
global manufacturing and commodity businesses.
BA (Modern Asian Studies, Gri th), CIM, INSEAD
. Brent Goldsack
Board Responsibilites Farmer-elected Director,
Member of the Co-operative Relations Committee,
the Risk Committee and the Milk Price Panel.
Term of Offi ce Elected 
Brent Goldsack was elected to the Fonterra Board
in 2017. Brent had a 25-year career in both New
Zealand and abroad in various corporate advisory
roles, including being a Partner at PwC for more
than 12 years. Brent is a Chartered Accountant.
Brent serves on the Boards of Canterbury
Grasslands Limited, Waitomo Petroleum Group
Limited and its subsidiaries and The New Zealand
Fieldays Society. Brent is actively involved as a
shareholder of three dairy operations in the Waikato
and has shareholding interests in two other dairy
farms with operations in both New Zealand and the
United States. Brent is also the General Manager
of a 3,000 cow dairy operation. In addition to his
strong fi nancial skills and knowledge, Brent has
particular expertise in Fonterra’s Farmgate Milk
Price and the drivers of the Co-operative’s earnings.
BCA, CA
. Bruce Hassall
Board Responsibilites Appointed Director, Chair
of the Audit and Finance Committee and the
Nominations Committee, Member of the Risk
Committee and the Milk Price Panel and is an
observer on the People, Culture and Safety Committee.
Term of Offi ce Appointed 
Bruce Hassall was appointed to the Fonterra Board in
2017. Bruce is a Chartered Accountant and has had a
35-year career at PwC, including holding the position
of Chief Executive Offi cer of the New Zealand practice
from 2009 to 2016. Bruce is Chairman of The Farmers
Trading Company Limited, Prolife Foods Limited and
Fletcher Building Limited (with eff ect 1 September
2018) and serves as a director on the Board of Bank
of New Zealand. He is a member of the University
of Auckland Business School Advisory Board and
was a founding Board Member of the New Zealand
China Council. Bruce has extensive experience in
fi nancial reporting information system processes, risk
management, business acquisitions, capital raising
and IPOs across listed and private companies.
BCom, FCA (CAANZ)
. Simon Israel
Board Responsibilites Appointed Director, Member
of the People, Culture and Safety Committee
Term of Offi ce Appointed 
Simon Israel was appointed to the Fonterra
Board in 2013. Simon currently chairs the Boards
of Singapore Telecommunications Limited and
Singapore Post Limited and is a member of
the Westpac Asia Advisory Board. He was an
Executive Director of Temasek Holdings for six
years and President from 2010 to 2011. Simon
was a director of Fraser & Neave, Neptune Orient
Lines, Asia Pacifi c Breweries, Griffi n Foods,
CapitaLand and Frucor Beverage Group. He had
10 years’ experience in the dairy industry with
Danone as a Senior Vice President and member
of the Group Executive Committee. He was
conferred Knight in the Legion of Honour by the
French Government in 2007. He had 10 years’
experience in Danone, a global consumer-oriented
company, as a Senior Vice President and member
of the Group Executive Committee.
DipBusStud
. Andrew Macfarlane
Board Responsibilites Farmer-elected Director,
Member of the Audit and Finance Committee,
Co-operative Relations Committee
and the Nominations Committee.
Term of Offi ce Elected 
Andy Macfarlane was elected to the Fonterra Board
in 2017. Andy was a farm management consultant
for 38 years. He is a Councillor of Lincoln University
and a Director of Ngai Tahu Farming and ANZCO.
Andy is an active member of the International
Farm Management Association (IFMA), Global
Dairy Farmers and New Zealand Institute of
Primary Industry Management (NZIPIM). He is the
Past President of the NZIPIM and chaired Deer
Industry New Zealand for seven years. Andy began
farming in 1989 and lives near Ashburton. Andy has
shareholding interests in the South Island. Andy
has a strong understanding of the governance of
research and development and innovation, and
has a particular interest in the strategic use of
technology in the dairy industry.
B.Agr.Sc
. Nicola Shadbolt ONZM
Board Responsibilites Farmer-elected Director,
Member of the Audit and Finance Committee and
the Risk Committee
Term of Offi ce Elected , last re-elected 
Nicola Shadbolt was elected to the Fonterra Board
in 2009 and serves on the Board of the Manager
of the Fonterra Shareholders’ Fund. Nicola has
worked in government, agribusiness, consultancy
and academia and is now a Professor of Farm and
Agribusiness Management. She serves on the
board of the International Food & Agribusiness
Association and, as chair, on a large dairy farming
business. Nicola was made an Offi cer of the New
Zealand Order of Merit for services to agribusiness
in 2018. Nicola lives in the Manawatu, the base for
her four farming and forestry equity partnerships,
which include two dairy farms. Nicola’s expertise
across international agribusiness sectors includes
a strong focus on the crucial role that science and
sustainability play in creating enduring value for
Fonterra, its owners and New Zealand.
B.Sc(Hons), M.AgrSc(Hons), DipBusStud
(Accountancy), FNZIPIM (Reg), FAICD,
INSEAD IDP-C
. Donna Smit
Board Responsibilites Farmer-elected Director,
Member of the Audit and Finance Committee and
the Co-operative Relations Committee
Term of Offi ce Elected 
Donna Smit was elected to the Fonterra Board
in December 2016. Donna lives and farms at
Edgecumbe, and has built and owns seven dairy
farms in Eastern Bay of Plenty and Oamaru.
Donna is a Director of Ballance Agri Nutrients
and Kiwifruit Equities Limited and a Trustee of the
Dairy Women’s Network. Donna is a Chartered
Accountant and was a company administrator
at kiwifruit Co-operative EastPack for 24 years.
Donna’s strong focus on fi nancial and risk
management has been built through her extensive
business experience and fi nancial background, and
complements her deep dairy farming experience.
CA
. Scott St John
Board Responsibilites Appointed Director, Chair
of the Milk Price Panel and Member of the Audit
and Finance Committee
Term of Offi ce Appointed 
Scott St John was appointed to the Fonterra Board
in 2016 and serves on the Board of the Manager of
the Fonterra Shareholders’ Fund. He was the CEO
of First NZ Capital (FNZC) for 15 years, stepping
down from that role in early 2017. Scott has served
on the Council of the University of Auckland since
2009 and was appointed Chancellor in 2017. He
is a Director of Fisher and Paykel Healthcare and
chairs their Audit and Risk Committee. Scott also
serves on the Board of Mercury NZ Limited and
NEXT Foundation. Previous roles have included
Chairman of the Securities Industries Association,
and membership of both the Capital Markets
Development Taskforce, and the Financial Markets
Authority Establishment Board.
B.Com, Diploma of Business
. Ashley Waugh
Board Responsibilites Farmer-elected Director,
Chair of the Risk Committee, Member of the Audit
and Finance Committee and the People Culture
and Safety Committee
Term of Offi ce Elected 
Ashley Waugh was elected to the Fonterra Board in
2015. Ashley serves on the Board of Seeka Limited
and the Colonial Motor Company Limited. He
previously chaired the Board of Moa Group Limited.
Ashley spent ten years with The New Zealand Dairy
Board followed by eight years with National Foods
in Australia including the last four years as Chief
Executive Offi cer. Ashley lives on his dairy farm near
Te Awamutu and has shareholding interests in Puke
Roha Limited in Pokuru. Ashley has had hands-on
experience as a leader of a consumer brands
business and a track record of value creation, which
underpins his expertise and interest in fi nancial
discipline and risk management.
BBS
. John Wilson
Board Responsibilites Farmer-elected Director,
Chair of the People, Culture and Safety Committee
Term of Offi ce Elected , last re-elected 
John Wilson was elected to the Fonterra Board
in 2003 and became Chairman in 2012, stepping
down in July 2018. Previously he served as the
inaugural Chairman of the Fonterra Shareholders’
Council. John is a director of Turners & Growers
Limited and the Hugh Green Group and its
subsidiary companies. John also serves on the
Executive Board of the New Zealand China
Council. He is a chartered member of the Institute
of Directors in New Zealand. John lives on his dairy
farm near Te Awamutu and jointly owns a dairy
farming business based near Geraldine, South
Canterbury. John’s governance and leadership
experience of diverse and complex businesses,
includes co-operatives, extensive family and
farming businesses, business councils and global
industry bodies.
B.Agr.Sc
FONTERRA ANNUAL REPORT 
45

Mark Van ZonMike CroninKelvin WickhamJudith SwalesRobert SpurwayLukas ParaviciniMarc RiversMiles Hurrell
1. 2. 3. 4. 5. 6. 7. 8.









OUR PEOPLE
Management Team
FONTERRA ANNUAL REPORT 
46

. Miles Hurrell
Chief Executive Offi cer
In August 2018, Miles Hurrell was appointed as
Chief Executive Offi cer. In Miles’ most recent
position as Chief Operating Offi cer, Farm Source,™
he led Fonterra’s global Co-operative farming
strategy which includes farmer services and
engagement, milk sourcing and the chain of
70 Farm Source™ rural retail stores throughout
New Zealand. Miles’ 19 years of experience in the
dairy industry has spanned four continents. From
2010 to 2014, Miles was General Manager Middle
East, Africa, Eastern Europe and Russia. In this
position he led a period of sustained growth during
a time of political unrest across these regions. He
reset the African sales strategy and was a Director
of Fonterra’s joint venture with Africa’s largest
dairy company, Clover Industries Limited. From
2006 to 2008, Miles oversaw the streamlining
of the Co-operative’s European operations
before moving to the United States to establish
new off shore partnerships. In 2014, Miles was
appointed the Co-operative Aff airs Group Director
and in 2016 he took up his role with Farm Source.
Miles has completed management programmes at
INSEAD (International Executive Development),
London Business School (Finance), Kellogg’s
North Western University (Global Sales) and IMD
(marketing). He has also had governance roles with
Prolesur, Falcon (China Farms), MyMilk and Global
Dairy Platform.
. Marc Rivers
Chief Financial Offi cer
Marc Rivers joined Fonterra in February 2018 as
the Chief Financial Offi cer, responsible for the Co-
operative’s fi nances, procurement and information
systems. Marc is an experienced global fi nance
executive with strong strategic leadership
capability. Prior to joining Fonterra, Marc was
the CFO at Roche Pharmaceuticals Division in
Switzerland, with oversight of NZ$54 billion in
sales including 14 manufacturing sites around the
world. His division was responsible for product
distribution for 140 countries, focussing on the
innovation pipeline and customer and market
development. Marc has worked in both emerging
and established markets, including China, Japan,
Thailand, Europe and the US. Marc has a strong
track record and is known for his commitment to
leading and developing his people while building
diverse and inclusive teams. He has a Bachelor of
Arts in International Studies and an International
Masters of Business Administration, Finance and
German from the University of South Carolina,
Columbia USA.
. Lukas Paravicini
Chief Operating Offi cer Global Consumer
and Foodservice
Lukas Paravicini heads Fonterra’s Global Consumer
& Foodservice business whose 11,000 people
are committed to bringing dairy nutrition to
80 countries across the world. He fi rst joined
Fonterra as CFO in 2013 after a long career with
Nestlé where he held a number of senior positions
including General Manager for Nestlé Professional
Europe, CFO of Nestlé Brazil, Vice President
of Global Business Services and CFO of Nestlé
Professional, and Nestlé’s globally managed Out-
of-Home business. Lukas’ extensive experience in
dairy provides him with an in-depth understanding
of how dairy can deliver people’s needs for
delicious nutritious food. He has lived and worked
in some of Fonterra’s most strategically important
markets. He holds a Business and Administration
degree from the University of Zurich, Switzerland,
and speaks fi ve languages.
. Robert Spurway
Chief Operating Offi cer, Global Operations
Robert Spurway joined Fonterra in 2011.
As Chief Operating Offi cer, Global Operations,
Robert leads Fonterra’s global operations
business and is responsible for the Co-operative’s
manufacturing and supply chain operations in
New Zealand and around the world. In his
previous role he was responsible for overseeing
milk collection, manufacturing and logistics for
the Co-operative’s New Zealand milk supply.
Prior to that, he was Fonterra’s South Island
Regional Operations Manager. In this role, he
oversaw the greenfi eld development of the
Co-operative’s Darfi eld site. Robert has more
than 25 years’ experience in the food and dairy
industries. After managing the Northland Dairy
Company’s Dargaville site, he moved to Australia
in 1999, where he held various roles in Goodman
Fielder Australia. From 2008 to 2011, Robert led
two Australian food companies before returning
to New Zealand. Robert holds a Bachelor of
Engineering (Chemical and Materials).
. Judith Swales
Chief Operating Offi cer - Velocity
and Innovation
Judith Swales shapes the future of Fonterra by
harnessing innovation, emerging technologies,
game changing business models and new ways
of working, while embedding a performance
driven culture. She joined the Co-operative in 2013
as Managing Director Fonterra Oceania, where
she led the successful turnaround of the Australian
business and oversaw Fonterra Brands New
Zealand. The daughter of a milkman, Judith grew
up helping her father on his daily milk run.
She has extensive experience in senior
management and business turnarounds, and prior
to joining Fonterra was the Managing Director of
Heinz Australia, and CEO and Managing Director
of Goodyear Dunlop, Australia and New Zealand.
Before coming to Australia in 2001, Judith worked
for a number of UK retailers which culminated in
her move to Australia as the Managing Director
of Angus and Robertson. She has served as a
Non-Executive Director on the DuluxGroup Board
since April 2011 and is a Director on the Global
Dairy Platform Board. Judith has a degree in
Microbiology and Virology.
. Kelvin Wickham
Chief Operating Offi cer, NZMP
Kelvin Wickham leads the sales and marketing
of all Fonterra ingredients globally, delivering
solutions to our global customers, ensuring
optimisation of supply and demand, commodity
price risk management, and championing
the NZMP™ brand. Kelvin has more than 29
years’ experience in the dairy industry and has
played a key role in building markets, customer
relationships and partnerships. His previous role
of President Greater China and India focussed
on directing the development of Fonterra’s
business in these expanding markets, during
which he oversaw a period of rapid growth. Prior
to that, Kelvin led Fonterra’s Supplier and External
Relations team, and was Managing Director of
Fonterra’s Global Trade overseeing the launch of
GlobalDairyTrade. From 2005 to 2007 he was the
Director of Sales and Operations Planning. Kelvin
holds a chemical and materials engineering degree,
a Master of Management and a Diploma of Dairy
Science and Technology.
. Mike Cronin
Managing Director Corporate Aff airs
Mike is the Managing Director Corporate Aff airs,
where he oversees Health, Safety, Resilience and
Risk; Legal; Social Responsibility; Governance;
Food Safety, Quality and Regulatory Aff airs; Global
Stakeholder Aff airs; Communications; Advocacy
and Fonterra Brand teams. Mike is also responsible
for co-ordinating the CEO’s offi ce, the Fonterra
Management Team, and the Fonterra Board.
After joining Fonterra in 2002 Mike has worked
on many of Fonterra’s most signifi cant projects,
including the buyback of the Anchor brand in
New Zealand, Trading Among Farmers and the
Governance and Representation Review. Prior to
2014, Mike was the General Manager of Strategy
Deployment. He was appointed Group Director
Governance and Legal before taking on his current
role in 2014. Mike has a Bachelor of Laws and
Bachelor of Arts from the University of Auckland.
. Mark Van Zon
Managing Director of People and Culture
Mark Van Zon was appointed Acting Managing
Director of People and Culture in 2018 after
Joanne Fair took up a secondment to lead Fonterra
Brands New Zealand. Mark oversees the delivery
of Fonterra’s people strategy, which includes
innovative solutions to attract, develop and retain
global talent, and to improve staff engagement
across our 22,000 employees. Prior to joining
Fonterra in 2017, Mark was based in Seattle and led
Starbucks’ international reward team. His overseas
experience also includes various Human Resources
roles in the Netherlands and UK. Mark is a well-
rounded Human Resources leader having worked
across a range of industries including logistics, IT
and consulting, retail and fast-moving consumer
goods. Mark holds a Master of Commerce (Hons)
from the University of Auckland.
FONTERRA ANNUAL REPORT 
47

OUR PERFORMANCE
Group
financial
metrics
Milk Collection

,

,

,

,

,
kgMS (millions)
.
.
8.

.
.
.

.
.
.

.
.
.

.
.
.6

Total Cash Payout
 Farmgate Milk Price Dividend
Sales Volume (LME bn)


.
.

.
.


.
.

.
.

.
.

. .

.

.

.
IngredientsConsumer and Foodservice
,


na



,6

Additional Volume to Higher Value

Cummulative Consumer and Foodservice (LME m)
Cummulative Advanced Ingredients (LME m)
Higher value products
 

as ­ of total LMEs





These charts have been
selected to represent
the fi nancial metrics
for Fonterra. We have
provided an historical
summary of our
performance which we
intend to include in our
annual results on an
ongoing basis.
1 Does not add to total due to inter-group eliminations.
Ingredients include China Farms.
2 Advanced ingredients split only from 2017.
3 Comprises Advanced Ingredients and Consumer and
Foodservices products.
FONTERRA ANNUAL REPORT 
48

Normalised EPS and Dividend Yield



.



.






EPS (cents)Dividend Yield
.
6.
.

Return on Capital
(including intangibles and EAI

)

.
.

.

.

.
CAPEX




,






 Capex (millions)
Normalised Gross Margin

,
.

,
.

,
.

,
.

,
.
 GM (millions) GMLME
Normalised EBIT
 EBIT (millions)
 EBITLME
 

.
 


.
 
,
.
 
,
.
 

.
Leverage

.
.x

.
.x

.

.

.
Gearing DebtEBITDA
.x
.x
.x
Working Capital Days










Free Cash Flow



–,

,




 Free Cash Flow (millions)
4 FY18 divided over volume weighted average FCG price of
$5.84 across the year.
5 Equity accounted investments.6 Calculated on the accrual basis.
FONTERRA ANNUAL REPORT 
49

We continued to shift more volume to higher value
products but we had less volume to sell due to record
low opening inventories and lower milk collections in
New Zealand. Our normalised earnings before interest
and tax (EBIT) were down 22% to $902 million, including
a downward adjustment to the Farmgate Milk Price of
5 cents per kgMS. The lower EBIT was due to the lower
sales volumes, tighter margins due to the higher Farmgate
Milk Price, especially the increase late in the season, and
higher operating costs. We also had two large one off
items, the payment for the Danone arbitration award and
Beingmate write-down, that signifi cantly impacted our
reported EBIT, which was down 77% to $262 million. Our
return on capital was unsatisfactory at 6.3%, down 2%
compared to last year.
As a result of this disappointing fi nancial performance,
we decided to limit our dividend to just the 10 cents paid
in April and reduce the Farmgate Milk Price to strengthen
our balance sheet and protect the long-term interests of
the Co-operative.
1 This includes the normalisation of Beingmate investment and the Danone
arbitration decision.
2 Ratio is economic net interest bearing debt divided by earnings before
interest, tax, depreciation and amortisation (EBITDA). Both debt and
EBITDA are adjusted for the impact of operating leases.
3 Gearing ratio is economic net interest bearing debt divided by total
capital. Total capital is equity excluding the hedge reserves, plus
economic net interest bearing debt.
4 Return on capital is calculated as normalised EBIT, less a notional tax charge
divided by capital employed. Capital employed includes brands, goodwill and
equity-accounted investments. Return on capital, excluding brands, goodwill
and equity-accounted investments was 8.0% (31 July 2017: 11. 1%).
OUR PERFORMANCE
Group Overview
It was a mixed year for us. On one hand we saw a
9% uplift in the Farmgate Milk Price to $6.69 per
kgMS. On the other, our earnings performance was
disappointing and well below our targets.
FOR THE YEAR ENDED
NZD MILLION JULY 31 JULY 2017CHANGE
Volume (LME, billion)22.2.
Volume (000 MT)4,123,
Normalised sales revenue20,431,
Normalised gross margin3,152,
Normalised gross margin
percentage15.4%.–
Normalised operating
expenses(2,496),
Reported EBIT262,
Normalised EBIT
1
902,
Net fi nance costs(416)
Tax (expense)/credit(42)
Net (loss)/profi t after tax(196)
Earnings per share (cents)(14)
Normalised earnings
per share (cents)24
Dividend per share (cents)10
Adjusted debt to
EBITDA
2
(ratio)4.5X.X
Gearing ratio
3
48.4%.–
Return on capital
4
6.3%.–
Free cash fl ow600
Capital expenditure861
FONTERRA ANNUAL REPORT 
50

Normalised EBIT
$
902 m
22%
Net Loss After Tax
$
196 m
Normalised
Earnings
Per Share
51%
24
cents
Return on
Capital
2%
6.3
%
FONTERRA ANNUAL REPORT 
51

In the 2018 fi nancial year, Fonterra grew total normalised
revenue by 6% where higher product pricing off set the
decline in overall sales volumes of Liquid Milk Equivalents
(LMEs).
Our overall sales volumes of LMEs were down 3%
mainly due to the lower sales volumes in our Ingredients
business where we had lower opening inventory and
lower collections in New Zealand. We continued to sell
increased volumes of higher value products with sales of
Advanced Ingredients increasing by 334 million LMEs and
we also shifted 131 million more LMEs into Consumer and
Foodservice. This increased sales volumes in Consumer
and Foodservice by 2%, which was below our targets and
mainly due to customer demand being impacted by higher
prices and increased competition.
Our group normalised gross margin per LME of $0.14
was in line with the previous year. However, the lower
sales volumes and higher group operating costs meant
normalised EBIT decreased by $253 million to $902 million.
After two years of reducing our costs, normalised group
operating costs were 7% higher than last year with
Ingredients and centrally held costs making up the
majority of the increase. In Ingredients we had higher
operating costs across the business, including some
one-off s. We also had costs for new category growth and
higher costs in Australia as we expanded our business.
In addition, we had higher IT and R&D expenditure to
support the future development of our Co-operative.
In Ingredients, normalised EBIT decreased by 7% to
$879 million. Gross margin in New Zealand Ingredients
improved on last year but was off set by other parts of
Ingredients and as a result normalised gross margin
was stable. The higher operating costs resulted in the
lower EBIT.
Normalised EBIT for Consumer and Foodservice was
down 9% on last year to $525 million
1
. Higher prices for
ingredients, especially for fat products, impacted demand
and while we increased prices through our pricing and
marketing strategies we were not able to fully recover the
higher input costs.
China Farms recorded a direct loss of $9 million for the
year. Production, and consequently sales volumes, were
down due to some changes in the herd to better match
the annual highs and lows in customer demand for milk.
We also had to make an unbudgeted investment in our
effl uent management to meet discharge standards.
Next year we expect volumes to increase and on-farm
productivity to improve.
Our Ingredients business is responsible for purchasing the
raw milk from the farms and capturing the highest value
for this milk, and this resulted in an additional $30 million
loss. We are progressing our strategy of moving this milk
up the value curve through partnerships with the likes
of Hema Fresh, Starbucks, McDonald’s and other Quick
Service Restaurants (QSR) channels. At less than 5% of our
milk from China Farms, these are still small volumes but
our plan is to continue to grow them over time.
OUR PERFORMANCE
Group Overview CONTINUED
Normalised Gross Margin

,
.

,
.

,
.

,
.

,
.
 GM (millions) GMLME
Normalised EBIT
 EBIT (millions)
 EBITLME
 

.
 


.
 
,
.
 
,
.
 

.
1 Normalised EBIT has been restated for FY17 from $614 million to $576 million
as we reallocated some group overhead costs to markets.
FONTERRA ANNUAL REPORT 
52

Net fi nance costs were $61 million higher than last year
due to higher average borrowings and the one-off $26
million interest payment made to Danone. Our gearing
ratio increased to 48.4% from 44.3% last year. This
included the result of the Danone arbitration award and
impairment of Beingmate, which collectively accounted
for 3.2% of the decline. Our working capital days went
up by eight days from 75 to 83 because of higher carrying
values of inventory and receivables, due to the late season
increase in the Farmgate Milk Price. Free cash fl ow,
being the cashfl ow that is available to pay interest and
dividends, and to reduce debt, decreased by $70 million
to $600 million. This was because of lower earnings, and
higher working capital and capital expenditure for the
year. Our capital expenditure went up to $861 million
compared to $851 million last year and included a number
of big projects such as construction of a third mozzarella
plant at our Clandeboye site, a cream cheese plant at our
Darfi eld site and the expansion of our Stanhope plant,
which will increase its cheese production capacity by
35,000 metric tonnes.
This was a year of challenging operating performance and
we are focussed on improving the business performance
of all assets. This combined with strong fi nancial discipline
will strengthen the balance sheet and improve the return
on invested capital.
Normalised Operating Expenses
$
2
,
496 m
7%
Free Cash Flow
$
600 m
10%
Gearing
Ratio
4.1%
4 8.4
%
FONTERRA ANNUAL REPORT 
53

OUR PERFORMANCE
Ingredients
Volume
Milk collection across New Zealand for the 2017/18 season
was 1,505 million kgMS, down 1% compared to the previous
season. Diffi cult weather conditions were the prevailing
theme this season with some regions hit harder than
others. Many North Island and upper South Island farmers
experienced extremely wet conditions in spring causing
damage to their pasture, stunting both grass growth and
supplementary feed production. This was followed, in some
regions, by diffi cult dry conditions which aff ected pasture
growth across the rest of the season.
In Australia, milk collection for the 2017/2018 season
reached 153 million kgMS, 30 million kgMS higher than the
2016/17 season. Strong volume growth in Australia was
predominantly due to increased market share as we gained
supply from competitors.
Ingredients’ sales volumes were down 4% for the year,
driven by the lower opening inventories and the lower
collections in New Zealand. This year we increased sales
of Advanced Ingredients by 334 million LMEs, which is
consistent with our strategy of shifting more of our farmers’
milk into higher value products. The main products that
contributed to the increased sales of Advanced Ingredients
were premium consumer powders into the Middle East and
South East Asia.
1 China raw milk gross margin represents the net benefi t/(loss) from the
external sale of milk produced by China Farms and sold to the Ingredients
business in China at an internal raw milk price.
2 Normalised EBIT for Ingredients excludes unallocated costs.
3 Return on capital is calculated as normalised EBIT, less a notional tax
divided by capital employed. Capital employed includes brands, goodwill
and equity-accounted investments. Return on capital, excluding brands,
goodwill and equity-accounted investments was 8.2% (31 July 2017: 10.3%).
In our Ingredients business normalised sales
revenue increased by 7% where higher sales
prices more than off set the lower sales volumes
due to record low opening inventory and lower
collections. Our total normalised gross margin
was in line with last year – however, increased
operating costs to achieve these gross margins
meant our EBIT declined by 7% to $879 million.
FOR THE YEAR ENDED
NZD MILLION JULY 31 JULY 2017CHANGE
Volume (LME, billion)20.5.
Volume (’000 MT)2,986,
Normalised sales revenue 16,306,
Normalised total
gross margin1,472,
– New Zealand ingredients1,346,
Reference products555
Non-reference products791
– Australia ingredients77
– China raw milk
1
(30)
– Other gross margin79
Normalised EBIT
2
8 79
Gross margin ($ per MT) –
New Zealand Ingredients
Reference products
($ per MT)309
Non-reference products
($ per MT)1,275,
Return on capital
3
8.3%. –
Summary Financials
FONTERRA ANNUAL REPORT 
54

FONTERRA ANNUAL REPORT 
55
FOR THE YEAR ENDED
NZD MILLION31 JULY 201831 JULY 2017CHANGE
Production Volume (’000 MT)
Reference
products1,849,
Non-reference
products762
Sales Volume (’000 MT)
2
Reference
products1,794,
Non-reference
products620
Revenue Per MT (NZD)
2
Reference
products4,851,
Non-reference
products5,637,
Added
334
million LMEs to
Advanced Ingredients
Normalised Total Gross Margin
$
1,472 m
in line with
201 7
Value
Ingredients’ revenues were up 7% on last year due to higher
commodity prices and higher sales volumes in Australia,
off setting the lower opening inventory and milk collections
in New Zealand.
Our New Zealand Ingredients business manufactures
fi ve ingredient 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.
Revenue per metric tonne for reference products was up
14% and remained largely fl at for non-reference products.
Total Ingredients’ normalised gross margin was in line with
last year, and includes the adjustment to the milk price of
5 cents per kgMS, benefi tting gross margin by $74 million.
This was achieved on a lower sales volume and therefore
represents an improved gross margin per LME.
New Zealand Ingredients’ gross margin increased 9% to
$1,346 million. Gross margins for reference products were
$555 million, or $309 on a per metric tonne basis, which
represents an increase of 33%. This included recovering
pricing lags from the previous year and is in line with the
margin per metric tonne for FY16.
The gross margins for non-reference products were
$791 million, down 2% on last year because of lower sales
volumes. Gross margin per metric tonne for non-reference
products was 9% higher at $1,275.
Australian ingredients' gross margin was in line with last
year including a planned 40 cents per kgMS payment to
suppliers. EBIT decreased by 44% because last year included
some one-off benefi ts that were not repeated this year.
The overall Ingredients’ gross margin was also impacted by
a $30 million loss representing the diff erence between the
domestic milk price and the internal raw milk price paid to
China Farms. Last year this loss was $38 million. We include
the China Farms’ volumes and earnings in Ingredients as
we use our sales expertise to maximise sales revenue of
the raw milk.
The improved gross margin for New Zealand Ingredients
was off -set by lower margins in “Other gross margin”. This
included a reduction in profi tability from globally sourced
products and last year we had a number of one-off benefi ts
that were not repeated this year.
Overall, normalised gross margin was in line with last year
but our operating costs were higher and there were some
one-off s. In addition, we had costs for new category growth
and higher costs in Australia as we expanded our business.
This resulted in normalised EBIT of $879 million, down 7%
on last year.
1 Table excludes bulk liquid milk. The bulk liquid milk volume for
the year ended 31 July 2018 was 68,000 MT of kgMS equivalent
(year ended 31 July 2017 was 76,000 MT of kgMS equivalent).
2 Revenue and sales volume exclude Foodservice volumes to
China, Latin America and Quick Service Restaurant channels.
This volume for the year ended 31 July 2018 was 198,000 MT
(year ended 31 July 2017 was 143,000 MT).
New Zealand Ingredients’ Revenue
and Volume
1

FONTERRA ANNUAL REPORT 
55

Consumer and Foodservice
OUR PERFORMANCE
We continued to move more
volume into our higher value
Consumer and Foodservice
business where our sales
volumes grew by 131 million
LMEs, 2% up on last year.
This was less than our targeted growth and was mainly
due to higher prices, product mix changes and the
underperformance of our New Zealand business. We
achieved volume growth in all other regions with the
strongest growth from our Greater China business.
Higher ingredient prices meant signifi cantly higher input
prices in both our Consumer and Foodservice businesses.
Through our pricing strategies and brand strength our
increased prices contributed an additional $551 million to
earnings but this was not suffi cient to cover the additional
$626 million of costs we incurred from the higher input
costs. As a result, our normalised EBIT was down 9% on
last year to $525 million
1
.
FOR THE YEAR ENDED
 MILLION JULY 31 JULY 2017CHANGE
Volume (LME, billion)5.6.
– Consumer3.2.
– Foodservice2.4.
Volume ( ’000 MT) 1,798,
Normalised sales revenue 7,122,
Normalised gross margin1,683,
Gross margin (%)24%
– Consumer28%
– Foodservice16%
Normalised EBIT525
Return on capital
2
8.3%. 
FOR THE YEAR ENDED
 MILLION JULY 31 JULY 2017
Normalised EBIT prior year576
Volume14
Price551
Cost of goods sold(626)
Operating expenses and other
3
10
Normalised EBIT525
Normalised EBIT: key performance driversSummary Financials
1 Normalised EBIT has been restated for FY17 from $614 million to $576 million
as we reallocated some group overhead costs to markets.
2 Return on capital is calculated as normalised EBIT, less notional tax charge
divided by capital employed. Capital employed includes brands, goodwill and
equity-accounted investments. Return on capital, excluding brands, goodwill
and equity-accounted investments was 35.1% (31 July 2017: 42.7%).
3 Includes net other operating income, net foreign exchange gains/losses and
share of profi t/loss of equity-accounted investees.
FONTERRA ANNUAL REPORT 
56

Greater China
In Greater China our volumes went up 11% driven by
strong growth in Mainland China. Consumer volumes
increased 24% on last year with strong growth in all
Anchor™ products. Based on market share, Anchor™
UHT milk is now the number one imported milk in
Mainland China, in both e-commerce and offl ine channels.
Foodservice volumes increased 9% on last year with
continued momentum in UHT culinary cream through
expansion into new cities and our launch of a beverage
house channel which includes tea houses that sell tea
macchiatos. In Greater China Foodservice there was a
signifi cant shift in product mix from butter to culinary UHT
creams due to the increase in butter prices. Butter has
a high ratio of LMEs per metric tonne so this shift in our
product mix was one of the key reasons our LME growth in
Greater China was not as high as the previous year.
Latin America
Latin America delivered 12 million more LMEs than last
year. Soprole
TM
had another strong year with its volumes
up 31 million LMEs which is 7% up on last year. We had
lower sales in Venezuela as the socio-economic situation
impacted consumer demand and there were also
diffi culties accessing the raw ingredients and packaging
materials to run the factories at optimal levels. In Brazil
there were also diffi cult economic conditions but we were
able to keep volumes in line with last year. We were able to
extend our leadership positions in the children’s category
and in the northeast of Brazil.
Asia
We had consistent growth across all Asian, Middle East
and African markets. Volumes were up by 71 million
LMEs, a 4% increase on last year – this includes growth
in both Consumer and Foodservice. We achieved our
strongest growth in Consumer in Malaysia and Sri Lanka.
In Foodservice, the Middle East, Vietnam and Thailand
had strong performances with volume growth from butter
in the Middle East and cream in Vietnam and Thailand.
In Consumer, growth was driven by Fernleaf powders in
Malaysia, the launch of our Red Cow brand in Sri Lanka and
the Middle East and the re-launch of Anlene™ across the
Asian region.
Oceania
Volumes were down 5% because of challenges in our New
Zealand business and marginally lower volumes in Australia.
New Zealand’s volumes were down 70 million LMEs, 9%
lower than last year. This was due to the issues with our
move to a new distribution centre, which we highlighted
in our interim results, combined with higher prices and
changes in consumer preferences. We have now put in place
a plan for turning around New Zealand’s performance. In
Australia, Foodservice volumes were fl at. Excluding the
Wagga Wagga Route business divested in October 2016,
Consumer achieved a volume increase versus 2017. This was
primarily due to liquid milk, Western Star butter sales and
recently launched Western Star cream.
Volume by region
Content for this page in progress
Greater China LME
1,413 million
Latin America LME
74 7million
Asia LME
1,7 73 million
Oceania LME
1,65 6 million
5%
11%
2%
4%
FONTERRA ANNUAL REPORT 
57

Consumer and Foodservice CONTINUED
OUR PERFORMANCE
Greater China
In Greater China, we delivered normalised EBIT of $165
million, down 19% on last year’s $204 million. Foodservice
margins declined to 15.2% compared to 23.7% last year.
The main reason was an increase in input costs as fat
prices rose signifi cantly and impacted the profi tability of
butter. In addition, there was also increased competition
in UHT cream from Europe. Our pricing strategy was set
to maintain our market share so we can benefi t from
future product price increases. Consumer gross margins
were steady, and combined with increased volumes, this
business broke-even two years ahead of our business
plan. This was achieved through the popularity of
Anchor™ UHT milk which holds the number one market
share in the imported UHT milk category, for both the
online and offl ine channels. In addition, the launch of
Anchor™ ambient yoghurt and the Daily Fresh milk range
into Alibaba’s new premium food stores, Hema Fresh,
contributed to this result.
Latin America
Latin America increased EBIT by 29% from $91 million in
2017 to $117 million in 2018. This was driven by another
year of solid performance from Soprole
TM
in the mature
cheese and yogurt categories. In addition, Brazil turned
around its performance and went from a loss position
to breakeven in a challenging economic environment.
In Brazil’s children’s category, we grew our market share
ahead of our competitors and now hold 32% market share
by value. There was a one-off benefi t of around $14 million
from restructuring our USD obligations in Venezuela.
Asia
Asia delivered EBIT of $176 million compared to last
year’s $194 million, down 10%. In Consumer, our pricing
strategies and marketing initiatives enabled us to keep our
gross margin percentage in line with last year. However,
price controls in some local markets did impact our
profi tability because we were not able to fully pass through
higher input costs. This impacted us most signifi cantly in
Sri Lanka. We launched our Red Cow brand in Sri Lanka
and the Middle East to support growth in these regions.
The lower price point makes it attractive to customers and
contributes to our margin. In Foodservice, we increased
our sales volumes by 6% but the higher input costs meant
our margins and profi tability were down on last year.
Oceania
Oceania delivered EBIT of $67 million, 23% less than
last year. This lower profi tability was due to operational
challenges in New Zealand which experienced lower
margins from the higher than expected costs involved in
moving to and starting up our new distribution centre.
This also impacted customer service levels and sales
volumes, which were down 9% on last year. In addition,
butter sales declined because of higher prices. However,
in Australia, we were able to maintain our number one
market share position in cheese and spreads.
LME BILLIONNORMALISED EBIT ($M)
YEAR ENDED
 JULY 
YEAR ENDED
31 JULY 2017CHANGE
YEAR ENDED
 JULY 
YEAR ENDED
31 JULY 2017CHANGE
Greater China1.41.165
Latin America0.75.117
Asia1.77.176
Oceania1.66.67
Consumer and Foodservice5.59.525
Value by region
Consumer and Foodservice Performance
FONTERRA ANNUAL REPORT 
58

Added
131
million LMEs to
Consumer and Foodservice
Latin America EBIT
$
117 m
29%
Oceania EBIT
$
67 m
23%
FONTERRA ANNUAL REPORT 
59

OUR PERFORMANCE
Our farming operations
in China are comprised of
seven farms across two hubs,
producing high quality
fresh milk.
China Farms
Volume
Yutian is our most established hub with around 17,000
milking cows. Our second hub, Ying, is our newest hub
with around 14,000 milking cows.
Excluding one-off milk powder sales in FY17, sales
volumes decreased by 12% to 273 million LMEs this
year. This was predominantly due to lower production
as changes are made to the herd profi le to improve its
future productivity. As these changes take eff ect, we
expect volumes to increase 10% per annum to reach
370 million LMEs by 2021.
Value
Our strategy for China Farms is to deliver the highest
value through integrating them into our Ingredients and
Consumer and Foodservice businesses in Greater China.
China Farms' partnerships with Hema Fresh, Starbucks,
McDonald’s and other QSR channels continue to build
positive momentum, as its raw milk goes into higher value
channels. At less than 5% of our milk from China Farms
these are still small but our plan is to continue to grow
them over time.
We also aim to reduce our cost base on an ongoing basis.
However, this year several one-off costs to meet discharge
standards combined with higher feed costs due to tariff s
and higher commodity prices have impacted earnings,
resulting in a direct normalised EBIT loss of $9 million.
Excluding these one-off s, China Farms have reduced
their costs by 6% since 2016 and will continue to focus
on improving their cost base through operational and
procurement effi ciencies.
Our Ingredients business is responsible for purchasing the
raw milk from the farms and capturing the highest value for
this milk, and this resulted in an additional $30 million loss.
FONTERRA ANNUAL REPORT 
60

FOR THE YEAR ENDED
NZD MILLION31 JULY 201831 JULY 2017CHANGE
Volume
(LME, billion)0.3.
Volume
( MT)22
Sales
revenue 262
Normalised
EBIT(9) ,
Sales volumes
273
million
LMEs
12%
1
Costs down
6%
since 2016
Launched the Daily
Fresh milk range
into Alibaba’s new premium
food stores, Hema Fresh
1 Excluding one-off milk powder sales in FY17.
FONTERRA ANNUAL REPORT 
61