Fonterra Bond Offer - NZX · PDF fileFonterra Bond Offer UNSECURED, UNSUBORDINATED, FIXED RATE BONDS FEBRUARY 2016

Fonterra Bond Offer

UNSECURED, UNSUBORDINATED,

FIXED RATE BONDS

FEBRUARY 2016

© Fonterra Co-operative Group Ltd. Page 1

Fonterra Co-operative Group Limited (Fonterra or Issuer) is offering up to NZ$150,000,000 of fixed rate bonds due 7 March 2023 (Bonds) in reliance upon the exclusion in clause 19 of

schedule 1 of the Financial Markets Conduct Act 2013 (FMCA).

The Bonds being offered have identical rights, privileges, limitations and conditions (except for the interest rate and maturity rate) as Fonterra’s:

(a) 6.83% NZ$150,000,000 fixed rate bonds maturing on 4 March 2016 which are currently quoted on the NZX Debt Market under the ticker code FCG020; and

(b) 4.33% NZ$350,000,000 fixed rate bonds maturing on 20 October 2021 which are currently quoted on the NZX Debt Market under the ticker code FCG030,

(together, Quoted Bonds).

The Bonds are of the same class as the Quoted Bonds for the purposes of the FMCA and the Financial Markets Conduct Regulations 2014.

Fonterra is subject to a disclosure obligation that requires it to notify certain material information to NZX Limited (NZX) for the purpose of that information being made available to participants in

the market and that information can be found from www.nzx.com/companies/FCG.

Investors should look to the market price of the Quoted Bonds referred to above to find out how the market assesses the returns and risk premium for those bonds.

Application has been made to NZX for permission to quote the Bonds on the NZX Debt Market. However, the Bonds have not yet been approved for trading and NZX accepts no responsibility

for any statement in this document.

This document does not constitute a recommendation by the Issuer, ANZ Bank New Zealand Limited (the Arranger and Organising Participant), Deutsche Craigs Limited (the Co-Manager), The

New Zealand Guardian Trust Company Limited (the Trustee) nor any of their respective directors, officers, employees or agents to subscribe for, or purchase, any of the Bonds. The Issuer, the

Arranger and Organising Participant, the Co-Manager and the Trustee, and their respective directors, officers, employees and agents accept no liability whatsoever for any loss arising from this

document or its contents or otherwise arising in connection with the offer of Bonds or any person's investment in the Bonds.

This presentation is for preliminary information purposes only and is not an offer to sell or the solicitation of an offer to purchase or subscribe for the Bonds and no part of it shall form the basis

of or be relied upon in connection with any contract or commitment whatsoever. The information in this document is given in good faith and has been obtained from sources believed to be

reliable and accurate at the date of preparation, but its accuracy, correctness and completeness cannot be guaranteed. All of the data provided in this document is derived from publicly

available information in relation to the Issuer (including the annual report of the Issuer for its financial year ended 31 July 2015) unless otherwise indicated.

Any internet site addresses provided in this presentation are for reference only and, except as expressly stated otherwise, the content of any such internet site is not incorporated by reference

into, and does not form part of, this presentation.

A Terms Sheet dated 22 February 2016 has been prepared in respect of the offer of the Bonds. The Terms Sheet is an important document and should be read carefully. Investors should not

purchase the Bonds until they have read the Terms Sheet. Investors should consider the risks that are associated with an investment in the Bonds, particularly with regard to their personal

circumstances (including financial and tax issues).

The selling restrictions set out in the schedule to the Terms Sheet apply to the Bonds.

This presentation is dated February 2016.

Important information

Disclaimer


I. Key terms of the offer

II. Fonterra overview

III. Financial overview

Agenda


Description of Bonds Senior unsecured fixed rate bonds. The offer is made in reliance upon the exclusion in clause 19 of schedule

1 of the Financial Markets Conduct Act 2013

Issue size Up to NZ$150,000,000

Tenor 7 Years

Interest Rate Set following bookbuild on 26 February 2016 and announced shortly thereafter by Fonterra via NZX

Indicative Margin 1.45% - 1.60% per annum

Interest Payments Semi-annually in arrear, in equal payments

Application Amounts $5,000 and multiples of $1,000 thereafter

Opening Date Monday 22 February 2016

Closing Date 1.00pm on Friday 26 February 2016

Bookbuild Bids to be submitted to the Arranger by 1.00pm on Friday 26 February 2016

Issue Date Monday 7 March 2016

Listing Ticker code FCG040 on the NZX Debt Market

Issuer Credit Rating1 A- (stable) by Standard & Poor’s & A (stable) by Fitch

1. The ratings referred to in this presentation are not a recommendation to buy, sell or hold the Bonds, and each rating may be subject to revision or withdrawal at any time by Standard & Poor’s or Fitch, as the case may be. Any downward revision or

withdrawal of a rating may have an adverse effect on the market price of the Bonds. Neither Standard & Poor’s nor Fitch have been involved in the preparation of this presentation.

Key terms of the offer


Fonterra Overview


Fonterra at a glance – “Dairy for Life”

• Leading processor of dairy products

• Fully integrated dairy business

(“grass to glass”)

• Consumer and Foodservice operations

in China, Asia, Middle East, Latin America

and Oceania

• China Farms – supporting our integrated

dairy business in China

• Access to global milk pools

– Collects ~85% of New Zealand’s milk

– Sales volume of 22.8 billion LME

FY15 revenue (NZ$) 18.8 billion

FY15 normalised EBIT (NZ$) 974 million

Shareholders 10,700

Market cap (NZ$)1 8.9 billion

Credit rating:

Fitch

Standard & Poor’s

A stable

A- stable

1. Market cap as at 19 February 2016.


World-class ingredients business

22

17

14 13 13 12

10 9

8 8

Fon

terr

a

DF

A

La

cta

lis

Ne

stle

Arla F

oods

De

an F

oods

Frie

sla

nd

Ca

mpin

a

Da

non

e

Ca

liforn

ia D

airie

s

Kra

ft F

oo

ds

Inta

ke (

millio

n t

on

nes)

17%

48%

15%

41%

TotalMarketShare

Whole milkpowder

Skim milkpowder

Butter

% G

lob

al

Exp

ort

s

1. Source: PM Food & Dairy Consulting, 2013.

2. Source: Fonterra, Global Trade Information Services. Note: Excludes intra-European trade, information for 2013/2014 season.

Scale and leadership in global trade

The world’s largest milk processor¹ The world’s largest dairy exporter²


High growth consumer and foodservice business Lead by strong brands and repeatable foodservice model

Dairy

Farming Systems

Dairy

Food Design

Dairy

Processing

Dairy

Nutrition

Technology Platforms

Natural

Energy

Growth and

Development

Mobility

Cognition

Benefit Platforms

Deliver on Foodservice potential

Selectively invest in milk pools

Grow our Anlene™ business

Develop leading positions in

paed & maternal nutrition

Optimise NZ milk

1

Build and grow beyond our

current consumer positions

3

2

4

5

6

Strategic Platforms Global Brands


• Volume off GDT and

increased sales

through bilateral

customer agreements

• Increasing volume

through value-add

consumer and

foodservice

Strategy delivering – shifting volume to higher value

Deliver on Foodservice potential

Selectively invest in milk pools

Grow our Anlene™ business

Develop leading positions in

paed & maternal nutrition

Optimise NZ milk

1

Align our business and organisation

Build and grow beyond our current

consumer positions

3

2

4

5

6

7

DIRA1

GDT2

Ingredient Sales

Foodservice

Consumer

1. Dairy Industry Restructuring Act.

2. Global Dairy Trade.


Note: All figures are year-to-date compared to same period last year (excl New Zealand which is season-to-date): Australia (Nov), United States (Dec), EU (Nov),

China (Dec), Asia (Oct), Middle East & Africa (Oct).

Source: Government milk production statistics / GTIS trade data / Fonterra analysis.

Dairy supply/demand imbalance

Demand

Supply China

Year to date

imports -6%

Russia

EU’s largest dairy export

market

Trade embargo remains

US

Year to date

production +1%

Australia

Year to date

production

New Zealand

Fonterra 2015/16

season production -4%

Asia (excl China)

Year to date

imports +8%

Middle East & Africa

Year to date

imports +1%

EU

Year to date

production +2%

+2%


Financial Overview


$258M 945K MT $3.6BN

1. Compared to the first quarter of the 2015 financial year.

2. Volume change is FY16 Q1 relative to FY15 Q1.

3. Gross Margin % is for FY16 Q1, the arrow represents change relative to FY15 Q1.

2016 Q1 performance summary

CAPEX

Consumer and

Foodservice

Volume Change² 3%

Gross Margin³ % 28%

International Farming

Volume Change² 56%

Gross Margin³ % -5%

Ingredients

Volume Change² 2%

Gross Margin³ % 15%

VOLUME (MT) REVENUE

0.6%¹ 17.6%¹ 36.5%¹

22.7%

GROSS MARGIN

$628M

OPEX

3.5%¹ FROM 14.1%¹


69 72

Q1 15 Q1 16

159

161

Q1 15 Q1 16

162

162

Q1 15 Q1 16

31

37

Q1 15 Q1 16

Consumer and foodservice growth in Q1

Asia Latin America

1. Volume (000s MT).

2. The percentage is for Q1 FY16 and the arrow shows the directional change.

Oceania Greater China

Volume¹ Gross Margin² Volume¹ Gross Margin²

Volume¹ Gross Margin² Volume¹ Gross Margin²

+4% +1%

+0% +19%

35% 33%

27% 19%


• Lower capex following planned

investment cycle

• Advance rate within guidelines

• Leverage reduction progressing

to plan

– FY16 year end gearing ratio

forecast to be down from FY15 as

planned and within 40-45% range

– Half year will reflect normal

seasonal profile

Credit Rating Fitch A (stable)

S&P A- (stable)

Debt Weighted

Average Term

to Maturity

As at 31

October 2015 4.6 years

Financial discipline continued Solid credit rating reflects strong

fundamentals

Financial strength and discipline


• “Market leadership in global exports of

dairy products”

• “Competitive cost position”

• “New Zealand’s largest producer and

exporter of dairy products”

• “Effective subordination”

• “Significant flexibility in setting and

revising the price of milk sourced in New

Zealand”

• “Global market leader in dairy exports”

• “Strong defensive traits”

• “Its status as New Zealand’s top dairy

producer”

• “Effective subordination”

• “Its ability to pass global-dairy price and

FX movements in the ingredients

business to farmers”

1. October 2015 update.

2. November 2015 update.

.

Standard & Poor’s¹

A- / A-2, Stable

Fitch Ratings2

A / F1, Stable

Key drivers of credit rating strength


1. Includes undrawn facilities, as at 31 October 2015.

2. Includes undrawn facilities and commercial paper, as at 31 October 2015.

Robust funding strategy & liquidity management

Bank Facility 47%

Diversified profile2 Prudent liquidity

Undrawn

Facilities

NZ$2.9bn

61%

Drawn Facilities

NZ$1.9bn

39%

AUD DCM 11%

CNY DCM 7% GBP DCM 6%

NZD DCM 14%

USD DCM 15%

• Strong credit rating

• Highly diversified sources of funds

– DCM for core, bank facilities for seasonal

• DCM strategy

– Increased liquidity and transparency

• Flexible bank facilities (WATM 3.3 years)1

• Prudent and balanced maturity profile

• Maximise access to highly liquid sources of funds

• Cost effective funding over long term

• Prudent liquidity management

• Efficient cash and working capital management

• Minimise refinancing risk

Key strategic components Funding strategy objectives


1. Excluding commercial paper.

2. NZ$ 467m equivalent maturing in FY16.

DCM strategy

0.0

0.6

1.2

1.8

FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY240.0

0.6

1.2

1.8

F16 F17 F18 F19 F20 F21 F22 F23 F24 F25 F26 F27 F28 F29 F30 F31

NZD bond offer part of refinancing FY16 maturities

• 2015 issuance aligned with strategy

– Apr: NZD 350m

– Jun: NZD 100m

– Jun: RMB 1000m

– Jul: RMB 800m

– Aug: USPP 200m

• Strategic market focus

– NZD, AUD, USD, RMB

– Build liquidity and curve through regular

issuance

• Increased focus on NZD liquidity

• Continue to monitor other market opportunities

• Maintain regular CP programme

Recent issuance Key components

Bank facility maturity profile At 31 October 2015 (NZ$ billion)

DCM maturity profile¹,²

At 31 October 2015 (NZ$ billion)


0

200

400

600

800

FY

16

FY

17

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22

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NZ

$ m

illi

on

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illi

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0

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$ m

illi

on

NZMTN Maturities¹ AUMTN Maturities

USD Maturities Other Maturities

1. All as at 31 October 2015.

Building the curves and liquidity

Documents

Fonterra Bond Offer - NZX · PDF fileFonterra Bond Offer UNSECURED, UNSUBORDINATED, FIXED RATE BONDS FEBRUARY 2016