Fonterra provides Q1 performance and Milk Price update

4 December 2020

Fonterra provides update on its forecast Farmgate Milk Price range and first quarter performance

Fonterra Co-operative Group Limited today narrowed its 2020/21 forecast Farmgate Milk Price range,
reported a solid start to the 2021 financial year and reconfirmed its forecast earnings guidance.

Fonterra CEO Miles Hurrell says as a result of strong demand for New Zealand dairy, the Co-op has
narrowed and lifted the bottom end of the forecast Farmgate Milk Price range from NZD $6.30 - $7.30 per
kgMS to NZD $6.70 - $7.30 per kgMS.

“This means the midpoint of the range, which farmers are paid off, has increased to NZD $7.00 per kgMS.

“China is continuing to recover well from COVID-19 and this is reflected in recent Global Dairy Trade (GDT)
auctions with strong demand from Chinese buyers, especially for Whole Milk Powder, which is a key driver
of the milk price.

“The impact of COVID-19 continues to play out globally, and we continue to have a watchful eye on the
increasing Northern Hemisphere milk production and New Zealand dollar.

“However, we have contracted a good proportion of our sales book for this time of the season, which has
given us the confidence to narrow and lift the bottom end of the forecast Farmgate Milk Price range.

“Our forecasts would see the Co-op contribute around NZD $10.5 billion to the New Zealand economy this
year.”

First quarter business update

Mr Hurrell says the Co-operative has continued to make progress on implementing its strategy and had a
solid start to the first quarter, delivering total Group normalised Earnings Before Interest and Tax (EBIT) of
NZD $250 million, up NZD $72 million on last year.

“Despite ongoing market disruptions from COVID-19, we are continuing to build on the momentum achieved
in the last financial year and this can be seen in the progress we are making against our 2021 priorities:

• Our Co-operative, which is about supporting farmers and employees;
• Performance, which is about hitting our financial targets; and
• Community, which is about exceeding customer expectations, supporting communities through our
nutrition programmes and making our low carbon farming model a powerful point of differentiation.

Fonterra Co-operative Group
Page 2


“These priorities are helping us take another step this year towards our goals of Healthy People, Healthy
Environment and Healthy Business.”

From a performance perspective, Mr Hurrell says he is pleased with the progress the Co-op has made in
the first quarter.

“Sales volumes are in line with the same period last year, which was before we felt the impact of COVID-
19. This reflects strong demand for dairy and careful management of our supply chain.

“We’ve seen improvements right across our business, which has resulted in a 40% increase in our
normalised earnings. There’s been a couple of exceptions to this – Europe, which has been impacted by
higher costs, and Africa, which has been impacted by lower volumes as we have shifted product to meet
strong demand across Asia.

“Our Greater China Foodservice business has been the stand-out performer so far as demand for dairy in
China continued to recover strongly from COVID-19.

“We expanded our Foodservice business into another 13 cities in China, bringing the total number of cities
we operate in to more than 360.

“And our teams are helping to drive demand by continuously releasing new innovative ways of using our
products in local cuisine as they pursue the next big food trend in China.

“Demand in our Southeast Asia (SEA) Consumer business has improved year-on-year, while our SEA
Foodservice business has started to recover as COVID-19 restrictions eased in some markets.”

Mr Hurrell says the Co-op remains focused on financial discipline and reducing debt.

“We continue to divest non-core assets with the announcement that we’ve agreed to sell our China Farms
for NZD $555 million, which will further reduce debt.

“The sale of this asset reinforces our strategy of prioritising New Zealand milk.”

Fonterra’s reported EBIT was down NZD $31 million on last year to NZD $235 million mainly due to the
one-off gain on sale of foodspring® which occurred in the first quarter of last year.

Commenting on the Co-op’s progress against its other priorities for the year, Mr Hurrell says Fonterra has
made tangible progress against its environmental targets and on supporting employees, customers and
communities. Some initiatives include:

• Supporting the NZ Government’s skills initiatives by increasing the number of apprenticeship roles
in engineering and dairy processing over the next two years and working to double the number of
on-the-job training hours we provide our employees by 2025.
• Accelerating demand for our Foodservice products in the US by partnering with Land O’Lakes, which
will give us access to a larger customer base.
• Working with more Fonterra farms in New Zealand to develop Farm Environment Plans and we’re
well on the way to our target of 100% by 2025.
• Installing solar panels at two of our sites in Malaysia and Indonesia, which will power up to a quarter
of the sites’ energy needs.
• Launching the Anchor plant-based bottle as part of our goal to have all packaging reusable,
recyclable or compostable by 2025.

Fonterra Co-operative Group
Page 3


Outlook

Commenting on the outlook for the rest of the year, Mr Hurrell says the Co-operative is confident in its
performance and is on track to deliver on its earnings guidance.

“However, there are still a number of risks we are keeping a close eye on and for this reason we have made
the decision to maintain our current forecast earnings range.

“COVID-19 related challenges remain, including how the global recession and new waves of the virus will
impact cust
omer demand, and there is some congestion in global supply chains that we are actively
managing. There is also continued uncertainty around what could happen to the price difference between
the products that determine our milk price and the rest of our product range in the second half of the year.

“We will continue to monitor the situation and, as the year progresses and we have more certainty, we would
expect the forecast earnings range to narrow.”


-ENDS-

For further information contact:

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

---

Fonterra
2020/21 Quarter One Update
4 December 2020

2
Important information
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
projectionsin thisreportreflectviewsheldonlyat thedateofthispresentation.
Statementsaboutpastperformancearenotnecessarilyindicativeof futureperformance.
ExceptasrequiredbyapplicablelaworanyapplicableListingRules,theRelevantPersonsdisclaimanyobligationor
undertakingto updateanyinformationin thispresentation.
Thispresentationdoesnotconstituteinvestmentadvice,oraninducement,recommendationoroffertobuyorsellany
securitiesin FonterraortheFonterraShareholders’Fund.

3
Forecast Farmgate Milk Price
$6.70 -$7.30per kgMS
Total Group normalised EBIT¹
$250million$72m²
Forecast normalised earnings per share³
20c –35c
• Narrowed and lifted the lower end of forecast
Farmgate Milk Price range
• Normalised EBIT up on same time last year, which
was before we felt the impact of COVID-19
• Maintained forecast earnings per share range
• Uncertainty remains around future impact
of COVID-19
• Progressing on our environmental targets and a
continued focus on our people
2020/21 Quarter One update
Solid start to 2020/21 Financial Year
1.Total Group normalised EBIT includes Continuing and Discontinued Operations. Includes amounts attributable to
non-controlling interests.
2.FY20 Quarter One normalised EBIT restated to $178m due to change in timing of revenue recognition for sales to
distributor in Greater China.
3.Excludes amounts attributable to non-controlling interests.

4
Business performance
• Similar volumes sold reflecting continued strong
customer demand for dairy and careful management of
supply chain
• Increased Gross Profit due to improved margins and higher
volumes in Foodservice and Consumer in Greater China
and South East Asia
• Stable performance in Ingredients overall. Growth across
Asia offset by lower volumes in Africa and increased costs
in Europe
• Continued focus on operating expenses
• Total Group normalisedEBIT up 40%, or $72 million
• Good progress on sale of China Farms and continued sell
down of Beingmate
1.Figures presented are for Total Group, which includes Continuing and Discontinued Operations on a normalised
basis unless stated otherwis e
2.FY20 Quarter One restated due to change in timing of revenue recognition for sales to distributor 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 figures
4.Consists of other operating income and expens es, which Includes net foreign exchange gains and losses, share of
profit or loss on equity accounted investees
5.Prior year Reported EBIT includes foodspring® gain on sale of $64 million. The difference between current year’s
NormalisedEBIT and Reported EBIT is Reported EBIT includes $(38) million revaluation of Beingmateholding and
$23 million preliminary estimate of China Farms gain on sale
million
¹
2020
²
2021%
∆
³
Volume (‘000 MT)8318320%
Revenue ($)4,2384,181(1)%
Gross Profit ($)7477581%
Gross Margin (%)17.6%18.1%
Operating Expenses ($)(553)(523)5%
Other
⁴
($)(16)15-
Normalised EBIT ($)17825040%
Reported EBIT
⁵
($)266235(12)%

5
Expanded
China Foodservice
into 13 new cities
taking total to
363cities
Continuously releasing new
innovative ways of using our
products in local Chinese
cuisine, with 54released
this quarter
Partnering with
Land O’Lakes
to accelerate demand
for our Foodservice products
in the US using our IP
Strengthening our
balance sheet
China Farms’
sales agreement
Re-affirmed
A Band
Credit Rating¹
Healthy Business
1.S&P Global Ratings

6
Supporting our people
during COVID-19 remains
our number one priority
Supporting the NZ Government’s
skillsinitiatives by increasing the
number of apprenticeship roles in
engineering and dairy processing
over the next two years
Taking new approach
to community nutrition
programmes, growing
KickStartBreakfast and partnering
with NZ Food Network
Healthy People

7
Healthy Environment
All Fonterra farmers in NZ now have
access to unique farm greenhouse
gas emissions profiles
– the first time such a tool has been
introduced in NZ at scale
Installedsolar panels at 2 sites
in Malaysia and Indonesia,
which will power up to 25%
of the sites’ energy needs
Launched Anchor
plant-based bottle as part
of our goal to have all packaging
reusable, recyclable or compostable by
2025

8
2021 Outlook
•Narrowed and lifted the lower end of forecast Farmgate
Milk Price range to $6.70-$7.30 per kgMS
•Assumes no significant impact on product pricing
from global economic impact of COVID-19
•Strong demand from China partially offset by
increasing milk supply from key milk producing
regions and higher NZ dollar
•Maintained full year forecast normalised earnings per
share range of 20-35 cents
•Currently tracking above midpoint of range, but there
are a number of risks
•Uncertainty around future impact of COVID-19,
including impact on customer demand, supply
chain and macroeconomics
•Price relativities for the remainder of the
financial year
Forecast Farmgate Milk Price
$6.70-$7.30
per kgMS
20 –35
cents per share
Forecast Earnings

9
Appendix

10
•Season to date collection, June – October,
was 527.5 million kgMS, up 0.5% on
last season
•Good early season conditions have
contributed to collections being slightly ahead
of last season
•Poor pasture quality impacted milk production
across parts of the country towards the end of
October and into early November
•Full season forecast remains at 1,525m
kgMS, up 0.5% on last season
Fonterra’s New Zealand milk collections
0
10
20
30
40
50
60
70
80
90
JunJulAugSepOctNovDecJanFebMarAprMay
SeasonTotal Milk Solids
(kgMS)
Peak Day
Milk
2018/191,523m(up 1%)85m litres
2019/201,517m (down 0.4%)83m litres
2020/211,525m (up 0.5%)¹83m litres
Volume (m litres/day)
1. Current full season forecast

11
Key
financial
metrics for
2020/21
Quarter
One
¹
,
²
Sales Volume
(’000 MT)
Normalised
Revenue
Normalised
Gross Profit
Normalised
OPEX
Normalised
EBIT
Free
Cash Flow
621
636
656
552
523
20172018201920202021
Opex ($ million)
3.8
4.0
3.9
4.24.2
20172018201920202021
Revenue ($ billion)
841
660
641
746
758
20172018201920202021
Gross Profit ($ million)
252
72
21
178
250
20172018201920202021
EBIT ($ million)
(610)
(671)
(1,245)
(648)
(845)
20172018201920202021
Free Cash Flow ($ million)
930
805
783
831
832
20172018201920202021
Sales Volume ('000 MT)
1.Figures presented are for Total Group, which includes Continuing and Discontinued Operations on a normalised
basis unless stated otherwis e
2.FY20 and FY19 Quarter One restated due to change in timing of revenue recognition for sales to distributor in
Greater China

12
Segment reporting
•At our half year announcement we will include detailed segment reporting under the new customer-
led operating model
•To provide further performance insights and transparency, the new segment reporting will include
both geographical and product channel, that is Ingredients, Foodservice and Consumer
•We will provide restated 2019/20 Financial Year segment information to allow for comparison

13
FY21
FY20Q1 ActualFull Year Target
Healthy People
Total recordable injury frequency rate (TRIFR) per million work hours¹5.85.55.0
Female representation in senior leadership²29%30%
35%
Employee engagement4.07NA³Top Quartile
Farmer sentiment (Net Promoter Score for Fonterra in New Zealand)333210⁴
Healthy Environment
Number of farms with Farm Environment Plans (New Zealand)34%37%45%
Reduction in water used at sites in water-constrained regions versus FY18(3.1)%(1.2)%⁵
(10)%
Reduction in greenhouse gas emissions from manufacturing versus FY15(5.7)%(11.7)%⁵(10)%⁶
Solid waste to landfill (kilotonnes) below FY2015.93.0⁵13.1
Healthy Business
Fonterra % kgMS of New Zealand milk collected for the season ended 31May80%NA⁷80%
New Zealand Farmgate Milk Price (per kgMS)$7.14$6.70-$7.30⁸$5.90-$6.90⁸
Return on capital6.7%On track6% to 7%
Debt/EBITDA3.4xOn track3.0-3.5x
Gearing Ratio41.4%On track36 to 40%
Normalised earnings per share24cOn track20c to 35c
Board Statement of Intentions
1.Part of zero harm philos ophy which also includes target 0 serious harm/0 fatalities
2.Senior leadership defined as Band 14+
3.Employee engagement is measured through a company-wide survey. The FY21 survey will take place in Q3
4.The Net Promoter Score for Fonterra was (17) when the target was set
5.The Q1 position has been calculated utilising actual data where available or estimates
6.Assumes Te Awamutu conversion to wood pellet is completed for full use in FY21
7.Only available on an annual basis
8.Based on latest publicly announced Forecast Farmgate Milk Price
The Board Statement of Intentions sets out the Board’s intentions for the performance and operations of Fonterra for
FY21. In accordance with the Constitution of Fonterra, Fonterra is required to provide a regular overview to the
Fonterra Shareholders’ Council of actual achievements, compared with the targets set by the Board. The table below
provides an update as at Q1 of Fonterra’s performance against these targets.

14
Glossary
Gearing ratio
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
.
Debt/EBITDA
Debt to EBITDA is calculated as total borrowings, plus bank
overdraft, plus the effect of debt hedging, less a cash
allowance of 75% of cash and cash equivalents, divided by
normalised earnings before interest, tax, depreciation and
amortisation (normalised EBITDA) excluding share of
loss/profit of equity accounted investees and net foreign
exchange losses/gains. Both Debt and EBITDA are adjusted
to include amounts relating to businesses classified as held for
sale.
Normalised earnings per share (EPS)
Normalised earnings per share means normalised profit after
tax attributed to equity holders divided by the weighted
average number of shares for the period
Farmgate Milk Price
The price for milk supplied in New Zealand to Fonterraby
farmer shareholders.
kgMS
Kilogram of milk solids, the measure of the amount of fat and
protein in the milk supplied to Fonterra.
Season
New Zealand: A period of 12 months to 31 May in eachyear.
Australia: A period of 12 months to 30 June in eachyear.
Return on capital
Return on capital is calculated as normalised EBIT, less a
notional tax charge divided by capital employed including
brands, goodwill and equity accounted investments. Capital
employed is calculated as the average for the period of: net
assets excluding net interest-bearing debt and deferred tax
balances.