Northington Partners Independent Report

4 November 2024

Northington Partners Independent Report

The attached independent report, prepared by Northington Partners at the request of the Fonterra Co-
operative Council (on behalf of Fonterra), for the purposes of s109LA of the Dairy Industry Restructuring
Act 2001, has been provided to shareholders by the Fonterra Co-operative Council.

ENDS

For further information contact:

Anya Wicks
Company Secretary
Phone: +64 21 283 0945

---

FONTERRA
CO-OPERATIVE
COUNCIL
Review of FY24 Performance
Fonterra Co-operative Group
November 2024

Review of FY24 Performance |
2
Important Notice
Declarations
This report is dated 1 November 2024 and has been prepared by Northington Partners at the request
of the Fonterra Co-operative Council (“
FCC”) on behalf of Fonterra Co-operative Group Limited
(“
Fonterra”) for the purposes of s109LA of the Dairy Industry Restructuring Act 2001. The report is
intended to provide Fonterra shareholders and unitholders with an independent review of Fonterra’s
performance for FY24.
The analysis and views expressed in this report have been prepared independently of Fonterra and
FCC by Northington Partners. Fonterra has not provided any input into the content of this report and
provides no warranty or assurance as to the accuracy, adequacy or completeness of the information
in it. Fonterra does not accept or assume any duty, responsibility or liability to any party (including,
without limitation, in negligence) in connection with this report.
Qualifications
Northington Partners provides an independent corporate advisory service to companies operating
throughout New Zealand. The company specialises in corporate advisory, mergers and acquisitions,
capital raising support, expert opinions, financial instrument valuations, and business and share
valuations. Northington Partners is retained by a mix of publicly listed companies, substantial
privately held companies, and state-owned enterprises.
The individuals responsible for preparing this report are Greg Anderson B.Com, M.Com (Hons), Ph.D,
Jonathan Burke B.Com (Hons) and Mathew Rooza B.Com, CPA. Each individual has a wealth of
experience in providing independent corporate finance advice to a wide range of clients.
Disclaimer and Restrictions on the Scope of our Work
In preparing this report, Northington Partners has relied on publicly available information, unless
stated otherwise. Northington Partners has not performed anything in the nature of an audit of that
information, and does not express any opinion on the reliability, accuracy, or completeness of the
information provided to us and upon which we have relied.
Northington Partners has used the provided information on the basis that it is true and accurate in
material respects and not misleading by reason of omission or otherwise. Accordingly, neither
Northington Partners nor its Directors, employees or agents, accept any responsibility or liability for
any such information being inaccurate, incomplete, unreliable or not soundly based or for any errors
in the analysis, statements and opinions provided in this report resulting directly or indirectly from any
such circumstances or from any assumptions upon which this report is based proving unjustified.
We reserve the right, but will be under no obligation, to review or amend our report if any additional
information which was in existence on the date of this report was not brought to our attention, or
subsequently comes to light.
To the maximum extent permitted by law, Northington Partners, its affiliates, directors, officers and
employees will not be liable for any loss or damage arising as a result of reliance being placed on any
of the information contained in this report.

Review of FY24 Performance |
FY24 Highlights
Continuation of Strong
Earnings
Fonterra reported FY24 earnings from continuing operations of 70 cents per share. This was at the top of its guidance (60 – 70 cents) and only
marginally down on FY23’s record earnings outcome of 75 cents.
Although price relativities between reference and non-reference products eased compared to FY23 and led to materially lower performance in
Ingredients, they did not narrow as much as expected and that outcome contributed to performance being at the top of the guidance range. Group
EBIT from continuing operations of $1,560m was down ~11% on last year’s record ($1,755m).
Significantly Improved
Consumer and
Foodservice Performance
Offsetting Weakening
Ingredients
Ingredients EBIT was down $657m (-42%) to $898m in FY24. The earnings decline was primarily due to lower margins resulting from narrower price
relativities. A higher proportion of milk volumes was also allocated to higher value channels.
Conversely, Consumer and Foodservice collectively contributed to a $462m increase in EBIT vs FY23. Consumer earnings increased to $199m, an
improvement of $111m on last year when adjusting for the difference in net impairments ($244m in FY23 and $31m in FY24). Foodservice earnings
were up $138m to $463m. Both channels were supported by increased volumes and higher margins (primarily due to the lower cost of milk).
Lift in 2024/25
Farmgate Milk Price and
Advance Rates
Fonterra declared a final 2023/2024 Farmgate Milk Price (FGMP) of $7.83 per KgMS and a total dividend for the year of 55 cents per share,
generating an effective total cash return of $8.38 per share backed kgMS for the season.
Further strengthening in GDT prices and constrained global milk supply has resulted in Fonterra lifting its 2024/25 forecast FGMP midpoint by 50
cents to $9.00 per kgMS (~15% up on the final 2023/2024 Milk Price) with a range of $8.25 - $9.75 per kgMS. The higher milk price has also been
accompanied by an uplift in Advance Payment Rates, ensuring that suppliers will be paid more for their milk earlier in the season. Fonterra’s
stronger balance sheet has enabled the Co-operative to enhance the Advance Rate over the past two seasons.
Continued Balance Sheet
Strengthening Supports
Capital Returns
Despite no significant asset sales in FY24, the strong underlying performance of the business and lower working capital requirements have resulted
in further strengthening of the balance sheet, with net debt reducing by $0.6bn year on year to $2.6bn. This has resulted in the gearing ratio
reducing to 24.0% (vs 28.8% in FY23 and a FY18-FY23 average of >40%, with a target of 30% - 40%).
The reduction in net debt provides Fonterra with significant balance sheet flexibility and supports the increased total annual dividend to a record 55
cents per share for FY24 (40 cent total ordinary and 15 cent special dividend vs 50 cent total ordinary in FY23). This represents a total dividend
payout of ~82% of earnings (vs current policy of 40% - 60%).
Strategic Review
Complete
Some further detail on Fonterra’s potential exit from Consumer and related businesses has been released. Fonterra has confirmed a strategic focus
on Ingredients and Foodservice while providing some key financial targets for the retained business, including higher returns (10% – 12% return on
capital vs 9% – 10% currently) and a higher dividend payout policy (60% – 80% of normalised earnings vs 40% – 60% currently).
The high-level rationale for the potential exit of the Consumer and related businesses appears reasonable when viewed from a financial performance
perspective, noting that the “In-scope” business comprises approximately 30% of the Co-operative’s capital employed but only delivered
approximately 17% of FY24 earnings.
FY25 Earnings Outlook &
Change in Tax Status
The Fonterra Board has provided earnings guidance of 40 – 60 cents per share for the 2025 financial year. However, the recent exhaustion of NZ tax
losses means that this is not comparable to historic earnings where dividends on supply backed shares were treated as a tax expense and utilisation
of tax losses contributed to lower overall tax expenses (higher post tax earnings) at the Group level. Normalising for the change in Fonterra’s tax
status and higher expected digital transformation costs, the current FY25 outlook implies underlying performance broadly consist ent with FY24.
1
2
4
3
5
6
3

Review of FY24 Performance |
Table of Contents
4
SectionPage
Section 1FY24 Results Review5
Financial Performance6
Return on Capital9
Financial Position12
Outlook15
Section 2Strategic Update18
Divestment19
Updated Strategic Targets24
Section 3Flexible Shareholding26
NZ Milk and Shareholder Flexibility27
Restricted Market Discount29
Appendix –SupportingInformation30

Section 1:
FY24 Results Review
FONTERRA
CO-OPERATIVE
COUNCIL

Review of FY24 Performance |
Fonterra reported FY24 earnings (EBIT) from continuing operations of $1,560m, a 11% reduction on FY23’s record results.
Total Group Financial Performance
NZ$ Million (Continuing Operations)FY24FY23% Change
Sales Volume (‘000 MT)
3,4703,497(1%)
Total Revenue
22,82224,580(7%)
Cost of Goods Sold
(19,000)(20,399)(7%)
Gross Profit
3,8224,181(9%)
Gross Margin
16.7%17.0%n/a
Impairments
(34)(248)n/a
Operating Expenses
(2,335) (2,248) 4%
Other Items
1077053%
Reported EBIT
1,5601,755(11%)
Reported EBIT Margin
6.8%7.1%n/a
Net Finance Costs & Tax
(392) (514) (24%)
Net Profit After Tax (Continuing Ops)
1,168 1,241 (6%)
Net Profit After Tax (Discontinued Ops)
(40) 336 n/a
Total Group Net Profit After Tax
1,128 1,577 (28%)
Earnings Per Share (Continuing Ops)
$0.70$0.75(7%)
Dividend per Share
$0.55$0.5010%
Although down on FY23, Fonterra delivered a solid earnings result for FY24, with reported earnings
before interest and tax (EBIT) and reported net profit after tax (NPAT) above long-term historical
averages. Reported EBIT from continuing operations reduced by 11% to $1,560m.
Similar to FY23, Fonterra’s results for FY24 are complicated by earnings relating to discontinued
businesses, being DPA Brazil in FY24 and Hangu China farm and Soprole in FY23. We have therefore
focused on the results for the continuing operations, as summarised in the adjacent table and
commentary below.
–Flat sales volumes and lower product pricing contributed to a 7% reduction in revenue
($22,822m in FY24 vs $24,580m in FY23).
–Reduced price relativities compared to FY23’s record levels contributed to reduced gross profits,
albeit with margins remaining high (16.7% FY24 vs 17.0% FY23). A lower contribution from
Ingredients was offset by higher margins and sales volumes in the Foodservice and Consumer
channels.
–Excluding impairment expenses, operating expenses from continuing operations increased by
$87m (4%), primarily reflecting increased IT & Digital transformation costs, technical and
professional costs as well as ongoing inflationary pressures.
–Reported EBIT from continuing operations was down $195m (11%). When excluding impairments
($56m
1
in FY24 and $248m in FY23), EBIT was down 19% on FY23.
–The resulting reported NPAT for FY24 was $1,128m on a continuing and discontinued operation
basis (67 cents per share), compared to an equivalent $1,577m in FY23 (95 cents per share)
which benefited from gains on the sale of Soprole. FY24 NPAT benefited from a significant decline
in finance costs due to recent divestments and the resulting reduction in debt costs.
–Earnings from continuing operations of 70 cents per share was at the top end of Fonterra’s
guidance (60 to 70 cents per share) and only marginally down on FY23’s record earnings
outcome of 75 cents.
–The Group declared a final ordinary dividend of 25 cents per share for FY24 and a special
dividend of 15 cents per share, bringing the total FY24 dividend to 55 cents per share. This
represents a 5 cents per share increase compared to FY23. Excluding the special dividend, the
dividend corresponds to a 60% payout ratio, at the top of Fonterra’s dividend policy payout range
of 40% to 60%. The high dividend payout and 15 cent special dividend is reflective of Fonterra’s
current strong balance sheet driven by recent cash earnings strength.
Reported EBIT and Reported EBIT Margin (Continuing Operations)
6
816
946
1,755
1,560
4.2%
4.3%
7.1%
6.8%
FY21FY22FY23FY24
Reported EBITReported EBIT Margin
1
FY24 Cost of Goods Sold includes impairments of $22m.

Review of FY24 Performance |
806
579
370
115
942
503
Core OperationsGlobal MarketsGreater China
FY23FY24
1,555
325
(125)
898
463
199
IngredientsFoodserviceConsumer
FY23FY24
Financial Performance by Channel & Segment
There was a material shift in the composition of operating earnings (EBIT) between channels in
FY24 vs FY23:
EBIT from the Ingredients channel was down by $657m in FY24, reflecting the following key
factors:
–Lower sales volumes and reduced margins, largely due to a reduction in price relativities
between Non-Reference products and Reference Products;
–Lower regional margins in Australia (due to a higher milk price); and
–An increase in the cost of milk (as per the Milk Price calculation) due to changes in lactose
prices.
Conversely, EBIT for Foodservice and Consumer was up $138m and $111m respectively when
adjusting for impairments in the Consumer channel in FY23 and FY24. Both segments benefited
from:
–Favourable margins predominantly driven by a comparatively lower cost of milk as well as
higher in-market pricing; and
–Increased sales volumes, mainly driven by UHT cream in the China Foodservice business as
well as Consumer products in FBNZ, Sri Lanka and the Middle East.
Similar market dynamics led to a shift in earnings contributions across the three Segments:
–Core Operations reported a $691m reduction in EBIT, largely reflecting lower margins in New
Zealand milk processing (Ingredients).
–Global Markets earnings were up $170m (adjusting for impairments) to $947m, largely
driven by improvements in the Consumer channel.
–Greater China delivered a $113m increase in EBIT (adjusting for impairments) to $529m,
with a particularly strong pick-up in Foodservice across the region.
While the price differential between Non-Reference and Reference products contributed to lower performance in Ingredients, the lower cost
of milk and firm end-product pricing led to significant margin & earnings improvement in the Consumer and Foodservice channels.
Reported EBIT by Channel (NZ$ million)
7
Reported EBIT by Segment (NZ$ million)
$119m when
adjusted for $244m
impairment.
$777m when adjusted for
$198m impairment.
$416m when adjusted for
$46m impairment.
Note: Segment and Channel Information is available for continuing operations onlyNote: FY24 includes impairments of $25m, $5m and $26m in Core Operations, Global Markets and Greater China respectively
$230m when
adjusted for $31m
impairment.

Review of FY24 Performance |
Although average price relativities eased in FY24 compared to the record levels observed in FY23, they remain high compared to historical
levels. Price relativities were estimated to have contributed ~12cps to FY24 earnings vs ~40cps in FY23 and Fonterra’s estimated long-run
average of 0-5cps.
Price Relativities
Historical Price Relativities (Non-Reference / Reference Product Prices)
8
The price relativities between Reference and Non-Reference Products have a significant
influence on Fonterra’s profitability, particularly within the Ingredients channel. The bottom left
chart summarises the price relativities by financial year using monthly GDT data for the prices of
cheddar and WMP as proxies for Non-Reference and Reference products. This illustrates that
although the average price relativity eased in FY24 to 1.3x when compared to FY23 (1.4x), it was
still higher than long-term averages. The start of FY25 also indicates a slight reduction in price
relativities compared to both FY24 and FY23.
While it is difficult to reliably identify specific factors which drive the changes through time, the
price relativity must ultimately be underpinned by changing supply and demand dynamics
between the product categories. Without any evidence for a structural change in the market, we
would expect that over the long-run, the price relativities will revert to average levels.
As is the case with general commodity prices, Fonterra is effectively a ‘price-taker’ in relation to
price relativities. Year-to -year volatility in earnings will therefore continue to be exposed to the
underlying variability in this key driver of performance.
Source: Global Dairy Trade, adjusted forward 3 months to reflect shipment delay.
WMP and Cheddar used as proxies for Reference & Non-Reference Products.
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
FY24
R² = 0.7846
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
1.11.151.21.251.31.351.41.45
Ingredients Segment Gross Margin
Non-reference / Reference Product Price Relativities
Relationship Between Price Relativities and the Ingredients Segment Gross Margin
Fonterra management estimates that price relativities in FY24 contributed 12 cents per share to
earnings, significantly down on FY23’s 40 cents. This change explains the majority of the drop in
the Ingredients channel contribution in FY24 - the 28 cent drop represents >$600m at the gross
profit level vs the $657m decline in Ingredients EBIT observed in FY24.
Based on the monthly GDT prices for Non-Reference and Reference Products averaged over each
financial year, the chart below shows a strong relationship between price relativities and the gross
margins generated by the Ingredients channel. Nine years of monthly pricing data suggests that
the price relativities have averaged 1.28x, consistent with the Ingredients segment delivering gross
margins of ~11.0%. Our analysis further suggests that FY24 excess or “abnormal” price relativities
were ~$300m (the gross margin difference of an average year at 11.0% and FY24 actual
Ingredients gross margins of 13.1%), equivalent to approximately 14 cents per share (post tax).
While this is similar to management’s estimate of 12 cents, we have insufficient information to
reconcile the difference.
If the price relativities do revert to long run averages, we expect that the gross margin achieved by
the Ingredients channel will reduce (subject to the impacts of periodic volatility, Fonterra’s cost
reduction initiatives and any further improvement in the relative volume split between Reference
and Non-Reference Products). We also note that price relativities for FY25 year to date suggest
that margins for the Ingredients channel may continue to reduce compared to recent years.
0.80
0.90
1.00
1.10
1.20
1.30
1.40
1.50
1.60
1.70
AugSepOctNovDecJanFebMarAprMayJunJul
Cheddar Price Relative to WMP Price as
Proxy for Price Relativities
FY20FY21FY22FY23FY24FY25

Review of FY24 Performance |
811
805
837
1,586
1,348
12,313
12,281
12,356
12,774
11,904
6.6%
6.6%
6.8%
12.4%
11.3%
FY20FY21FY22FY23FY24
Group Normalised EBIT Average Capital Employed Return on Capital
Our review of Fonterra’s financial performance since inception (published in November 2018)
noted that the average post-tax return on capital employed (“
ROCE”) was approximately 6.0%,
below the assessed benchmark range of 6.9% - 7.7%. The chart below summarises ROCE since
FY20 and shows the dramatic improvement recorded in FY23 and FY24.
These results are based on Fonterra’s approach to calculating ROCE; it reflects normalised EBIT
and is based on the book value of equity. Normalised EBIT excludes the $66 million loss related
to the disposal of DPA Brazil. FY24 impairments totaling $34 million, mainly recognised in the
Group’s Consumer channel, are however included in the calculation of normalised EBIT.
Fonterra’s FY24 ROCE was 11.3% vs 12.4% in FY23.
The reduction in FY24 ROCE reflects reduced earnings offset by the material reduction in average
capital employed in FY24 ($870m or 7%) when compared to FY23. The lower capital employed is
primarily due to the $804m capital return to shareholders in August 2023 following the Soprole
sale. As discussed previously, FY24’s decreased earnings is largely driven by lower profitability in
the Ingredients channel, attributed mainly to the narrowing price relativity between Reference
and Non-Reference Product prices when compared to FY23.
Return on Capital
Historical Return on Capital (Based on Fonterra Estimates)
ROCE = (Group Normalised EBIT + finance income on long term advances) x (1 – notional tax rate)
Explanation
Return on Capital (ROC) or Return on Capital Employed (ROCE) is a measure of how well
capital has been invested. As shown below, this is assessed by looking at the post-tax
return from the assets as a proportion of their book value.
Average Capital Employed (Seasonally-adjusted)
Fonterra provided a breakdown of return on capital by channel for the first time in FY23, along
with the comparable data for FY22. In line with the earnings improvements previously discussed,
the ROCE for both the Foodservice and Consumer channels were materially higher in FY24, with
both channels supported by increased volumes and higher margins (primarily due to the lower
cost of milk).
ROCE calculations reflect the impact of the impairments taken – that is, the channel earnings
used in the calculation have not been normalised for the impairments.
A continuation of strong earnings in FY24 resulted in a return on capital employed of 11.3%, down on 12.4% in FY23, but above the
previous four-year average of 8.1% and significantly above the previous Long-Term Aspirations target of 7% - 8%.
Historical Return on Capital by Channel (Based on Fonterra Estimates)
9
1.
Plus finance income on long term advances less notional tax charge
9.0%
5.5%
(0.4%)
16.3%
15.7%
(3.9%)
10.2%
19.6%
6.8%
IngredientsFoodserviceConsumer
FY22FY23FY24
1

Review of FY24 Performance |
Fonterra declared a final Farmgate Milk Price of $7.83 per kgMS for the 2023/2024 season, a
decrease from $8.22 in the prior year. The reduction was largely attributed to weaker
international demand for Reference Products which reduced pricing. As summarised in the chart
below, reduced pricing had a negative impact of $0.65 per kgMS, partly offset by favourable
foreign exchange movement resulting from on-going weakness in the New Zealand dollar ($0.39
per kgMS). A $147m inflationary increase in input costs also contributed to a $0.14 per kgMS
decline.
At the time of the results announcement, Fonterra communicated strengthening GDT prices and
constrained milk supply in key producing regions. The most recent GDT auctions have confirmed
an improvement in market demand and have led to a $0.50 upgrade to the forecast 2024/2025
FGMP, now at $8.25 - $9.75 per kgMS with a mid-point of $9.00 per kgMS
1
. This forecast of
$8.25 - $9.75 per kgMS positions it above Dairy NZ’s current estimated national breakeven milk
price of $8.15 per kgMS
2
.
Fonterra declared a final 2023/2024 Farmgate Milk Price of $7.83 per kgMS and has increased its 2024/2025 forecast range to $8.25 -
$9.75 per kgMS with a mid-point of $9.00 per kgMS
1
.
Final Milk Price
Normalised Earnings Per Share and Payout Ratio ($ per kgMS)
2023/2024 Farmgate Milk Price Guidance Range
The graph below shows that the milk price guidance for FY24 issued to farmers in May 2023 was
broadly in line with the final declared FGMP of $7.83. Downgrades in August were offset with
upgrades during the remainder of the season. This is opposite to pattern observed in FY23, where
an initial uplift was followed by downgrades over the course of the season.
The higher milk price has also been accompanied by an uplift in Advance Payment Rates,
ensuring that suppliers will be paid more for their milk earlier in the season. Fonterra’s stronger
balance sheet has enabled the Co-operative to enhance the Advance Rate over the past two
seasons. The Advance Rate of $7.00 for September 2024 represents 78% of the forecast
2024/2025 FGMP mid-point of $9.00 compered to ~70% for the corresponding period in 2023.
10
1
As at 25 September 2024
2
As at 11 October 2024
7.83
5.00
5.50
6.00
6.50
7.00
7.50
8.00
8.50
9.00
9.50
10.00
Guidance RangeGuidance - MidpointActual FGMP
$8.22 $0.01
($0.65)$0.39
($0.14)$7.83
FY23 FGMPVolumePricingForeign ExchangeCash CostsFY24 FGMP
Net $0.25 reduction in Revenue
Final FGMP determined in
September 2024.

Review of FY24 Performance |
Fonterra announced a final dividend of 25 cents per share for FY24 plus a special dividend of 15
cents per share, bringing the total dividend for the year to 55 cents per share. This is a marginal
increase on the total dividend paid in FY23 of 50 cents per share (excluding the 50 cent capital
return).
The adjusted NPAT used as the basis for the dividend calculation was $0.67 per share, meaning
the 40 cents per share ordinary dividend corresponds to a payout ratio at the top end of the 40%
- 60% dividend policy range. Fonterra noted that the special dividend is supported by the higher
earnings over the last two years, combined with a strengthened balance sheet and leverage
metrics within target levels. Including the special dividend, the total dividend of 55 cents per
share corresponds to an 82% FY24 payout ratio.
Fonterra has subsequently updated its dividend policy to a payout target of 60% - 80% of
reported net profit after tax that is attributable to Co-operative equity holders, excluding abnormal
items (see page 24).
Total payout to fully shared up farmers for FY24 has been bolstered by a dividend of 55 cents per share, which includes a special dividend
of 15 cents per share.
The chart below summarises the total payout per share since FY21 (see page 38 for further
details). With a final 2023/2024 Farmgate milk price of $7.83 and the 55 cent total dividend,
total payout reached $8.38 per share backed kgMS in FY24. The total cash return of $8.38 in
FY24 was below the highest total payout achieved over the last ten years ($9.50 in FY22)
1
but
above the historic ten-year (FY14-23) average total payout of $7.03.
Despite current earnings guidance for FY25 (40 – 60 cents per share) being down on FY24 (67
cents) largely due to the change in tax status and ongoing IT and transformation costs, FY25
ordinary dividends may only reduce modestly. This reflects the updated dividend policy along with
Fonterra’s strong capital position. If the higher milk price forecast for the current season is
achieved, the total payout for FY25 is likely to increase to levels higher than those achieved over
the last two years.
Normalised Earnings Per Share and Payout Ratio
Total Payout
1
Excludes 50c
capital return
Total Payout and Payout Ratio
11
1. Per share backed kgMS
$7.54
$9.30
$8.22
$7.83
$0.20
$0.20
$0.50
$0.55
$7.74
$9.50
$8.72
$8.38
FY21FY22FY23FY24
Farmgate Milk PriceDividend per Share
Includes 15c
special dividend
$0.14
$0.15
$0.30
$0.16
$0.20
$0.20
$0.50
$0.40
$0.15
$0.34$0.35
$0.80
$0.71
57%
59%
63%
82%
FY21FY22FY23FY24
Normalised Retentions Per ShareDividend Per ShareSpecial Dividend Per SharePayout Ratio

Review of FY24 Performance |
Fonterra’s recent focus on capital management, along with its improved earnings performance and recent divestments (including DPA
Brazil in FY24) have contributed to a strong balance sheet.
Financial Position
NZ$ MillionFY24FY23% Change
Assets
Cash and Cash Equivalents5401,822(70%)
Receivables2,1232,473(14%)
Inventories4,4584,3463%
Other Current Assets 374854(56%)
PP&E6,4006,3431%
Intangible Assets1,7851,824(2%)
Other Non-Current Assets 9999396%
Total Assets16,67918,601(10%)
Liabilities
Payables2,5732,3738%
Owing to Suppliers1,6231,997(19%)
Current Borrowings1,03278531%
Capital Return Payable-8040%
Other Current Liabilities6191,302(52%)
Non-Current Borrowings2,3563,156(25%)
Other Non-Current Liabilities30121639%
Total Liabilities8,50410,633(20%)
Net Assets8,1757,9683%
Non-Controlling Interests766223%
Equity Attributable to Co-op8,0997,9062%
Adjusted Net Debt (NZ$ million) and Gearing Ratio (%)
12
$5,238m
$4,325m
$5,339m
$3,207m
$2,605m
44.2%
38.5%
42.4%
28.8%
24.0%
FY20FY21FY22FY23FY24
Adjusted Net DebtGearing Ratio
Net Assets increased to $8,175 million at the end of FY24, representing an increase of $207 million
(+3%) from the previous year.
The Group’s cash and cash equivalents decreased by $1,282 million (-70%) to $540 million, with
FY23’s balance of $1,822 million including the sale proceeds of Soprole which was completed in
FY23. A capital return of $804 million in relation to the divestments were paid in August 2023,
significantly contributing to the decrease of cash and cash equivalents in FY24.
Inventory values increased $112 million (3%) during FY24, now at $4,458 million. Fonterra
estimates that based on a reduction of ~25,000 MT (-4%), the volume of inventory held at FY24 year
end equates to a ~$200 million reduction. The higher closing milk price per MT in FY24 offsets the
lower volume held, resulting in an increase in the balance sheet value.
Broader reductions in working capital days (89 in FY24 vs 91 in FY23) have also contributed to
improved cash conversion and lower debt. Adjusted net debt has decreased by $602 million to
$2,605 million with gearing levels correspondingly lower at 24.0% (vs 28.8% FY23). The gearing ratio
is also significantly below Fonterra’s policy range of 30% - 40% and historic average levels.
Further analysis of the ending net debt position is set out on the following page.

Review of FY24 Performance |
$3,207m
($2,201m)
($112m)
($11m)
$741m
$884m
$97m
$2,605m
FY23
Net Debt
Cash from
Operations
Change in
Net Working
Capital
Divestments
& Asset Sales
Capital
Expenditure
& Other
DividendsOther Non-cash
and Financing
Cash Flow
FY24
Net Debt
4.6x
4.3x
3.3x
2.7x
3.2x
1.3x
1.2x
FY18FY19FY20FY21FY22FY23FY24
Fonterra’s net debt has decreased by a further $602m over FY24 due to strong earnings and decreased working capital. Gearing and
leverage ratios are now well below target levels.
Fonterra’s significantly reduced debt levels and improved gearing (24.0%) and debt / EBITDA
ratios (1.2x) provide significant financial flexibility for future investment or capital returns.
–Fonterra’s FY24 debt to EBITDA ratio decreased to 1.2x (1.3x at FY23), significantly below its
target of <2.5x and historic levels.
–Along with the reduced gearing ratio (24.0%), we consider that the strong balance sheet
provides scope for further growth investment or capital returns to shareholders even prior to
the potential divestment of the Consumer and associated businesses (see Section 2).
However, we expect that any decision on future capital returns will be deferred until the
divestment process has been concluded.
–The improved debt position also supports the increased dividend payout target of 60% - 80%
(vs 40% - 60%) and provides the scope to improve Advance Rates while still maintaining
Fonterra’s “A” band credit rating (a key influence on Fonterra’s ability to access debt at
attractive rates).
Debt / EBITDA
1
Net Debt decreased to $2,605 million at the end of FY24, representing a decrease of $602
million (-19%) from the previous year. Key contributors to the changes in net debt over the FY24
period are summarised as follows:
–Operating cash flows of $2,201 million are down $543 million on $2,744 million achieved in
FY23 (albeit off a record earnings year).
–Investment in working capital has reduced by $112 million.
–Capital expenditure during FY24 increased only slightly ($32 million) compared to FY23
($709 million).
–Dividends paid during FY24 includes the FY23 final dividend of $643 million and the FY24
interim dividend of $241 million, together totaling $884 million.
–We note that the $804m capital return that was paid in FY24 was included in the closing
FY23 adjusted net debt as a payable.
13
Net Debt Bridge (NZ$ million)
1. Calculated as Adjusted Net Debt / Normalised EBITDA
Debt Position

Review of FY24 Performance |
Capital investment for the last four years has been broken down into three broad categories:
1.Essential capital expenditure;
2.Growth capital expenditure; and
3.Other capital investment.
Most of the expenditure in FY24 was allocated to essential capital expenditure ($558 million) which
generally reflects the maintenance and improvement of existing assets. Fonterra has further broken
down this category into four sub-components categories, as shown in the chart below. Also included
within the essential capital expenditure for FY24:
–$40 million spend on decarbonisation to support Fonterra’s sustainability goals; and
–$54 million spend on wastewater assets to improve its environmental footprint.
A total of $56 million was invested to support growth for the Foodservice and Ingredients business,
including capacity expansion for high value products such as lactoferrin, probiotics and
hyrdrolysates. Three new growth investments have also been announced; these are the $75 million
high-value protein hub at Studholme, $150 million new UHT cream plant at Edendale and $150
million new cool store at Whareroa. These investments along with other growth initiatives are
expected to contribute to a significant increase in growth capital expenditure over the next few years
(see page 25).
Total capital invested during FY24 was $720 million, representing a decrease of $27 million compared to the prior year.
The $106 million of other capital investment includes investments into the Ki Tua Equity Investment
Fund, right-of -use assets and other equity investments.
As already mentioned, Fonterra completed the divestment of DPA Brazil in November 2023. This
aligns with the Group’s strategy to increase its focus on Core Operations (i.e. New Zealand milk
collection and processing). The transaction resulted in a net loss on sale for FY24 of $66 million on
both a pre-tax post-tax basis.
In May 2024, Fonterra announced a material change in its strategic direction which included the
potential divestment of some or all of its global Consumer business together with Fonterra Oceania
and Fonterra Sri Lanka. Our analysis of this potential divestment is included in Section 2 of our
report.
Capital Expenditure & Divestments
FY24FY23
Sale PriceGain/(Loss)Sale PriceGain/(Loss)
DPA Brazil
240(66)
Soprole
1,066349
China Farms (Hangu)
18(12)
Total240(66)1,084337
Historical Capital Invested by Type (NZ$ million)Summary of Recent Divestments (NZ$ million)
Note: Gain / (Loss) on Sale is on a pre-tax basis
14
249
285
281
333
291
14
36
54
51
54
104
119
121
152
173
15
26
78
85
40
37
79
53
47
56
106
63
30
79
106
525
608
617
747
720
FY20FY21FY22FY23FY24
Essential Capital for NZ OperationsWastewater
Essential Capital for Other OperationsDecarbonisation
Growth Capital ExpenditureOther Capital Invested
382
466
534
621
558

Review of FY24 Performance |
$0.48
$0.31
$0.36
$0.75
$0.70
$0.40
$0.60
FY20FY21FY22FY23FY24Est. pro forma
adjustments
FY25
Fonterra’s FY25 outlook reflects expectation of improved margins in the Consumer channel, with
Ingredients and Foodservice expected to be stable.
While the 40 – 60 cent guidance range reflects a significant reduction on the 70 cents achieved in
FY24, the FY25 forecast reflects a significant increase in non-operating related costs. These include:
–Fonterra has exhausted its New Zealand tax losses and is therefore subject to a change in tax
status. This is expected to result in a significant increase in the future level of New Zealand tax
paid, with Fonterra’s effective tax rate expected to increase to ~25% (vs ~17% in FY24). We
discuss the implications of this for shareholders on the following page; and
–Ongoing investment in IT & digital transformation costs are expected to be materially higher in
FY25 relative to the $81 million in FY24. We understand that these costs may be as high as $250
million in FY25 (~10 cents per share higher than FY24).
Despite the lower earnings guidance, current expectations for underlying FY25 performance (i.e. EBIT
before IT & digital transformation costs) appear to be in line with the FY24 outcome. Broker
consensus estimates are also consistent with this view, with a current average FY25 EBIT forecast of
$1,369 million
1
(vs $1,560 million from continuing operations in FY24 before allowing for ~$170
million of additional IT & digital transformation costs).
Fonterra’s opening EPS guidance for FY25 of 40c – 60c per share implies an underlying performance broadly consistent with FY24 when
adjusting for the change in tax status and increased IT transformation costs.
FY25 Outlook
As with previous years, price relativities will continue to have a significant influence on Fonterra’s
future performance. Consistent with management commentary, price relativities are expected to
make a similar contribution to earnings in FY25 as they did in FY24 (12 cents per share).
Note: GDT prices are adjusted forward 3 months to reflect delay between GDT
contracts struck and the shipment date (at which the invoice and revenue is recognised)
FY25 Year-to-Date Price Relativities
15
2,500
3,000
3,500
4,000
4,500
5,000
5,500
USD / MT
Cheddar (Non-Reference Product)Whole Mik Powder (Reference Product)
FY25 H1FY24 H2
Earnings Per Share (Continuing Operations)
Estimated impact of change
in tax status and increased
IT Transformation costs
(>$0.15 cents)
1
Capital IQ as at 25 October 2024

Review of FY24 Performance |
Fonterra’s exhaustion of New Zealand tax losses means it is changing how dividends are paid. While the change in tax status is unavoidable,
there may be negative consequences for certain shareholders with available tax losses at the individual level.
FY25 Change in Tax Status
16
Prior to FY25FY25 onwards
Gross dividend per share (cents)$1.00$1.00
Imputation Credit-($0.28)
Cash Dividend$1.00$0.72
Tax Payable (28%)($0.28)($0.28)
Imputation Credit Utilised-$0.28
Net cash for shareholder$0.72$0.72
Prior to FY25FY25 onwards
Gross dividend per share (cents)$1.00$1.00
Imputation Credit-($0.28)
Cash Dividend$1.00$0.72
Tax Payable (28%)--
Imputation Credit Utilised--
Net cash for shareholder$1.00$0.72
Fonterra has advised that it has now exhausted its New Zealand tax losses, previously used to
offset its tax liability. This means that from FY25, Fonterra expects to pay tax in New Zealand,
generating imputation credits which can be applied to dividend distributions. To enable all
shareholders to receive imputation credits, Fonterra is changing how it treats supply backed shares
for tax purposes:
–Prior to FY25, dividends on supply backed shares were treated as a business expense paid by
Fonterra to farmer suppliers. This tax deduction reduced the amount of tax payable by Fonterra.
–From FY25 onwards, dividends on supply backed shares will not be deducted for tax purposes
by Fonterra. This change will increase the amount of tax payable by Fonterra but means that
imputation credits will be able to be attached to dividends on all Fonterra shares and available
to offset any tax payable by individual shareholders.
All else equal, this has the following impact on Fonterra’s earnings:
–There is no impact on earnings prior to tax and therefore no impact on operating performance
(as measured at the EBIT level);
–A higher tax expense results in reduced post-tax earnings, with a flow-on effect for reported
earnings per share (as discussed on page 15);
–However, imputation credits can be attached to dividends on all shares and will be available to
offset the tax payable at the shareholder level.
At an individual shareholder level, the implications of the tax change using a simplifying assumption
of gross dividends of $1.00 per share are:
No impact on a tax paying shareholder with an effective tax rate at or above 28%. For example,
relative outcomes for a shareholder with a 28% tax rate are as follows:
–Prior to FY25, the shareholder received a higher cash dividend ($1.00), but that payment is
subject to tax at 28%. The post-tax cash benefit is $0.72.
–From FY25 onwards, Fonterra pays tax on the $1.00 at 28% and pays the net amount of $0.72
to the shareholder along with the associated imputation credits. The shareholder can apply the
imputation credits to offset their tax payable. The post-tax cash benefit is $0.72.
Non-tax paying / loss making / low effective tax rate paying shareholder worse off in the dividend tax
period.
–For shareholders with tax losses or an effective tax rate less than 28%, the ability to utilise
imputation credits may be limited and they will not be able to claim a refund on excess
imputation credits (although they can be accumulated for future benefit).
–For these shareholders, prior to FY25 the shareholder receives a higher cash dividend ($1.00)
but this would reduce from FY25 onward ($0.72).
–With insufficient taxable income available to offset through the utilisation of imputation credits,
this means the net cash received by the shareholder is lower when compared to prior FY25.
We note that these examples are only intended to be illustrative, is not tax advice and shareholders
should seek their own advice in relation to the changes to Fonterra’s tax status.
Tax Paying Shareholder (28% effective tax rate)Shareholder with Tax Losses

Review of FY24 Performance |
Fonterra reports on two efficiency targets focusing on operating costs and manufacturing costs per kgMS. These efficiency metrics were
introduced as part of Fonterra’s drive to enhance efficiencies and reduce its cost base.
Operational Efficiency Metrics
Cash Operating Expenses per kgMS
1.Cash operating expenses per kgMS collected
Cash operating expenses represent the global overheads of the Group and include head office,
selling, marketing, storage and distribution costs. In order to objectively assess cost efficiencies
relative to varying milk volumes, the cash operating costs are assessed per kgMS of New
Zealand and Australia milk solids collected.
The total costs in FY24 were $2.1 billion (based on continuing operations, less depreciation,
amortisation and impairments), implying a cost of $1.36 per kgMS vs $1.35 per kgMS in FY23.
Performance in FY24 was impacted by the following:
–Operating savings that were achieved were largely offset by the impact of inflation and
product mix change with greater volumes shifted to higher cost products (Foodservice and
Consumer); and
–An increase of $59 million in IT & digital transformation costs to $81 million.
Fonterra’s revised targets (illustrated in the chart below) imply a ~23% reduction in nominal
operating expenses on a per kgMS basis by FY27, to $1.05 per kgMS. However, this reduction is
hard to reconcile on a like-for-like basis because it is significantly impacted by:
–Increased IT & digital transformation costs in FY25 are expected to contribute to most of the
increase (~$0.10 per kgMS), representing an increase of ~$160 million on FY24. However,
these costs are not expected to continue indefinitely; and
–The large decrease after FY25 is due to the assumed divestment of the Consumer business
together with Fonterra Oceania and Fonterra Sri Lanka.
2.Core Operations manufacturing cash costs per kgMS collected (a more appropriate measure of
manufacturing efficiencies that the previous “Gross profit from Core Operations per kgMS”
measure used)
This metric measures the manufacturing performance of Fonterra. It is aimed at measuring
targeted efficiencies in the core New Zealand processing and manufacturing cost base to
improve gross profit margins on each kgMS. These costs largely represent materials, labour,
energy & packaging and the other costs directly incurred in processing milk products to the
point of sale. The measure has intentionally excluded the cost of milk (i.e. the FGMP) which is
out of Fonterra’s control and is assessed per kgMS of New Zealand milk solids collected.
The core manufacturing costs in FY24 were $3.8 billion, implying a cost of $2.58 per kgMS vs
$2.63 per kgMS in FY23. The improved performance in FY24 benefited from the following:
–Procurement benefits for materials and inputs;
–Shift in the product mix to lower cost products; and
–Efficiency gains through performance improvement programs partially offsetting inflation
and labour cost increases.
The information provided by Fonterra (illustrated in the chart below) implies a ~2% appreciation
in nominal operating expenses on a per kgMS basis by FY27, to $2.64 per kgMS. This suggests
ongoing manufacturing efficiencies are expected over the medium term when backing out an
allowance for future inflation.
17
Core Operations Manufacturing Cash Costs per kgMS
1.32
1.29
1.28
1.35
1.36
1.09
1.10
1.17
1.30
1.47
1.12
1.05
FY20FY21FY22FY23FY24FY25FY26FY27
Inflation-AdjustedActualTarget
2.53
2.51
2.49
2.63
2.58
2.06
2.11
2.30
2.62
2.64
2.62
2.64
FY20FY21FY22FY23FY24FY25FY26FY27
Inflation-AdjustedActualTarget

Section 2:
Strategic Update
FONTERRA
CO-OPERATIVE
COUNCIL

Review of FY24 Performance |
Foodservice
Ingredients
Consumer
17 Manufacturing sites
In May 2024, Fonterra announced a material change in its strategic direction which included the potential divestment of some or all of its
global Consumer business together with Fonterra Oceania and Fonterra Sri Lanka. The Co-operative has subsequently provided further
information on its revised strategy and key performance targets which replace the previous “Long-Term Aspirations” established in 2021.
Introduction
19
Fonterra’s key rationale for the potential divestment includes:
−Ownership of these businesses is not required to fulfil Fonterra’s core function of collecting,
processing and selling milk.
−Prioritizing Ingredients and Foodservice channels and releasing capital from the In Scope
Businesses would generate more value for shareholders.
−A divestment of these assets would help create a simpler, higher performing Co-operative with a
focus on Fonterra’s core business and doing what it does best.
−A divestment could allow a new owner with the right expertise and resources to unlock the full
potential of these businesses on a global scale.
We note that it is likely to be some time before any decision to divest the In Scope Businesses is
formalized. The degree to which Fonterra fully or partially exits the businesses will depend on the
level of market interest and any decision to exit will likely involve shareholder consultation and
approval.
In Scope Businesses: businesses, brands and manufacturing sites
Australia
−Cobden
−Stanhope
−Darnum
−Spreyton
−Wynyard
−Tullamarine 1
−Tullamarine 2
−Campbellfield
−Bayswater
New Zealand
−Takanini
(Auckland)
−Bridge St (Eltham)
−Makomako Rd
(Palmerston North)
Malaysia
−Dairymas
−Susumas
Sri Lanka
−Biyagama
Indonesia
−Cikarang
Middle East
−Dammam
Oceania
−FBNZ and Fonterra
Australia Foodservice
Sri LankaOceania
−Fonterra Australia Ingredients
Oceania
−Fonterra Oceania
(previously known
as FBNZ and
Fonterra Australia)
South East Asia
−Indonesia
−Malaysia
−Philippines
−Singapore
−Thailand
−Vietnam
Greater China
−China
−Taiwan
−Hong Kong
Rest of the World
−Americas
2
−Middle East
−Africa
Sri Lanka
Oceania Brands
1
Global Brands
1
1
Key brands only. ‘Anchor Food Professionals’ is a Foodservice brand and excluded
2
Americas includes Mexico and other Caribbean and Central American countries
Fonterra has announced a step-change in strategic direction with the intention of increasing
focus on the Ingredients and Foodservice part of the business. This is expected to “grow further
value for the Co-op by focusing on being a B2B dairy nutrition provider and working closely with
customers through our high-performing Ingredients and Foodservice channels”. As part of the
revised strategy, the Co-operative is exploring the divestment of some or all of the global
Consumer business as well as Fonterra Oceania and Fonterra Sri Lanka (“
In Scope Businesses”).
The In Scope Businesses comprise well known consumer brands in New Zealand and Australia
including Anchor, Mainland, Kapiti, Perfect Italiano and Fresh’n Fruity as well as the Australian
manufacturing and ingredients business. A summary of the make up of the In Scope Businesses
is set out below.
This section provides a brief overview of the potential rationale and implications for divestment
as well as Fonterra’s updated strategic targets which replace the previous “Long-Term
Aspirations” from 2021.

Review of FY24 Performance |
•Australia provides 6.8% of Fonterra’s total milk
supply (107 million kgMS)
•This represents approximately 16% of Australia’s
total milk collections
•Combined businesses represent 14.3% of
Fonterra’s total sales volumes (231 million
kgMS)
•$3.4bn (30%) of Fonterra’s total capital
employed in combined businesses
•Significant majority of which is invested across
processing / manufacturing in Australia and NZ
•$5.4bn revenue
1
•$282m EBIT ($79m Australia & $203m NZ +
rest of world) compared to total Group EBIT of
$1,616m
•<7% return on capital (vs >13% for out of scope
businesses)
2
High Level Summary of In Scope Businesses
20
The In Scope Businesses are a material component of the Co-operative, accounting for almost 30% of Fonterra’s capital employed. Despite
improved performance in FY24, these assets only contributed approximately 17% of EBIT for the year.
In Scope Businesses: FY24 Key Metrics
The In Scope Businesses represent significantly more than just the Consumer channel, with a
material level of capital invested across the entire Australian dairy value chain (collections and
processing through to consumer brands and foodservice), the NZ Consumer and Foodservice
businesses, global consumer brands and Sri Lanka.
While limited information is currently available on the In Scope Businesses, the adjacent table and
the FY23 and FY24 earnings breakdown below highlight some key metrics. These illustrate the
considerable scale of the In Scope Businesses as well as their relative underperformance compared
to the rest of the business (based on return on capital). Even after the improvement in the total EBIT
contribution of $282m in FY24 (representing a ~80% improvement on FY23), the return on capital for
the In Scope Businesses was just ~7%.
We note that the poor recent returns of the In Scope Businesses are materially impacted by the
relative underperformance of Fonterra Australia. This is partly attributable to unsustainable prices for
milk in Australia over the last three seasons as a result of the prevailing competitive landscape. Milk
prices have become disconnected from global commodity prices, with the average Australian
farmgate milk price for the 2023/2024 season over $2/kgMS higher than NZ. Excluding Australia, we
suspect that the performance of the In Scope Businesses would be within Fonterra’s previous return
on capital targets (8% – 10%).
The inclusion of Fonterra Australia as part of the In Scope Businesses follows on from the strategic
review of that business unit which was announced in 2021, but which did not lead to any divestment
or significant restructuring. Wrapping the Australian business together with the broader global
Consumer business could be more appealing to prospective purchasers and is likely to attract more
interest than Fonterra Australia on a standalone basis.
1
Based on FY23, FY24 unavailable.
2
Northington Partners’ estimates based on Fonterra’s overall return on capital of 11.3% and the relative
levels of EBIT and capital employed by the In Scope Businesses. Assumes a consistent level of notional tax
across businesses.
(20)
45
132
(33)
57
258
IngredientsFoodserviceConsumer
FY23FY24
In Scope Reported EBIT by Channel (NZ$ million)
Exclusively
Australia
Australia, NZ
and Sri Lanka
Total FY24 EBIT:
$282m ($157m FY23)
Global

Review of FY24 Performance |
Potential Divestment Value and Capital Return
21
Comparable Companies EV / Forecast EBIT Multiples
Given the value of the In Scope Businesses, the implications of the divestment for Fonterra and its shareholders are significant. We estimate
that Fonterra could return up to $3bn of capital to shareholders assuming a full exit.
While the potential value of the In Scope Businesses is subject to market testing with potential
purchasers and is highly uncertain until offers are received, a number of valuation reference points
are available. Based on high-level analysis, we estimate that 100% of the In Scope Businesses may
be worth in excess of $3bn:
− Comparable consumer dairy businesses broadly trade at average enterprise value (“EV”) to
“forecast” EBIT multiples of >14.0x. While the comparable companies are large multinational
nutrition businesses with distinct investment characteristics compared to the In Scope
Businesses, we consider the evidence supports a valuation >$3bn (i.e. EV/FY24 EBIT multiple of
>10.6x); and
−The book value of capital employed in the In Scope Businesses is $3.4bn, implying a multiple of
approximately 12x FY24 EBIT.
It is possible that Fonterra may divest some or all of the In Scope Businesses or may decide to retain
a shareholding (e.g. through an IPO or JV of the In Scope Businesses). In addition, ongoing milk supply
arrangements or other transaction terms may impact on value. The EBIT of the In Scope Businesses
is based on transfer pricing within Fonterra – if the contract milk supply arrangements used different
pricing, this would impact on value. Therefore, the potential proceeds received by Fonterra may vary
considerably depending on the final transaction structure and ongoing milk supply terms.
6.5x
13.6x
14.1x
14.4x
16.0x
17.1x
17.7x
18.1x
14.7x
SavenciaChina
Mengniu
Dairy
SaputoDanoneInner
Mongolia Yili
NestléKerry GroupBega Cheese
Source: Capital IQ. See Appendix on page 47 for further details.
Average
Based on Fonterra’s target debt levels (gearing ratio of 30% – 40% and debt to EBITDA of 2.0x-3.0x),
the Resource Allocation Framework and the Company’s current debt position (see page 13), we think
that the majority of any sale proceeds could be returned to shareholders while maintaining its “A”
band credit rating.
A value of $3.0 - $3.4bn for 100% of the In Scope Businesses represents approximately $2.00 per
share. While the level of capital that will be returned to shareholders following a successful
divestment process will be influenced by a wide range of factors (including seasonal working capital
requirements and expected capital expenditure), it could be material relative to the current share
price.

Review of FY24 Performance |
$mFY24
(Continuing
Operations)
Pro Forma Impact
1
Pro Forma FY24
Excluding In Scope
Businesses
EBIT$1,560($282)$1,278
Net finance costs($157)-($157)
Tax($235)$47($188)
NPAT$1,168($235)$933
Earnings per share$0.70($0.14)$0.56
Return on capital employed 11.3%~13.0%
Debt / EBITDA1.2x1.5x
Gearing (debt /(debt + equity))24.0%35.0%
22
Key Impacts of Potential Divestment
The divestment of the In Scope Businesses would see Fonterra focus on its international Ingredients and Foodservice businesses with no
consumer facing brands – the emphasis would instead be on business customers and developing innovative dairy products.
Illustrative FY24 Pro Forma Financial Impact of In Scope Businesses Divestment
Source: Northington Partners’ estimates.
1
Assumes that 100% of In Scope Businesses are sold and that the entire proceeds are returned to
shareholders (i.e. no impact on debt levels) through a capital return and with no change in the total number
of shares on issue.
Consistent with Fonterra’s own rationale, we consider some of the potential benefits of divestment
may include:
−Concentrates Fonterra’s effort on its core business of collecting and processing milk while
stabilising supply and improving processing efficiency.
−Creates a simplified co-operative with a focus on maximising returns from its core operations.
−Allows for an exit of the Australian business which has required significant investment at return
levels lower than what have been achieved in Fonterra’s other channels and markets.
−Prioritises investment in the Ingredients and Foodservice channels while releasing capital from
the In Scope Businesses which would generate more value for shareholders.
−Provides the potential to achieve better return on capital in the remaining businesses.
For farmer shareholders, the sale of the In Scope Businesses would see the end of Fonterra’s
ownership of well-known brands but would be unlikely to result in a material reduction in milk sales
volumes. Other than Australia (where milk collections and processing operations are also potentially
being sold), it is likely Fonterra would continue to supply milk to the divested business through its
Ingredients channel.
Potential Financial Consequences
Based on FY24 results, the pro forma impact of a 100% exit is shown in the adjacent table. This
demonstrates:
−A 18% reduction in EBIT (to $1,278m) and 20% reduction in EPS (to $0.56 per share, assuming
no change in debt levels or the number of shares on issue);
−Improved return levels on capital employed from 11.3% to ~13.0%, reflecting both a lower level of
capital and higher returns from the out of scope businesses; and
−Even if the entire sale proceeds were returned to shareholders through a capital return, debt
levels would remain well within target levels (i.e. 35% gearing and debt / EBITDA of 1.5x).
In addition, we consider that the potential sale should result in reduced capital expenditure currently
required to support the In Scope Businesses.
We also note that the potential sale of the In Scope Businesses may result in an upward “re-rating” of
the Fonterra share price depending on the price achieved and level of capital returned to
shareholders. This is largely due to the potential scale of the capital return compared to the current
share price (~50% of the farmers-only market price) while a sale would have less impact on earnings,
only reducing by ~20% (based on FY24 pro-forma estimates).

Review of FY24 Performance |
23
Decision to Divest
More detailed information around the potential divestment of the In Scope Businesses will be provided as the strategic review process
progresses. However, shareholders are expected to be consulted on any final decision and any material divestment will likely require
shareholder approval.
More detailed information will be required to properly assess the merits of a potential exit from the In
Scope Businesses. In addition to the potential benefits noted earlier, there may be some potential
downsides from the divestment which need to be more fully addressed. These include:
−Less exposure to “value-add” consumer brands and their growth potential. However, historic
growth has been limited which may be due to the brands not living up to their potential under
Fonterra ownership. We also note that a value-add strategy can readily be pursued through the
Ingredients and Foodservice channels on a B2B basis;
−Less diversified earnings streams and a reduced milk pool due to the divestment of Australia; and
−The potential loss of milk sales volumes if the potential divestment does not include milk supply
arrangements with Fonterra or the buyer(s) subsequently moves away from Fonterra supply.
Fonterra has committed to engage in further consultation with shareholders in relation to any potential
divestment. We therefore expect that more information will be provided in due course including details
on transaction structure, transaction value, use of sale proceeds (including the level of capital return
to shareholders), implications for the brands, manufacturing and people and the ongoing relationship
between Fonterra and the purchaser (e.g. milk supply arrangements). We expect that more
information will become available over the course of the remainder of FY25.
We also note that both the sale of the In Scope Businesses and any associated capital return are
expected to require shareholder approval.

Review of FY24 Performance |
As a result of the potential divestment of the In Scope Businesses, Fonterra withdrew its previous Long-Term Aspirations targets in May
2024 and has subsequently introduced new strategic targets for performance, investment and dividend policy.
Updated Strategic Targets
As part of a significant reset of the business announced in 2019, Fonterra provided some key
business targets for the following 3-5 years. Those targets were subsequently updated and amended
in September 2021 with the publication of Long-Term Aspirations (“
LTAs” ) which extended out to
2030 and included additional long-term earnings targets (EBIT and earnings per share). These have
now been withdrawn (partly due to the potential sale of the In Scope Businesses) and have been
replaced with new strategic targets.
The table below summarises the changes to the targets, illustrating:
−Higher return on capital targets of 10% - 12% vs 9% - 10% previously. However, the divestment of
the lower returning In Scope Businesses should make this target more readily achievable (noting
that the out of scope businesses returned >13% in FY24 vs <7% for the In Scope Businesses).
−A higher dividend payout policy of 60% - 80% of normalised profits vs 40% - 60% previously. Along
with higher return targets, this should deliver higher dividends per share and we suggest that the
change demonstrates confidence in the earnings outlook and strengthened balance sheet.
−Balance sheet targets (debt to EBITDA and gearing ratio) broadly consistent with previous LTA
targets. This is not unexpected and will reflect the Co-operative’s target of maintaining its “A”
band credit rating (currently A- with S&P and A Fitch).
Although Fonterra has withdrawn its previous LTA earnings guidance, we estimate that the new
targets imply long-term earnings per share performance in a similar range of 50 – 60 cents per
share, despite the sale of the In Scope Businesses. This compares to Fonterra’s current FY25
outlook of 40 – 60 cents per share which includes the In Scope Businesses. We estimate an
implied FY25 earnings per share range of 30 - 50 cents excluding the In Scope Businesses
(assuming the In Scope Businesses FY25 performance is consistent with FY24 and that Fonterra
continues to supply milk solids to the In Scope Businesses at Ingredients’ margins / kgMS
comparable with FY24).
24
1
Based on old LTA FY30 Targets
2
From an FY18 base year
Previous LTA Framework
Revised
Long Term Target
FY24
Actual
FY18-23 AverageLTA Target
1
Shareholder
returns
Return on Capital11.3%8.6%9% – 10%10% – 12%
Dividend Policy (% of
earnings)
60% (excluding
special div.)
n.a40% – 60%60% – 80%
Balance Sheet
Debt to EBITDA1.2x3.2x<2.5x2.0x – 3.0x
Gearing Ratio24%42%<35%30% – 40%
Emissions
reduction by
2030
2
Absolute Scope 1 & 2
emissions
18.5%50%50%
On-farm emissions
intensity Scope 3
Not available30%30%

Review of FY24 Performance |
525
608
617
747
720
1,050
1,030
1,125
1,000
1,200
980
FY20FY21FY22FY23FY24FY25 PreviousFY25 RevisedFY26 PreviousFY26 RevisedFY27 PreviousFY27 Revised
EssentialSustainabilityGrowth
Fonterra’s long term capex outlook has moderated due to the potential sale of the In Scope Businesses. However, it remains high in the
short-term relative to historic levels as the Co-operative looks to increase growth and sustainability investment.
Long Term Capital Expenditure Outlook
Forecast
Following average capex over the last 5 years of ~$650m, Fonterra expects capex to increase by
~50% to an average of ~$1,000m over the period to FY27. We note that:
−Some catch-up in maintenance for existing plant (referred to as “essential” capex) is expected.
Given the previous LTA included all of Fonterra’s existing operations while the revised target
excludes the In Scope Businesses from FY26 onwards, the updated projection suggests that
Fonterra expects to spend more in the core NZ business in FY26 and FY27;
−The revised FY25 growth capex partially reflects recently announced growth projects including
the $75m high value protein hub at Studholme, the $150m UHT cream plant at Edendale and
the $150m cool store expansion at Whareroa. Overall, growth capex over the FY25 – FY27
period is largely unchanged despite the potential sale of the In Scope Businesses; and
−While capex to meet Fonterra’s sustainability goals (made up of investment in “decarbonisation”
and “regulatory requirements”) seems to have reduced, it remains high compared to historical
levels. We also note that some of this expenditure may have shifted beyond FY27 given other
strategic priorities. Sustainability capex includes investment in key projects such as coal to
electric / biomass boilers, improved refrigerants and wastewater collection.
The projections for the next three years represents a material increase in investment - ~$350 million
more than average capital expenditure over the FY20 – FY24 period and twice the current
depreciation charge (~$460 million). However, the FY27 capex is $220m lower than the previous LTA
target which potentially reflects the capex that would have been required to support the In Scope
Business or other investment reductions. We also suggest that:
−Growth capex enables Fonterra to grow the Ingredients and Foodservice business and develop new
products for customers to support more value and earnings growth for the Co-operative (e.g. the
new UHT cream plant);
−The essential capex is necessary to meet Fonterra’s asset health targets and follows a period of
relative under-investment. This capex may also contribute to improved processing and supply
chain efficiencies through technology advancements (e.g. automation) and asset flexibility;
−Similarly, the material increase in decarbonisation and regulatory capital expenditure is essential
to meet Fonterra’s own sustainability targets as well as the increased ESG demands of its
customers. While it is hard to determine the earnings or premium contribution from this
investment, without it, Fonterra could lose the increasing number of customers who are seeking
sustainably-sourced milk.
Capital Expenditure FY20 – FY30, LTA vs Revised Strategy (NZ$ million)
25

Appendix – Flexible Shareholdings
Section 3:
Flexible Shareholding

Review of FY24 Performance |
Fonterra’s recent capital structure changes and strong financial performance should support greater flexibility for farmers while maintaining
Fonterra’s competitiveness for milk supply.
Competition for NZ Milk and Shareholder Flexibility
Given that Fonterra’s revised strategy is designed to optimise the value of NZ milk volumes,
maintaining stability in its future milk volumes will be critical to future performance. Fonterra’s NZ
milk collections have been relatively stable over the last five years, an outcome that is consistent
with the overall market levelling off in terms of total milk production. This has resulted in Fonterra
maintaining ~79% market share since FY21, but we note a modest decline in FY24. Long-term NZ
milk volumes are also expected to remain broadly consistent with the current level, but with the
potential for further small declines.
The potential for increased competition, including from new market entrants, could however
impact on Fonterra’s milk volumes. Any further declines would generate excess processing
capacity and could have a negative impact on margins.
Recent changes to the minimum required shareholding (as outlined in the Appendix on page 40)
should support a more sustainable supply of milk, particularly in an environment of increased
competition from other processors who may not require farmers to invest capital to support supply
(i.e. buy shares). However, restricting share trading to meet Fonterra’s new minimum required
shareholding in the farmer-only market means that farmers now set the price for shares and this
has resulted in a larger disconnect between the Fonterra share price and the FSF unit price
(currently a 20% – 25% difference)
1
. See page 29 for a recent history of relative prices between
the shares and units.
While the changes to the minimum required shareholding reduce the investment needed by
farmers to continue to supply Fonterra, the investment in FCG shares remains material even at the
minimum level. Fonterra must therefore ensure that the shares deliver long-term returns in line
with the level of required investment and the risk profile of the business. The shares must be seen
as a compelling, standalone investment opportunity rather than just a cost of remaining with the
Co-op.
Any future loss of milk supply volumes could limit future earnings growth, but we also expect that it
may provide some potential benefits, including:
−Reducing the requirement for Fonterra to collect milk from farmer suppliers that may be of
marginal profitability (i.e. sub-optimal from a cost or volume basis, for instance, due to location
and size); and
−Reduce the need to invest in processing capacity or provide the opportunity to shutdown
marginal processing capacity and avoid capacity duplication with other milk processors.
Taking all factors into consideration, we consider that Fonterra’s future collection volumes may
decline further (through either or both of declines in total market collections and increased
competition), but the net earnings impact may be limited and more than offset by Fonterra’s other
strategic objectives.
Fonterra NZ Milk Collections and Market Share
27
1
As of October 2024
1,517
1,539
1,478
1,480
1,471
80.0%
79.0%
79.1%
79.0%
78.1%
50%
55%
60%
65%
70%
75%
80%
85%
90%
95%
100%
1,000
1,100
1,200
1,300
1,400
1,500
1,600
1,700
1,800
1,900
2,000
FY20FY21FY22FY23FY24
Fonterra NZ Market Share
Milk Solids Collected (million kgMS)

Review of FY24 Performance |
121
1,035
229
244
1,024
167
301
949
171
Undershared
(less than 80%)
Close to Equally Shared
(80 - 120%)
Overshared
(Over 120%)
July 2023February 2024September 2024
Flexible Shareholding
28
Fonterra’s Flexible Shareholding was announced in May 2021 and introduced in April 2023. Since then,
Fonterra is required to periodically disclose certain shareholding metrics including ceased-farmer
holdings and the distribution of farmer shareholders relative to the Share Standard (1 share per kgMS
supplied). The recent September 2024 disclosure confirms that Fonterra remained within its specified
thresholds for the Flexible Shareholding metrics (shares on issue above the Share Standard, shares
held by ceased farmers and shares held by the Fonterra Shareholders’ Fund). However, the data also
highlights movements in farmer shareholdings relative to the Share Standard since the first disclosure
in July 2023.
Changes to the distribution of farmer milk supply relative to shareholding levels are summarised in the
chart below. Farmers described as “undershared” are those that have shares less than 80% relative to
the Share Standard, “close to equally shared” being those that are 80% – 120% of the Share Standard
and “overshared” being those with more than 120% of the Share Standard. Over the 14-month period
since July 2023, the data demonstrates significant compositional changes at the under and over
shared ends of the spectrum.
Farmer Milk Supply Relative to Share Standard (million kgMS)
Increase in # farms from 939 in
July 23 to 1,586 in Sep 24
Avg supply per farmer increased
from 129,000 to 190,000kgMS
Farmer shareholding levels relevant to milk supply have changed since the introduction of Fonterra’s flexible shareholding structure 18
months ago.
Increase in # farms from 1,276 in
July 23 to 1,422 in Sep 24
Avg supply per farmer decreased
from 179,000 to 120,000kgMS
While it is difficult to determine the drivers of changes in farmer shareholdings relative to milk
supply, we note that:
−Milk supply from undershared farmers continues to increase, from 121 million kgMS in July
2023 to 301 million kgMS in September 2024. This reflects an increase in the number of
farmers in this category (increased by ~650 to 1,588), as well as an increase in the average
milk supply per farmer (increased from 129,000kgMS to ~190,000kgMS vs an overall average
supply of 174,700kgMS). We expect that much of this increase reflects farm sales and new
farmers (~250 since July 2023) as they begin the process of sharing up, as well as production
growth (ie . increased average production relative to shares) and larger farmers sharing down
also contributing to the change;
−The number of farms that are close to equally shared has decreased by 540 (10%) since July
2023, broadly consistent with reduced volumes; and
−Milk supply in the overshared category has decreased by ~58 million kgMS despite an increase
of 150 farms in this category, but appears to have stabilized. There has been a significant
decrease in average farm supply from this group, from 179,000kgMS to 120,000kgMS. This
suggests that overshared farms are increasingly smaller farms.
Overshared farmers supplied 171 million kgMS in the 12
months to September 2024 (compared to the 229 million
kgMS supplied in the 12 months to July 2023)

Review of FY24 Performance |
362,787
267,581
225,809
71,152
116,064
120,199
107,182
461,687
238,089
176,475
65,453
44,530
63,123
62,080
824,474
505,670
402,284
136,605
160,595
183,322
169,262
2018/20192019/20202020/20212021/20222022/20232023/20242024/2025
FCGFSF
Restricted Market Discount
Average Daily Trading Volume on NZXDiscount of FCG Share Price to FSF Unit Price
1
29
While the restricted market discount has reduced since Fonterra’s strategic update in May, it still remains ~25%. This is consistent with
the average discount since implementation in April 2023.
While the price of Fonterra shares (FCG) in the farmer-only market continues to trade at a significant
discount compared to units in the Fonterra Shareholders’ Fund (FSF), the discount has narrowed
since the all-time highs seen at the beginning of 2024. Some of this is likely due to Fonterra’s
strategic update in May, the potential for a capital return and Fonterra’s ongoing strong financial
performance. However, the current discount (ranging between 20% and 25%) is still consistent with
the average 25% discount that has prevailed since the new capital structure was implemented.
The discount is consistent with the broad level of restricted market discount expected at the time the
revised capital structure was put to shareholders. We expect the volatility in the relative prices
between FCG and FSF will continue.
While the discount has represented a relative loss in value for farmers who shared up before the
announcement of the capital structure review, the change has made it easier for new suppliers to
join the Co-op. Recent financial performance and the potential for a capital return, which would make
the cost of buying shares lower (all else equal), should also make ownership more attractive and
affordable (on a per kgMS basis).
1
Calculated as (FCG price per share / FSF price per share) - 1
-40%
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
Price Discount
Capital Structure Review
Announcement Date
New Capital Structure
Implementation
Season to date
Source: Iress as at 30 September 2024

Appendix – Supporting Information

Review of FY24 Performance |
Continuing and Discontinuing Operations
31
NZ$ MillionFY23FY24
Continuing
Operations
Discontinued
Operations
Total
Group
Continuing
Operations
Discontinued
Operations
Total
Group
Sales Volume (‘000 MT)3,4974763,9733,470593,529
Total Revenue 24,5801,46626,04622,82217222,994
Cost of Goods Sold(20,399)(1,048)(21,447)(19,000)(106)(19,106)
Gross Profit
4,1814184,5993,822663,888
Gross Margin (%)17.0%28.5%17.7%16.7%38.4%16.9%
Operating Expenses(2,496)(303)(2,799)(2,369)(99)(2,468)
Other Items70348418107-107
Reported EBIT
1,7554632,2181,560(33)1,527
Reported EBIT Margin (%)7.1%31.6%8.5%6.8%(19.2%)6.6%
Normalisations-(337)(337)-6666
Normalised EBIT1,7551261,8811,560331,593
Reported Net Profit After Tax1,2413361,5771,168(40)1,128
Normalisations (post tax adjustments)-(248)(248)-6666
Normalised Net Profit After Tax1,241881,3291,168261,194

Review of FY24 Performance |
FY24 Integrated Scorecard
Key Performance Indicator (KPI)
FY22
Actual
FY23
Actual
FY24
Actual
FY24
Scorecard
People
Serious harm853*4
Gender diversity (Band 12+)37.6%39.5%40.1%*40.0%
Culture Measure-7979-
1
Nature
GHG emissions (Scope 1,2)
2
(11.2%)(14.1%)(18.5%) *(15.6%)
FEP adoption (New Zealand)71%85%93%*92%
Water Improvement Plans in place-44.0%100.0%*100.0%
Relationships
Share of New Zealand milk collected for the season to 31 May79.1%79.0%78.1%79.0%
Delivered in full, on time (DIFOT, ex-New Zealand)51.6%53.2%70.8%80.0%
Financial / Assets &
Infrastructure
Cash operating expenses per kgMS (real)
3
1.391.441.461.37
Core Operations gross profit per kgMS (real)
4
10.329.518.128.52
Return on capital6.8%12.4%11.3%*8.0% - 9.0%
Farmgate Milk Price ($)9.308.227.83*7.25 – 8.75
5
Alignment Rights
Total shareholder return (share price plus dividend)$2.73 ($0.20)$3.20 ($1.00)
6
$2.97
7
($0.55)Not Available
On-farm profitability ($ per hectare)
8
4,1503,017Not AvailableNot Available
32
* Indicates that target was met
1. No target set for FY24
2. Relative to FY18 Baseline. Scope 1&2 including farms under Fonterra operational control
3. Based on New Zealand milk solids
4. Excludes the cost of milk. Based on New Zealand milk solids
5. FY24 Scorecard reflects opening forecast price for 2024 season
6. Includes 50-cent per share capital return
7. FCG closing share price on 31 July 2024
8. DairyNZ Economic Survey 2022-2023 (Owner-Operator)

Review of FY24 Performance |
FY25 Integrated Scorecard
33
Key Performance Indicator (KPI)
FY23
Actual
FY24
Actual
FY25
Scorecard
People
Serious harm
1
181612
Percentage of Health, Safety and Wellbeing priority actions fully completed by due date76%77%95%
Culture Measure797981
Nature
GHG emissions (Scope 1,2)
2
(14.1%)(18.5%)(21.1%)
Absolute water reduction across manufacturing sites (15% by FY30)
2
(6.7%)(12.4%)(13.1%)
Relationships
Share of New Zealand milk collected for the season to 31 May79.0%78.1%78%
Delivered in full, on time (DIFOT, ex-New Zealand)53.2%70.8%80%
Financial / Assets &
Infrastructure
Cash operating expenses per kgMS (real)
3
1.351.361.43
Core Operations manufacturing cash costs per kgMS (real)
4
2.632.582.57
Return on capital (FY)12.4%11.3%8% - 10%
Farmgate Milk Price ($)8.227.837.75 – 9.25
Alignment Rights
Total shareholder return
(12-month Value Weighted Average Price of Fonterra Co-operative Unit plus dividend)
5
$2.82 ($1.00)$2.58 ($0.55)Not Available
On-farm profitability ($ per hectare)
6
3,017Not AvailableNot Available
1. A broader definition, which also includes Contractors, has been adopted for FY25 resulting in an increased number of injuries captured under the revised definition
2. Relative to FY18 Baseline. Scope 1&2 including farms under Fonterra operational control
3. Based on New Zealand and Australia milk solids. FY25 includes IT and digital transformation costs
4. Based on New Zealand milk solids collected. Excludes the cost of milk
5. Value Weighted Average Price (VWAP) for the period 1 October to 30 September. As an indicator for FY25, VWAP for the 12months to 31 August 2024 was $2.58. FY23 dividend includes 50-cent per share capital return
6. DairyNZ Economic Survey 2022-2023 (Owner-Operator)

Review of FY24 Performance |
Historical Financial Information
Sales Volume (‘000 MT)
Reported EBIT (NZ$ million)
Revenue (NZ$ million)
Normalised EBIT (NZ$ million)
Total Assets (NZ$ million)
Total Equity (NZ$ million)
1
1
Excluding non-controlling interests
Note: Includes continued & discontinued operations where known
34
Capital Expenditure (NZ$ million)
Free Cash Flow (NZ$ million)
4,3034,3134,1804,1234,1524,0694,102
3,924
3,973
3,529
FY15FY16FY17FY18FY19FY20FY21FY22FY23FY24
18,845
17,199
19,232
20,438
19,920
20,975
21,124
23,425
26,046
22,994
FY15FY16FY17FY18FY19FY20FY21FY22FY23FY24
974
1,358
1,155
902
812
879
952
991
1,881
1,593
FY15FY16FY17FY18FY19FY20FY21FY22FY23FY24
942
1,431
1,120
269
-16
1,147
959
976
2,218
1,527
FY15FY16FY17FY18FY19FY20FY21FY22FY23FY24
18,315
17,118
17,842
18,099
17,284
17,916
17,341
18,781
18,601
16,679
FY15FY16FY17FY18FY19FY20FY21FY22FY23FY24
6,473
6,859
7,140
6,219
5,757
6,692
6,863
6,933
7,906
8,099
FY15FY16FY17FY18FY19FY20FY21FY22FY23FY24
(1,372)
2,184
670
600
1,095
1,828
1,417
(324)
3,650
1,583
FY15FY16FY17FY18FY19FY20FY21FY22FY23FY24
1531
944
851
861
600
419
545
587
668
614
FY15FY16FY17FY18FY19FY20FY21FY22FY23FY24

Review of FY24 Performance |
Reported EBIT Bridge by Segment and Channel
Reported EBIT Bridge by Channel
Reported EBIT Bridge by Segment
35
($658m)
($19m)
($14m)
$13m
$57m
$293m
($12m)
$100m
$45m
($496m)
$1,527m
$2,218m
ReportedIngredientsFoodserviceConsumerIngredientsFoodserviceConsumerIngredientsFoodserviceConsumerDiscontinued
Operations
Reported
FY23 EBITCore OperationsGlobal MarketsGreater ChinaFY24 EBIT
($658m)
$13m
($12m)
($19m)
$57m
$100m
($14m)
$293m
$45m
($496m)
$1,527m
$2,218m
ReportedCore OperationsGlobal MarketsGreater ChinaCore OperationsGlobal MarketsGreater ChinaCore OperationsGlobal MarketsGreater ChinaDiscontinued
Operations
Reported
FY23 EBITIngredientsFoodserviceConsumerFY24 EBIT

Review of FY24 Performance |
Summary of Normalisations
ItemImpact on EBITImpact on Gearing
Loss on Sale of DPA Brazil▲$66m loss on sale▼
Sale proceeds reduce Net Debt, while the loss on sale
decreases Equity. All else equal, the net impact should be
a reduction in Gearing.
Normalisation Adjustments to EBIT
NZ$ millionFY20FY21FY22FY23FY24
Disposals$543m$23m$42m$337m($66m)
Impairment ($232m)($16m)($57m)--
Other / Strategy ($43m)----
Total$268m$7m($15m)$337m($66m)
Reported EBIT$1,147m$959m$976m$2,218m$1,527m
Normalisations($268m)($7m)$15m($337m)$66m
Normalised EBIT$879m$952m$991m$1,881m$1,593m
Impact of FY23 Normalisations
36

Review of FY24 Performance |
Long Term Reference vs Non-Reference Price Relativities
Reference vs Non-Reference Price Relativity Proxies
Price Margin between Reference and Non-Reference Proxies
37
Source: GDT
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
Dec-15
Feb-16
Apr-16
Jun-16
Aug-16
Oct-16
Dec-16
Feb-17
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
Feb-18
Apr-18
Jun-18
Aug-18
Oct-18
Dec-18
Feb-19
Apr-19
Jun-19
Aug-19
Oct-19
Dec-19
Feb-20
Apr-20
Jun-20
Aug-20
Oct-20
Dec-20
Feb-21
Apr-21
Jun-21
Aug-21
Oct-21
Dec-21
Feb-22
Apr-22
Jun-22
Aug-22
Oct-22
Dec-22
Feb-23
Apr-23
Jun-23
Aug-23
Oct-23
Dec-23
Feb-24
Apr-24
Jun-24
Aug-24
USD / MT
Whole Milk Powder (Reference Product)Cheddar (Non-Reference Product)
-1,000
-500
-
500
1,000
1,500
2,000
2,500
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
Dec-15
Feb-16
Apr-16
Jun-16
Aug-16
Oct-16
Dec-16
Feb-17
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
Feb-18
Apr-18
Jun-18
Aug-18
Oct-18
Dec-18
Feb-19
Apr-19
Jun-19
Aug-19
Oct-19
Dec-19
Feb-20
Apr-20
Jun-20
Aug-20
Oct-20
Dec-20
Feb-21
Apr-21
Jun-21
Aug-21
Oct-21
Dec-21
Feb-22
Apr-22
Jun-22
Aug-22
Oct-22
Dec-22
Feb-23
Apr-23
Jun-23
Aug-23
Oct-23
Dec-23
Feb-24
Apr-24
Jun-24
Aug-24
USD / MT
Whole Milk Powder (Reference Product)
Whole Milk Powder (Reference Product)

Review of FY24 Performance |
Historical Total Payout
Total Payout (Nominal NZ$ per kgMS)
Total Payout
1
(Real NZ$ per kgMS)
Note: Figures reflect the average payout for a 100% share-backed supplier
1
Adjustment made based on CPI average during relevant period, reflects price in today’s dollars
38
$5.33
$3.60
$4.25
$4.59
$4.10
$4.46
$7.66
$5.23
$6.37
$7.90
$6.40
$6.16
$8.50
$4.65
$4.30
$6.52
$6.79
$6.35
$7.19
$7.74
$9.50
$8.72
$8.38
FY02FY03FY04FY05FY06FY07FY08FY09FY10FY11FY12FY13FY14FY15FY16FY17FY18FY19FY20FY21FY22FY23FY24
Dividend per ShareFarmgate Milk Price
10 Year Average Payout of $7.01 per
kgMS ($6.75 excluding dividends)
$9.28
$6.12
$7.10
$7.47
$6.45
$6.83
$11.38
$7.52
$9.00
$10.75
$8.52
$8.13
$11.05
$6.01
$5.54
$8.28
$8.50
$7.81
$8.68
$9.17
$10.59
$9.10
$8.38
FY02FY03FY04FY05FY06FY07FY08FY09FY10FY11FY12FY13FY14FY15FY16FY17FY18FY19FY20FY21FY22FY23FY24
Dividend per ShareFarmgate Milk Price
10 Year Average Payout of $8.21 per
kgMS ($7.90 excluding dividends)

Review of FY24 Performance |
Historical Earnings per Share Performance vs Guidance
Historical Earnings Per Share Guidance Midpoint vs Actual Reported
= Actual EPS Reported at
end of guidance period
39
FY16
FY17
FY18
FY19
FY20
FY21FY22
FY23
FY24
FY25
0
10
20
30
40
50
60
70
80
90
Sep-15Mar-16Sep-16Mar-17Sep-17Mar-18Sep-18Mar-19Sep-19Mar-20Sep-20Mar-21Sep-21Mar-22Sep-22Mar-23Sep-23Mar-24Sep-24

Review of FY24 Performance |
Flexible Shareholding Summary
A new Flexible Shareholding structure came into effect during FY23. The key changes between
the old structure and the new structure are summarised in the table below.
Key ItemsOld StructureNew Structure
Increased flexibilityShare minimum: 1:1 / 100%Share minimum: 1:3 / 33%
Move to a farmer-only market
with the Fund capped
Shares and units traded and
exchanged between FSF and
FCG.
Capped FSF, can only transfer
units into shares
More types of farmers can hold
shares
Supplying Farmer owners and
sharemilkers if transferred
Addition of associated
sharemilkers, contract milkers
and farm lessors
Entry provision easedUp to 3 seasons to enter
Share-up & My Milk offered
Up to 6 seasons to enter
No Share-up & My Milk
Exit provisions extendedUp to 3 seasons to exit,
minimum 1/3 per year
Large extension for current and
new supplying farmers
Same voting rights1 vote per 1000 kgMS supplied
(share-backed)
1 vote per 1000 kgMS supplied
(share-backed)
MetricAs at July 2023As at July 2024Threshold
Total Shares on Issue above the
aggregate Share Standard
12.22%13.13%+/- 15.00%
Shares Held by Ceased Shareholders
and Permitted Transfers
9.23%10.19%≤ 25.00%
Shares held for the Fonterra
Shareholders’ Fund (“Overall Limit”)
6.67%6.67%≤ 10.00%
Since Flexible Shareholding came into effect on 28
th
March 2023, there hasn’t been any material
change to the Group’s shareholding structure. As at 31
st
July 2024, the Group was well within the
specified thresholds for all three Flexible Shareholding metrics:
40

Review of FY24 Performance |
Comparable Company Performance
41
Fonterra is very different to other entities operating in the NZ dairy sector and to overseas dairy co-ops and companies. This is due to a range of factors including the DIRA regulatory regime, scale and
product mix. Arguably the most comparable entities to Fonterra can be found overseas. This includes Arla and Friesland Campina, which are both farmer co-operatives (based in Denmark and the
Netherlands respectively) with substantial commodity and consumer operations. However, neither company is subject to the same re gulatory regime as Fonterra.
The comparisons on the following pages provide a high-level overview of revenue and earnings over time for companies in both dairy ingredients and value-add sectors, along with a single ‘point in time’
view of summary financial ratios. It is important to note that these comparisons do not take into account the differing mix of c ore dairy ingredients and value-add divisions for each company, which is a
key driver of the differing margins and gearing.
They also do not take into account different regulatory regimes for the other dairy co-operatives and the impact such regimes may have on margins, capital investment required and ultimate returns.
Finally, the performance trends over time all reflect the currency exchange rates at the relevant time, and relative changes in those rates may affect the values presented.
Dairy Co-ops
All figures are quoted in New Zealand dollars unless otherwise stated. Figures sourced from Capital IQ and Annual Reports
Note: Companies presented here have a December financial year end compared to Fonterra’s July year end
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
-
5,000
10,000
15,000
20,000
25,000
30,000
20132014201520162017201820192020202120222023
NZ$ MillionsNZ$ Millions
RevenueEBIT (RHS)
-
200
400
600
800
1,000
1,200
1,400
-
5,000
10,000
15,000
20,000
25,000
20132014201520162017201820192020202120222023
NZ$ Millions
NZ$ Millions
RevenueEBIT (RHS)
-
100
200
300
400
500
600
700
800
900
1,000
-
5,000
10,000
15,000
20,000
25,000
30,000
20132014201520162017201820192020202120222023
NZ$ Millions
NZ$ Millions
RevenueEBIT (RHS)
-
50
100
150
200
250
300
350
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
20132014201520162017201820192020202120222023
NZ$ Millions
NZ$ Millions
RevenueEBIT (RHS)

Review of FY24 Performance |
Comparable Company Performance (Continued)
42
Dairy Companies
All figures are quoted in New Zealand dollars unless otherwise stated. Figures sourced from Capital IQ and Annual Reports
Note: Companies presented here have a December financial year end compared to Fonterra’s July year end
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
-
50,000
100,000
150,000
200,000
20132014201520162017201820192020202120222023
NZ$ Millions
NZ$ Millions
RevenueEBIT (RHS)
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
20132014201520162017201820192020202120222023
NZ$ Millions
NZ$ Millions
RevenueEBIT (RHS)
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
-
10,000
20,000
30,000
40,000
50,000
60,000
20132014201520162017201820192020202120222023
NZ$ Millions
NZ$ Millions
RevenueEBIT (RHS)
-
50
100
150
200
250
300
350
400
450
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
20132014201520162017201820192020202120222023
NZ$ Millions
NZ$ Millions
RevenueEBIT (RHS)

Review of FY24 Performance |
28.7%
57.6%
23.2%
46.2%
36.4%
52.2%
16.6%
24.0%
10.7%
16.8%
3.1%
12.6%
1.6%
3.7%
5.8%
6.9%
EBIT Margin
Gearing Ratio
Average EBIT Margin
10.8%
Average Gearing
38.9%
Average EBIT Margin
(excl. Fonterra) 3.7%
Average Gearing (excl.
Fonterra) 35.1%
Dairy Companies
Dairy Co-ops
Dairy Companies
Dairy Co-ops
43
All figures are quoted in New Zealand dollars unless otherwise stated. Figures sourced from Capital IQ and Annual Reports
Note: Companies presented here have a December financial year end compared to Fonterra’s July year end

Review of FY24 Performance |
35.4%
29.3%
29.4%
34.7%
Kerry
Nestlé
Savencia
(formerly
Bongrain)
Danone
12.0%
16.6%
37.5%
12.2%
Friesland
Campina
Arla
Tine
Fonterra
46.1%
46.1%
32.5%
47.4%
13.6%
20.3%
43.4%
16.9%
Gross Margin
Operating Expenses to Sales
Dairy Companies
Dairy Co-ops
Average Gross Margin
43.0%
Average Gross Margin
(excl. Fonterra) 25.8%
Dairy Companies
Dairy Co-ops
44
All figures are quoted in New Zealand dollars unless otherwise stated. Figures sourced from Capital IQ and Annual Reports
Note: Companies presented here have a December financial year end compared to Fonterra’s July year end
Average Opex to
Sales 32.2%
Average Opex to Sales
(excl. Fonterra) 22.1%

Review of FY24 Performance |
•The share price data below provides comparisons to New Zealand and international dairy competitors to illustrate the performance of Fonterra’s share price against some of the company’s peers.
•Fonterra is the only entity within our Co-op set that is both a co-operative and a publicly listed company, therefore comparison of market pricing has only been completed against other publicly listed
companies. Similar to prior analysis, it is important to note that this does not take into account any regulatory differences or local market conditions that may ultimately impact share price data. It also
excludes dividends paid to shareholders or unitholders.
•The below chart demonstrates the performance of Fonterra Co-operative shares over the period from 1 August 2023 (start of FY24) to 9 October 2024 demonstrating a return of 37% over the period
(excluding dividends but adjusting for the capital return which occurred in August 2023). This compares favourably to both Fonterra’s domestic and international peers.
Daily price information has been rebased in NZD to 1 August 2023 for comparability between share price and local currency. Fonterra returns also adjusted for its August 2023 capital return
Source: Iress and Capital IQ as at 9 October 2024, Fonterra share price is represented by FCG.NZ
New Zealand Dairy Manufacturers
Global Dairy Competitors
Share Price Performance – Dairy Competitors
45
1.37x
0.25x
1.27x
-
0.2x
0.4x
0.6x
0.8x
1.0x
1.2x
1.4x
1.6x
FonterraSynlaitA2 Milk
1.37x
1.17x
0.97x
1.04x
0.6x
0.8x
1.0x
1.2x
1.4x
1.6x
FonterraDanoneSavencia GroupKerry

Review of FY24 Performance |
-40%
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
Oct-20
Dec-20
Feb-21
Apr-21
Jun-21
Aug-21
Oct-21
Dec-21
Feb-22
Apr-22
Jun-22
Aug-22
Oct-22
Dec-22
Feb-23
Apr-23
Jun-23
Aug-23
Oct-23
Dec-23
Feb-24
Apr-24
Jun-24
Aug-24
Price Discount
Capital Structure Review
Announcement Date
~29% average
discount over the
last 12 months
FSF and FCG Share Price Comparison
Daily Share Price Comparison
1
Discount of FCG Share Price to FSF Unit Price
1
46
1
Uses daily volume-weighted average price (VWAP). Source: Iress as at 30 September 2024
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
$5.00
$5.50
Oct-20
Dec-20
Feb-21
Apr-21
Jun-21
Aug-21
Oct-21
Dec-21
Feb-22
Apr-22
Jun-22
Aug-22
Oct-22
Dec-22
Feb-23
Apr-23
Jun-23
Aug-23
Oct-23
Dec-23
Feb-24
Apr-24
Jun-24
Aug-24
NZD per Share Unit
FSF Unit PriceFCG Share Price
Capital Structure Review
Announcement Date
New Capital Structure
Implementation
New Capital Structure
Implementation

Review of FY24 Performance |
Publicly Listed Companies
47
Source: Capital IQ as at 30 September 2024
TickerCompany NameDomicileMarket Cap
(NZD m)
Enterprise Value
(NZD m)
NTM EBIT
(NZD m)
EV / NTM EBIT
ENXTPA:SAVESavencia S.A.France1,2192,6174046.5x
SEHK:2319China Mengniu Dairy Company LimitedCayman Islands14,84919,8621,45513.6x
TSX:SAPSaputo Inc.Canada14,40718,4351,30714.1x
ENXTPA:BNDanone S.A.France73,70491,4206,34714.4x
SHSE:600887Inner Mongolia Yili Industrial Group Co., Ltd.China41,30746,4382,90316.0x
SWX:NESNNestlé S.A.Switzerland406,368518,27430,28217.1x
ISE:KRZKerry Group plcIreland27,81431,0661,75217.7x
ASX:BGABega Cheese LimitedAustralia1,7472,13111818.1x
Average
14.7x
Median
15.2x

Review of FY24 Performance |
Abbreviations & Definitions
TermDefinition
CAGRCompound average growth rate
CapexCapital expenditure
Co-op, Group or the CompanyFonterra Co-operative Group Limited
CYCalendar year ending 31 December
DIRADairy Industry Restructuring Act
DPA BrazilDairy Partners Americas Brazil
EBITEarnings before interest and tax
EBITDAEarnings before interest, tax, depreciation and amortisation
EPSEarnings per share
ESGEnvironmental, social and governance
FCGShares in Fonterra Co-operative Group Ltd (FCG.NZ)
FGMPFarmgate Milk Price
FSFShares in Fonterra Shareholders’ Fund (FSF.NZ)
FundFonterra Shareholders’ Fund (FSF.NZ)
FYFinancial year ending 31 July
GDTGlobal Dairy Trade
In Scope BusinessesGlobal Consumer business together with Fonterra Oceania and Fonterra Sri Lanka
kgMSKilograms of milk solids
LTAsLong-Term Aspirations
MTMetric tonnes
NPATNet profit after tax
Non-Reference ProductsProducts that are not included in the calculation of the Farmgate Milk Price
NTMNext Twelve Months
NWCNet working capital
NZDNew Zealand dollars
PP&EPlant, property and equipment
Price RelativitiesRefers to the difference in the weighted average price (in USD) between the Reference Product portfolio and Non Reference Product portfolio
Reference ProductsIncludes commodity products and groups that are included in the calculation of the Farmgate Milk Price
Share StandardMeans one share per one kgMS supplied
RHSRight hand side (axis)
ROC or ROCEReturn on capital employed
SMP
Skim milk powder
TSR
Total shareholder return
USDUnited States dollars
WACCWeighted average cost of capital
WMPWhole milk powder
48

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