Annual Meeting presentations

© Fonterra Co-operative Group Ltd.
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JOHN MONAGHAN
Chairman

© Fonterra Co-operative Group Ltd.
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0.3
0.5
A ug- 17S ep- 17Oct -17N ov- 17D ec- 17Jan -18F eb- 18Ma r- 18A pr- 18Ma y-1 8Jun -18Jul - 18
0
0.2
0.4
0.6
0.8
19901994199820022006201020142018
Globally competitive cash pay-out
EUUSNZ
Global Milk Prices (USD / litre)
Source: DairyNZ(NZ to May 2014);Fonterra announced payout(milk price and dividend) (NZ from June 2014); USDA; European Milk Market Observatory
(Netherlands milk price). Prices are adjusted to a milk composition of 3.5% protein and 4.2% fat and for spot exchange rates.

© Fonterra Co-operative Group Ltd.
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On Farm Compliance

© Fonterra Co-operative Group Ltd.
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ROLL OF HONOUR SLIDE

© Fonterra Co-operative Group Ltd.
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© Fonterra Co-operative Group Ltd.
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Strong Farmgate Milk Price Range
4.726.107.606.085.848.404.403.906.126.69
6.25
to
6.50
0.48
0.27
0.30
0.32
0.32
0.10
0.25
0.40
0.40
0.10
5.20
6.37
7.90
6.40
6.16
8.50
4.65
4.30
6.52
6.79
20092010201120122013201420152016201720182019
Forecast
Farmgate Milk PriceDividend
1.Total available for pay-out = Forecast Farmgate Milk Price range of $6.25 -$6.50 + Forecast Earnings Per Share (EPS) of 25-35 cents. For farm budgeting purposes the likely dividend will
be calculated in accordance with Fonterra policy of paying out 65-75 per cent of adjusted net profit after tax over time.
Note: Farmgate Milk Price: $ per kgMS; Dividend: $ per share
6.50 – 6.85
Forecast total
available for
payout
1

© Fonterra Co-operative Group Ltd.
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© Fonterra Co-operative Group Ltd.
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Portfolio Review Phases
IMMEDIATE ACTIONS
IN FY18
•Debt reduction focus
1
STRATEGIC REVIEW OF
PORTFOLIO
•Strategic alignment
•Value creation potential
•Agree where to exit /
optimise / invest
2
DELIVERY OF
STRATEGIC REVIEW
ACTIONS
•Exit / optimise and
reallocate capital
•Invest
•Reduce debt / return
capital
3

© Fonterra Co-operative Group Ltd.
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© Fonterra Co-operative Group Ltd.
Page 12
MILES HURRELL
Chief Executive Officer

© Fonterra Co-operative Group Ltd.
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Disappointing earnings performance
Margin pressure, higher costs and one-offs
GROSSMARGIN¹
$3,152M
3%
REVENUE
$20.4B
6%
VOLUME
22.2B LME
3%
ANNUALDIVIDEND
10CPS
YIELD 1.7%
3
NORMALISEDEBIT
2
$902M
22%
OPEX
1
$2,496M
7%
NET PROFIT AFTERTAX
$(196)M
126%, EPS (14)c
NORMALISED NPAT
2
$382M
51%, EPS¹24c
Ingredients
Volume (LME)
4
20.5B
Gross Margin (%)¹ 9.0%
Normalised EBIT $879
M
Return on Capital
6
8.3%
Consumer and Foodservice
Volume (LME)
4
5.6B
Gross Margin (%)¹ 23.6%
Normalised EBIT $525
M
Return on Capital
6
8.3%
China Farms
Volume (LME)
5
0.3B
Gross Margin (%)¹ 2.1%
Normalised EBIT $(9)
M
75%
1.Reflect normalisation adjustments.
2.Attributable to equity holders.
3.FY18 divided over volume weighted average FCG price of $5.84 across the year.
4.Includes inter-company sales.
5.Prior year volumes include 26m LME of milkpowdersnot included this year.
6.Return on Capital (ROC) includes goodwill, brands and equity accounted investments.
Excluding goodwill, brands and equity accounted investments ROC was 8.2% in Ingredients
and 35.1% in Consumer and Foodservice.

© Fonterra Co-operative Group Ltd.
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Value creation not satisfactory
Requires improved performance and better use of capital
$861M
CAPEX
1%
83 DAYS
WORKING CAPITAL
8 days
$2,496M
OPEX
2
7%
15.4%
GROSS MARGIN
2
Down from 16.9%
$902M
NORMALISED EBIT
2
22%
6.3%
RETURN ON CAPITAL
Down from 8.3%
$6.2B
NET DEBT
3
Up 11%
Return
Capital
1.Return on Capital (ROC) includes goodwill, brands and equity accounted investments. Excluding goodwill, brands and equity accounted investments ROC
was 8.0% in FY18 and 11.1% in FY17.
2.Reflect normalisation adjustments.
3.Economic net interest-bearing debt.
1,2

© Fonterra Co-operative Group Ltd.
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Committed to reducing debt
A strong balance sheet provides options
1.Gearing ratio is economic net interest-bearing debt divided by economic net interest-
bearing debt plus total equity excluding hedge reserves.
2.Economic net interest-bearing debt.
3.Debt payback ratio is economic net interest-bearing debt divided by EBITDA. Both debt
and EBITDA are adjusted for the impact of operating leases.
$6.3B
TOTAL EQUITY
12%
$6.2B
NET DEBT²
Up 11%
4.5X
DEBT/EARNINGS³
Up from 3.5x
48.4%
GEARING¹
Up 4.1%
AA-
CREDIT RATING
FitchS&P
STABLESTABLE

© Fonterra Co-operative Group Ltd.
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More volume to higher value
465 million more LMEs shifted to higher value
Note: Wheel shows category percentage of total FY18 external sales (LME)
1. Additional LME volumes include inter-company sales.
– Total volumes declined 3%
due to lower collections
– More volume into higher
value, up from 42% to 45%
– 334m¹ LMEs shifted to
higher- margin Advanced
Ingredients
– Added 131m¹ more LMEs
Combined consumer,
Foodservice and
Advanced Ingredients
2%
20%
33%
22%
11%
12%
DIRA
GDT
Advanced
Ingredients
Foodservice
Consumer
FY18
22.2b
LME
Base
Ingredients
45%

© Fonterra Co-operative Group Ltd.
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© Fonterra Co-operative Group Ltd.
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© Fonterra Co-operative Group Ltd.
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© Fonterra Co-operative Group Ltd.
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© Fonterra Co-operative Group Ltd.
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© Fonterra Co-operative Group Ltd.
Page 46
DUNCAN COULL
Chairman
Fonterra Shareholders’ Council

© Fonterra Co-operative Group Ltd.
Page 47
Statement of Intentions
for year ending 31 July 2018
KPIFY2018 TargetFY2018 Actual
Available for Payout$6.95 - $7.05$6.93

Farmgate Milk Price$6.50$6.69

Earnings Per Share$0.45 - $0.55$0.24

Consumer & Foodservice Volume5.5 billion5.2 billion

Gearing Ratio40 - 45%48.4%

Working Capital Days7683

Return on Capital14%8%

Milk Solids (Retain and Grow)82.0%81.8%

Employee TRIFR5.06.1


© Fonterra Co-operative Group Ltd.
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FY2018
Budget
$000
FY2018
Actual
$000
FY2019
Budget
$000
Total OperatingCosts2,4352,3882,385
Connection
(MyConnect, UYCP, Purpose
Review, Councillor development,
Shareholder engagement)
602555670
Governance Development
Programme
146123146
Guardianship
(Elections – Returning Officer &
candidate meetings)
00250
Performance
(External analyst inclValue Review)
5598175
Total3,2383,1643,626
Budget FY2019

© Fonterra Co-operative Group Ltd.
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Under this item of business the Chairman of the Shareholders’ Council will, in
accordance with the requirements of the Company’s Constitution:
•Report on the Council’s view as to the Company’s direction, performance and
operations for the preceding season
•Report on the activities undertaken by the Council in the preceding season
•Present the Council’s programme and budget for the current season
•Present the Milk Commissioner’s Report
•Comment on other dairy industry matters
“To approve the Shareholders’ Council’s programme and budget for the
current season.”
Resolution 6:
Approval of Shareholders' Council programme and budget