Fonterra provides performance and milk price updates

21 May 2020

Fonterra provides performance and milk price updates


Third quarter summary
• Total Group Earnings Before Interest and Tax (EBIT): $1.1 billion, up from $378 million
• Total Group normalised EBIT: $815 million, up from $514 million
• Total Group normalised gross margin: $2.5 billion, up from $2.2 billion
• Normalised Total Group operating expenses: $1,665 million, down $148 million from $1,813 million
• Free cash flow: $698 million, up $1.4 billion
• Net debt: $5.7 billion, down from $7.4 billion
• Normalised Ingredients EBIT: $668 million, up from $615 million
• Normalised Foodservice EBIT: $208 million, up from $135 million
• Normalised Consumer EBIT: $187 million, up from $128 million
• Full year forecast underlying earnings: 15-25 cents per share
• 2019/20 forecast Farmgate Milk Price range: $7.10 - $7.30 per kgMS
• Opening 2020/21 forecast Farmgate Milk Price range: $5.40 - $6.90 per kgMS
• 2020/21 Advance Rate Schedule has been set off the mid-point of $6.15 per kgMS


Fonterra Co-operative Group Limited today announced its third-quarter business update, narrowed the
range for its 2019/2020 forecast Farmgate Milk Price, and announced an opening forecast Farmgate Milk
Price range for the 2020/2021 season.

Fonterra CEO Miles Hurrell says despite COVID-19 challenges, the Co-operative’s total group normalised
Earnings Before Interest and Tax (EBIT) for the nine months to 30 April is $815 million, an increase of
$301 million on this time last year.

“The work done over the last year to strengthen our balance sheet, and the Co-op’s ability to respond
quickly has helped us manage the COVID-19 situation over the last few months. We’re drawing on our
global supply chain and diverse product and customer base to minimise disruptions for our customers and
our business.

“COVID-19 has affected virtually every country, market and industry, and as a result, the global dairy
market is volatile and the outlook is uncertain. This is a tough environment for everyone. As a New
Zealand dairy Co-op, exporting 95% of our products, many of the markets we do business in have always
been prone to sudden shocks and this can impact where, when and what we sell. However, the global
nature of COVID-19 is like nothing we’ve experienced before. Like other businesses, we will feel the

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

impact of COVID-19 and its flow-on effects but how and to what extent is still uncertain. We are drawing
on all our experience in managing market volatility.

“I’m proud to lead a team who genuinely care and recognise the importance of our farmer owners, unit
holders, customers and local communities. The way our Co-op has responded to COVID-19 has been a
real highlight for me.”

Business performance and earnings guidance

Mr Hurrell says all three of Fonterra’s business units have delivered a good performance for the year to
date, despite the negative impact COVID-19 had on the foodservice business in the third quarter.

“Our Ingredients business delivered a normalised EBIT of $668 million in the nine months to 30 April. This
is up 9% from $615 million on this time last year, mainly due to improved margins.

“As we said at half-year, when the COVID-19 pandemic took hold, we had already contracted a high
percentage of this season’s milk supply and this has helped minimise the impact of COVID-19 to date.

“Overall Foodservice EBIT for the year is $208 million, up 54% from $135 million – however, it was the
part of our business that was most affected by COVID-19. Restaurants, bakeries and cafes in many of our
markets were closed as a result of government enforced lockdowns and restrictions. This impacted our
sales in the third quarter.

“In China, the foodservice sector started its recovery relatively quickly, although it is still not at 100%. We
saw our sales in China fall in February, but they bounced back to more normal levels in March and this
continued in April. We are now seeing the impact of COVID-19 across our foodservice businesses in
Oceania, South East Asia and Latin America. We expect this impact to also show up in our fourth quarter
results.

“While the consumer business benefited from a spike in sales as people stockpiled and bought food to
cook at home, this was not sustained through the COVID-19 lockdowns. Overall, Consumer EBIT was
$187 million, up 46% from $128 million on the same period last year. This was mainly due to cost savings
across all regions and gross margin growth in Asia.”

Mr Hurrell says the Co-op has a strong balance sheet with good cashflow and is continuing to reduce
debt.

The Co-op is on track to deliver on its gross margin target, with gross margin up $244 million on last year
to $2.5 billion. It has also continued its focus on cost control and reduced Total Group operating expenses
by $148 million on the same period last year.

Free cash flow is $698 million, up by $1.4 billion on last year, and net debt has reduced by 23% or $1.7
billion.

In talking about the remainder of the financial year, Mr Hurrell reaffirmed the FY20 forecast underlying
earnings guidance of 15-25c per share.

"Based on the first nine month’s performance we would expect our full year underlying earnings* to be at
the top half of this range. However, there are significant uncertainties in the last quarter – for example,
how quickly the foodservice sector recovers, timing of shipments, and how the broader economic
downturn will impact our business.

Updated 2019/2020 forecast Farmgate Milk Price range and 2020/21 opening season forecast
Farmgate Milk Price range

Fonterra has narrowed its 2019/2020 forecast Farmgate Milk Price range for the season to $7.10 - $7.30
per kgMS, with a mid-point of $7.20 per kgMS.

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

This will see the Co-op contribute about $11 billion to the New Zealand economy through milk price for the
year.

Chairman John Monaghan says the Co-op has narrowed its price range and reduced the mid-point of the
range in response to a softening of demand relative to supply which is pushing down prices.

“One of the main drivers of the softening demand is that many foodservice businesses remain closed. On
the supply side, the EU and the US have just been through the peak of their season and that milk is
flowing into export markets and increasing competition for sales. As a result, prices are softening across
the board.

“This supply and demand imbalance has impacted GlobalDairyTrade (GDT) prices for the products that
determine our Farmgate Milk Price. In US dollar terms, GDT prices for Whole Milk Powder are down 17%
since late January.

“Looking out to next season, a global recession will continue to reduce consumers’ purchasing power.

“It is not clear what impact government interventions in the EU and US will have on curbing their milk
supply, however, we expect our competitors there to put more of their milk into the product types that
determine our Milk Price, as they chase government support programmes and favour longer-life products.

“COVID-19 adds significant uncertainty into the process of forecasting what will happen with global dairy
prices over the next 15 months.

“For that reason, we are setting the opening 2020/21 forecast Farmgate Milk Price range at $5.40 - $6.90
per kgMS. The wider range reflects the increased uncertainty we face in the coming season.

“This forecast is based on the information that’s available now. We will regularly update our farmers on
changes or events that may impact our milk price as the season progresses.”

Healthy People and Healthy Environment

Mr Hurrell says despite all these challenges, the Co-op continues to focus on all three of its long-term
goals – healthy people, healthy environment and healthy business.

“We remain committed to making progress, and some examples in the environment and people space
include:

• Making an additional two million litres of ethanol available to help with the supply of hand sanitiser
in New Zealand during the COVID-19 outbreak
• Redirecting Anchor milk from our in-school nutrition programme, Fonterra Milk for Schools, into
communities throughout New Zealand as schools were closed during Level 4 lockdown.
• Making improvements to farmers’ payments to get money to them faster
• Continuing to make progress in switching from coal to wood pellets at our Te Awamutu
manufacturing site
• 31% of supplying farms now have Farm Environment Plans, up from 23% at the start of the
financial year
• Around 1000 farms have achieved Te Pūtake Level 2 through The Co-operative Difference
programme after meeting high environment, animal, milk, people and community standards
• On-track to deliver farm-specific greenhouse gas emissions reports to every supplying farm this
year.”

* As previously stated, 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 FY20
earnings when that transaction is announced, and will provide details of the overall impact of its
divestment programme on FY20 earnings as part of its full-year financial statements

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

-ENDS-

For further information contact:

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

---

Confidential to Fonterra Co-operative Group
21 MAY 2020

Disclaimer
Thispresentationmaycontainforward-lookingstatementsandprojections.Therecanbenocertaintyofoutcomein
relationtothematterstowhichtheforward-lookingstatementsandprojectionsrelate.Theseforward-looking
statementsandprojectionsinvolveknownandunknownrisks,uncertainties,assumptionsandotherimportantfactors
thatcouldcausetheactualoutcomestobemateriallydifferentfromtheeventsorresultsexpressedorimpliedbysuch
statementsandprojections.Thoserisks,uncertainties,assumptionsandotherimportantfactorsarenotallwithinthe
controlofFonterraCo-operativeGroupLimited(Fonterra)anditssubsidiaries(theFonterraGroup)andcannotbe
predictedbytheFonterraGroup.
Whileallreasonablecarehasbeentakeninthepreparationofthispresentation,noneofFonterraoranyofits
respectivesubsidiaries,affiliatesandassociatedcompanies(oranyoftheirrespectiveofficers,employeesoragents)
(RelevantPersons)makesanyrepresentation,assuranceorguaranteeastotheaccuracyorcompletenessofany
informationinthispresentationorlikelihoodoffulfilmentofanyforward-lookingstatementorprojectionorany
outcomesexpressedorimpliedinanyforward-lookingstatementorprojection.Theforward-lookingstatementsand
projectionsinthisreportreflectviewsheldonlyatthedateofthispresentation.
Statementsaboutpastperformancearenotnecessarilyindicativeoffutureperformance.
ExceptasrequiredbyapplicablelaworanyapplicableListingRules,theRelevantPersonsdisclaimanyobligationor
undertakingtoupdateanyinformationinthispresentation.
Thispresentationdoesnotconstituteinvestmentadvice,oraninducement,recommendationoroffertobuyorsellany
securitiesinFonterraortheFonterraShareholders’Fund.
2

FARMGATE
MILK PRICE
per kgMS
from $514m
NORMALISED
EBIT²
,
³
,
⁴
million
NET DEBT¹
from $7.4b
billion
from $378m
TOTAL GROUP
EBIT²
,
³
billion
•Global scale and diversity reduced impact
of COVID-19
•Business performance improvement continued
•Strong cashflow and continuing to reduce debt
•Forecast normalised earnings guidance maintained⁵
•Forecast 2019/20 Farmgate Milk Price
range narrowed
•Forecast 2020/21 Farmgate Milk Price range of
$5.40 -$6.90 per kgMS announced
1.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, and bank overdraft. It
excludes the $288 million of borrowings attributed to Discontinued Operations.
2.This includes Continuing Operations and Discontinued Operations. The basis of determining Discontinued Operations is set
out in the Basis of Preparation in the previously released FY20 Interim Report.
3.2019 EBIT restated down $8 million to reflect change in timing of revenue recognition for distributor sales in Greater China
4.The adjustment of $242 million to calculate normalised EBIT is set out in the Appendix.
5.The announced forecast earnings reflects only the underlying performance of the business. Normalisations to Earnings
Before Interest and Tax are provided in the Appendix, details of FY20 normalisations to Net Profit After Tax will be provided
as part of Fonterra’s full-year financial statements.
3

4
The work done over the last year to strengthen our balance sheet, and our Co-op’s ability
to respond quickly has helped manage the COVID-19 situation
•COVID-19 event continues to unfold globally and
expecting increased uncertainty and volatility
•The expected global economic downturn will have a
negative impact on consumer purchasing power
•We are confident in our strategy and agile in how
we implement it
•We will continue to draw on our Co-op’s proven
strengths and work closely with our customers
•Rapidly established strategic and tactical teams
to manage our business through the impacts of
COVID-19
•Our global operations continued
•Our diverse customer and product base, and
global supply chain are proven strengths
•Our ability to change our product mix and move
products between markets has helped minimise
disruptions for our customers and our business

201920202019202020192020201920202019202020192020
From $378m²
³⁴
³³
From $15.0bn
billion
REVENUE¹
From $2.2bn
billion
GROSS
MARGIN¹
From $1.8bn
billion
OPERATING
EXPENSES¹
From $514m²
million
NORMALISED
EBIT¹
billion
TOTAL
GROUP EBIT
Improved performance with lift in all key metrics
1.This is Total Group, includes Continuing and Discontinued Operations on a normalised basis.
2.2019 EBIT restated down $8 million to reflect change in timing of revenue recognition for distributor sales in Greater China.
3.Does not add to total group due to including inter-segment sales, and excludes Discontinued Operations.
4.Ingredients performance includes the China Farming joint venture. For the first nine months of FY19 and FY20
ChinaFarming joint venture reported a loss of $(7) million and $(15) million respectively.
5.Provides end-to-end perspective, comprising China Farms, China Farming joint venture, and financials from Ingredients,
Consumer and Foodservice related to sales of milk from China Farms. China Farms is considered ‘Held for sale’ and
classified as a Discontinued Operation as previously reported in the FY20 Interim Report.
Note: EBIT and gross margin are in NZD millions. Figures presented are for the first nine months of FY20, and FY19 as
a comparative.
2019202020192020
Gross MarginEBIT
⁵
Gross MarginEBITGross MarginEBITGross MarginEBIT
5

6
Working together to care for people and help our communities
Our business has remained fully operational during the COVID-19 lockdown
On-track to inject $11
billion of milk price
payments into the New
Zealand economy
Kept each other safe &
our business running,
while continuing to
provide nutritious dairy to
the world
#GoodTogether
Redirected Anchor milk
from our in-school
programmes to
communities throughout
the country
Supplied 2 million litres of
ethanol to help with the
supply of hand sanitiser
in New Zealand

7
Working together to achieve a healthy environment for farming and society
Through The Co-operative Difference:
•31% of supplying farms now have Farm Environment
Plans, up from 23% at the start of the year. However, the
inability to access farms during the COVID-19 lockdown
has impacted progress towards this year’s target.
•Around 1000 farms have achieved Te PūtakeLevel 2 after
meeting high environment, animal, milk, people and
community standards
•On-track to deliver farm-specific greenhouse gas
emissions reports to all supplying farms this year
Progressing switch
from coal to wood pellets
at Te Awamutu site

•Forecast Farmgate Milk Price range narrowed from
$7.00-$7.60 per kgMS to $7.10-$7.30 per kgMS
•The lower mid-point within the narrowed range reflects
lower ingredient prices following a softening of demand
relative to supply
•Full year normalised earnings per share range of
15-25 cents maintained
•Reflects significant uncertainty in the last quarter:
•Profile of the recovery in foodservice sector
•Timing of shipments
•Broader global economic downturn
per kgMS
Forecast Farmgate Milk Price
cents
per share¹
Forecast Normalised Earnings
8
1.The announced forecast earnings reflects only the underlying performance of the business. Normalisations to Earnings
Before Interest and Tax are provided in the Appendix, details of FY20 normalisations to Net Profit After Tax will be
provided as part of Fonterra’s full-year financial statements.

9
•COVID-19 adds further uncertainty to process of
forecasting global dairy prices over the next 18 months
•Initial range of $1.50 reflects increased uncertainty
•COVID-19 and associated macroeconomics factors will continue
to impact demand
•GDT prices declined from late January to mid May
•Whole Milk Powder prices down 17%
•Skim Milk Powder prices down 15%
•Butter prices down 11%
•Lower NZD but expect increased volatility in foreign exchange
to continue
•EU and US production currently at seasonal peak and
uncertainty remains regarding the impact from government
interventions in these markets
per kgMS

0
10
20
30
40
50
60
70
80
90
JunJulAugSepOctNovDecJanFebMarAprMay
11
•Season to date collections, June –April,
were 1,447 million kgMS, down 0.5% on
last season
•North Island production is down 2.0%
•Effects of the drought are still being felt
across much of the North Island
•Soil moisture levels remain low, and
pasture growth rates have slowed
•South Island production has had a strong
start to autumn
•Total forecast collections for the season
remain unchanged at 1,515 million kgMS
Season
Total Milk Solids
(kgMS)
Peak Day
Milk
2017/181,505m (down 1%)82m litres
2018/191,523m (up 1%)85m litres
2019/20F1,515m (down 0.5%)83m litres
Volume (m litres/day)

12
Q1Q2Q3Q4
2019
2020
∆²
Volume³ (‘000 MT)2,4062,327(3)%
Revenue ($)12,08613,2309%
Gross Margin ($)1,0991,21811%
Gross Margin (%)9.1%9.2%
Other
⁴
887
Operating Expenses ($)(572)(557)3%
EBIT ($)6156689%
Discontinued EBIT(13)–
•Sales volumes down 3%, 79,000 MT, mainly due to
lower milk collections in both Australia and New Zealand
•Ingredients’ gross margin increased $119 million:
•New Zealand gross margin improved mainly due to higher
margins within Global Sourcing business, and favourable
price relativities in third quarter
•Improved performance in Australia due to manufacturing
cost savings and favourable product mix
•Largest contributors to decrease in ‘Other’ were divestment of
DFE Pharma and increased loss in China Farming joint venture
•Ingredients’ EBIT from continuing operations increased 9%,
being $53 million
¹
1.Ingredients’ performance restated to include China
Farming joint venture. China Farms business unit is
classified as a Discontinued Operation, financials relating
to sales of milk from China Farms have been removed
from the Ingredients segment for FY19.
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.Includes sales to other strategic platforms.
4.Includes other income, net foreign exchange gain/(loss)
and share of equity accounted investees.
5.Summing of EBIT margin figures may not add up to total
EBIT displayed in table above due to rounding.
Note: EBIT and gross margin are in NZD millions. Figures
presented are for the first nine months of FY20, and FY19 as a
comparative. Numerical or percentage changes are expressed
relative to the first nine months ofFY19.
⁵

13
MT
From 243,000 MT
From (0.1)%
MT
From (102,000) MT
Volume²
MT
From 2,265,000 MT
Gross Margin
From 9.4%
¹
$ million
1.Ingredients’ performance restated to include China Farming joint venture. China Farms business unit is classified as
a Discontinued Operation. Financial performance relating to sales of milk from China Farms has been removed
from the Ingredients segment for FY19.
2.Includes sales to other strategic platforms.
Note: EBIT and gross margin are in NZD millions. Figures presented are for the first quarter of FY20, and FY19 as a
comparative. Numerical or percentage changes are expressed relative to the first quarter ofFY19.
Sum of individual numbers from the regional and divisional breakdown may not add to the totals in each category due
torounding.
Gross MarginEBITGross MarginEBITGross MarginEBIT
201920202019202020192020201920202019202020192020

14
1.Excludes bulk liquid milk.
2.Note: Figures represent Fonterra-sourced New Zealand milk only. Reference products are products used in the calculation of the Farmgate Milk Price –W MP, SMP, BMP, Butter and AMF.
Q3 FY19Q4 FY19Q1 FY20Q2 FY20Q3 FY20
Change
Q3 FY19
to Q3 FY20
Production Volume¹ (‘000 MT)
Reference440 94607704433(2)%
Non-Reference210722362722152%
SalesVolume(‘000 MT)
Reference535405291630490(8)%
Non-Reference233226178247219(6)%
Revenue ($ per MT)
Reference4,539 5,1885,2895,1115,39419%
Non-Reference5,238 6,0555,6795,8776,44823%
Reference and Non-Reference price relativities improved relative to prior
four quarters

Q1Q2Q3Q4
2019
2020
¹²
∆³
Volume
⁴
(‘000 MT)3443543%
Revenue ($)1,9902,1337%
Gross Margin ($)29736824%
Gross Margin (%)14.9%17.3%
Other
⁵
3(2)
Operating Expenses ($)(165)(158)4%
EBIT ($)13520854%
Discontinued EBIT––
⁶
15
1.Individual Consumer and Foodservice tables may not align
to combined Consumer and Foodservice table due
torounding.
2.2019 restated to reflect change in timing of revenue
recognition for distributor sales in Greater China
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.Includes sales to other strategic platforms.
5.Includes other income, net foreign exchange gain/(loss)
and share of equity accounted investees.
6.Summing of quarterly EBIT figures may not add up to total
EBIT displayed in table above due torounding.
Note: EBIT is in NZD millions. Figures presented are for the
first nine months of FY20, and FY19 as a comparative.
Numerical or percentage changes are expressed relative to
the first nine months ofFY19.
•Foodservice EBIT is up $73 million
•third quarter sales volumes reduced the growth rate
relative to the half year performance
•Third quarter sales volumes impacted by store closures
(restaurants, bakeries etc.) across most markets
•Markets are in varying stages of reopening during fourth quarter
•Foodservice sales volumes are 3% ahead of prior year due to a
strong first half performance in Greater China and Asia
•Foodservice gross margin is 17.3%, up from 14.9% due to
improved butter margins in Greater China and Asia
•Greater China Foodservice started its recovery relatively quickly,
although the sector is still not at 100% in Greater China
•Fourth quarter Asia and Oceania sales volumes will be impacted
by COVID-19 situation

16
000 MT
From 24,000 MT
From 19.6%
000 MT
From 70,000 MT
From 15.8%
000 MT
From 70,000 MT
From 18.8%
Volume¹
000 MT
From 180,000 MT
Gross Margin
From 12.7%
¹
$ million
Gross MarginEBITGross MarginEBITGross MarginEBIT
201920202019202020192020201920202019202020192020
Gross MarginEBIT
2019202020192020
1.2019 restated to reflect change in timing of revenue recognition for distributor sales in Greater China
2.Includes sales to other strategic platforms.
Note: Figures presented are for the first nine months of FY20, and FY19 as a comparative. Numerical or percentage
changes are expressed relative to the first nine months performance ofFY19. Sum of individual numbers from the
regional and divisional breakdown may not add to the totals in each category due to rounding.

Q1Q2Q3Q4
2019
2020
¹²
∆³
Volume
⁴
(‘000 MT)868834(4)%
Revenue ($)3,1963,178(1)%
Gross Margin ($)803759(6)%
Gross Margin (%)25.1%23.9%
Other
⁵
2(12)
Operating Expenses ($)(678)(560)17%
EBIT ($)12818746%
Discontinued EBIT(6)19
⁶
17
1.Normalised basis and excludes Discontinued Operations.
Discontinued EBIT provided on separate line for
comparative purposes.
2.Individual Consumer and Foodservice tables may not align
to combined Consumer and Foodservice table due
torounding.
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.Includes sales to other strategic platforms.
5.Includes other income, net foreign exchange gain/(loss)
and share of equity accounted investees.
6.Summing of quarterly EBIT figures may not add up to total
EBIT displayed in table above due torounding.
Note: EBIT is in NZD millions. Figures presented are for the
first nine months of FY20, and FY19 as a comparative.
Numerical or percentage changes are expressed relative to
the first nine months ofFY19.
•Consumer earnings impacted significantly less
than Foodservice by COVID-19
•Lower sales volumes across all regions, largest contributors
were Latin America, due to civil unrest in Chile, and Oceania,
due to the divestment of Tip Top
•Gross margin down from 25.1% to 23.9% predominantly due to
lower volumes of high gross margin product in Greater China
•Consumer EBIT increased $59 million due to:
•All regions reducing operating expenses by a combined
$118 million
•Gross margin growth in Asia due to improved performance
in Sri Lanka
•Consumer EBIT growth partially offset by losses in Hong Kong,
due to COVID-19 and pre-existing challenging trade conditions

¹
000 MT
From 252,000 MT
From 26.5%
000 MT
From 155,000 MT
From 26.3%
000 MT
From 399,000 MT
From 20.3%
Volume²
000 MT
From 62,000 MT
Gross Margin
From 39.6%
$ million
Gross MarginEBITGross MarginEBITGross MarginEBIT
201920202019202020192020201920202019202020192020
Gross MarginEBIT
2019202020192020
1.Normalised basis and excludes Discontinued Operations.
2.Includes sales to other strategic platforms.
Note: Figures presented are for the first nine months of FY20, and FY19 as a comparative. Numerical or percentage
changes are expressed relative to the first nine months performance ofFY19. Sum of individual numbers from the
regional and divisional breakdown may not add to the totals in each category due to rounding.
18

19
∆¹
Volume² (‘000 MT)15167%
Revenue ($)17420518%
Gross Margin ($)(18)19205%
Gross Margin (%)(10.3)%9.2%
Operating Expenses ($)(12)(14)17%
Other
³
($)113
China Farms EBIT ($)(19)8142%
End-to-End EBIT Perspective
Ingredients EBIT
⁴
($)(7)(18)
Consumer and Foodservice
EBIT
⁵
($)
34
China Farms End-to-End
⁶
($)(23)(6)74%
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.Includes sales to other strategic platforms.
3.Includes other income, net foreign exchange gain/(loss).
4.Includes China Farming joint venture and associated
management fees.
5.EBIT impact of milk from China Farms sold by Consumer
and Foodservice businesses.
6.Provides end-to-end perspective, comprising China Farms,
the China Farming joint venture, and financials from
Consumer and Foodservice related sales of milk from
China Farms.
Note: Figures presented are for the first nine months of FY20,
and FY19 as a comparative. Numerical or percentage changes
are expressed relative to the first nine months performance
ofFY19.
•The China Farms operations were impacted by
COVID-19, with increased feed and logistics costs
•China Farms’ sales volumes are up 7% due to recovering from
flooding in Yutian, higher productivity and feed management
•Cost efficiencies and improved pricing lifted China Farms’
profitability:
•Gross margin increased $37 million
•EBIT increased $27 million
•From an end-to-end EBIT perspective the improved China
Farms EBIT was offset by the China Farming joint venture loss
•China Farming joint venture loss increased from $(7) million to
$(15) million due to ongoing animal management costs

¹
DFE Pharma
401 26
foodspring™
6666
China Farms
(63) (63)
DPA Brazil
(71)(71)
China Farming JV
(65)(65)
Sub total
467(199)26294
Beingmate²
2 2
Other
³
(54) (54)
20
1.Earningsbeforeinterestandtax.
2.Beingmateisclassifiedas‘heldfortrading’.Theinvestmentisrecordedatfairvalue,withchangesinfairvaluerecordedinprofitorloss.Fairvalueiscalculatedasthequotedsharepriceatendofquarter,multipliedbynumberofsharesheld.
3.Includescostsassociatedwithimplementingthenewoperatingmodelandotherlegalcosts.
Note:RefertothepreviouslyprovidedNote2oftheFinancialStatementsintheFY20InterimReportforfurtherdetailofimpairments.
Largest contributor to $20 million increase in normalisations from FY20 Interim Results is
revaluation of Beingmateholding to align with quoted market share price

¹²³¹²³
Revenue
14,384 481 14,865 15,485 521 16,006
Cost of Goods Sold
(12,219) (418) (12,637) (13,132) (402) (13,534)
Gross Margin
2,165 63 2,228 2,353 119 2,472
Gross Margin %15.0 %13.2 %
15.0 %
15.2 %22.9 %
15.4 %
Operating Expenses
1,715 98.3 1,813 1,575 90 1,665
Other Income
88 11 99 7 1 8
Normalised EBIT
538 (24) 514 785 30 815
Normalisations
(136) -(136) 376 (134) 242
402 (24) 378 1,162 (105) 1,057
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1.ContinuingOperationsaredefinedinNote1oftheFinancialStatementsinthepreviouslyreleasedFY20InterimReport.
2.ThebasisofdeterminingDiscontinuedOperationsissetoutintheBasisofPreparationoftheFinancialStatementsinthepreviouslyreleasedFY20InterimReport.
3.TotalGroupincludesContinuingOperationsandDiscontinuedOperations.

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AMF
Anhydrous Milk Fat
BMP
Butter Milk Powder
Base Price
Prices used by Fonterra’s sales team as referenced
against GDT prices and other relevant benchmarks.
DIRA
Dairy Industry Restructuring Act 2001 (New Zealand)
GDT
Global Dairy Trade, the online provider of the twice
monthly global auctions of dairy ingredients.
Gearing Ratio
Gearing ratio is economic net interest bearing debt
divided by total capital. Total capital is equity
excluding the hedge reserves, plus economic net
interest bearing debt.
Farmgate Milk Price
The price for milk supplied in New Zealand to
Fonterraby farmer shareholders.
Fluid and Fresh Dairy
The Fonterra grouping of skim milk, whole milk and
cream –pasteurised or UHT processed,
concentrated milk products andyoghurt.
kgMS
Kilogram of milk solids, the measure of the amount of
fat and protein in the milk supplied to Fonterra.
Non-Reference Products
All dairy products, except for Reference, produced by
the NZ Ingredients business.
Price Achievement
Revenue achieved over the base price less
incremental supply chain costs above those set out in
the Milk Pricemodel.
Reference Products
The dairy products used in the calculation of the
Farmgate Milk Price, which are currently WMP, SMP,
BMP, butter and AMF.
Regulated Return
The earnings component of Milk Price generated
from a WACC return on an assumed asset base.
Season
New Zealand: A period of 12 months to 31 May in
eachyear.
Australia: A period of 12 months to 30 June in
eachyear.
SMP
Skim Milk Powder
Stream Returns
The gross margin differential between Non-Reference
Product streams and the WMP stream (based on
baseprices).
WACC
Weighted Average Cost of Capital
WMP
Whole Milk Powder

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Ingredients
The Ingredients platform comprises bulk and specialty dairy products such as milk powders, dairy fats, cheese and proteins manufactured in New Zealand, Australia,
Europe and Latin America, or sourced through our global network, and sold to food producers and distributors in over 140 countries. It also includes Fonterra
FarmSource™ retail stores.
Consumer
The Consumer platform comprises branded consumer products, such as powders, yoghurts, milk, butter, and cheese. Base productsare sourced from the
ingredients business and manufactured into higher-value consumer dairy products.
Foodservice
The Foodservice platform comprises a range of branded products and solutions for commercial kitchens, including bakery butter, culinary creams, and cheeses.