Fonterra announces 2019 Interim Result

Page 1



Reporting Period 6 months to 31 January 2019
Previous Reporting Period 6 months to 31 January 2018


Amount
(m’s)
Percentage
Change
Revenue from ordinary activities NZ$9,746 (1)%
Profit (loss) from ordinary activities after tax attributable to
security holder
1

NZ$80 123%
Net profit (loss) attributable to security holders NZ$76 121%

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

Interim/Final Dividend
Amount per Security
Imputed Amount
per Security
No interim dividend to be paid - -

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.

---

Fonterra
Interim
Report

2019

XXX
Letter from the Chairman 02
Letter from the CEO 04
Our Farmers 06
Our Potential 08
Our Performance 10
Interim Financial Results 32
Group financial metrics 10
Ingredients 16
Consumer and Foodservice 18
China Farms 22
Historical financial summary 24
CONTENTS

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.Please refer to page
56
for the reconciliation of the NZ IFRS measures to the
non-GAAP measures and page
57
for definitions of the non-GAAP measures
used by Fonterra.

LETTER FROM THE CHAIRMAN
Our rising forecast Farmgate Milk Price reflects a global
export market in which we expect demand to remain
stronger relative to supply for the rest of the season. It is
welcome relief for our farmers who have faced difficult
conditions since the start of the year.
Global supply, while still up on last season, has slowed due
to challenging weather conditions in some of the world’s
largest milk producing regions. It’s a similar story here in
New Zealand where recent hot, dry weather means our
forecast milk collections are down on earlier expectations at
1,510 million kgMS, up just 0.3% on last year.
Stronger global demand, being driven predominantly by
China and Asia, has seen an upward trend in global prices
for our reference products over the last quarter. That is
putting pressure on the margins for non-reference products,
and they significantly contribute to our earnings.
Alongside those input prices, three main pressure points on
our earnings have remained constant across the first half of
the year – challenges in our Australian Ingredients business,
in our Foodservice businesses in Greater China where
higher butter prices and inventories slowed demand, and
the impact of global geopolitical issues – particularly in our
markets in Latin America.
Interim financial results and interim
dividend decision
At a range of $6.30-$6.60 per kgMS, our forecast Farmgate
Milk Price is strong but the Co-op’s earnings performance is
not where it needs to be.
As announced in February, our forecast earnings per share
range is down at 15-25 cents and we have decided there will
be no interim dividend payment. A decision on any full year
dividend will be made once the Board has a complete picture
of the full year earnings and balance sheet position.
Our performance is not something that will be fixed
overnight. It will require the courage to make difficult
decisions and a culture of accountability and performance
right across the organisation.
Farmers and unit holders expect a respectable return on
their investment and your Board is making solid progress on
a fundamental review of the business strategy to deliver it.
New leadership
As I’ve said, our performance is not something that will be
fixed overnight. However, the Board has been impressed by
Miles Hurrell’s leadership and commercial skills since he took
up the role of interim CEO in August last year. Our decision
to appoint Miles as the permanent CEO was a clear one.
Earnings performance a
clear signal that fundamental
change is needed
John Monaghan

Chairman
Vision
+
Purpose
Portfolio Review
Strategy ReviewProgress update in MayFull Strategy Announced
Kick off in January(MyConnect conference and Q3 business update)at 2019 Annual Results
Strategy timeline
FONTERRA INTERIM REPORT 2018
02

His work alongside the Board as we progress our full strategy
review, and the portfolio review we began back in late 2018 to
re-evaluate our investments, major assets and partnerships,
make him uniquely qualified to be our CEO. His permanent
appointment will bring much needed continuity and stability
to the Co-op during this critical period of change.
Full strategy review
The Board is progressing well with a full review of the Co-op’s
business strategy. This isn’t mere tinkering around the edges.
There will be fundamental change. We are taking a hard look at
our end-to-end business, where we can win in the world, and
the products where we have a real competitive advantage.
Our Co-operative values of the last 148 years won’t change.
Your quality, pasture-based milk will always be collected,
processed and sold for the highest possible returns. You’ll
always be paid on the 20th of the month – every month.
Outside of that, there are no sacred cows. The business
strategies designed to secure the highest possible returns
will change, but some underlying principles will remain.
The emerging themes from the strategic review are listed in
full to the right, but there are a few worth calling out.
Sustainability must be at the core of everything we do. Healthy,
strong communities and environments underpin sustainable,
profitable dairy farming. We have shown our ability to adapt
farm management systems to work within increasingly
stringent rules and still contribute to healthy lifestyles and a
healthy economy. But more will be required.
Our future is a farming system that uses advancements in
technology and innovation, including adaptations from other
industries, to help protect or enhance the premium qualities
and reputation of our milk.
We are a New Zealand dairy farmers’ Co-op. Maximising the
value of our home milk supply will always be our number
one priority. We believe there’s a premium to be earned from
products backed by our co-operative heritage and provenance,
supplemented by offshore milk components where required to
meet demand.
Our portfolio review has given us the information we need to
simplify our business and concentrate on getting the basics
right. We are already simplifying our portfolio of investments
back to those that target higher value. Within that, there is still
an important role for our base ingredients products where we
already have a competitive advantage.
Achieving our ambition will rely on us maintaining premium
quality right across the supply chain. It starts on farm and flows
through to the premiumisation of the products we make, and
the type of customers we sell to.
It sounds simple. Experience tells us that the best strategies
often are.


John Monaghan
Fonterra Chairman


Key numbers
Forecast Farmgate Milk Price range 2018/2019 season
$
6.30-
$
6.60kgMS
1,510kgMS
m
per
New Zealand milk collection for the 2018/2019 season
Strategic review
– emerging themes
0.3%
A globally competitive
New Zealand dairy Co-op.
Sustainability at the heart
of everything we do.
Prioritise our New Zealand
milk supply and earn a
premium from our heritage
and provenance.
Simplify our global portfolio
to focus on where we have
competitive advantage.
Value rather than volume.
Increase focus on return
on capital.
FONTERRA INTERIM REPORT 2019
03

Resetting the
business
LETTER FROM THE CEO
We are taking the right steps in the three-point plan
to turn our business around. What these interim results
show is that more is clearly needed to increase our
earnings and ensure they’re sustainable. This requires
a fundamental reset of the business.
I want to update you on our progress on the three-
point plan, share our half year results and let you know
our priorities for the rest of the year, which are focused
on the reset.
Three-point plan
The first measure in our three-point plan is to take
stock of the business and re-evaluate every investment,
major asset and partnership to ensure it still meets the
needs of the Co-op. We also have a target to reduce our
debt by $800 million by the end of FY19, as previously
announced, and this is going to require us to divest some
assets. We have identified three assets as no longer
core to our business through our portfolio review. We
are in discussion with interested parties for Tip Top and
DFE Pharma, and actively considering options for our
shareholding in Beingmate.
I understand that we have strong ties with all our
businesses and the people who work in them. This is
only natural for a Co-op with a strong heritage. But we
need to ensure the Co-op is delivering financially for
farmers and their families, and unit holders. Right now,
this means making strategic decisions to let things
go, get our debt down and focus on those assets that
we can scale up and grow value from. We also need to
get comfortable with the idea of constant movement
in and out of our asset portfolio because we need to
continuously review our assets and ensure they are
meeting the changing needs of the Co-op.
The second measure is to get the basics right and
lift the level of financial discipline in the Co-op. This
is about living within our means. We’re on track to
meet our capital expenditure target of $650 million –
over $200 million less than last year – and the tide is
turning on our normalised operating expenses which
we have reduced by $31 million compared to the first
half of last year.
The third measure is to ensure more accurate
forecasting. Our industry is one of the most volatile
in the world and we are dealing with factors that have
a big impact on us but are not in our control – for
example, weather, political uncertainty in markets we
trade with, and the flow on effects of these factors
on milk prices. We can’t predict these but we can
acknowledge them early and respond or adapt quickly.
This is why we’re now talking about ranges for our
forecast milk price. I also have a no-surprises policy and
will quickly share all news, whether it’s good or bad.
First half operating performance
Coming from the loss we made last year, it is pleasing
to see we’re back in the black and have returned to
profitability in the first half of FY19 with a reported
Net Profit After Tax (NPAT) of $80 million.
However, we obviously have plenty more work to do
with a normalised Earnings Before Interest and Tax
(EBIT) of $323 million, down 29% compared to the first
half of last year. Our earnings performance at half year
is not where it should be and this is why we reduced
our full year earnings guidance to 15-25 cents per share
in February.
Miles Hurrell

Chief Executive Officer
FONTERRA INTERIM REPORT 2019
04

Key performance metrics
123%
Net Profit After Tax (NPAT)
$
80 m
Normalised Earnings Before
Interest and Tax (EBIT)
$
323 m
29%
The steady performance of New Zealand Ingredients has
been offset by challenges in Australia Ingredients and this
has seen our total Ingredients EBIT decline by 17% to $461
million. Our Australia Ingredients business continues to
feel the impact of the drought. We can see it clearly in
the decline of Australian milk collections, the aggressive
competition on milk prices, the underutilisation of assets
and tightening margins.
Consumer and Foodservice is tracking behind last year
with an EBIT of $134 million. This part of the business
has been held back by disruptive economic and
geopolitical conditions in Latin America. In addition to
this, demand slowed in China due to higher prices at
the end of FY18 and growing in-market inventory levels
for butter. Our performance in Sri Lanka was impacted
by price constraints.
Priorities for the second half
To increase our earnings and ensure they’re sustainable
we’re going to have to work our existing assets harder and
create more demand for our milk so we have more levers to
pull, especially when times are tough. I’m excited about the
reset of our business which is our focus for the second half
of FY19 and beyond.
It will involve meeting our earnings guidance range of 15-25
cents per share. To shed some light on what it will take to
achieve the mid-point of this range, it assumes Ingredients
has a slightly softer second half but there is a significant
increase in Consumer and Foodservice earnings.
Our forecast increase in our Consumer and Foodservice
performance is based on a strong improvement in our
Foodservice business, in Greater China in particular,
Brazil’s economy improving, which will support stronger
consumer demand for chilled dairy, and Sri Lanka’s price
environment improving.
The second half also involves delivering our three-point plan.
We need to take these steps to firm up our foundations and
strengthen our balance sheet.
But as I’ve already said it’s clear that more is needed
and the second half will also see us continuing the work
on developing a new strategy to support the change
in direction and accelerate the much-needed lift in our
performance. We need to simplify and improve the Co-op
so we can grow value.
Thank you for your ongoing support and commitment.
I am confident that together we can back each other
to deliver the Co-op’s full potential for the benefit of
generations to come.
I’m looking forward to leading this Co-op as we make
this happen.


Miles Hurrell
Chief Executive Officer
Take stock of our business
Three assets identified as
no longer core to our business.
Reducing year end debt by
$800 million.

Get the basics right
Bringing our operating expenses
back to FY17 levels over the next
two years.
Capital expenditure target for
FY19 set at $650 million, down
from $861 million last year.

More accurate forecasting
Providing ranges for our forecast
Farmgate Milk Price.
Quickly sharing good news
and bad news.
Three-point plan
05
FONTERRA INTERIM REPORT 2019

OUR FARMERS
$
21.3m
369
$4.4m
92
Working for farmers
in partnership savings
on power and fuel.
Mazda vehicles were purchased with
a combined discount of $1.3 million.
A further 90 farmers
attended the Understanding
Your Co-operative
programme in the first
half of this year, expanding
their knowledge of the
Co-op’s global, national
and local operations.
Connecting
your Co-op
in Farm Source™ Reward Dollars,
discounts on everyday farming
supplies, and partnership deals
in the first half of the year.
more farms
now have Farm
Environment Plans
(FEPs). This is in
addition to the 1, 011
farms that had FEPs
as at 31 July 2018.
$ 7m
$8.5m
earned in Reward Dollars.
saved by farmers through in store
discounts on farming supplies.
With cross-country farmer workshops now complete,
the Co-op is finalising a new programme set to begin
for the 2019/2020 season that will recognise farmers
who go beyond the minimum standards to produce
high-quality milk, care for their cows, protect the
environment, empower their people and keep the
Co-op strong for generations to come.
Recognising farmers’
good work
FONTERRA INTERIM REPORT 2019
06

240
4,500
farms
90%
Fixed Milk Price was introduced as
a new financial tool to help farmers
manage some of the risk they face from
unpredictable global milk prices. For the
2019/20 season, farmers will have the
opportunity to fix the price they receive
for a portion of their milk supply.
have downloaded the
new Dairy Diary app.
More than 90% of farmers
use our smartphone apps, and
60% connect with the Co-op
using more than one of our
digital channels regularly.
Providing more
financial tools
farmer events
were held across
the country.
26
Sustainable
Dairying Advisors
are now on the
ground working
one-on-one with
farmers to help them
make their farms
more sustainable.
FONTERRA INTERIM REPORT 2019
07

OUR POTENTIAL
Growing Demand
OUR POTENTIAL
Growing Demand
High growth in the
ready-to-drink market
We lifted our high-value milk protein concentrate
sales in the United States as we teamed up with key
customers experiencing high-growth in ready-to-drink
beverages, such as sports drinks.
Around the globe, our teams are working
hard to maximise the value of New Zealand’s
milk for farmers and unitholders.
We’re a demand-led business, and we’re working to grow the
demand for higher-value products with New Zealand milk to
bring value to our Co-op and New Zealand communities. We
always prioritise New Zealand milk and where we can’t meet
a customer’s shopping list with this, we source it globally
through partnerships or establish new supply arrangements.
In the first half of FY19 we
achieved 6% growth in NZMP
sales volumes due to increased
New Zealand milk collections,
availability of product and strong
demand for powders in China and
South East Asia.
50%
growth
Nearly 50% growth in our Foodservice
Beverage House Channel which captures
the rapid global expansion of dairy
beverage trends by putting high-value
products like cream and cream cheese
right at the chef’s table. Off the back
of growth in China, we’ve launched
Beverage House in other key markets
across the wider Asia, the Middle
East and Africa region, and plans are
underway in USA and Chile.
We’ve taken a minor stake in
Motif Ingredients, a US-based
food ingredients company
focused on developing and
commercialising bio-engineered
animal and plant ingredients.
Dairy nutrition will always be at
our core but exploring how we
capture more value from new
types of nutrition is a key part
of our strategy to futureproof
our Co-op.
Complementing
diets
6%
growth
FONTERRA INTERIM REPORT 2019
08

We launched a co-branded
Anchor™ premium fresh
milk range with global
supermarket Carrefour,
following on from our
successful Hema Daily range
with Alibaba. This year we’re
tapping into this growing
market by expanding our
fresh milk products to more
channels and customers,
straight from our China
Farms to consumers.
40% of Australian households
use Western Star™. It’s one of the
most popular brands in Australia,
with a pack selling every second.
It’s now worth over $200 million
in retail sales per year.
The equivalent of more than 2 billion
glasses of milk are drunk in India every
day. That’s why we set up a joint venture
partnership with Future Consumer. We’re
looking forward to our first products hitting
shelves in India this year, in a market worth
$21 billion annually that’s forecast to grow
seven times faster than China.
Clever engineering
to lift capacity
Launching in India
Fresh Milk
in China
A pack selling
every second
Driving high-value
demand
Thanks to some clever engineering at
Hautapu, we expect to lift our Lactoferrin
capacity by 10% to help meet a growing
demand in Asia for one of our highest value
products, commonly referred to as 'pink gold'.
Our third mozzarella plant at
Clandeboye and new cream
cheese plant at Dar1eld are now
up and running. We built these
plants to meet growing demand
for high-value products around
the world, particularly in China.
FONTERRA INTERIM REPORT 1482
09

XXXOUR PERFORMANCE
Group
financial
metrics

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.
.
.
.
.
Ingredients
Consumer and Foodservice
.
.
.
.
.
Sales Volume (LME bn)

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.

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.

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.6

,
.
 GM (millions) GMLME
Normalised Gross Margin

Normalised NPAT ( millions)







Gearing ()
.
.
.
.
.
These charts have been
selected to represent
the half year financial
metrics for Fonterra.
Previously shared
full year metrics, for
example Return on
Capital, will be shared
in our Annual Report.
1 Does not add to total due to inter-group eliminations.
2 Represents total volumes in the period rather than
cumulative changes. It is not meaningful to report
on a cumulative change half year to half year basis.
HALF YEAR FINANCIAL METRICS
FONTERRA INTERIM REPORT 2019
10








-


Reported NPAT ( millions)








Working Capital Days


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 Operating Revenue
 Revenue LME
Reported Revenue ( millions)
,
,
,
,
,
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,
437

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Consumer and Foodservice (LME m)
Advanced Ingredients (LME m)
As  of Total LMEs




Volume to Higher Value

,,
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,
,

Normalised OPEX
,,
,
,
,
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.
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 Normalised OPEX (millions) OPEXLME








CAPEX

( millions)

 EBIT (millions)
 EBITLME
 

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Normalised EBIT

-,



-

-

-
Free Cash Flow ( millions)
3 Comprises Advanced Ingredients and Consumer
and Foodservice products.
4 Includes non-controlling interests.
5 Capital expenditure comprises purchases of property
(less specific disposals where there is an obligation to
repurchase), plant and equipment and intangible assets,
and net purchases of livestock.
FONTERRA INTERIM REPORT 2019
11

We have returned to profitability in the first half of FY19
with a reported Net Profit After Tax (NPAT) of $80 million.
However, with normalised Earnings Before Interest and
Tax (EBIT) of $323 million, down 29% compared to the
same period last year, our earnings performance at half
year is not where it needs to be. This has seen us reduce
our full year earnings guidance from 25-35 cents per share
to 15-25 cents per share.
We have also decided not to pay an interim dividend.
The primary reason for this is that while we are focused
on reducing our debt and strengthening our balance
sheet, it is appropriate that any dividend decisions are
made with a complete picture of our full year earnings
and the outcome of our portfolio review, which will
include the divestment of assets.
1 Percentages as shown in table may not align to the calculation
of percentages based on numbers in the table due to rounding
of reported figures.
2 Represents total external sales.
3 There were no normalisation adjustments for the six months ended
31 January 2019.
4 Includes non-controlling interests.
5 Gearing ratio is calculated as economic net interest bearing debt
divided by total capital. Total Capital is equity excluding the hedge
reserves, plus economic net interest bearing debt.
6 Capital expenditure comprises purchases of property (less specific
disposals where there is an obligation to repurchase), plant and
equipment and intangible assets, and net purchases of livestock.
Group Overview
We have a mixed set of results. The forecast
Farmgate Milk Price looks solid, and New Zealand
Ingredients and Consumer and Foodservice in
Oceania have performed steadily. However, this has
been offset by challenges in our offshore milk pools
and a slow start in our Latin America Consumer and
Greater China Foodservice businesses.
SIX MONTHS ENDED
NZD MILLION31 JAN 201931 JAN 2018CHANGE
1
Volume (LME, billion)
2
10.710.52%
Volume (’000 MT)
2
2,0552,0033%
Normalised sales revenue
3
9,74 69,836(1%)
Normalised gross margin
3
1,5001,659(10%)
Normalised gross
margin percentage
3
15%17%
Reported operating
expenses(1,232)(1,864)(34%)
Normalised operating
expenses
3
(1,232)(1,263)(2%)
Reported EBIT 323(176)284%
Normalised EBIT
3
323458(29%)
Net finance costs(205)(201)2%
Tax (expense)/credit(38)29(230%)
Net profit after tax
4
80(348)123%
Earnings per share (cents)5(22)122%
Dividend per share (cents)–10(100%)
Gearing ratio
5
53%52%
Free cash flow(782)(690)13%
Capital expenditure
6
316346(9%)
OUR PERFORMANCE
FONTERRA INTERIM REPORT 2019
12

Normalised EBIT
$
323m
29%
123%
2%
Net Profit After Tax (NPAT)
Volume
$
80m
10.7
b
LME
FONTERRA INTERIM REPORT 2019
13

Consistent with our seasonal milk collection profile in
New Zealand, our production and inventory built in
the second quarter. This flowed through to strong sales
volumes which were up 2% to 10.7 billion Liquid Milk
Equivalents (LMEs) for the first six months to 31 January
2019 compared to the same period last year.
The sales volume growth was driven by a 6% increase
in sales volume in Ingredients. However, Consumer and
Foodservice sales volumes were down 2% to 2.5 billion
LMEs which was mainly because of a 17% decrease in
Greater China Foodservice sales volume. This was due to
demand slowing at the end of the last quarter of FY18 and
in-market inventory levels growing, especially for butter.
The butter market corrected sharply in the first half of
FY19, and this has helped with clearing excess inventories.
Butter shipments to China started again in the second
half of the year.
Our total normalised sales revenue declined 1% to $9.7
billion despite the strong volume growth. In Ingredients,
normalised sales revenue was up 4% on the back of
higher sales volume but overall prices were lower. In
Consumer and Foodservice, sales revenue was flat on last
year and despite higher product prices being achieved
they were offset by lower sales volumes.
Total normalised gross margin was $1.5 billion, down 10%
which is a $159 million decrease. Our Ingredients’ gross
margins were still strong at 10%, but less than the first half
of last year which was a strong performance. We also had
pricing challenges in a number of markets which impacted
Consumer and Foodservice’s gross margin. For example,
in Latin America we experienced disruptive economic
conditions combined with high input costs, in China higher
butter prices and inventories at the end of FY18 slowed
demand, and in Sri Lanka we faced price constraints.
The increase in operating expenses seen in FY18 and
in the first quarter of FY19 has been reversed with our
normalised operating expenses down 2%. There is a
concerted effort right across the business to reduce
costs and to date, significant reductions have been made
in selling and marketing costs, including a significant
reduction in corporate brand advertising and overheads.
Our normalised EBIT of $323 million was down 29%
compared to the same period last year.
While New Zealand Ingredients delivered a steady
result, challenges in our offshore milk pools have caused
Ingredients’ normalised EBIT to decrease 17% on last year
to $461 million.
Our New Zealand Ingredients business manufactures
five ingredient products that inform the Farmgate Milk
Price range. These are referred to as reference products,
while all other products are referred to as non-reference
products. As the five reference products drive the
cost of milk used to make non-reference products, the
relative price differences and movements of the two
sets of products is an important contributor to our EBIT
performance. Their price relativities were favourable,
but less than the comparable period last year.
In Consumer and Foodservice, the challenges across Latin
America, Greater China and Sri Lanka have resulted in a
30% decline in Consumer and Foodservice normalised
EBIT to $134 million. Oceania was the only region to
report growth in normalised EBIT in Consumer and
Foodservice and this was driven by Australia’s strong
performance predominantly in butter sales to consumers.
Our China Farms reported a total loss of $21 million
which was flat on the same period last year. This is made
up of a direct loss of $17 million, which is a 43% increase
in the loss on the first half of last year, a $5 million loss
in Ingredients and a $1 million profit in our Consumer
and Foodservice business. Continuous rainstorms and
floods in Yutian have impacted milk production and,
consequently, sales volumes from our China Farms so
far this year. We’ve also incurred additional effluent and
animal management costs. Our Ingredients business is
responsible for purchasing the raw milk from China Farms
and selling it for the highest possible price. We have
seen an improvement in the average price Ingredients
has been selling this milk at but it is still less than what
Ingredients buys it for. Our Consumer and Foodservice
business has continued to make small steps to capitalise
on China’s trend towards fresh milk with the launch of a
premium milk range with global supermarket Carrefour.
Group Overview CONTINUED
OUR PERFORMANCE
FONTERRA INTERIM REPORT 2019
14

Our total reported EBIT has increased 284% to $323
million for the first six months of FY19. The significant
increase reflects the two large one-off items in FY18,
being the payment for the Danone arbitration award and
the Beingmate write-down, that significantly impacted
our reported EBIT last year.
Economic net interest bearing debt and gearing are both
typically higher for the Co-operative at the end of the
first six months of the year, reflecting the seasonal profile
of our business. This usual scenario occurred in the first
half of FY19 too but we have not needed as much new
debt in the first half of this year compared to last year.
This is because the lower earnings were offset by reduced
capital expenditure and investments, and, furthermore,
we did not pay a final dividend for FY18, resulting in an
improved net cashflow by 16%.
We started the year with economic net interest bearing
debt at $6.2 billion, up 11% on the previous year’s $5.6
billion. As at 31 January 2019, economic net interest
bearing debt was $7.4 billion and our gearing ratio is 53%.
This is up 0.9% on the same period last year and is due
to the higher debt at the start of the year as opposed
to us needing greater levels of debt during the first half.
We continue to be committed to our target end of year
gearing range of 40-45% and achieving this will require
receiving sale proceeds from the asset sales being
progressed under our portfolio review.
Our working capital days have increased by two days to
82 days, mainly due to higher inventory levels following
the increased collections. This is considered a temporary
increase as we are seeing continuing strong demand for
our Ingredients’ products in the second half of the year.
There is a reduction in the level of capital expenditure
on larger projects this year, which is consistent with
the strong focus on financial discipline and keeping our
capital expenditure within our $650 million target for the
year. This is forecast to be more than $200 million down
on last year. We are on track to meet our target with
capital expenditure sitting at $316 million at half year
and 9% down on the same time last year.
Normalised operating expenses
$
1,232m
2%
FONTERRA ANNUAL REPORT 2019
15

Ingredients
Volume
Sales volumes in New Zealand Ingredients were up.
This was supported by strong collections for the first
half of the 2018/19 milk season, which were up 5% on
last year to 1,083 million kgMS.
In Australia, our sales volumes were also up mainly due
to strong opening inventory levels. However, sales were
constrained due to the 16% decline in milk collections
to 83 million kgMS for the first half of the year. The
Australian dairy industry, including our business, is
experiencing a heavy decline in milk collections due
to severe drought conditions.
In Latin America, Prolesur’s milk collections were down 9%
due to strong competition for farmers’ milk. In China, our
Ingredients business bought 15% less milk from our China
Farms due to lower milk production. This flowed through to
smaller sales volumes from both these offshore milk pools
in the first half compared to the same period last year.
Despite the challenges in our offshore milk pools, total
Ingredients sales volumes were 10.4 billion LME, up 6%
compared to the same period last year. This was due to
the increased New Zealand milk collections and hence
availability of product combined with strong demand for
powders in China and South-East Asia.
The increase in sales volumes has flowed through to $8,196
million of revenue in the first half, up 4% or $290 million
on the same period last year.
At the end of the first half our inventory levels were up
47,000 metric tonnes on last year to 943,000 metric
tonnes primarily due to the higher milk collections.
1 Percentages as shown in table may not align to the calculation
of percentages based on numbers in the table due to rounding
of reported figures.
2 There were no normalisation adjustments for the six months ended
31 January 2019.
3 China raw milk gross margin represents the net benefit/(loss) from the
external sales of milk produced by China Farms and sold to the Ingredients
business in China at an internal raw milk price.
4 Normalised EBIT for Ingredients excludes unallocated costs. There were
no normalisation adjustments for the six months ended 31 January 2019.
Our sales volumes in Ingredients were 10.4 billion LMEs, up
6% in the first half of FY19 compared to the same period last
year, but normalised EBIT declined 17% to $461 million.
We saw Australia Ingredients’ gross margin decline
significantly due to drought conditions, declining milk
collections and high milk prices. This was in addition to
tightening margins in New Zealand Ingredients.
SIX MONTHS ENDED
NZD MILLION31 JAN 201931 JAN 2018CHANGE
1
Volume (LME, billion)10.49. 86%
Volume (’000 MT)1,5561,4418%
Normalised sales revenue
2
8,1967,9034%
Normalised total
gross margin
2
791871(9%)
– New Zealand Ingredients669734(9%)
Reference products345372(7%)
Non-reference products324362(10%)
– Australia Ingredients650(87%)
– China raw milk
3
(5)(9)
– Other gross margin1219626%
Normalised EBIT
4
461558(17%)
Gross margin ($ per MT) –
New Zealand Ingredients
Reference products
($ per MT)373413(10%)
Non-reference products
($ per MT)9151,309(30%)
Ingredients Performance
OUR PERFORMANCE
FONTERRA INTERIM REPORT fi023
16

Value
Overall Ingredients’ normalised gross margin for the first
half was $791 million, down 9% on the first half of FY18.
Total Ingredients' EBIT was $461 million, down 17% or $97
million on the same period last year.
Our New Zealand Ingredients business manufactures five
ingredient products that inform the Farmgate Milk Price
range. These are referred to as reference products, while all
other products are referred to as non-reference products.
As the five reference products are used to price the milk
used to make non-reference products, the relative price
differences and movements of the two sets of products is
an important contributor to EBIT performance.
Although still strong, New Zealand Ingredients’ gross
margin declined 9% in the first half to $669 million. The
gross margin on our reference products was $345 million,
down 7% on the first half of last year. However, the main
contributor to the overall gross margin decline was the
reduced margin in our non-reference products to $324
million, down 10%. This was because of a number of
factors: the increased conversion costs, associated with
bringing new plants online; additional costs of processing
larger volumes of milk; and the reference product prices
declining less than non-reference product prices.
Our Australia Ingredients business had a difficult first
half with gross margins down 87% from $50 million to $6
million. We have continued to increase our milk price in
response to the market and in February we announced
an increase in the milk price to AUD$6.05. Lower milk
collections meant some factories have been underutilised.
In addition to the higher milk prices, this has increased our
cost of goods and significantly impacted gross margins.
In January we repurchased a 51% share in the Darnum
factory in Australia from Beingmate. We structured the
transaction to ensure we did not pay any cash up front
and have entered into a multi-year supply contract for
Beingmate to purchase ingredients from us. By taking full
control of Darnum, we will now be able to look for new
partners, improve efficiencies and produce the product mix
that creates the greatest value. However, in the meantime,
we need to recover all Darnum’s fixed costs and, in the first
half of this year, this was an additional $11.3 million.
Our Ingredients’ gross margin was also impacted by a
$5 million loss in the first half representing the difference
between the domestic milk price and the internal raw milk
price paid to China Farms. This is a 44% improvement on
the first half of last year and reflects a strengthening of
the domestic milk price. We include the China Farms’ sales
volumes and earnings in Ingredients as we use our sales
expertise to maximise sales revenue of the raw milk,
leaving China Farms to focus on efficient milk production.
Margins in “Other gross margin” were up 26% in the first
half to $121 million. The main contributor was an increase in
the profitability of our globally sourced products.
SIX MONTHS ENDED
NZD MILLION
31 JAN 201931 JAN 2018
CHANGE
2
Production Volume (’000 MT)
Reference
products 1,346 1,266 6%
Non-reference
products 485 483 0%
Sales Volume (’000 MT)
3
Reference
products9249003%
Non-reference
products35427728%
Revenue Per MT (NZD)
3
Reference
products4,6584,783(3%)
Non-reference
products5,2945,726(8%)
1 Figures exclude bulk liquid milk. The bulk liquid milk for the
six months ended 31 January 2019 was 34,000 MT (six months
ended 31 January 2018 was 34,000 MT).
2 Percentages as shown in table may not align to the calculation
of percentages based on numbers in the table due to rounding
of reported figures.
3 The way in which Ingredients presents certain inter-segment
sales between Ingredients and Foodservice was revised in
FY19. This increased sales volumes for the six months ended
31 January 2019 by 4,000 MT and 79,000 MT on reference
and non-reference products respectively, and increased sales
revenue by $34 million and $360 million on reference and non-
reference products respectively. This change had no impact
to the reported gross margin for the Ingredients business.
New Zealand Ingredients’ Revenue
and Volume
1

New Zealand Ingredientsʼ Gross Margin
$
669 m
Normalised Total Gross Margin
$
791 m
Normalised Sales Revenue
$
8 ,1 9 6 m
Australia Ingredientsʼ Gross Margin
$
6 m
9%
9%
4%
87%
17
FONTERRA INTERIM REPORT 2019

Consumer and Foodservice
After three years of growth, our Consumer and Foodservice
business had a slower start in the first half of this year with both
volumes and earnings down due to market-specific challenges.
In particular, disruptive economic conditions and high input
costs in Latin America, demand slowing due to higher prices
at the end of FY18 and in-market inventory levels growing for
butter in China, and price constraints in Sri Lanka.
Overall Consumer and Foodservice volumes were down
2% to 2,487 million LMEs but Oceania sales volumes were
up 3% on last year. Total revenue was flat on last year at
$3,470 million with Oceania and Asia revenues up 2% and
3%, respectively, and Greater China and Latin America
down 6% and 1%, respectively.
Our gross margin decreased by 7% to $766 million and
our normalised EBIT decreased by 30% to $134 million due
to a combination of price competition and the economic
conditions in various markets. We reduced Consumer and
Foodservice’s operating expenses by $1 million despite
additional sales, storage and distribution costs.
SIX MONTHS ENDED
NZD MILLION31 JAN 201931 JAN 2018CHANGE
1
Volume (LME, billion)2.52.6(2%)
– Consumer1.51.44%
– Foodservice1.01.1(11%)
Volume (’000 MT) 8888771%
Sales revenue3,4703,4730%
Gross margin766821(7%)
Gross margin percentage22%24%–
– Consumer25%27%–
– Foodservice16%17%–
Normalised EBIT
2
134193(30%)
SIX MONTHS ENDED
NZD MILLION31 JAN 201931 JAN 2018
Normalised EBIT prior year193313
– Volume10(20)
– Price(49)301
– Cost of goods sold(18)(420)
– Operating expenses14
– Other
1
(3)15
Normalised EBIT
2
134193
Normalised EBIT: Key performance driversConsumer and Foodservice Performance
1 Percentages as shown in table may not align to the calculation
of percentages based on numbers in the table due to rounding
of reported figures.
2 There were no normalisation adjustments for the six months ended
31 January 2019.
OUR PERFORMANCE
1 Includes net other operating income, net foreign exchange gains/losses
and share of profit/loss of equity-accounted investees.
2 There were no normalisation adjustments for the six months ended
31 January 2019.
FONTERRA INTERIM REPORT 2019
18

Greater China
Greater China sales volumes were down 13% to 524 million
LMEs in the first half compared to the same period last year
and normalised EBIT was $61 million, down 34%. The main
reason for this was a 17% decrease in Foodservice volumes
due to demand slowing at the end of the last quarter of FY18
and in-market inventory levels growing, especially for butter.
The butter market corrected sharply in the first half of
FY19, clearing excess inventories and enabling China butter
shipments to resume in the second half of the year.
Foodservice’s gross margins were down 21% to $85 million
in the first half of last year. While gross margins were down
for butter, Anchor Food Professionals UHT culinary cream
range and mozzarella continued to perform well.
Consumer gross margins were up 4% to $77 million. This
was mainly due to the lift in margin percentage we have
achieved on Anchor™ UHT and, since bringing it back in
house, Anmum™ in Mainland China. Consumer volumes
were also up 29% to 81 million LMEs. Two consumer
products now hold number one position, based on market
share, in their categories: Anchor™ UHT skim milk and
Anchor™ UHT milk.
Latin America
At the EBIT level, we made a loss of $3 million in Latin
America in the first half. Our sales volumes were up 5%
to 388 million LMEs compared to the same period last
year and gross margin was down 16% to $185 million.
While we grew Soprole sales volumes, we saw a decrease
in Soprole’s gross margins, following a ‘buy local’ marketing
campaign, which impacted the sales of a number of foreign
owned companies, including our own. An increase in milk
input costs in Brazil due to its weak, but now improving,
economy also impacted our gross margin. Brazil was able
to offset some of its gross margin challenges with supply
chain savings.
In Venezuela, volumes were down due to the challenging
socio-economic situation which is restricting consumers’
ability to access basic goods and services, including dairy
products. There are also difficulties accessing the raw
ingredients and packaging materials to run our factories.
This impacted our gross margins.
By region
Greater China Normalised EBIT
Latin America Normalised EBIT
111%
34%
$
61 m
(
$
3 m
)
FONTERRA INTERIM REPORT 2019
19

Asia
Asia’s normalised EBIT was $44 million in the first
half, down 22% on the same period last year. Political
uncertainty in Sri Lanka dampened the overall performance
in Asia, where ongoing price constraints and weakened
currency eroded gross margins by 22%. Our sales volumes
in Asia were also down 4% to 733 million LMEs in the first
half. This was due to a 16% drop in Foodservice volumes as
a result of high levels of inventory already in the markets
following our strong volume sales into the region at the end
of last year.
We grew our Asia consumer business by 5% to 461 million
LMEs. While gross margins were down 3%, Asia continued
to be a profitable region. The exit of a key competitor in
Singapore and Malaysia helped Fernleaf™ increase its
market share in powders, leading gross margins to double
on the back of better pricing. Malaysia performed well with
Consumer continuing to perform strongly and saw strong
growth in adult milk and growth in Anmum™ Essential.
Gross margins in Asia Foodservice were down 13%. This
was due to product mix and absorbing higher input costs
to defend market share in Vietnam and Thailand.
Oceania
We improved our performance in Oceania and delivered a
normalised EBIT of $32 million in the first half, up 110% on
last year. Sales volumes in Oceania were also up 3% to 843
million LMEs on same period last year. Earnings were up in
both Consumer and Foodservice, mainly led by Australia.
In our Consumer business, gross margin increased by
2% to $171 million. In Australia, increased demand, new
business and strategic cost management all helped to drive
growth. Australia’s Consumer volumes grew across all core
categories with market share of 26% in chilled spreads
and 19% in cheese. Western Star butter and spreads is
performing strongly, reaching an annualised retail sales
value of over $200 million.
In Foodservice, our margins were up 15% to $47 million,
with strong results from our Australian business.
While our operational performance in New Zealand
continues to improve, increased competition in cheese
and yoghurt has seen our market share decline in these
categories. New Zealand Consumer and Foodservice was
flat with strong competition impacting volumes but this
was offset by continued improvements in our operational
performance and pricing strategies.
LME (BILLION)NORMALISED EBIT ($M)
1
SIX MONTHS ENDED
31 JAN 201931 JAN 2018CHANGE
2
31 JAN 201931 JAN 2018CHANGE
2
Consumer and Foodservice2.52.6(2%)134193(30%)
Greater China0.50.6(13%)6192(34%)
Asia0.70.8(4%)4456(22%)
Latin America0.40.45%(3)30(111%)
Oceania0.80.83%3215110%
Consumer and Foodservice Regional Performance
OUR PERFORMANCE
Consumer and Foodservice CONTINUED
1 There were no normalisation adjustments for the six months ended 31 January 2019.
2 Percentages as shown in table may not align to the calculation of percentages based on numbers in the table due to rounding of reported figures.
FONTERRA INTERIM REPORT 2019
20

Asia Normalised EBIT
Oceania Normalised EBIT
22%
110%
$
44 m
$
32 m
FONTERRA INTERIM REPORT 2019
21

Our seven farms across two hubs are producing
premium fresh milk for the China ingredients,
foodservice and consumer markets. In the first
six months of FY19 domestic milk prices have
improved and 40% of our milk volumes sold for
more than 4RMB versus 17% in FY18.
China Farms
Volume
We milk more than 31,000 cows on our farming
operations in China on two farm hubs – around 17,000
at Yutian and around 14,000 at Ying.
Sales volumes were down 15% to 113 million LMEs in the
first half of this year compared to the same period last
year. One of the factors contributing to this result was
the continuous rainstorms and floods in Yutian, which
reduced milk production and increased the cost of feed.
Our plan is to shift more milk from our China Farms into
our higher-value products. We have a target of 15% of our
milk volume going into consumer brands and foodservice
products this financial year, up from 5% in FY18.
Value
China Farms reported total losses of $21 million EBIT,
flat on the first half of last year. This is made up of a
$17 million direct loss from China Farms, a further
$5 million loss in Ingredients and a $1 million profit
in Consumer and Foodservice.
The reasons for the loss from the farms, which is a 43%
increase on the loss in the first half of last year, are lower
production volumes, additional effluent and animal
management costs, and increasing feed commodity prices
due to trade disputes between China and the US. Several
initiatives to drive efficiencies on-farm and reduce our cost
base, including our award-winning Eco-Win programme,
cost controls, and feed procurement efficiencies, in
combination with our seasonal lift in production, will
improve performance in the second half.
Our Ingredients business is responsible for purchasing the
raw milk from China Farms and selling it. We have seen an
improvement in the average price Ingredients has been
achieving for this milk. This has seen our loss from China
Farms in Ingredients improve by $4 million. The loss in the
first half for Ingredients was $5 million.
Having farms in China means we can supply premium
fresh milk to customers like Alibaba's Hema Fresh which
stocks our Daily Fresh milk range. We continue to look
for new opportunities and have launched a new Anchor
co-branded fresh milk product with Carrefour in
November, our second consumer fresh product in China.
The product is sold in all 31 Carrefour hypermarkets across
Shanghai and thanks to strong sales was ranked the
number two fresh milk in the last quarter.
OUR PERFORMANCE
FONTERRA INTERIM REPORT 2019
22

Launched our second
premium fresh milk range
with global supermarket
Carrefour in 31 stores
across Shanghai.
15%
Volume
113
m
LME
SIX MONTHS ENDED
NZD MILLION31 JAN 201931 JAN 2018CHANGE
1
Volume
(LME, billion)0.10.1(15%)
Volume
(’000 MT)910(13%)
Sales
revenue 108123(12%)
Normalised
EBIT
2
(17)(12)(43%)
1 Percentages as shown in table may not align to the calculation
of percentages based on numbers in the table due to rounding
of reported figures.
2 There were no normalisation adjustments for the six months
ended 31 January 2019.
FONTERRA INTERIM REPORT 2019
23

Historical Financial Summary
Commodity Prices
JAN 2019JAN 2018JAN 2017JAN 2016JAN 2015
Weighted average commodity prices ($ USD per MT FOB)
Whole Milk Powder
1
2,845 3,087 2,580 2,064 2,813
Skim Milk Powder
1
2,050 2,000 2,135 1,758 2,826
Butter
1
4,460 5,879 3,434 2,731 2,899
Cheese
2
3,5223,8973,5543,0883,931
Group Overview
3
JAN 2019JAN 2018JAN 2017JAN 2016JAN 2015
Income
Volume (liquid milk equivalents, billion)10.6710.4511.7112.5911.70
Volume (000s MT)2,0552,0032,1312,3242,189
Normalised sales revenue ($ million)9,74 69,8369,2328,8389,746
Normalised EBITDA ($ million)
4
607733896951659
Normalised earnings ($ million)
5
323458607665376
Normalised NPAT ($ million)
6
7624238436752
Reported earnings per share0.05(0.22)0.260.250.10
Normalised earnings per share0.050.150.240.230.03
Revenue Margin Analysis
7
EBITDA
8
6.2%7. 4%9.7%10.8%6.8%
EBIT
9
3.3%4.7%6.6%7. 5%3.9%
NPAT
10
0.8%2.5%4.2%4.2%0.5%
Cash flow ($ million)
Operating cash flow
11
(612)(292)(167)924(1,014)
Free cash flow(782)(690)(417)346(1,761)
Net working capital
12
5,4515,3564,8384,6235,378
Capital Measures
Equity excluding hedge reserve ($ million)6,6436,6247,0057,1376,937
Economic net interest-bearing debt ($ million)
13
7,3527,0606,1156,9087,134
Economic debt to debt plus equity ratio
14
52.5%51.6%46.6%49.2%50.7%
Capex ($ million)
15
316346244453763
OUR PERFORMANCE
FONTERRA INTERIM REPORT fi023
24

Ingredients
3, 16
JAN 2019JAN 2018JAN 2017
Sales Volume (000 MT)
17
Reference Products924900973
Non-reference Products354277338
Revenue ($/MT)
17
Reference Products4,6584,7833,873
Non-reference Products5,2945,7265,201
Gross Margin ($/MT)
Reference Products373413253
– Margin8.0%8.6%6.5%
Non-reference Products9151,3091,178
– Margin17.3%22.9%22.6%
Ingredients
7
Volume (liquid milk equivalents, million)
18
10,3969,77710,981
Volume (000s MT)
18
1,5561,4411,543
Revenue ($ million)8,1967,9037,219
Gross margin ($ million)791871792
Gross margin %
19
9.6%11.0%11.0%
Normalised earnings ($ million)
20
461558510
Normalised earnings margin %
21
5.6%7.1%7.1%
FONTERRA INTERIM REPORT 2019
25

Divisional Breakdown – Ingredients
3, 7, 22
JAN 2019JAN 2018JAN 2017
Global Ingredients and Operations
Volume (liquid milk equivalents, million)
18
9,4168,7639,998
Volume (000s MT)
18
1,4571,3421,465
Revenue ($ million)7,3187,0066,607
Gross margin ($ million)722766730
Gross margin %
19
9.9%10.9%11.0%
Fonterra Ingredients Australia
Volume (liquid milk equivalents, million)
18
843836833
Volume (000s MT)
18
175148155
Revenue ($ million)919855727
Gross margin ($ million)65027
Gross margin %
19
0.7%5.9%3.7%
Other and Eliminations
Volume (liquid milk equivalents, million)
18
137178150
Volume (000s MT)
18
(76)(49)(77)
Revenue ($ million)(41)42(115)
Gross margin ($ million)
19
635535
Historical Financial Summary CONTINUED
OUR PERFORMANCE
FONTERRA INTERIM REPORT 2019
26

Regional Breakdown – Consumer and Foodservice
3, 7, 22, 23
JAN 2019JAN 2018JAN 2017
Oceania
Volume (liquid milk equivalents, million)
18
843819912
Volume (000s MT)
18
315309335
Revenue ($ million)1,1081,087988
Gross margin ($ million)218208243
Gross margin %
19
19.6%19.2%24.6%
Normalised earnings ($ million)321558
Normalised earnings margin %
21
2.9%1.4%5.9%
Asia
Volume (liquid milk equivalents, million)
18
733763857
Volume (000s MT)
18
149145156
Revenue ($ million)933905933
Gross margin ($ million)200211288
Gross margin %
19
21.5%23.3%30.9%
Normalised earnings ($ million)4456124
Normalised earnings margin %
21
4.7%6.2%13.3%
Greater China
Volume (liquid milk equivalents, million)
18
524599 583
Volume (000s MT)
18
144129112
Revenue ($ million)688731567
Gross margin ($ million)163182198
Gross margin %
19
23.6%24.9%34.9%
Normalised earnings ($ million)619296
Normalised earnings margin %
21
8.9%12.6%16.9%
Latin America
Volume (liquid milk equivalents, million)
18
388368358
Volume (000s MT)
18
280294305
Revenue ($ million)74 1750751
Gross margin ($ million)185220234
Gross margin %
19
25.0%29.3%31.1%
Normalised earnings ($ million)(3)3035
Normalised earnings margin %
21
(0.4%)4.0%4.7%
Total Consumer and Foodservice
Volume (liquid milk equivalents, million)
18
2,4872,5502,711
Volume (000s MT)
18
888877908
Revenue ($ million)3,4703,4733,239
Gross margin ($ million)766821963
Gross margin %
19
22.1%23.9%29.7%
Normalised earnings ($ million)134193313
Normalised earnings margin %
21
3.9%5.6%9.7%
FONTERRA INTERIM REPORT 2019
27

Regional Breakdown – Consumer
3, 7, 22, 23
JAN 2019JAN 2018JAN 2017
Oceania
Volume (liquid milk equivalents, million)
18
630610685
Volume (000s MT)
18
267260285
Revenue ($ million)846832768
Gross margin ($ million)171168199
Gross margin %
19
20.2%20.1%25.9%
Asia
Volume (liquid milk equivalents, million)
18
461439558
Volume (000s MT)
18
10496111
Revenue ($ million)646587682
Gross margin ($ million)166171227
Gross margin %
19
25.7%29.1%33.3%
Greater China
Volume (liquid milk equivalents, million)
18
816349
Volume (000s MT)
18
454028
Revenue ($ million)199183121
Gross margin ($ million)777460
Gross margin %
19
38.8%40.6%50.1%
Latin America
Volume (liquid milk equivalents, million)
18
334321305
Volume (000s MT)
18
265280288
Revenue ($ million)672693693
Gross margin ($ million)170207216
Gross margin %
19
25.3%29.8%31.2%
Total Consumer
Volume (liquid milk equivalents, million)
18
1,5061,4331,597
Volume (000s MT)
18
680676712
Revenue ($ million)2,3632,2952,263
Gross margin ($ million)584619702
Gross margin %
19
24.7%27.0%31.0%
Historical Financial Summary CONTINUED
OUR PERFORMANCE
FONTERRA INTERIM REPORT 2019
28

Regional Breakdown – Foodservice
3, 7, 22, 23
JAN 2019JAN 2018JAN 2017
Oceania
Volume (liquid milk equivalents, million)
18
213209227
Volume (000s MT)
18
484951
Revenue ($ million)
262255220
Gross margin ($ million)
474144
Gross margin %
19
17.8%16.1%20.1%
Asia
Volume (liquid milk equivalents, million)
18
272323299
Volume (000s MT)
18
454945
Revenue ($ million)
287318252
Gross margin ($ million)
354061
Gross margin %
19
12.1%12.6%24.4%
Greater China
Volume (liquid milk equivalents, million)
18
443535534
Volume (000s MT)
18
998984
Revenue ($ million)
489548446
Gross margin ($ million)
85108137
Gross margin %
19
17.5%19.7%30.8%
Latin America
Volume (liquid milk equivalents, million)
18
544653
Volume (000s MT)
18
161416
Revenue ($ million)
695759
Gross margin ($ million)
151318
Gross margin %
19
21.4%22.8%30.1%
Total Foodservice
Volume (liquid milk equivalents, million)
18
9821,1131,114
Volume (000s MT)
18
208201197
Revenue ($ million)
1,1071,178976
Gross margin ($ million)
181202261
Gross margin %
19
16.4%17.1%26.7%
FONTERRA INTERIM REPORT 2019
29

Operating Performance – China Farms
3, 7
JAN 2019JAN 2018JAN 2017
China Farms
Volume (liquid milk equivalents, million)
18
113132156
Volume (000s MT)
18
91013
Revenue ($ million)108123122
Gross margin ($ million)(8)(8)(6)
Gross margin %
19
(7.0%)(6.1%)(5.3%)
Normalised earnings ($ million)(17)(12)(24)
Normalised earnings margin %
21
(15.7%)(9.8%)(19.7%)
Historical Financial Summary CONTINUED
OUR PERFORMANCE
FONTERRA INTERIM REPORT 2019
30

1 Source: Fonterra Farmgate Milk Price data representing the weighted-average
United States Dollar contract prices of Reference Commodity Products.
2 Source: Oceania Export Series, Agricultural Marketing Service,
US Department of Agriculture.
3 Percentages as shown in table may not align to the calculation
of percentages based on numbers in the table due to rounding of
reported figures.
4 Normalised earnings before interest, tax, depreciation and amortisation
and is calculated as profit for the period before net finance costs, tax,
depreciation and amortisation, including normalised adjustments.
5 Represents segment earnings before unallocated finance income,
finance costs and tax. For the six months ended 31 January 2016, and
2015 Greater China has been disclosed separately in alignment with the
disclosures in the segment note. The six months ended 31 January 2015
has been restated to reflect changes to the organisation of business
units that occurred in the six months ended 31 January 2016.
6 Normalised Net Profit after Tax attributable to equity holders of
the Parent.
7 Includes normalisation adjustments.
8 Normalised EBITDA divided by normalised sales revenue.
9 Normalised EBIT divided by normalised sales revenue.
10 Normalised net profit after tax divided by normalised sales revenue.
11 Cash flow generated by normal business operations, less net taxes paid.
12 Working Capital is calculated as current trade receivables plus
inventories, less current trade payables and accruals. It excludes
amounts owing to suppliers and employee entitlements.
13 Economic net interest-bearing debt reflects total borrowings less
cash and cash equivalents and non-current interest-bearing advances
adjusted for derivatives used to manage changes in hedged risks.
14 Economic debt to debt plus equity ratio is calculated as economic net
interest-bearing debt divided by economic net interest-bearing debt plus
equity excluding hedge reserves.
15 Capital expenditure comprises purchases of property (less specific
disposals where there is an obligation to repurchase), plant and
equipment and intangible assets, and net purchases of livestock.
16 Figures exclude bulk liquid milk. The bulk liquid milk volume for the six
months 31 January 2019 was 34,000 MT of kgMS equivalent (six months
ended 31 January 2018 was 34,000 MT of kgMS equivalent).
17 The way in which Ingredients presents certain inter-segment sales
between Ingredients and Foodservice was revised in FY19. This increased
sales volumes for the six months ended 31 January 2019 by 4,000 MT and
79,000 MT on reference and non-reference products respectively, and
increased sales revenue by $34 million and $360 million on reference
and non-reference products respectively. This change had no impact
to the reported gross margin for the Ingredients business.
18 Includes sales to other strategic platforms.
19 Normalised gross margin divided by normalised sales revenue.
20 Normalised EBIT for Ingredients excludes unallocated costs.
21 Normalised EBIT divided by normalised revenue.
22 Summing of individual numbers from the regional and divisional
breakdown may not add up to the totals in each category due
to rounding.
23 Includes share of Consumer and Foodservice overhead allocations,
the total impact of which is $37 million.
Notes to the Historical Financial Summary
FONTERRA INTERIM REPORT 2019
31

FONTERRA INTERIM REPORT 2019
32
Interim
Financial
Results
OUR FINANCIALS
Directors’ Statement 33
Income Statement 34
Statement of Comprehensive Income 35
Statement of Financial Position 36
Statement of Changes In Equity 37
Cash Flow Statement 38
Basis of Preparation 39
Notes to the Financial Statements 41
Independent Review Report 54
Contents
FOR THE SIX MONTHS
ENDED 31 JANUARY 2019

FONTERRA INTERIM REPORT 2019
33
Directors’ Statement
FOR THE SIX MONTHS ENDED 31 JANUARY 2019
The Directors of Fonterra Co-operative Group Limited (Fonterra) present to Shareholders the financial statements for Fonterra
and its subsidiaries (together the Group) and the Group’s interest in its equity accounted investments for the six months ended
31 January 2019.
The Directors present financial statements for the six months, which fairly present the financial position of the Group and its
financial performance and cash flows for that period.
The Directors consider the financial statements of the Group have been prepared using accounting policies which have been
consistently applied and supported by reasonable judgements and estimates, and that all relevant financial reporting and
accounting standards have been followed.
The Directors believe that proper accounting records have been kept which enable, with reasonable accuracy, the determination
of the financial position of the Group and facilitate compliance of the financial statements with the Financial Markets Conduct
Act 2013.
The Directors consider that they have taken adequate steps to safeguard the assets of the Group, and to prevent and detect
fraud and other irregularities.
The Directors hereby approve and authorise for issue the financial statements for the six months ended 31 January 2019.

For and on behalf of the Board:
JOHN MONAGHAN BRUCE HASSALL
Chairman Director
19 March 2019 19 March 2019

FONTERRA INTERIM REPORT 2019
34
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
NOTES
31 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
AUDITED
Revenue from sale of goods29,7469,83920,438
Cost of goods sold3(8,246)(8,177)(17,279)
Gross profit1,5001,6623,159
Other operating income4552192
Selling and marketing expenses(326)(346)(651)
Distribution expenses(291)(278)(572)
Administrative expenses(439)(461)(873)
Other operating expenses(176)(178)(400)
WPC80 recall costs–(196)(196)
Impairment of equity accounted investees–(405)(405)
Net foreign exchange losses(10)(29)(12)
Share of profit of equity accounted investees20320
Profit/(loss) before net finance costs and tax323(176)262
Finance income81123
Finance costs(213)(212)(439)
Net finance costs(205)(201)(416)
Profit/(loss) before tax118(377)(154)
Tax (expense)/credit(38)29(42)
Profit/(loss) after tax80(348)(196)
Profit/(loss) after tax is attributable to:
Equity holders of the Co-operative76(354)(221)
Non-controlling interests4625
Profit/(loss) after tax80(348)(196)
GROUP $
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
AUDITED
Earnings per share:
Basic and diluted earnings per share0.05(0.22)(0.14)
Income Statement
FOR THE SIX MONTHS ENDED 31 JANUARY 2019
OUR FINANCIALS

FONTERRA INTERIM REPORT 2019
35
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
AUDITED
Profit/(loss) after tax80(348)(196)
Items that may be reclassified subsequently to profit or loss:
Cash flow hedges and other costs of hedging, net of tax204(128)(459)
Net investment hedges and translation of foreign operations, net of tax(58)209188
Hyperinflation gains/(losses) attributable to equity holders14(1)17
Share of equity accounted investees’ movements in reserves–(1)–
Other reserve movements21(1)
Total items that may be reclassified subsequently to profit or loss16280(255)
Items that will not be reclassified subsequently to profit or loss:
Net fair value gains on investments in shares–48
Foreign currency translation (loss)/gain attributable to
non-controlling interests(1)12(2)
Hyperinflation movements attributable to non-controlling interests9–12
Total items that will not be reclassified subsequently to profit or loss81618
Total other comprehensive income/(expense) recognised
directly in equity17096(237)
Total comprehensive income/(expense)250(252)(433)
Total comprehensive income/(expense) is attributable to:
Equity holders of the Co-operative 238(270)(468)
Non-controlling interests121835
Total comprehensive income/(expense)250(252)(433)
Statement of Comprehensive Income
FOR THE SIX MONTHS ENDED 31 JANUARY 2019

FONTERRA INTERIM REPORT 2019
36
GROUP $ MILLION
AS AT
NOTES
31 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
AUDITED
ASSETS
Current assets
Cash and cash equivalents348359446
Trade and other receivables 2,2372,3282,355
Inventories5,0765,0172,917
Tax receivable474147
Derivative financial instruments 16239559
Other current assets 117332141
Total current assets7,9878,4725,965
Non-current assets
Property, plant and equipment6,9176,5556,810
Equity accounted investments 633609615
Livestock278298288
Intangible assets3,1893,2003,227
Deferred tax assets504507583
Derivative financial instruments261196204
Other non-current assets 372324323
Total non-current assets12,15411,68912,050
Total assets20,14120,16118,015
LIABILITIES
Current liabilities
Bank overdraft577161
Borrowings76181,383831
Trade and other payables 2,1212,2422,116
Owing to suppliers2,7342,7371,579
Tax payable353935
Derivative financial instruments10391296
Provisions167914
Other current liabilities7741101
Total current liabilities 5,7616,6195,133
Non-current liabilities
Borrowings77,1366,2295,907
Derivative financial instruments 471466480
Provisions128142130
Deferred tax liabilities995
Other non-current liabilities56811
Total non-current liabilities 7,8006,8546,533
Total liabilities13,56113,47311,666
Net assets6,5806,6886,349
EQUITY
Subscribed equity5,8875,8775,887
Retained earnings1,013961934
Foreign currency translation reserve(422)(343)(364)
Hedge reserves6(63)64(267)
Other reserves42929
Total equity attributable to equity holders of the Co-operative6,4576,5686,219
Non-controlling interests123120130
Total equity6,5806,6886,349
Statement of Financial Position
AS AT 31 JANUARY 2019
OUR FINANCIALS

FONTERRA INTERIM REPORT 2019
37
ATTRIBUTABLE TO EQUITY HOLDERS OF THE CO-OPERATIVE
GROUP $ MILLION
SUBSCRIBED
EQUITY
RETAINED
EARNINGS
FOREIGN
CURRENCY
TRANSLATION
RESERVE
HEDGE
RESERVES
OTHER
RESERVESTOTAL
NON-
CONTROLLING
INTERESTS
TOTAL
EQUITY
As at 1 August 20185,887934(364)(267)296,2191306,349
Profit after tax–76–––76480
Other comprehensive income/(expense)–3(58)204131628170
Total comprehensive income/(expense)–79(58)2041323812250
Transactions with equity holders in their capacity as equity holders:
Acquisition of subsidiaries––––––11
Dividend paid to non-controlling interests––––––(20)(20)
As at 31 January 2019 (unaudited)5,8871,013(422)(63)426,4571236,580
As at 1 August 20175,8581,637(552)19257,1401087,248
(Loss)/profit after tax–(354)–––(354)6(348)
Other comprehensive (expense)/income–(1)209(128)4841296
Total comprehensive (expense)/income–(355)209(128)4(270)18(252)
Transactions with equity holders in their capacity as equity holders:
Dividend paid to equity holders of the Co-operative–(321)–––(321)–(321)
Equity instruments issued19––––191534
Dividend paid to non-controlling interests––––––(21)(21)
As at 31 January 2018 (unaudited)5,877961(343)6496,5681206,688
As at 1 August 20175,8581,637(552)19257,1401087,248
(Loss)/profit after tax–(221)–––(221)25(196)
Other comprehensive income/(expense)––188(459)24(247)10(237)
Total comprehensive (expense)/income–(221)188(459)24(468)35(433)
Transactions with equity holders in their capacity as equity holders:
Dividend paid to equity holders of the Co-operative–(482)–––(482)–(482)
Equity instruments issued29––––291544
Dividend paid to non-controlling interests––––––(28)(28)
As at 31 July 2018 (audited)5,887934(364)(267)296,2191306,349
Statement of Changes in Equity
FOR THE SIX MONTHS ENDED 31 JANUARY 2019

FONTERRA INTERIM REPORT 2019
38
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
AUDITED
Cash flows from operating activities
Profit/(loss) before net finance costs and tax323(176)262
Adjustments for:
Foreign exchange (gains)/losses(11)127239
Depreciation and amortisation284275544
Impairment of equity accounted investees–405405
Other (7)265
2668331,193
(Increase)/decrease in working capital:
Inventories(2,137)(2,419)(313)
Trade and other receivables19375
Amounts owing to suppliers9781,273277
Payables and accruals3422798
Other movements (61)842
Total(1,167)(908)179
Cash flows from operations(578)(251)1,634
Net taxes paid(34)(41)(86)
Net cash flows from operating activities(612)(292)1,548
Cash flows from investing activities
Cash was provided from:
–Proceeds from disposal of property, plant and equipment31426
–Proceeds from sale of livestock185879
–Proceeds from sale of investments867
–Co-operative support loans177138149
–Other cash inflows216
Cash was applied to:
–Acquisition of property, plant and equipment (320)(400)(858)
–Acquisition of livestock (including rearing costs)(20)(24)(45)
–Acquisition of intangible assets(38)(74)(147)
–Advances to and investments in equity accounted investees(2)(92)(151)
–Other cash outflows(26)(15)(14)
Net cash flows from investing activities(170)(398)(948)
Cash flows from financing activities
Cash was provided from:
–Proceeds from borrowings2,9052,8114,334
–Interest received7918
Cash was applied to:
–Interest paid(212)(199)(446)
–Repayment of borrowings(1,874)(1,589)(4,077)
–Dividends paid to non-controlling interests(20)(21)(27)
–Dividends paid to equity holders of the Co-operative–(302)(453)
–Other cash outflows(1)(58)(74)
Net cash flows from financing activities805651(725)
Net increase/(decrease) in cash23(39)(125)
Opening cash 285382382
Effect of exchange rate changes(17)928
Closing cash 291352285
Reconciliation of closing cash balances to the statement of financial position:
Cash and cash equivalents348359446
Bank overdraft(57)(7)(161)
Closing cash291352285
Cash Flow Statement
FOR THE SIX MONTHS ENDED 31 JANUARY 2019
OUR FINANCIALS

FONTERRA INTERIM REPORT 2019
39
Basis of Preparation
FOR THE SIX MONTHS ENDED 31 JANUARY 2019
a) General information
Fonterra Co-operative Group Limited (Fonterra, the Company
or the Co-operative) is a co-operative company incorporated
and domiciled in New Zealand. Fonterra is registered under the
Companies Act 1993 and the Co-operative Companies Act 1996,
and is an FMC Reporting Entity under the Financial Markets
Conduct Act 2013. Fonterra is also required to comply with the
Dairy Industry Restructuring Act 2001.
These interim financial statements, as at and for the six months
ended 31 January 2019, comprise Fonterra and its subsidiaries
(together referred to as the Group) and the Group’s interest in
its equity accounted investees after adjustments to align to the
accounting policies of the Group.
The Group operates predominantly in the international dairy
industry. The Group is primarily involved in the collection,
manufacture and sale of milk and milk-derived products and
in fast-moving consumer goods and foodservice businesses.
b) Basis of preparation
These interim financial statements have been prepared
in accordance with International Accounting Standard 34:
Interim Financial Reporting and New Zealand Equivalent
to International Accounting Standard 34: Interim Financial
Reporting. They have also been prepared in accordance with
Generally Accepted Accounting Practice (GAAP) applicable
to for-profit entities. These interim financial statements are
unaudited, and should be read in conjunction with the
financial statements for the year ended 31 July 2018.
These interim financial statements are presented in
New Zealand dollars ($ or NZD), which is Fonterra’s functional
currency, and rounded to the nearest million, except where
otherwise stated.
The preparation of interim financial statements requires
management to make judgements, estimates, and assumptions
that affect the application of accounting policies and the
reported amounts of assets and liabilities, income and expenses.
Actual results may differ from these estimates. In preparing
these interim financial statements, the significant judgements
made by management in applying the Group’s accounting
policies and key sources of estimation uncertainty were the
same as those applied to the financial statements for the year
ended 31 July 2018. Further details on specific key estimates
and judgments can be found in Note 8.
Impact of a forecast Farmgate Milk Price on the
31 January 2019 interim financial statements
The Farmgate Milk Price is the average price paid by Fonterra
in a season, which is the 12 months ending 31 May, for each
kilogram of milk solids (kgMS) supplied by farmer shareholders
under Fonterra’s standard terms of supply. The Farmgate Milk
Price for a season is finalised after the end of that milk season.
Global dairy commodity prices that inform the Farmgate Milk
Price revenue are the most significant driver of the level of
each season’s Farmgate Milk Price.
Within the forecast Farmgate Milk Price, the majority of
the milk sourced up until 31 January 2019 is contracted for
sale at hedged NZD/USD exchange rates. This means that
the Farmgate Milk Price revenue that would be earned from
the milk sourced during the period ended 31 January 2019 is
largely known.
The full season forecast Farmgate Milk Price remains uncertain.
This is because the Farmgate Milk Price revenue that will be
earned from milk supplied during the remainder of the milk
season ending 31 May 2019 is impacted by future global dairy
commodity prices. Future global dairy commodity prices in USD
are uncertain as they are influenced by global supply and demand
dynamics, and their conversion to NZD is uncertain because the
conversion of these USD selling prices to NZD depends on the
NZD/USD exchange rate and associated hedging.

FONTERRA INTERIM REPORT 2019
40
Basis of Preparation CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2019
OUR FINANCIALS
C) Accounting policies
The same accounting policies are followed in these interim
financial statements as were applied in the Group’s financial
statements for the year ended 31 July 2018 with the exception
of the impact of adopting NZ IFRS 15 Revenue from Contracts
with Customers.
Impact of adopting NZ IFRS 15 Revenue from Contracts
with Customers
Fonterra adopted NZ IFRS 15 from 1 August 2018.
Fonterra is not materially impacted by the adoption of NZ IFRS
15 for the following reasons:
–Fonterra has historically recognised revenue at the time the
risks and rewards of ownership of the products pass to the
customer. Management has determined that the customer
obtains control of the products at the same time as risks and
rewards of ownership pass to the customer. The timing of
revenue recognition is therefore unchanged by the adoption
of NZ IFRS 15.
–In relation to the contract price, management has not
identified any material changes to the accounting for rebates,
discounts, or other items of variable consideration.
On transition to NZ IFRS 15 Fonterra has taken advantage of the
practical expedient to only apply NZ IFRS 15 to contracts that
were not completely fulfilled at 1 August 2018.
Accounting standards issued but not yet effective
NZ IFRS 16 Leases
Fonterra has established a project to ensure operational
readiness for the adoption of NZ IFRS 16 on 1 August 2019.
During the six months to 31 January 2019 Fonterra has
progressed with collecting and validating the Groups’ portfolio
of leases, commenced implementation of an IT system solution
for lease accounting under NZ IFRS 16, and continued to assess
the changes required to internal processes and controls.
Fonterra has elected to utilise the modified retrospective
transition approach. This will require an adjustment to equity
as at 1 August 2019, however prior year comparatives will not
be restated. Fonterra has also chosen to retain the current
accounting treatment for short-term leases and low value assets.
The adoption of NZ IFRS 16 is not expected to have a significant
impact on Fonterra’s net profit after tax. However, there will be
an increase in profit before net finance costs and tax, because a
portion of the lease costs currently reported in cost of goods
sold or operating expenses will be recorded as finance costs.
On the statement of financial position, many of Fonterra’s
current operating leases will be recognised as ‘right of use
assets’ and a lease liability.
There are no other new or amended standards that are issued
but not yet effective that are expected to have a material
impact on the Group.
d) Assets portfolio review
During the period, Fonterra announced it is undertaking an
asset portfolio review. This is a full strategic review of Fonterra’s
assets, investments and joint venture arrangements. While the
review will take time to complete the following progress has
been made to date.
Beingmate arrangements
In January 2019 Fonterra regained full ownership of the
Darnum manufacturing plant in Australia, unwinding
the joint arrangement with Beingmate, and renegotiating
commercial terms for product purchases by Beingmate.
The transaction price of $126 million (AU$120 million)
represents the 51 per cent share of the Darnum manufacturing
plant and associated working capital balances. No cash
payments have been made in the period to 31 January 2019.
Amounts owed to Fonterra by Beingmate of $64 million (AU$61
million) have been settled against the transaction price. As at 31
January 2019 Fonterra has an amount payable to Beingmate of
$62 million (AU$59 million) in relation to this transaction. The
amount payable is unsecured and accrues interest at a market
interest rate. It is repayable in four equal annual instalments.
The arrangement with Beingmate also includes an off-setting
supply agreement of the same timeframe, that commits
Beingmate to purchase minimum volumes of product from
the Darnum plant.
Status as at 31 January 2019
The review has identified other investments, including Tip Top,
Fonterra’s ice cream business in New Zealand, that will be
considered for their strategic alignment, capital requirements
and future earnings potential. As at 31 January 2019, Fonterra is
in the process of investigating a range of options for these
investments, no decisions have been made.
Progress since 1 February 2019
During the period since 1 February 2019 Fonterra has continued to
investigate a range of options for certain investments, including
those noted above and DMV Fonterra Excipients GmbH & Co KG.
No decisions have been made in relation to those investments.
Fonterra has made the decision to sell its consumer and
foodservice business operations in Venezuela. The Venezuelan
economy has been in a period of political and economic
instability resulting in uncertainties over the exchange and
inflation rates. The overall impact arising from the transaction,
which includes the derecognition of assets and liabilities relating
to this business (including the foreign currency translation
reserve) is currently being estimated.

FONTERRA INTERIM REPORT 2019
41
PERFORMANCE
1 SEGMENT REPORTING
a) Operating segments
Operating segments reflect the way financial information is regularly reviewed by the Fonterra Management Team (FMT).
The measure of profit or loss used by the FMT to evaluate the underlying performance of operating segments is normalised
segment earnings before net finance costs and tax. To enable underlying segment performance to be compared between
reporting periods a normalised segment income statement has been presented.
Transactions between segments are based on estimated market prices, with the exception of the sale of milk from China Farms
to Ingredients. The transfer price used for these transactions is an amount reflective of long-term milk price trends in China.
Unallocated costs represent corporate costs including Corporate Affairs and Group services.
REPORTABLE SEGMENTDESCRIPTION
Ingredients Represents the collection, processing and distribution of the ingredients business in New Zealand,
global sales and marketing of New Zealand and non-New Zealand ingredients products,
Fonterra Farm Source™ stores, the ingredients business in Australia (including Milk Supply
and Manufacturing) and the ingredients business in South America.
Consumer and foodservice
–OceaniaRepresents the fast-moving consumer goods (FMCG) and foodservice businesses in New Zealand
and Australia (including export to the Pacific Islands).
–AsiaRepresents FMCG and foodservice businesses in Asia (excluding Greater China), Africa and the
Middle East.
–Greater ChinaRepresents FMCG and foodservice businesses in Greater China.
–Latin AmericaRepresents FMCG and foodservice businesses in Latin America and the Caribbean.
China Farms Represents farming operations in China.
Notes to the Financial Statements
FOR THE SIX MONTHS ENDED 31 JANUARY 2019

FONTERRA INTERIM REPORT 2019
42
a) Operating segments
GROUP $ MILLION
31 JANUARY 2019 (UNAUDITED)
INGREDIENTSCONSUMER AND FOODSERVICE
CHINA
FARMS
UNALLOCATED
COSTS AND
ELIMINATIONSTOTAL
OCEANIAASIA
GREATER
CHINA
LATIN
AMERICATOTAL
Normalised segment
income statement
External revenue6,3761,0339126867393,370––9,746
Inter-segment revenue1,820752122100108(2,028)–
Revenue from sale of goods8,1961,1089336887413,470108(2,028)9,746
Cost of goods sold(7,405)(890)(733)(525)(556)(2,704)(116)1,979(8,246)
Segment gross profit791218200163185766(8)(49)1,500
Operating expenses(387)(190)(153)(107)(189)(639)(12)(194)(1,232)
Net other operating income354253146(10)45
Net foreign exchange gains/(losses)2–(5)–(4)(9)1(4)(10)
Share of profit/(loss) of equity
accounted investees20–––22(4)220
Normalised segment earnings
before net finance costs and tax
1
461324461(3)134(17)(255)323
Finance income8
Finance costs(213)
Profit before tax118
Other segment information:
Volume
2
(liquid milk equivalents, billion)10.400.840.730.520.392.480.11(2.32)10.67
Volume
2
(metric tonnes, thousand)1,5563151491442808889(398)2,055
Depreciation and amortisation
($ million)(205)(14)(6)(1)(16)(37)(13)(29)(284)
Capital expenditure
3
($ million)251223–1641618316
Equity accounted investments
($ million)320––214102247910633
1 There were no normalisation adjustments for the six months ended 31 January 2019.
2 Includes sales to other strategic platforms. Total column represents total external sales.
3 Capital expenditure comprises purchases of property (less specific disposals where there is an obligation to repurchase), plant and equipment
and intangible assets, and net purchases of livestock.
Notes to the Financial Statements CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2019
OUR FINANCIALS

FONTERRA INTERIM REPORT 2019
43
a) Operating segments continued
GROUP $ MILLION
31 JANUARY 2018 (UNAUDITED)
INGREDIENTSCONSUMER AND FOODSERVICE
CHINA
FARMS
UNALLOCATED
COSTS AND
ELIMINATIONSTOTAL
OCEANIAASIA
GREATER
CHINA
LATIN
AMERICATOTAL
Normalised segment
income statement
External revenue
1
6,4481,0029057317503,388––9,836
Inter-segment revenue1,45585–––85123(1,663)–
Revenue from sale of goods7,9031,0879057317503,473123(1,663)9,836
Cost of goods sold(7,032)(879)(694)(549)(530)(2,652)(131)1,638(8,177)
Segment gross profit871208211182220821(8)(25)1,659
Operating expenses(391)(192)(154)(98)(196)(640)(14)(218)(1,263)
Net other operating income321273138(1)52
Net foreign exchange gains/(losses)15(2)(3)11(3)4(37)(21)
Share of profit/(loss) of equity
accounted investees31–––22(2)–31
Normalised segment earnings
before net finance costs and tax55815569230193(12)(281)458
Normalisation adjustments:
Reduction in the carrying value
of investment in Beingmate
2
–––(433)–(433)––(433)
WPC80 recall costs
3
(196)–––––––(196)
Time value of options
4
(5)–––––––(5)
Segment earnings before
net finance costs and tax3571556(341)30(240)(12)(281)(176)
Finance income11
Finance costs(212)
Loss before tax(377)
Other segment information:
Volume
5
(liquid milk equivalents, billion)9.780.820.760.600.372.550.13(2.01)10.45
Volume
5
(metric tonnes, thousand)1,44130914512929487710(325)2,003
Depreciation and amortisation
($ million)(198)(15)(7)(1)(14)(37)(14)(26)(275)
Capital expenditure
6
($ million)26826511648(30)60346
Equity accounted investments
($ million)275––24410254737609
1 Total Group revenue from the sale of goods is $9,839 million, the difference of $3 million relates to the normalisation of time value of options.
2 Of the $433 million normalisation adjustment, $405 million relates to the impairment of equity accounted investees and $28 million to the share
of losses of Beingmate.
3 The $196 million normalisation adjustment relates to operating expenses.
4 Of the $5 million normalisation adjustment, $3 million relates to revenue offset by $8 million of net foreign exchange losses.
5 Includes sales to other strategic platforms. Total column represents total external sales. Volume (MT’s and LME’s) have been restated to reflect
consistently internal transactions between segments. There was no impact on gross margin or EBIT from this restatement.
6 Capital expenditure comprises purchases of property (less specific disposals where there is an obligation to repurchase), plant and equipment
and intangible assets, and net purchases of livestock.
Notes to the Financial Statements CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2019

FONTERRA INTERIM REPORT 2019
44
a) Operating segments continued
GROUP $ MILLION
31 JULY 2018 (AUDITED)
INGREDIENTSCONSUMER AND FOODSERVICE
CHINA
FARMS
UNALLOCATED
COSTS AND
ELIMINATIONSTOTAL
OCEANIAASIA
GREATER
CHINA
LATIN
AMERICATOTAL
Normalised segment
income statement
External revenue
1
13,4852,0011,8491,5641,5326,946––20,431
Inter-segment revenue2,82115816–2176262(3,259)–
Revenue from sale of goods16,3062,1591,8651,5641,5347,122262(3,259)20,431
Cost of goods sold(14,834)(1,726)(1,409)(1,229)(1,075)(5,439)(257)3,251(17,279)
Segment gross profit1,4724334563354591,6835(8)3,152
Operating expenses(808)(373)(289)(183)(368)(1,213)(31)(444)(2,496)
Net other operating income11181814246422(5)192
Net foreign exchange gains/(losses)50(1)(9)(1)(2)(13)–(37)–
Share of profit/(loss) of equity
accounted investees54–––44(5)154
Normalised segment earnings
before net finance costs and tax87967176165117525(9)(493)902
Normalisation adjustments:
Reduction in the carrying value
of investment in Beingmate
2
–––(439)–(439)––(439)
WPC80 recall costs
3
(196)–––––––(196)
Time value of options
4
(5)–––––––(5)
Segment earnings before
net finance costs and tax67867176(274)11786(9)(493)262
Finance income23
Finance costs(439)
(Loss)/profit before tax(154)
Other segment information:
Volume
5
(liquid milk equivalents, billion)20.521.661.551.410.755.370.27(3.96)22.20
Volume
5
(metric tonnes, thousand)2,9866232982665781,76522(650)4,123
Depreciation and amortisation
($ million)(389)(26)(13)(2)(29)(70)(26)(59)(544)
Capital expenditure
6
($ million)6446217261142(25)100861
Equity accounted investments
($ million)308––20410214858615
Capital employed
7
($ million)9,15651595(65)332877788(1,269)9,552
1 Total Group revenue from the sale of goods is $20,438 million. The difference of $7 million relates to the normalisation of time value of options.
2 Of the $439 million normalisation adjustment, $405 million relates to impairment of equity accounted investees and $34 million relates to Fonterra’s
equity accounted share of Beingmate’s losses.
3 The $196 million normalisation adjustment relates to operating expenses.
4 Of the $5 million normalisation adjustment, $7 million relates to revenue offset by $12 million of net foreign exchange losses.
5 Includes sales to other strategic platforms. Total column represents total external sales. Volume (MT’s and LME’s) have been restated to reflect
consistently internal transactions between segments. There was no impact on gross margin or EBIT from this restatement.
6 Capital expenditure comprises purchases of property (less specific disposals where there is an obligation to repurchase), plant and equipment and
intangible assets, and net purchases of livestock.
7 Capital employed is calculated as the average for the period of: net assets excluding net-interest bearing debt, deferred tax balances and brands,
goodwill and equity accounted investments.
Notes to the Financial Statements CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2019
OUR FINANCIALS

FONTERRA INTERIM REPORT 2019
45
b) Geographical revenue
GROUP $ MILLION
CHINA
REST
OF ASIAAUSTRALIA
NEW
ZEALAND
UNITED
STATESEUROPE
LATIN
AMERICA
REST OF
WORLDTOTAL
Geographical segment external revenue:
Six months ended 31 January 2019
(unaudited)2,2082,6818771,0823763851,0471,0909,746
Six months ended 31 January 2018
(unaudited)2,0942,6508601,0213213371,0951,4619,839
Year ended 31 July 2018 (audited)3,9805,6841,8362,0767936812,2723,11620,438
Revenue is allocated to geographical segments on the basis of the destination of the goods sold.
c) Non-current assets
GROUP $ MILLION
INGREDIENTS OCEANIAASIA
GREATER
CHINA
LATIN
AMERICA
TOTAL
GROUP
NEW
ZEALAND
REST OF
WORLD
NEW
ZEALANDAUSTRALIA
Geographical segment non-current assets:
As at 31 January 2019 (unaudited)5,5224971,3301,0348171,1141,07511,389
As at 31 January 2018 (unaudited)5,4094241,3008687741,1671,04410,986
As at 31 July 2018 (audited)5,5384671,3249288271,1271,05211,263
GROUP $ MILLION
AS AT
31 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
AUDITED
Reconciliation of geographical segment’s non-current assets to total non-current assets:
Geographical segment non-current assets 11,38910,98611,263
Deferred tax assets504507583
Derivative financial instruments 261196204
Total non-current assets12,15411,68912,050
Notes to the Financial Statements CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2019

FONTERRA INTERIM REPORT 2019
46
2 REVENUE FROM SALE OF GOODS
a) Ingredients revenue
Revenue from the Ingredients business, a reportable segment, is disaggregated by division. Revenue attributable to Global
Ingredients and Operations is further disaggregated primarily into revenue from reference and non-reference products.
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
UNAUDITED
Reference products
1
4,3044,3058,703
Non-reference products
2
1,8741,5863,495
Other
3
1,1411,1152,366
Global Ingredients and Operations7,3197,00614,564
Fonterra Ingredients Australia9198551,877
Other(42)42(135)
Total revenue 8,1967,90316,306
1 Represents revenue from the sale of five ingredient products that inform the Farmgate Milk Price, and that are manufactured using New Zealand-sourced
milk. Currently these five products are whole milk powder, skim milk powder, butter milk powder, butter and anhydrous milk fat (otherwise known as
‘reference products’).
2 Represents revenue from the sale of all ingredient products, except reference products, that are manufactured using New Zealand-sourced milk.
3 ‘Other’ primarily consists of Global Sourcing revenue, which is revenue from the sale of ingredient products manufactured using non-New Zealand-sourced milk.
b) Consumer and Foodservice revenue
Revenue attributable to the consumer and foodservice businesses is disaggregated by region. Geographic regions are consistent
with the reportable segments for Consumer and Foodservice as a whole.
CONSUMERFOODSERVICETOTAL CONSUMER AND FOODSERVICE
SIX MONTHS ENDEDYEAR ENDEDSIX MONTHS ENDEDYEAR ENDEDSIX MONTHS ENDEDYEAR ENDED
GROUP $ MILLION
31 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
UNAUDITED
31 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
UNAUDITED
31 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
AUDITED
Oceania8468321,6442622555151,1081,0872,159
Asia6465871,2382873186279339051,865
Greater China1991833434895481,2216887311,564
Latin America6726931,41869571167417501,534
Total revenue 2,3632,2954,6431,1071,1782,4793,4703,4737,122
Notes to the Financial Statements CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2019
OUR FINANCIALS

FONTERRA INTERIM REPORT 2019
47
3 COSTS OF GOODS SOLD
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
AUDITED
Opening inventory2,9172,5932,593
Cost of milk:
–New Zealand sourced6,3776,58010,115
–Non-New Zealand sourced5997371,245
Other costs3,4293,2846,243
Closing inventory(5,076)(5,017)(2,917)
Total cost of goods sold8,2468,17717,279
DEBT AND EQUITY
4 SUBSCRIBED EQUITY INSTRUMENTS
Co-operative shares, including shares held within the Group
Co-operative shares may only be held by a shareholder supplying milk to the Company (farmer shareholder), by former farmer
shareholders for up to three seasons after cessation of milk supply, or by Fonterra Farmer Custodian Limited (the Custodian).
Voting rights in the Company are dependent on milk supply supported by Co-operative shares.¹
CO-OPERATIVE SHARES
(THOUSANDS)
Balance at 1 August 2018 1,611,923
Shares issued under the Farm Source Rewards scheme69
Balance at 31 January 2019 (unaudited)1,611,992
Balance at 1 August 20171,606,933
Shares issued under the dividend reinvestment plan²3,309
Balance at 31 January 2018 (unaudited)1,610,242
Balance at 1 August 20171,606,933
Shares issued under the dividend reinvestment plan²4,990
Balance at 31 July 2018 (audited)1,611,923
1 These rights are also attached to vouchers when backed by milk supply (subject to limits).
2 Total value of $19 million and $29 million for periods ending 31 January 2018 and 31 July 2018 respectively.
The rights attaching to Co-operative shares are set out in Fonterra’s Constitution, available in the ‘About Us/Governance’ section
of Fonterra’s website.
Notes to the Financial Statements CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2019

FONTERRA INTERIM REPORT 2019
48
Units in the Fonterra Shareholders’ Fund
The Custodian holds legal title of Co-operative shares of which the Economic Rights have been sold to the Fund on trust for the
benefit of the Fund. At 31 January 2019, 110,573,858 Co-operative shares (31 January 2018: 137,366,342; 31 July 2018: 111,423,603)
were legally owned by the Custodian, on trust for the benefit of the Fund.
UNITS
(THOUSANDS)
Balance at 1 August 2018111,424
Units issued14,923
Units surrendered(15,773)
Balance at 31 January 2019 (unaudited)110,574
Balance at 1 August 2017126,047
Units issued19,504
Units surrendered(8,185)
Balance at 31 January 2018 (unaudited)137,366
Balance at 1 August 2017126,047
Units issued20,946
Units surrendered(35,569)
Balance at 31 July 2018 (audited)111,424
The rights attaching to units are set out in the Fonterra Shareholders’ Fund 2018 Annual Report, available in the ‘Investors/Fonterra
Shareholders’ Fund’ section of Fonterra’s website.
5 DIVIDENDS PAID
No dividend was paid during the six months ended 31 January 2019.
The Dividend Reinvestment Plan applied to all dividends in the table below.
$ MILLION
SIX MONTHS ENDEDYEAR ENDED
DIVIDENDS
31 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
AUDITED
2018 Interim dividend – 10 cents per share¹––161
2017 Final dividend – 20 cents per share²–321321
1 Declared on 20 March 2018 and paid on 20 April 2018 to all Co-operative shares on issue at 6 April 2018.
2 Declared on 23 September 2017 and paid on 20 October 2017 to all Co-operative shares on issue at 9 October 2017.
6 EQUITY RESERVES
a) Hedge reserves
The hedge reserves predominately relate to cash flow hedges, which are used as part of the Group’s risk management strategy
to manage variability in cash flows due to changes in foreign currency and interest rates.
The Group uses cash flow hedges to manage its foreign currency exposure on forecast foreign currency sales transactions and borrowings
denominated in foreign currencies.
A cash flow hedge provides certainty of cash flows. Gains or losses relating to the difference between the hedge rate and the current market
rate are recognised in the hedge reserve. They are transferred to profit or loss when the forecast transaction occurs.
The foreign currency forward contracts, foreign currency options and interest rate swaps used to hedge the forecast cash flows are recognised
on the balance sheet as ‘Derivative financial instruments’.
b) Foreign currency translation reserve (‘FCTR’)
The foreign currency translation reserve primarily relates to the translation of Fonterra’s net investments in overseas businesses from their
local currency to New Zealand dollars.
Foreign currency gains / losses on the translation of the overseas business are deferred in the foreign currency translation reserve.
The accumulated amount attributed to an overseas business is transferred to profit or loss, as part of the gain or loss in sale, when the
overseas business is sold.
Movements in the foreign currency translation reserve relate to changes in foreign currency exchange rates from the beginning
of the period to the end of the period, and changes in the net assets of the overseas businesses.
The foreign currency translation reserve of ($422) million includes balances relating to, the Group’s consumer & foodservice operations
in Venezuela ($126 million), Consumer and Foodservice business in Brazil ($92 million), and the investment in Beingmate ($58 million).
Notes to the Financial Statements CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2019
OUR FINANCIALS

FONTERRA INTERIM REPORT 2019
49
7 BORROWINGS
Economic net interest-bearing debt
Economic net interest-bearing debt reflects the effect of debt hedging in place at balance date.
GROUP $ MILLION
AS AT
31 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
AUDITED
Net interest-bearing debt position
Total borrowings7,7547,6126,738
Cash and cash equivalents(348)(359)(446)
Interest-bearing advances(171)(323)(332)
Bank overdraft577161
Net interest-bearing debt7,2926,9376,121
Value of derivatives used to manage changes in hedged risks
on debt instruments6012378
Economic net interest-bearing debt7,3527,0606,199
Total borrowings in the table above are represented by:
GROUP $ MILLION
AS AT
31 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
AUDITED
Commercial paper354239304
Bank loans1,9471,7631,128
Finance leases¹72134131
Capital notes²353535
NZX-listed bonds600500500
Medium-term notes4,7464,9414,640
Total borrowings³7,7547,6126,738
Included within the statement of financial position as follows:
Total current borrowings6181,383831
Total non-current borrowings7,1366,2295,907
Total borrowings7,7547,6126,738
1 Finance leases are secured over the related item of property, plant and equipment.
2 Capital notes are unsecured subordinated borrowings.
3 All other borrowings are unsecured and unsubordinated.
Notes to the Financial Statements CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2019

FONTERRA INTERIM REPORT 2019
50
LONG-TERM ASSETS
8 KEY ESTIMATES AND JUDGEMENTS
Judgements and estimates that have the most significant effect on the amounts recognised in the interim financial statements
for the period ended 31 January 2019 are those used to assess the recoverable amounts of the following assets: the investment
in Beingmate, the China Farms assets and the goodwill attributed to the consumer and foodservice businesses in New Zealand
and Brazil.
The key assumptions used in determining the recoverable amounts of these assets at 31 July 2018 have been re-assessed at
31 January 2019 to reflect any changes in circumstances during the period.
a) Investment in Beingmate Baby & Child Food Co., Ltd. (Beingmate)
As at 31 January 2019 Fonterra holds 192.23 million shares in Beingmate, representing an 18.8 per cent investment. There have
been no changes to the shareholding during the period.
The assumptions used to support the carrying value of the investment in Beingmate have been reassessed at 31 January 2019
to reflect changes in the quoted market price of Beingmate shares. No indicator of impairment was identified.
The assumptions underlying the calculation of the fair value of the 18.8 per cent investment in Beingmate are shown below:
AS AT
RMB PER SHARE
31 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
AUDITED
Weighted average share price period
30 trading days up to
31 January 2019
15 trading days from
22 January 2018
30 trading days up to
31 July 2018
Weighted average base price5.055.364.91
Net premium (including costs to sell)0.490.520.48
Implied value per share5.545.885.39
Using these assumptions, as at 31 January 2019 the carrying value of the investment is supported by the fair value assessment.
b) China Farms
The key assumptions used in determining the recoverable amount of the China Farms assets as at 31 July 2018 were the forecast
future milk price of RMB 4.00 per kg and a discount rate of 9.1 per cent.
The forecast average external milk price for the year ending 31 July 2019 is higher than the average price achieved in the year ended
31 July 2018 of RMB 3.56 per kg. The average milk price is steadily increasing, with 41 per cent of sales in the period achieving more
than RMB 4.00 per kg, a substantial increase on the prior year. Therefore RMB 4.00 per kg continues to be an appropriate milk
price to use in the impairment assessment as it reflects the medium-term average milk price forecast to be achieved based on
continued execution of the premium fresh milk business strategy in China. The discount rate applied remains appropriate.
An assessment of impairment indicators has not triggered an impairment assessment as at 31 January 2019.
c) Consumer and foodservice New Zealand
The key assumptions used in determining the recoverable amount of intangible assets in the business as at 31 July 2018 were
revenue growth, productivity savings and operating expense efficiencies over a five-year forecast period.
The business is executing its five-year business turnaround plan. Although progress is slower than planned, improvements in key
underlying operating metrics support management’s assessment that the business can execute on the business plan and deliver
the forecast results in years two to five.
Based on this, the assessment of impairment indicators has not triggered an impairment assessment as at 31 January 2019.
d) Consumer and foodservice Brazil
The intangible assets attributable to the consumer and foodservice business in Brazil arose in the financial year ended 31 July 2015
when Fonterra acquired a controlling interest in DPA Brazil.
Since that time the economic environment in Brazil has been challenging. However, the cash flow forecast used to support the
carrying value of the business shows significant year-on-year growth. This growth is supported by the strategic business plan and
associated initiatives.
The key assumptions used in determining the recoverable amount of these intangible assets as at 31 July 2018 were revenue growth
and productivity savings over a three-year forecast period.
The achievement of the revenue growth assumptions is dependent on the extent and timing of the economic recovery in Brazil
because performance of the chilled dairy sector is highly correlated to Brazil’s economic performance.
The productivity and cost saving initiatives are progressing in line with expectations.
Political uncertainty in Brazil has resulted in short-term volatility impacting key macro-economic indicators. The level of uncertainty
is such that management considers more time is required to gain a clear view of the outcome. In the interim, the economic
performance is sufficiently close to the key assumptions included in the 31 July 2018 impairment assessment that no impairment
assessment is required as at 31 January 2019.
Notes to the Financial Statements CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2019
OUR FINANCIALS

FONTERRA INTERIM REPORT 2019
51
The sensitivity of the 31 July 2018 impairment assessment to changes in the key assumptions is shown below. A change in the
assumptions by the amount shown in the table would lead to elimination of the $124 million excess of recoverable amount
over carrying amount.
KEY ASSUMPTIONSVALUE ATTRIBUTEDSENSITIVITY
Revenue growth (year 1 to year 3 CAGR)9.6 per centDecrease by 166 basis points
Productivity savings per year (year 1 to year 3 average)$10 millionDecrease by $3 million per annum
Due to the uncertainty in the macro-economic indicators, the impact on the impairment assessment of a reasonably possible
change in the economic growth and inflation rates in Brazil is shown below.
KEY ASSUMPTIONSVALUE ATTRIBUTEDPOSSIBLE CHANGEIMPACT ON VALUATION
Brazil economic growth
from year 3
3.8 per centDecrease by
100 basis points
Decrease by
$25 million
Inflation rates from year 3
(including the long term rate)
4.5 per centDecrease by
50 basis points
Decrease by
$39 million
9 PROPERTY, PLANT AND EQUIPMENT
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
AUDITED
Additions366310781
Disposals(10)(7)(32)
Capital commitments89236149
INVESTMENTS
10 EQUITY ACCOUNTED INVESTMENTS
The Group’s significant equity accounted investments are listed below. The ownership interest in these entities is 51 per cent
or less and the Group is not considered to exercise a controlling interest.
Equity accounted investees with different balance dates from that of the Group are due to legislative requirements in the country
in which the entities are domiciled, or are aligned with their other investors’ balance dates or with the milk season.
OWNERSHIP INTERESTS (%)
AS AT
EQUITY ACCOUNTED INVESTEE NAME
COUNTRY OF INCORPORATION
AND PRINCIPAL PLACE OF BUSINESS
31 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
AUDITED
DMV Fonterra Excipients GmbH & Co KGGermany505050
Beingmate Baby & Child Food Co., LtdChina18.818.818.8
Falcon Dairy Holdings Limited
Hong Kong515151
All investees have balance dates of 31 December.
Notes to the Financial Statements CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2019

FONTERRA INTERIM REPORT 2019
52
OTHER
11 CONTINGENT LIABILITIES, PROVISIONS AND COMMITMENTS
Contingent liabilities
In the normal course of business, Fonterra, its subsidiaries and equity accounted investees, are exposed to claims and legal
proceedings that may in some cases result in costs to the Group.
In January 2014, Danone initiated legal proceedings against Fonterra in the High Court of New Zealand and separate Singapore
arbitration proceedings against Fonterra in relation to Fonterra’s Whey Protein Concentrate 80 (WPC80) precautionary recall
in August 2013. The New Zealand High Court proceedings have been stayed pending completion of the Singapore arbitration.
The Singapore arbitration panel issued its award ( judgement), finding in favour of Danone and ordered Fonterra to pay to Danone
€105 million ($183 million) in recall costs. In addition, Fonterra also paid Danone €29 million ($49 million) representing interest
on the award amount and Danone’s costs in connection with the arbitration proceedings. Fonterra paid these amounts during the
financial year ended 31 July 2018.
It is unclear whether Danone will continue to pursue the New Zealand High Court proceedings that were stayed pending the
decision in the Singapore arbitration. Due to the uncertainty regarding whether Danone will seek to re-initiate these proceedings,
and the nature and scope of these potential proceedings in light of the arbitration findings and award, no amount has been
recognised in relation to these proceedings.
There are no additional claims or legal proceedings in respect of this matter that require provision or disclosure in these interim
financial statements.
The Group has no other contingent liabilities as at 31 January 2019 (31 January 2018: nil; 31 July 2018: nil).
12 FAIR VALUE
Fair value hierarchy
The fair value hierarchy described below is used to provide an indication of the level of estimation or judgement required
in determining fair value:
–Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
–Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either
directly (i.e. as prices) or indirectly (i.e. derived from prices).
–Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
The following table shows the fair value hierarchy for assets and liabilities measured at fair value on the statement
of financial position:
GROUP $ MILLION
LEVEL 1LEVEL 2LEVEL 3
AS ATAS ATAS AT
31 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
AUDITED
31 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
AUDITED
31 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
AUDITED
Derivative assets
–Commodity derivatives212115453–––
–Foreign exchange derivatives–––18639045–––
–Interest rate derivatives¹–––212175200–––
Derivative liabilities
–Commodity derivatives(8)(4)(12)(6)–(2)–––
–Foreign exchange derivatives–––(90)(77)(308)–––
–Interest rate derivatives¹–––(470)(476)(454)–––
Investments in shares612131615161476
Livestock––––––278298288
Fair value192916(148)32(500)292305294
1 Includes cross-currency interest rate swaps.
OUR FINANCIALS
Notes to the Financial Statements CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2019

FONTERRA INTERIM REPORT 2019
53
The following table shows the fair value hierarchy for each class of financial asset and liability where the carrying value in the
statement of financial position differs from the fair value:
GROUP $ MILLION
CARRYING VALUELEVEL 1LEVEL 2
AS ATAS ATAS AT
31 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
AUDITED
31 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
AUDITED
31 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
AUDITED
Financial assets
Long-term advances171138154–––172133148
Financial liabilities
Borrowings
–NZX-listed bonds(600)(500)(500)(619)(512)(513)–––
–Capital notes(35)(35)(35)(32)(34)(34)–––
–Medium-term notes(4,746)(4,941)(4,640)–––(4,960)(5,223)(4,883)
–Finance leases(72)(134)(131)–––(78)(149)(143)
13 NET TANGIBLE ASSETS PER SECURITY
GROUP
AS AT
31 JAN 2019
UNAUDITED
31 JAN 2018
UNAUDITED
31 JUL 2018
AUDITED
Net tangible assets per security¹
$ per listed debt security on issue4.835.795.18
$ per equity instrument on issue2.102.171.94
Listed debt securities on issue (million)703603603
Equity instruments on issue (million)1,6121,6101,612
1 Net tangible assets represents total assets less total liabilities less intangible assets.
Notes to the Financial Statements CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2019

FONTERRA INTERIM REPORT 2019
54
Independent Review Report
TO THE SHAREHOLDERS OF FONTERRA CO-OPERATIVE GROUP LIMITED
REPORT ON THE INTERIM FINANCIAL STATEMENTS
We have reviewed the accompanying interim financial statements of Fonterra Co-operative Group Limited (the Company) and
its controlled entities (the Group) on pages 34 to 53, which comprise the statement of financial position as at 31 January 2019,
and the income statement, the statement of comprehensive income, the statement of changes in equity and the cash flow
statement for the six months ended on that date, and selected explanatory notes.
DIRECTORS RESPONSIBILITY FOR THE INTERIM FINANCIAL STATEMENTS
The Directors are responsible on behalf of the Company for the preparation and fair presentation of these interim financial
statements in accordance with International Accounting Standard 34 Interim Financial Reporting (IAS 34) and New Zealand
Equivalent to International Accounting Standard 34 Interim Financial Reporting (NZ IAS 34) and for such internal control as
the Directors determine is necessary to enable the preparation of interim financial statements that are free from material
misstatement, whether due to fraud or error.
OUR RESPONSIBILITY
Our responsibility is to express a conclusion on the accompanying interim financial statements based on our review. We conducted
our review in accordance with the New Zealand Standard on Review Engagements 2410 Review of Financial Statements Performed by
the Independent Auditor of the Entity (NZ SRE 2410). NZ SRE 2410 requires us to conclude whether anything has come to our
attention that causes us to believe that the interim financial statements, taken as a whole, are not prepared in all material respects,
in accordance with IAS 34 and NZ IAS 34. As the auditors of the Company, NZ SRE 2410 requires that we comply with the ethical
requirements relevant to the audit of the annual financial statements.
A review of interim financial statements in accordance with NZ SRE 2410 is a limited assurance engagement. The auditor performs
procedures, primarily consisting of making enquiries, primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures.
The procedures performed in a review are substantially less than those performed in an audit conducted in accordance with
International Standards on Auditing (New Zealand) and International Standards on Auditing. Accordingly, we do not express an
audit opinion on these interim financial statements.

FONTERRA INTERIM REPORT 2019
55
Independent Review Report CONTINUED
AUDITOR INDEPENDENCE
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised) Code of Ethics for Assurance
Practitioners (PES 1) issued by the New Zealand Auditing and Assurance Standards Board and the International Ethics Standards
Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
Bruce Hassall was appointed an Independent Director and Chair of the Audit and Finance Committee (AFC) of the Company
on 2 November 2017. Bruce Hassall was Chief Executive Officer of PricewaterhouseCoopers to 30 September 2016 when he
retired from the firm. At the time of his appointment, the Board of the Company (the Board) made the decision that Bruce
Hassall would not be involved in the appointment of the Group’s auditor or the setting of audit fees for three years from the
date of his appointment. Scott St John, Independent Director and member of the AFC, would act as Chair of the AFC for these
matters and the Chair of the Board will join the AFC for deliberation. In addition, the engagement partner on the audit has
direct access to the Chair of the Board to address any actual or perceived auditor independence threats.
Brent Goldsack was appointed a Director of the Company on 2 November 2017. Brent Goldsack retired as a partner of
PricewaterhouseCoopers on 22 September 2017. Brent Goldsack was not involved in the provision of any audit services to the
Group during his time as a partner of PricewaterhouseCoopers. Bruce Hassall and Brent Goldsack had no financial relationship
with PricewaterhouseCoopers upon their appointment as Directors of the Company.
Our firm carries out vendor due diligence services for the Group, Board strategy workshop facilitation and attestation services.
Partners and employees of our firm may deal with the Group on normal terms within the ordinary course of trading activities
of the Group.
These matters have not impaired our independence as auditor of the Group.
CONCLUSION
Based on our review, nothing has come to our attention that causes us to believe that these interim financial statements of the
Group do not present fairly, in all material respects, the financial position of the Group as at 31 January 2019, and of its financial
performance and cash flows for the six months then ended, in accordance with IAS 34 and NZ IAS 34.
WHO WE REPORT TO
This report is made solely to the Company’s shareholders, as a body. Our review work has been undertaken so that we might state
to the Company’s shareholders those matters which we are required to state to them in our review report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the shareholders, as a body,
for our review procedures, for this report, or for the conclusion we have formed.
For and on behalf of:
Chartered Accountants
Auckland
19 March 2019

FONTERRA INTERIM REPORT 2019
56
OUR FINANCIALS
Non-GAAP Measures
Fonterra uses several non-GAAP measures when discussing financial performance. For further details and definitions of non-GAAP
measures used by Fonterra, refer to the glossary on page 57. These are non-GAAP measures and are not prepared in accordance
with NZ IFRS.
Management believes that these measures provide useful information as they provide valuable insight on the underlying
performance of the business. They may be used internally to evaluate the underlying performance of business units and to
analyse trends. These measures are not uniformly defined or utilised by all companies. Accordingly, these measures may not
be comparable with similarly titled measures used by other companies. Non-GAAP financial measures should not be viewed
in isolation nor considered as a substitute for measures reported in accordance with NZ IFRS.
Reconciliations for the NZ IFRS measures to certain non-GAAP measures referred to by Fonterra are detailed below.
Reconciliation from the NZ IFRS measure of profit for the period to Fonterra’s normalised EBITDA
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2019 31 JAN 2018 31 JUL 2018
Profit/(loss) for the period 80(348)(196)
Add: Depreciation 234229446
Add: Amortisation504698
Add: Net finance costs205201416
Add/(Less): Taxation expense/(credit)38(29)42
Total EBITDA 60799806
Add: WPC80 recall costs–196196
Add: Reduction in the carrying value of investment in Beingmate–433439
Add: Time value of options–55
Total normalisation adjustments–634640
Normalised EBITDA6077331,446
Reconciliation from the NZ IFRS measure of profit for the period to Fonterra’s normalised EBIT
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2019 31 JAN 2018 31 JUL 2018
Profit/(loss) for the period 80(348)(196)
Add: Net finance costs205201416
Add/(Less): Taxation expense/(credit)38(29)42
Total EBIT323(176)262
Add: Normalisation adjustments (as detailed above)–634640
Total normalised EBIT323458902
Reconciliation from the NZ IFRS measure of profit for the period to Fonterra’s normalised earnings per share
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2019 31 JAN 2018 31 JUL 2018
Profit/(loss) for the period 80(348)(196)
Add: Normalisation adjustments (as detailed above)–634640
Add: Normalisation adjustment to net finance costs–2626
Less: Tax on normalisation adjustments–(64)(63)
Total normalised earnings80248407
Less: Share attributable to non-controlling interests(4)(6)(25)
Net normalised earnings attributable to equity holders of the Parent76242382
Weighted average number of shares (thousands of shares)1,611,9691,608,8211,610,005
Normalised earnings per share ($)0.050.150.24

FONTERRA INTERIM REPORT 2019
57
NON-GAAP MEASURES
Fonterra refers to non-GAAP financial measures throughout the Interim Report, and these measures are not prepared in
accordance with NZ IFRS. The definitions below explain how Fonterra calculates the non-GAAP measures referred to throughout
the Interim Report.
EBITmeans earnings before interest and tax and is calculated as profit for the period before
net finance costs and tax.
EBITDAmeans earnings before interest, tax, depreciation and amortisation and is calculated as
profit for the period before net finance costs, tax, depreciation and amortisation.
Economic net interest-bearing debtmeans net interest-bearing debt including the effect of debt hedging.
Farmgate Milk Pricemeans the base price that Fonterra pays for milk supplied to it in New Zealand for a season.
The season refers to the 12-month milk season of 1 June to 31 May.
Gearing ratiois calculated as economic net interest-bearing debt divided by total capital. Total capital
is equity excluding the hedge reserves, plus economic net interest-bearing debt.
Normalisation adjustmentsmeans transactions that are unusual by nature and size. Excluding these transactions can
assist users with forming a view of the underlying performance of the business. Unusual
transactions by nature are the result of specific events or circumstances that are outside
the control of the business, or relate to major acquisitions, disposals or divestments, or are
not expected to occur frequently. It also includes fair value movements if they are non-cash
and have no impact on profit over time. Unusual transactions by size are those that are
unusually large in a particular accounting period.
Normalised EBITmeans profit for the period before net finance costs and tax, and after
normalisation adjustments.
Normalised earnings per share (EPS)means normalised profit after tax attributable to equity holders divided by the weighted average
number of shares for the period.
Normalised profit after taxmeans net profit after tax after normalisation adjustments, and the interest and tax impacts
of those normalisation adjustments.
Normalised segment earningsmeans segmental profit for the period before net finance costs and tax, and after
normalisation adjustments.
Payoutmeans the total cash payment to farmer shareholders. It is the sum of the Farmgate Milk
Price (kg/MS) and the dividend per share. Both of these components have established
policies and procedures in place on how they are determined.
Retentionsmeans net profit after tax attributable to farmer shareholders divided by the number of
shares at 31 May, less dividend per share.
Return on capitalis calculated as normalised EBIT less equity accounted investees’ earnings divided by capital
employed. Capital employed is calculated as the average for the period of: net assets
excluding net interest-bearing debt, deferred tax balances and brands, goodwill and equity
accounted investments.
Segment earningsmeans segmental profit for the period before net finance costs and tax.
Working capitalis calculated as current trade receivables plus inventories, less current trade payables
and accruals. It excludes amounts owing to suppliers and employee entitlements.
Working capital daysis calculated as average period to date working capital divided by external revenue,
multiplied by the number of days in the period.
Glossary

FONTERRA INTERIM REPORT 2019
58
FONTERRA BOARD OF DIRECTORS
John Monaghan
Clinton Dines
Brent Goldsack
Leonie Guiney
Bruce Hassall
Simon Israel
Andrew Macfarlane
Peter McBride
John Nicholls
Donna Smit
Scott St John
FONTERRA MANAGEMENT TEAM
Miles Hurrell
Marc Rivers
Robert Spurway
Judith Swales
Kelvin Wickham
Mike Cronin
Deborah Capill
REGISTERED OFFICE
Fonterra Co-operative Group Limited
Private Bag 92032
Auckland 1142
New Zealand
109 Fanshawe Street
Auckland Central 1010
New Zealand
Phone +64 9 374 9000
Fax +64 9 374 9001
AUDITORS
PricewaterhouseCoopers
Level 22, PwC Tower
188 Quay Street
Auckland 1010
New Zealand
FARMER SHAREHOLDER AND SUPPLIER SERVICES
Freephone 0800 65 65 68
FONTERRA SHARES AND FSF UNITS REGISTRY
Computershare Investor Services Limited
Private Bag 92119
Auckland 1142 New Zealand
Level 2, 159 Hurstmere Road
Takapuna
Auckland 0622
New Zealand
CAPITAL NOTES REGISTRY
Link Market Services Limited
PO Box 91976
Auckland 1142
New Zealand
Level 11, Deloitte Centre
80 Queen Street
Auckland Central 1010
New Zealand
INVESTOR RELATIONS ENQUIRIES
Phone +64 9 374 9000
investor.relations@fonterra.com
www.fonterra.com
Directory
OUR DIRECTORY

This document is printed on an
environmentally responsible paper produced
using elemental chlorine free (ECF)FSC
®

certified mixed source pulp, sourced from
well managed and legally harvested forests,
and manufactured under the strict ISO14001
environmental management system.

---

20 MARCH 2019

Fonterra announces 2019 Interim Result

• Key numbers in Interim Results
o Sales volumes 10.7 billion liquid milk equivalents (LME), up 2%
o Revenue $9.7 billion, down 1%
o Normalised EBIT: $323 million, down 29%
o NPAT: $80 million, up 123%
o Total normalised gross margin: $1.5 billion
▪ Ingredients Gross Margin: $791 million, down 9%
▪ Consumer and Foodservice Gross Margin: $766 million, down 7%
o Full year forecast earnings: 15-25 cents per share
o Forecast Farmgate Milk Price: $6.30-$6.60 per kgMS
• Sales process started for Fonterra’s 50% share of DFE Pharma
• Completed the sale of Corporacion Inlaca to Mirona
• Update on full strategy review

Fonterra Co-operative Group Limited today announced its 2019 Interim Results which show the Co-op
has returned to profitability with a Net Profit After Tax (NPAT) of $80 million, but normalised Earnings
Before Interest and Tax (EBIT) are down 29% on the same period last year to $323 million.

Fonterra CEO Miles Hurrell says that while it is good to see the Co-operative back in the black, the Co-
operative’s earnings performance is not where it should be and this was the reason for revising the full
year earnings guidance down to 15-25 cents per share in February.

“The steady performance from New Zealand Ingredients in the first half of FY19 has been offset by
challenges in Australia Ingredients and this has seen our total Ingredients EBIT decline by 17% to $461
million.

“Our Australia Ingredients business continues to feel the impact of the drought. We can see it in the
decline of Australian milk collections and aggressive price competition for milk, which is resulting in the
underutilisation of manufacturing assets and tightening margins.

“Consumer and Foodservice is tracking behind last year with an EBIT of $134 million. This part of the
business has been held back by disruptive political and economic conditions as well as high input costs in
Latin America. In addition, in our China Foodservice business, demand slowed due to higher prices and
in-market inventory levels growing for butter at the end of FY18. In Sri Lanka our performance was
impacted by price constraints.”

Outlook for the second half of the year

In talking about priorities for the Co-operative in the second half of the year, Mr Hurrell says the focus is to
meet the earnings guidance, deliver the three-point plan and fundamentally reset the business so it can
deliver sustainable earnings.

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

“We have a forecast Farmgate Milk Price of $6.30-$6.60 per kgMS but we also have to meet our earnings
guidance range of 15-25 cents per share. This range builds in an expectation of a slightly softer second
half for our Ingredients business, but a meaningful increase in Consumer and Foodservice earnings,” says
Mr Hurrell.

“Our forecast increase in our Consumer and Foodservice performance is based on a few key factors. It
needs a strong improvement in our Foodservice business in Greater China, stronger consumer demand
for Soprole in Chile and chilled dairy in Brazil, and an improvement in our Sri Lankan business.

“Our three-point plan involves taking stock of our business and conducting a portfolio review, getting the
basics right and improving our forecasting. We’ve made good progress so far and we will continue to take
these steps in the second half to firm up our foundations and strengthen our balance sheet.

“The second half will also see us continuing the work on developing a new strategy to support a much-
needed change in direction. We are doing the right things but it’s clear more is needed to lift our
performance. We need to simplify and improve the Co-op so we can grow value.”

Portfolio review update

As part of taking stock of the business, Fonterra has let its farmer owners and unit holders know today
that the third asset it has identified in its portfolio review is DFE Pharma, a 50/50 joint venture established
in 2006 between Fonterra and FrieslandCampina.

DFE Pharma is one of the largest suppliers of pharmaceutical excipients which are used as a carrier
agent in medicines such as tablets and powder inhalers.

Mr Hurrell says Fonterra has let FrieslandCampina know that it has started a sales process for our 50%
share of DFE Pharma.

“At the same time, we have confirmed that we are committed to maintaining our lactose service and
supply agreements from Fonterra’s Kapuni operation in Taranaki and supporting the ongoing operations
of the DFE Pharma business.

“Together with our partner, we have grown DFE Pharma from relatively small beginnings into a significant
and successful business. While continuing to perform well, ownership of DFE is not core to our strategy.”

In addition to this sales process, the Co-op has received strong interest in Tip Top and is actively
considering its options for its shareholding in Beingmate.

“We are well on track to meet our target to reduce end of year debt by $800 million,” says Mr Hurrell.

Mr Hurrell also advised that Fonterra has sold its interest in its Venezuelan consumer joint venture,
Corporacion Inlaca, to Mirona, an international food business.

“The decision to sell Inlaca is the result of ongoing instability in Venezuela which has led to challenging
operating conditions.

“The economic situation in Venezuela is not expected to improve in the foreseeable future, so we have
made the decision to act now to minimise the impact on Fonterra,” he says.

Fonterra received $16 million cash for the Inlaca sale. Like any multi-national business, Fonterra is
exposed to currency risk on its overseas operations and the impact of changes is held in a foreign
currency translation reserve (FCTR). When a business is sold there is a non-cash accounting adjustment
that releases the accumulated FCTR to the profit and loss statement. The full impact of this transaction,
including the devaluation of the Venezuelan currency which has resulted in a negative FCTR balance of
approximately $126 million, will be reflected in the profit and loss statement.

This sale is not directly included in Fonterra’s half-year results, and the impact of the FCTR on the profit
and loss statement has not been reflected in the forecast earnings per share range. Fonterra expects

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

there to be a number of one-off transactions and adjustments over the course of its financial year (some
positive and some negative). The sale of Inlaca would have an eight cents per share negative impact on
earnings. As Fonterra has other one-off transactions that are underway but not yet completed, such as the
potential sale of Tip Top and DFE Pharma, it is too early to assess the overall impact of our divestment
programme on the Co-op’s FY19 earnings.

As a result, the announced forecast earnings will continue to reflect only the underlying performance of
the business. Fonterra will advise any one-off impacts of a transaction on its FY19 earnings when that
transaction is announced, and will provide details of the overall impact of its divestment programme on
FY19 earnings as part of its full-year financial statements.

Fundamental change in direction

Fonterra Chairman John Monaghan used today’s announcement to give the Co-operative’s farmer owners
and unit holders a progress update on the full review of its business strategy. He says that the review isn’t
mere tinkering around the edges.

“There will be fundamental change. We are taking a hard look at our end-to-end business, where we can
win in the world and the products where we have a real competitive advantage.

“Our Co-operative values of the last 148 years won’t change. Our farmers’ quality, pasture-based milk will
always be collected, processed and sold for the highest possible returns. They’ll always be paid on the
20th of the month – every month.

“Outside of that, there are no sacred cows. The business strategies designed to secure the highest
possible returns will change, but some underlying principles will remain.”

Mr Monaghan says the Co-operative’s strategy will focus on sustainability and provenance throughout the
value chain.

“We are a New Zealand dairy farmers’ Co-op. Maximising the value of our home milk supply will always
be our number one priority. We believe there’s a premium to be earned from products backed by our co-
operative heritage and provenance.

“Our future will be built on our owners’ farming businesses that use advancements in technology and
innovation, including adaptations from other industries, to help protect or enhance the premium qualities
and reputation of our milk.”

Fonterra’s portfolio review will simplify its business and concentrate on getting the basics right. It is
changing its portfolio of investments to achieve higher return on capital.

“Achievement of our ambition will rely on us maintaining premium quality right across the supply chain -
starting on-farm and flowing through to the products we make, and the customers we sell to. It will need
the support and commitment of all our people – our farmer owners and our employees.

“It sounds simple. The best strategies often are,” says Mr Monaghan.

-ENDS-

For further information contact:

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

---

Interim Results
2019
March 2019

2
Disclaimer
This presentation may contain forward-looking statements and projections. There can be no certainty of outcome in relation to the matters to which
the forward-looking statements and projections relate. These forward-looking statements and projections involve known and unknown risks,
uncertainties, assumptions and other important factors that could cause the actual outcomes to be materially different from the events or results
expressed or implied by such statements and projections. Those risks, uncertainties, assumptions and other important factors arenot all within the
control of Fonterra Co-operative Group Limited (Fonterra) and its subsidiaries (the Fonterra Group) and cannot be predicted by the Fonterra
Group.
While all reasonable care has been taken in the preparation of this presentation none of Fonterra or any of its respective subsidiaries, affiliates and
associated companies (or any of their respective officers, employees or agents) (Relevant Persons) makes any representation, assurance or
guarantee as to the accuracy or completeness of any information in this presentation or likelihood of fulfilment of any forward-looking statement or
projection or any outcomes expressed or implied in any forward-looking statement or projection. The forward-looking statements and projections in
this report reflect views held only at the date of this presentation.
Statements about past performance are not necessarily indicative of future performance.
Except as required by applicable law or any applicable Listing Rules, the Relevant Persons disclaim any obligation or undertaking to update any
information in this presentation.
This presentation does not constitute investment advice, or an inducement, recommendation or offer to buy or sell any securitiesin Fonterra or the
Fonterra Shareholders’ Fund.

3
Headlines
•Forecast Farmgate Milk Price range $6.30-$6.60 per kgMSbut forecast New Zealand collections flat on last year
•Earnings performance reinforces need for fundamental change –full strategy review is well underway
•Good progress made on three point plan
–Processes well advanced (Beingmate, Tip Top and DFE Pharma) and key to $800 million year-end debt reduction
–On track with capex and opexreductions
–Increased disclosures to deal with forecast volatility
•Full year earnings guidance revised to 15-25 cents per share in February –no interim dividend
–Ingredients softer second half forecasted
–Requires substantial second half improvement in Consumer and Foodservice
•Committed to financial discipline –final dividend decision depends on full-year earnings and balance sheet

4
China
+8%
12 months
1.Global Supply is represented by global milk production data.
2.Global Demand is represented by global dairy import data.
Note: All 12-month figures are rolling 12 months compared to previous comparable period: Australia (Dec), EU (Dec), United States (Dec), China (Dec), Asia (Nov), Middle East & Africa (Nov), Latin America (Nov), New Zealand (Jan).
Source: Government milk production statistics; GTIS trade data; Fonterra analysis.
Improved milk price reflects
global dairy market
Rest of
Asia
+5%
12 months
Middle
East/Africa
-5%
12 months
Latin
America
+2%
12 months
Europe
+1%
12 months
-1%
October to
December
United
States
+1%
12 months
+1%
October to
December
New Zealand
+4%
12 months
+4%
November to
January
Australia
-2%
12 months
-7%
October to
December
Global
Supply
1
Global
Demand
2
Russia
EU’s largest
dairy export
market
Trade
embargo
remains

5
1.There were no normalisation adjustments for the six months ended 31 January 2019.
2.Includes inter-segment sales.
3.Provides end-to-end perspective, comprising China Farm segment plus financials from Ingredients and Consumer and
Foodservice related to China Farms.
Note: All changes are expressed relative to the first half of FY18.
Earnings performance not where it needs to be
$80m
2%
Volume LME
10.7bn
1%
Revenue
$9.7bn
$159m
Gross
Margin
1
$1.5bn
123%
Reported
NPAT
$80m
68%
Normalised
EBIT
1
$80m
from 11.0%
6%
Ingredients
Volume LME
2
10.4b
Gross Margin¹
$791m
9.6%
2%
Consumer &
Foodservice
Volume LME
2
2.5b
Gross Margin¹
$766m
22.1%
15%
China
Farms
³
(End to End)
Volume LME
2
113m
Gross Margin¹
$(10)m
(7.8)%
$55m
from 23.6%
$6m
from (13.0)%
Opex
$323m
29%
Net DebtNormalised
NPAT
1
4%
$7.4bn$1.2bn
2%
$97m
EBIT¹
$461m
EBIT¹
$134m
EBIT¹
$(21)m
$59mno change
New Zealand Ingredients’ steady performance offset by Australia Ingredients and Consumer andFoodservice

6
Good progress with three-point plan
Take stock, getting the basics right, more accurate forecasting
Take Stock
•Reduce debt by $800 million•In discussion with interested parties for Tip Top and DFE Pharma, and actively
considering options for our shareholding in Beingmate
•Gearing within 40-45% range by
year-end
•Improved net cashflows but higher half year gearing reflects milk curve and
higher opening debt levels
•Full-year gearing target requires asset divestments
•Reduce capex to $650 million inFY19•On track for the full-year
•Reduce opexback to FY17 levels
over the next twoyears
•Down at half year following good progress in secondquarter
More accurate forecasting
•Improved disclosures to deal with forecast volatility
•Introduced milk price range
•No surprises policy
Getting the basics right

7
1.Gearing ratio is economic net interest-bearing debt divided by economic net interest-bearing debt plus equity excluding cash flow hedge reserve.
2.Economic net interest-bearing debt reflects total borrowings less cash and cash equivalents and non-current interest-bearing advances adjusted for derivatives used to manage changes in hedged risks.
3.Capital expenditure comprises purchases or property (less specific disposals where there is an obligation to repurchase), plant and equipment and intangible assets, and net purchases of livestock.
4.Net Cash Flow is calculated as Free Cash Flow less amounts paid for interest and dividends in the same period.
Higher debt at half year reflects milk curve
Better financial discipline but higher net debt due to higher opening debt level
Gearing¹
0.9%
52.5%
0cps
Interim Dividend
$0
9%
Net Debt²
$316m
$7.4bn
4%
Working Capital
Capex³
2 days
82 days
16%
$(1.0)bn
Net Cash Flow⁴
Fitch
A
Negative
Credit Rating
S&P
A-
Stable

8
1.Earnings per share.
Full-year earnings guidance reduced in February
Forecast EPS¹
15-25
cents
Forecast 2019 Farmgate Milk Price
$6.30 -$6.60
kgMS
Challenges at Q1 continue and margins on non-reference products have reduced
Forecast 2019 Milk Collections
1,510
million kgMS
Forecast Gross Margin
8% -10%
Forecast Gross Margin
23% -26%
Forecast EBIT
$750-$850million
Forecast EBIT
$475-$525million
INGREDIENTSCONSUMER AND FOODSERVICE

9
$366m
H1H2
Q1Q2Required
1.Midpoint of the forecast EBIT range that supports the EPS guidance of 15-25 cps.
2.H1 represents actual reported EBIT in the first half and H2 is the amount required in the second half to achieve the midpointofthe full year earnings guidance.
What we need to do in the second half to achieve the midpoint of earnings guidance
Ingredients
•$339 million second half EBIT:
–Sell similar volumes to first half
–Achieve gross margin of at least 8%
•Risks:
–Tighter New Zealand milk supply impacting
operational efficiency and product mix
–Increased Milk Price further reducing
non-reference gross margin
Consumer and Foodservice
•$366 million second half EBIT:
–$34 million more than second half FY18
–Sell 2.8 billion LME, up 13% on first half
–Increase gross margin to at least 26%
•Risks:
–Ongoing margin pressure in key markets
–Lower sales volumes
Ingredients
Consumer &
Foodservice
$800m
EBIT²
Forecast
EBIT¹
$500m
H2
$339m
H1H2
Q1Q2Required
$461m
$134m

10
Progress updates
(Interim Results, MyConnectconference in May
and Q3 business update)
Full strategy announced at
2019 Annual Results
Strategic review –emerging themes
•A globally competitive New Zealand dairy co-op
•Sustainability at the heart of everything we do
•Value rather than volume
•Prioritise our New Zealand milk supply and earn a premium from our heritage and provenance
•Simplify our global portfolio to focus on where we have competitive advantages
•Increase focus on return on capital
Looking at all aspects of our business
Full strategy review well underway to fundamentally reset the Co-op
Timeline
Strategy Review
kicked-off in
January

APPENDIX

12
Milk collections forecast for season recently reduced
•New Zealand milk collections forecast is 1,510 million
kgMS
–1% reduction from previous forecast due to ongoing
dry weather in New Zealand, particularly North Island
–Slightly above last season’s 1,505 million kgMS, a
season also impacted by poor on-farm conditions
•On-farm conditions will continue to be an important factor
for milk supply in the remainder of theseason
Strong start to the season, collections impacted by on-farm conditions
New Zealand Milk Collection
SeasonTotal Milk Solids (kgMS)Peak Day Milk
2016/171,526m (down 3%)80m litres
2017/181,505m (down 1%)82m litres
2018/19F1,510m (up 0.3%)85m litres
10
20
30
40
50
60
70
80
90
JunJulAugSepOctNovDecJanFebMarAprMay
Volume (m litres/day)
2016-17
2017-18
2018-19

13
1,2311,184$407$390
1.Includes sales to other strategic platforms.
Note: Volume is in million LME. EBIT is in NZD millions unless otherwise stated. All changes are expressed relative to the firsthalf of FY18.
Steady New Zealand performance, challenging environment in offshore milk pools
Ingredients
•New Zealand Ingredients steady performance
–Sales volume and inventory up reflecting higher
milk collection
–Overall solid margins but non-reference margins
down slightly on last year
•Challenging environment in Australia
–Lower milk collections due to severe drought and
aggressive price competition
–Integration of the full costs of Darnumfollowing
taking back full ownership
–Under utilisation of asset base due to
lowercollections
•Prolesur
–Lower milk collections due to price competition
Volume¹EBIT
Performance
2018201920182019
$461$55810,3969,777
+6%
Growth
$97

14
1.Excludes bulk liquid milk. Bulk liquid milk for the six months to 31 January 2019 was 34,000 MT (six months ended 31 January 2018: 34,000 MT).
2.The way in which Ingredients presents certain inter-segment sales between Ingredients and Foodservice was revised in FY19. This increased sales volumes for the six months ended 31 January 2019 by 4,000 MT and 79,000 MT on reference and
non-reference products respectively, and increased sales revenue by $34 million and $360 million on reference and non-reference products respectively. This change had no impact to the reported gross margin for the Ingredients business.
Note: Reference products are products used in the calculation of the Farmgate Milk Price –WMP, SMP, BMP, Butter and AMF. Milk solids used in the products sold were 515 million kgMSin reference and 178 million kgMSnon-reference (previous
comparable period 547 million kgMSreference and 190 million non-reference).
•Increased volume
–Reference products due to higher first half
milkcollections
–Non-reference due to including intercompany
Foodservice sales²
•Margin relativities between non-reference and
reference products, while favourable, are lower than
lastyear due to sales pricing, product mix and costs
•Gross margins impacted by higher conversion costs
associated with commissioning of new plants
New Zealand Ingredients product mix
20182019
$ million$ per MT$ million$ per MT
Sales Volume (000 MT)¹
Reference900–924–
Non-Reference277 –354–
Revenue¹
Reference4,3054,783 4,304 4,658
Non-Reference1,586 5,726 1,874 5,294
Cost of Milk
Reference3,3163,6843,2313,495
Non-Reference8302,9951,0522,973
Gross Margin ($)
Reference372413345373
Non-Reference3621,309324915

15
1,2311,184$407$390
2018201920182019
Tighter margins in Consumer and lower volumes and margins in Foodservice
1.Includes sales to other strategic platforms.
Note: Volume is in million LME. EBIT is in NZD millions unless otherwise stated. All changes are expressed relative to the firsthalf of FY18.
Consumer and Foodservice
Volume¹EBIT
Performance
•Improved sales volume in Q2 but down for the half
year due to strong sales at end of last year
•Localised challenges in Greater China, Chile and
SriLanka resulted in a decline in normalised EBIT
–Lower sales volume and margin in
GreaterChinaFoodservice
–Lower margins in Soprole
•Oceania normalised EBIT up 110% to $32 million
–Growth in Australia Consumer and Foodservice
–New Zealand flat on comparable period
•Overall operating costs down despite additional costs
of bringing Anmumin-house
-2%
Growth
$59
2,5502,487$193$134

16
Latin
America
AsiaOceania
Challenges in China Foodservice and Latin America Consumer outweigh growth in Australia
1.Includes sales to other strategic platforms.
2.Percentages as shown in tables may not align to the calculation of percentages based on numbers in the tables due to roundingofreported figures.
Note: Volume is in million LME. EBIT and gross margin are in NZD millions unless otherwise stated. All changes are expressed relative to the first half of FY18.
Consumer and Foodservice by region
Greater
China
$92$61
20182019
$56$44
20182019
$30
20182019
$15
$32
20182019
-34%
-22%
-111%
+110%
EBIT²
Gross
Margin
24%
from
25%
$163m
-11%
21%
from
23%
$200m
-5%
25%
from
29%
$185m
-16%
20%
from
19%
$218m
+4%
Volume¹
524m
-13%
733m
-4%
388m
+5%
843m
+3%
$(3)