Strong profit and dividend for FY24 interim results
Fonterra Co-operative Group Limited
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 2024
Previous Reporting Period 6 months to 31 January 2023
Currency NZD
Amount (000s) Percentage change
Revenue from continuing operations $11,085,000 (10%)
Total Revenue $11,257,000 (15%)
Net profit from continuing operations $714,000 31%
Total net profit $674,000 23%
Interim Dividend
Amount per Quoted Equity Security $0.15
Imputed amount per Quoted Equity Security Not Applicable
Record Date 28 March 2024
Dividend Payment Date 11 April 2024
Current period Prior comparable period
Net tangible assets per Quoted Equity
Security
$3.89 $3.76
A brief explanation of any of the figures
above necessary to enable the figures to be
understood
Please refer to the unaudited interim financial statements
for further explanation
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 21/03/2024
Unaudited interim financial statements accompany this announcement.
---
21 March 2024
Strong profit and dividend for FY24 interim results
• Reported profit after tax: NZ $674 million, up 23%
• Continuing operations EBIT: NZ $986 million, up 14%
• Earnings per share: 40 cents per share
• Return on capital: 13.4%, up from 8.6%
• Interim dividend: 15 cents per share, up from 10 cents per share
• Maintained forecast FY24 continuing operations earnings range of 50-65 cents per share
• Forecast Farmgate Milk Price range narrows: NZ$7.50 - $8.10 per kgMS
• Forecast milk collections: 1,465 million kgMS, down 1%
Fonterra Co-operative Group Ltd today released its FY24 interim results which show a continuation of
strong earnings performance.
CEO Miles Hurrell says the Co-op’s performance has been driven by higher margins and sales volumes
across Fonterra’s diversified product and category mix.
“I’m pleased to report we’ve continued the positive momentum seen in our earnings performance and
delivered an interim dividend of 15 cents for our Co-op’s farmer shareholders and unit holders, up from 10
cents this time last year.
“The forecast Farmgate Milk Price has also lifted recently, with a current midpoint of $7.80 per kgMS,
following volatility earlier in the season.
“While supply and demand dynamics remain finely balanced, with continuing global uncertainty, we are
now well progressed through the season. This gives us the confidence to narrow our forecast Farmgate
Milk Price range to $7.50 - $8.10 per kgMS.
“We have also maintained our forecast earnings guidance for the year of 50-65 cents per share,” says Mr
Hurrell.
Business performance
Fonterra’s reported profit after tax of $674 million is up $128 million on this time last year, with EBIT from
continuing operations up 14% to $986 million over the same period.
The Co-op has reported a return on capital for the last 12 months of 13.4%, up from 8.6% on this time last
year, and earnings per share of 40 cents, up from 33 cents.
Fonterra Co-operative Group
Page 2
“Our FY24 earnings have been driven by higher margins and sales volumes in our Foodservice and
Consumer channels, which have helped to offset lower returns in the Ingredients channel following
historically high price relativities last year,” says Mr Hurrell.
“Sales volumes from continuing operations are up 22kMT or 1.3% to 1,721kMT and gross margins are up
from 16.6% to 18.4%.
“At the same time, our balance sheet position remains resilient, with our strong underlying performance
and low debt position helping to further lower our financing costs this year.
“Operating expenses for continuing operations are up $52 million on last year after removing the impact of
FY23 impairments, due to increased labour costs, professional fees and investment in IT infrastructure.
The Co-op remains focused on reducing costs across the business.
“Looking at our channels and regions, our Consumer and Foodservice earnings are up year on year, due
to improved pricing and higher sales volumes.
“Ingredients channel earnings are down year on year off the back of historically high price relativities in
FY23 and lower margins in Australia Ingredients during FY24.
“Global Markets’ reported profit after tax is up $230 million to $380 million, due to lower input costs in
Southeast Asia, Sri Lanka and Fonterra Brands New Zealand. Fonterra Australia’s performance has been
impacted by the higher Australian milk price.
“In February, we announced plans to merge our Australia and Fonterra Brands New Zealand businesses
from 1 May. These two units share many similarities, and we expect the integration to create scale
efficiencies.
“Greater China reported profit after tax is up $94 million to $232 million, primarily due to strong
performance in the Foodservice channel.
“Core Operations’ reported profit is down $154 million to $102 million due to lower price relativities
compared to last year, which have been partially offset by New Zealand manufacturing efficiencies.
Progress on strategy
“Across FY24, the Co-op has continued to make progress on its strategy with new initiatives in place to
create value for farmers, commercialise our sustainability position and unlock capacity through innovation.
“Our new capital structure has been in place for a year and encouragingly, we’re seeing new Co-op
farmers citing it as a reason for returning to the Co-op. Some are wanting to take advantage of the flexible
shareholding options now available to them and this, coupled with the Co-op’s stability, means we have a
strong pipeline of farmers wanting to join the Co-op.
“We have also been utilising our scale, optionality, and strong balance sheet to deliver benefits to farmers.
This includes getting cash to farmers sooner through our revised Advance Rate guideline.
“Earlier this financial year, we returned $800 million to farmer shareholders and unit holders following the
divestment of Soprole. We also completed the sale of our DPA Brazil JV with Nestlé to Lactalis.
“Since announcing our on-farm emissions target, we have been working with customers to commercialise
our farmers’ sustainability credentials. This includes introducing to customers our regenerative agriculture
position, which recognises our farmers’ pastural farming system.
“We’ve continued to decarbonise our New Zealand operations as we progress toward the Co-op’s scope 1
and 2 emissions reductions target, including commissioning our wood biomass boiler at Waitoa and
announcing plans to electrify our Edendale site.
Fonterra Co-operative Group
Page 3
“We’ve also deployed a new technology within our manufacturing base which has unlocked 8000 MT
additional production capacity for our high-value UHT cream,” says Mr Hurrell.
Outlook
"Looking out to the remainder of the year, while global inflationary pressures are easing, we are
monitoring the potential for volatility as a result of geopolitical instability.
“Our partnership with Kotahi and diversification across markets means we’re well prepared for disruption
in global supply chains or changes in demand from key importing regions.
“We’re pleased with our first half performance for FY24 and look forward to the second half as we
continue to deliver for our farmer shareholders and unit holders,” says Mr Hurrell.
ENDS
Non-GAAP financial information
Fonterra uses several non-GAAP measures when discussing financial performance. Non-GAAP measures are not defined or
specified by 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.
Non-GAAP measures are not subject to audit unless they are included in Fonterra’s audited annual financial statements.
For further information contact:
James Kaufman
Fonterra Communications
Phone: +64 21 507 072
---
Results overview3-7
Macro environment8-14
Financial overview15-25
Additional financial information26-48
Flexible Shareholding metrics49-53
Appendix54-60
from 33c from 546m
from 864m
from 8.6%
from 10c
from 43.3%
•Profit after tax up $128m, or 23%, to $674m due to higher operating earnings (EBIT) and lower
financing costs
–EBIT up $95m, or 11%,to $953m, with $986m and $(33)m from continuing and discontinued
operations, respectively
–Composition of earnings between channels materially different; with lower earnings from
Ingredients offset by higher earnings in Foodservice and Consumer
–Prior year Consumer performance includes $162m of impairments, adjusting for the
impairments operating earnings are behind the prior year
–Financing costs down $68m to $89m reflecting lower average borrowings
•Earnings per share attributable to equity holders of 40 cents, up from 33 cents
–43 cents from continuing operations and (3) cents from discontinued operations
•Balance sheet continues to be very strong
–Net Debt down $1.6b to $4.2b reflecting strong underlying performance, reduction in working
capital during the year and divestments
•Interim dividend of 15 cents per share, up from 10 cents per share
•2023/24 Farmgate Milk Price range narrowed from $7.30 -$8.30 per kgMS to $7.50 –8.10 per kgMS
•Maintained FY24 continuing operations earnings range of 50 –65 cents per share
12,333
11,085
916
172
20232024
2,046 2,036
252
66
20232024
1,6991,721
295
59
20232024
(‘000 MT)
($ million)
($ million)
($ million)
1,2191,109
258
99
20232024
•Continuing operations up due to
continued focus to optimise
inventory levels
•Continuing operations decreased mainly
due to lower product prices in the
Ingredients channel
•Favourablemovement in continuing
operations reflects prior year result
including $162m of impairments
•Continuing operations down due to
lower margins in Ingredients, partially
offset by higher margins and sales
volume in Foodservice and Consumer
Continuing operations
Discontinued operations
Discontinued operations performance is lower compared to prior year due to FY23 including Soprole for the first 8 months
Note: All figures are for the six months ended 31 January
Channel performance
858 -
864
--
-
986
-953
Underlying Consumer growth of $140m after
adjusting for $162m of impairments in FY23
FY23 H1
Total Group EBIT
Discontinued
operations
EBIT
FY23 H1
continuing operations
EBIT
IngredientsFoodserviceConsumerFY24 H1
continuing operations
EBIT
Discontinued
operations
EBIT
FY24 H1
Total Group EBIT
($ million)
•Continuing operations earnings up $122m to $986m. FY23 earnings included $162m of
impairments. Adjusting for impairments, underlying earnings has decreased $40m from
$1,026m to $986m
•Material shift in composition of operating earnings between channels, reflecting:
–Ingredients down due to reduced margins in both New Zealand and Australia
–Foodservice and Consumer up due to volume growth, improved pricing and lower milk
cost inputs
•Discontinued operations made a loss of $(33)m for the first six months of FY24 reflecting
the sale of DPA Brazil in October 2023. DPA Brazil was profitable over the period, but this
was more than offset by the release of the $(68)m foreign currency translation reserve as
part of the sale
6
(383)
203
302
(33)
Continuing operations
546
(2)
544
122
40
8
714
(40)
674
•Continuing operations’ operating earnings increased due to:
–prior year including $162m of impairments
–sales volumes and gross margin growth in the Foodservice and Consumer channels,
offset by lower sales volumes and margins in the Ingredients channel
–removing impact of impairments in prior year, operating expenses increased $52m due
to higher staff costs, and upfront costs of driving efficiency improvements
•Continuing operations’ net financing costs improved reflecting lower average
totalborrowings mainly due to higher earnings, lower working capital and divestments
•Discontinued operations made a loss of $(40)m for the first six months of FY24 reflecting
the sale of DPA Brazil in October 2023. DPA Brazil was profitable over the period, but this
was more than offset by the release of the $(68)m foreign currency translation reserve as
part of the sale
FY23 H1
Total Group
profit after tax
Discontinued
operations
profit after tax
FY23 H1
continuing operations
profit after tax
Operating
earnings
Net finance
costs
TaxFY24 H1
continuing operations
profit after tax
Discontinued
operations
profit after tax
FY24 H1
Total Group
profit after tax
33c EPS
($ million)
Underlying operating earnings
down $40m after adjusting for
$162m of impairments in FY23
33c EPS43c EPS40c EPS
Note: Profit after tax presented in the graph includes profit attributable to non-controlling interests. EPS presented is for profit attributable to equity holders of the Co-operative
0.8%
0.3%
•Outlook for dairy trade is positive
–Gradual rebalance of China domestic
milk production, and import demand has
improved but remains volatile with a
soft economy
–Increasing demand from key import
regions, particularly Southeast Asia,
and Middle East and Africa
–EU and US production remains stifled
due to high on-farm costs
–New Zealand and Australia production
has lifted mainly due to better weather
conditions
•Current global economic uncertainty,
exacerbated by geopolitical conflicts,
impacting costs such as energy and feed,
influencing milk supply in the EU and US
•Environmental regulations may further
affect milk production, particularly in the EU
1.6%
–
0.0%
9.0%
9.6%
18.7%
1.2%
0.3%
0.6%
4.6%
1.0%
4.1%
3.5%
4.8%
8.3%
Note: Refer to appendix for source data and date ranges
$6
$7
$8
$9
$10
JunJulAugSepOctNovDecJanFebMarAprMay
2022/23 season2023/24 season
•Prior season milk price benefited from strong
Reference Product prices leading into the season
before declining over the season
•The lower product prices flowed into 2023/24
season, partially offset by favourable currency
movements
•GDT WMP, SMP, AMF and butter prices from
August to February increased 33%, 20%, 47% and
44%, respectively. This has increased the price of
milk heading into the last half of the season
•Season-on-season increases in operating costs,
mainly due to inflation, have also impacted the
2023/24 season milk price
($ per kgMS)
2022/23 season monthly milk
prices average to $8.22, the
Farmgate Milk Price
2023/24 season forecast
range of $7.50 -$8.10,
midpoint $7.80
•FY24 Q1 gross margin and operating earnings are
strong relative to prior quarters and FY24 Q2 due to
lower cost of milk at start of financial year
•Direction of indicative monthly milk prices for
2023/24 season at a midpoint of $7.80 will place
margin pressure on Foodservice and Consumer
channels in second half of FY24
Impact on Foodservice and Consumer channels
2,500
3,500
4,500
5,500
6,500
(USD/MT)
FY23 H1FY22 H1
FY24 H1
GDT only Reference Product contract shipment price
GDT only Non-Reference Product contract shipment price
Reference Product shipment price
Non-Reference Product shipment price
Q1Q2H1
Average Non-Reference price4,9395,4585,230
Average Reference price4,3003,8624,023
Price difference6391,5961,207
•Average price for the Reference portfolio declined USD 892 per MT in FY24 H1 compared to the prior year,
whereas the Non-Reference portfolio decreased by USD 958 per MT
•GDT contracts for the near term indicate a continued contraction of price relativities as improved demand for
powders from the Middle East and Africa, and more recently Greater China lift the average Reference price
•GDT cheddar contracts are used as a proxy for Non-Reference prices in the near term. Cheddar prices have
adjusted down to within a historical long-term range reflecting expectation of higher production volumes in the US
Q1Q2H1
Average Non-Reference price4,3334,2184,272
Average Reference price3,2983,0553,131
Price difference1,0351,1631,141
Note: Refer to appendix for source data and date ranges
(‘000 MT)
Reference Products85787215
Non-Reference Products430422(8)
(NZD)
Reference Products ($ billion) 5.64.7-
Non-Reference products ($ billion) 3.52.9-
Reference Products ($ per MT) 6,5845,398(1,186)
Non-Reference products ($ per MT) 8,1466,956(1,190)
(NZD)
Reference Products ($ billion) (4.3)(3.5)-
Non-Reference Products ($ billion) (1.8)(1.4)-
Reference Products ($ per MT)(5,042)(3,957)1,085
Non-Reference Products ($ per MT)(4,256)(3,404)852
Note: Table includes Ingredients’ products that are on-sold to the Foodservice and Consumer channels and excludes bulk liquid milk. Bulk liquid milk for 2024 was 35,000 MT of kgMS equivalent (for the comparative period it was 35,000 MT of
kgMS equivalent). Milk solids used in the Reference Products sold were 480 million kgMS and 215 million kgMS in the Non-Reference Products (for the comparative period 482 million kgMS in Reference Products and 220 million kgMS in
Non-Reference Products)
•8,000 MT less of higher value Non-Reference products due to
timing of shipments
•On an NZD basis, the relative price change per MT for the
Reference and Non-Reference portfolio is flat
–The sales profile and allocation of FX hedging between
Reference and Non-Reference offset the unfavourable USD
price relativity movements
•Non-Reference portfolio cost of milk did not decline as much as the
Reference Portfolio
–The cream products in the Non-Reference portfolio are
manufactured and sold on a shorter timeframe due to their
shorter shelf life, therefore, they get expensed at a more current
milk cost
–The cost of fat, which is the primary component of the milk cost
in cream products, has increased significantly over the past 12
months
735
273
714
284
691
272
671
279
677
270
FY20 H1FY21 H1FY22 H1FY23 H1FY24 H1
72.9%
71.6%
71.7%
70.6%
71.5%
27.1%
28.4%
28.3%
29.4%
28.5%
Reference ProductsNon-Reference Products
% milk solids manufactured
(kgMSmillions)
Deliver a strong Farmgate Milk Price and earnings growth
•Limited product mix flex over peak collection period, tends to mean a higher proportion of
solids are allocated to the Reference portfolio in the first half of year relative to second half
•Long-term trend remains positive, allocating a greater proportion of milk solids to higher
value products in the Non-Reference portfolio
•Lower milk collections over the past 5 years has meant total milk solids processed within the
Non-Reference portfolio is relatively flat, despite the increased proportion of solids allocated
•Materially less milk was allocated to Reference portfolio in 2023 due to high whole milk
powder inventory levels and strong domestic milk production in China. 2024 allocation is a
return to a more gradual reduction in Reference portfolio allocation
399
82
246
107
38
50
63
396
75
237
109
44
51
62
382
74
228
105
45
51
57
335
84
244
112
42
50
60
356
84
228
101
53
45
60
Whole Milk PowderSkim Milk PowderCream
(Butter and AMF)
CheeseCream (other)CaseinOther Proteins
FY20 H1FY21 H1FY22 H1FY23 H1FY24 H1
•FY23 and FY24 production significantly lower than prior years due to a conscious product mix decision to
mitigate global demand risk by allocating away from WMP into product streams with higher value and
more stable demand
•China demand is showing signs of stabilising with inventories normalising, however macroeconomic
indicators continue to be weak. A key indicator of Chinese recovery will be post-Chinese New Year
consumption and the extent of domestic WMP production occurring in China as it enters its milk season
•Overall WMP demand is finely balanced relative to supply with global WMP production across key export
origins expected to remain flat
•Strong demand for cream in the Greater China Foodservice business, particularly UHT cream, has driven
an increase in solids allocated to Non-Reference cream
•Reduced allocation as value of these portfolios reduces relative to the WMP and cream portfolios that
have experienced better pricing during the year
•Cheese and Casein supply and demand currently remains well balanced for the near term, with a
reduction in production from New Zealand as US production increases
Reference Products
Non-Reference Products
(kgMSmillions)
8.1%
7.5%
7.7%
8.8%8.9%
39.6%39.7%39.6%
35.3%
37.6%
24.4%
23.7%
23.7%
25.7%
24.1%
10.6%
11.0%
10.9%
11.8%
10.7%
3.8%
4.4%
4.7%
4.5%
5.6%
5.0%
5.2%
5.3%
5.3%
4.8%
6.3%
6.2%
5.9%
6.3%
6.3%
% milk solids manufactured
Note: Excludes Butter Milk Powder, and other smaller Non-Reference commodity groups
-
Operating earnings performance by reporting segment and channel
289
561
501
226
251
216
42
97
110
85
208
134
22
(147)
51
(82)
116
61
560
90
62
552
91
66
520
98
60
574
99
52
564
111
58
IngredientsFoodserviceConsumer
FY20 H1FY21 H1FY22 H1FY23 H1FY24 H1
78.7%
77.8%
77.1%
79.5%
77.0%
8.7%
9.3%
8.4%
7.1%
7.9%
•Greater proportion of solids sold through Foodservice and Consumer due to the higher margins in these channels, as a result of improved pricing and lower cost of milk
•A higher proportion of Ingredients was sold last year due to the additional inventory carried over into the 2023 financial year
•A higher proportion of milk solids was sold through the Greater China Foodservice channel, particularly UHT cream
12.6%
12.9%
14.5%
13.4%
15.1%
(kgMS)
% milk solids sold
Shifting New Zealand milk into higher margin products to deliver a strong Farmgate Milk Price and earnings growth
850(324)
(16)
(28)
(15)
467
FY23
H1 EBIT
Core
Operations
VolumeMarginOperating
expenses and
other
FY24
H1 EBIT
EBIT ($ million)
Within the regions
289
561
501
226
251
216
13.9%
16.4%
17.6%
12.5%
16.2%
11.9%
-80.0%
-70.0%
-60.0%
-50.0%
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10. 0%
20. 0%
0
100
200
300
400
500
600
700
800
900
1000
FY23 Q1FY23 Q2FY23 Q3FY23 Q4FY24 Q1FY24 Q2
EBIT ($ million)Gross margin (%)
FY24 H1
•Ingredients EBIT is down $383m, due to:
–the FY24 lactose price materially declining so the benefit to Core Operations of relatively
higher lactose costs in the Milk Price calculation (due to requiring more lactose for
standardisationof WMP, SMP and BMP) has significantly reduced
–lower margins achieved in Core Operations reflecting lower sales volumes of higher
value Non-Reference Products, and Non-Reference Portfolio cost of milk which did not
decline as much as the Reference Portfolio
–lower margins within the regions, mainly due to a higher milk price in Australia and
weaker demand for Milk Protein Concentrate (MPC) and cheese in China
•Gross margins are expected to continue to tighten in the second half of FY24 reflecting the
recent increase in the price of Reference Products on GDT relative to
Non-Reference prices
Note: Prepared on a continuing operations basis
FY24 H1
139
59
31
144(31)
342
FY23
H1 EBIT
Core
Operations
VolumeMarginOperating
expenses and
other
FY24
H1 EBIT
EBIT ($ million)
Within the regions
42
97
110
85
208
134
14.4%
19.3%
21.7%
22.0%
29.4%
23.3%
-80.0%
-60.0%
-40.0%
-20.0%
0.0%
20. 0%
40. 0%
0
100
200
300
400
500
600
700
800
900
1000
FY23 Q1FY23 Q2FY23 Q3FY23 Q4FY24 Q1FY24 Q2
EBIT ($ million)Gross margin (%)
•Foodservice EBIT is up $203m, due to:
–higher margins within Core Operations driven by lower input costs
–favourable margins predominately driven by the lower cost of milk, as well as benefit
from higher in-market pricing particularly in our Southeast Asia markets
–sales volume growth of 8%, mainly driven by UHT cream in Greater China
•The Foodservice channel experienced stronger earnings in FY24 Q1 relative to FY24 Q2
driven by higher gross margins in the Q1
•Gross margins tightened in Q2 due to a combination of lower prices achieved in-market
and higher cost of goods sold as cost of milk increased
•Gross margins are expected to continue to tighten in the second half of FY24 reflecting the
recent increase in the price of Reference Products on GDT
Note: Prepared on a continuing operations basis
22
(147)
51
(82)
116
61
23.8%
21.2%
25.8%
24.0%
28.8%
25.2%
-70.0%
-50.0%
-30.0%
-10.0%
10. 0%
30. 0%
-200
-100
0
100
200
300
400
500
600
FY23 Q1FY23 Q2FY23 Q3FY23 Q4FY24 Q1FY24 Q2
EBIT ($ million)Gross margin (%)
FY24 H1
(125)7
25
101
169177
FY23
H1 EBIT
Core
Operations
VolumeMarginOperating
expenses and
other
FY24
H1 EBIT
EBIT ($ million)
Within the regions
•Consumer EBIT increased $302m, due to:
–sales volume growth of 8%, mainly driven by demand in Sri Lanka and the
Middle East
–improved gross margins, driven by favourable pricing across most regions, and lower
cost of milk
–lower operating expenses due to prior year including $162m of impairments
•Adjusting for impairments, Consumer EBIT increased $140m
•Lower cost of milk during FY24 Q1, coupled with favourablepricing meant a strong FY24
Q1 gross margin and EBIT relative to FY23 and FY24 Q2
•Gross margins tightened in the second quarter due to a combination of lower in-market
prices and higher cost of milk
•Gross margins are expected to continue to tighten in the second half of FY24 reflecting the
recent increase in the price of Reference products on GDT that inform the cost of milk
•FY23 Q2 and Q4 EBIT was impacted by the accounting for impairments
Note: Prepared on a continuing operations basis
∆
1
Staff expenses
467 501 7%
Storage and distribution
127 128 1%
Advertising and promotion
96 103 7%
Information technology
99 113 14%
Technical and professional
7110548%
Depreciation & amortisation
89 93 4%
Impairments
162 - -
Foreign exchange
19--
Other
89 66 (26)%
Continuing operations operating expenses
1,219 1,109 (9)%
Discontinued operations operating expenses
258 99 (62)%
Total Group operating expenses
1,477 1,208 (18)%
Note: Comparative information has been re-presented for consistency with the current period and preparedon a by nature basis. For operating expenses by function, refer to note 4a of the 2024 Interim Financial Statements
1.Percentages as shown in table may not align to the calculation of percentages based on numbers in the table due to rounding of figures
•Total Group operating expenses reduced $269m due to the prior year including
$162m of Consumer brand impairments and Soprole’soperating expenses,
which was sold in the second half of FY23
•Removing the impact of the impairments, operating expenses from continuing
operations were up $52m reflecting:
–a $34m increase in staff costs due to inflationary pressures and
redundancies
–a $34m increase in technical and professional fees, mainly related to
upfront costs of delivering future efficiencies
–a $14m increase in information technology mainly due to an increase in
cloud software usage
(30)
137
(1,160)
663
(23)(413)
FY23 H1
free cash flow
EarningsSuppliers
payable
Trade and
other working
capital
Capex and
other
FY24 H1
free cash flow
Free cash flow for the first six months is typically an outflow, reflecting the seasonal nature of the business
•Free cash flow for the first six months ending 31 January 2024 was a $413m outflow.
•This was a larger outflow from the prior period due to a decrease in amounts owing to suppliers primarily due to the impact of alower Milk Price and a higher advance rate for the current
year compared to prior year, partly offset by
–higher inflows from trade and other receivables as a result of lower revenue due to lower commodity prices
–increased cash earnings against the prior year
369
(632)
(849)
(30)
(413)
FY20 H1FY21 H1FY22 H1FY23 H1FY24 H1
($ million)
($ million)
6.4
6.1
5.6
5.8
4.2
5.2
4.3
5.3
3.2
20202021202220232024
Half YearFull Year
•Net debt is $1.6b lower, reflecting:
–strong underlying performance of the business
–reduction in working capital during the year
–impact of divestments
•Gearing ratio reduced reflecting:
–lower net debt
–higher equity due to improved continuing operations
earnings and gains from the disposal of Soprole,
after distributing $1.6b in dividends and through a
capital return
•Working capital days reduced reflecting lower volume
and value of milk in inventory compared to prior year
49.8
47.3
44.1
43.3
34.6
44.2
38.5
42.4
28.8
20202021202220232024
Half YearFull Year
(%)
86
93
9898
92
20202021202220232024
S&P Global
Ratings
A-Stable outlook
Fitch RatingsAStable outlook
($ billion)
-
1,000
2,000
3,000
4,000
5,000
6,000
May-21May-22May-23May-24
per kgMS
2023/24 Season Forecast2021/22 Season
$9.30
$8.22
USD/MT
2022/23 Season
Fonterra Reference Product shipment price
Average Reference Product shipment price for the season
The range has narrowed reflecting:
•well contracted sales book
•approximately 90% of the full year forecast USD cash flows related to the 2023/24 season hedged
•finely balanced demand and supply for Reference Products
Note: Refer to appendix for source data and date ranges
GDT only Reference Product contract shipment price
,
,
,
,
USD/MT
FY23 FY22
per share
The range is maintained reflecting 43 cents per share earned in first half and an expectation that:
•year-to-go price relativities will materially reduce
•strong Foodservice and Consumer margins in the first half of FY24 will return to more historical levels in the second half
•normal seasonal factors will occur:
–milk collection curve impacting Core Operations cost recoveries
–lower sales volumes in the second half, particularly the fourth quarter
May-24
FY24 H1
-
1,000
2,000
3,000
4,000
5,000
6,000
Jul-21Jan-22Jul-22Jan-23Jul-23Jan-24
Fonterra Non-Reference shipment priceFonterra Reference shipment price
GDT only Non-Reference contract shipment priceGDT only Reference contract shipment price
Note: Refer to appendix for source data and date ranges
1,624
1,745
1,607
2,298
2,102
20202021202220232024
($ million)
1,240
1,124
1,056
1,477
1,208
20202021202220232024
($ million)
806
657
607
858
953
20202021202220232024
($ million)
501
391
364
546
674
20202021202220232024
($ million)
10.4
9.9
10.8
13.2
11.3
20202021202220232024
($ billion)
2,037
1,996
1,921
1,994
1,780
20202021202220232024
('000 MT)
Note: For the six months ended 31 January unless otherwise stated
Note: For the six months ended 31 January unless otherwise stated
1.Gearing ratio is at31 January
2.Working capital days are presented on a 13-month rolling average basis. Comparative information has been re-presented for consistency with the current period. Inventory has been restated to reflect the inclusion of emissions trading units
which were previously held as intangible assets
293
418
364
611
740
20202021202220232024
($ million)
86
93
98
98
92
20202021202220232024
(Days)
49.8
47.3
44.1
43.3
34.6
20202021202220232024
(%)
175
184
195
330
265
20202021202220232024
($ million)
369
(632)
(849)
(30)
(413)
20202021202220232024
($ million)
584
684
607
940
1,019
20202021202220232024
($ million)
•Season to date collections, 1 June –31 January,were
1,012million kgMS, 0.4%behind last season
•The decrease in collections is due to lower collections
in the North Island partially offset by improved
collections in the South Island
–Poor weather conditions in the North Island
resulted in lower milk flows
–Favourable weather conditions have resulted in
stronger milk flows in all regions in the
South Island
•Variable weather conditions continue to persist in the
North Island through Autumn
-
10
20
30
40
50
60
70
80
90
JunJulAugSepOctNovDecJanFebMarAprMay
2021/22
2022/23
2023/24
2021/221,478m (down 4.0%)
80m litres
2022/231,480m (up 0.1%)
78m litres
2023/241,465m
1
(down 1.0%)
76m litres
1. Current full season forecast
1.Comprises of other operating income, net foreign exchange gains and share of profit or loss of equity
accounted investees
2.Includes amounts attributable to non-controlling interests
3.Normalisationsin FY24 comprise of $(66)min relation to the sale of DPA Brazil (FY23 comprises of $(4)m
impairment in relation to exiting HanguChina farm and $(61)m FX movements in relation to the sale of
Soprole)
Sales volume (‘000 MT)
1,699 295 1,994 1,721 59 1,780
Revenue
12,333 916 13,249 11,085172 11,257
Cost of goods sold
(10,287)(664)(10,951)(9,049)(106)(9,155)
Gross profit
2,046 252 2,298 2,036 66 2,102
Gross margin (%)
16.6%27.5%17.3%18.4%38.4%18.7%
Operating expenses
(1,219)(258)(1,477)(1,109)(99)(1,208)
Other¹
37 -3759- 59
EBIT
864 (6)858 986(33)953
Net finance costs
(122)(35)(157)(82)(7)(89)
Tax expense
(198)43 (155)(190)- (190)
Profit after tax
2
544 2 546 714(40)674
Normalisations
3
-6565-6666
Normalised profit after tax
2
5446761171426740
-
Profit after tax by reporting segment and channel
183
380
340
261
164
170
7
(116)
32
(87)
81
40
22
68
77
74
147
112
32
•Sales volumes up due to continued focus to optimise inventory levels.
Higher sales volume through Foodservice and Consumer channels,
partially offset by lower volumes in Ingredients
•Revenue down mainly due to lower product prices in Ingredients channel
•Gross profit down slightly due to lower margins in Ingredients, partially
offset byhigher margins and sales volume in Foodservice and Consumer
•Gross margin increased due to more favourable product mix, with higher
portion of sales volumes through Foodservice and Consumer
•Operating expenses down due to prior year including $162m of
Consumer brand impairments
–Adjusting for impairments, operating expenses are up $52m due to
higher staff costs and technical and professional fees, mainly related
to upfront costs of delivering future efficiencies
•Other up $22m mainly due to favourable net foreign
exchange movements
•EBIT up $122m due to not repeating the impairments of $162m in the
prior year
•Net finance costs decreased $40m due to reduced average borrowings
•Discontinued operations made a loss of $(40)m for the first six months of
FY24 reflecting the sale of DPA Brazil in October 2023. DPA Brazil was
profitable over this period, but this was more than offset by the release of
the $(68)m foreign currency translation reserve as part of the sale
∆
1
Sales volume (‘000 MT)1,699 1,721 1%
Revenue12,333 11,085(10)%
Cost of goods sold(10,287)(9,049)12%
Gross profit2,046 2,036 (0)%
Gross margin (%)16.6%18.4%
Operating expenses(1,219)(1,109)9%
Other
2
37 5959%
EBIT 864 98614%
Net finance costs(122)(82)33%
Tax expense(198)(190)(4)%
Profit after tax from continuing operations544 71431%
Profit after tax from discontinued operations2 (40)-
Total Group profit after tax
3
546 674 23%
Earnings per share (cents)33 40 21%
1.Percentages as shown in table may not align to the calculation of percentages based on
numbers in the table due to rounding of figures
2.Consists of other operating income, net foreign exchange gains and share of equity
accounted investees
3.Includes amounts attributable to non-controlling interests
$1.02
$1.09
$1.10
$1.26
$1.22
$1.27
$1.21
$1.30
$1.35
20202021202220232024
ActualInflation adjusted
‘000)
17 kgMS $48m $0.05 /kgMS
23 kgMS
$66m $0.12 /kgMS
12 kgMS
$41m $0.08 /kgMS
Actual ($ million)
1,662 1,753 1,773 1,975 2,130
Cumulative CPI
19.9%16.6%9.3%3.3%
Inflation adjusted ($ million)
1,993 2,044 1,938 2,040 2,130
(kgMS million)
New Zealand
1,520 1,509 1,501 1,462 1,477
Australia
109 107 105 104 106
Total
1,629 1,616 1,606 1,566 1,583
•Actual operating expenses on a 12-month rolling average have increased by
9c/kgMS, due to:
–5c/kgMSon product mix, increased allocation of solids to Foodservice
and Consumer channels, which have higher EBIT margins
–4c/kgMSmainly due to driving future efficiencies and underlying inflation
•By channel, Foodservice cash operating expenses increased the most due to
higher selling and marketing spend, distribution costs and staff salaries and
wages
Note: data is a 12-month rolling average for continuing operations
Net foreign exchange
-(78)(78)--
Other operating expenses
(4)-(4)(66)(66)
Profit before net finance costs and tax
(4)(78)(82)(66)(66)
Net finance costs and tax
-1717--
Profit after tax
(4)(61)(65)(66)(66)
Profit attributable to non-controlling
interests
---(3)(3)
Profit after tax attributable to equity holders
of the Co-operative
(4)(61)(65)(69)(69)
EBIT
858
953
Net finance costs
(157)
(89)
Tax expense
(155)
(190)
Reported profit after tax
546
674
Normalisation adjustments
89
66
Tax on normalisation adjustments
(24)
-
Normalised profit after tax
611
740
(Profit)/loss attributable to non-controlling interests
(16)
(35)
Less: Normalisation adjustments attributable to non-controlling interests
-
3
Normalised profit after tax attributable to equity holder of the Co-operative
595
708
Normalised earnings per share (cents)
37
44
Interim dividend per share (cents)
1015
Reported profit after tax
546
674
Less: Profit attributable to non-controlling interests
(16)
(35)
Reported profit after tax attributable to equity holders of the Co-operative
530
639
Reported earnings per share (cents)
33
40
Normalised profit after tax
611
740
Less: Profit attributable to non-controlling interests
(16)
(35)
Less: Normalisation adjustments attributable to non-controlling interests
-
3
Normalised profit after tax attributable to equity holder of the Co-operative
595708
Normalised earnings per share (cents)
3744
Cash generated from operations1,1811,318
Net change in working capital(905)(1,402)
A. Net cash flows from operating activities276(84)
Cash flows from investing activities
Divestments and asset sales34
Capital expenditure and other(309)(333)
B. Net cash flows from investing activities(306)(329)
Free cash flow (A+B)(30)(413)
Dividends paid to equity holders of the Co-operative(242)(643)
Capital return paid-(804)
Other financing cash flows(153)(132)
Reversal of capital return payable accrual-804
Other non-cash changes in net debt(47)171
Decrease/(increase) in net debt(472)(1,017)
Total Group normalised EBIT
1,3241,959
Finance income on long-term advances
138
Notional tax charge
(215)(317)
Total Group normalised EBIT plus finance income on
long-term advances less notional tax charge
1,1221,650
Capital employed at 31 January
13,43412,323
Impact of seasonal capital employed
(429)(20)
Average capital employed
13,00512,303
Return on capital
8.6%13.4%
•Return on capital increased due to a $635m increase in
normalised EBIT for the 12 months
•On a pre-tax basis, normalisations consist of a $66m
loss related to the sale of DPA Brazil
•Average capital employed reduced due to divestments
and lower levels of inventory carried forward compared
to the prior year
1.Includes undrawn facilities and commercialpaper. DCM is debt capital markets
2.Excludes commercial paper
3.Weighted average term to maturity (WATM)
¹
0.01.02.03.0
FY24
FY25
FY26
FY27
FY28
FY29
FY30
FY31
$ billion
WATM
3
: 3.0 years
Maturity Profile
0.01.02.03.0
FY24
FY25
FY26
FY27
FY28
FY29
FY30
FY31
$ billion
WATM
3
: 2.7 years
Maturity Profile
Undrawn
Facilities
$3.1bn
78%
Drawn Facilities
$0.9bn
22%
EUR DCM 8%
AUD DCM 10%
CNY DCM
2%
NZD DCM 7%
USD DCM 17%
Bank Facilities
56%
∆
Sales volume ('000 MT)1,106 1,083 (2)%1,049 1,034 848 817 279 283 (1,070)(1,051)
Revenue8,735 7,077 (19)%7,903 6,248 6,963 5,499 2,154 1,660 (8,285)(6,330)
Cost of goods sold(7,390)(6,109)17%(7,146)(5,824)(6,484)(5,048)(2,045)(1,567)8,285 6,330
Gross profit 1,345 968 (28)%757 424 479 451 109 93 --
Operating expenses(511)(539)(5)%(305)(305)(176)(198)(30)(36)--
Other
3
16 38 138%6 15 10 22 - 1 --
EBIT
4
850 467 (45)%458 134 313 275 79 58 --
Net finance costs and tax expense(287)(133)54%(165)(53)(99)(66)(23)(14)--
Profit after tax563 334 (41)%293 81 214 209 56 44 --
Gross margin15.4%13.7%9.6%6.8%6.9%8.2%5.1%5.6%
EBIT margin9.7%6.6%5.8%2.1%4.5%5.0%3.7%3.5%
1.Ingredients performance is prepared on a continuing operations basis and includessales to other segments
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/(losses) and share of profit or loss of equity
accounted investees
4.Includes total Corporate Costs of $101m for 2024 ($61m for the comparative period)
∆
Sales volume ('000 MT)274 295 8%171 179 141 141 137 158 (175)(183)
Revenue1,928 2,134 11%1,034 1,036 942 925 1,128 1,277 (1,176)(1,104)
Cost of goods sold(1,602)(1,573)2%(1,020)(962)(833)(745)(925)(970)1,176 1,104
Gross profit 326 561 72%14 74 109 180 203 307 - -
Operating expenses(185)(228)(23)%(40)(45)(85)(105)(60)(78)- -
Other
3
(2)9 -(1)3 (1)5 - 1 - -
EBIT
4
139 342 146%(27)32 23 80 143 230 - -
Net finance costs and tax expense(49)(83)(69)%- (9)(5)(24)(44)(50)- -
Profit after tax90 259 188%(27)23 18 56 99 180 - -
Gross margin16.9%26.3%1.4%7.1%11.6%19.5%18.0%24.0%
EBIT margin7.2%16.0%(2.6)%3.1%2.4%8.6%12.7%18.0%
1.Foodservice performance is prepared on a continuing operations basis and includessales to other segments
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/(losses) and share of profit or loss of equity
accounted investees
4.Includes total Corporate Costs of $25m for 2024 ($27m for the comparativeperiod)
∆
Sales volume ('000 MT)319 343 8%125 133 283 305 39 41 (128)(136)
Revenue1,670 1,874 12%759 659 1,525 1,700 217 220 (831)(705)
Cost of goods sold(1,295)(1,367)(6)%(731)(625)(1,226)(1,287)(169)(160)831 705
Gross profit 375 507 35%28 34 299 413 48 60 - -
Operating expenses(504)(342)32%(34)(37)(398)(255)(72)(50)- -
Other
3
4 12 200%(1)3 5 9 - - - -
EBIT
4
(125)177 -(7)- (94)167 (24)10- -
Net finance costs and tax expense16 (56)-(3)(2)12 (52)7 (2)- -
Profit after tax(109)121 -(10)(2)(82)115 (17)8- -
Gross margin22.5%27.1%3.7%5.2%19.6%24.3%22.1%27.3%
EBIT margin(7.5)%9.4%(0.9)%0.0%(6.2)%9.8%(11.1)%4.5%
1.Consumer performance is prepared on a continuing operations basis and includessales to other segments
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/(losses) and share of profit or loss of equity
accounted investees
4.Includes total Corporate Costs of $30m for 2024 ($31m for the comparativeperiod)
∆
Sales volume ('000 MT)1,345 1,346 0%1,049 1,034 171 179 125 133
Revenue9,696 7,943 (18)%7,903 6,248 1,034 1,036 759 659
Cost of goods sold(8,897)(7,411)17%(7,146)(5,824)(1,020)(962)(731)(625)
Gross profit 799 532 (33)%757 424 14 74 28 34
Operating expenses(379)(387)(2)%(305)(305)(40)(45)(34)(37)
Other
3
4 21 425%6 15 (1)3 (1)3
EBIT
4
424 166 (61)%458 134 (27)32 (7)-
Net finance costs and tax expense(168)(64)62%(165)(53)- (9)(3)(2)
Profit after tax256 102 (60)%293 81 (27)23 (10)(2)
Gross margin8.2%6.7%9.6%6.8%1.4%7.1%3.7%5.2%
EBIT margin4.4%2.1%5.8%2.1%(2.6)%3.1%(0.9)%-
1.Core Operations performance is prepared on a continuing operations basis and includessales to
other segments
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/(losses) and share of profit or loss of equity
accounted investees
4.Includes total Corporate Costsof $72m for 2024 ($77m for the comparativeperiod)
∆
Sales volume ('000 MT)1,272 1,263 (1)%848 817 141 141 283 305
Revenue9,430 8,124 (14)%6,963 5,499 942 925 1,525 1,700
Cost of goods sold(8,543)(7,080)17%(6,484)(5,048)(833)(745)(1,226)(1,287)
Gross profit 887 1,044 18%479 451 109 180 299 413
Operating expenses(659)(558)15%(176)(198)(85)(105)(398)(255)
Other
3
14 36 157%10 22 (1)5 5 9
EBIT
4
242 522 116%313 275 23 80 (94)167
Net finance costs and tax expense(92)(142)(54)%(99)(66)(5)(24)12 (52)
Profit after tax150 380 153%214 209 18 56 (82)115
Gross margin9.4%12.9%6.9%8.2%11.6%19.5%19.6%24.3%
EBIT margin2.6%6.4%4.5%5.0%2.4%8.6%(6.2)%9.8%
1.Global Markets performance is prepared on a continuing operations basis and includessales to other segments
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/(losses) and share of profit or loss of equity
accounted investees
4.Includes total Corporate Costs of $58m for 2024 ($25m for the comparativeperiod)
∆
Sales volume ('000 MT)455 482 6%279 283 137 158 39 41
Revenue3,499 3,157 (10)%2,154 1,660 1,128 1,277 217 220
Cost of goods sold(3,139)(2,697)14%(2,045)(1,567)(925)(970)(169)(160)
Gross profit 360 460 28%109 93 203 307 48 60
Operating expenses(162)(164)(1)%(30)(36)(60)(78)(72)(50)
Other
3
- 2 -- 1 - 1 - -
EBIT
4
198 298 51%79 58 143 230 (24)10
Net finance costs and tax expense(60)(66)(10)%(23)(14)(44)(50)7 (2)
Profit after tax138 232 68%56 44 99 180 (17)8
Gross margin10.3%14.6%5.1%5.6%18.0%24.0%22.1%27.3%
EBIT margin5.7%9.4%3.7%3.5%12.7%18.0%(11.1)%4.5%
1.Greater China performance is prepared on a continuing operations basis and includessales to other segments
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/(losses) and share of profit or loss of equity
accounted investees
4.Includes total Corporate Costs of $26m for 2024 ($17m for the comparativeperiod)
Note: Figures are prepared on a continuing operations basis.
1.Percentages as shown in table may not align to the calculation of percentages based on numbers in the table due to rounding of figures
2.Consists of other operating incomeand net foreign exchange gains/(losses)
∆¹
Milk collections (kgMS)
66672%
Sales volume (‘000 MT)181180(1)%
Revenue1,2531,165(7)%
Cost of goods sold(1,082)(1,027)5%
Gross profit ($)171138(19)%
Gross margin (%)13.6%11.8%-
Operating expenses ($)(97)(97)-
Other² ($)-1-
EBIT ($)7442(43)%
Net finance costs and tax expense
(5)(21)(320)%
Profit after tax ($)6921(70)%
•Milk collections and sales volumes in line with prior year
–Shift in volume favouring the Consumer channel, less sold through
Ingredients and Foodservice with both impacted by reduced demand
•Improved Consumer channel operating earnings more than offset by
reduced margins in Ingredients channel
–Consumer growth due to annualisationof lagging pricing rises. Fonterra
continues to hold #1 volume and value branded leadership position in
Butter & Spreads and Fixed Weight Cheese
–Ingredients margins impacted by competitive domestic milk price which
is disconnected from global commodity prices
∆
¹
Sales volume ('000 MT)295 59 (80)%1-112 59 182 -
Revenue916 172 (81)%11-291 172 614 -
Cost of goods sold(664)(106)84%(18)-(200)(106)(446)-
Gross profit 252 66(74)%(7)- 91 66168 -
Operating expenses(258)(99)62%(6)-(62)(99)(190)-
Other
2
---------
EBIT
3
(6) (33)(450)%(13)-29 (33)(22)-
Net finance costs and tax expense8(7)---(23)(7)31-
Profit after tax2(40) -(13)-6(40) 9-
Gross margin27.5%38.4%(63.6)%31.3%38.4%27.4%
EBIT margin(0.7)%(19.2)%(118.2)%10.0%(19.2)%(3.6)%
1.Percentages as shown in the table may not align to calculations of percentages based on numbers in the table due to rounding of figures.
2.Consists of other operating income and net foreign exchange gains/(losses)
3.Depreciation is not recognised in discontinued operations from the date at which the operations are classified as held for sale
-
To provide a full end-to-end view of performance, Core Operations is attributed to the regions
289
561
501
226
251
216
22
(147)
51
(82)
116
61
42
97
110
85
208
134
As at 31 January 2024, the Co-operative was within the specified thresholds for all three Flexible Shareholding metrics
•The percentage of Co-operative Shares on issue
above or below the combined Share Standard of
all Shareholders
•The threshold range is set at total Co-operative
Shares on issue being within +/-15% of the
Share Standard
•The percentage of shares held by shareholders
who have ceased supplying milk to the
Co-operative, and/or transferred their shares to a
non-supplying person or entity in accordance
with the permitted transferee rules
•The threshold is set at no greater than 25%
•The size of the Fonterra Shareholders’ Fund has
been capped at 10% of shares on issue to
protect farmer ownership and control of
the Co-operative
Note: Movements are compared to figures as at 31 July 2023, the first publication of Flexible Shareholding metrics in the 2023 Business Performance Report
from 12.22%
No change
from 9.23%
Supplying Shareholders1,365,867,566 84.88%
Secondary Shareholders3,372,726 0.21%
Associated Shareholders1,240,126 0.08%
Ceased Shareholders115,104,326 7.15%
Permitted Transferees13,831,666 0.86%
Custodian shares, on behalf of the Fund107,410,984 6.67%
Custodian shares, on behalf of the Market Makers2,363,161 0.15%
Total shares on Issue1,609,190,555 100.00%
To be bought3,454,281 3,711,572 3,767,948 3,173,134 2,071,268 - -
To be sold112,445 - 26,230 86,179 - --
To be bought- - - - - -16,178,203
To be sold- - - - - 129,010,511 129,235,365
-
50
100
150
200
250
300
Number of Shareholding Farms
Percentage of Shares Held Relative to Share Standard
Note:
•Shareholding farms presented exclude Ceased Shareholders, Permitted Transferees, Associated Shareholders
and shareholding farms over 4x the Share Standard
•Shareholdings can be less than 33% of Share Standard, under Flexible Shareholding new supplying entities
have six years to reach 33% of Share Standard
1.Milk Supply is derived from each shareholding farm’s Share Standard
# of shareholding farms 365 986 5,609 1,290 8,250
Milk Supply
1
(kgMS)66,780,386 186,685,754 1,025,335,044 156,640,319 1,435,441,503
Shareholding farms
holding 33% of the
Share Standard
(Minimum Holding)
Shareholding farms
holding 100% of the
Share Standard
Shareholding farms
holding 4x the
Share Standard
(Maximum Holding)
-33%66%100%150%200%250%300%350%
400%
-
10
20
30
40
50
60
Milk Supply
1
(million
kgMS
)
Percentage of Shares Held Relative to Share Standard
-33%66%100%150%200%250%300%350%
400%
Milk supply at 33% of the
Share Standard
(Minimum Holding)
Milk supply at 100% of the
Share Standard
Milk supply at 4x the
Share Standard
(Maximum Holding)
Serious harm
8540
Gender diversity (Band 12+)
37.6%39.5%40.5%39.4%
Culture Measure
–79–¹78
GHG emissions (Scope 1,2)²
(11.2)%(14.1)%(15.6)%(20.2)%
FEP adoption (New Zealand)
71%85%92%89%
Water Improvement Plans in place
–44.0%100.0% On track
Share of NewZealand milk collected for the season to 31 May79.1%79.0%79.0%78.5%
Delivered in full, on time (DIFOT, ex-NewZealand)51.6%53.2%80.0%Behind
Cash operating expenses per kgMS (real)1.341.391.37Behind
Core Operations gross profit per kgMS (real)³8.829.218.52Behind
Return on capital (FY)6.8%12.4%8.0%-9.0%Ahead
Farmgate Milk Price ($)9.30$8.22$6.50-$7.50$7.30-$8.30⁴
Total shareholder return
(share price plus dividend)
$2.73
$0.20
$3.20
$1.00⁵
Not AvailableNot Available
On-farm profitability ($ per hectare)⁶4,1502,063Not AvailableNot Available
1.No target set for FY24
2.Relative to FY18 Baseline. Long-term will include Scope 3 but for now Scope 1&2 including farms under our operationalcontrol
3.Excludes the cost of milk
4.Latest announced Forecast Farmgate Milk Price range with a mid-point of $7.80 per kgMS(12February 2024)
5.Includes 50-cent per share capital return
6.DairyNZEconomic Survey 2021-2022 (Owner-Operator). FY23 is a modelled forecast
•Dairy Production and Imports
–12-month production
▪NZ, Aus, US (Jan 2023 to Jan 2024) DCANZ, Dairy Australia, USDA
▪EU (Dec 2022 to Dec 2023) Eurostat
─3-month production
▪NZ, Aus, US (Nov 2022 – Jan 2023 to Nov 2023 – Jan 2024) DCANZ, Dairy Australia, USDA
▪EU (Oct 2022 – Dec 2022 to Oct 2023 – Dec 2023) Eurostat
─12-month imports
▪LATAM, Asia (excl. China), Middle East & Africa, China (Dec 2022 – Dec 2023) S&P Global
─3-month imports
▪LATAM, Asia (excl. China), Middle East & Africa, China (Oct 2022 – Dec 2022 to Oct 2023 – Dec 2023) S&P Global
•Price Relativities, Forecast 2023/24 season Farmgate Milk Price and FY24 continuing operations’ earnings outlook
–Reference and Non-Reference actuals: Fonterra Free Alongside Ship (FAS) prices of the New Zealand Ingredients portfolio
–GDT only Non-Reference contract shipment price uses GDT cheddar prices as a proxy
Is a Shareholder that is a Farm Lessor, Sharemilker or Contract
Milker
is used to indicate that a measure or sub-total excludes amounts
attributable to non-controlling interests
is a 13-month rolling average of capital employed
means bulk raw milk that has not been processed and bulk
separated cream
is adjusted net debt less the cash adjustment (used in calculating
adjusted net debt), plus cash and cash equivalents held by
subsidiaries for working capital purposes, plus equity excluding
hedge reserves and net deferred tax assets
is capital expenditure plus right of use asset (e.g. leases) additions
and business acquisitions, including equity contributions, long-term
advances, and other investments
is continuing operations operating expenses, less non-cash costs
(depreciation, amortisation, impairments and net foreign exchange
losses). Shown by kilogram of New Zealand and Australia milk solids
collected
represents the channel of branded consumer products, such as
powders, yoghurts, milk, butter, and cheese
means operations of the Group that are not discontinued operations
represents core operating functions including New Zealand milk
collection and processing operations and assets, supply chain and
sustainability, Fonterra Farm Source™retail stores, and the Strategy
and Optimisation function
means the Fonterra Farmer Custodian, which is the legal holder of
the shares in respect of which economic rights are held for the
Fonterra Shareholders’ Fund and any Market Makers
is adjusted net debt divided by Total Group normalisedearnings
before interest, tax, depreciation and amortisation(Total Group
normalisedEBITDA) excluding share of profit/loss of equity
accounted investees, net foreign exchange gains/losses and any
normalisedEBITDA relating to entities divested during the year
means 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
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 coordinated
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
represents eliminations of inter-business unit sales
means the average price paid by Fonterra for each kgMSsupplied by
Fonterra’s farmer shareholders under Fonterra’s standard terms of
supply. 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
is the rate that Fonterra has converted net United States Dollar
receipts into New Zealand Dollars including hedge cover in place
represents the channel selling to businesses that cater for out-of-
home consumption; restaurants, hotels, cafés, airports, catering
companies etc. The focus is on customers such as; bakeries, cafés,
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
is adjusted net debt divided by total capital. Total capital is equity
excluding hedge reserves, plus adjusted net debt
means the electronic auction platform that is used to sell commodity
dairy products
represents the Ingredients, Foodservice and Consumer channels
outside of Greater China
represents the Ingredients, Foodservice and Consumer channels in
Greater China
represents the channel comprising bulk and specialty dairy products
such as milk powders, dairy fats, cheese and proteins manufactured
in New Zealand, Australia and Europe, or sourced through our global
network, and sold to food producers and distributors
means kilograms of milk solids, the measure of the amount of fat and
protein in the milk supplied to Fonterra
is calculated as total borrowings, plus bank overdraft, less cash and
cash equivalents, plus a cash adjustment for 25% of cash and cash
equivalents held by the Group’s subsidiaries, adjusted for derivatives
used to manage changes in hedged risks on debt instruments.
Amounts relating to disposal groups held for sale are included in the
calculation
means all NZ milk solids processed by Core Operations, except for
Reference Commodity Products
means adjustments made for certain transactions that meet the
requirements of the Group’s NormalisationPolicy. 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. Normalisationadjustments
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 normalisationadjustments. E.g. ‘NormalisedEBIT’
refers to the difference in the weighted average price (in USD)
between the Reference Product portfolio and Non-Reference Product
portfolio. The difference between these two weighted average prices
is a key driver of the Ingredients’ gross margin
is commodity specifications of the five Reference Commodity
Products (RCPs) which are Whole Milk Powder (WMP) and Skim
Milk Powder (SMP), and their by-products Butter, Anhydrous Milk Fat
(AMF) and Buttermilk Powder (BMP). These commodity groups are
used to calculate the Farmgate Milk Price
is used to indicate a sub-total or total is reported in the Group’s
Financial Statements before normalisationadjustments. E.g.
‘Reported profit after tax’
is calculated as Total Group normalisedEBIT including finance
income on long-term advances less a notional tax charge, divided by
average capital employed
New Zealand: A period of 12 months from 1 June to 31 May
Australia: A period of 12 months from 1 July to 30 June
means one share per one kgMSof milk supplied, used to calculate a
Supplying Shareholder's Minimum Holding and Maximum Holding
means a farm where the owning entity of the farm has a minimum
required shareholding of at least 1,000 shares in the Co-operative.
This includes farms where the owning entity is in the process of
sharing up on a Share Up Over Time contract
is used to indicate that a measure or sub-total comprises continuing
operations, discontinued operations and non-controlling interests.
E.g. ‘Total Group EBIT’
means the total cash payment per milk solid that is backed by a
share, being the sum of the Farmgate Milk Price per kgMSand the
dividend per share
represents shares on issue that are in excess of aggregate minimum
shareholding
is total trade and associate receivables plus inventories, less trade
and associate payables and accruals. It excludes amounts owing to
suppliers and employee entitlements and includes trade working
capital classified as held for sale
is calculated as 13-month rolling average trade working capital
divided by revenue from the sale of goods (excluding impact of
derivative financial instruments) multiplied by the number of days in
the period
This presentation may contain forward-looking statements, financial targets and ambitions (“Forward Statements”), each of which is based on a range of assumptions, including (in the case of our 2030
strategy) the assumptions noted in the Appendix of the booklet titled Our Path to 2030 which is available on our website. None of the Forward Statements is intended as a forecast, estimate or projection
of the outcome that will, or is likely to, eventuate. They should not be taken as forecasts or a guarantee of returns to shareholders.
There can be no certainty of outcome in relation to the matters to which the Forward Statements relate. Our ability to achieve the outcomes described in the Forward Statements is subject to a number of
assumptions, each of which could cause the actual outcomes to be materially different from the events or results expressed orimplied by such Forward Statements.
The Forward Statements also involve known and unknown risks, uncertainties and other important factors that could cause the actual outcomes to be materially different from the events or results
expressed or implied by such Forward Statements. Those risks, uncertainties, assumptions and other important factors are not allwithin the control of Fonterra Co-operative Group Limited (“Fonterra”)
and its subsidiaries (the “Fonterra Group”) and cannot be predicted by the Fonterra Group. The Forward Statements in this presentation reflect views held only at the date of this presentation.
While all reasonable care has been taken in the preparation of this presentation, none of Fonterra, the Fonterra Group, or any of their respective subsidiaries, affiliates and associated companies (or any
of their respective officers, employees or agents) (together “Relevant Persons”) makes any representation or gives any assuranceor guarantee as to the accuracy or completeness of any information in
this presentation or the likelihood of fulfilment of any Forward Statement or any outcomes expressed or implied in any Forward Statement. Accordingly, to the maximum extent permitted by law, none of
the Relevant Persons accepts any liability whether direct or indirect, express or implied, contractual, tortious, statutory or otherwise, in respect of any Forward Statements or for any loss, howsoever
arising, from the use of this presentation.
Statements about past performance are not necessarily indicative of future performance.
Except to the extent (if any) as required by applicable law or any applicable Listing Rules (including the Fonterra Shareholders’ Market Rules), the Relevant Persons disclaim any obligation or
undertaking to update any information in this presentation.
This presentation does not constitute investment advice or opinions, or an inducement, recommendation or offer to buy or sellany securities in Fonterra or the Fonterra Shareholders’ Fund.
Fonterra uses several non-GAAP measures when discussing financial performance. Non-GAAP measures are not defined or specified byNZ 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 utilisedby 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 in Fonterra’s 2024 Interim Report for reconciliation of NZ IFRS to non-GAAP measures, and the Glossary for definitions of non-GAAP measures referred
to by Fonterra.
---
Interim Report 2024
Pūrongo Taupua
This report covers the activities of Fonterra
Co-operative Group Limited for the first six
months of Financial Year 2024, commencing
1 August 2023 and ending 31 January 2024.
More information about Fonterra and our
previous years’ performance can be found
here: www.fonterra.com
About
this report
Stephanie & Teagan, Auckland
Chair and CEOContentsPerformanceInterim Financial StatementsGlossaryDirectoryNon-GAAP MeasuresHistorical SummaryProgress
Fonterra Interim Report 2024
02
Fonterra uses several non-GAAP measures when discussing financial performance.
Non-GAAP measures are not defined or specified by 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. 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 of this report for reconciliations
of NZ IFRS to non-GAAP measures, and the Glossary for definitions of non-GAAP
measures referred to by Fonterra.
MESSAGE FROM OUR CHAIR AND CEO 04
PROGRESS ON STRATEGY06
BUSINESS PERFORMANCE 11
INTERIM FINANCIAL STATEMENTS16
INDEPENDENT REVIEW REPORT17
FINANCIAL STATEMENTS18
NOTES TO THE FINANCIAL STATEMENTS23
HISTORICAL SUMMARY30
NON-GAAP MEASURES35
GLOSSARY37
DIRECTORY39
Contents
Chair and CEOPerformanceInterim Financial StatementsGlossaryDirectoryNon-GAAP MeasuresHistorical SummaryProgressContents
03
Fonterra Interim Report 2024
Sustained progress
As we transform our Co-op for tomorrow,
we continue to perform today
Kia ora
We are proud to present Fonterra’s FY24 interim results, which show a
continuation of the strong earnings performance delivered by the Co-op
through FY23.
Total group profit after tax is up 23% to NZ$674 million and EBIT from
continuing operations is up 14% to NZ$986 million, with a return on
capital of 13.4%.
The underlying performance of our business is in good shape. This result
has been driven by improved earnings in our Consumer and Foodservice
channels, helping to offset lower returns in our Ingredients channel
relative to last year, which benefited from historically high price relativities
during FY23.
Our strong earnings put us in a position to pay an interim dividend of
15 cents per share to farmer shareholders and unit holders, up 50%
from FY23.
We are also pleased to be forecasting an improved 2023/24 Farmgate Milk
Price after volatility earlier in the season.
Our midpoint lifted by 30 cents in February to $7.80 per kgMS following
strengthening demand from the Middle East and Southeast Asia.
As we are now well progressed through the 2023/24 season, we have the
confidence to narrow the forecast range to $7.50 – $8.10 per kgMS.
Sustained financial performance provides stability
Our focus is always on utilising our Co-op’s strengths and scale, including
our diversification across products, markets and categories, to maximise
overall returns to our owners.
This year, we have been able to utilise our strong balance sheet to get more
of the Farmgate Milk Price payment to farmers earlier in the season through
implementation of our new Advance Rate guideline.
We know supporting on-farm cash flow is important to farmers, especially
during a time of increasing costs.
On-farm cash flow was further supported by the payment of the $804 million
capital return in August, equivalent to 50 cents per share and unit. This
followed the divestment of Soprole and delivered on a commitment made
by the Co-op to return capital to shareholders and unit holders by FY24.
We note the share price impact following the capital return. Over time
we expect the share price will reflect the Co-op’s financial performance.
Ultimately, farmers will determine the value of the shares, given farmers
can only buy from and sell to each other.
Peter McBride
Chair
Miles Hurrell
Chief Executive Officer
ContentsPerformanceInterim Financial StatementsGlossaryDirectoryNon-GAAP MeasuresHistorical SummaryProgressChair and CEO
04
Fonterra Interim Report 2024
MESSAGE FROM OUR CHAIR AND CEO
The Co-op has given considerable focus to managing owners’ capital,
lowering our debt position and shoring up our balance sheet over the last
few years.
We are pleased to be in a position where this work is allowing us to
provide some financial stability to farmers, as well as allowing us to
invest in the upgrades required to sustain and decarbonise our
manufacturing assets.
This stability is one of our strengths, with feedback from farmers
wanting to join Fonterra showing us that many are seeking the security
of a stable Co-op.
Our new capital structure has now been in place for one year with some
farmers citing the new flexible shareholding options as another reason
for their interest in joining or remaining with us.
The combination of our strong performance, financial stability and flexible
shareholding options mean we now have a waitlist of farmers in some
regions who want to be part of the Co-op.
At the core of our principles is the promise to farmers that their milk will
be collected every day and the highest possible return will be sought for
that milk.
Right now, we are operating in a period of heightened geopolitical
tensions, which is resulting in disruptions to global supply chains and
presents the potential for further volatility in global demand.
Farmers can be confident that the Co-op is well positioned to navigate
through these dynamics thanks to our stable financial position, scale and
diversification across markets and categories, and strong partnerships,
such as with global logistics provider, Kotahi.
In terms of the remainder of FY24, we have a positive outlook for dairy
demand, which gives us confidence to maintain our forecast earnings
guidance for the year of 50-65 cents per share.
Ngā mihi,
Peter & Miles
Peter McBride
Chairman
Miles Hurrell
Chief Executive Officer
Earnings per share
40 cents
per share
Forecast Farmgate Milk Price range
NZ$7.50-$8.10
per kgMS
Profit After Tax
NZ $6 74m
up 23%
Interim dividend
15 cents
per share
Return on Capital
13.4%
up from 8.6%
Our focus is always
on utilising our
Co-op’s strengths and
scale, including our
diversification across
products, markets
and categories, to
maximise overall
returns to our owners.
ContentsPerformanceInterim Financial StatementsGlossaryDirectoryNon-GAAP MeasuresHistorical SummaryProgressChair and CEO
05
Fonterra Interim Report 2024
MESSAGE FROM OUR CHAIR AND CEO
We are working alongside farmers to
seek to make farming easier and partnering
with customers to commercialise our
sustainability credentials and unlock the
potential of dairy through innovation.
Progress
on strategy
Chair and CEOContentsPerformanceInterim Financial StatementsGlossaryDirectoryNon-GAAP MeasuresHistorical SummaryProgress
Fonterra Interim Report 2024
06
PROGRESS ON STRATEGY
On-farm
At the heart of our Co-operative are the farmers who produce what we
believe to be the world’s best milk. To support them in doing this, we
utilise our scale, optionality, and strong balance sheet to deliver benefits
to farmers that are hard for others to replicate.
This includes getting cash to farmers sooner through our revised Advance
Rate guideline, advocating on their behalf with the Government, and
providing tailored tools to try to make things easier and more efficient
on-farm.
Through the first six months of FY24, farmers have experienced high
on-farm costs driven by inflation and increasing compliance expectations.
To alleviate some of the pressure, our Farm Source team has introduced
new solutions to save farmers time or money.
One new initiative is a collaboration with the Ministry for Primary
Industries (MPI) which has resulted in simplifying MPI’s Farm Dairy
Assessments for Co-op farmers who meet certain criteria. This will help
farmers to save time when completing the Farm Dairy Assessment process
in future.
We also implemented a price cap on key on-farm products sold through
our Farm Source retail stores, at a time when farmers have been facing
significantly increasing on-farm costs.
Driving value for farmers’ milk
Fonterra’s goal is to maximise the value of its farmers’ milk. One way
we do this is through the commercialisation of our sustainability story,
which recognises the work of Fonterra farmers to produce grass-fed,
low carbon milk.
In November, the Co-op announced an on-farm emissions reduction target
and released a Climate Roadmap which details our plan for achieving our
climate goals. This is a significant step in demonstrating to customers
our commitment to sustainability and communicating the differentiating
position of New Zealand milk when compared to offshore milk sources.
Having an on-farm emissions target will also support the Co-op and its
farmers with accessing finance and meeting regulatory requirements.
The announcement of an on-farm emissions target followed extensive
discussions with farmers about why a target is needed, and how we will
collectively achieve it. We continue to work with farmers to find ways to
make farming more efficient and are working with partners to develop
novel technologies which could help to reduce on-farm emissions.
A stable milk supply
A stable milk supply is integral to the Co-op’s long-term success. March
2024 marks one year since we introduced our new Flexible Shareholding
capital structure, which has been designed to make it easier for new
farmers to join our Co-op and for existing farmers to remain by allowing
greater flexibility in the level of investment required.
While it’s still early days, Flexible Shareholding is working as expected.
We’ve seen interest in the more flexible shareholding options from both
existing farmers and those looking to join the Co-op.
The two new categories of shareholders have seen growth across the last
12 months. Refer to the Interim Results Presentation for more detail.
This year, we have introduced two new initiatives to support farmers with
their on-farm sustainability action.
In December, we announced a partnership with Nestlé which will see them
fund an additional payment to farmers who achieve The Co-operative
Difference in the 2023/24 season.
The funding is to be shared evenly (on a per kgMS basis) across farmers who
achieve any level of The Co-operative Difference. Depending on the number
of farmers that qualify, Fonterra expects the additional payment to farmers
to be about 1-2 cents per kgMS.
In February, we launched Greener Choices through our national network
of Farm Source stores, which offers Fonterra farmers an incentive to buy
products that help with on-farm sustainability. This initiative is part of a
collaboration with a key customer, Mars.
Dave, Southland
Chair and CEOContentsPerformanceInterim Financial StatementsGlossaryDirectoryNon-GAAP MeasuresHistorical SummaryProgress
07
Fonterra Interim Report 2024
PROGRESS ON STRATEGY
Overseas divestments completed
In the first six months of FY24, we achieved
two milestones related to the divestment of
offshore businesses.
In August, we completed a capital return following
the sale of Soprole. This allowed us to deliver on a
commitment we made to farmer shareholders and unit
holders by returning 50 cents per share and unit from
the sale proceeds.
Then in November, we announced the sale of our
Brazilian JV with Nestlé, Dairy Partners Americas (DPA)
Brazil, to Lactalis.
Both of these divestments have helped to streamline
the business, allowing our people to focus on Fonterra’s
core business.
Kiri, Michael & Alan, Bay of Plenty
Chair and CEOContentsPerformanceInterim Financial StatementsGlossaryDirectoryNon-GAAP MeasuresHistorical SummaryProgress
08
Fonterra Interim Report 2024
PROGRESS ON STRATEGY
Decarbonising our operations
In addition to working with farmers to reduce on-farm emissions, we are
decarbonising our manufacturing operations. We have a target to reduce
our Scope 1&2 emissions by 50% by 2030 and a commitment to get out of
coal by 2037.
As progress towards these goals, in the first six months of FY24 we have:
• Commissioned a wood biomass boiler at our Waitoa site that reduces
the site’s annual emissions by at least 48,000 tonnes of CO
2
e, the
equivalent of taking 20,000 cars off New Zealand’s roads.
• Commissioned our first high temperature heat pump and solar
thermal plant combination at our Palmerston North site, reducing
natural gas reliance.
• Announced a new 20-megawatt electrode boiler that will be installed
at our Edendale site, reducing Fonterra’s overall carbon emissions by
nearly 3%, or 47,500 tonnes of CO
2
e, per annum.
Innovation across our value chain
Innovation sits at the core of our business and stretches across our value
chain, driving the premiums we extract from farmers’ milk. We’re also
utilising innovation in our manufacturing operations to unlock further
production capacity of our high value products.
This year, we have optimised our Individual Quick Frozen (IQF) mozzarella
process by addressing a blast freezing bottleneck, resulting in an 8.5%
increase in throughput. IQF is a high value product sold through our
Foodservice and Ingredients channels. The subsequent production runs
have recorded the highest volumes ever achieved during a full run.
We also installed a new innovation at our Waitoa UHT site to increase
production of Anchor Whipping Cream. While the technology itself is
protected IP, it extends UHT cream production and has unlocked an
additional 8,000 MT capacity.
Microsoft partnership & exploring AI
We’re looking for innovative ways to optimise our internal processes
through the use of technology. In January, we completed a proof of
concept with Microsoft to lift a whole genome sequencing process from
our on-site data storage to the cloud. The result was 20x faster processing
of data, demonstrating a pathway to apply in other R&D areas that have
complex datasets and require large computing power.
We have also partnered with Microsoft to develop a number
of AI solutions tailored for Fonterra. Primary amongst these is
DairyDetective, a Generative AI platform which allows our researchers
to access our bank of 96 years of dairy specific knowledge at speed with
curated responses.
Yiying & Olivia, Palmerston North
Chair and CEOContentsPerformanceInterim Financial StatementsGlossaryDirectoryNon-GAAP MeasuresHistorical SummaryProgress
09
Fonterra Interim Report 2024
PROGRESS ON STRATEGY
Innovating with customers
We also innovate close to customers in our
global markets to co-develop products utilising
Fonterra’s expertise.
For example, one of Fonterra’s key customers in Greater
China, a leading dairy brand, worked with our team to
develop and launch six ready-to-drink (RTD) products in
the sports market segment in the first half of FY24.
These products leverage Fonterra’s grass-fed provenance
and ingredients such as milk protein concentrate, whey
protein concentrate and calcium caseinate.
The RTD market in China is strong, with good growth
potential. Our team is supporting this key customer
through Marketing Insights and Solutions. In addition, we
focus on product iteration and formula optimisation at
our Fonterra Application Centres throughout China.
Emma & Daniel, Auckland
Chair and CEOContentsPerformanceInterim Financial StatementsGlossaryDirectoryNon-GAAP MeasuresHistorical SummaryProgress
10
Fonterra Interim Report 2024
PROGRESS ON STRATEGY
Additional interim results
material can be found on the
Fonterra Investor Relations webpage.
Business
performance
summary
Chair and CEOContentsInterim Financial StatementsGlossaryDirectoryNon-GAAP MeasuresHistorical SummaryProgressPerformance
Fonterra Interim Report 2024
11
BUSINESS PERFORMANCE
Our Total Group profit after tax increased
23%, or $128 million, to $674 million for the
first six months of the 2024 financial year,
and we have confirmed an interim dividend
of 15 cents per share.
Total Group EBIT increased $95 million to $953 million, reflecting higher
margins and increased sales volume in our Foodservice and Consumer
channels, partially offset by lower volumes and margins in our Ingredients
channel. The prior year also included $162 million of impairments.
In addition to the increase in EBIT, the higher profit after tax was driven
by a $68 million improvement in net financing costs. This reflects lower
average total borrowings due to higher earnings and divestments, and
the composition of total borrowings. The favourable net financing costs
were partially offset by a $35 million increase in tax expense.
The following business performance commentary has been provided
on a continuing operations basis. It excludes the performance of
discontinued operations, which made a $40 million loss, reflecting the
sale of the DPA Brazil consumer and foodservice business in October
2023. DPA Brazil was profitable over this period, but this was more than
offset by the release of the $(68)m foreign currency translation reserve
as part of the sale.
Chair and CEOContentsInterim Financial StatementsGlossaryDirectoryNon-GAAP MeasuresHistorical SummaryProgressPerformance
12
Fonterra Interim Report 2024
BUSINESS PERFORMANCE
Ingredients profit after tax decreased $229 million to $334 million
due to reduced margins and sales volume in both New Zealand
and Australia.
Foodservice profit after tax increased $169 million to $259 million
due to volume growth, improved pricing and lower cost of milk.
Consumer profit after tax increased $230 million to $121 million
due to volume growth, improved pricing and lower cost of milk.
Prior year also included $150 million (after tax) of impairments.
Core Operations’ profit after tax decreased $154 million to $102 million
due to lower earnings in the Ingredients channel.
Global Markets’ profit after tax increased $230 million to $380 million
mainly due to improved earnings in the Consumer channel and impacts of
impairments in FY23.
Greater China’s profit after tax increased $94 million to $232 million
mainly due to improved earnings in the Foodservice channel and impacts of
impairments in FY23.
Core OperationsGlobal MarketsGreater ChinaTo t a l
External sales volume
(‘000 MT)
1,239
0%
482
6%
1,721
1%
Profit after tax contribution
from continuing operations
Ingredients
$81m
$212m
$209m
$5m
$44m
$12m
$334m
$229m
Foodservice
$23m
$50m
$56m
$38m
$180m
$81m
$259m
$169m
Consumer
$(2)m
$8m
$115m
$197m
$8m
$25m
$121m
$230m
To t a l
$102m
$154m
$380m
$230m
$232m
$94m
$714m
$170m
Q2Q1Q4Q3Q2Q1
0
5
10
15
20
183
380
13.9%
16.4%
340
261
164
170
17.6%
12.5%
16.2%
11.9%
Q2Q1Q4Q3Q2Q1
0
5
10
15
20
25
30
22
68
14.4%
19.3%
77
74
147
112
21.7%
22.0%
29.4%
23.3%
0
5
10
15
20
25
30
7
(116)
23.8%
21.2%
32
(87)
81
40
25.8%
24.0%
28.8%
25.2%
Q2Q1Q4Q3Q2Q1
0
5
10
15
20
25
212
332
15.5%
17.4%
449
248
392
322
19.3%
15.6%
21.4%
15.9%
Gross margin (%)
Profit after tax ($m)
FY23FY24
Q2Q1Q4Q3Q2Q1
0
5
10
15
20
25
212
332
15.5%
17.4%
449
248
392
322
19.3%
15.6%
21.4%
15.9%
Gross margin (%)
Profit after tax ($m)
FY23FY24
Profit after tax by quarter
from continuing operations
Chair and CEOContentsInterim Financial StatementsGlossaryDirectoryNon-GAAP MeasuresHistorical SummaryProgressPerformance
13
Fonterra Interim Report 2024
BUSINESS PERFORMANCE
Note: Soprole was classified as a discontinued operation in 2023, and 2022 was re-presented.
Soprole operating earnings for 2020 and 2021 were $22 million and $38 million respectively,
and Soprole operating expenses for 2020 and 2021 were $105 million and $98 million respectively.
Continuing Operations’ Operating Earnings (EBIT)
For the six months ended 31 January
20242023202220212020
EBIT margin
EBIT ($ million)
917
602
9.1%
5.4%
543
864
986
6.3%
7.0%
8.9%
The composition of earnings between channels has significantly changed
with lower earnings from Ingredients offset by higher earnings in the
Foodservice and Consumer channels. EBIT for the first six months of FY23
of $864 million included $162 million of consumer brands impairments.
After adjusting for these impairments, underlying earnings for the first six
months of FY24 are $40 million behind the prior year, from $1,026 million
to $986 million.
Continuing Operations’ Operating Expenses
For the six months ended 31 January
20242023202220212020
$ million
1,112
1,080
902
1,219
1,109
Operating expenses reduced $110 million due to the prior year including
$162 million of impairments. After adjusting for these impairments,
operating expenses were up $52 million due to an increase in staff
expenses and an increase in technical and professional fees, mainly related
to upfront costs of delivering future efficiencies.
Chair and CEOContentsInterim Financial StatementsGlossaryDirectoryNon-GAAP MeasuresHistorical SummaryProgressPerformance
14
Fonterra Interim Report 2024
BUSINESS PERFORMANCE
Return on Capital
Our return on capital on a rolling 12-month basis has improved due
to the increase in our normalised EBIT
1
. The average level of capital
employed was lower due to a reduction in working capital during the
year, together with the impact of divestments executed.
Key capital projects for 2024 include our Hautapu wastewater upgrades
to improve discharge processes and the installation of an electrode
boiler at Edendale as part of our decarbonisation program.
HY24FY23HY23FY22HY22FY21HY21FY20HY20
7.7%
6.6%
6.7%
6.6%
6.1%
6.8%
8.6%
12.4%
13.4%
1. Normalisations for the first six months of the 2024 financial year include a $66 million loss
relating to the sale of DPA Brazil.
2. EPS is presented on a continuing operations basis.
3. Soprole was classified as a discontinued operation in 2023, and 2022 was re-presented.
EPS prior to 2022 includes earnings from Soprole.
Balance Sheet
The decrease in net debt reflects the strong underlying performance
of the business, and a reduction in working capital during the year,
together with the impact of divestments executed. The reduction in our
gearing ratio reflects lower net debt, improved earnings and gains on
divestment of Soprole, and after distributing $1.6 billion in dividends
and through a capital return.
As at 31 January
20242023202220212020
Gearing Ratio
Net Debt ($ billion)
6.4
6.1
49.8%
44.1%
5.6
5.8
4.2
47.3%
43.3%
34.6%
Earnings Per Share & Dividends
Continuing operations profit after tax of $714 million equates to earnings
per share attributable to equity holders of 43 cents.
For the six months ended 31 January
2
20242023202220212020
Reported earnings (cents per share)
3
37
Dividend (cents per share)
_
20
21
55
33
10
43
15
The stronger earnings and continued strength of our balance sheet has resulted
in an interim dividend of 15 cents per share, up 5 cents from the prior year
interim dividend of 10 cents per share.
Michael, Southland
Chair and CEOContentsInterim Financial StatementsGlossaryDirectoryNon-GAAP MeasuresHistorical SummaryProgressPerformance
15
Fonterra Interim Report 2024
BUSINESS PERFORMANCE
Interim
Financial
Statements
INDEPENDENT REVIEW REPORT17
STATEMENT OF FINANCIAL POSITION18
STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
19
STATEMENT OF CASH FLOWS20
STATEMENT OF CHANGES IN EQUITY21
BASIS OF PREPARATION22
NOTES TO THE INTERIM FINANCIAL
STATEMENTS
23
Michael & William, Southland
DirectoryGlossaryNon-GAAP MeasuresHistorical SummaryPerformanceProgressChair and CEOContentsInterim Financial Statements
16
Fonterra Interim Report 2024
INTERIM FINANCIAL STATEMENTS
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 2024;
–the statements of profit or loss and other comprehensive income, cash flows and changes in equity for the
six 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 18 to 29 do not:
i. present fairly, in all material respects, the Group’s financial position as at 31 January 2024 and its financial
performance and cash flows for the six 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
We conducted our review in accordance with NZ SRE 2410 (Revised) Review of Financial Statements Performed by
the Independent Auditor of the Entity (“NZ SRE 2410 (Revised)”). Our responsibilities are further described in the
Auditor’s Responsibilities for the review of the interim financial statements section of our report.
We are independent of Fonterra Co-operative Group Limited, in accordance with the relevant ethical
requirements in New Zealand relating to the audit of the annual financial statements, and we have fulfilled our
other ethical responsibilities in accordance with these ethical requirements.
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 (Revised). NZ SRE 2410 (Revised) 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.
A review of interim financial statements in accordance with NZ SRE 2410 (Revised) Review of Financial Statements
Performed by the Independent Auditor of the Entity (“NZ SRE 2410 (Revised)”) 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.
The procedures performed in a review are substantially less than those performed in an audit conducted in
accordance with International Standards on Auditing (New Zealand) and consequently does not enable us to
obtain assurance that we might identify in an audit. Accordingly, we do not express an audit opinion on these
interim financial statements.
KPMG
Auckland
20 March 2024
Chair and CEOContentsPerformanceGlossaryDirectoryNon-GAAP MeasuresHistorical SummaryProgressInterim Financial Statements
17
Fonterra Interim Report 2024
INTERIM FINANCIAL STATEMENTS
Statement of Financial Position
AS AT 31 JANUARY
($ MILLION)
NOTES
31 JAN 2024
UNAUDITED
31 JAN 2023
UNAUDITED
31 JUL 2023
AUDITED
ASSETS
Current assets
Cash and cash equivalents2393191,822
Trade and other receivables 2,1222,8702,473
Inventories6,4997, 0 3 44,346
Derivative financial instruments 217527190
Other assets 132209149
Assets held for sale131,289515
Total current assets9,22212,2489,495
Non-current assets
Property, plant and equipment66,2836,2626,343
Intangible assets31,8131,8811,824
Deferred tax assets181178182
Derivative financial instruments347428379
Other assets 385394378
Total non-current assets9,0099,1439,106
Total assets18,23121,39118,601
NOTES
31 JAN 2024
UNAUDITED
31 JAN 2023
UNAUDITED
31 JUL 2023
AUDITED
LIABILITIES
Current liabilities
Bank overdraft2657102
Borrowings61,2442,063785
Trade and other payables 64,7905,9064,370
Derivative financial instruments124570415
Capital return payable5––804
Other liabilities6335247249
Liabilities held for sale6972536
Total current liabilities 6,5259,8157,261
Non-current liabilities
Borrowings63,3713,4263,156
Derivative financial instruments 4565106
Other liabilities6210156110
Total non-current liabilities 3,6263,6473,372
Total liabilities10,15113,46210,633
Net assets8,0807,9297, 9 6 8
EQUITY
Subscribed equity55,0735,8825,073
Retained earnings2,7651,8992,774
Reserves17613259
Non-controlling interests661662
Total equity8,0807,9297, 9 6 8
The Board approved and authorised for issue these Interim Financial Statements on 20 March 2024.
For and on behalf of the Board:
Peter McBride Bruce Hassall
Chairman Director
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18
Fonterra Interim Report 2024
INTERIM FINANCIAL STATEMENTS
Statement of Profit or Loss and Other Comprehensive Income
FOR THE SIX MONTHS ENDED 31 JANUARY
($ MILLION)
NOTES
31 JAN 2024
UNAUDITED
31 JAN 2023
UNAUDITED
Revenue from sale of goods111,08512,333
Cost of goods sold
New Zealand sourced cost of milk(7,239)(8,377)
Non-New Zealand sourced cost of milk(620)(633)
Other collection and manufacturing costs(3,343)(3,163)
Increase in inventories2,1531,886
Total cost of goods sold¹4(9,049) (10,287)
Gross profit2,0362,046
Other operating income5937
Operating expenses4(1,109) (1,219)
Net finance costs(82) (122)
Profit before tax from continuing operations904742
Tax exp ense(190) (198)
Profit after tax from continuing operations714544
(Loss)/profit after tax from discontinued operations2(40)2
Profit after tax 674546
Cash flow hedges and other costs of hedging, net of tax60668
Net investment hedges and translation of foreign operations, net of tax(18)16
Foreign currency translation reserve losses transferred to profit or loss68–
Other movements in reserves24
Total items that may be reclassified subsequently to profit or loss112688
Total items that will not be reclassified subsequently to profit or loss(1)13
Total other comprehensive income111701
Total comprehensive income7851,247
Earnings per share attributed to equity holders of the Co-operative
Basic and diluted earnings per share from continuing operations ($)0.430.33
Basic and diluted loss per share from discontinued operations ($)(0.03)–
Total basic and diluted earnings per share ($)0.400.33
1. This Statement is presented on a functional basis. The shaded information provides an additional breakdown of Cost of goods sold by nature of expense.
Chair and CEOContentsPerformanceGlossaryDirectoryNon-GAAP MeasuresHistorical SummaryProgressInterim Financial Statements
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Fonterra Interim Report 2024
INTERIM FINANCIAL STATEMENTS
Statement of Cash Flows
FOR THE SIX MONTHS ENDED 31 JANUARY
($ MILLION)
NOTES
31 JAN 2024
UNAUDITED
31 JAN 2023
UNAUDITED
Cash flows from operating activities
Profit after tax674546
Adjustments for:
Net finance costs89157
Tax exp ense190155
Depreciation and amortisation307313
Impairments–162
Loss on sale of businesses266–
Foreign exchange gains(21) (81)
Other 57 (24)
Total adjustments688682
Increase in working capital and other operating activities6(1,402) (905)
Net taxes paid(44) (47)
Net cash flows from operating activities(84)276
Cash flows from investing activities
Acquisition of property, plant and equipment (233) (256)
Acquisition of intangible assets(56) (42)
Acquisition of investments(12) (10)
Other cash (outflows)/inflows(28) 2
Net cash flows from investing activities(329) (306)
NOTES
31 JAN 2024
UNAUDITED
31 JAN 2023
UNAUDITED
Cash flows from financing activities
Proceeds from borrowings2,3862,346
Other cash inflows2462
Repayment of borrowings(1,928) (1,893)
Capital return paid5(804)–
Dividends paid(674) (259)
Interest paid(125)(189)
Share buyback– (9)
Net cash flows from financing activities(1,121)58
Net (decrease)/increase in cash(1,534)28
Opening cash 1,750281
Effect of exchange rate changes(3) (1)
Closing cash 213308
Reconciliation of closing cash to the Statement of
Financial Position
Cash and cash equivalents239319
Bank overdraft(26) (57)
Cash balances included in assets and liabilities held for sale–46
Closing cash213308
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Fonterra Interim Report 2024
INTERIM FINANCIAL STATEMENTS
ATTRIBUTABLE TO EQUITY HOLDERS OF THE CO-OPERATIVE
NOTES
SUBSCRIBED
EQUITY
RETAINED
EARNINGSRESERVES
NON-CONTROLLING
INTERESTS
TOTAL
EQUITY
As at 1 August 20235,0732 , 7 7459627, 9 6 8
Profit after tax–639–35674
Transfer between reserves–(5)5––
Other comprehensive income/(expense)––112(1)111
Total comprehensive income–63411734785
Transactions with equity holders:
Dividends paid–(643)–(31)(674)
Dairy Partners Americas Brasil Limitada capital contributions received –––88
Derecognition of non-controlling interest in Dairy Partners Americas Brasil Limitada –––(7)(7)
As at 31 January 2024 (unaudited)5,0732,765176668,080
As at 1 August 20225,8911,611 (569) (27)6,906
Profit after tax–530–16546
Other comprehensive income––701–701
Total comprehensive income–530701161,247
Transactions with equity holders:
Dividends paid–(242)–(17)(259)
Dairy Partners Americas Brasil Limitada capital contributions received–––4444
Share buyback5(9)–––(9)
As at 31 January 2023 (unaudited)5,8821,899132167,929
Statement of Changes in Equity
FOR THE SIX MONTHS ENDED 31 JANUARY
($ MILLION)
Chair and CEOContentsPerformanceGlossaryDirectoryNon-GAAP MeasuresHistorical SummaryProgressInterim Financial Statements
21
Fonterra Interim Report 2024
INTERIM FINANCIAL STATEMENTS
At a glance
The basis of preparation, describes changes in material accounting policies and significant judgements and
estimates, in addition to providing explanatory comments on the seasonality of Fonterra’s operations.
a) General information
Fonterra Co-operative Group Limited (Fonterra, the Company or the Co-operative) is 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 (DIRA).
b) Basis of preparation
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.
These unaudited Interim Financial Statements:
–comply with International Accounting Standard 34 Interim Financial Reporting;
–comply with New Zealand Equivalent to International Accounting Standard 34 Interim Financial Reporting;
–have been prepared in accordance with Generally Accepted Accounting Practice (GAAP) applicable to
for-profit entities;
–are presented in New Zealand Dollars ($ or NZD), which is Fonterra’s functional currency, and rounded to the
nearest million, except where otherwise stated; and
–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 2023.
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 for the Statement
of Financial Position and associated Notes to the Interim Financial Statements has been presented in these
Interim Financial Statements.
Re-presentations
Simplification of Financial Statements
To improve disclosure effectiveness and focus on the most relevant and material information, consistent with the
Group’s Financial Statements for the year ended 31 July 2023, the Group has made a number of simplifications to
the Interim Financial Statements of the current period.
Changes in accounting policies
Consistent with the Group’s Financial Statements for the year ended 31 July 2023, comparative information
for interim periods has been re-presented to reflect a change in accounting policies implemented in the 2023
financial year. Emissions units held for compliance purposes are now presented as inventory (previously intangible
assets). In the Statement of Financial Position, current intangible assets of $88 million and non-current intangible
assets of $102 million at 31 January 2023 have been reclassified to inventory.
Subsequent to 31 July 2023, the Group has presented interest paid as a financing activity rather than an operating
activity in the Statement of Cash Flows. This presentation is consistent with the policy applied at 31 January 2023,
and no re-presentation of comparative information in these Interim Financial Statements is required.
c) Material accounting policies
The accounting policies applied in the preparation of these Interim Financial Statements are consistent with those
applied in the Group’s Financial Statements for the year ended 31 July 2023.
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 2023.
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 2024 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 2024 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 2024 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.
e) Climate risk
At 31 July 2023, the Group had committed to exiting coal by 2037 and reducing global absolute Scope 1 and 2
greenhouse gas emissions by 50% by 2030 (from a 2018 base year). In November 2023 the Group also announced
the target of reducing its Scope 1 and 3 forest, land and agriculture (FLAG) greenhouse gas emissions from dairy
by 30% per tonne of Fat and Protein Corrected Milk (FPCM) by 2030 (from a 2018 baseline).
While the effects of climate change are a continuing source of uncertainty, the impact of the Group’s announcements
during the period have been assessed as not having a material impact on these Interim Financial Statements.
Basis of Preparation
FOR THE SIX MONTHS ENDED 31 JANUARY 2024
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22
Fonterra Interim Report 2024
INTERIM FINANCIAL STATEMENTS
Notes to the
Interim Financial
Statements
1SEGMENT REPORTING AND REVENUE24
2DIVESTMENTS25
3INTANGIBLE ASSETS25
4EXPENSES26
5SUBSCRIBED EQUITY INSTRUMENTS27
6OTHER DISCLOSURES28
Chris & Andrew, Canterbury
DirectoryGlossaryNon-GAAP MeasuresHistorical SummaryPerformanceProgressChair and CEOContentsInterim Financial Statements
23
Fonterra Interim Report 2024
NOTES TO THE INTERIM FINANCIAL STATEMENTS
Notes to the Interim Financial Statements CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2024
($ MILLION)
1 Segment reporting and revenue
At a glance
This note provides information on the Group’s organisational structure and segment performance, from continuing operations, together with information on the Group’s external revenue. The Group’s reportable segments are
Core Operations, Global Markets, and Greater China, and are unchanged from those reported as at 31 July 2023.
SIX MONTHS ENDED 31 JANUARY (UNAUDITED)
CORE OPERATIONS GLOBAL MARKETSGREATER CHINAELIMINATIONS
1
TOTAL
CONTINUING OPERATIONS
2024202320242023202420232024202320242023
Revenue from sale of goods7, 9 4 39,6968,1249,4303,1573,499(8,139)(10,292)11,08512,333
Cost of goods sold( 7, 4 1 1 )(8,897)(7,080)(8,543)(2,697)(3,139)8,13910,292(9,049)(10,287)
Gross profit5327991,044887460360––2,0362,046
Operating expenses(387)(379)(558)(659)(164)(162)––(1,109)(1,200)
Other
2
21436142–––5918
EBIT166424522242298198––986864
Profit after tax102256380150232138––714544
Profit after tax attributable to equity
holders of the Co-operative102256373143218129––693528
Other segment information:
–Inter-segment revenue7, 9 9 110,0931321741625(8,139)(10,292)––
–External revenue
3
:
Ingredients channel revenue23(248)5,4106,8361,6442,147––7, 0 7 78,735
Foodservice channel revenue(42)(97)8999141,2771,111––2,1341,928
Consumer channel revenue(29)(52)1,6831,506220216––1 , 8 741,670
Total external revenue(48)(397)7, 9 9 29,2563,1413, 474––11,08512,333
–Depreciation and amortisation(218)(226)(78)(72)(11)(7)––(307)(305)
– Share of (loss)/profit of equity
accounted investees(4)246–––––8
1. The performance of the Group’s reporting segments includes transactions between the regional business units and Core Operations for the purchase and sale of goods, which are eliminated at the total Group level.
2. Comprises other operating income, net foreign exchange gains/(losses) and share of (loss)/profit of equity accounted investees.
3. External revenue is determined in accordance with the accounting policy, estimates and judgements consistent with those disclosed in the Group’s Financial Statements for the year ended 31 July 2023. Core Operations includes external revenue together with adjustments to reflect that it acts as an agent for
other segments, and the volatility associated with the Group’s sales hedging activities.
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24
Fonterra Interim Report 2024
NOTES TO THE INTERIM FINANCIAL STATEMENTS
Notes to the Interim Financial Statements CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2024
($ MILLION)
2 Divestments
At a glance
This note provides information on components of the Group that have been divested.
The Group completed the sale of the Brazil consumer and foodservice business during the period ended
31 January 2024.
Sale of the Brazil consumer and foodservice business
In December 2022 the Group announced the sale of the Brazil consumer and foodservice business. The Brazil
consumer and foodservice business is considered a discontinued operation and its performance has not been
included in a reportable segment.
The divestment was completed in October 2023. Fonterra’s share of sales proceeds amounted to $4 million
after adjustments for net debt and working capital, with a loss of $66 million recognised in Profit after tax from
discontinued operations in the Statement of Profit or Loss and Other Comprehensive Income, mainly comprised
of a debit balance of $68 million that was reclassified from the foreign currency translation reserve.
A breakdown of net assets disposed of is presented in the following table.
UNAUDITED
Cash and cash equivalents33
Trade receivables69
Inventory34
Property, plant and equipment91
Intangible assets123
Other assets159
Borrowings(183)
Trade and other payables (219)
Other liabilities(98)
Net assets disposed9
3 Intangible assets
At a glance
This note provides information on the Group’s assessment of indicators of impairment, and any
subsequent impairment testing, of a cash-generating unit (CGU) that has goodwill allocated to it and
indefinite life brands. An impairment is recognised when the carrying amount of the CGU or indefinite
life brand is greater than its recoverable value.
At 31 January 2024 the Group assessed whether there were any indicators that its CGUs with goodwill or indefinite
life brands could be impaired. It was determined that indicators did exist for the Australia CGU. An impairment test
was performed and no impairment was identified (no indicators identified for the Australia CGU at 31 January 2023).
No impairments have been recognised within operating expenses in the Statement of Profit or Loss and Other
Comprehensive Income (31 January 2023: $162 million).
Australia CGU
This CGU represents a business which sells dairy products in the ingredients, consumer and foodservice channels,
primarily in Australia.
At July 2023, the recoverable amount of the business was determined on a value in use basis using a discounted
cash flow methodology, with the recoverable amount exceeding its carrying amount by $197 million. As presented
in the Group’s Financial Statements for the year ended 31 July 2023, a reasonably possible change in certain key
assumptions (including discount rate (post-tax)) used to determine the value in use would result in an impairment.
During the period the discount rate (post-tax) has increased from 7.0% to 7.9%, resulting in an indicator of impairment.
At 31 January 2024 the Group determined the recoverable amount of the business on a value in use basis using
a discounted cash flow methodology. The model uses a cash flow forecast based on the business plan approved
by the Board and growth expectations for the business adjusted for expected operational cost management. The
business plan incorporates volume and margin growth above the long-term growth rate for the first three years
and then reverts to the long-term growth rate.
There are two additional key drivers for the business to achieve the cash flows included in the impairment model:
–Operational cost management, including efficiencies created through the recently announced Fonterra Oceania
business; and
–The return of the Australian milk price to long-term historical relativities to global dairy prices.
These assumptions reflect past experience and Management’s future expectations for the business. A range of other
possible scenarios were also considered, and a probability weighting applied to determine the recoverable amount.
The long-term growth rate applied to the future cash flows of the forecast was 2.5% (31 January 2023: 2.5%,
31 July 2023: 2.5%). This reflects the expected long-term economic growth rate for Australia.
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Fonterra Interim Report 2024
NOTES TO THE INTERIM FINANCIAL STATEMENTS
Notes to the Interim Financial Statements CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2024
($ MILLION)
The post-tax discount rate was 7.9% (31 January 2023: 7.0%, 31 July 2023: 7.0%). The pre-tax discount rate was
10.6% (31 January 2023: 9.3%, 31 July 2023: 9.3%).
The recoverable amount of the business exceeded its carrying amount by $50 million. The Group has identified
that a reasonably possible change in several key assumptions could cause the carrying amount to exceed the
recoverable amount. The following table shows the amount by which these assumptions would need to change
individually for the carrying amount to exceed estimated recoverable amount.
KEY ASSUMPTIONSVALUE ATTRIBUTED
CHANGE REQUIRED FOR THE CARRYING
AMOUNT TO EXCEED THE RECOVERABLE
AMOUNT
Australian milk price relative to global
dairy prices to normalise from 2025
milk price season
Long-term average
from 2025
Continuation of 2024 season differential
Operational cost management
$7 million per annumSavings of $4 million per annum not achieved
Discount rate (post-tax)
7. 9 %An increase in the discount rate of 0.2%
Long-term growth rate
2.5%A decrease in the long-term growth rate
of 0.2%
4 Expenses
At a glance
This note provides information on expenses and cost of goods sold by function that have been included in
profit before tax from continuing operations, together with additional information on expenses by nature.
a) Expenses by function
31 JAN 2024
UNAUDITED
31 JAN 2023
UNAUDITED
Cost of goods sold9,04910,287
Administrative expenses481429
Selling and marketing expenses276254
Distribution expenses218211
Other operating expenses134325
Operating expenses1,1091,219
b) Expenses by nature
COST OF GOODS SOLD
31 JAN 2024
UNAUDITED
31 JAN 2023
UNAUDITED
Cost of milk:
–New Zealand sourced7, 2 3 98,377
–Non-New Zealand sourced620633
Other ingredient purchases and manufacturing costs1 ,4761,376
Employee benefits expense683636
Energy costs453371
Packaging312294
Storage and distribution205270
Depreciation and amortisation214216
Total other collection and manufacturing costs3,3433,163
Increase in inventories(2,153)(1,886)
Total cost of goods sold9,04910,287
OPERATING EXPENSES
31 JAN 2024
UNAUDITED
31 JAN 2023
UNAUDITED
Employee benefits expense501467
Storage and distribution128127
Advertising and promotion10396
Information technology11399
Professional and management fees10571
Depreciation and amortisation9389
Impairments–162
Other66108
Total operating expenses1,1091,219
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Fonterra Interim Report 2024
NOTES TO THE INTERIM FINANCIAL STATEMENTS
Notes to the Interim Financial Statements CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2024
($ MILLION)
5 Subscribed equity instruments
At a glance
This note provides information on the Group’s capital structure, including shares of the Co-operative and Units of the Fonterra Shareholders’ Fund.
a) Co-operative shares, including shares held within the Group
A reconciliation of movements in shares of the Co-operative is presented in the following table.
SHARES$ MILLION
31 JAN 2024
UNAUDITED
31 JAN 2023
UNAUDITED
31 JUL 2023
AUDITED
31 JAN 2024
UNAUDITED
31 JAN 2023
UNAUDITED
31 JUL 2023
AUDITED
Co-operative shares on issue at beginning of period1,609,244,6691,612,825,5851,612,825,5855,0785,8915,891
Shares acquired (and cancelled) under buyback programmes (54,114) (3,530,916)(3,580,916)– (9)(9)
Capital return payable–––––(804)
Co-operative shares on issue at end of period1,609,190,5551,609,294,6691,609,244,6695,0785,8825,078
Treasury shares¹(2,000,000)–(2,000,000)(5)–(5)
Co-operative shares on issue, excluding treasury shares1,607,190,5551,609,294,6691,607,244,6695,0735,8825,073
1. The treasury shares relate to shares acquired by the Market Makers with the legal title held by Fonterra Farmer Custodian Limited, but which are treated as treasury shares for accounting purposes.
On 18 August 2023 the approved capital return of $804 million was paid to shareholders. 268,208,181 shares were repurchased and cancelled. At the same time, one share held by each shareholder
which was not repurchased was subdivided into such number of shares as were repurchased, plus one. Accordingly, there was no change in the number of shares on issue following this transaction.
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Fonterra Interim Report 2024
NOTES TO THE INTERIM FINANCIAL STATEMENTS
Notes to the Interim Financial Statements CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2024
($ MILLION)
5 Subscribed equity instruments continued
b) Units in the Fonterra Shareholders’ Fund (the Fund)
A reconciliation of movements in units of the Fund is presented in the following table.
UNITS
31 JAN 2024
UNAUDITED
31 JAN 2023
UNAUDITED
31 JUL 2023
AUDITED
Units on issue at beginning of period
107,410,984 107, 417, 32 2107, 417, 32 2
Units redeemed
–(6,338)(6,338)
Units on issue at end of period
107,410,984107,410,984107,410,984
c) Market capitalisation
The Group’s market capitalisation has been below the carrying amount of net assets since Fonterra’s capital
review announcement in May 2021. At 31 January 2024, the Group’s market capitalisation was $3.5 billion
(31 January 2023: $4.2 billion, 31 July 2023: $5.1 billion) and the carrying amount of net assets was $8.1 billion
(31 January 2023: $7.9 billion, 31 July 2023: $8.0 billion).
The share price is not considered an accurate reflection of the fair value of the Group’s net assets for a number of
reasons, including the nature of the Co-operative and its unique capital structure. For example, shares traded in a
restricted market (i.e. Co-operative shares) are generally expected to trade at a discount compared to unrestricted
markets, there is reduced liquidity in the market, supply and demand dynamics are impacted, and there is limited or
no ability for investors to take a significant ownership interest or controlling interest.
However, accounting standards consider market capitalisation below the value of net assets to be an indicator
of impairment and an impairment test has been performed. An external valuation was obtained to support the
recoverable amount of the Group’s net assets, using a multiples based approach on a fair value less costs of disposal
basis. The valuation used key estimates including maintainable EBIT, earnings multiples of between 13.0x to 14.0x and
seasonally adjusted net debt. This implied an equity valuation of between $10.5 billion and $11.6 billion which exceeds
the net assets of the Group. As such, no impairment has been recognised.
6 Other disclosures
At a glance
This note provides further information on other matters related to the Group’s interim reporting.
a) Property, plant and equipment
Additions of $181 million (31 January 2023: $206 million, 31 July 2023: $589 million) were recognised during
the period.
As at 31 January 2024 the Group was committed to spend $237 million (31 January 2023: $197 million,
31 July 2023: $98 million), primarily related to plant, vehicles and equipment.
b) Owing to suppliers
At 31 January 2024 Owing to suppliers, included within Trade and other payables, was $2,412 million
(31 January 2023: $3,693 million, 31 July 2023: $1,997 million).
c) Borrowings
31 JAN 2024
UNAUDITED
31 JAN 2023
UNAUDITED
31 JUL 2023
AUDITED
Total current borrowings1,2442,063785
Total non-current borrowings3,3713,4263,156
Total borrowings
1
4,6155,4893,941
Opening balance3,9415,2565,256
Proceeds2,3862,1462,493
New lease liabilities275881
Repayments(1 ,765)(1,798)(3,828)
Foreign exchange movements(17)(43)98
Changes in fair values40(101)(132)
Other3(29)(27)
Closing balance
1
4,6155,4893,941
1. As at 31 January 2024, there were no borrowings attributable to disposal groups held for sale excluded from the table above (31 January 2023:
$481 million, 31 July 2023: $199 million).
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Fonterra Interim Report 2024
NOTES TO THE INTERIM FINANCIAL STATEMENTS
d) Net movement in working capital and other operating activities
A breakdown of the cash outflows resulting from the increase in working capital and other operating activities from the Statement of Cash Flows is presented
in the following table.
31 JAN 2024
UNAUDITED
31 JAN 2023
UNAUDITED
Trade and other receivables298 (353)
Inventories(2,172) (2,118)
Trade and other payables4691,622
Other movements3 (56)
Total increase in working capital and other operating activities(1,402) (905)
e) Fair value measurement
The fair value hierarchy for assets and liabilities measured at fair value is presented in the following table.
LEVEL 1LEVEL 2LEVEL 3
31 JAN 2024
UNAUDITED
31 JAN 2023
UNAUDITED
31 JUL 2023
AUDITED
31 JAN 2024
UNAUDITED
31 JAN 2023
UNAUDITED
31 JUL 2023
AUDITED
31 JAN 2024
UNAUDITED
31 JAN 2023
UNAUDITED
31 JUL 2023
AUDITED
Measured at fair value on a recurring basis
Derivative assets165734548898535–––
Derivative liabilities(62)(124)(190)(107)(511)(331)–––
Other396055131813515638
Measured at fair value on a non-recurring basis
Net assets/(liabilities) held for sale ––––––7(65)(21)
Fair value(7)(7)(101)45440521758(9)17
The fair value of financial assets and liabilities not measured at fair value approximates carrying value.
f ) Tax liabilities
At 31 January 2024 Tax payable, included within Other current liabilities, was $178 million (31 January 2023: $102 million, 31 July 2023: $118 million).
At 31 January 2024 Deferred tax liabilities, included within Other non-current liabilities, was $145 million (31 January 2023: $89 million, 31 July 2023: $36 million).
g) Dividend declared after the reporting period
On 20 March 2024, the Board declared an interim dividend of 15 cents per share, to be paid on 11 April 2024 to all holders of Co-operative shares on issue at 28 March 2024.
6 Other disclosures continued
Notes to the Interim Financial Statements CONTINUED
FOR THE SIX MONTHS ENDED 31 JANUARY 2024
($ MILLION)
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Fonterra Interim Report 2024
NOTES TO THE INTERIM FINANCIAL STATEMENTS
Total Group Overview (continuing and discontinued operations)
JAN 2020JAN 2021JAN 2022JAN 2023JAN 2024
Income Statement Measures
Sales volumes (‘000 MT)2,0371,9941,9211,9941,780
Revenue ($ million)10,4239,91510,79713,24911,257
EBITDA ($ million)
1
1,1299779211,1711,260
EBIT ($ million)
1
806657607858953
Profit after tax ($ million)501391364546674
Normalised profit after tax attributable to equity holders of the Co-operative
($ million)283399348595708
Earnings per share0.320.230.220.330.40
Normalised earnings per share0.180.250.220.370.44
Revenue Margin Analysis
EBITDA margin (%)
1
10.8%9.9%8.5%8.8%11.2%
EBIT margin (%)
1
7.7 %6.6%5.6%6.5%8.5%
Profit after tax margin (%)
1
4.8%3.9%3.4%4.1%6.0%
Cash Flow ($ million)
Operating cash flow(124)(544)(617)276(84)
Free cash flow
1
369(632)(849)(30)(413)
Trade working capital
1,6
6,1896,1947, 6 357, 85 66,440
Capital Measures
Equity excluding hedge reserve ($ million)6,4926,8077,0937,6077, 9 7 7
Net debt ($ million)
1
6,4426,1085,6075,8114,224
Gearing ratio (%)
1
49.8%47. 3%44.1%43.3%34.6%
Average capital employed ($ million)
1
13,00912,30312,14613,00512,303
Capital expenditure ($ million)
1
112147180245225
Capital invested ($ million)
1
175184195330265
Return on capital (%)
1
7.7 %6.7%6.1%8.6%13.4%
Notes to the Historical Summary
Note: Historical summary is presented on a reported basis.
Previously presented on a normalised basis.
1. Refer to the Glossary for definition.
2. Percentages as shown in the table may not align to calculations of
percentages based on numbers in the table due to rounding of figures.
3. Prepared on a continuing operations basis.
4. Includes inter-segment transactions.
5. The China Farms business, DPA Brazil consumer and foodservice
businesses and Soprole meet the definition of a discontinued
operation. The Group’s China Farms business comprises the Hangu
China farm and the two farming hubs in Ying and Yutian. Performance
of discontinued operations are recognised up to the date of sale.
6. Comparative information has been re-presented for consistency
with the current period. Inventory has been restated to reflect the
inclusion of emissions trading units which were previously held as
intangible assets.
Historical Summary
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Fonterra Interim Report 2024
HISTORICAL SUMMARY
JAN 2022JAN 2023JAN 2024
Total
Sales volume (‘000 MT)1,2641,3451,346
Revenue ($ million)7, 70 99,6967, 9 4 3
Gross profit ($ million)322799532
Gross margin (%)
1
4.2%8.2%6.7%
EBIT ($ million)67424166
EBIT margin (%)
1
0.9%4.4%2.1%
Profit after tax ($ million)9256102
Profit after tax margin (%)0.1%2.6%1.3%
Historical Summary CONTINUED
Core Operations
2,3,4
JAN 2022JAN 2023JAN 2024
Ingredients
Sales volume (‘000 MT)9631,0491,034
Revenue ($ million)6,2397, 9 0 36,248
Gross profit ($ million)330757424
Gross margin (%)
1
5.3%9.6%6.8%
EBIT ($ million)134458134
EBIT margin (%)
1
2.1%5.8%2.1%
Profit after tax ($ million)6829381
Profit after tax margin (%)1.1%3.7%1.3%
Foodservice
Sales volume (‘000 MT)199171179
Revenue ($ million)8651,0341,036
Gross profit ($ million)(13)1474
Gross margin (%)
1
(1.5)%1.4%7. 1%
EBIT ($ million)(52)(27)32
EBIT margin (%)
1
(6.0)%(2.6)%3.1%
Profit after tax ($ million)(45)(27)23
Profit after tax margin (%)(5.2)%(2.6)%2.2%
Consumer
Sales volume (‘000 MT)102125133
Revenue ($ million)605759659
Gross profit ($ million)52834
Gross margin (%)
1
0.8%3.7%5.2%
EBIT ($ million)(15)(7)–
EBIT margin (%)
1
(2.5)%(0.9)%–
Profit after tax ($ million)(14)(10)(2)
Profit after tax margin (%)(2.3)%(1.3)%(0.3)%
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HISTORICAL SUMMARY
Historical Summary CONTINUED
Global Markets
2,3,4
JAN 2022JAN 2023JAN 2024
Ingredients
Sales volume (‘000 MT)651848817
Revenue ($ million)4,5036,9635,499
Gross profit ($ million)323479451
Gross margin (%)
1
7. 2 %6.9%8.2%
EBIT ($ million)179313275
EBIT margin (%)
1
4.0%4.5%5.0%
Profit after tax ($ million)131214209
Profit after tax margin (%)2.9%3.1%3.8%
Foodservice
Sales volume (‘000 MT)132141141
Revenue ($ million)697942925
Gross profit ($ million)92109180
Gross margin (%)
1
13.2%11.6%19.5%
EBIT ($ million)32380
EBIT margin (%)
1
0.4%2.4%8.6%
Profit after tax ($ million)–1856
Profit after tax margin (%)–1.9%6.1%
Consumer
Sales volume (‘000 MT)292283305
Revenue ($ million)1,3531,5251,700
Gross profit ($ million)305299413
Gross margin (%)
1
22.5%19.6%24.3%
EBIT ($ million)82(94)167
EBIT margin (%)
1
6.1%(6.2)%9.8%
Profit after tax ($ million)53(82)115
Profit after tax margin (%)3.9%(5.4)%6.8%
JAN 2022JAN 2023JAN 2024
Total
Sales volume (‘000 MT)1,0751,2721,263
Revenue ($ million)6,5539,4308,124
Gross profit ($ million)7208871,044
Gross margin (%)
1
11.0%9.4%12.9%
EBIT ($ million)264242522
EBIT margin (%)
1
4.0%2.6%6.4%
Profit after tax ($ million)184150380
Profit after tax margin (%)2.8%1.6%4.7%
Global Market - Australia
2,3
JAN 2022JAN 2023JAN 2024
Total
Milk collection (millions kgMS)686667
Sales volume (‘000 MT)172181180
Revenue ($ million)9161,2531,165
Gross profit ($ million)137171138
Gross margin (%)
1
15.0%13.6%11.8%
EBIT ($ million)597442
EBIT margin (%)
1
6.4%5.9%3.6%
Profit after tax ($ million)406921
Profit after tax margin (%)4.4%5.5%1.8%
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Fonterra Interim Report 2024
HISTORICAL SUMMARY
Historical Summary CONTINUED
Greater China
2,3
JAN 2022JAN 2023JAN 2024
Ingredients
Sales volume (‘000 MT)377279283
Revenue ($ million)2,2852,1541,660
Gross profit ($ million)10410993
Gross margin (%)
1
4.6%5.1%5.6%
EBIT ($ million)817958
EBIT margin (%)
1
3.5%3.7%3.5%
Profit after tax ($ million)595644
Profit after tax margin (%)2.6%2.6%2.7%
Foodservice
Sales volume (‘000 MT)146137158
Revenue ($ million)1,0051,1281,277
Gross profit ($ million)182203307
Gross margin (%)
1
18.1%18.0%24.0%
EBIT ($ million)124143230
EBIT margin (%)
1
12.3%12.7%18.0%
Profit after tax ($ million)9599180
Profit after tax margin (%)9.5%8.8%14 .1%
Consumer
Sales volume (‘000 MT)433941
Revenue ($ million)211217220
Gross profit ($ million)614860
Gross margin (%)
1
28.9%22.1%2 7. 3 %
EBIT ($ million)7(24)10
EBIT margin (%)
1
3.3%(11.1)%4.5%
Profit after tax ($ million)5(17)8
Profit after tax margin (%)2.4%( 7. 8) %3.6%
JAN 2022JAN 2023JAN 2024
Total
Sales volume (‘000 MT)566455482
Revenue ($ million)3,5013,4993,157
Gross profit ($ million)347360460
Gross margin (%)
1
9.9%10.3%14.6%
EBIT ($ million)212198298
EBIT margin (%)
1
6.1%5.7%9.4%
Profit after tax ($ million)159138232
Profit after tax margin (%)4.5%3.9%7. 3 %
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Fonterra Interim Report 2024
HISTORICAL SUMMARY
Product Channels
2,3
JAN 2022JAN 2023JAN 2024
Ingredients
Sales volume (‘000 MT)1,0131,1061,083
Revenue ($ million)6,8488,7357, 0 7 7
Gross profit ($ million)7571,345968
Gross margin (%)
1
11.1%15.4%13.7%
EBIT ($ million)394850467
EBIT margin (%)
1
5.8%9.7%6.6%
Profit after tax ($ million)258563334
Profit after tax margin (%)3.8%6.4%4.7%
Foodservice
Sales volume (‘000 MT)276274295
Revenue ($ million)1 , 6741,9282,134
Gross profit ($ million)261326561
Gross margin (%)
1
15.6%16.9%26.3%
EBIT ($ million)75139342
EBIT margin (%)
1
4.5%7. 2 %16.0%
Profit after tax ($ million)5090259
Profit after tax margin (%)3.0%4.7%12.1%
Consumer
Sales volume (‘000 MT)334319343
Revenue ($ million)1,5631,6701 , 8 74
Gross profit ($ million)371375507
Gross margin (%)
1
23.7%22.5%2 7. 1%
EBIT ($ million)74(125)177
EBIT margin (%)
1
4.7%( 7. 5) %9.4%
Profit after tax ($ million)44(109)121
Profit after tax margin (%)2.8%(6.5)%6.5%
Historical Summary CONTINUED
Discontinued Operations
2,5
JAN 2022JAN 2023JAN 2024
China Farms
Sales volume (‘000 MT)11–
Revenue ($ million)1311–
Gross profit ($ million)(2)(7)–
Gross margin (%)
1
(15.4)%(63.6)%–
EBIT ($ million)(8)(13)–
EBIT margin (%)
1
(61.5)%(118.2)%–
Profit after tax ($ million)(8)(13)–
Profit after tax margin (%)(61.5)%(118.2)%–
DPA Brazil
Sales volume (‘000 MT)10511259
Revenue ($ million)196291172
Gross profit ($ million)609166
Gross margin (%)
1
30.6%31.3%38.4%
EBIT ($ million)1429(33)
EBIT margin (%)
1
7. 1%10.0%(19.2)%
Profit after tax ($ million)16(40)
Profit after tax margin (%)0.5%2.1%(23.2)%
Soprole
Sales volume (‘000 MT)192182–
Revenue ($ million)503614–
Gross profit ($ million)160168–
Gross margin (%)
1
31.8%27.4%–
EBIT ($ million)58(22)–
EBIT margin (%)
1
11.5%(3.6)%–
Profit after tax ($ million)199–
Profit after tax margin (%)3.8%1.5%–
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Fonterra Interim Report 2024
HISTORICAL SUMMARY
Non-GAAP measures
Fonterra uses several non-GAAP measures when discussing financial performance. Non-GAAP measures are not
defined or specified by 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.
Non-GAAP measures are not subject to audit unless they are included in Fonterra’s audited annual
financial statements.
Please refer to the following tables for reconciliations of NZ IFRS to non-GAAP measures, and the Glossary for
definitions of non-GAAP measures referred to by Fonterra.
Reconciliation from profit after tax to total Group normalised EBITDA
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2024
UNAUDITED
31 JAN 2023
UNAUDITED
31 JUL 2023
AUDITED
Profit after tax6745461,577
Net finance costs from continuing operations82122211
Net finance costs from discontinued operations73550
Tax expense from continuing operations190198303
Tax (credit)/expense from discontinued operations–(43)77
Depreciation and amortisation from continuing
operations307305654
Depreciation and amortisation from discontinued
operations–88
Total Group EBITDA 1,2601,1712,880
Loss on sale of China Farm (Hangu)–412
Hedging loss/(gain on sale) of Chile business –78(349)
Loss on sale of DPA Brazil 66––
Total normalisation adjustments6682(337)
Total Group normalised EBITDA1,3261,2532,543
Reconciliation from profit after tax to total Group normalised EBIT
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2024
UNAUDITED
31 JAN 2023
UNAUDITED
31 JUL 2023
AUDITED
Profit after tax6745461,577
Net finance costs from continuing operations82122211
Net finance costs from discontinued operations73550
Tax expense from continuing operations190198303
Tax (credit)/expense from discontinued operations–(43)77
Total Group EBIT9538582,218
Normalisation adjustments (as detailed above)6682(337)
Total Group normalised EBIT1,0199401,881
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Fonterra Interim Report 2024
NON-GAAP MEASURES
Reconciliation from profit after tax to normalised profit after tax and normalised earnings
per share
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2024
UNAUDITED
31 JAN 2023
UNAUDITED
31 JUL 2023
AUDITED
Profit after tax 6745461,577
Normalisation adjustments (as detailed on the
previous page)6682(337)
Normalisation adjustments to net finance costs–7–
Tax on normalisation adjustments–(24)89
Normalised profit after tax74 06111,329
Profit attributable to non-controlling interests(35)(16)(40)
Normalisation adjustments attributable to non-
controlling interests3––
Normalised profit after tax attributable to equity
holders of the Co-operative7085951,289
Weighted average number of Co-operative shares
(thousands of shares)1,607,2121,612,2911,610,507
Normalised earnings per share ($)
1
0.440.370.80
Reconciliation from gross profit from continuing operations to total Group normalised
gross profit
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2024
UNAUDITED
31 JAN 2023
UNAUDITED
31 JUL 2023
AUDITED
Gross profit from continuing operations2,0362,0464,181
Gross profit from discontinued operations66252418
Total Group normalised gross profit2,1022,2984,599
Non-GAAP measures CONTINUED
The Group uses adjusted net debt, a non-GAAP debt measure in monitoring its net debt position and in
calculating the Group’s debt to EBITDA ratio, gearing ratio, and return on capital.
Adjusted net debt is calculated as total borrowings, plus bank overdraft, less cash and cash equivalents, plus a
cash adjustment for 25% of cash and cash equivalents held by the Group’s subsidiaries, adjusted for derivatives
used to manage changes in hedged risks on debt instruments. Amounts relating to disposal groups held for sale
are included in the calculation.
The Group believes that adjusted net debt provides useful information as it is aligned with how certain rating
agencies calculate the Group’s debt to EBITDA and gearing ratios.
GROUP $ MILLION
SIX MONTHS ENDEDYEAR ENDED
31 JAN 2024
UNAUDITED
31 JAN 2023
UNAUDITED
31 JUL 2023
AUDITED
Total borrowings4,6155,4893,941
Add: Bank overdraft2657102
Less: Cash and cash equivalents(239)(319)(1,822)
Add: Capital return payable––804
Add: Borrowings attributable to disposal groups held
for sale–481199
Less: Cash and cash equivalents attributable to disposal
groups held for sale–(46)(30)
Add: Cash adjustments of 25% for cash held by
subsidiaries (including cash and cash equivalents
attributable to disposal groups held for sale)586850
Less: Derivatives used to manage changes in hedged
risk on debt instruments(236)81(37)
Adjusted net debt4,2245,8113,207
Equity excluding hedge reserves7, 97 77,6077, 92 5
Total capital12,20113,41811,132
Adjusted net debt gearing ratio34.6%43.3%28.8%
1. Normalised earnings per share is based on weighted average number of Co-operative shares.
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36
Fonterra Interim Report 2024
NON-GAAP MEASURES
Glossary
TERMSDEFINITION
Adjusted net debtis calculated as total borrowings, plus bank overdraft, less cash and cash
equivalents, plus a cash adjustment for 25% of cash and cash equivalents
held by the Group’s subsidiaries, adjusted for derivatives used to manage
changes in hedged risks on debt instruments. Amounts relating to
disposal groups held for sale are included in the calculation.
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.
Average capital employedis a 13-month rolling average of capital employed.
Capital employedis adjusted net debt less the cash adjustment (used in calculating adjusted
net debt), plus cash and cash equivalents held by subsidiaries for working
capital purposes, plus equity excluding hedge reserves and net deferred
tax assets.
Consumeris 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.
Core Operationsrepresents core operating functions including New Zealand milk
collection and processing operations and assets, supply chain and
sustainability, Fonterra Farm Source™ retail stores, and the Strategy
and Optimisation function.
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 operationsmeans 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.
Earnings before interest and
tax (EBIT)
is profit before net finance costs and tax.
Earnings before interest, tax,
depreciation and amortisation
(EBITDA)
is profit before net finance costs, tax, depreciation and amortisation.
TERMSDEFINITION
Earnings per share (EPS)is 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 EBIT divided by revenue from sale of goods.
EBITDA marginis EBITDA divided by revenue from sale of goods.
Eliminationsrepresents eliminations of inter-business unit sales.
Farmgate Milk Pricemeans the average price paid by Fonterra for each kilogram of milk solids
(kgMS) supplied by Fonterra’s farmer shareholders under Fonterra’s
standard terms of supply. 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.
Foodservicerepresents the channel selling to businesses that cater for out-of-home
consumption; restaurants, hotels, cafés, airports, catering companies etc.
The focus is on customers such as; bakeries, cafés, 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 the total of net cash flows from operating activities and net cash flows
from investing activities.
Gearing ratio (%)
(adjusted net debt)
is adjusted net debt divided by total capital. Total capital is equity
excluding hedge reserves, plus adjusted net debt.
Global Dairy Trade (GDT)means the electronic auction platform that is used to sell commodity
dairy products.
Global Markets represents the Ingredients, Foodservice and Consumer channels outside
of Greater China.
Greater Chinarepresents the Ingredients, Foodservice and Consumer channels in
Greater China.
Gross marginis gross profit divided by revenue from sale of goods.
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37
Fonterra Interim Report 2024
GLOSSARY
TERMSDEFINITION
Ingredientsrepresents the channel comprising bulk and specialty dairy products such
as milk powders, dairy fats, cheese and proteins manufactured in New
Zealand, Australia and Europe, or sourced through our global network,
and sold to food producers and distributors.
kgMSmeans kilograms of milk solids, the measure of the amount of fat and
protein in the milk supplied to Fonterra.
Net debtmeans adjusted net debt.
Non-Reference Productsmeans all NZ milk solids processed by Core Operations, except for
Reference Commodity Products.
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. Normalised is used to indicate that a measure or sub-
total has been adjusted for the impacts of normalisation adjustments. E.g.
‘Normalised EBIT’.
Price Relativities refers to the difference in the weighted average price (in USD) between
the Reference Product portfolio and Non-Reference Product portfolio.
The difference between these two weighted average prices is a key driver
of the Ingredients’ gross margin.
Product channelFonterra has three product channels, Ingredients, Foodservice and
Consumer.
Profit after tax marginis 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)
is commodity specifications of the five Reference Commodity Products
(RCPs) which are Whole Milk Powder (WMP) and Skim Milk Powder
(SMP), and their by-products Butter, Anhydrous Milk Fat (AMF) and
Buttermilk Powder (BMP). These commodity groups are used to calculate
the Farmgate Milk Price.
TERMSDEFINITION
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’.
Return on Capital (ROC) is calculated as Total Group normalised EBIT including finance income
on long-term advances less a notional tax charge, divided by average
capital employed.
SeasonNew Zealand: A period of 12 months from 1 June to 31 May.
Australia: A period of 12 months from 1 July to 30 June.
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’.
Trade working capitalis total trade and associate receivables plus inventories, less trade and
associate payables, and accruals. It excludes amounts owing to suppliers
and employee entitlements and includes trade working capital classified
as held for sale.
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 capital daysis calculated as 13-month rolling average trade working capital divided by
revenue from the sale of goods (excluding impact of derivative financial
instruments) multiplied by the number of days in the period.
Glossary CONTINUED
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38
Fonterra Interim Report 2024
GLOSSARY
Directory
Fonterra Board of Directors
Peter McBride
Clinton Dines
Brent Goldsack
Leonie Guiney
Bruce Hassall
Holly Kramer
Andy Macfarlane
John Nicholls
Cathy Quinn
Scott St John
Alison Watters
Fonterra Management Team
Miles Hurrell
Simon Till
Judith Swales
Teh-han Chow
Kate Daly
Mike Cronin
Komal Mistry-Mehta
Emma Parsons
Anna Palairet
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
Auditor
KPMG
18 Viaduct Harbour Avenue
Auckland 1010
New Zealand
Farmer shareholder & supplier services
Freephone 0800 65 65 68
Fonterra Shares & FSF Units Registry
Computershare Investor
Services Limited
Private Bag 92119
Auckland 1142
New Zealand
Level 2, 159 Hurstmere Road Takapuna
Auckland 0622
New Zealand
Investor Relations Enquiries
Phone +64 9 374 9000
https://www.fonterra.com/nz/en/investors.html
Stephanie & Brent, Auckland
insightcreative.co.nz FONTERRA126
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39
Fonterra Interim Report 2024
DIRECTORY
fonterra.com
---
Fonterra Co-operative Group Limited
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 28/03/2024
Ex-Date (one business day before the
Record Date)
27/03/2024
Payment date (and allotment date for DRP) 11/04/2024
Total monies associated with the
distribution
1
$241,078,583
Source of distribution (for example, retained
earnings)
Retained earnings
Currency NZD
Section 2: Distribution amounts per financial product
Gross distribution
2
$0.15000000
Gross taxable amount
3
$0.15000000
Total cash distribution
4
$0.15000000
Excluded amount (applicable to listed PIEs) Not Applicable
Supplementary distribution amount Not Applicable
1
Continuous issuers should indicate that this is 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
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
Not Applicable
Imputation tax credits per financial product Not Applicable
Resident Withholding Tax per financial
product
0.04950000
Section 4: Distribution re-investment plan (if applicable)
DRP % discount (if any) Not Applicable
Start date and end date for determining
market price for DRP
Not Applicable Not Applicable
Date strike price to be announced (if not
available at this time)
Not Applicable
Specify source of financial products to be
issued under DRP programme (new issue
or to be bought on market)
Not Applicable
DRP strike price per financial product Not Applicable
Last date to submit a participation notice for
this distribution in accordance with DRP
participation terms
Not Applicable
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 21/03/2024
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.
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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