Ann: FLLYR: FCG: FONTERRA FY2012 FINANCIAL RESULT

• Release Date: 26/09/12 12:23
• Summary: FLLYR: FCG: FONTERRA FY2012 FINANCIAL RESULTS
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FCG
26/09/2012 10:23
FLLYR

REL: 1023 HRS Fonterra Co-operative Group Limited

FLLYR: FCG: FONTERRA FY2012 FINANCIAL RESULTS

Reporting Period Year ended 31 July 2012
Previous Reporting Period Year ended 31 July 2011

 31 July 2012
(NZD million) 31 July 2011
(NZD million) Percentage
Change
Revenue from sale of goods 19,769 19,871 (0.5%)
Net profit attributable to Shareholders of the company [1] 609 754 (19.2%)
Non-controlling interests 15 17 (11.8%)
Net profit for the year 624 771 (19.1%)

[1] Net profit attributable to shareholders of the company is equivalent to
profit from ordinary activities after tax attributable to shareholders of the
company (as required to be disclosed pursuant to Clause 1.2 of Appendix 1 of
the NZSX and NZDX Listing Rules).

Interim/Final Dividend Amount per Security
(NZ cents) Imputed Amount per Security
(NZ cents)
Interim 12.0 nil
Final 20.0 nil

Record Date Interim: 31 March 2012
Final: 31 May 2012
Dividend Payment Date Interim: 20 April 2012
Final: 20 October 2012

Comments On 25 September 2012, the Board of Directors declared a final
dividend of 20.0 cents per share payable on 20 October 2012 to Shareholders
on the share register at 31 May 2012.

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FONTERRA ANNOUNCES 2012 FINANCIAL RESULTS

PAYOUT DOWN 19%

STRONG OPERATING PERFORMANCE - NORMALISED EARNINGS  UP 2%

Fonterra Co-operative Group announced today a payout of $6.40 for a fully
shared up farmer for the 2012 year, 19 per cent down on the prior year.

The result includes a lower Farmgate Milk Price of $6.08 per kilogram of
milksolids (kgMS), down from $7.60 last year reflecting lower commodity
prices and a strong New Zealand dollar.  A dividend of 32 cents per share has
been announced, with retentions of 10 cents per share.

Announcing the result, Chairman Sir Henry van der Heyden said the 2012 year
had been one out of the box for dairy: "All around the world, we saw record
dairy production which was mirrored back here in New Zealand.

"Global dairy demand held up reasonably well but this ocean of milk obviously
impacted on global commodity prices, with the GlobalDairyTrade (GDT) index
reaching its lowest value in 34 months in May.

"This contributed to a lower Farmgate Milk Price in the 2012 year, however,
the impact of this decline on overall earnings for farmers has been eased a
little by the much higher volumes of milk they produced."

Fonterra Chief Executive Theo Spierings said the Co-operative had posted a
strong operating performance, with normalised earnings1 of NZ$1.03 billion
for the 2012 year, up 2 per cent on the prior year.

Profit before tax was up 9 per cent on the prior year and net profit after
tax was $624 million, down 19 per cent, largely due to tax credits of $202
million in the prior year not repeated in the current year. Excluding those
credits, Fonterra's net profit after tax improved by 10 per cent.

Results highlights compared to the prior year include: -
- Record New Zealand milk flows, up 11 per cent to 1,493m kgMS in the current
season
- 11 per cent increase in export volumes to 2.32 million metric tonnes (MT)
- Sales volumes increased 2 per cent to 3.94 million MT
- Flat revenues of $19.8 billion
- Higher operating cash flows of $1.4 billion, up $206 million
- Balance sheet strengthened with economic gearing ratio improving from 41.8
per cent to 39.1 per cent

Mr Spierings said the result showed Fonterra's success in growing both
volumes and value.

"The hard work of our farmers in producing record milk flows was matched by
the efforts of the business in processing, selling and shipping these higher
volumes, while also managing inventory levels," said Mr Spierings.

"We know volatility is here to stay and we showed our ability to manage this
volatility by adding value to our products, generating prices above GDT."

Business units

NZ Milk Products
NZ Milk Products had a strong year, with a 23 per cent increase in normalised
earnings to $515 million. Revenue increased by 1 per cent to $15.72 billion
for the year. Effective product mix management, a 7 per cent rise in sales
volumes to 2.8 million MT and the ability to attain prices above GDT through
continued efforts to add value to our products. Year-end inventory levels
were $373 million lower at $2.13 billion, with a 14 per cent increase in
volume on hand offset by lower prices.

Australia New Zealand (ANZ)
The integrated ANZ business faced a difficult year with a 20 per cent decline
in normalised earnings to $204 million. After adjusting for the sales of the
Western Australian dairy business last year, volumes were down 4 per cent or
44,000 MT. The lower earnings were impacted by lower prices to support market
shares across all categories. Normalised earnings were up slightly in New
Zealand; however, the trading environment in Australia remains challenging
with a continued downturn in consumer spending and aggressive competition.
The ANZ business is implementing a plan to increase profitability and
maximise cash flow in these tough market conditions.

Asia/Africa, Middle East (Asia/AME)
Asia/AME achieved good results given the various challenges, including supply
constraints and flooding encountered during the year with normalised earnings
increasing 1 per cent to $194 million. In constant currency terms, Asia/AME
achieved an increase in normalised earnings of 8 per cent. Sales volumes
increased by 3 per cent4 contributing to revenue growth of $62 million, with
strong performance in Sri Lanka, Vietnam  Hong Kong, Philippines and Malaysia
contributing to this result. The "big three" brands of Anmum(TM), Anlene(TM)
and Anchor/Fernleaf(TM), all achieved revenue growth, with Anlene now the
established market leader in over 10 countries across Asia, and the Middle
East.

Latin America (LATAM)
LATAM's normalised earnings increased by 16 per cent on a constant currency
basis. Sales volumes increased by 2 per cent4, driving a constant currency
increase in revenue of 4 per cent, with growth achieved in milk powder and
beverages. Improved product mix, along with product innovation and higher
volumes in higher margin products such as mature cheese contributed to the
result.

Strategy Refresh
During the year, Fonterra completed a review of its business strategy and
reorganised the business to align with its Strategy Refresh. The Strategy
Refresh is now being deployed via approximately 90 projects, each aimed to
deliver higher volumes and value for the Co-operative. Restructuring costs of
$30 million associated with this re-organisation were included in the current
year result.

The Co-operative is targeting to reduce operating expenses by $90 million,
and is aiming to deliver $60 million of this amount in the 2013 financial
year.

Global Situation
Fonterra announced in August a forecast Farmgate Milk Price for the 2012/13
season of $5.25 per kilogram of milksolids.  While there has been a combined
increase of 9 per cent over the last two GDT events, the recovery had been
expected and was partly offset by further appreciation of the NZ dollar
versus the US dollar.

(Note: Fonterra is working towards the launch of Trading Among Farmers later
this year and is in a "blackout" period until the release of its prospectus.
Accordingly, the Co-operative will not be updating its earnings forecast at
this time.)
End CA:00227745 For:FCG    Type:FLLYR      Time:2012-09-26 10:23:05