Fonterra reports a positive half year result
Fonterra Co-operative Group Page 1
Results for Announcement to the Market
Results for announcement to the market
Name of issuer
Fonterra Co-operative Group Limited
Reporting Period 6 months to 31 January 2021
Previous Reporting Period 6 months to 31 January 2020
Currency NZD
Amount (m’s) Percentage change
Revenue from continuing operations $9,597 (5)%
Total Revenue $9,915 (5)%
Net profit/(loss) from continuing operations $339 (44)%
Total net profit/(loss) $391 (22)%
Interim Dividend
Amount per Quoted Equity Security 5 cents per share
Imputed amount per Quoted Equity Security Not Applicable
Record Date 24 March 2021
Dividend Payment Date 15 April 2021
Current period Prior comparable period
Net tangible assets per Quoted Equity
Security
$3.07 $2.46
A brief explanation of any of the figures
above necessary to enable the figures to be
understood
Please refer to the interim financial statements for further
explanation. Net tangible assets per quoted equity security
for the prior comparable period have been restated, please
see the interim financial statements for further details.
Authority for this announcement
Name of person authorised to make this
announcement
Anya Wicks
Contact person for this announcement Anya Wicks
Contact phone number (09) 374 9341
Contact email address anya.wicks@fonterra.com
Date of release through MAP 17/03/2021
Unaudited interim financial statements accompany this announcement.
---
17 March 2021
Fonterra reports a positive half year result
Summary of numbers
• Reported Profit After Tax $391 million, down 22%
*
• Normalised Profit After Tax: $418 million, up 43%
#
• Total Group normalised Earnings Before Interest and Tax (EBIT): $684 million, up 17%
#
• Total Group EBIT: $657 million, down 18%
• Net debt: $5.6 billion, down 3%
• Total Group normalised Gross Profit: $1,722 million, up 3%
• Total Group normalised Gross Margin: 17.4%, up from 16%
• Total Group normalised Operating expenditure: $1,055 million, down 3%
• Normalised Greater China EBIT: $339 million, up 38%
• Normalised Asia Pacific EBIT: $190 million, up 9%
• Normalised Africa, Middle East, Europe, North Asia, Americas (AMENA) EBIT: $201 million, down
7%
• Full year forecast normalised earnings per share: 25-35 cents per share
• Interim dividend: 5 cents per share
• Forecast Farmgate Milk Price: $7.30-$7.90 per kgMS
• Forecast milk collections: 1,525 million kgMS, up 0.5%
* 2020 included the gain from the divestments of DFE Pharma and foodspring®.
#
These normalised numbers reflect the underlying performance of the business.
Fonterra Co-operative Group Limited today announced its 2021 Interim Results and they show the Co-
operative has had a positive first half, resulting in a Total Group normalised EBIT of $684 million,
normalised Profit After Tax of $418 million and a decision to pay an interim dividend of 5 cents alongside
a strong forecast Farmgate Milk Price.
Fonterra CEO Miles Hurrell says Fonterra is pleased with its Reported Profit After Tax of $391 million.
“While down on this time last year at a headline level, the 2020 financial year benefited significantly from
the divestments of DFE Pharma and foodspring®.
Fonterra Co-operative Group
Page 2
“Despite the major impact COVID-19 is having around the world, the Co-op is staying focused on what it
can control – looking after our people, making progress on our strategy to drive sustainable value for New
Zealand milk and remaining committed to our 2021 priorities. Those priorities are:
• Our Co-operative, which is about being there for 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 New Zealand’s low carbon farming model a powerful point of
differentiation.
“I would like to thank our team for delivering this result. While we’ve been fortunate here in New Zealand,
many of our people overseas are still in lockdown and have now been working from home for 12 months.
Our farmer owners have shared words of support for our teams and this has provided a sense of purpose
and encouragement when it’s been needed the most. It’s during these times you really can see what
makes our Co-op special.”
From a performance perspective, Hurrell says the Co-op has had a great first six months of the 2021
financial year with Total Group normalised EBIT up $100 million to $684 million, a Total Group normalised
Gross Margin of 17.4% (up from 16%) and Total Group normalised operating expenditure down $37
million.
“Our standout performer continues to be Greater China. The team has delivered a 38% increase in
normalised EBIT to $339 million, reflecting the strength of our Foodservice business in this region,
improvements in our Consumer business and China’s strong economic recovery following the initial
impact of COVID-19.
“Asia Pacific’s normalised EBIT is up 9% to $190 million as a result of improvements in Foodservice and
Consumer. Consumer has benefitted from more people staying at home and cooking with dairy and a
renewed focus on our brands of Anchor, Anmum and Anlene.
“AMENA’s normalised EBIT is down 7% because of lower sales volumes in Ingredients as we made the
most of our ability to move milk into higher returning markets and products. However, we did see some
good improvements in Foodservice and Consumer across AMENA.”
Commenting on the global supply chain challenges, Hurrell says while it’s tough going out there, the Co-
op is proactively managing the situation and working with its ocean freight partnership Kotahi to keep
product moving.
“Our sales book is well contracted – however, as a result of some small shipping delays, our product
inventory is higher than it was this time last year and this means our investment in working capital is also
higher. By the end of the financial year we expect this to be back to more normal levels as we have
confidence in our supply chain to get product, already contracted, delivered to our customers.
“There’s still more work to do, but our improved performance and reduced debt levels are helping us build
the financial strength of the Co-op and we’re on track to achieve our target debt/ EBITDA ratio of less than
3.5 this year.
“The Board wanted to be in a position to continue paying dividends. It is encouraging to have got the Co-
op’s earnings and debt to a level that supports a 5 cent dividend at this point in the year.”
Fonterra Co-operative Group
Page 3
The record date for the payment of this dividend is 24 March 2021, and the payment date is 15 April 2021.
Given Fonterra’s ongoing capital structure review, the Co-op’s dividend reinvestment plan will not apply to
this dividend, which will be paid in cash.
Divestment update
As part of Fonterra’s continuous review of its asset portfolio, today Fonterra can advise farmers and unit
holders that, along with the joint venture partner, it has decided to undertake a sales process for the JV
farms in China.
Hurrell says as with Fonterra’s own China farms, the decision to sell the JV farms is in line with the Co-
op’s strategy to focus on New Zealand milk.
“We expect the sales of our farms to be completed this financial year and the sale of the JV farms to be
completed this calendar year.
Fonterra has also continued to reduce its shareholding in Beingmate, which on 31 January 2021 was
sitting at 3.94 % and is now 2.82%.
Hurrell says Fonterra will continue to sell down its remaining shareholding and expects to have fully exited
this investment before the end of this financial year.
“As shown through our results today, Greater China continues to be one of our most important strategic
markets. We remain committed to growing the value of our Greater China business, which we’ll do by
bringing the goodness of New Zealand milk to Chinese customers in innovative ways and partnering with
local Chinese companies to do so.”
Social and environmental progress
Commenting on Fonterra’s social and environmental progress, Hurrell says at the same time as driving
financial performance, the Co-op knows this goes hand-in-hand with being there for farmers, employees
and customers, contributing to local communities and reducing our environmental footprint.
“We can’t have one without the others if we want to be here for generations to come – and we’re making
some good progress in these areas too.
“Some examples include:
• Taking proactive steps to help keep our people well through COVID-19, at the same time as keeping
the business operating during our busiest time of the year.
• Helping feed 15,000 Kiwi families through the Anchor Christmas Appeal in partnership with the NZ
Food Network.
• Expanding a promising plantain trial to improve waterways, in partnership with Nestlé and DairyNZ,
and also working with Royal DSM to test whether a feed additive called Bovaer® can reduce methane
emissions in New Zealand’s pasture-based farms.
• Working with more farmers in New Zealand to develop Farm Environment Plans and, with 42% of
supplying farms now having one, we’re well on our way to our target of 100% by 2025.”
Fonterra Co-operative Group
Page 4
Outlook for the second half
In talking about the second half of the financial year, Hurrell reaffirms the forecast Farmgate Milk Price
range of $7.30 - $7.90 per kgMS and forecast normalised earnings guidance of 25-35 cents per share.
“Fortunately, we are in a position, where so far, New Zealand dairy is proving to be resilient in a COVID-
19 world. It’s a staple in people’s diets around the world and demand is strong.
“Despite a strong first half, we are expecting our earnings performance to come under significant pressure
in the second half.
“The strong milk price is great for farmers. It’s good for New Zealand too – with a mid-point of $7.60 per
kgMS, it would see us contribute more than $11.5 billion to the New Zealand economy.
“However, the increasing raw milk prices through the first half and now into the second half puts a lot of
pressure on our sales margins and this will be seen through the second half of the year.
“We will face into this challenge in the same way we are with others – that’s focusing on what’s in our
control and staying on strategy.”
Non-GAAP financial information
Fonterra uses several non-GAAP measures when discussing financial performance. These measures include
normalised Profit After Tax, normalised EBIT, EBIT, normalised earnings per share and normalisation adjustments.
Total Group measures present the combined financial performance of the Group’s continuing and discontinued
operations.
Non-GAAP financial measures 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 audited Annual Financial Statements.
Reconciliations of the NZ IFRS measures to the non-GAAP measures used by Fonterra can be found in the Non-
GAAP measures section of the Interim Report 2021 that is available on Fonterra’s website.
-ENDS-
For further information contact:
Fonterra Communications
24-hour media line
Phone: +64 21 507 072
---
Creating Goodness
INTERIM REPORT 2021
FOR THE SIX MONTHS ENDED
31 JANUARY 2021
Our Co-operative,
Empowering people
To create goodness for generations.
You, me, us together.
Tātou, tātou.
We are a co-operative created and owned by Aotearoa
New Zealand dairy farmers.
We were founded by farming families, working
together to share the natural goodness of
New Zealand milk with the world.
We create goodness in many ways. From the
nutritional goodness of our products to the
livelihoods of farmers and our employees.
We also contribute to the wellbeing of communities
and the health of our land and waters. We’re
transitioning to a low carbon future and working
to meet the changing needs of customers and
consumers. All of this helps build a strong,
sustainable Co-op.
Creating Goodness
1
Fonterra uses several non-GAAP measures when
discussing financial performance. These measures
include normalised profit after tax, normalised EBIT,
EBIT and normalisation adjustments. Non-GAAP
financial measures 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. Non-GAAP measures are not subject to audit
unless they are included in Fonterra’s audited Annual
Financial Statements.
Please refer to the Non-GAAP measures section for
reconciliation’s of the NZ IFRS measures to the non-
GAAP measures and the Glossary for definitions of
the non-GAAP measures used by Fonterra.
Contents
A LETTER FROM OUR CHAIR & CEO
4
OUR PROGRESS
8
HEALTHY BUSINESS
12
INTERIM FINANCIAL RESULTS
46
DIRECTORS’ STATEMENT
47
FINANCIAL STATEMENTS
48
NOTES TO THE FINANCIAL
STATEMENTS
55
INDEPENDENT REVIEW REPORT
67
NON-GAAP MEASURES
68
GLOSSARY
70
FONTERRA INTERIM REPORT 2021
32
Creating Goodness
We measure the success of our strategy through
progress towards our goals of Healthy People,
Healthy Environment and Healthy Business.
These three goals require us to chase
value not volume. That starts on-farm
with producing milk that is backed by the
quality and sustainability credentials that
customers now demand. By getting closer
to our customers, we’re making sure the
New Zealand-ness of our Co-op’s milk is
being understood and valued more.
We’re clear about the consumption
categories we want to be in – Core Dairy,
Foodservice, Sports and Active Lifestyles,
Medical and Aging Nutrition, and Paediatrics.
We already have a competitive advantage in
some of these categories and in others we’re
wanting to do the same, drawing on our dairy
know-how and innovation capabilities.
That intellectual property, innovation
and dairy know-how is incredibly valuable.
Part of our strategy is looking for ways to
better commercialise it – whether that be
through licensing agreements or bringing it
as our contribution to a joint venture in place
of capital.
We’re realistic about the amount of capital
we have access to and know we can still grow
value by partnering with others based on our
knowledge and skills. We remain committed
to divesting non-core businesses – so we can
continue to reduce debt and get even more
focused on creating value.
Our 2021 business priorities
At our 2020 Annual Results, we shared our
priorities for the 2021 financial year:
• Performance, which is about hitting our
financial targets;
• Our Co-operative, which is about being there
for farmers and employees; 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.
These build on the lessons we’ve learnt from
the past but also show our commitment to
build a sustainable co-operative. This requires
us to meet the expectations and needs of many
different groups of people – and we’re making
progress against all three priorities.
Creating Goodness
A letter
from our
Chair &
CEO
F
irstly, we want to thank the Co-op’s people
– farmers and employees – for their hard
work in delivering a positive set of results for
the first six months of the 2021 financial year.
Sitting here in New Zealand we’ve been
relatively sheltered from the full impact of
COVID-19. But for many of our people on the
ground in our markets around the world, it’s
been a different story. The pandemic has been
rife and some of our people and customers
have found themselves still in lockdown
12 months on. It hasn’t been easy.
We’re proud of how our people have
responded to this situation. They’ve supported
each other, focused on what’s in their control,
worked together to create demand for our
New Zealand milk and managed supply chain
challenges so our customers could rely on us
to get products to market.
It’s thanks to all this hard work and true
‘Good Together’ spirit that we’ve been able to
build on the momentum from 2020 and deliver
a positive performance.
We are pleased with our reported profit
after tax of $391 million. While down 22% on
this time last year at a headline level, the 2020
financial year benefited significantly from the
divestments of DFE Pharma and foodspring
®
.
The three key numbers that show our
progress are our normalised profit after tax of
$418 million, up 43% on the comparable period
last year, forecast Farmgate Milk Price range
of $7.30 - $7.90 per kgMS and interim dividend
of 5 cents.
We wanted to be in a position to continue
paying dividends, so it is encouraging that our
earnings and debt levels support a dividend at
this point in the year.
Strategy
Staying on strategy and focusing on what
is in our control has played a big role in our
performance so far this year.
Our strategy is to grow the value of
our New Zealand milk by using innovation,
sustainability and efficiency to deliver
products that international customers value.
“
We’re proud of our how our
people have responded to the
COVID-19 situation. They’ve
supported each other, focused
on what’s in their control,
worked together to create
demand for our New Zealand
milk and managed supply
chain challenges so our
customers could rely on us to
get products to market.
Normalised profit after tax of
$
418 million
up
43%
Reported profit after tax of
$
391 million
down
22%
1
Interim dividend decision
5c
per
share
Forecast Farmgate Milk Price
$
7. 3 0 -
$
7. 9 0
per
kgMS
1 The comparative period included the gain on sale of DFE Pharma and foodspring
®
.
FONTERRA INTERIM REPORT 2021
54
— A letter from our Chair & CEO
Performance
Our core financial targets for the 2021 financial
year are to achieve: a return on capital of 6-7%;
a debt to EBITDA ratio of 3-3.5x; and a gearing
ratio of 36-40%.
We are on track to achieve all of these
targets. Key to this has been our improved
underlying performance so far this year and
this can be seen in our Total Group normalised
Earnings Before Interest and Tax (EBIT) of
$684 million – up $100 million year-on-year.
A big factor has been our scale and the
diversity in our markets and products, which
has given us the ability to move our Co-op’s
milk to where the most value can be created.
Our standout performer continues to be
Greater China. The team has delivered a 38%
increase in normalised EBIT to $339 million,
reflecting the strength of our Foodservice
business in this region, improvements in
our Consumer business and China’s strong
economic recovery following the initial impact
of COVID-19.
Asia Pacific’s normalised EBIT is up 9% to
$190 million and this is predominantly driven
by people cooking more with dairy and our
focus on some of our most loved brands – for
example, Western Star in Australia, Anchor in
New Zealand and Anlene in Malaysia.
AMENA’s normalised EBIT is down 7% to
$201 million and this is mainly because of lower
sales volumes in Ingredients as we made the
most of our ability to move milk into higher
returning markets and products.
There’s still plenty of work to do, but our
underlying business performance is helping
us further reduce debt levels and, in turn,
is helping us build the financial strength of
our Co-op.
Our Co-operative
We know that one of the best ways we can be
there for farmers is by delivering a competitive
Farmgate Milk Price and, with a forecast
Farmgate Milk Price range of $7.30 - $7.90 per
kgMS, we’re on track for the second highest
milk price so far.
We’ve seen dairy remain resilient in a
COVID-19 world and the macro demand
picture for dairy looks promising. Our strong
sales book is also the result of the hard work
and commitment of our sales teams out in the
markets, driving more demand for our farmer
owners’ milk.
Through The Co-operative Difference
we’re connecting farmers with what customers
expect and need. This allows farmers to take
the necessary steps to grow the value of their
milk and ensure their farming businesses are
here for generations to come. People want to
know their milk is coming from a business that
cares for the environment, animals, people
and communities. The data collected through
The Co-operative Difference enables us to
show customers that our Co-op is that kind of
business.
We also want our employees to know that
our Co-op cares for them. We know it’s been a
tough six months and that’s why we’ve taken
proactive steps to keep them physically and
mentally well through COVID-19. This has
involved regular global calls to discuss how
employees are dealing with the impact of
COVID-19 on their lives – over 5,000 have
now joined these calls. We’ve also allowed our
people to work flexibly so they can juggle work
and home life during COVID-19 lockdowns.
Community
One way we’ve been able to exceed customer
expectations in a COVID-19 world is by
continuing to get product to market. Like so
many businesses, including ourselves, our
customers have faced global supply chain
challenges. It’s tough going out there right now
but we’re proactively managing the situation
and working with our ocean freight partnership,
Kotahi, to keep product moving. Customers are
looking to us for this reliability.
We’re also helping local communities by
supporting foodbanks and those that need
help the most. Here in New Zealand, we
helped feed 15,000 families during the Anchor
Christmas Appeal, in partnership with the
NZ Food Network.
Our low carbon farming model is a
powerful point of differentiation. A report
from AgResearch, commissioned by DairyNZ,
confirms New Zealand farms have the lowest
carbon footprint in the world. We’re now
proactively working with our customers to
show how this can help them achieve their
environmental ambitions and we are starting
to see this help win new business with them.
But we’re not stopping there and we’re
investing to further reduce our footprint.
Capital Structure Review
Farmer owners and unit holders can expect to
hear more about our Capital Structure Review
this year. The aim of the Review is to build
the strength and sustainability of our Co-op
by ensuring we have a capital structure that
best supports our purpose and strategy into
the future.
We’re assessing a range of alternative
structures, as well as looking at options within
our current structure. Recently, we conducted
an online farmer survey to help progress this
work. There was a high level of participation
with around 1,800 farmers taking part.
The first thing we learned from the results
is that there is a strong appetite for change.
62% of respondents say they support a change
to our structure, while 19% are unsure.
The results also showed that the
top priorities in any potential structure
are, in order:
• maintaining farmer ownership and control;
• making sure Fonterra has a strong balance
sheet;
• getting a good return on investment;
• making it easy for new farmers to join our
Co-op; and
• giving existing farmers more flexibility with
their capital.
This feedback is being carefully considered
as we continue to develop and prioritise the
options. We intend to be in a position to
consult with farmer owners and unitholders
in the next couple of months, and if we
decide to go ahead with a change we would
likely aim for a farmer vote around the time
of the Annual Meeting in November.
Looking ahead
While we’ve had a strong first half,
we are expecting our earnings to come
under significant pressure in the second
half. The simple reason for this is our
increased input costs as a result of the
higher forecast Farmgate Milk Price.
The strong Farmgate Milk Price is
good news for our Co-op’s farmers
and New Zealand – with a mid-point of
$7.60 per kgMS it would see us contribute
more than $11.5 billion to the New Zealand
economy. But it does put a lot of pressure
on our margins and this will be seen in our
earnings performance in the second half.
Our teams understand the challenges
that come with a high Farmgate Milk Price
and we’re already seeing the extra effort
they’re putting in to drive sales. They’re
staying on strategy, focusing on what’s in
their control and driving demand for our
New Zealand milk.
Peter McBride
Chairman
Miles Hurrell
Chief Executive Officer
“
Our teams understand the challenges that
come with a high Farmgate Milk Price
and we’re already seeing the extra effort
they’re putting in to drive sales. They’re
staying on strategy, focusing on what’s in
their control and driving demand for our
New Zealand milk.
Africa, Middle East, Europe, North Asia, Americas (AMENA) normalised EBIT
$
201 million
down
7%
Asia Pacific normalised EBIT
$
190 million
up
9%
Total Group normalised operating expenditure down
$
37 million
Greater China normalised EBIT
$
339 million
up
38%
Total Group normalised gross margin
17. 4%
up from
16%
FONTERRA INTERIM REPORT 2021
76
Creating Goodness— A letter from our Chair & CEO
COVID-19 is still clearly having a major impact around the world and we’re
continuing to focus on what’s in our control. That’s looking after our people,
making the most of our ability to move milk into the markets and products
that have the most demand, and proactively managing global supply chain
challenges. In doing this, we’ve made good progress towards our goals of
Healthy People, Healthy Environment and Healthy Business.
Our Co-op’s strategy is about prioritising New
Zealand’s milk and making sure we’re sharing
it with those that value its uniqueness.
The Co-operative Difference is part of this
strategy. It takes our customer insights, and
what we know about the world, and brings
them together to help farmers know what
needs to be done on farm to help ensure there
is continued demand for our products.
That means asking farmers to focus on the
Environment, Co-op & Prosperity, Animals,
People & Community and Milk Quality.
Our farmer owners’ progress in each of these
areas is measured through three levels of
achievement. Each level brings additional
recognition and, so far this season, the number
of farms reaching Te Pūtake, the first of three
achievement levels, is 788. From 1 June 2021
up to 10 cents of a farmer’s Farmgate Milk
Price will also be influenced by progress across
The Co-operative Difference.
Our
Progress
HEALTHY ENVIRONMENTHEALTHY BUSINESSHEALTHY PEOPLE
New Zealand dairy farms already have
the lowest carbon footprint in the world.
In fact, it’s 70% lower than the global
average and 46% lower than other major
milk producers. That’s something our
Co-op is proud of but we’re not stopping
there. We’re partnering to find innovative
solutions for farmers who are doing the
hard graft to further reduce their footprint.
For example, in partnership with Nestlé
and DairyNZ, we’re expanding a promising
trial to include plantain in a cow’s diet
to help improve waterways and on-farm
Greenhouse Gas emissions. We’ve also
teamed up with Royal DSM to test whether
a feed additive called Bovaer® can help
reduce on-farm emissions in New Zealand.
Connecting farmers with customer needs
Farm Environment Plans are a key component
in The Co-operative Difference and, as of 31
January 2021, 42% of the Co-op’s supplying
farms in New Zealand have one – that’s up from
34% at the start of the financial year and well
on the way to 100% by 2025.
More Farm Environment Plans
Finding answers to the methane challenge
We’re working
together to
achieve a healthy
environment for
farming and society.
Our
Focus
MILK
CO-OP & PROSPERITY
ANIMALS
ENVIRONMENT
PEOPLE & COMMUNITY
1 This is our progress for the six months to 31st Jan 2021, and has been calculated using actual data where available or estimates.
Reduction in water use at sites
in water constrained regions
0.2%
Our full year target is to be 10% below FY18.
Reduction in Greenhouse
Gas emissions
11.2%
Our full year target is to be 10% below FY15.
Reduction in solid waste
to landfill
34%
Our full year target is to be 18% below FY20.
below
FY18
1
below
FY15
1
below
FY20
1
FONTERRA INTERIM REPORT 2021
98
Creating Goodness— Our Progress
Our China Foodservice business has expanded
into 22 new cities in the first half, bringing the
total to 372, and we’re continuously releasing
new ways of using our products in local cuisine
to pursue the next big food trend in China.
We’ve also launched new cream products in
China – including, Cheese Pro, which is a mix
of cream and cheese that helps customers save
time when making tea macchiatos. And, Easy
Topping Cream, our first ambient cream, which
will enable us to enter new cities that do not
have an extensive cool supply chain.
In the US, we launched NZMP Milk
Phospholipids 70 – it’s our first ingredient
developed to support mental wellbeing.
It taps into the growing awareness of the
importance of mental wellbeing, which has
been heightened by COVID-19.
And to help accelerate demand for our
Foodservice products in the US, we’ve
entered a sales and marketing agreement
with one of America’s leading dairy
co-operatives, Land O’Lakes, Inc. This
gives us access to Land O’Lakes’ strong,
well-established distribution network
and its large customer base. What’s great
about this partnership is we’ve been able
to leverage our intellectual property and
skills, rather than making significant capital
investments of our own.
Back home in New Zealand, we’ve launched
the Anchor carbonzero specialty milks range
as part of our commitment to reduce our
environmental footprint. We also helped make
Christmas a little easier for Kiwis in need by
feeding 15,000 families through the Anchor
Demand for dairy is proving resilient in a
COVID-19 world. We’ve seen strong demand
from China and South East Asia for whole
milk powder and skim milk powder, and
record monthly sales for cream cheese and
mozzarella, resulting in increased production
at our Darfield and Clandeboye sites. Darfield
has also had to employ more people to keep
up with the increasing customer demand for
cream cheese.
Good demand for dairy
New cities and products in China
New partnership and innovations in the US
Our Australian Anchor Food Professionals team
was recognised as the number one supplier
in the 2020 Advantage Survey. Almost 120
distributors participated in this annual survey,
measuring each company on their partnership,
execution, reputation and vision. The food
sector in Australia has been one of the hardest
hit industries due to COVID-19 and we’ve
worked hard to support the
industry and be there for
our customers.
In the Middle East region there has been
growing demand from customers for more
certainty around prices and guaranteed supply
of product. The Middle East team has responded
with a range of Price Risk Management (PRM)
solutions that are giving customers in the region
the price certainty they have been looking for.
At the same time PRM has allowed the team to
secure higher returns to our farmers and it has
helped to grow demand for value added protein
and cheese this year.
Our manufacturing site in Indonesia has installed a new rainwater collection system, which
will reduce water consumption at the site by up to 20%.
Launching carbonzero™ product range and helping Kiwi families
Growing demand in the Middle East
Reducing water use in Indonesia
We’re working
together to care for
people and make a
positive social impact.
We’re working
together to deliver a
sustainable business.
Christmas appeal, in partnership with the NZ
Food Network. We’ve also won the WorkSafe
New Zealand ‘best initiative’ award for a new
programme that improves the way we support
and care for our people’s safety at work.
Strong relationships with
Australian distributions
1 This is our progress for the 6 months to 31st Jan 2021, and has
been calculated using actual data where available or estimates.
2 Part of zero harm philosophy which also includes the aim of
0 serious harm/0 fatalities
.
1 The comparative period included the gain on sale of DFE Pharma and foodspring®.
Normalised profit after tax
$
418 million
Reported profit after tax
$
391 million
Up
$125 million
Down
$110 million
1
Total recordable injury frequency rate
5.4
Per million hours
1, 2
Full year target: 5.0
FONTERRA INTERIM REPORT 2021
1110
Creating Goodness— Our Progress
Group
Financial Metrics
20172018201920202021
1,722
1,668
1,489
1,659
1,752
NORMALISED GROSS PROFIT
($ MILLIONS)
20172018201920202021
(632)
369
(782)
(690)
(417)
FREE CASH FLOW
1
($ MILLIONS)
20172018201920202021
147
112
316
346
244
CAPITAL EXPENDITURE
1
($ MILLIONS)
20172018201920202021
9,915
10,423
9,745
9,836
9,232
NORMALISED REVENUE
($ MILLIONS)
20172018201920202021
90
82
81
80
68
WORKING CAPITAL DAYS
20172018201920202021
684
584
312
458
607
NORMALISED EBIT
($ MILLIONS)
20172018201920202021
391
501
72
(348)
418
REPORTED PROFIT AFTER TAX
2
($ MILLIONS)
20172018201920202021
1,996
2,037
2,075
2,003
2,131
SALES VOLUME
(’000 MT)
20172018201920202021
45.2
47.1
52.7
51.6
46.6
GEARING
1,3
(%)
20172018201920202021
1,055
1,092
1,232
1,263
1,232
NORMALISED OPEX
($ MILLIONS)
20172018201920202021
1,071 1,079
1,083
1,035
1,054
NEW ZEALAND MILK COLLECTION
1
kgMS (MILLIONS)
20172018201920202021
418
293
72
248
389
NORMALISED PROFIT AFTER TAX
2
($ MILLIONS)
1 Refer to Glossary on page 70 for definition.
2 Includes amounts attributable to non-controlling interests.
3 Excludes net borrowings attributed to Discontinued Operations.
1 Milk collections are for the period June 1 – January 31.
These charts have been selected to represent the financial metrics for
Fonterra, to provide a historical summary of our performance.
FONTERRA INTERIM REPORT 2021
1312
— Healthy BusinessCreating Goodness
W
e have had a positive first six-months
with our normalised profit after tax
increasing 43%, up $125 million to $418
million. We have resumed paying an interim
dividend, with 5 cents confirmed for this
period. The increased earnings and interim
dividend are alongside a strong forecast
Farmgate Milk Price.
Our reported profit after tax of
$391 million is 22% lower than the prior
year due to last year’s results including the
gains on sale from divesting DFE Pharma
and foodspring
®
.
This increase in normalised profit after
tax has been primarily driven by improved
gross margin, up from 16.0% to 17.4%,
while keeping control of our operating costs
and a lower interest expense. This earnings
improvement has been achieved despite the
additional challenges COVID-19 has created,
particularly in the supply chain, where we are
proactively managing and working with our
ocean freight partnership, Kotahi, to keep
product moving to our customers.
Our improved gross margin and earnings
reflect a significant margin increase in Greater
China Foodservice and an increase in Asia
Pacific Consumer margins, but are partially
offset by reduced earnings in AMENA’s –
Africa, Middle East, Europe, North Asia,
Americas – Ingredients channel.
On a reported basis, our profit after
tax was $391 million, with the $27 million
difference to our normalised profit after tax
being the China Farm impairment reversal
of $23 million offset by the loss on disposal
and downward revaluation of our Beingmate
holding of $50 million. Our reported profit
after tax is $110 million lower than the prior
comparative period due to last year’s results
including items from the strategic refresh, in
particular, the gains on sale from divesting
DFE Pharma and foodspring
®
.
With ongoing financial discipline and
improved earnings we continue to reduce our
debt and gearing. For this financial year our
target Debt to EBITDA ratio is to be between
3.0 to 3.5 times, and we will continue to reduce
our gearing ratio to below 40% by the end of
the financial year.
The current forecast Farmgate Milk Price range
would make this season one of our highest Milk
Prices, which is positive for our farmer owners
and the New Zealand economy. However, the
strong rise in dairy prices from November 2020
through to now will place pressure on our sales
margins and this is expected to impact our
second half earnings performance, particularly
in the last quarter.
As part of our continuous review of our
asset portfolio, we have decided, along with
our joint venture partner, to undertake a sales
process for the joint venture farms in China.
For the same reason that we decided to sell
our wholly-owned China farms, the decision
to sell the joint venture farms is in line with
our Co-operative’s strategy to focus on New
Zealand milk. Current expectations are for the
sale of our 85% interest in our Hangu farm,
and our two wholly-owned farming hubs in
Ying and Yutian to be completed this financial
year and for the sale of the joint venture farms
to be completed this calendar year. We have
also continued to reduce our shareholding in
Beingmate, which on 31 January 2021 was
sitting at 3.94%. We will continue to sell down
the remaining shareholding and we expect to
have fully exited this investment before the
end of this financial year.
Overview
Normalised profit after tax
$
418 million
up
43%
Total Group normalised gross margin
17. 4%
up from
16.0%
Adrian and Ben, Northland
FONTERRA INTERIM REPORT 2021
1514
— Healthy BusinessCreating Goodness
BREAKDOWN OF TOTAL GROUP PERFORMANCE
FOR THE
SIX-MONTHS ENDED31 JAN 202031 JAN 2021
NORMALISED BASIS
NZD MILLION
CONTINUING
OPERATIONS
1
DISCONTINUED
OPERATIONS
1
TOTAL
GROUP
CONTINUING
OPERATIONS
1
DISCONTINUED
OPERATIONS
1
TOTAL
GROUP
Sales volume (‘000 MT)1,9281092,0371,8751211,996
Revenue10,07135210,4239,5973189,915
Cost of goods sold(8,483)(272)(8,755)( 7, 9 4 6 )(247)(8,193)
Gross profit1,588801,6681,651711,722
Gross margin15.8%22.7%16.0%17. 2 %22.3%1 7. 4 %
Operating expenses(1,023)(69)(1,092)(1,013)(42)(1,055)
Other
2
(4)12814317
Normalised EBIT5612358465232684
Normalisations
3
356(134)222(50)23(27)
EBIT917(111)80660255657
1 Refer to Note 1a and 2b of the FY21 Interim Financial Statements.
2 Consists of other operating income, net foreign exchange gains and losses, share of profit or loss on equity accounted investees.
3 Refer to the Non-GAAP Measures section in the FY21 Interim Report.
T
o provide a complete view of our
performance for the first six-months of
the 2021 financial year, the Total Group figures
presented in this section are inclusive of both
Continuing and Discontinued Operations.
Overall, our milk collection volumes are down
slightly due to lower collections in New Zealand
and Australia, while collections in Chile are up
as we grow our farmer base there.
Our sales book is well contracted and
we are getting products to our customers.
COVID-19 has created global supply chain
challenges and we have not been immune
with some minor shipping delays. This is the
main cause for our sales volume being 41,000
MT, or 2%, lower relative to the comparative
period. We are proactively managing the supply
chain situation and working with our ocean
freight partnership, Kotahi, to keep product
moving and we expect to have caught up on
these delays by the end of the financial year.
Revenue is 5% lower, down $508 million
to $9.9 billion. While the timing of shipments
has impacted revenue, the main cause is
lower sale prices in the AMENA and Greater
China Ingredients channels relative to the
comparative period. This was partially
offset by revenue growth in Greater China
Foodservice and Consumer as we moved milk
into higher margin products, and similarly,
revenue growth in Asia Pacific’s Ingredients
and Consumer channels.
Our cost of goods sold decreased 6%,
down $562 million to $8.2 billion, due to lower
raw milk costs for the first six-months of the
financial year relative to the comparative
period. Gross profit increased 3% to $1.7
billion as a result of the lower input costs more
than offsetting the decrease in revenue. This
increase in gross profit together with lower
revenue resulted in the gross margin increasing
from 16.0% to 17.4%.
Our Greater China Foodservice channel
had very strong gross margin growth,
and was a major contributor to our Total
Group gross profit increasing relative to the
comparative period. Asia Pacific also contributed
to the increase in gross profit with additional
demand in its Foodservice and Consumer
channels as a result of the COVID-19 “stay-at-
home” culinary trend. This was partially offset
by AMENA and Asia Pacific’s lower gross profit
in their Ingredients channels due to lower sales
volume and gross margins.
Operating expenses in our Continuing
Operations are down slightly as a result
of our businesses focusing on what is in
their control in this challenging COVID-19
environment, such as, targeted selling and
promotional spend during lockdown periods.
Our Discontinued Operations, China Farms
and DPA Brazil, had a greater reduction
in operating expenses mainly due to the
translation of expenses in DPA Brazil benefiting
from a weaker local currency. China Farms’
costs were stable.
The Total Group’s improved gross margin
and focus on managing costs has resulted
in our normalised EBIT increasing 17%, up
$100 million to $684 million.
Our Total Group net financing costs for the
six-month period are $32 million lower than
the comparative period due to lower average
debt and a reduction in global interest rates.
The increase in the profits attributable to
our non-controlling interests predominately
reflects that there has been no further
impairment of the DPA Brazil business in the
six-month period.
One of our priorities is to be in the
position to pay regular dividends. Our strong
first half earnings equate to normalised
earnings per share of 25 cents and combined
with our continued debt reduction has enabled
us to return to paying an interim dividend,
with 5 cents confirmed for this period to be
paid in April.
Total Group normalised EBIT
$
684 million
up
17%
Our Total Group
performance
FONTERRA INTERIM REPORT 2021
1716
Healthy BusinessCreating Goodness
FINANCIAL METRICS
1
FOR THE SIX-MONTHS ENDED 31 JANUARY
20202021CHANGE
2
Capital expenditure (NZD Million)(112)(147)31%
Net debt (NZD Million)
3,4
5,7765,618(3)%
Gearing ratio
3,4
47. 1%45.2%–
Free cash flow (NZD Million)369 (632) –
Working capital days8290(10)%
TOTAL GROUP PERFORMANCE
1
FOR THE SIX-MONTHS ENDED 31 JANUARY
NZD MILLION20202021CHANGE
2
EBIT806657(18)%
Net finance costs(173)(141)18%
Tax E xp ense(132)(125)5%
Reported profit after tax501391(22)%
(Less)/add: Normalisation adjustments
3
(222)27–
Add: Tax on normalisation adjustments14––
Total normalised profit after tax29341843%
Add/(less): (Profit)/loss attributable to
non-controlling interests 20(19)–
Less: Normalisation adjustments attributable
to non-controlling interests(30)––
Normalised profit after tax attributable to equity
holders of the Co-operative28339941%
Normalised earnings per share (cents)182541%
FY21 Interim Dividend per share (cents)–5–
1 Includes Continuing and Discontinued Operations.
2 Percentages as shown in table may not align to calculations of percentages based on numbers in the table due to rounding
or reported figures.
3 Refer to the Non-GAAP Measures section in the FY21 Interim Report.
TOTAL GROUP OPERATING EXPENSES
FOR THE SIX-MONTHS ENDED 31 JANUARY
NORMALISED BASIS
NZD MILLION20202021
Selling & marketing316299
Distribution & storage 274265
Administration expenses266254
Research & development3134
Other expenses4250
Unallocated costs 94111
Operating expenses from Continuing Operations
1,0231,013
Discontinued Operations6942
Total Group operating expenses 1,0921,055
We remain committed to ongoing
financial discipline. This includes strong
management of both operating and
capital expenditure and further reduction
in debt and gearing levels.
Our Total Group normalised operating
expenses are $37 million lower than
the comparative period, mainly due to
lower levels of Selling and Marketing
expenses and Distribution and Storage
expenses. Many of the businesses within
regions that have been impacted by
COVID-19 lockdowns have limited the
level of Selling and Marketing expenses,
with the expectation of an increase
through the second half of the year as
these restrictions ease.
Our capital expenditure over the six-months
is in line with our expectations, with the
majority of the expenditure weighted to the
second half of the financial year when the bulk
of the maintenance of the manufacturing plants
is undertaken.
The seasonal profile of the New Zealand
milk curve means the investment in our
working capital is weighted to the first half of
the financial year and reduced in the second
half of the year. As a result, we typically
have negative free cash flow over the first
six-months. This year the amount of working
capital days is higher than the comparative
period, with the increase mainly due to higher
inventory days. We began the first half of the
year with higher levels of inventory carried over
from the previous year, which combined with
the lower sales revenue has resulted in higher
inventory days relative to the comparative
period. The business remains focused on the
timely collection of receivables, and receivable
days are consistent with last year. Payable days
are also at similar levels to last year.
In addition to the difference in working
capital, in the comparative period our free cash
flow included $623 million of cash received
from the sales of DFE Pharma and foodspring
®
and was a significant contributor to the
difference between the two periods.
Given the seasonal profile of our working
capital requirements, our debt level at the end
of the first six-months of the financial year is
typically higher than what we expect at the
end of the financial year, as the working capital
is reduced throughout the second half. At the
end of the first six-months of the financial
year, our net debt, measured as economic net
interest bearing debt, was down $0.2 billion to
$5.6 billion.
For this financial year our target Debt to
EBITDA ratio is to be between 3.0 to 3.5 times,
and we will continue to reduce our gearing ratio
to below 40%
201920202021
7.4
5.7
5.8
4.7
5.6
NET DEBT
($ BILLION)
HALF YEARFULL YEAR
1 Refer to Glossary of the FY21 Interim Report for definition of
the metrics displayed in the table.
2 Percentages as shown in table may not align to calculations
of percentages based on numbers in the table due to rounding
or reported figures.
3 FY20 has been restated, refer to Basis of Preparation section
in the FY21 Interim Report.
4 Excludes net borrowings attributed to disposal groups held
for sale.
Total Group normalised operating expenses
$
37 million
lower than
last year
FONTERRA INTERIM REPORT 2021
1918
Healthy BusinessCreating Goodness
20172018201920202021
1,071 1,079
1,083
1,035
1,054
HISTORICAL NEW ZEALAND MILK COLLECTION
1
kgMS (MILLIONS)
Group
Operations
T
he following business performance
section reflects only Continuing
Operations and has been prepared under
our new operating model that we moved
to through the course of last financial year.
The operating model is based around our
three regional business units: Asia Pacific,
AMENA, and Greater China. The three
regional business units are supported by
a shared infrastructure, which is referred
to in this section as Group Operations.
Group Operations is comprised of
the functions that the Chief Operating
Officer (COO) has responsibility for
(including New Zealand milk collection
and processing operations and assets,
global supply Chain, digital and
information technology, sustainability and
innovation); Farmsource, and the Central
Portfolio Management (CPM) function.
CPM’s goal is to optimise our business
by connecting customers with our
assets, farmers and markets to make our
New Zealand milk into the most valuable
products. It includes optimising the
New Zealand milk pool, in-market product
pricing support for the regions, managing
Fonterra’s dairy and non-dairy product
price risk, as well as providing customer
and farmer price risk management tools.
sustainability to adhere to disciplined health
and safety protocols and undertake substantial
contingency planning in case of widespread
community transmission. This involved
cooperation across multiple partners and
stakeholders including government, unions,
regional councils, local communities, vendors.
These COVID-19 risk management activities
are both ongoing and dynamic.
In the six months we processed the
equivalent of approximately $7 billion of milk
over our 30 manufacturing sites. We incurred
$2.4 billion of conversion, supply chain, testing,
packaging, energy, cleaning and overhead costs,
and also supported product mix optimisation
and efficiency gains. An example of efficiency
gains is the use of data analytics to monitor
milk tanker operating conditions and fuel
burn to achieve a 1% fuel burn improvement
over approximately 50 million litres of
diesel. Within our manufacturing plants we
are also delivering efficiency gains through
the increased investment in technology.
As an example, at our Darfield cream cheese
plant we have installed new food scan
machinery technology which is now delivering
composition control benefits equivalent to an
additional 100 MT of finished product.
Global supply chains have experienced
unprecedented disruption due to direct and
indirect consequences of COVID-19. However,
with our strong partnership with Kotahi, we
maintained supply of products to our global
customer base, although at lower service
delivery levels. Prior to COVID-19, our DIFOT,
being product delivered in full and on time,
plus or minus one week, was around 90%.
For the first six-months of this financial year
we have averaged 71%. Despite this reduction,
our performance is considered reliable relative
to many other market participants. The delays
experienced in the supply chain has meant our
closing inventory position at the end of the
first six-months of the financial year is slightly
higher than where we targeted and we expect
levels to return to our target levels by the end
of the financial year.
Capital expenditure in the first six-
months of the financial year was focused
on refurbishment of the powder 3 and 4
buildings at Whareroa, waste water upgrades
at Whareroa and Clandeboye and the Waitoa
powder 3 dehumidifier for greater quality
control for specialty products. Capital
expenditure is heavily weighted to the
second six-months of the financial year, with
scheduling of capital works and maintenance
at manufacturing sites aligned to commence at
the end of the milk season in May.
Greenhouse Gas emissions are tracking to
our target of a 30% reduction by 2030, assisted
by our investment last year in our Te Awamutu
biomass boiler, as well as pre-capex scoping for
decarbonisation of the Stirling site.
We are working on a wide range of potential
Greenhouse Gas mitigation solutions to help
reduce biological emissions for our farmers, our
customers and the global agricultural industry.
This includes partnering with global experts
to create, develop and trial new solutions, for
example, our collaboration with Royal DSM
a Dutch health and nutrition multinational
on the Bovaer methane inhibitor, and the use
of Kowbucha™ fermentations in partnership
with the Pastoral Greenhouse Gas Research
Consortium and AgResearch.
0
10
20
30
40
50
60
70
80
90
MAYAPRMARFEBJANDECNOVOCTSEPAUGJULJUN
NEW ZEALAND MILK COLLECTION
Volume (m litres/day)
2018/19
2019/20
2020/21
SEASON
1,523m (up 1%)
1,517m (down 0.4%)
1,525m (up 0.5%)
1
TOTAL MILK SOLIDS
85m Litres
83m Litres
83m Litres
PEAK DAY MILK
Our New Zealand milk volumes started well
from 1 June 2020 with warmer conditions
through winter combining with good rainfall
to promote solid pasture growth. However, as
the season progressed conditions became less
favourable. Milk collections from 1 June 2020
to 31 January 2021 have drifted slightly behind
the prior season, down 0.8% to 1,071 million
kgMS. The full season forecast remains 1,525
million kgMS.
We have largely completed the roll out of
milk vat telemetry technology. The improved
visibility regarding on-farm milk conditions
and volumes has improved both the quality of
milk supplied and made milk collection more
efficient, with five less milk tankers required
across the fleet.
Managing and mitigating disruption from
COVID-19 has been a key focus for Group
Operations, in particular through the peak
milk processing and export volume period
of October to January. This required our
workforce of ten thousand people within
milk collection, manufacturing, supply
chain, laboratories, technical excellence and
1 Milk collections are for the period June 1 - January 31
1 Current full season forcast
FONTERRA INTERIM REPORT 2021
2120
— Healthy BusinessCreating Goodness
GROUP OPERATIONS’
ATTRIBUTION TO REGIONAL
SEGMENTS
In broad terms, Group operations collects and
processes New Zealand milk into the optimal
products that are then sold to our customers
by the regional business units. The segment
reporting, within these Interim Financial
Statements, is prepared based on the regional
business units, with the income statement
of Group Operations attributed between the
three regional business units. This attribution
enables the results of both the regional business
and product channels to be presented on an end-
to-end basis.
When products are transferred between
Group Operations and the regions, the internal
GROUP OPERATIONS ATTRIBUTION
FOR THE SIX-MONTHS ENDED 31 JANUARY
NORMALISED BASIS
EBIT (NZDM)TOTAL ASIA PACIFICAMENAGREATER CHINA
20202021CHANGE
1
20202021CHANGE
1
20202021CHANGE
1
20202021CHANGE
1
Group Operations’
Attribution to
regional segments17389(49)%341(97)%5617(70)%8371(14)%
1 Percentages as shown in table may not align to the calculations of percentages based on numbers in the table due to rounding of reported figures.
prices are determined based on market-based
commodity reference prices (e.g. GDT) and
include charges where appropriate to reflect
the additional costs of producing non-
commoditised products. The internal pricing is
adjusted fortnightly for Ingredients products
and either quarterly or monthly for Consumer
and Foodservice products.
The Group Operations performance (that
is attributed to the three regions) includes
movements in the capital charge on the notional
Milk Price asset base, the impact of longer-term
pricing commitments, product mix and the
impact of price relativities between reference
and non-reference ingredient products.
When attributing the results of Group
Operations to the regions, the principle is
for the end-to-end margin to reflect the
underlying transaction between Fonterra
and the customer where possible. If costs
are not directly linked to transactions, such
as overheads, attributions are activity based
where appropriate e.g. Information Technology
and Research and Development. If none of
these principles apply, the attribution is based
on a volume-based allocation.
Overall, the Group Operations result
has reduced $84 million compared to the
comparative period. Key drivers of this are
an adverse movement in the margin on
bulk liquids, lower sales volumes due to the
shipping delay, price relativities on ingredients
products and the lagged impact of longer-
term pricing arrangements in sales contracts.
In addition, there were some changes in the
internal pricing principles as the new operating
model was implemented.
We continue to focus on product innovation,
on adding value to milk and on working
collaboratively with our customers and
partners to satisfy consumer nutritional needs.
For example, we commercialised a functional
Whey Protein Concentrate ingredient for the
cultured dairy snack segment that enables
yoghurt to contain very high levels of protein
(25g of protein per serve). We also launched
NEW ZEALAND REFERENCE AND NON-REFERENCE PRODUCTS
1
FOR THE SIX-MONTHS ENDED 31 JANUARY
20202021
(‘000 MT)(‘000 MT)
Sales Volume
Reference products921870
Non-reference products389419
$ BILLION$ PER MT$ BILLION$ PER MT
Revenue
Reference products4.85,1674.24,784
Non-reference products 2.25,6882.35,372
Cost of Milk
Reference products3.73,9973.23,676
Non-reference products 1.33,4351.43,294
1 Table excludes bulk liquid milk. The bulk liquid milk volume for the six months ended 31 January 2021 was 36,000 MT of kgMS
equivalent six months ended 31 January 2020 was 37,000 MT of kgMS equivalent.
Extra Stretch Plus mozzarella, which offers
more tenderness for longer which is particularly
important for the pizza delivery market.
Consistent with our strategy of prioritising
New Zealand milk and growing our
Foodservice channel, we processed more of our
New Zealand sourced milk into higher returning
Foodservice and Consumer products reflecting
the strong demand from Greater China and
Asia Pacific. This is reflected in the 30,000
MT increase in sales volume of non-reference
products from New Zealand milk.
The season started with the overhang of
global economic concerns driven by the
ongoing impact of the COVID-19 pandemic.
Dairy product trading conditions suggested a
milk price mid-point in the low $6.00 per kgMS
range as reflected by our opening Farmgate
Milk Price range which was aligned to the bank
milk price forecasts and NZX futures. At this
time, non-reference product prices (cheese
and proteins) were selling at favourable prices
relative to reference products. These trading
conditions are seen in the lower revenue and
slightly lower cost of goods sold in the first
six-months of the financial year.
Our order book for our products has been
strong with good demand, in particular for
milk powders and cream products which are
products from the reference product basket.
Reference product prices have progressively
firmed as the milk season has progressed.
The announced Farmgate Milk Price forecast
now has a mid-point of $7.60 per kgMS.
Powders and cream product prices are in
general more volatile than cheese and protein
prices. Consequently, reference product
prices have risen at a faster rate than non-
reference prices and this has been adverse for
price relativities. This is expected to result in
a tightening on Ingredient and Foodservice
product margins and liquid milk margins in
the last six-months of the financial year.
31 Jan 2021July 202031 Jan 2020July 2019
FY20 H1 FY21 H1
GDT Average Price
Average price
USD3,380
Average price
USD3,210
39%
1
Kiri, Bay of Plenty
1 39% increase in dairy prices from November 2020 through to now.
FONTERRA INTERIM REPORT 2021
2322
— Healthy BusinessCreating Goodness
SUMMARY OF REGION PERFORMANCE
1
FOR THE SIX-MONTHS ENDED 31 JANUARY
NORMALISED BASIS
NZD MILLION TOTALASIA PACIFICAMENAGREATER CHINA
UNALLOCATED COSTS
AND ELIMINATIONS
2020202120202021202020212020202120202021
Sales volume (‘000 MT)
2
1,9281,875688672667627579593(6)(17)
Revenue
10,0719,5973,3523,3993,7033,1973,0303,061(14)(60)
Cost of goods sold
(8,483)( 7, 9 4 6 )(2,753)(2,788)(3,171)(2,726)(2,596)(2,520)3788
Gross profit1,5881,6515996115324714345412328
Gross margin 15.8%1 7. 2 %17. 9 %18.0%14.4%14.7%14.3%1 7. 7 %––
Operating expenses(1,023)(1,013)(431)(423)(321)(279)(177)(200)(94)(111)
Other
3
(4)146259(12)(2)(3)5
EBIT
4
561652174190216201245339( 74)(78)
EBIT includes Group
Operations’ attribution
5
1738934156178371––
EBIT excludes
Discontinued
Operations2332––1412920––
1 Regions performance are shown on a Continuing Operations basis.
2 Includes sales to other regions
3 Consists of other operating income, net foreign exchange gains and losses, share of profit or loss on equity accounted investees.
4 This includes EBIT attribution from Group Operations
5 Drivers of movements in the Group Operations attribution is detailed further in each region’s performance section.
Summary of
Regional Performance
W
ithin these Interim Financial Statements
the Group’s reportable segments
are the three regional business units: Asia
Pacific, AMENA and Greater China, and are
inclusive of their respective attribution of
Group Operations. This provides a full end-
to-end view of the performance for each of
the customer facing regional business units.
Additional insights are provided by showing
a breakdown of the three main product
channels – Ingredients, Foodservice and
Consumer – for each reporting segment on
the same end-to-end basis.
Our business and earnings are diversified
across markets and products.
Our Asia Pacific region has a strong
Consumer channel which accounted for 62%
of its EBIT and 64% of our overall Consumer
EBIT. The Asia Pacific region contributed to our
improved Group earnings with a 9% increase
in its EBIT to $190 million. This increase was
due to a strong performance in the Consumer
and Foodservice channels, particularly South
East Asia, India Subcontinent and New
Zealand. Lower margins in our New Zealand
Ingredients business and challenging trade
conditions in the Australia Ingredients export
EBIT CONTRIBUTION OF REGIONS AND PRODUCT CHANNELS
1
FOR THE SIX-MONTHS ENDED 31 JANUARY
NORMALISED BASIS
EBIT (NZD MILLIONS)TOTAL ASIA PACIFICAMENAGREATER CHINA
20202021CHANGE
2
20202021CHANGE
2
20202021CHANGE
2
20202021CHANGE
2
Ingredients374288(23)%5318(66)%204147(28)%1171235%
Foodservice14325880%325469%(13)1–12420364%
Consumer11818456%8911833%2553112%413225%
Unallocated &
Eliminations
( 74)(78)(5)%–––––––––
Continuing
Operations
56165216%1741909%216201(7)%24533938%
Discontinued
Operations
233239%––– 14 12(14)%920122%
Total Group EBIT58468417%
1 Regions performance are shown on a Continuing Operations basis.
2 Percentages as shown in table may not align to the calculations of percentages based on numbers in the table due to rounding of reported figures.
However, reduced sales volume and lower
gross margins in AMENA’s Ingredients channel
has more than offset the improved Foodservice
and Consumer performance.
Our Greater China region has a large
Foodservice channel and this accounted for
60% of the Greater China region’s performance
and 79% of our overall Foodservice EBIT.
The 38% increase in our Greater China EBIT
to $339 million is predominantly due to
performance of our Foodservice channel as we
shifted milk into higher value product, and this
can be seen in the increased gross margin from
14.3% to 17.7%. This earnings improvement in
Greater China was a major contributor to the
Group’s total earnings improvement.
channel partially offset the areas of improved
performance in Asia Pacific.
Our AMENA region has a large Ingredients
market and the Ingredients channel accounted
for 73% of our AMENA region’s EBIT and
51% of our overall Ingredients EBIT. AMENA’s
Ingredients EBIT decreased $57 million and was
the main reason for the decline in our overall
Ingredients earnings. AMENA’s Foodservice
and Consumer EBIT has increased due to
improved gross margin in both businesses, and
the Consumer channel also had higher sales
volume. All three of AMENA’s product channels
reduced their operating expenses.
FONTERRA INTERIM REPORT 2021
2524
Healthy BusinessCreating Goodness
Asia Pacific
ASIA PACIFIC PERFORMANCE
1
FOR THE SIX-MONTHS ENDED 31 JANUARY
NORMALISED BASIS
NZD MILLION TOTALINGREDIENTSFOODSERVICECONSUMER
20202021CHANGE
2
20202021CHANGE
2
20202021CHANGE
2
20202021CHANGE
2
Sales volume (‘000 MT)
3
688672(2)%287280(2)%8982(8)%312310(1)%
Revenue 3,3523,3991%1,5681,6364%551469(15)%1,2331,2945%
Cost of goods sold(2,753)(2,788)(1)%(1,396)(1,502)(8)%(452)(351)22%(905)(935)(3)%
Gross profit5996112%172134(22)%9911819%3283599%
Operating expenses(431)(423)2%(125)(119)5%(67)(65)3%(239)(239)–
Other
4
62(67)%63(50)%–1––(2)–
EBIT
5
1741909%5318(66)%325469%8911833%
Includes EBIT Group
Operations’ attribution341(97)%
Gross margin17. 9 %18.0%11.0%8.2%18.0%25.2%26.6%2 7. 7 %
1 Asia Pacific performance represents Continuing Operations.
2 Percentages as shown in table may not align to calculations of percentages based on number in the table due to rounding or reported figures.
3 Includes sales to other regions.
4 Consists of other operating income, net foreign exchange gains and losses, share of profit or loss on equity accounted investees.
5 This includes EBIT attribution from Group Operations.
O
ur Asia Pacific region’s normalised
EBIT improved $16 million to
$190 million due to a strong performance
in the Consumer and Foodservice channels,
particularly in South East Asia, India
Subcontinent and New Zealand. Lower
margins in our New Zealand Ingredients
business and challenging trade conditions
in the Australia Ingredients export
channel partially offset the Consumer
and Foodservice margin increase.
The Consumer channel is the largest
contributor to Asia Pacific’s earnings, and its
EBIT increased $29 million, or 33% relative to
the comparative period, to $118 million. This
was primarily due to an improvement in the
gross margin from 26.6% to 27.7% on relatively
stable volume and operating expenses. The
majority of our consumer markets within Asia
Pacific benefited from the COVID-19 “stay-
at-home” culinary trend, with significantly
stronger sales in chilled dairy food products
such as cream cheese, butter and cheese.
Australia’s consumer brands such as
Western Star in the chilled spreads channel,
and Perfect Italiano, in the branded cheese
channel, are two consumer brands that
benefited from this culinary trend. On top of
this we improved our leadership position in
the chilled spreads category, with our value
share increasing from 33.1% to 35.7%, and
our volume share from 25.4% to 27.7%.
Our number one position in branded cheese
increased in value from 22.6% to 22.8%,
and in volume from 20.9% to 21.2%.
Our New Zealand Consumer business
continues to turnaround its performance and
has put an increased emphasis on sustainability
during this six-month period, including gaining
carbon zero certification for Anchor Enriched
Milks and launching a plant-based bottle
for 2L Anchor Blue Milk.
In Malaysia we have completed a reset
of the Anlene brand. Anlene is our global
consumer brand positioned in advanced adult
nutrition. It holds a market leadership position
in the adult fortified milk for mobility, where it
promotes bone health, joint health and strong
muscles. Having completed the brand reset
in Malaysia we are now preparing to roll out
across the rest of South East Asia.
The performance of our Asia Pacific
Foodservice channel has also improved, with
gross margin up significantly from 18.0%
to 25.2%, and this flowed through to EBIT,
which was up $22 million or 69% relative to
the comparative period last year. This is a
strong result given many markets continue
to be impacted by COVID-19 lockdowns,
which resulted in lower sales volumes for
the region. The impact of the lower sales
volume was offset by moving milk to higher
margin products such as cream cheese,
where bakery and beverage outlets continue
to find customer demand for cream cheese
applications, particularly in South East Asia.
These channel trends have emerged rapidly
over the last 12 months and our Foodservice
teams have been able to adjust quickly
to allow our customers to meet changing
consumer demands. We are also seeing more
at-home consumption and less out-of-home
consumption, and a back-to-basics approach
with consumers purchasing less pre-made
baked goods and instead opting to bake their
own goods with trusted ingredients.
In this challenging environment with
lockdowns, our in-market teams have focused
on what is in their control, such as, targeted
selling and promotional spend during
lockdown periods and working closely with
our customers. This has also ensured better
customer payment performance.
The New Zealand Ingredients business has
experienced faster sales contracting rates from
our domestic Ingredients customers as they
keep pace with the strong consumer demand
from increased cooking at home. However,
this was offset by significantly lower margins
on our bulk liquid milk sales relative to the
comparative period. This is the milk we are
required to sell to other manufacturers under
the Dairy Industry Restructuring Act. The
impact of the reduced margins on the bulk
liquid sales is reflected in the attribution from
Group Operations to the Asia Pacific region.
Asia Pacific
FONTERRA INTERIM REPORT 2021
2726
Healthy BusinessCreating Goodness
AUSTRALIA PERFORMANCE
1
FOR THE SIX-MONTHS ENDED 31 JANUARY
NORMALISED BASIS
NZD MILLION20202021CHANGE
2
Production volume (‘000 MT)2052123%
Sales volume (‘000 MT)
3
198174(12)%
Revenue 1,000899(10)%
Cost of goods sold(891)(796)11%
Gross profit109103(6)%
Operating expenses(72)(68)6%
Other
4
–(3)–
EBIT3732(14)%
Gross margin 10.9%11.5%
1 Performance is prior to Group Operations attribution.
2 Percentages as shown in table may not align to the calculations of percentages based on numbers in the table due to rounding
of reported figures.
3 Includes sales to other regions.
4 Consists of other operating income, net foreign exchange gains and losses, share of profit or loss on equity accounted investees.
The Ingredients channel has also been
impacted by the challenging trade conditions
in the Australia Ingredients export channel.
The challenges include China trade relations,
contraction of the Daigou channel and
shipping delays.
Overall, the Asia Pacific Ingredients
channel’s gross margin declined from 11.0% to
8.2%, and the small improvement in operating
expenses was not enough to offset this, with
the Asia Pacific Ingredients EBIT declining
$35 million to $18 million.
Looking at our whole Australia business,
Australia’s challenges in its Ingredients
channel have been partially offset by improved
performance in its Consumer channel.
On-farm, our Australian milk collections
for the first six-months were down 1.3% on
the comparative period. Following wetter than
usual spring conditions and a resulting lower
peak collection, production has stabilised on
the back of wetter and cooler than average
summer conditions. Favourable seasonal
conditions would normally result in production
growth, however, they are being offset by
reduced herd numbers and labour shortages
constraining production growth.
Australia’s overall sales volumes decreased
relative to the comparative period, driven by
shipping delays stemming from COVID-19
supply chain congestion and industrial action
at Australian ports.
A robust recovery in our Australian
Foodservice channel is also well underway,
with volumes and margins only slightly down
on the comparative period despite ongoing
impacts of state-based lockdowns and border
closures due to COVID-19. Our Australian
Foodservice business once again achieved the
number one ranking in the annual Foodservice
Advantage Survey.
Asia Pacific normalised EBIT
$
190 million
up
9%
Despite our Australian business gross
margin improving through allocating milk
to higher value products in the Consumer
channel, our total Australian EBIT was down
due to the lower sales volume.
Our New Zealand Consumer and
Foodservice businesses had an improved
first six-months of the financial year as they
continue turning around their performance.
Gross profit was up due to a favourable product
mix that met the demand of the stay-at-home
culinary trend.
Operating expenses have been well managed
with the amount of Distribution and Storage
expense favourable relative to the comparative
period due to the lower cost of third-party
freight providers. The improved gross profit
and reduced operating expenses resulted
in improved EBIT but further performance
improvement is required to achieve satisfactory
overall returns for the business.
FONTERRA INTERIM REPORT 2021
2928
Healthy BusinessCreating Goodness
O
ur AMENA region’s normalised EBIT
reduced $15 million to $201 million due
to lower sales volumes and gross margins
in our Ingredients channel, particularly in
Europe, Africa and North Asia. The decline in
the Ingredients channel was partially offset
by improved gross margin in the Foodservice
and Consumer channels, with Consumer
also having stronger sales volume as well
as all three of AMENA’s channels reducing
operating expenses.
The Ingredients channel is the largest
contributor to AMENA’s earnings, and its
EBIT decreased $57 million, or 28% relative
to the comparative period, to $147 million.
Relative to the comparative period, the decline
in Ingredients’ product sale prices has been
greater than the reduction in input costs for
the first six-months of this financial year. In
addition, the prices of New Zealand sourced
milk have been driven up by the strong demand
in our Greater China and Asia Pacific regions,
and this has made it more challenging to
compete in markets such as Europe, Africa
and North Asia. As a result, our gross margin
reduced from 12.7% to 11.9%, and our
Ingredients sales volumes decreased by 11% as
we allocated milk to higher margin channels in
the other markets.
We are actively expanding our AMENA
Ingredients product portfolio to higher margin
products, such as functional ingredients; this
involves working with customers to meet the
consumer needs that are emerging. While
not new, COVID-19 has increased consumer
awareness of immunity, wellbeing and
sustainability.
To support these trends, we have launched
our New Zealand Milk Products (NZMP) Milk
Phospholipids range that helps with stress
management. By extending our portfolio into
the mental wellness space, we’re helping food
brands tap into new consumer needs, such as
mood-enhancement and cognitive performance
under stress – requirements that have recently
been amplified due to the pandemic.
We also launched NZMP’s first carbonzero™
certified ingredient, NZMP Organic Butter, in
the North American market and intend to roll it
out to other markets. Having this capability in
place means that over time we can broaden the
portfolio of carbonzero™ certified ingredients
to support customer needs and demands.
Our AMENA Ingredients channel has large
global customers and to support them and
manage the volatility in dairy product prices
we use longer-term pricing contracts, where
the sale price for product is the average price
of a number of prior months. Relative to the
comparative period, the margins on these
sales has reduced due to the lag in the pricing
profile of these contracts versus the rising
cost of milk. The impact of the reduced gross
margin can be seen in the earnings attribution
from Group Operations to the AMENA region
as the margin on longer-term sales sits within
Group Operations. In addition, the Ingredients
product mix was less favourable to the
comparative period, and Group Operations
made a lower margin between the cost to make
product and the market-based transfer price.
Operating expenses in AMENA’s Ingredients
channel decreased 15% to $162 million, in part
due to lower sales volumes, but also a strong
focus from the in-market teams to control costs.
In AMENA’s Foodservice channel, the
comparative period incurred start-up costs
relating to our operations in the Netherlands as
part of the partnership with A-ware. These have
not been repeated this financial year and led to
improved gross profit. The A-ware partnership
is in the early stages and is currently not yet
profitable. The performance of A-ware this
year is allocated across all three regions as they
collectively work to grow demand.
Operating expenses in AMENA’s Foodservice
channel improved largely due to the successful
transition of our USA Foodservice business to a
new operating model in partnership with Land
O’Lakes, one of America’s leading dairy co-
operatives. This gives us access to Land O’Lakes’
strong, well-established distribution network
and its large customer base. The improved gross
margin and reduced operating expenses led to
AMENA’s Foodservice performance improving
from an EBIT loss of $13 million to a positive
EBIT of $1 million.
AMENA PERFORMANCE
1
FOR THE SIX-MONTHS ENDED 31 JANUARY
NORMALISED BASIS
NZD MILLIONTOTALINGREDIENTSFOODSERVICECONSUMER
20202021CHANGE
2
20202021CHANGE
2
20202021CHANGE
2
20202021CHANGE
2
Sales volume (‘000 MT)
3
667627(6)%476424(11)%1010–1811937%
Revenue 3,7033,197(14)%3,0602,523(18)%9811719%5455572%
Cost of goods sold(3,171)(2,726)14%(2,672)(2,223)17%(91)(102)(12)%(408)(401)2%
Gross profit532471(11)%388300(23)%715114%13715614%
Operating expenses(321)(279)13%(190)(162)15%(24)(14)42%(107)(103)4%
Other
4
5980%6950%4––(5)––
EBIT
5
216201(7)%204147(28)%(13)1–2553112%
Includes EBIT Group
Operations’ attribution5617(70)%
Gross margin14.4%14.7%12.7%11.9%7. 1%12.8%25.1%28.0%
1 AMENA performance represents Continuing Operations.
2 Percentages as shown in table may not align to the calculations of percentages based on numbers in the table due to rounding of reported figures.
3 Includes sales to other regions.
4 Consists of other operating income, net foreign exchange gains and losses, share of profit or loss on equity accounted investees.
5 This includes EBIT attribution from Group Operations.
AMENA
AMENA
FONTERRA INTERIM REPORT 2021
3130
— Healthy BusinessCreating Goodness
The Consumer channel in Latin America
has had strong growth and is a significant
contributor to AMENA’s Consumer EBIT of
$53 million. Latin America’s performance is
predominately driven by our business in Chile.
In Chile we have increased our market
share of milk collections as we improved our
engagement with farmers. This has contributed
to increased production volume, up 17,000 MT
compared to last year.
Our value and volume share in the
Chilean Consumer channel increased 0.6%
and 0.5% to 30.2% and 31.3%, respectively.
This was predominantly due to new product
development such as our 1+1 Single Yoghurt
and Manjarate 3D. Both products won Product
of the Year as voted by Chilean consumers,
in their respective yoghurt and desserts
categories. They also received Effie Awards,
given by communication specialists to those
products with the best communication
efficiency in their categories.
In addition, to support the economy
through COVID-19, the Chilean Government
released pension funds, which have positively
impacted the whole industry and contributed
to demand for dairy products as consumers
spend more.
The Chilean milk market is competitive,
and our cost of goods sold increased due to
higher raw milk costs as we competed for more
milk. Our operating expenses were steady,
although we did incur additional costs related
to keeping the workforce safe while operating
under COVID-19 conditions. However, other
operational efficiencies offset these.
LATIN AMERICA
1
FOR THE SIX-MONTHS ENDED 31 JANUARY
NORMALISED BASIS
NZD MILLION20202021CHANGE
2
Sales volume (‘000 MT)
3
16518210%
Revenue 4504899%
Cost of goods sold(322)(351)(9)%
Gross profit1281388%
Operating expenses(97)(97)–
Other
4
(6)––
EBIT254164%
Gross margin 28.4%28.2%
1 Performance includes Ingredients, Foodservice and Consumer channels. It does not include Group Operations attribution.
2 Percentages as shown in table may not align to the calculations of percentages based on numbers in the table due to rounding of
reported figures.
3 Includes sales to other regions.
4 Consists of other operating income, net foreign exchange gains and losses, share of profit or loss on equity accounted investees.
AMENA normalised Consumer gross margin
28.0%
up from
25.1%
AMENA normalised operating expenses
$
42 million
lower than
last year
FONTERRA INTERIM REPORT 2021
3332
— Healthy BusinessCreating Goodness
GREATER CHINA PERFORMANCE
1
FOR THE SIX MONTHS ENDED 31 JANUARY
NORMALISED BASIS
NZD MILLIONTOTALINGREDIENTSFOODSERVICECONSUMER
20202021CHANGE
2
20202021CHANGE
2
20202021CHANGE
2
20202021CHANGE
2
Sales volume (‘000 MT)
3
5795932%3893993%149148(1)%414612%
Revenue 3,0303,0611%1,9881,903(4)%8609379%18222121%
Cost of goods sold(2,596)(2,520)3%(1,795)(1,699)5%(685)(673)2%(116)(148)(28)%
Gross profit43454125%1932046%17526451%667311%
Operating expenses(177)(200)(13)%(64)(73)(14)%(51)(64)(25)%(62)(63)(2)%
Other
4
(12)(2)83%(12)(8)33%–3––3–
EBIT
5
24533938%1171235%12420364%413225%
Includes EBIT Group
Operations’ attribution8371(14)%
Gross margin14.3%1 7. 7 %9.7%10.7%20.3%28.2%36.3%33.0%
1 Greater China performance represents Continuing Operations.
2 Percentages as shown in table may not align to the calculations of percentages based on numbers in the table due to rounding of reported figures.
3 Includes sales to other regions.
4 Consists of other operating income, net foreign exchange gains and losses, share of profit or loss on equity accounted investees.
5 This includes EBIT attribution from Group Operations.
O
ur Greater China normalised EBIT
improved $94 million to $339 million
due to increased sales volumes and gross
margins, which improved from 14.3% to
17.7%, predominantly through a very strong
increase in our Foodservice gross margins.
The Ingredients and Consumer channels
also contributed positively to the improved
Greater China performance with increased
sales volumes and the Ingredients channel
also increased its gross margin.
The Foodservice channel is the largest
contributor to Greater China’s earnings, and its
EBIT increased $79 million, or 64% relative to
the comparative period, to $203 million. This
was due to an improvement in the Foodservice
channel gross margin from 20.3% to 28.2%
as we shifted milk into higher value products
on relatively stable volume and a $13 million
increase in operating expenses.
The increased demand for our Foodservice
products is driven by our solutions focused
team, continuous innovation and wide
customer reach into China’s 2nd tier and 3rd
tier cities. We now have a presence in 372
cities, compared to 350 this time last year.
The Foodservice channel also benefited from
the health of the macro economy and China’s
recovery from COVID-19.
Our Mainland China team are continuously
looking to innovate and grow demand, they
have developed 120+ new applications over the
last six-months to support demand generation
across the bakery, beverage and dining channels,
including fruit tea macchiato series featuring
Anchor Food Professionals UHT whipping cream,
baked cheese rice with mozzarella cheese, and
cream cheese Chinese pastry.
We have also successfully released three
new cream products in the bakery and coffee
& beverage channels under the Anchor Food
Professionals brand. One of these is our Anchor
Easy Topping Cream. It is our first ambient
cream and will enable us to enter new cities
that do not have an extensive cool supply chain.
Our strong customer focus has enabled us
to grow with our customers as they expand.
The increased demand for our mozzarella
has been driven by growth of key customers
in the pizza business as they accelerate new
store expansion and the fast growth in the
pizza delivery channel. Furthermore, the
consolidation and significant growth from
leading beverage brands that we work with
has supported UHT cream demand.
As we work to generate more demand our
costs have increased, albeit at a relatively low
level compared with the incremental gross
profit growth, with our Foodservice operating
expenses increasing $13 million while our
Foodservice gross profit increased $89 million.
The Greater China Ingredients channel has
continued to steadily grow in the first six-
months of the 2021 financial year with volumes
up 3% on the comparative period. Gross
margin has improved driven by product mix
diversification and new business development
initiatives, in particular the growth of Probiotics
as well as cheese and proteins into the processed
cheese market, such as cheese lollipops.
In addition, the China Farm joint
venture broke even compared to a loss of
$13 million in the comparative period, with
the improved performance coming from
operational efficiencies and favourable
foreign exchange movements.
However, the improved Ingredients’ gross
margin and performance in the joint venture,
reported in the ingredients channel, was
partially offset by higher operating expenses in
Ingredients, with increased COVID-19 related
testing of imported dairy products at various
stages through the supply chain increasing costs.
Our Greater China Consumer channel,
while smaller relative to our Foodservice
and Ingredients channels, improved on last
year’s performance, with gross profit up
11% to $73 million, and EBIT up $9 million
to $13 million. This is predominantly due to
increased sales volume from our brands in
Mainland China, in particular, Anchor, which
remains the number one imported milk brand.
The Chinese Government’s endorsement of
dairy consumption during COVID-19 had a
positive impact on sales volume.
The Consumer channel also benefited from
a small improvement in trading conditions in
Hong Kong. However, the Hong Kong market
overall continues to be impacted by challenging
trading conditions, closed borders and the
impact of COVID-19.
Overall, our performance in Greater
China tends to be weighted towards the first
six-months of the financial year as customers
make use of the Free Trade Agreement window,
with strong demand generated from a number
of major events occurring around this period,
such as National day, Singles day, and Chinese
New Year.
Greater China
Greater China
Greater China normalised EBIT
$
339 million
up
38%
FONTERRA INTERIM REPORT 2021
3534
Healthy BusinessCreating Goodness
New Zealand Milk
O
ur strategy prioritises using
New Zealand milk to meet customer
needs and creating sustainable value for our
farmers and customers.
The following tables provide a breakdown
of our earnings performance between our
New Zealand and non-New Zealand sourced
milk, over and above the milk prices paid to
our milk suppliers.
Our earnings from New Zealand sourced
milk have improved, with the EBIT contribution
from New Zealand milk increasing 18% over
the comparative period, from $493 million
to $582 million.
This has been achieved through our
improved gross margin on New Zealand milk
NEW ZEALAND AND NON-NEW ZEALAND SOURCED MILK
1
FOR THE SIX-MONTHS ENDED 31 JANUARY
NORMALISED BASIS
NZD MILLIONTOTALNEW ZEALAND MILKNON-NEW ZEALAND MILK
20202021CHANGE
2
20202021CHANGE
2
20202021CHANGE
2
Sales volume (‘000 MT)1,9281,875(3)%1,5161,480(2)%412395(4)%
Revenue10,0719,597(5)%8,5848,144(5)%1,4871,453(2)%
Cost of goods sold(8,483)( 7, 9 4 6 )6%( 7, 249)(6 , 745)7%(1,234)(1,201)3%
Gross profit1,5881,6514%1,3351,3995%253252–
Operating expenses(1,023)(1,013)1%(832)(833)–(191)(180)6%
Other
3
(4)14–(10)16–6(2)–
EBIT56165216%49358218%68703%
Discontinued Operations233239%–––233239%
Gross Margin 15.8%1 7. 2 %15.6%1 7. 2 %17. 0 %1 7. 3 %
EBIT margin5.6%6.8%5.7%7. 1%4.6%4.8%
1 Represents Continuing Operations.
2 Percentages as shown in table may not align to the calculations of percentages based on numbers in the table due to rounding of reported figures.
3 Consists of other operating income, net foreign exchange gains and losses, share of profit or loss on equity accounted investees.
as we allocate an increased portion of milk to
higher margin products. This can be seen in
the increased sales volume of New Zealand
sourced milk in the Greater China Foodservice
and Consumer channels, up 10% and 14%,
respectively. These channels were some
of our best performing channels, with our
gross margin on New Zealand sourced milk
used in the Greater China Foodservice channel
being 28.6%.
Our non-New Zealand sourced milk
performance is relatively stable, with gross
margin at 17.3%, similar to the comparative
period. The main contribution to our non-New
Zealand sourced milk gross margin is from our
Consumer Channel in Chile and Australia.
NEW ZEALAND MILK BY PRODUCT CHANNEL – REVENUE
1
FOR THE SIX MONTHS ENDED 31 JANUARY
NZD MILLIONTOTAL INGREDIENTSFOODSERVICECONSUMER
UNALLOCATED COSTS
& ELIMINATIONS
20202021CHANGE
2
20202021CHANGE
2
20202021CHANGE
2
20202021CHANGE
2
20202021
Asia Pacific2,6692 , 74 43%1,3361,4488%429362(16)%9049343%––
AMENA2,9812,455(18)%2,7742,279(18)%5650(11)%151126(17)%––
Greater China2,9483,0052%1,9601,880(4)%82091612%16820924%––
Eliminations(14)(60)––––––––––(14)(60)
Total8,5848,144(5)%6,0705,607(8)%1,3051,3282%1,2231,2694%(14)(60)
NEW ZEALAND MILK BY PRODUCT CHANNEL – GROSS MARGIN
1
FOR THE SIX MONTHS ENDED 31 JANUARY
NORMALISED
BASIS TOTAL INGREDIENTSFOODSERVICECONSUMER
20202021202020212020202120202021
Asia Pacific18.4%18.8%11.5%8.7%17. 5%28.5%29.1%30.8%
AMENA13.1%13.0%12.7%12.3%28.6%20.0%16.6%21.4%
Greater China14.6%1 7. 8 %9.8%10.7%20.9%28.6%38.7%34.4%
Total15.6%1 7. 2 %11.5%10.9%20.1%28.2%28.9%30.5%
NEW ZEALAND MILK BY PRODUCT CHANNEL – EBIT
1
FOR THE SIX MONTHS ENDED 31 JANUARY
NZD MILLIONTOTAL INGREDIENTSFOODSERVICECONSUMER
UNALLOCATED COSTS
& ELIMINATIONS
20202021CHANGE
2
20202021CHANGE
2
20202021CHANGE
2
20202021CHANGE
2
20202021
Asia Pacific13516119%5730(47)%1849172%608237%––
AMENA182159(13)%175141(19)%86(25)%(1)12–––
Greater China25034036%1171213%12520463%81588%––
Eliminations( 74)(78)––––––––––( 74)(78)
Total49358218%349292(16)%15125972%6710963%( 74)(78)
1 Represents Continuing Operations.
2 Percentages as shown in table may not align to the calculations of percentages based on numbers in the table due to rounding of
reported figures.
NEW ZEALAND MILK BY PRODUCT CHANNEL – VOLUME
1
FOR THE SIX-MONTHS ENDED 31 JANUARY
(‘000) MTTOTAL INGREDIENTSFOODSERVICECONSUMER
UNALLOCATED COSTS
& ELIMINATIONS
20202021CHANGE
2
20202021CHANGE
2
20202021CHANGE
2
20202021CHANGE
2
20202021
Asia Pacific535529(1)%244243(0)%7369(5)%218217(0)%––
AMENA443397(10)%413370(10)%87(13)%2220(9)%––
Greater China5445715%3833933%12413610%374214%––
Eliminations(6)(17)––––––––––(6)(17)
Total1,5161,480(2)%1,0401,006(3)%2052123%2772791%(6)(17)
New Zealand milk normalised gross margin
17. 2%
up from
15.6%
For the first six-months of the financial year
our New Zealand and non-New Zealand gross
margins are at similar levels. However, at
an EBIT margin level, our non-New Zealand
sourced milk has a lower margin relative to our
New Zealand sourced milk, and this is reflective
of our non-New Zealand sourced milk being
predominantly sold in the Consumer channel,
which is a more cost intensive channel.
Fooderservice normalised EBIT from New Zealand milk
$
259 million
up
72%
NORMALISED BASIS
NORMALISED BASIS
FONTERRA INTERIM REPORT 2021
3736
— Healthy BusinessCreating Goodness
DISCONTINUED OPERATIONS PERFORMANCE
FOR THE SIX MONTHS ENDED 31 JANUARY
NORMALISED BASIS
NZD MILLION TOTALCHINA FARMSDPA BRAZIL
20202021CHANGE
1
20202021CHANGE
1
20202021CHANGE
1
Sales volume (‘000 MT)10912111%101110%9911011%
Sales revenue 352318(10)%135135–217183(16)%
Cost of goods sold(272)(247)9%(124)(113)9%(148)(134)9%
Gross profit8071(11)%1122100%6949(29)%
Operating expenses(69)(42)39%(8)(6)25%(61)(36)41%
Other
2
123(75)%64(33)%6(1)–
EBIT233239%920122%1412(14)%
Gross margin22.7%22.3%8.1%16.3%31.8%26.8%
1 Percentages as shown in table may not align to the calculations of percentages based on numbers in the table due to rounding of reported figures.
2 Consists of other operating income, net foreign exchange gains and losses, share of profit or loss on equity accounted investees.
Discontinued
Operations
W
e have two Discontinued operations
that are progressing through sale
processes.
The sale of our 85% interest in our Hangu farm
continues to progress, and our two wholly-
owned farming hubs in Ying and Yutian have
received anti-trust clearance and are now
subject to obtaining the remaining regulatory
approvals in China. We expect to complete the
sale of all three China Farms hubs within this
financial year.
We intend to use the sale proceeds from
the divestment to pay down debt, as part of
our overall debt reduction programme.
China Farms’ EBIT increased $11 million
relative to the comparative period due to
lower input costs and no depreciation being
included due to the assets being classified
for accounting purposes as held for sale.
The depreciation for the six-months ending
31 January 2020 was $6 million. The China
Farms EBIT does not include the China Farm
joint venture as this is included in the Greater
China Ingredients results.
The sale process of DPA Brazil is taking
longer due to the ongoing challenges of
COVID-19 in Brazil. Sales volume increased
due to Government emergency aid impacting
demand and consumer behaviours changing
as they look for healthy food. However,
gross profit declined 29% due to higher
input costs and a weaker local currency.
Operating expenses decreased 41% and
offset the reduced gross profit, as our costs
were favourably impacted by the weaker local
currency. DPA Brazil also benefited from no
depreciation being included due to the assets
being classified for accounting purposes as held
for sale. The depreciation for the six-months
ending 31 January 2020 was $8 million.
China Farms’ Normalised EBIT
1
$
20 million
up
122%
Kiri, Alan and Te Kaihou, Bay of Plenty
1 Accounting standards require that we cease deducting depreciation costs when China Farms
was classified as held for sale as at 31 January 2020. For the six months to 31 January 2021 this
was $6 million
FONTERRA INTERIM REPORT 2021
3938
Healthy BusinessCreating Goodness
Historical
Financial Summary
COMMODITY PRICES
JAN 2017JAN 2018JAN 2019JAN 2020JAN 2021
Weighted Average Commodity Prices (USD per MT FOB)
Whole Milk Powder
1
2,5803,0872,8453,1663,009
Skim Milk Powder
1
2,1352,0002,0502,6402,776
Butter
1
3,4345,8794,4604,3023,561
Cheese
2
3,5543,8973,5223,8833,757
GROUP OVERVIEW
3,4
JAN 2017JAN 2018JAN 2019JAN 2020JAN 2021
Income Statement Measures
Sales volume (000s MT)2,1312,0032,0752,0371,996
Normalised revenue ($ million)9,2329,8369,74510,4239,915
Normalised EBITDA ($ million)
5
8967335969071,004
Normalised EBIT ($ million)
5
607458312584684
Normalised profit after tax attributable to equity holders
of the Co-operative ($ million)38424268283399
Reported earnings per share0.26(0.22)0.040.320.23
Normalised earnings per share0.240.150.040.180.25
Revenue Margin Analysis
EBITDA margin
5
9.7%7. 4%6.1%8.7%10.1%
EBIT margin
5
6.6%4.7%3.2%5.6%6.9%
Profit after tax margin
5
4.2%2.5%0.7%2.7%4.0%
Cash Flow ($ million)
Operating cash flow
5
(167)(292)(612)(124)(544)
Free cash flow
5
(417)(690)(782)369(632)
Net working capital
5
4,8385,3565,3966,1966,239
Capital Measures
Equity excluding hedge reserve ($ million)
6
7, 0 0 56,6246,6076,4926,807
Economic net interest-bearing debt ($ million)
5, 6
6,1157,0607, 3525,7765,618
Gearing ratio
5, 6
46.6%51.6%52.7%47. 1%45.2%
Capital expenditure ($ million)
5
244346316112147
ASIA PACIFIC
3,4
JAN 2020JAN 2021
Ingredients
Sales volume (000s MT)
7
287280
Normalised revenue ($ million)1,5681,636
Normalised gross profit ($ million)172134
Normalised gross margin %
5
11.0%8.2%
Normalised EBIT ($ million)5318
Normalised EBIT margin %
5
3.4%1 .1%
Foodservice
Sales volume (000s MT)
7
8982
Normalised revenue ($ million)551469
Normalised gross profit ($ million)99118
Normalised gross margin %
5
18.0%25.2%
Normalised EBIT ($ million)3254
Normalised EBIT margin %
5
5.8%11.5%
Consumer
Sales volume (000s MT)
7
312310
Normalised revenue ($ million)1,2331,294
Normalised gross profit ($ million)328359
Normalised gross margin %
5
26.6%2 7. 7 %
Normalised EBIT ($ million)89118
Normalised EBIT margin %
5
7. 2 %9.1%
Total
Sales volume (000s MT)
7
688672
Normalised revenue ($ million)3,3523,399
Normalised gross profit ($ million)599611
Normalised gross margin %
5
17. 9 %18.0%
Normalised EBIT ($ million)174190
Normalised EBIT margin %
5
5.2%5.6%
ASIA PACIFIC – AUSTRALIA
3,4
JAN 2020JAN 2021
Total
Production Volume (000s MT)205212
Sales Volume (000s MT)
7
198174
Normalised revenue ($ million)1,000899
Normalised gross profit ($ million)109103
Normalised gross margin %
5
10.9%11.5%
Normalised EBIT ($ million)3732
Normalised EBIT margin %
5
3.7%3.6%
FONTERRA INTERIM REPORT 2021
4140
Healthy BusinessCreating Goodness
AMENA
3,4
JAN 2020JAN 2021
Ingredients
Sales volume (000s MT)
7
476424
Normalised revenue ($ million)3,0602,523
Normalised gross profit ($ million)388300
Normalised gross margin %
5
12.7%11.9%
Normalised EBIT ($ million)204147
Normalised EBIT margin %
5
6.7%5.8%
Foodservice
Sales volume (000s MT)
7
1010
Normalised revenue ($ million)98117
Normalised gross profit ($ million)715
Normalised gross margin %
5
7. 1%12.8%
Normalised EBIT ($ million)(13)1
Normalised EBIT margin %
5
(13.3)%0.9%
Consumer
Sales volume (000s MT)
7
181193
Normalised revenue ($ million)545557
Normalised gross profit ($ million)137156
Normalised gross margin %
5
25.1%28.0%
Normalised EBIT ($ million)2553
Normalised EBIT margin %
5
4.6%9.5%
Total
Sales volume (000s MT)
7
667627
Normalised revenue ($ million)3,7033,197
Normalised gross profit ($ million)532471
Normalised gross margin %
5
14.4%14.7%
Normalised EBIT ($ million)216201
Normalised EBIT margin %
5
5.8%6.3%
AMENA – LATIN AMERICA
3,4
JAN 2020JAN 2021
Sales Volume (000s MT)
7
165182
Normalised sales revenue ($ million)450489
Normalised gross profit ($ million)128138
Normalised gross margin %
5
28.4%28.2%
Normalised EBIT ($ million)2541
Normalised EBIT margin %
5
5.6%8.4%
GREATER CHINA
3,4
JAN 2020JAN 2021
Ingredients
Sales volume (000s MT)
7
389399
Normalised revenue ($ million)1,9881,903
Normalised gross profit ($ million)193204
Normalised gross margin %
5
9.7%10.7%
Normalised EBIT ($ million)117123
Normalised EBIT margin %
5
5.9%6.5%
Foodservice
Sales volume (000s MT)
7
149148
Normalised revenue ($ million)860937
Normalised gross profit ($ million)175264
Normalised gross margin %
5
20.3%28.2%
Normalised EBIT ($ million)124203
Normalised EBIT margin %14.4%21.7%
Consumer
Sales volume (000s MT)
7
4146
Normalised revenue ($ million)182221
Normalised gross profit ($ million)6673
Normalised gross margin %
5
36.3%33.0%
Normalised EBIT ($ million)413
Normalised EBIT margin %
5
2.2%5.9%
Total
Sales volume (000s MT)
7
579593
Normalised revenue ($ million)3,0303,061
Normalised gross profit ($ million)434541
Normalised gross margin %
5
14.3%1 7. 7 %
Normalised EBIT ($ million)245339
Normalised EBIT margin %
5
8.1%11 .1%
FONTERRA INTERIM REPORT 2021
4342
Healthy BusinessCreating Goodness
DISCONTINUED OPERATIONS
3,4,8
JAN 2018JAN 2019JAN 2020JAN 2021
China Farms
Sales volume (000s MT)
7
1091011
Normalised revenue ($ million)123110135135
Normalised gross profit ($ million)(8)(13)1122
Normalised gross margin %
5
(6.1)%(11.8)%8.1%16.3%
Normalised EBIT ($ million)(12)(18)920
DPA Brazil
Sales volume (000s MT)
7
969599110
Normalised revenue ($ million)222207217183
Normalised gross profit ($ million)66546949
Normalised gross margin %
5
29.4%26.2%31.8%26.8%
Normalised EBIT ($ million)(7)(5)1412
Notes to the Historical Financial Summary
1 Source: Fonterra Farmgate Milk Price Statement 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 Includes normalisation adjustments.
5 Definition can be found in the Glossary on page 70 of the FY21 Interim Report.
6 FY20 has been restated. Refer to Basis of Preparation section in the FY21 Interim Report.
7 Includes sales to other strategic platforms.
8 The proposed divestment of our Fonterra-owned China Farms and our interest in DPA Brazil have impacted how the financial statements are presented. The sales process for these businesses are at the
point that they meet the accounting requirements to be classified as ‘held for sale’ on the Statement of Financial Position, on the basis that a sale is considered highly probable. Furthermore, because both
businesses are considered to be major businesses in one of our segments and/or geographical regions, their results are classified as ‘Discontinued Operations’ within the Income Statement. The segment
note within our financial statements excludes these businesses, and therefore reflects the Group’s Continuing Operations only.
NEW ZEALAND MILK AND NON-NEW ZEALAND MILK
3,4
JAN 2020JAN 2021
New Zealand Milk
Sales volume (000s MT) 1,5161,480
Normalised revenue ($ million)8,5848,144
Normalised gross profit ($ million)1,3351,399
Normalised gross margin %
5
15.6%1 7. 2 %
Normalised EBIT ($ million)493582
Normalised EBIT margin %
5
5.7%7. 1%
Non-New Zealand Milk
Sales volume (000s MT) 412395
Normalised revenue ($ million)1,4871,453
Normalised gross profit ($ million)253252
Normalised gross margin %
5
17. 0 %1 7. 2 %
Normalised EBIT ($ million)6870
Normalised EBIT margin %
5
4.6%4.8%
Total
Sales volume (000s MT) 1,9281,875
Normalised revenue ($ million)10,0719,597
Normalised gross profit ($ million)1,5881,651
Normalised gross margin %
5
15.8%1 7. 2 %
Normalised EBIT ($ million)561652
Normalised EBIT margin %
5
5.6%6.8%
FONTERRA INTERIM REPORT 2021
4544
Healthy BusinessCreating Goodness
The Directors of Fonterra Co-operative Group Limited (Fonterra) present
to Shareholders the Interim Financial Statements for Fonterra and its
subsidiaries (together the Group) and the Group’s interests in its equity
accounted investments for the six months ended 31 January 2021.
The Directors present Interim 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 that the Interim 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 Interim 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 Interim Financial
Statements for the six months ended 31 January 2021.
For and on behalf of the Board:
Directors’ Statement
FOR THE SIX MONTHS ENDING 31 JANUARY 2021
Contents
DIRECTORS’ STATEMENT47
INCOME STATEMENT48
STATEMENT OF COMPREHENSIVE INCOME49
STATEMENT OF FINANCIAL POSITION50
STATEMENT OF CHANGES IN EQUITY51
CASH FLOW STATEMENT52
BASIS OF PREPARATION54
NOTES TO THE FINANCIAL STATEMENTS55
INDEPENDENT REVIEW REPORT67
NON-GAAP MEASURES68
GLOSSARY70
Interim Financial Results
FOR THE SIX MONTHS ENDED 31 JANUARY 2021
Peter McBride
Chairman
16 March 2021
Bruce Hassall
Director
16 March 2021
Creating GoodnessFONTERRA INTERIM REPORT 2021
4746
— Financial Results
Income Statement
FOR THE SIX MONTHS ENDED 31 JANUARY 2021
Statement of Comprehensive Income
FOR THE SIX MONTHS ENDED 31 JANUARY 2021
NOTES
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2021
UNAUDITED
31 JAN 2020
UNAUDITED
1
31 JUL 2020
AUDITED
1
Continuing Operations
Revenue from sale of goods19,59710,07120,282
Cost of goods sold3( 7, 9 4 6 )(8,483)(17, 2 3 6 )
Impact of strategy review–1916
Gross profit1,6511,6073,062
Other operating income282762
Selling and marketing expenses(263)(270)(551)
Distribution expenses(236)(247)(482)
Administrative expenses(382)(389)(835)
Other operating expenses(149)(177)(377)
Impairment of intangible assets ––(55)
Share of profit/(loss) of equity accounted investments3(9)(6)
Impact of strategy review2c)(50)375464
Profit before net finance costs and tax from continuing operations6029171,282
Finance income5613
Finance costs(143)(167)(317)
Net finance costs(138)(161)(304)
Profit before tax from continuing operations464756978
Tax exp ense(125)(147)(175)
Profit after tax from continuing operations339609803
Discontinued Operations
Profit/(loss) after tax from discontinued operations2b)52(108)(144)
Profit after tax391501659
Profit after tax is attributable to:
Profit attributable to equity holders of the Co-operative372521686
Profit/(loss) attributable to non-controlling interests19(20)(27)
Profit after tax391501659
GROUP $
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2021
UNAUDITED
31 JAN 2020
UNAUDITED
31 JUL 2020
AUDITED
Earnings per share:
Basic and diluted earnings per share from continuing operations0.200.370.48
Basic and diluted earnings/(loss) per share from discontinued operations0.03(0.05)(0.05)
Basic and diluted earnings per share0.230.320.43
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2021
UNAUDITED
31 JAN 2020
UNAUDITED
31 JUL 2020
AUDITED
Profit after tax391501659
Items that may be reclassified subsequently to the Income Statement:
Cash flow hedges and other costs of hedging, net of tax25038354
Net investment hedges and translation of foreign operations, net of tax(106)(11)(67)
Foreign currency translation reserve losses transferred to the Income Statement14621
Share of equity accounted investments’ movement in reserves––(6)
Other reserve movements–(33)(35)
Total items that may be reclassified subsequently to the Income Statement158–267
Items that will not be reclassified subsequently to the Income Statement:
Net fair value gains on investments in shares2–2
Foreign currency translation gain/(loss) attributable to non-controlling interests3(1)3
Other reserve movements attributable to non-controlling interests(2)(16)(13)
Total items that will not be reclassified subsequently to the Income Statement3(17)(8)
Total other comprehensive income/(expense) recognised in equity161(17)259
Total comprehensive income552484918
Total comprehensive income is attributable to:
Equity holders of the Co-operative 532520955
Non-controlling interests20(36)(37)
Total comprehensive income552484918
Total comprehensive income arises from:
Continuing operations4756131,054
Discontinued operations77(129)(136)
Total comprehensive income552484918
1 Comparative information includes re-presentations for consistency with the current period. Re-presentations have had no impact on the totals or sub-totals presented in the Income Statement.
Creating GoodnessFONTERRA INTERIM REPORT 2021
4948
— Financial Statements
Statement of Financial Position
AS AT 31 JANUARY 2021
NOTES
GROUP $ MILLION
AS AT
31 JAN 2021
UNAUDITED
31 JAN 2020
UNAUDITED
RESTATED
1
31 JUL 2020
AUDITED
ASSETS
Current assets
Cash and cash equivalents345460788
Trade and other receivables 1,9222,0571,832
Inventories5,8965,8523,268
Tax receivable594144
Derivative financial instruments 86283452
Investment in Beingmate2c)40–157
Other current assets 826473
Assets held for sale2a)1,0781,1751,005
Total current assets10,2849,7327, 61 9
Non-current assets
Property, plant and equipment5,8935,8906,006
Right-of-use assets527571569
Equity accounted investments 9114396
Intangible assets2,2032,3072,240
Deferred tax assets238496421
Derivative financial instruments468535664
Investment in Beingmate–170–
Long-term advances163230220
Other non-current assets 887481
Total non-current assets9,67110,41610,297
Total assets19,95520,14817, 916
LIABILITIES
Current liabilities
Bank overdraft175231
Borrowings61,1441,032764
Trade and other payables 1,8461,9532,004
Owing to suppliers3,2523,5171,588
Tax payable936388
Derivative financial instruments54189113
Provisions565168
Other current liabilities715254
Liabilities held for sale2a)584716603
Total current liabilities 7, 1 1 77, 6 2 55,313
Non-current liabilities
Borrowings65,1085,6545,277
Derivative financial instruments 442468483
Provisions676364
Deferred tax liabilities241920
Other non-current liabilities394256
Total non-current liabilities 5,6806,2465,900
Total liabilities12,79713,87111,213
Net assets7, 1 5 86,2776,703
EQUITY
Subscribed equity45,8925,8875,887
Retained earnings1,224775933
Foreign currency translation reserve(321)(188)(229)
Hedge reserves351(215)101
Other reserves2(2)–
Total equity attributable to equity holders of the Co-operative7, 1 4 86,2576,692
Non-controlling interests102011
Total equity7, 1 5 86,2776,703
1 Comparative information has been restated for the GBP bond adjustment reflected in the Group Financial Statements for the year ended 31 July 2020. Please see the Basis of preparation section for
further details.
Statement of Changes in Equity
FOR THE SIX MONTHS ENDED 31 JANUARY 2021
GROUP $ MILLION
ATTRIBUTABLE TO EQUITY HOLDERS OF THE CO-OPERATIVE
NON-
CONTROLLING
INTERESTS
TOTAL
EQUITY
SUBSCRIBED
EQUITY
RETAINED
EARNINGS
FOREIGN
CURRENCY
TRANSLATION
RESERVE
HEDGE
RESERVES
OTHER
RESERVESTOTAL
As at 1 August 2020 5,887933(229)101–6,692116,703
Profit after tax–372–––37219391
Other comprehensive (expense)/income––(92)25021601161
Total comprehensive income/(expense) –372(92)250253220552
Transactions with equity holders in their capacity as equity holders:
Dividend paid to equity holders of the Co-operative–(81)–––(81)–(81)
Equity instruments issued (refer to Note 4)5––––5–5
Dividend paid to non-controlling interests––––––(21)(21)
As at 31 January 2021 (unaudited)5,8921,224(321)35127, 1 4 8107, 1 5 8
As at 1 August 2019 (restated)
1
5,887313(183)(268)85,757775,834
NZ IFRS 16 transition adjustment –(20)–––(20)–(20)
As at 1 August 2019 adjusted 5,887293(183)(268)85,737775,814
Profit/(loss) after tax–521–––521(20)501
Transfer between reserves–(15)–15––––
Other comprehensive (expense)/income–(24)(5)38(10)(1)(16)(17)
Total comprehensive income/(expense)–482(5)53(10)520(36)484
Transactions with equity holders in their capacity as equity holders:
Dividend paid to non-controlling interests––––––(21)(21)
As at 31 January 2020 (unaudited)5,887775(188)(215)(2)6,257206,277
As at 1 August 2019 5,887313(183)(268)85,757775,834
NZ IFRS 16 transition adjustment –(20)–––(20)–(20)
As at 1 August 2019 adjusted 5,887293(183)(268)85,737775,814
Profit/(loss) after tax–686–––686(27)659
Transferred between reserves–(15)–15––––
Other comprehensive (expense)/income –(31)(46)354(8)269(10)259
Total comprehensive income/(expense) –640(46)369(8)955(37)918
Transactions with equity holders in their capacity as equity holders:
Dividend paid to non-controlling interests––––––(29)(29)
As at 31 July 2020 (audited)5,887933(229)101–6,692116,703
1 Retained earnings as at 1 August 2019 has been restated from the amount reported in the Group Interim Financial Statements for the six months ended 31 January 2020 to reflect the restatements
presented in the Group Financial Statements for the year ended 31 July 2020.
Creating GoodnessFONTERRA INTERIM REPORT 2021
5150
— Financial Statements
1 Comparative information has been restated for the adjustment to cash flows from financing activities reflected in the Group Financial Statements for the year ended 31 July 2020. The restatement had
no impact on net cash flows. Please see the Basis of preparation section for further details.
2 Comparative information also includes re-presentations for consistency with the current period. Re-presentations have had no impact on the totals or sub-totals presented in the Cash Flow Statement.
Cash Flow Statement
FOR THE SIX MONTHS ENDED 31 JANUARY 2021
The Cash Flow Statement presents total Group cash flows from continuing and discontinued operations.
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2021
UNAUDITED
31 JAN 2020
UNAUDITED
RESTATED
1,2
31 JUL 2020
AUDITED
2
Cash flows from operating activities
Profit before net finance costs and tax from continuing operations6029171,282
Profit/(loss) before net finance costs and tax from discontinued operations55(111)(135)
Total Group profit before net finance costs and tax6578061,147
Adjustments for:
– Depreciation and amortisation320323627
– Foreign exchange (gains)/losses(220)(32)37
– Gain on sale of investment in DFE Pharma–(401)(401)
– Gain on sale of investment in Goodminton–(68)(66)
– Falcon China Farms joint venture impairment–6565
– China Farms (impairment reversal)/impairment(23)6363
– Brazil consumer and foodservice business impairment–71104
– Other 424695
Total adjustments11967524
(Increase)/decrease in working capital:
Trade and other receivables(75)(267)(105)
Inventories(2,658)(2,749)(180)
Trade and other payables(163)82100
Owing to suppliers1,6641,98254
Other movements (30)(10)25
Total increase in working capital(1,262)(962)(106)
Net cash flows from operations(486)(89)1,565
Net taxes paid(58)(35)(73)
Net cash flows from operating activities(544)(124)1,492
Cash flows from investing activities
Cash was provided from:
– Proceeds from sale of businesses32624624
– Proceeds from disposal of property, plant and equipment5136
– Proceeds from sale of livestock191340
– Proceeds from sale of investments7146127
Cash was applied to:
– Acquisition of non-controlling interests– (29)(29)
– Acquisition of property, plant and equipment (162)(113)(355)
– Acquisition of livestock (including rearing costs)(20)(20)(36)
– Acquisition of intangible assets(30)(20)(49)
– Other cash outflows(3)(9)(22)
Net cash flows from investing activities(88)493336
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2021
UNAUDITED
31 JAN 2020
UNAUDITED
RESTATED
1,2
31 JUL 2020
AUDITED
2
Cash flows from financing activities
Cash was provided from:
– Proceeds from borrowings1,6722,1632,286
– Interest received5711
– Other cash inflows321–
Cash was applied to:
– Interest paid(154)(205)(395)
– Repayment of borrowings(1,219)(2,385)(3,381)
– Dividends paid to equity holders of the Co-operative(76)––
– Dividends paid to non-controlling interests(21)(21)(29)
– Other cash outflows––(31)
Net cash flows from financing activities239(440)(1,539)
Net (decrease)/increase in cash(393)(71)289
Opening cash780516516
Effect of exchange rate changes(19)(19)(25)
Closing cash368426780
Reconciliation of closing cash balances to the Statement of Financial Position:
Cash and cash equivalents345460788
Bank overdraft(17)(52)(31)
Cash balances included in held for sale401823
Closing cash368426780
Cash Flow Statement CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2021
1 Comparative information has been restated for the adjustment to cash flows from financing activities reflected in the Group Financial Statements for the year ended 31 July 2020. The restatement had
no impact on net cash flows. Please see the Basis of preparation section for further details.
2 Comparative information also includes re-presentations for consistency with the current period. Re-presentations have had no impact on the totals or sub-totals presented in the Cash Flow Statement.
Creating GoodnessFONTERRA INTERIM REPORT 2021
5352
— Financial Statements
Basis of Preparation
FOR THE SIX MONTHS ENDED 31 JANUARY 2021
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 comprise Fonterra and its subsidiaries
(together referred to as the Group) and the Group’s interests in its equity
accounted investments.
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 (FMCG) and foodservice businesses.
B) BASIS OF PREPARATION
These unaudited 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 do not include all the information and disclosures required
in the Annual Financial Statements, and should be read in conjunction
with the Group’s Financial Statements for the year ended 31 July 2020.
The Group’s operations are seasonal due to the profile of milk production
in New Zealand. Milk production, and therefore the Group’s milk collections
and production volumes are higher in the New Zealand Spring (October
and November). Consequently, the amount owing to suppliers, inventory
balances and borrowings are higher at the 31 January interim reporting
dates compared to the 31 July year-end reporting dates. This reflects the
higher cash outflows required to support the business operations in the
first six months of the financial year. Due to the seasonality of the Group’s
operations additional comparative information has been presented in
these Interim Financial Statements.
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.
Re-presentations
Certain comparative period information has been re-presented for
consistency with the current period presentation. Such re-presentations
have had no impact on the totals or sub-totals presented in the Income
Statement, Statement of Financial Position or Cash Flow Statement.
Restatements
The following restatements were disclosed in the Group’s Financial
Statements for the year ended 31 July 2020.
GBP bond adjustment
During the year ended 31 July 2009, the Group designated a
GBP-denominated medium term note and associated cross currency
interest rate swaps used to manage foreign exchange and interest
rate risk into hedge accounting relationships.
During the year ended 31 July 2020 the Group reassessed the historic
effectiveness of these relationships. This resulted in a restatement of
the Group’s retained earnings, borrowings and deferred tax assets.
This adjustment was reflected in the Group’s Financial Statements for
the year ended 31 July 2020. The following table shows the impact on the
key line items in the Statement of Financial Position as at 31 January 2020.
The restatement had no impact on the Income Statement for the six months
ended 31 January 2020.
STATEMENT OF FINANCIAL POSITION (EXTRACT)
GROUP $ MILLION (UNAUDITED)
AS AT
31 JAN 2020
GBP BOND
ADJUSTMENT
AS AT
31 JAN 2020
RESTATED
Deferred tax asset4915496
Non-current borrowings(5,635)(19)(5,654)
Net assets6,291(14)6,277
Retained earnings789(14)775
Total equity 6,291(14)6,277
Adjustment of cash flows from financing activities
During the year ended 31 July 2020 the Group reassessed the presentation
of gross cash flows relating to bank loans in the Cash Flow Statement.
This resulted in an increase in proceeds from borrowings and repayments
of borrowings. This adjustment was reflected in the Group’s Financial
Statements for the year ended 31 July 2020.
Proceeds from borrowings and repayments of borrowings in the Cash Flow
Statement for the six months ended 31 January 2020 have increased by
$790 million. This restatement has had no impact on net cash flows, the
Income Statement or Statement of Financial Position.
C) ACCOUNTING POLICIES
The accounting policies applied in the preparation of these Interim
Financial Statements were consistent with those applied in the Group’s
Financial Statements for the year ended 31 July 2020.
D) SIGNIFICANT JUDGEMENTS AND ESTIMATES
In the process of applying the Group’s accounting policies and the
application of accounting standards, a number of judgements and
estimates have been made. Sources of significant judgement and
estimation uncertainty in preparing these Interim Financial Statements
were consistent with those disclosed in the Group’s Financial Statements
for the year ended 31 July 2020.
Impairment
At 31 January 2021 the Group assessed whether there were any indicators
of impairment for the Group’s assets, including goodwill and indefinite life
brands. Where indicators existed, the Group performed an impairment test.
No impairment was identified.
Forecast Farmgate Milk Price
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 2021 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 six months ended 31 January 2021 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 2021
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.
NOTE
PAGE
Performance56
1Segment reporting56
2Strategy review update61
3Cost of goods sold63
Debt and equity63
4Subscribed equity instruments63
5Dividends63
6Borrowings64
Other65
7Contingent liabilities, provisions and commitments65
8Fair value measurement65
9Net tangible assets per quoted equity security66
Notes to the Financial Statements
FOR THE SIX MONTHS ENDED 31 JANUARY 2021
Creating GoodnessFONTERRA INTERIM REPORT 2021
5554
— Basis of Preparation
PERFORMANCE
1 SEGMENT REPORTING
Segment information provided in this note reflects the Group’s performance from continuing operations only. Both the China Farms and Brazil consumer and
foodservice businesses are considered discontinued operations and have been excluded from the disclosures in this note. Please see Note 2 Strategy review
update for further details about the Group’s discontinued operations.
a) Reportable segments
Operating segments reflect the way financial information is regularly reviewed by the Fonterra Management Team (FMT). The FMT is considered to be
the Chief Operating Decision Maker. The FMT consists of the Group CEO, CFO and Chief Operating Officer, the CEOs of the three customer-facing
regional business units (Asia Pacific, AMENA – Africa, Middle East, Europe, North Asia, Americas, and Greater China), the Director Office of the CEO and
the MD Co-operative Affairs. The measure of profit or loss used by the FMT to evaluate the underlying performance of operating segments is normalised
profit before net finance costs and tax.
The Group’s operating model is based around the three regional business units, supported by a shared infrastructure, referred to as COO/CPM which
comprises:
– the functions under the Chief Operating Office (COO) and includes New Zealand milk collection and processing operations and assets, Group IT and
Innovation; and
– the Central Portfolio Management function (CPM).
The operating model forms the basis for the Group’s operating segments. Under the operating model, the business is managed as a matrix form of
organisation, whereby regional business unit CEOs and the Chief Operating Officer have overlapping responsibility for the performance of operating
segments. Information about the performance of COO/CPM is reported to the FMT both separately and attributed to each of the regional business units.
Fonterra has determined that its operating segments are Asia Pacific, AMENA, Greater China and COO/CPM. As a result of the Group’s matrix structure,
the Group’s reportable segments are Asia Pacific, AMENA and Greater China, inclusive of their respective attribution of COO/CPM. This presentation
provides a full end-to-end view of performance for each of the customer facing regional business units.
REPORTABLE SEGMENTSDESCRIPTION
Asia PacificRepresents the ingredients, foodservice and consumer businesses in New Zealand, Australia, Pacific Islands, South East Asia,
South Asia, and Fonterra Farm Source™ retail stores.
AMENARepresents the ingredients, foodservice and consumer businesses in Africa, Middle East, Europe, North Asia and Americas.
Greater ChinaRepresents the ingredients, foodservice and consumer businesses in Greater China, and the Falcon China Farms joint
venture (Falcon China Farms JV).
The performance of Global Accounts are reported within the reportable segment that they are managed by. This can differ from the geographical region of the
destination of goods sold.
Transactions between reportable segments follow underlying business rules that determine how each segment records a transaction. These rules have been
designed to reflect the end-to-end contribution of each segment. Where there is common activity amongst segments and there is a distribution of those
revenues and costs across segments, the attribution is based on a number of principles, including:
– activity based allocation where appropriate;
– volumes of product sold/manufactured in the segment; and
– the segment’s proportion of New Zealand sourced milk sales.
The Group regularly reviews the application of these principles to ensure they continue to remain appropriate. Where appropriate, comparative information
may be restated for consistency with the current period attribution.
For the six months ended 31 January 2021, the Group has continued to refine its approach to attributing the change in the cost of milk across the season.
Comparative information has been restated for consistency with the current period.
Unallocated costs represent corporate costs including Co-operative Affairs and Group Functions.
GROUP $ MILLION
SIX MONTHS ENDED 31 JANUARY 2021 (UNAUDITED)
ASIA
PACIFICAMENA
GREATER
CHINA
UNALLOCATED
COSTS AND
ELIMINATIONSTOTAL
Continuing Operations
Normalised Income Statement
Ingredients channel revenue1,5902,5221,903–6,015
Foodservice channel revenue
463117937–1,517
Consumer channel revenue1,287557221–2,065
Total external revenue3,3403,1963,061–9,597
Inter-segment revenue591–(60)–
Revenue from sale of goods3,3993,1973,061(60)9,597
Cost of goods sold(2,788)(2,726)(2,520)88( 7, 9 4 6 )
Gross profit611471541281,651
Operating expenses(423)(279)(200)(111)(1,013)
Net other operating income129–728
Net foreign exchange losses(9)(3)(2)(3)(17)
Share of (loss)/profit of equity accounted investments(1)3–13
Normalised profit before net finance costs and tax 190201339(78)652
Normalisation adjustments:
– Income Statement impact of Beingmate investment––(50)–(50)
Profit before net finance costs and tax190201289(78)602
Finance income5
Finance costs(143)
Profit before tax from continuing operations464
Other segment information:
Volume
1
(metric tonnes, thousand)672627593(17)1,875
Depreciation and amortisation ($ million)(121)(95)(92)(12)(320)
Equity accounted investments
2
($ million)2855–891
1 Includes inter-segment sales. Total column represents total external sales.
2 As at 31 January 2021.
a) Reportable segments CONTINUED
Creating GoodnessFONTERRA INTERIM REPORT 2021
5756
— Notes to the Financial Statements
Notes to the Financial Statements CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2021
GROUP $ MILLION
SIX MONTHS ENDED 31 JANUARY 2020 RESTATED (UNAUDITED)
1
ASIA
PACIFICAMENA
GREATER
CHINA
UNALLOCATED
COSTS AND
ELIMINATIONSTOTAL
Continuing Operations
Normalised Income Statement
Ingredients channel revenue1,5633,0601,988–6,611
Foodservice channel revenue
54698860–1,504
Consumer channel revenue1,229545182–1,956
Total external revenue3,3383,7033,030–10,071
Inter-segment revenue14––(14)–
Revenue from sale of goods3,3523,7033,030(14)10,071
Cost of goods sold(2,753)(3,171)(2,596)37(8,483)
Normalised gross profit599532434231,588
Operating expenses(431)(321)(177)(94)(1,023)
Net other operating income141012(2)34
Net foreign exchange (losses)/gains(6)(9)(11)(3)(29)
Share of (loss)/profit of equity accounted investments(2)4(13)2(9)
Normalised profit before net finance costs and tax174216245( 74)561
Normalisation adjustments:
– Disposal of investment in DFE Pharma –427––427
– Disposal of investment in Goodminton–62–668
– Falcon China Farms JV impairment––(65)–(65)
– Income Statement impact of Beingmate investment––(29)–(29)
– Other(8)(12)(15)(10)(45)
Profit before net finance costs and tax166693136(78)917
Finance income6
Finance costs(167)
Profit before tax from continuing operations756
Other segment information:
Volume
2
(metric tonnes, thousand)688667579(6)1,928
Depreciation and amortisation ($ million)(118)(112)(67)(12)(309)
Equity accounted investments
3
($ million)666269143
The total segment gross profit shown above is different to the reported gross profit as a result of certain normalisation adjustments recognised in gross profit.
Reconciliation of reported to segment gross profit for the six months ended 31 January 2020:
GROUP $ MILLION
SIX MONTHS ENDED
31 JANUARY 2020
Normalised gross profit1,588
Normalisation adjustments:
– DFE Pharma dividend received26
– Other impact of strategy review(7)
Gross profit1,607
1 Comparative information includes restatements for consistency with the current period.
2 Includes inter-segment sales. Total column represents total external sales.
3 As at 31 January 2020.
a) Reportable segments CONTINUED
GROUP $ MILLION
YEAR ENDED 31 JULY 2020 RESTATED (UNAUDITED)
1
ASIA
PACIFICAMENA
GREATER
CHINA
UNALLOCATED
COSTS AND
ELIMINATIONSTOTAL
Continuing Operations
Normalised Income Statement
Ingredients channel revenue3, 6746,5213,471–13,666
Foodservice channel revenue
9181581,555–2,631
Consumer channel revenue2,5081,139338–3,985
Total external revenue7, 10 07, 81 85,364–20,282
Inter-segment revenue391–(40)–
Revenue from sale of goods7, 1 397, 81 95,364(40)20,282
Cost of goods sold(5,939)(6,750)(4,591)44(17, 2 3 6 )
Normalised gross profit1,2001,06977343,046
Operating expenses(951)(612)(390)(241)(2,194)
Net other operating income231020356
Net foreign exchange (losses)/gains(21)(22)(20)8(55)
Share of profit/(loss) of equity accounted investments(3)6(12)3(6)
Normalised profit before net finance costs and tax248451371(223)847
Normalisation adjustments:
– Disposal of investment in DFE Pharma –427––427
– Disposal of investment in Goodminton–60–666
– Falcon China Farms JV impairment––(65)–(65)
– Income Statement impact of Beingmate investment––50–50
– Other5(13)(22)(13)(43)
Profit before net finance costs and tax253925334(230)1,282
Finance income13
Finance costs(317)
Profit before tax from continuing operations978
Other segment information:
Volume
2
(metric tonnes, thousand)1,4061,4331,021(18)3,842
Depreciation and amortisation ($ million)(235)(222)(133)(23)(613)
Equity accounted investments
3
($ million)3158–796
The total segment gross profit shown above is different to the reported gross profit as a result of certain normalisation adjustments recognised in gross profit.
Reconciliation of reported to segment gross profit for the year ended 31 July 2020:
GROUP $ MILLION
YEAR ENDED
31 JULY 2020
Normalised gross profit3,046
Normalisation adjustments:
– DFE Pharma dividend received26
– Other impact of strategy review(10)
Gross profit3,062
1 Comparative information includes restatements for consistency with the current period.
2 Includes inter-segment sales. Total column represents total external sales.
3 As at 31 July 2020.
a) Reportable segments CONTINUED
Creating GoodnessFONTERRA INTERIM REPORT 2021
5958
— Notes to the Financial Statements
Notes to the Financial Statements CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2021
b) Geographical analysis of revenue
GROUP $ MILLION (UNAUDITED)
NEW
ZEALANDAUSTRALIACHINA
REST OF
ASIA AMERICAS
REST OF
WORLDTOTAL
Geographical external revenue:
Six months ended 31 January 20218048292,8973,2271,1966449,597
Six months ended 31 January 2020 (re-presented)8838762,7373,6181,25270510,071
Year ended 31 July 2020 (re-presented)1,6131,6975,1877, 4912,7031,59120,282
Revenue is analysed by geography on the basis of the destination of the goods sold. Geographical groupings in the table above are not aligned with the
Group’s reportable segments.
c) Geographical analysis of non-current assets
GROUP $ MILLION (UNAUDITED)
NEW
ZEALANDAUSTRALIACHINA
REST OF
ASIA AMERICAS
REST OF
WORLDTOTAL
Geographical non-current assets:
As at 31 January 20216,524997147 743932638,965
As at 31 January 2020 (re-presented)6,688960701,0214172299,385
As at 31 July 2020 (re-presented)6,626997638154282839,212
Geographical groupings in the table above are not aligned with the Group’s reportable segments.
GROUP $ MILLION
AS AT 31 JAN 2021
UNAUDITED
AS AT 31 JAN 2020
UNAUDITED
RESTATED
AS AT 31 JUL 2020
AUDITED
Reconciliation of geographical non-current assets to total non-current assets:
Geographical non-current assets 8,9659,3859,212
Deferred tax assets238496421
Derivative financial instruments 468535664
Total non-current assets9,67110,41610,297
GROUP $ MILLION (UNAUDITED)
NEW
ZEALANDAUSTRALIACHINA
REST OF
ASIA AMERICAS
REST OF
WORLDTOTAL
Capital expenditure:
Six months ended 31 January 202112852–72144
Six months ended 31 January 2020827––6499
Year ended 31 July 202034725132411411
Capital expenditure comprises purchases of property, plant and equipment and intangible assets. Capital expenditure is analysed by geography on the basis of
physical location. Geographical groupings in the table above are not aligned with the Group’s reportable segments.
2 STRATEGY REVIEW UPDATE
During the year ended 31 July 2019 Fonterra announced and commenced the implementation of a Group-wide strategy review. This note provides an update
on developments since 31 July 2020.
a) Disposal groups held for sale
A disposal group is a group of assets and liabilities to be disposed of (by sale or otherwise) in a single transaction. A disposal group meets the criteria to be
classified as held for sale if it is available for immediate sale in its present condition and its sale is highly probable. Disposal groups classified as held for sale
are measured at the lower of their carrying amount and fair value less costs to sell.
Judgement is required to determine if the sale of a disposal group is highly probable, and to estimate fair value less costs to sell.
The major classes of assets and liabilities held for sale are shown in the table below:
ASSETS AND LIABILITIES HELD FOR SALE
$ MILLION
AS AT
31 JAN 2021
UNAUDITED
AS AT
31 JAN 2020
UNAUDITED
AS AT
31 JUL 2020
AUDITED
Trade receivables748273
Inventory817647
Property, plant and equipment298314279
Livestock260295253
Intangible assets123197140
Other assets242211213
Total assets held for sale1,0781,1751,005
Borrowings 274354289
Trade and other payables 206219197
Provisions496855
Other liabilities557562
Total liabilities held for sale584716603
Net assets held for sale494459402
China Farms business
In October 2020 the Group announced the sale of the China Farms business pending regulatory approval. The Group estimated the fair value less costs to
sell of the business and recognised an impairment reversal of $23 million. The impairment reversal has been recognised as part of profit/(loss) after tax from
discontinued operations in the Income Statement.
At 31 January 2021 the completion of the sale was still subject to regulatory approval and the business continues to be classified as held for sale. The Group
reassessed the fair value less costs to sell of the business and no further adjustment has been recognised. The fair value less costs to sell of the business
has been estimated based on information received through the sales process.
At 31 January 2021 the foreign currency translation reserve balance attributable to the China Farms business was a credit balance of $32 million
(31 January 2020: $27 million, 31 July 2020: $31 million).
Brazil consumer and foodservice business
As at 31 January 2021 the Brazil consumer and foodservice business continues to meet the requirements to be classified as held for sale.
Market conditions that existed at the date the business was initially classified as held for sale deteriorated due to COVID-19 and, as a result, the business
was not sold within the initial one-year period from being classified as held for sale. The business continues to be actively marketed and the Group expects
the sale to be completed within one year of the reporting date.
At 31 January 2021 the Group reassessed the fair value less costs to sell of the business and no further adjustment has been recognised. The fair value of
the business has been estimated based on information received through the sales process.
At 31 January 2021 the foreign currency translation reserve balance attributable to the Brazil consumer and foodservice business was a debit balance of
$60 million (31 January 2020: $68 million, 31 July 2020: $66 million).
Falcon China Farms JV
The sales process for the Falcon China Farms JV has advanced to the point that the investment meets the requirements to be classified as held for sale as
at 31 January 2021. The Group and joint venture partner are both committed to the sale. The Group expects to complete the sale within one year of the
reporting date.
Whilst the Group remains an investor in the Falcon China Farms JV, it is committed to providing future funding of up to US$33 million
(31 January 2020: US$30 million, 31 July 2020: US$33 million).
At 31 January 2021 the foreign currency translation reserve balance attributable to the Falcon China Farms JV was a credit balance of $3 million
(31 January 2020: $19 million, 31 July 2020: $15 million).
Creating GoodnessFONTERRA INTERIM REPORT 2021
6160
— Notes to the Financial Statements
Notes to the Financial Statements CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2021
b) Discontinued operations
A disposal group that meets the criterion to be classified as held for sale (or has been sold) is a discontinued operation if it represents, or is part of a single
co-ordinated plan to dispose of, a separate major line of business or geographical area of operations, or is a subsidiary acquired exclusively with a view
to resale.
The divestment of the China Farms and Brazil consumer and foodservice businesses both meet the definition of a discontinued operation. The Falcon China
Farms JV does not meet the definition of a discontinued operation.
The summarised financial performance of the China Farms business and Brazil consumer and foodservice business, recognised as part of profit/(loss) after tax
from discontinued operations in the Income Statement, is shown in the table below:
DISCONTINUED OPERATIONS
$ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2021
UNAUDITED
31 JAN 2020
UNAUDITED
31 JUL 2020
AUDITED
Revenue from sale of goods318352693
Cost of goods sold(247)(272)(531)
China Farms impairment reversal/(impairment)23(63)(63)
Gross profit941799
Other operating income5–3
Total operating expenses (44)(57)(133)
Brazil consumer and foodservice impairment–(71)(104)
Profit/(loss) before net finance costs and tax55(111)(135)
Net finance costs(3)(12)(28)
Profit/(loss) before tax52(123)(163)
Tax credit–1519
Profit/(loss) after tax from discontinued operations52(108)(144)
Share of (loss)/profit attributable to non-controlling interests(3)3152
Profit/(loss) after tax attributable to equity holders49(77)(92)
Movement in exchange differences on translation of discontinued operations22325
Other reserve movements3(24)(17)
Total comprehensive income/(expense) from discontinued operations77(129)(136)
Net cash (outflow)/inflow from operating activities(5)1177
Net cash outflow from investing activities(5)(11)(6)
Net cash inflow/(outflow) from financing activities10(5)(1)
Net increase/(decrease) in cash generated by the discontinued operations–(5)70
c) Beingmate Baby & Child Food Co., Ltd
The Group’s holdings of Beingmate Baby & Child Food Co., Ltd (Beingmate) shares continue to be subject to an active sales process.
A loss of $50 million relating to Beingmate, which includes realised and unrealised fair value and foreign exchange movements, has been recognised as part of
impact of strategy review in the Income Statement (31 January 2020: loss of $29 million, 31 July 2020: gain of $50 million).
The details of sales during the period are summarised in the table below.
% SHARESPRICE RMB$ MILLION
As at 31 July 20209.117. 9 2157
Sales for the period5.174.55 – 9.4371
As at 31 January 20213.944.6540
3 COST OF GOODS SOLD
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2021
UNAUDITED
31 JAN 2020
UNAUDITED
31 JUL 2020
AUDITED
Opening inventory3,2683,1653,165
Cost of milk:
– New Zealand sourced7, 2 1 57, 7 1 110,888
– Non-New Zealand sourced5775871,007
Other costs2,7822,8725,444
Closing inventory(5,896)(5,852)(3,268)
Total cost of goods sold7, 9 4 68,48317, 2 3 6
Other costs include purchases of other products, raw materials, packaging, direct labour costs, depreciation and other costs directly incurred to bring
inventory to its final point of sale location.
DEBT AND EQUITY
4 SUBSCRIBED EQUITY INSTRUMENTS
a) Co-operative shares, including shares held within the Group
Co-operative shares may only be held by a shareholder supplying milk to Fonterra (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 Fonterra are dependent on milk supply supported by
Co-operative shares, these rights are also attached to vouchers when backed by milk supply (subject to limits).
At 31 January 2021 there were 1,613,357,879 Co-operative shares on issue (31 January 2020: 1,612,097,067 shares, 31 July 2020: 1,612,097,067 shares).
During the six months ended 31 January 2021, Fonterra issued:
– 1,138,230 shares under the Dividend Reinvestment Plan (31 January 2020: nil, 31 July 2020: nil).
– 122,582 shares under the Farm Source Rewards scheme (31 January 2020: 105,345 shares, 31 July 2020: 105,345 shares).
The rights attaching to Co-operative shares are set out in Fonterra’s Constitution, available in the ‘Our Co-operative/Governance and Management’ section
of Fonterra’s website.
b) Units in the Fonterra Shareholders’ Fund (the 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. As at
31 January 2021 106,336,396 Co-operative shares (31 January 2020: 100,187,385; 31 July 2020: 104,581,516) were legally owned by the Custodian, on trust
for the benefit of the Fund.
During the six months ended 31 January 2021, the Fund issued 5,111,889 units (31 January 2020: 4,410,779 units, 31 July 2020: 17,298,927 units) and
redeemed 3,357,009 units (31 January 2020: 7,157,976 units, 31 July 2020: 15,651,993 units).
The rights attaching to units are set out in the Fonterra Shareholders’ Fund 2020 Annual Report, available in the ‘Investors/Fonterra Shareholders’ Fund’
section of Fonterra’s website.
5 DIVIDENDS
On 17 September 2020 the Board declared and on 15 October 2020 the Group paid a dividend of 5 cents per share to all Co-operative shares on issue at
25 September 2020.
DIVIDEND
$ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2021
UNAUDITED
31 JAN 2020
UNAUDITED
31 JUL 2020
AUDITED
2020 Final dividend – 5 cents per share81––
Under Fonterra’s Dividend Reinvestment Plan, eligible shareholders can choose to reinvest all or part of their future dividend in additional Co-operative shares.
The Dividend Reinvestment Plan applied to the dividend in the table above.
2 STRATEGY REVIEW UPDATE
CONTINUED
Creating GoodnessFONTERRA INTERIM REPORT 2021
6362
— Notes to the Financial Statements
Notes to the Financial Statements CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2021
5 DIVIDENDS CONTINUED
Dividend declared after the reporting period
On 16 March 2021, the Board declared an interim dividend of 5 cents per share, to be paid on 15 April 2021 to all Co-operative shares on issue at 24 March 2021.
The Dividend Reinvestment Plan does not apply to this dividend.
6 BORROWINGS
Economic net interest-bearing debt
Economic net interest-bearing debt reflects the carrying amount of the Group’s net interest-bearing debt after incorporating the effect of debt hedging in
place at balance date.
Economic net interest-bearing debt and total borrowings presented in the tables below exclude borrowings that relate to disposal groups held for sale.
See Note 2a) Strategy review update for total borrowings relating to disposal groups held for sale.
GROUP $ MILLION
AS AT
31 JAN 2021
UNAUDITED
AS AT
31 JAN 2020
UNAUDITED
RESTATED
AS AT
31 JUL 2020
AUDITED
Net interest-bearing debt position
Total borrowings6,2526,6866,041
Cash and cash equivalents(345)(460)(788)
Long-term advances(163)(230)(220)
Bank overdraft175231
Net interest-bearing debt5,7616,0485,064
Value of derivatives used to manage changes in hedged risks on debt instruments(143)(272)(405)
Economic net interest-bearing debt
1
5,6185,7764,659
1 Economic net interest-bearing debt relating to disposal groups held for sale not included in the table above was $186 million (31 January 2020: $336 million, 31 July 2020: $266 million).
Total borrowings are represented by:
GROUP $ MILLION
AS AT
31 JAN 2021
UNAUDITED
AS AT
31 JAN 2020
UNAUDITED
RESTATED
AS AT
31 JUL 2020
AUDITED
Commercial paper40169–
Bank loans57416820
Lease liabilities558617604
Capital notes¹353535
NZX-listed bonds600600600
Medium-term notes4,4455,0974,782
Total borrowings²6,2526,6866,041
Included within the Statement of Financial Position as follows:
Total current borrowings1,1441,032764
Total non-current borrowings5,1085,6545,277
Total borrowings6,2526,6866,041
1 Capital notes are unsecured subordinated borrowings.
2 All borrowings other than lease liabilities and capital notes are unsecured and unsubordinated.
OTHER
7 CONTINGENT LIABILITIES, PROVISIONS AND COMMITMENTS
Contingent liabilities
In the normal course of business, Fonterra, its subsidiaries and equity accounted investments, are exposed to claims and legal proceedings that may in some
cases result in costs to the Group.
In June 2020 a class action was filed in the Supreme Court of Victoria against Fonterra Australia Pty. Ltd., Fonterra Milk Australia Pty. Ltd. and Fonterra Brands
(Australia) Pty. Ltd. (collectively, Fonterra Australia) by Geoffrey and Lynden Iddles on behalf of farmers who supplied milk to Fonterra Australia during the
2015/2016 season. The class action relates to actions taken by Fonterra Australia in connection with its milk price in the 2015/2016 season including the
manner in which Fonterra Australia set its opening milk price and forecast closing milk price at the outset of that season, its communications with suppliers
about the milk price throughout the season and its reduction of the milk price in May 2016. The plaintiffs are alleging that Fonterra Australia breached its
contracts with suppliers, engaged in misleading and deceptive conduct and engaged in unconscionable conduct in connection with these matters. Fonterra
expects to vigorously defend these claims. Given the early stage of the litigation, it is not currently possible to estimate the amount of any potential exposure
in connection with this class action.
The Group has no other contingent liabilities as at 31 January 2021.
8 FAIR VALUE MEASUREMENT
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 Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change occurred.
The following table shows the fair value hierarchy for assets and liabilities measured at fair value:
GROUP $ MILLION
LEVEL 1 AS ATLEVEL 2 AS ATLEVEL 3 AS AT
31 JAN 2021
UNAUDITED
31 JAN 2020
UNAUDITED
31 JUL 2020
AUDITED
31 JAN 2021
UNAUDITED
31 JAN 2020
UNAUDITED
31 JUL 2020
AUDITED
31 JAN 2021
UNAUDITED
31 JAN 2020
UNAUDITED
31 JUL 2020
AUDITED
Measured at fair value on a
recurring basis:
Derivative assets
– Commodity derivatives862519412–––
– Foreign exchange derivatives–––85378493–––
– Interest rate derivatives¹–––387514602–––
Derivative liabilities
– Commodity derivatives(5)(9)(23)(3)(2)(2)–––
– Foreign exchange derivatives–––(40)(185)(72)–––
– Interest rate derivatives¹–––(448)(461)(499)–––
Investment in Beingmate40–157–170––––
Investments in shares191117181723171211
Measured at fair value on
a non-recurring basis:
Disposal groups held for sale––––––494459402
Fair value14027170771132547511471413
1 Includes cross-currency interest rate swaps.
Creating GoodnessFONTERRA INTERIM REPORT 2021
6564
— Notes to the Financial Statements
Notes to the Financial Statements CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2021
8 FAIR VALUE MEASUREMENT CONTINUED
The following table shows the fair value hierarchy for each class of financial asset and liability where the carrying amount differs from the fair value:
GROUP $ MILLION
FAIR VALUE
CARRYING AMOUNT AS ATLEVEL 1 AS ATLEVEL 2 AS AT
31 JAN 2021
UNAUDITED
31 JAN 2020
UNAUDITED
RESTATED
31 JUL 2020
AUDITED
31 JAN 2021
UNAUDITED
31 JAN 2020
UNAUDITED
31 JUL 2020
AUDITED
31 JAN 2021
UNAUDITED
31 JAN 2020
UNAUDITED
31 JUL 2020
AUDITED
Financial assets
Long-term advances163230220–––177244235
Financial liabilities
Borrowings
– NZX-listed bonds(600)(600)(600)(625)(624)(633)–––
– Capital notes(35)(35)(35)(33)(34)(32)–––
– Medium-term notes(4,445)(5,097)(4,782)–––(4,620)(5,317)(4,996)
9 NET TANGIBLE ASSETS PER QUOTED EQUITY SECURITY
Net tangible assets is calculated as net assets less intangible assets.
GROUP
AS AT
31 JAN 2021
UNAUDITED
AS AT
31 JAN 2020
UNAUDITED
RESTATED
AS AT
31 JUL 2020
AUDITED
Net tangible assets per security
$ per equity instrument on issue3.072.462.77
Equity instruments on issue (million)1,6131,6121,612
Independent Review Report
To the shareholders of Fonterra Co-operative Group Limited
REPORT ON THE INTERIM FINANCIAL STATEMENTS
Conclusion
We have completed a review of the accompanying interim financial statements which comprise:
– the statement of financial position as at 31 January 2021;
– the income statement, statements of other comprehensive income, changes in equity and cash flows for the 6 month period then ended; and
– notes, including a summary of significant accounting policies and other explanatory information.
Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements on pages 48 to 66 do not:
i. present fairly in all material respects the Group’s financial position as at 31 January 2021 and its financial performance and cash flows for the 6 month
period ended on that date; and
ii. comply with NZ IAS 34 Interim Financial Reporting (NZ IAS 34) and IAS 34 Interim Financial Reporting (IAS 34).
Basis for conclusion
A review of interim financial statements in accordance with NZ SRE 2410 Review of Financial Statements Performed by the Independent Auditor of the Entity
(“NZ SRE 2410”) is a limited assurance engagement. The auditor performs procedures, consisting of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review procedures.
As the auditor of Fonterra Co-operative Group Limited, NZ SRE 2410 requires that we comply with the ethical requirements relevant to the audit of the
annual financial statements.
Other than in our capacity as auditor we have no relationship with, or interests in, the Group.
Use of this Independent Review Report
This report is made solely to the shareholders as a body. Our review work has been undertaken so that we might state to the shareholders those matters
we are required to state to them in the Independent 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 work, this report, or any of the opinions we have formed.
Responsibilities of the Directors for the interim financial statements
The Directors, on behalf of the Company, are responsible for:
— the preparation and fair presentation of the interim financial statements in accordance with NZ IAS 34 and IAS 34;
— implementing necessary internal control to enable the preparation of interim financial statements that are fairly presented and free from material
misstatement, whether due to fraud or error; and
— assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless they either intend to liquidate or to cease operations or have no realistic alternative but to do so.
Auditor’s Responsibilities for the review of the interim financial statements
Our responsibility is to express a conclusion on the interim financial statements based on our review. We conducted our review in accordance with
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 are not prepared, in all material respects, in accordance with NZ IAS 34 and IAS 34.
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). Accordingly, we do not express an audit opinion on these interim financial statements.
This description forms part of our Independent Review Report.
KPMG
Auckland
16 March 2021
Creating GoodnessFONTERRA INTERIM REPORT 2021
6766
— Independent Review ReportFONTERRA INTERIM REPORT 2021— Notes to the Financial Statements
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. These non-GAAP measures 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.
Reconciliation 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 after tax to total Group normalised EBITDA
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2021
UNAUDITED
31 JAN 2020
UNAUDITED
31 JUL 2020
AUDITED
Profit after tax391501659
Add: Depreciation 271274528
Add: Amortisation494999
Add: Net finance costs141173332
Add: Tax expense125132156
Total Group EBITDA 9771,1291 ,774
Less: Disposal of investment in DFE Pharma–(427)(427)
Less: Disposal of investment in Goodminton–(68)(66)
Add: Falcon China Farms JV impairment–6565
(Less)/add: China Farms (impairment reversal)/impairment(23)6363
Add: Brazil consumer and foodservice business impairment–71104
Add/(less): Income Statement impact of Beingmate investment5029(50)
Add: Other –4543
Total normalisation adjustments27(222)(268)
Total Group normalised EBITDA1,0049071,506
Reconciliation from the NZ IFRS measure of profit after tax to total Group normalised EBIT
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2021
UNAUDITED
31 JAN 2020
UNAUDITED
31 JUL 2020
AUDITED
Profit after tax391501659
Add: Net finance costs141173332
Add: Tax expense125132156
Total Group EBIT6578061,147
Add: Normalisation adjustments (as detailed above)27(222)(268)
Total Group normalised EBIT684584879
Non-GAAP Measures CONTINUED
Reconciliation from the NZ IFRS measure of profit after tax to normalised profit after tax and normalised earnings per share
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2021
UNAUDITED
31 JAN 2020
UNAUDITED
31 JUL 2020
AUDITED
Profit after tax 391501659
Add/(less): Normalisation adjustments (as detailed on the previous page)27(222)(268)
Add: Tax on normalisation adjustments–147
Normalised profit after tax418293398
(Less)/add: (profit)/loss attributable to non-controlling interests(19)2027
Less: Normalisation adjustments attributable to non-controlling interests–(30)(43)
Normalised profit after tax attributable to equity holders of the Co-operative399283382
Weighted average number of Co-operative shares (thousands of shares)1,612,8571,612,0551,612,076
Normalised earnings per share ($)0.250.180.24
Reconciliation from reported gross profit to total Group normalised gross profit
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2021
UNAUDITED
31 JAN 2020
UNAUDITED
31 JUL 2020
AUDITED
Gross profit from continuing operations1,6511,6073,062
Add: Gross profit from discontinued operations 941799
(Less)/add: China Farms (impairment reversal)/impairment(23)6363
Less: Other normalisation adjustments–(19)(16)
Total Group normalised gross profit1,7221,6683,208
Creating GoodnessFONTERRA INTERIM REPORT 2021
6968
— Non-GAAP Measures
Glossary
Foodservicerepresents the channel selling to businesses that cater for out-of-home consumption; restaurants,
hotels, cafes, airports, catering companies etc. The focus is on customers such as; bakeries, cafes,
Italian restaurants, and global quick-service restaurant chains. High performance dairy ingredients
including whipping creams, mozzarella, cream cheese and butter sheets, are sold in alongside our
business solutions under the Anchor Food Professionals brand.
Free cash flowis calculated as total of net cash flows from operating activities and net cash flows from
investing activities.
Functional Nutrition Unit (FNUs)represents consumption categories including Paediatrics, Sports and Active and Medical and
Ageing, where superior value can be created.
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. It excludes net borrowings
attributed to businesses classified as held for sale.
Global Accountsmeans large scale, multi-national / multi-region customers.
Global Dairy Trade (GDT)means the electronic auction platform that is used to sell commodity dairy products.
Greater Chinarepresents the Ingredients, Foodservice and Consumer businesses in Greater China, and the
Falcon China Farms JV.
Gross marginis calculated as gross profit divided by revenue from sale of goods.
Group operationscomprises functions under the Chief Operating Office (COO) including New Zealand milk
collection and processing operations and assets, supply chain, Group IT and Innovation; and the
Central Portfolio Management function (CPM).
Held for sale an asset or disposal group is classified as held for sale if it is available for immediate sale in its
present condition and its sale is highly probable.
A disposal group is a group of assets and liabilities to be disposed of (by sale or otherwise) in a
single transaction.
Ingredientsrepresents the channel comprising 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 Farm Source™ retail stores.
kgMSmeans kilograms of milk solids, the measure of the amount of fat and protein in the milk supplied
to Fonterra.
Net debtmeans economic net interest-bearing debt.
Net tangible assets per securityis calculated as net tangible assets divided by the number of equity instruments on issue.
Net tangible assets is calculated as net assets less intangible assets.
Non-reference productsmeans all dairy products, except for reference commodity products manufactured in NZ.
Normalisation adjustmentsmeans adjustments made for certain transactions that meet the requirements of the Group’s
Normalisation Policy. These transactions are typically unusual in size and nature. Normalisation
adjustments are made to assist users in forming a view of the underlying performance of the
business. Normalisation adjustments are set out in the Non-GAAP Measures section.
Normalisedis used to indicate that a measure or sub-total has been adjusted for the impacts of normalisation
adjustments. E.g. ‘Normalised EBIT’.
Pay-out (per share)means the total cash payment to an 100% share backed farmer shareholder. 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.
Product channel Fonterra has three product channels, Ingredients, Foodservice and Consumer.
Production volume (MT)means quantity of product made from the fresh milk collected.
Profit after tax marginis calculated as profit after tax attributable to equity holders of the Co-operative, divided by
revenue from sale of goods.
Reference commodity products
(also referred to as reference products)
means the commodity products used to calculate the Farmgate Milk Price, comprising
Whole Milk Powder, Skim Milk Powder, Butter Milk Powder, Anhydrous Milk Fat and Butter.
Reportedis used to indicate a sub-total or total is reported in the Group’s Financial Statements before
normalisation adjustments. E.g. ‘Reported profit after tax’.
AMENArepresents the Ingredients, Foodservice and Consumer businesses in Africa, Middle East, Europe,
North Asia and Americas.
Asia Pacific represents the Ingredients, Foodservice and Consumer businesses in New Zealand, Australia,
Pacific Islands, South East Asia, South Asia and Fonterra Farm Source™ retail stores.
Attributable to equity holders of the Co-operative is used to indicate that a measure or sub-total excludes amounts attributable to non-controlling
interests.
Base Pricemeans prices referenced by Fonterra’s sales team when pricing contracts, including GDT prices and
other relevant benchmarks.
Bulk liquidsmeans bulk raw milk that has not been processed and bulk separated cream.
Capital employedis calculated as the average for the period of: net assets excluding net interest-bearing debt
and deferred tax balances, and including certain intangibles (brands and goodwill) and equity
accounted investments (EAI).
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, and
includes amounts relating to businesses classified as held for sale.
Consumerrepresents the channel of branded consumer products, such as powders, yoghurts, milk, butter,
and cheese.
Continuing operationsmeans operations of the Group that are not discontinued operations.
Debt payback ratio (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. Debt and EBITDA are
adjusted to include amounts relating to businesses classified as held for sale and discontinued
operations respectively.
DIRAmeans the Dairy Industry Restructuring Act 2001, which authorised Fonterra’s formation and
regulates its activities, subsequent amendments to the Act, and the Dairy Industry Restructuring
(Raw Milk) Regulations 2012.
Discontinued operations means a component of the Group that is classified as held for sale (or has been sold) and
represents, or is part of a single co-ordinated plan to dispose of, a separate major line of business
or geographical area of operations, or is a subsidiary acquired exclusively with a view to resale.
Dividend yieldis calculated as dividend (per share) over volume weighted average share price for the period
1 August to 31 July.
Earnings before interest and tax (EBIT)is calculated as profit before net finance costs and tax.
Earnings before interest, tax, depreciation and
amortisation (EBITDA)
is calculated as profit before net finance costs, tax, depreciation and amortisation.
Earnings per share (EPS)means profit after tax attributable to equity holders of the Co-operative divided by the weighted
average number of shares on issue for the period.
EBIT marginis calculated as EBIT divided by revenue from sale of goods.
EBITDA marginis calculated as EBITDA divided by revenue from sale of goods.
Economic net interest-bearing debtmeans net interest bearing debt including lease liabilities and the effect of debt hedging. It reflects
total borrowings plus bank overdraft less cash and cash equivalents and non-current interest-
bearing advances, adjusted for derivatives used to manage changes in hedged risks on debt
instruments. It excludes net borrowings attributed to businesses classified as held for sale.
Farmgate Milk Pricemeans the average 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. The Farmgate Milk Price
is set by the Board, based on the recommendation of the Milk Price Panel. In making that
recommendation, the Panel provides assurance to the Board that the Farmgate Milk Price has been
calculated in accordance with the Farmgate Milk Price Manual.
Fonterra’s average NZD/USD conversion rate is the rate that Fonterra has converted net United States Dollar receipts into New Zealand Dollars
including hedge cover in place.
Creating GoodnessFONTERRA INTERIM REPORT 2021
7170
— Glossary
Directory
Retentionsmeans profit after tax attributable to equity holders of the Co-operative, divided by the number
of Co-operative shares on issue, less dividend per share. Retentions are reported as nil where
Fonterra has reported a net loss after tax.
Return on capitalis calculated as EBIT less a notional tax charge, divided by capital employed including certain
intangibles (brands and goodwill) and equity accounted investments.
SeasonNew Zealand: A period of 12 months to 31 May in each year.
Australia: A period of 12 months to 30 June in each year.
China: A period of 12 months to 31 July in each year.
Total Groupis used to indicate that a measure or sub-total comprises continuing operations, discontinued
operations and non-controlling interests. E.g. ‘Total Group EBIT’.
Unallocated costs and eliminationsrepresents corporate costs including Co-operative Affairs and Group Functions; and any other
costs that are not directly associated to the reporting segments; and eliminations of inter-segment
transactions.
WACCmeans weighted average cost of capital.
Weighted average share pricerepresents the average price Fonterra Co-operative Group Limited shares traded at, weighted
against the trading volume at each price over the reporting period.
Working capitalis calculated as total trade and other receivables plus inventories, less trade and other payables.
It excludes amounts owing to suppliers and employee entitlements.
Working capital daysis calculated as working capital divided by revenue from sale of goods, multiplied by the number
of days in the period.
Glossary CONTINUED
FONTERRA INTERIM REPORT 2021
72
— Glossary
FONTERRA BOARD OF DIRECTORS
Peter McBride
Clinton Dines
Brent Goldsack
Leonie Guiney
Bruce Hassall
Holly Kramer
Andrew Macfarlane
John Nicholls
Donna Smit
Scott St John
Cathy Quinn
FONTERRA MANAGEMENT TEAM
Miles Hurrell
Marc Rivers
Judith Swales
Mike Cronin
Fraser Whineray
Kelvin Wickham
Teh-han Chow
Carly Robinson
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
KPMG
18 Viaduct Harbour Avenue
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
insight
creative.co.nz
FONTERRA072
fonterra.com
---
17 March 2021
2
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.
¹
¹²
³
•Increased forecast Farmgate Milk Price range, on track
for one of the highest milk prices
•Total Group normalised gross margin improved from
16.0% to 17.4%, contributing to normalised profit after
tax increasing $125 million to $418 million, up 43%
•Narrowed earnings guidance -heavily weighted to the
first half, reflecting increasing dairy prices
•Resumed paying interim dividend
•COVID-19 continues to impact around the world and
we’re continuing to focus on what’s in our control
•Reporting under customer-led operating model, new
segment information providing further insights
1.This is Total Group, includes Continuing and Discontinued Operations, and includes amount attributable to non-controlling interests
2.Normalised profit after tax excludes $(50) million of loss on disposal and downward revaluation of our Beingmateholdings and $23 million impairment reversal for China Farms
3.Attributable to equity holders of the Co-operative, excludes non-controlling interest
To create superior value
forourcustomers and
our Co-operative
To do what is right for the
longterm good and meet
consumer and community needs
Unlock greater value from
ourscale efficiency and
focus on execution
5
VolumeValue
Global Milk Pools
Prioritise New Zealand Milk
+ complementary components
Maximum volume into consumerFocus on key categories to deliver superior value
Dairy onlySupplement with non-dairy where makes sense
Partner with cash investmentsPartner with IP and skills and lift R&D
Debt funded growthConservative balance sheet
Global giant with HQ
in New Zealand
Celebrate Aotearoa New Zealand
and take it to the world
Invest widely based on
aggressive growth plans
Divest non-core businesses and
focus where we have a competitive advantage
Confidential to Fonterra Co-operative Group
6
1.Prepared on a normalised Continuing Operations basis and excludes unallocated costs and eliminations.
•New Zealand Consumer turnaround on track
•Launched Anchor carbonzero
TM
milk range
•Australia Consumer brands’ growth outpaced their market
categories, but Ingredients requires further improvement
•Relaunched the Anlenebrand in Malaysia, building a
strong foundation for future innovations and formats
•Working with the NZ Food Network to support families in
need during Christmas
Confidential to Fonterra Co-operative Group
7
7
1.Prepared on a normalised Continuing Operations basis and excludes unallocated costs and eliminations.
2.Certifications awarded by Great Place to Work®and Top Employer Institute
3. Excludes 900 people employed by China Farms, a Discontinued Operation
•Cream cheese and mozzarella sales volumes up,
increasing utilisation of Darfield and Clandeboyesites
•Launched ambient cream for Foodservice customers
•Expansion of Foodservice into 22 new cities, bringing
total to 372 cities
•Awarded ‘Best Work Place’ in Greater China and
‘Top Employer’²
•Progressing divestment of farms and Beingmate
³
Confidential to Fonterra Co-operative Group
8
1.Prepared on a normalised Continuing Operations basis and excludes unallocated costs and eliminations.
2.Excludes 1,350 people employed by DPA Brazil, a Discontinued Operation
•Launched Milk Phospholipids 70 which helps
mental wellbeing in adults
•Improved performance in Chile, with increased
market share
•Lower volume and margins for Ingredients
products in Europe, Africa and North Asia
•Actively expanding our product portfolio to include
more higher margin products
•Supported foodbanks and community organisations in
COVID-19 relief efforts
9
9
•Introducing The Co-operative Difference payment to encourage farmers to adapt to changing
customer expectations
•Milk vat monitoring, increases collection efficiency with less truck units and benefits to milk quality
•Investing in sustainability, e.g. waste water treatment at Whareroaand Clandeboyeand investing in
innovation, e.g. Waitoadehumidifier and Darfield cream cheese quality
•Strong standing partnership with Kotahi maintaining supply to customers despite unprecedented
disruption to international shipping due to COVID-19
•Optimisationby moving milk to higher value products and markets
1.Quality is a measure of product made to specification at final grading
2.DIFOT; delivered in full and on time +/-1 week
3.Serious Harm Events (injuries resulting in permanent or severe temporary impairments requiring immediate medical
treatment), measured on trailing 12 months basis
¹²³
10
•Sales volumes similar with strong demand. Minor
delays in shipments expect to be recovered in second half
•Gross profit increased reflecting strong margin growth in
Greater China Foodservice, and improved margins in Asia
Pacific Consumer
•Reduced gross profit in AMENA’s Ingredients business due
to lower sales volume and tighter margins
•Total Group normalisedEBIT up $100 million, or 17%,
reflects improved margins and stable operating expenses
•Normalisedprofit after tax has improved $125 million, or
43%, due to improved earnings and lower interest costs
•Reported profit after tax of $391 million⁶
1.Figures are for the first six months and are for Total Group, which includes Continuing and Discontinued
Operations on a normalised basis unless stated otherwise.
2.Percentages as shown in table may not align to the calculation of percentages based on numbers in the table due
to rounding of figures
3.Consists of other operating income, net foreign exchange gains and losses, share of profit or loss on equity
accounted investees
4.Normalised EBIT excludes $(50) million of loss on disposal and downward revaluation of our Beingmateholdings
and $23 million impairment reversal for China Farms
5.Attributable to equity holders of the Co-operative, excludes non-controlling interest
6.Reported profit after tax down $110 million, last year’s result included sale proceeds of non-core assets
¹
∆²
³
⁴
⁵
11
6.1
7.1
7.4
5.8
20172018201920202021
Net Debt ($ billion)
Note: Figures are for the first six months of the financial year unless stated otherwise
1.Refer to Glossary on page 38 for definition. FY20 has been restated, refer to Basis of Preparation in
FY21 Interim Report
2.Normalised basis
•Debt level and gearing continue to reduce
•Debt and gearing are higher at half year due to
seasonal profile of working capital
•Target for gearing to be below 40% at year-end
•Working capital days up due to minor delay in
shipments increasing inventory
•Working closely with our customers has lowered
overdue receivables
•Maintaining focus on operating expenditure
68
80
81
82
20172018201920202021
Working Capital Days
1,232
1,263
1,232
1,092
20172018201920202021
Opex ($ million)
52.7
47.1
48.5
41.4
201920202021
Half YearFull Year
12
¹
¹
²³
1.Prepared on a normalised Continuing Operations basis. Does not align to reported Continuing Operations due to excluding unallocated costs and eliminations
2.Normalised EBIT contributions sum to $730 million, which does not align to reported Continuing Operations due to excluding unallocated costs and eliminations
3.Inclusive of Group Operations EBIT attribution
13
Gross ProfitEBITGross ProfitEBIT
Gross ProfitEBIT
$ millions
Note: Does not add to Total Group as shown on a normalised Continuing Operations basis and excludes unallocated costs and eliminations. Refer to reconciliation in Appendix, page 20
20202021
•62% of EBIT from Consumer
channel, which increased $29 million
•Strong gross margin improvement in
South East Asia
•Challenging Australia Ingredients
export market
•73% of EBIT from Ingredients
channel, which decreased $57 million
•Lower volume and reduced margins
in Europe, Africa and North Asia
•Strong performance in Chile and
lower operating expenses across
most sub-regions
•60% of EBIT from Foodservice
channel, which increased $79 million
•China Government endorsed dairy
consumption during COVID-19 and
economy remains robust
•Continuing city expansion, entered a
further 22 cities
14
$ millions
Note: Does not add to Total Group as shown on a normalised Continuing Operations basis and excludes unallocated costs and eliminations. Refer to reconciliation in Appendix, page 20
20202021
Gross ProfitEBITGross ProfitEBIT
Gross ProfitEBIT
•Lower volumes in AMENA, as shifted
milk to higher value product channels
•Reduced margins due to
•lower pricing in core Ingredients
•pricing profile of long-term
contracts
•Growth in higher value products in
Greater China
•120+ new applications in bakery,
beverage and dining channels
•3 new cream products for
beverage channel
•Increased demand as consumers
stayed at home during lockdowns
•Australian chilled spreads extended
leadership position
•Chile increased demand and
improved market share
•Margins benefited from lower dairy prices; average GDT price of
US$ 3,210 compared to US$ 3,380 in the same period last year
•39% increase in dairy prices from November 2020 to 3
rd
March
2021
•Foodservice and Consumer margins will be adversely impacted in
the second half due to increasing dairy prices
•Non-reference milk price products have not increased at the same
rate as reference milk price products
GDT Average Price
31 Jan 202131 Jan 202031 July 2019
39%
•Lifted the forecast Farmgate Milk Price range with
midpoint of $7.60 per kgMS
•Dairy continues to prove resilient in a Covid-19
world
•Forecasting ongoing strength in dairy prices
•Narrowed full year forecast normalised earnings per
share range of 25-35 cents
•Earnings heavily weighted towards the first half due to;
•Increasing dairy prices in first half will impact
earnings in second half
•Seasonal profile of milk curve and manufacturing
per kgMS
cents per share
31 July 2020
FY20 H1
Average price:
US$ 3,380
Average price:
US$ 3,210
FY21 H1
16
17
1,232
1,263
1,232
1,092
1,055
20172018201920202021
Opex ($ million)
9.2
9.8
9.7
10.4
9.9
20172018201920202021
Revenue ($ billion)
1,752
1,659
1,489
1,668
1,722
20172018201920202021
Gross Profit ($ million)
607
458
312
584
684
20172018201920202021
EBIT ($ million)
1.Figures are for the first six months and are for Total Group, which includes Continuing and Discontinued Operations on a normalised basis unless stated otherwise
2,131
2,003
2,075
2,037
1,996
20172018201920202021
Sales Volume ('000 MT)
644
(176)
312
806
657
20172018201920202021
Reported EBIT ($ million)
18
1.Figures are for the first six months and are for Total Group, which includes Continuing and Discontinued
Operations on a normalised basis unless stated otherwise
2.Includes amounts attributable to non-controlling interests
3.Refer to Glossary, page38, for definition ofcalculation
4.Excludes net borrowings attributed to disposal groups held for sale
Note: Gearing ratioFY20 has been restated, refer to Basis of Preparation in FY21 Interim Report
(417)
(690)
(782)
369
(632)
20172018201920202021
Free Cash Flow ($ million)
389
248
72
293
418
20172018201920202021
Normalised NPAT ($ million)
68
80
81
82
90
20172018201920202021
Working Capital Days
418
(348)
72
501
391
20172018201920202021
Reported NPAT ($ million)
244
346
316
112
147
20172018201920202021
Capex ($ million)
46.6
51.6
52.7
47.1
45.2
20172018201920202021
Gearing Ratio (%)
19
•Season to date collection, June –January,
was 1,071 million kgMS, down 0.8% on
last season
•Good start to the season impacted by poor
pasture conditions across New Zealand in
November and dry conditions in January,
especially in South Island and upper North
Island
•Full season forecast remains at 1,525 million
kgMS, up 0.5% on last season
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
0
10
20
30
40
50
60
70
80
90
JunJulAugSepOctNovDecJanFebMarAprMay
20
¹¹²¹¹²
³
1.RefertoNote1aand2boftheFY21InterimFinancialStatements
2.TotalGroupincludesContinuingOperationsandDiscontinuedOperations
3.Consistsofotheroperatingincome,netforeignexchangegainsandlosses,shareofprofitorlossonequityaccountedinvestees
21
Note:RefertoNote2intheFY21InterimFinancialStatementsforfurtherdetails
22
¹
²
²
1.Includesamountattributabletonon-controllinginterests
2.AttributabletoequityholdersoftheCo-operative
¹
²
²
23
1.Normalised basis
2.Prepared on a Continuing Operations basis
¹
²
•Total Group normalised operating expenses
decreased $37 million
•$10 million decrease in Continuing
Operations
•$27 million decrease in Discontinued
Operations, predominantly due to lower
cost in DPA Brazil, benefiting from a
weaker local currency
•Unallocated costs increased due to a release
from the Foreign Currency Translation
Reserve –a non-cash expense
24
¹
•Unallocated costs have increased $17 million
predominantly driven by ‘Other’
•The increase in ‘Other’ is mainly due to a release from the
Foreign Currency Translation Reserve following the
liquidation of an entity no longer in use. This is a non-cash
expense
1.Refer to Glossary, page38, for definition
25
²
1.Includes undrawn facilities and
commercialpaper. DCM is debt capital
markets
2.Excluding commercial paper
3.W ATM is weighted average term to
maturity
Note: As at 31 January 2021
0.01.02.03.04.0
FY21
FY22
FY23
FY24
FY25
FY26
FY27
FY28
FY29
FY30
FY31
0.01.02.03.04.0
FY21
FY22
FY23
FY24
FY25
FY26
FY27
FY28
FY29
FY30
FY31
$ billion
WATM³: 2.1 years
$ billion
WATM³: 4.0years
Undrawn
Facilities
$3.8bn
87%
Drawn Facilities
$0.6bn
13%
EUR/GBP
12%
AUD DCM
12%
CNY DCM
4%
NZD DCM
13%
USD DCM
13%
Bank
Facilities
46%
¹
25
Q1Q2Q3Q4
20202021
∆
¹
²
³
⁴
Includes EBIT attribution
from Group Operations⁵
341(97)%
Note: Prepared on a normalised Continuing Operations basis
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 regions
3.Consists of other operating income, net foreign exchange
gain/(loss) and share of equity accounted investees
4.This includes EBIT contribution from Group Operations
5.This is included in Asia Pacific’s EBIT. Refer to Glossary for
explanation of Group Operations
6.Summing of EBIT margin figures may not add up to total
EBIT displayed in table above due to rounding
⁶
•Asia Pacific EBIT improved $16 million due to a strong
performance in Consumer and Foodservice
•Lower volumes due to Australia impacted by China trade
relations, contraction of Daigouchannel and shipping
delays
•Gross margin up, Consumer and Foodservice benefiting
from COVID-19 with “stay at home” culinary trend
•Improved Consumer and Foodservice performance
partially offset by New Zealand and Australia Ingredients
•Operating expenses down $8 million due to targeted
selling and promotional spend during lockdown periods
27
$ millions
Note: Does not add to Total Group as shown on a normalised Continuing Operations basis and excludes unallocated and eliminations.
20202021
Gross ProfitEBITGross ProfitEBIT
Gross ProfitEBIT
28
¹
∆
²
³
⁴
Note: This table was prepared exclusive of Group Operations attribution
1.Normalised basis
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 regions
4.Consists of other operating income, net foreign exchange gain/(loss) and share of equity accounted investees
•Improved Consumer performance offset by challenges in
Australia Ingredients business
•Lower volumes due to Ingredients’ exports impacted by
China trade relations, contraction of Daigouchannel and
shipping delays
•Gross margin improved through allocating milk to high
value products in the Consumer business
•Operating expenses down slightly due to targeted selling
and promotional spend during lockdown periods
•EBIT decreased $5 million
∆
¹
²
³
⁴
Includes EBIT attribution
from Group Operations⁵
5617(70)%
Q1Q2Q3Q4
20202021
Note: Prepared on a normalised Continuing Operations basis
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 regions
3.Consists of other operating income, net foreign exchange
gain/(loss) and share of equity accounted investees
4.This includes EBIT contribution from Group Operations
5.This is included in AMENA’s EBIT. Refer to Glossary for
explanation of Group Operations
6.Summing of EBIT margin figures may not add up to total
EBIT displayed in table above due to rounding
•Lower volume in Ingredients as milk moved to higher value
products and markets
•Gross margin improved in Foodservice and Consumer, but
partially offset by lower Ingredients margin
•Gross profit declined $61 million due to lower sales
volumes in Ingredients’ business
•Operating expenses improved $42 million, with an
improvement in all three channels
•EBIT of $201 million, down $15 million
⁶
30
$ millions
Note: Does not add to Total Group as shown on a normalised Continuing Operations basis and excludes unallocated and eliminations.
20202021
Gross ProfitEBIT
Gross ProfitEBIT
Gross ProfitEBIT
31
¹
∆
²
³
⁴
Note: This table was prepared exclusive of Group Operations attribution. Latin America includes Chile, Brazil and
Venezula
1.Normalised basis
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 regions
4.Consists of other operating income, net foreign exchange gain/(loss) and share of equity accounted investees
•Sales volume increased 17,000 MT, driven by new product
development and government stimulus in Chile
•Gross margin decreased due to higher raw milk costs as
competition for milk increased
•Operating expenses were steady despite additional costs
relating to workforce safety under COVID-19 conditions
•EBIT up 64% to $41 million
Q1Q2Q3Q4
20202021
∆
¹
²
³
⁴
Includes EBIT attribution
from Group Operations⁵
⁶
Note: Prepared on a normalised Continuing Operations basis
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 regions
3.Includes other operating income, net foreign exchange
gain/(loss) and share of equity accounted investees
4.This includes EBIT contribution from Group Operations
5.This is included in Greater China’s EBIT. Refer to Glossary
for explanation of Group Operations
6.Summing of EBIT margin figures may not add up to total
EBIT displayed in table above due to rounding
•EBIT increased $94 million to $339 million, with $79
million contributed from Foodservice growth
•Foodservice gross margin increased from 20.3% to
28.2% as it shifted milk into higher value products
•Sales volume increased, benefiting from a robust
economy and China Government endorsed dairy
•Operating expenses increased $23 million, supporting
the increased expansion of Foodservice business
33
$ millions
Note: Does not add to Total Group as shown on a normalised Continuing Operations basis and excludes unallocated costs and eliminations.
20202021
Gross ProfitEBITGross ProfitEBIT
Gross ProfitEBIT
34
$ millions
Note: Does not add to Total Group as shown on a normalised Continuing Operations basis and excludes unallocated costs and eliminations. Refer to reconciliation in Appendix, page 20
20202021
Gross ProfitEBITGross ProfitEBIT
Gross ProfitEBIT
35
1.Excludes bulk liquid milk. Bulk liquid milk for the six months ended 31 January 2021 was 36,000 MT of kgMSequivalent six months ended 31 January 2020 was 37,000 MT of kgMSequivalent).
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. Milk solids used in the products sold were 488million
kgMSin reference and 205 million kgMSnon-reference (previous comparable period 513 million kgMSreference and 200 million non-reference).
¹
¹
•Relative to prior year, lower reference and
higher non-reference sales volumes reflect
strong Foodservice and Consumer demand
•Year on year, reference product price per MT
declined slightly more than non-reference
•Lower revenue from reference products due
to reduced sales volume and price per MT
•Increased non-reference revenue from higher
sales volume
36
¹
²
Note:Forthesix-monthsended31January
1.Normalisedbasis
2.Consistsofotheroperatingincome,netforeignexchangegainsandlosses,shareofprofitorlossonequityaccountedinvestees
37
FY21
FY20H1 ActualFull Year Target
Total recordable injury frequency rate (TRIFR) per million work hours¹5.85.45.0
Female representation in senior leadership²29%31%
35%
Employee engagement4.07NA³Top Quartile
Farmer sentiment (Net Promoter Score for Fonterra in New Zealand)333510⁴
Number of farms with Farm Environment Plans (New Zealand)34%42%45%
Reduction in water used at sites in water-constrained regions versus FY18(3.1)%(0.2)%⁵
(10)%
Reduction in greenhouse gas emissions from manufacturing versus FY15(5.7)%(11.2)%⁵(10)%⁶
Solid waste to landfill (kilotonnes)below FY2015.95.9⁵13.1
Fonterra % kgMS of New Zealand milk collected for the season ended 31May80%NA⁷80%
New Zealand Farmgate Milk Price (per kgMS)$7.14$7.30-$7.90⁸$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 share24c25c to 35c20c to 35c
1.Part of zero harm philosophy 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 Q2 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 Co-operative Council of actual achievements, compared with the targets set by the Board. The table below
provides an update of Fonterra’s performance against these targets as at 31 January 2021.
38
Represents the Ingredients, Foodservice and Consumer businesses in New Zealand,
Australia, Pacific Islands, South East Asia, South Asia and Fonterra Farm Source
TM
retail stores
Represents the Ingredients, Foodservice and Consumer businesses in Africa, Middle
East, Europe, North Asia and Americas
Represents the Ingredients, Foodservice and Consumer businesses in Greater
China, and the Falcon China Farms JV
Comprises the functions under Chief Operating Office (COO) including New Zealand
milk collection and processing operations and assets, supply chain, Group IT and
Innovation; and the Central Portfolio Management function (CPM)
Represents the channel comprising 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 Farm
Source
TM
retail stores
Represents the channel selling to businesses that cater for out-of-home
consumption; restaurants, hotels, cafes, airports, catering companies
etc.The focus is on customers such as; bakeries, cafes, Italian restaurants,
and quick-service global chains.High performance dairy ingredients
including whipping creams, mozzarella, cream cheese and butter sheets, are
sold in alongside our business solutions under the Anchor Food Professionals
brand
Represents the channel of branded consumer products, such as powders,
yoghurts, milk, butter, and cheese. Base products are sourced from the
ingredients business and manufactured into higher-value consumer dairy
products
eans 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. The Farmgate Milk Price is set by the Board, based on the
recommendation of the Milk Price Panel. In making that recommendation, the
Panel provides assurance to the Board that the Farmgate Milk Price has been
calculated in accordance with the Farmgate Milk Price Manual
Kilogram of milk solids, the measure of the amount of fat and protein in the
milk supplied to Fonterra
39
Return on capital is calculated as EBIT less a notional tax charge, divided by
capital employed including certain intangibles (brands and goodwill) and
equity accounted investments.
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, and includes amounts
relating to businesses classified as held for sale.
Net interest bearing debt including lease liabilities and the effect of debt
hedging. It reflects total borrowings plus bank overdraft less cash and cash
equivalents and non-current interest-bearing advances, adjusted for
derivatives used to manage changes in hedged risks on Debt instruments. It
excludes net borrowings attributed to businesses classification as held for
sale
Represents corporate costs including Co-operative Affairs and Group
Functions; and any other costs that are not directly associated to the
reporting segments
New Zealand: A period of 12 months to 31 May in eachyear.
Australia: A period of 12 months to 30 June in eachyear.
China: A period of 12 months to 31 July in each year.
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. It excludes net borrowings attributed to businesses classified as held for sale
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. Debt and EBITDA are adjusted to include
amounts relating to businesses classified as held for sale and Discontinued
Operations respectively.
Normalised earnings per share means normalised profit after
tax attributed to equity holders divided by the weighted
average number of shares for the period
40
Fonterra uses several non-GAAP measures when discussing financial performance. These measures include
normalised Profit After Tax, normalised EBIT, EBIT, normalised earnings per share and normalisation adjustments. Total
Group measures present the combined financial performance of the Group’s continuing and discontinued operations.
Non-GAAP financial measures 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 audited Annual Financial Statements.
Reconciliations of the NZ IFRS measures to the non-GAAP measures used by Fonterra can be found in the Non-GAAP
measures section of the Interim Report 2021 that is available on Fonterra’s website.
---
Confidential to Fonterra Co-operative Group Page 1
Distribution Notice
Section 1: Issuer information
Name of issuer
Fonterra Co-operative Group Limited
Financial product name/description Fonterra Co-operative Group Limited Shares
NZX ticker code FCG
ISIN (If unknown, check on NZX website) NZFCGE0001S7
Type of distribution
(Please mark with an X in the
relevant box/es)
Full Year Quarterly
Half Year X Special
DRP applies
Record date 24/03/2021
Ex-Date (one business day before the
Record Date)
23/03/2021
Payment date (and allotment date for DRP) 15/04/2021
Total monies associated with the
distribution
1
$80,667,894
Source of distribution (for example, retained
earnings)
Retained earnings
Currency NZD
Section 2: Distribution amounts per financial product
Gross distribution
2
$0.05000000
Gross taxable amount
3
$0.05000000
Total cash distribution
4
$0.05000000
Excluded amount (applicable to listed PIEs) N/A
Supplementary distribution amount N/A
1
Based on the number of units on issue at the date of the form.
2
“Gross distribution” is the total cash distribution plus the amount of imputation credits, per financial product, before the deduction of Resident
Withholding Tax (RWT).
3
“Gross taxable amount” is the gross distribution minus any excluded income.
4
“Total cash distribution” is the cash distribution excluding imputation credits, per financial product, before the deduction of RWT. This should include
any excluded amounts, where applicable to listed PIEs.
Fonterra Co-operative Group
Confidential to Fonterra Co-operative Group Page 2
Section 3: Imputation credits and Resident Withholding Tax
5
Is the distribution imputed Fully imputed
Partial imputation
No imputation
If fully or partially imputed, please state
imputation rate as % applied
6
N/A
Imputation tax credits per financial product N/A
Resident Withholding Tax per financial
product
0.01650000
Section 4: Distribution re-investment plan (if applicable)
DRP % discount (if any) N/A
Start date and end date for determining
market price for DRP
N/A N/A
Date strike price to be announced (if not
available at this time)
N/A
Specify source of financial products to be
issued under DRP programme (new issue
or to be bought on market)
N/A
DRP strike price per financial product N/A
Last date to submit a participation notice for
this distribution in accordance with DRP
participation terms
N/A
Section 5: Authority for this announcement
Name of person authorised to make this
announcement
Anya Wicks
Contact person for this announcement Anya Wicks
Contact phone number (09) 374 9341
Contact email address Anya.wicks@fonterra.com
Date of release through MAP 17/03/2021
5
The imputation credits plus the RWT amount is 33% of the gross taxable amount for the purposes of this form. If the distribution is fully imputed the
imputation credits will be 28% of the gross taxable amount with remaining 5% being RWT. This does not constitute advice as to whether or not RWT
needs to be withheld.
6
Calculated as (imputation credits/gross taxable amount) x 100. Fully imputed dividends will be 28% as a % rate applied.
---
For the 2020 financial year relating to the new operating model
17 March 2021
Confidential to Fonterra Co-operative Group Page 1
In our FY21 interim results, we have reported our financial performance based on our new operating model
and this includes the new reportable segments plus some other additional supplementary information.
Our new operating model is based around three regional business units (Asia Pacific, AMENA, and Greater
China) supported by a shared infrastructure that includes New Zealand milk collection and processing
operations and assets Group IT, Innovation functions and a Central Portfolio Management function. We
refer to the shared infrastructure as Group Operations.
Fonterra’s new reportable segments are each of the three regions: APAC, AMENA and Greater China.
In our FY21 interim results we also provide additional supplementary information, including:
- For each region, performance by product channel: Ingredients, Foodservice and Consumer;
- The amount of Group Operations’ earnings before interest and tax (EBIT) that has been attributed to
each region;
- Summary earnings performance for each of the Australian and Latin American businesses;
- Summary earnings performance split between New Zealand and non-New Zealand sourced
milk; and
- Regional and product performance for New Zealand sourced milk.
This pack includes this additional supplementary unaudited information for FY20 to assist with comparison
of performance over the periods.
Fonterra Co-operative Group
Confidential to Fonterra Co-operative Group Page 2
Summary of Regional Performance
1
31 July 2020
Normalised basis
NZD million Total
Asia
Pacific AMENA
Greater
China
Unallocated
Costs and
Eliminations
Sales volume (‘000 MT)
2
3,842 1,406 1,433 1,021 (18)
Revenue 20,282 7,139 7,819 5,364 (40)
Cost of goods sold (17,236) (5,939) (6,750) (4,591) 44
Gross profit 3,046 1,200 1,069 773 4
Gross margin 15.0% 16.8% 13.7% 14.4% –
Operating expenses (2,194) (951) (612) (390) (241)
Other
3
(5) (1) (6) (12) 14
EBIT
4
847 248 451 371 (223)
Includes EBIT attribution from
Group Operations
5
170 55 27 88 –
EBIT excludes discontinued
operations
32 – 21 11 –
EBIT Contribution of Regions and Product Channels
1
31 July 2020
Normalised basis
EBIT (NZD million) Total Asia Pacific AMENA
Greater
China
Ingredients 714 143 395 176
Foodservice 221 7 (15) 229
Consumer 135 98 71 (34)
Unallocated costs & eliminations (223) – – –
Continuing operations
6
847 248 451 371
Discontinued operations 32 – 21 11
Total Group EBIT 879
1 Regions performance is shown on a continuing operations basis.
2 Includes sales to other regions.
3 Consists of other operating income, net foreign exchange gains and losses, share of profit or loss on equity accounted investees.
4 EBIT includes Group Operations attribution.
5 The Group Operations attribution is the EBIT attribution from a shared infrastructure that includes New Zealand milk collection and processing
operations and assets, Group IT and Innovation and a Central Portfolio Management function.
6 Include unallocated costs and eliminations to add across.
Fonterra Co-operative Group
Confidential to Fonterra Co-operative Group Page 3
Asia Pacific
1
31 July 2020
Normalised basis
NZD million Total Ingredients Foodservice Consumer
Sales volume (‘000 MT)
2
1,406 623 143 640
Revenue 7,139 3,693 918 2,528
Cost of goods sold (5,939) (3,285) (778) (1,876)
Gross profit 1,200 408 140 652
Operating expenses (951) (271) (136) (544)
Other
3
(1) 6 3 (10)
EBIT
4
248 143 7 98
Includes EBIT attribution from Group
Operations
5
55
Gross margin 16.8% 11.0% 15.3% 25.8%
Australia Performance
6
Normalised basis
NZD million 31 July 2020
Production volume (‘000 MT) 365
Sales volume (‘000 MT)
2
406
Revenue 2,036
Cost of goods sold (1,821)
Gross profit 215
Operating expenses (157)
Other
3
(3)
EBIT 55
Gross margin 10.6%
1 Asia Pacific performance represents continuing operations.
2 Includes sales to other regions.
3 Consists of other operating income, net foreign exchange gains and losses, share of profit or loss on equity accounted investees.
4 EBIT includes Group Operations attribution.
5 Included in Asia Pacific’s EBIT is the Group Operations attribution of $55 million.
6 Performance does not include Group Operations attribution.
Fonterra Co-operative Group
Confidential to Fonterra Co-operative Group Page 4
AMENA Performance
1
31 July 2020
Normalised basis
NZD million Total Ingredients Foodservice Consumer
Sales volume (‘000 MT)
2
1,433 1,041 14 378
Revenue 7,819 6,522 158 1,139
Cost of goods sold (6,750) (5,746) (139) (865)
Gross profit 1,069 776 19 274
Operating expenses (612) (378) (37) (197)
Other
3
(6) (3) 3 (6)
EBIT
4
451 395 (15) 71
Includes EBIT attribution from Group
Operations
5
27
Gross margin 13.7% 11.9% 12.0% 24.1%
Latin America Performance
6,7
Normalised basis
NZD million 31 July 2020
Sales volume (‘000 MT)
14
346
Revenue 926
Cost of goods sold (685)
Gross profit 241
Operating expenses (192)
Other
3
(7)
EBIT 42
Gross margin 26.0%
1 AMENA’s performance represents continuing operations.
2 Includes sales to other regions.
3 Consists of other operating income, net foreign exchange gains and losses, share of profit or loss on equity accounted investees.
4 EBIT includes Group Operations attribution.
5 Included in AMENA’s EBIT is the Group Operations attribution of $27 million.
6 Performance does not include Group Operations attribution.
7 Latin America includes Chile, Brazil and Venezula
Fonterra Co-operative Group
Confidential to Fonterra Co-operative Group Page 5
Greater China Performance
1
31 July 2020
Normalised basis
NZD million Total Ingredients Foodservice Consumer
Sales volume (‘000 MT)
2
1,021 691 257 73
Revenue 5,364 3,471 1,555 338
Cost of goods sold (4,591) (3,136) (1,222) (233)
Gross profit 773 335 333 105
Operating expenses (390) (149) (102) (139)
Other
3
(12) (10) (2) –
EBIT
4
371 176 229 (34)
Includes EBIT attribution from Group
Operations
5
88
Gross margin 14.4% 9.7% 21.4% 31.1%
Group Operations Attribution
31 July 2020
Normalised basis
NZD million Total Asia Pacific AMENA
Greater
China
EBIT Group Attribution 170 55 27 88
New Zealand and non-New Zealand Milk Performance
6
31 July 2020
NZD million Total New Zealand Milk
Non-New Zealand
Milk
Sales volume (‘000 MT) 3,842 3,003 839
Revenue 20,282 17,212 3,070
Cost of goods sold (17,236) (14,615) (2,621)
Gross profit 3,046 2,597 449
Operating expenses (2,194) (1,813) (381)
Other
3
(5) (7) 2
EBIT 847 777 70
Discontinued Operations 32 – 32
Gross margin 15.0% 15.1% 14.6%
1 Greater China performance represents Continuing Operations.
2 Includes sales to other regions.
3 Consists of other operating income, net foreign exchange gains and losses, share of profit or loss on equity accounted investees.
4 EBIT includes Group Operations attribution.
5 Included in Greater China’s EBIT is the Group Operations attribution of $88 million.
6 Shown on a continuing operations basis.
Fonterra Co-operative Group
Confidential to Fonterra Co-operative Group Page 6
New Zealand Milk by Product Channel – Sales Volume
1
31 July 2020
(‘000 MT) Total Ingredients Foodservice Consumer
Unallocated Costs
and Eliminations
Asia Pacific 1,079 518 116 445 –
AMENA 981 922 12 47 –
Greater China 961 676 220 65 –
Eliminations (18) – – – (18)
Total 3,003 2,116 348 557 (18)
New Zealand Milk by Product Channel – Revenue
26
31 July 2020
NZD million Total Ingredients Foodservice Consumer
Unallocated Costs
and Eliminations
Asia Pacific 5,673 3,135 706 1,832 –
AMENA 6,359 5,959 79 321 –
Greater China 5,220 3,409 1,495 316 –
Eliminations (40) – – – (40)
Total 17,212 12,503 2,280 2,469 (40)
New Zealand Milk by Product Channel – Gross Margin
26
31 July 2020
NZD million Total Ingredients Foodservice Consumer
Asia Pacific 17.8% 12.1% 14.9% 28.7%
AMENA 12.8% 12.4% 26.6% 17.4%
Greater China 14.8% 9.8% 22.2% 33.2%
Total 15.1% 11.6% 20.1% 27.8%
New Zealand Milk by Product Channel – EBIT
26
31 July 2020
NZD million Total Ingredients Foodservice Consumer
Unallocated Costs
and Eliminations
Asia Pacific 206 165 (7) 48 –
AMENA 405 374 7 24 –
Greater China 389 175 239 (25) –
Eliminations (223) – – – (223)
Total 777 714 239 47 (223)
1 Shown on a continuing operations basis.
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.
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