Fonterra
Annual Report 2023

Plain-text annual report

3 2 0 2 w e i v e R l a u n n A a r r e t n o F a n u p ā t ā M e T u a t - ā - e k a t o r A Michael (& COVER), William, Chris, Bethanne, Peter & Margaret, Southland Our three strategic choices are guiding everything we do Focus on New Zealand milk Be a leader in sustainability We believe New Zealand milk is the most valuable milk in the world. With demand for sustainable dairy nutrition growing at a pace that will outstrip supply, we are creating more value for our farmer owners and unit holders by further differentiating our milk in the global market. Globally, people want to know where their food comes from and the impact it leaves. New Zealand milk is amongst the most carbon-efficient in the world, produced by a proven pasture-based model and underpinned with strong animal wellbeing standards. By leading in sustainability, we can respond to changing demands from customers, capital providers and regulators. Be a leader in dairy innovation & science Our Co-op has a long and proud heritage of dairy innovation. We are building on this expertise by continuously developing new dairy nutrition solutions and partnerships which help people live healthier and longer lives. Contents About this report Welcome to our Annual Review, which forms part of our end-of-year reporting suite. We know there are a wide range of stakeholders who are interested in our Co-op. This report gives an integrated view of our performance across financial and non-financial measures, and our targets for the future. It is supported by a series of supplementary reports where stakeholders can find more detailed information most relevant to them. This Annual Review provides a summary of our environmental, social and economic activities and performance. It covers key achievements and performance data, as well as the challenges and opportunities we have faced across our Co-op over the last 12 months. It is a chance to reflect on our work, quantify our impacts and look to the future. OVERVIEW About us Letter from Chair of Board Letter from CEO Our purpose, values and goals How we create value Creating value for stakeholders Our year in review Doing Good Together BUSINESS PERFORMANCE ON-FARM Honour roll OFF-FARM PRODUCTS & CUSTOMERS FONTERRA MANAGEMENT TEAM NON-GAAP MEASURES GLOSSARY DIRECTORY 03 04 05 08 10 11 12 14 15 22 30 36 43 46 50 54 56 60 Fonterra uses several non-GAAP measures when discussing financial performance. Non-GAAP measures are not defined or specified by NZ IFRS. Management believes that these measures provide useful information as they provide valuable insight on the underlying performance of the business. They may be used internally to evaluate the underlying performance of business units and to analyse trends. These measures are not uniformly defined or utilised by all companies. Accordingly, these measures may not be comparable with similarly titled measures used by other companies. Non-GAAP financial measures should not be viewed in isolation nor considered as a substitute for measures reported in accordance with NZ IFRS. Non- GAAP measures are not subject to audit unless they are included in Fonterra’s audited Financial Statements. Please refer to the Non-GAAP measures section for further information about non- GAAP measures used by Fonterra, including reconciliations back to NZ IFRS measures. Definitions of non-GAAP measures used by Fonterra can be found in the Glossary. OUR 2023 SUITE OF REPORTS Annual Review 2023 (Referenced as AR) Financial Statements 2023 (Referenced as FS) Business Performance Report 2023 (Referenced as BP) Sustainability Report 2023 (Referenced as SR) Governance & Statutory Disclosures 2023 (Referenced as G&S) Modern Slavery Statement 2023 (Referenced as MS) Farmgate Milk Price Statement 2023 (Referenced as MP) OUR REPORTS ARE AVAILABLE FROM FONTERRA.COM/NZ/ EN/INVESTORS.HTML 04 About us We’re a dairy co-operative, owned and supplied by farming families across Aotearoa, New Zealand. Through the spirit of co-operation and a can-do attitude, Fonterra’s farmers, along with almost 18,000 employees around the world, share the goodness of our milk through innovative consumer, foodservice and ingredient brands. We believe that food and nutrition are essential to sustain us today and for future generations to thrive. This is why we take great care with every drop of milk, from the beginning, through every step of the way. It’s our dedication and care that enables us to produce safe and high-quality food, and our dairy know-how and innovation capability mean we can do amazing things with our milk to enhance people’s lives. Our farmers farm naturally and because of this, we are proud to have one of the lowest on-farm carbon footprints in the world. We want to be the most emissions efficient and environmentally sustainable dairy co-op. To do this we are reducing our footprint, restoring nature, and adopting a regenerative mindset. Our portfolio of well-known brands includes Anchor, Anmum, Anlene, Nutiani, NZMP and Farm Source. 9,012 1,366 Revenue ($ Million) 24,580 4,619 6,192 FY221: 21,901 2,518 2,239 Raw milk collected (million litres) 17,803 FY22: 18,455 16,3332 New Zealand Australia China Rest of Asia Pacific Rest of World 4 8 5 Manufacturing sites 45 FY22: 48 28 1,829 1,809 672 1,534 Employees (FTE) 17,993 FY22: 19,608 12,149 1 FY22 has been re-presented due to the Soprole business being moved to held for sale and classified as discontinued operations (and subsequently sold). 2 Amount collected during FY23 (which differs to the 16,317 million litres collected during the 2022/23 season ended 31 May 2023). Letter from Chair of Board Kia ora, Miles and the team have delivered a third consecutive year of strong performance overall, despite facing into difficult market conditions in a number of regions. Final Farmgate Milk Price $8.22per kgMS Peter McBride – Chair 05 The team can be proud of delivering a reported profit after tax of $1.58 billion, equivalent to 95 cents per share and up 170% on last year. We faced real challenges on-farm in New Zealand this year, as extreme weather events took a toll on our communities. In February, Cyclone Gabrielle hit the North Island with Northland, Coromandel, the Hawke’s Bay and Gisborne among the hardest hit. In the Hawke’s Bay and Gisborne some communities were cut off and isolated. The Co-op accessed these areas via helicopter to assess the damage, understand farmers’ needs and provide provisional supplies and veterinary support. Many suffered losses to their property, had to manage animal welfare issues and support the wellbeing of their families and neighbours. As a Co-op, we look after each other when it comes to natural disasters like this. The Co-op helps farmers to manage these types of risk through what is known as a Force Majeure event. In accordance with the Terms of Supply, where we had to instruct a farmer to dispose of milk or dry off, appropriate compensation for these farmers was made. Volatile milk price environment For share aligned farmers this strong earnings performance is helpful in the context of a declining Farmgate Milk Price. Our final milk price for the 2022/23 season was $8.22 per kgMS down from the high forecast midpoint of $9.50 in June 2022. The reduction is due to lower than anticipated demand for imported products, particularly from China, which contributed to the Global Dairy Trade prices dropping, with the average whole milk powder price down 16% compared to last season. The impact would have been greater, if not for the team’s efforts to utilize the scale of the Co-op and shift milk into the products and places that were delivering the most value at the time. 06 Reviewing our Board size and composition: Since the Co-op’s formation it has been envisaged that the Board size would be rationalised over time. With the Capital Structure review, asset divestment programme and long-term strategy development largely behind us, the Board believes it is the right time to review its size and composition. We have shared our initial thinking from that review, which we are discussing with farmers and shareholders in advance of this year’s Annual Meeting – at which we plan to seek endorsement for the changes via a vote. Having now been part of the Co-op’s Board for five years, the last three as Chair, I’m confident that reducing the size of our Board will improve the dynamics within the group, encouraging greater participation from directors, and maintaining access to the necessary skills and experience to govern the Co-op into the future. Our current thinking is to reduce the number of directors on the Board from 11 down to nine. The balance between Farmer Elected and Appointed Directors would be maintained, with a composition of six Farmer Elected Directors and three Appointed Directors. As is the case today, the Chairman would be one of the Farmer Elected Directors. Strong performance underpinned by non-reference products While on the one hand our milk price was negatively impacted by market forces, on the other our earnings did benefit from favourable market conditions, including strong margins in our Ingredients channel, in particular the cheese and protein portfolios. There are two other key performance metrics the Board is particularly pleased with this year: – Return on Capital for the last 12 months is 12.4%, up from 6.8% in the comparable period. – We have also exceeded our performance target for the Co-op’s balance sheet strength, with the gearing ratio at 28.8% and debt to EBITDA at 1.3x, even after adjusting for the impact of the Capital Return. Full year dividend at the maximum end of our policy In acknowledgement of the declining milk price environment and the impact that has on farmers, the Board has made the decision to pay a final dividend slightly above our dividend policy. We are pleased to deliver a strong full year dividend of 50 cents per share and unit – comprising of an interim dividend of 10 cents per share and a final dividend of 40 cents per share. This is in addition to the 50 cents per share capital return paid to shareholders and unit holders in August, following the divestment of Soprole. This brings the total cash return for a fully share-backed farmer to $9.22 per kgMS for the 2022/23 season. The Board believes it is the right time to review its size & composition. Flexible shareholding Our Flexible Shareholding capital structure has been in place since late March. It’s generally working as expected and we are comfortable with the liquidity in the market. Following the transition to the Flexible Shareholding structure Fonterra implemented market maker arrangements to support liquidity in the Farmer Shareholders’ Market. We also have the ability to buy back shares as part of our ongoing capital management programme, where we see it as value accretive to the Co-op. Our share price has come down. This was anticipated and well- signalled before shareholders voted to support the changes to our capital structure. There has also been a share price impact as a result of the recent capital return. Over time we expect that the price will reflect the Co-op’s financial performance, and the value farmers see in that. Ultimately farmers will determine the value of the shares. Flexible Shareholding is the right capital structure for our Co-op. By making it easier for farmers to join or stay with the Co-op, it will help us to maintain a sustainable milk supply. Delivering our strategy Outlook for the year ahead and beyond We remain confident in delivering our long-term strategic targets and plan to provide shareholders and unit holders with a strategic update in early 2024. Prior to that we will be confirming our Scope 3 target, which Miles and I signalled at last year’s Annual Meeting. Being a leader in sustainability is a fundamental part of our strategy. Introducing a Scope 3 target is a critical step for us when we consider our global competitive landscape, international market access, funding sources, and continued partnerships with customers. We need to set a target that is meaningful and brings us into line with our international competitors – many of which have already set targets. We know that the rate of change farmers are being asked to live with is already challenging. Good progress towards the target can already be made using the tools and information available to us today. The Co-op will support farmers to meet this target through the sharing of best practice and innovation. Our methodology will continue to evolve alongside the science that supports these changes. We will work with you, not against you. Looking out to the end of the current season and new financial year it is clear that we will face a challenging operating environment – for our individual farming businesses and for our Co-op. We know that the 2023/24 forecast Farmgate Milk Price range is below breakeven for many of our farmers. The Co-op is entirely focused on performance and, as you will be on farm, reducing its costs to offset the impact of inflation over the coming years. Dairy is a long-term game and as an exporter, we need to accept that we are impacted by demand and supply dynamics, commodity prices and geopolitical events. The Co-op does its best to try and smooth the edges and optimise value, but there will always be volatility. Right now, the Co-op is well-positioned to recover from this part of the cycle. Our strong balance sheet gives us options to consider how we create more value. It also benefits all farmers, as we know that the banks assess our individual farming business risks together with Fonterra’s balance sheet and performance when considering their overall exposure to the sector. Ultimately, strong performance is the best way we can support our farmers through this difficult period. That remains our focus for the year ahead. We need to set a target that is meaningful and brings us into line with our international competitors – many of which have already set a target. Peter McBride Chair of Board 07 Full year dividend 50c per share and unit Total cash return $9.22 per share backed kgMS 08 Letter from CEO Miles Hurrell – Chief Executive Officer Kia ora, I’m proud to have led a dedicated team who have delivered a strong result for your Co-op. Our reported profit after tax is $1.6 billion, up 170% on last year, and our return on capital is 12.4%, up from 6.8%. This has put us in the position to pay a full year dividend of 50 cents per share, including the interim dividend of 10 cents per share. Throughout FY23 we also made progress on several key strategic initiatives. We implemented our new Flexible Shareholding capital structure, completed divestment of our China Farms business and Chilean business, Soprole, and launched our new corporate ventures arm, provisionally named Nutrition Science Solutions. As a result of the successful divestment of Soprole, we were able to return tax-free 50 cents per share to shareholders and unit holders. These milestones were several years in the making and I’m proud the team has delivered upon the commitments we made to our shareholders. I also acknowledge that these achievements have been against a backdrop of a falling Farmgate Milk Price across the season. We work hard every day to maximise total shareholder returns. We ended the 2022/23 season with a final Farmgate Milk Price of $8.22 per kgMS. When combined with our strong dividend and capital return, our total cash return to farmer shareholders was $9.22 per share backed kgMS. Strong earnings performance FY23 was a volatile year for global economies and commodity markets as the world continued to recover from COVID-19. There was strong demand for protein products, in particular cheese and caseinates, at the same time as demand for milk powders softened. This resulted in historic high price relativities across the year. We captured the high protein prices in our Ingredients channel, and these have been a strong driver of our earnings performance for the year. To optimise our Farmgate Milk Price, we moved milk into higher performing reference product categories, such as skim milk powder and cream, where possible. However, we were required to reduce the forecast Farmgate Milk Price across the season as demand for whole milk powder from key importing regions, in particular China, continued to soften. We recognised the impact the reduced forecast Farmgate Milk Price has on farm profitability, particularly at a time when farmers are facing higher input costs, and utilised our strong balance sheet to favourably adjust the Advance Rate Schedule, which meant that we were able to get cash to farmers sooner. Progress on strategy Despite economic headwinds, we’ve made good progress on strategic initiatives this year that will help to set us up for the future. A sustainable supply of New Zealand milk is fundamental to the future prosperity of the Co-op, so that we can maintain efficient operations and continue to meet customer demand for New Zealand milk at scale. Our new Flexible Shareholding capital structure, which was implemented in March, supports a sustainable milk supply and stable balance sheet by making it easier for farmers to join and remain with the Co-op. 09 One of the benefits of being part of the Co-op is having access to the advice and services provided through Farm Source. The team is working alongside farmers to provide tools that support more efficient farming businesses and help to meet the changing needs of both regulators and our customers. An important focus for the team right now is introducing a Scope 3, or on-farm emissions intensity target, which we will announce before the end of calendar year 2023. Achieving the target will be a collective effort, with incremental efficiency gains enabled by the tools made available by the Co-op and wider industry partners. We’ve made a strategic choice to be a leader in dairy innovation and science, with innovation expected to play an important role in achieving the target by reducing methane production on-farm. We are working with partners to invest in potential solutions. Looking to the future, our innovation portfolio of activity is also exploring potential new revenue streams for the Co-op that utilise either our milk or our expertise. This year, we’ve established Vivici, our joint venture with Royal DSM, which is exploring commercial opportunities in fermentation derived ingredients. These ingredients could be used to extend our farmers’ milk into products, categories, and markets which we do not currently sell into, as well as earn the Co-op a return on the commercialisation of our IP. We’ve also launched our corporate ventures arm, Nutrition Science Solution (NSS), which made its first strategic investment in the form of a minority stake in Pendulum Inc, a biotech company specialising in metabolic health. NSS is a long-term play for the Co-op, that will seek to partner with and invest in global start-ups in the nutrition science category. Driving efficiencies across the Co-op Outlook for FY24 and beyond When pursuing these opportunities, we’re assessing them against other investment opportunities for our farmers’ capital. Our new resource allocation framework demonstrates how we think about delivering value. It shows how we aim to allocate farmers’ milk to the products and channels where we believe it will earn the highest risk-adjusted returns. The priority use of the Co-op’s capital is maintaining safe, productive operations. With any capital remaining, we assess the opportunities available to us and use it either to pay down debt, for dividends, capital returns, share buybacks, or for growth opportunities including innovation. It is as part of this approach to capital management that we have allocated up to $50 million to an on-market share buyback programme, which commenced in August 2023. We’re also taking a close look at our operating expenses to assist us to stay on track for our short and long-term financial targets. We have announced a goal of reducing costs across the Co-op by about $1 billion over the 7 years to 2030. This goal will help offset higher inflation expectations and we intend to achieve it through a range of projects that will streamline how we operate. To track our progress, we have introduced two new efficiency metrics which we’ll report against every six months. These are: 1. Opex per kgMS – targeting a 4% cash operating cost improvement per year to support long-term discipline in our global overheads. 2. Gross profit per kgMS – targeting a 2% New Zealand cash manufacturing cost improvement every year to support efficient New Zealand operations while remaining laser focused on delivering value. Looking at FY24, ongoing reduced demand for whole milk powder from key importing regions continues to impact the outlook for our Farmgate Milk Price, with our 2023/24 forecast range currently $6.00 - $7.50 per kgMS, with a midpoint of $6.75. We are watching market dynamics closely and there are indications demand for New Zealand milk powders will start to return from early 2024. Demand for other products, including Foodservice and our value-added Ingredients, continues to be robust. The favourable price relativities that we’ve experienced across FY23 have reduced from their peaks. But we are forecasting improvement in our Consumer and Foodservice channels as our markets capture improved margins. As such, our FY24 forecast earnings range for continuing operations is 45-60 cents per share. We acknowledge that across the year, farmers will continue to feel the pressure from high input costs and a reduced Farmgate Milk Price. We’ll continue to do all that we can to assist farmers through this challenging period. Over the medium to long-term, the outlook for New Zealand dairy remains positive. Demand for sustainable nutrition is continuing to grow and by implementing our strategic plans we are well positioned to meet this demand. We’re also accelerating plans to extract more value from our farmers milk by refining our innovation portfolio and investing in new areas for growth. I intend to provide an update on our long-term strategy early in calendar year 2024, which will further detail our market context and plans to 2030 and beyond. Miles Hurrell Chief Executive Officer Our purpose, values & goals Our Purpose Our Values Our Principles Our Co-operative, Empowering people, To create goodness, for generations. You, me, us together, Tātou, tātou Co-operative spirit Do what’s right Make it happen Challenge boundaries Our principles are aligned with the Māori world view. Manaakitanga is the care we show for others – it strengthens our relationships and communities. Kaitiakitanga is how we care for our environment today, tomorrow, and for future generations. Whanaungatanga is our Co-operative spirit – it sits at the heart of our values. 10 We’ve made key strategic choices Key aspirations for 2030 Group ROC ~9-10% Operating Profit 40-50% increase from FY21 50% absolute reduction in Scope 1&2 emissions by 2030, from 2018 baseline Focus on Aotearoa New Zealand Milk Be a leader in dairy Innovation & Science Be a leader in Sustainability The resources we rely on People & Culture — Approximately 18,000 skilled and motivated employees led by a board and management team with diverse skills and experience — 20,000+ dedicated farmers and farm workers — Thousands more people in our supply chain Nature — 4 million milking cows grazing on 1.5 million hectares of pastoral land — Some fertiliser, irrigated water and supplementary animal nutrition — Energy (27.5PJ) and freshwater (48.7 million cubic metres) for our manufacturing sites Relationships — With farmers, governments and regulators, unions, employees, customers, iwi and communities Intellectual Capital — Our know-how, systems and intellectual property — Our strong global brands — 232 granted patents across 25 families of patents Assets & Infrastructure — Our portfolio of property, plant and equipment including right-of-use assets ($6,343 million total net book value) — 500+ milk collection tankers — 45 manufacturing sites Financial — A strong financial base, capital from our farmer shareholders, unit holders and debt ($12,774 million average capital employed) 11 Applying innovation & our ingenuity to make & distribute nutrition We source raw milk from farmers How we create value as ingredients for foodservice & to consumers We connect farmers with markets to maximise the value from their milk 12 Creating value for stakeholders Farmers Customers & consumers Employees We create value by – Delivering a strong total payout (AR-22) – Reliably collecting their perishable product and providing efficient access to valuable international markets (AR-04) – Adding value to their milk through innovation and a flexible product portfolio (AR-46) – Providing resilience to operating volatilities such as price, energy, foreign exchange rates and ocean freight (BP-34 & 29) – Providing access to technology and services that help meet regulatory requirements and continue to improve farming practices (AR-32) How we engage – On an ongoing basis led by our locally based Farm Source support teams across New Zealand – At meetings and roadshows, and through our formal governance processes We create value by – Delivering nutrition products that are high-quality, low carbon and responsibly produced (SR-20) – Providing access to nutrition products that include healthier options and linked to sustainable credentials (SR-22) – Using responsible procurement to influence our supply chain (SR-68) – Responding quickly to changing needs and customer demand for innovative new products and ingredients (AR-48) How we engage – On an ongoing basis through our account management teams – By sharing information through programmes such as EcoVadis, SEDEX and the CDP – With our own direct consumers through our service teams, email and social media, and consumer research We create value by – Providing a safe workplace (SR-17) – Supporting health and wellbeing (SR-16) – Providing good learning and development opportunities (SR-12) – Building an inclusive culture where everyone contributes and feels supported (SR-11) How we engage – On an ongoing basis through our everyday interactions, regular engagement surveys and engagement with unions. Kathryn, Taranaki Kiri & Te Kaihou, Bay of Plenty Lisa, Canterbury 13 Society Investors Local communities We create value by We create value by We create value by – Complying with regulatory requirements, including food – Providing sustainable returns via dividends and – Providing direct rural and urban employment (SR-83) safety, marketing and environmental (SR-26) interest paid (AR-22) – Reducing our environmental footprint including GHG – Reducing investment risk through transparency emissions, water consumption and waste (SR-27) and independent assessment (SR-67) – Providing opportunities to invest in New Zealand dairy nutrition through the Fonterra Shareholders’ Fund How we engage – On a regular basis through updates, formal reporting and meetings coordinated by our Capital Markets team – Contributing to the development of policy and responding to crises (AR-18) – Collaborating with industry partners to achieve international commitments Ref. (SR-59) – Taking a responsible approach to tax (SR-66) – Supporting international relations through our presence in global markets (AR-47 & 48) How we engage – On an ongoing basis through our Government and Stakeholders Affairs team – Through formal consultation on important issues such as climate change – Through partnerships on initiatives such as Living Water with the New Zealand Department of Conservation – Reducing our environmental footprint (SR-27) – Supporting communities through natural disasters and crises such as floods (AR-18) – Providing access to nutrition through in-school nutrition and food bank donations (AR-17) – Strengthening and enhancing our relationships with tangata whenua (SR-15) How we engage – With interested groups, such as NGOs, through collaboration and consultation on specific topics – On an ongoing basis with iwi around Aotearoa New Zealand – Through public events, the media and our own social media channels – Through our Community programmes, such as Hapori, Kickstart Breakfast, Feeding NZ Communities and supporting the Rural Support Trust Fonterra Application Centre, Shenzhen Annabelle & Rajiv, Auckland KickStart Breakfast Our year in review August October December February April The Co-operative releases its Sustainable Finance Framework. This Framework aligns Fonterra’s funding strategy with its sustainability ambitions and reflects the evolving preferences of lenders and debt investors in this area. Fonterra and Nestlé agree to sell their Dairy Partners Americas (DPA) Brazil joint venture to French dairy company Lactalis. Fonterra and MAN Energy Solutions (MAN ES) enter a strategic partnership to reduce CO2 emissions in dairy production using climate- friendly heat pump technology for steam generation. We revise our 2022/23 season forecast Farmgate Milk Price range from $8.20-$8.80 per kgMS to $8.00-$8.60 per kgMS. Announce the conversion of coal boilers at our Hautapu site to wood pellets and installation of a heat pump at Palmerston North. Fonterra and Royal DSM establish new start-up company, Vivici, to accelerate development and commercialisation of fermentation-derived proteins with dairy-like properties. We take another step on our low carbon transition with our Waitoa site in the Waikato planning to install a 30 megawatt wood biomass boiler to replace a coal boiler. We also announce the closure of our small and ageing Brightwater site near Nelson. 14 June Acting Chief Operational Officer Anna Palairet announced. Launch of new nutrition science venture arm to incubate, scale and invest in ventures in the area of nutrition science. First investment announced with Pendulum. 2022 2023 September November January March May July Announced 2021/22 season final Farmgate Milk Price of $9.30 per kgMS. Fonterra announces sale of its Chilean Soprole business to Gloria Foods JORB S.A. Launch new wellbeing solution brand, Nutiani, targeting medical and everyday wellbeing nutrition markets. Neil Beaumont appointed as new Chief Financial Officer. Many co-operative farmers and their whānau, our employees and customers across the North Island of NZ are impacted by flooding during the wettest month on record. Fonterra supports those impacted throughout the coming months. We announce a partnership with Rural Support Trust (RST) to support rural New Zealanders by improving access to wellbeing and resilience services for farming families who are doing it tough. Fonterra & Nestlé announce a new partnership designed to help reduce New Zealand’s on- farm emissions, including a New Zealand first – a drive to develop a commercially viable net zero carbon emissions dairy farm. We complete the sale of Chilean Soprole business to Gloria Foods - JORB S.A. (Gloria Foods). Announced an opening 2023/24 season forecast Farmgate Milk Price of $7.25 to $8.75 per kgMS, with a midpoint of $8.00. Announced an increase in our Scope 1&2 emissions target, along with a $790 million investment, which includes up to $90 million funding from Government. Announce a Profit After Tax of $546 million, up 50% on same period last year, in our FY23 Interim Results. Taranaki dairy farmer Donna Cram is announced as the 2023 Fonterra Dairy Woman of the Year and we welcome three new First Foundation Scholars to the Co-operative. 15 Doing Good Together Durham Farm, Northland As a co-op we know just how much good can come from working together, which is why we’re working with partners right across the country to make a meaningful impact. Our Doing Good Together programme delivers across three impact pillars to care for people, the environment and our Co-op for generations. Our impact pillars 1 Putting good quality nutrition in the hands of those who need it most 2 3 Keeping our communities strong Protecting & regenerating the environment 16 Fred and Ken, NZ Food Network 5.6 million KickStart breakfasts served in 1,400 schools 17 13 million Dairy serves donated to communities in New Zealand 22,000 trees $980K Partnered with Trees for Survival to support 22 schools to nurture 22,000 trees Donated to community projects in regional New Zealand $650K $100K Over $650K donated to community projects globally Farm Source Charitable Giving raised over $100K 2,900 people More than 2,900 people attended 16 events with Rural Support Trust on mental health & wellbeing Helping communities respond to natural disasters In response to the devastating floods and Cyclone Gabrielle that hit the North Island earlier this year, Fonterra along with our strategic partners supported community groups on the front-line giving assistance to affected Kiwis. CEO of The New Zealand Food Network (NZFN), Gavin Findlay, said that with the many people displaced by the flooding, the donation of quality dairy products went a long way. Along with the support we provided communities post the cyclone, the team also volunteered in the Wairoa region and got stuck in helping to clean up Tākitimu Marae. This was followed by cleaning silt beneath houses for whānau that had no insurance and could not occupy their houses until the silt had been removed. The combined Fonterra support was significant and the Fonterra staff were incredibly proud to show up and offer support during this time. Fonterra Emergency Response Team supporting the clean up at Tākitimu Marae alongside Waikato Tainui in Wairoa following Cyclone Gabrielle. 18 “ Once again, our great partners at Fonterra are helping us get food to where it’s needed most. Fonterra’s quick response to this emergency shows their commitment to doing good together for the sake of our communities and reinforces the value of having them on the NZFN team.” Gavin Findlay, CEO New Zealand Food Network Some of the ways we supported the community through the recent natural disasters: 1.3 million $60,000 Dairy serves to Auckland, Tairāwhiti, Hawke’s Bay and Northland as part of flooding and cyclone response Donated to Community Foundation flood relief funds in Hawke’s Bay and Auckland $15,000 $40,000 Donated to NZ Landcare Trust and Trees That Count to support remediation of restoration projects after the floods Over $40k donated through Farm Source Charitable Giving to the Hawke’s Bay disaster relief trust 19 Penelope, Blair, Joe & Billie, Hawke’s Bay The Big Feed and our continued commitment to getting food where it’s needed the most The Big Feed called to action thousands of farmers across the country to donate some of what they produce. In one day, the event aimed to raise 1 million ‘meals’. In FY23 Feed Out successfully raised 1 million meals with Fonterra and their farmers providing just under 430,000 milk meals towards the cause. The Big Feed event will now occur annually with a goal of raising 3 million meals on December 14th 2023. With our partners New Zealand Food Network (NZFN) and Feed Out, our Feeding New Zealand Communities programme donated 13 million serves of dairy nutrition in FY23. We will continue to increase our contribution of more nutritious dairy goodness more frequently. In FY23 we’ve also had a strong focus on identifying surplus product across the Fonterra network to donate to the NZFN. This is complimented by our voluntary agreement to the Kai Commitment, under which we’re working on a number of food waste reduction strategies. Our Hapori programme continues to be present in 10 New Zealand regions, with each regional committee offering funding and donations of dairy products to local community groups, schools and marae. 20 “ I’ve seen the faces of our rangatahi light up with excitement when they see they have milk in their kai boxes. Milk is a product that our rangatahi know how to confidently prepare. This is so helpful as some don’t have cooked meals to come home to and must source meals themselves. We are super appreciative for the milk that Fonterra has donated”. Reconnect – Family Services, Manukau Community connection — Farming Fonterra formed a strategic partnership with Rural Support Trust in August 2022. The shared vision for the partnership is to support rural New Zealanders by improving access to wellbeing and resilience services for farming families who are doing it tough. Phase one of the partnership was to gain insight into the value Rural Support Trust brings and what future opportunities exist for the Co-op to strengthen and collaborate on. Early insights indicate we have formed the right community partnership to support farmers. As we move into FY24, phase two of the partnership involves Fonterra supporting Rural Support Trust to thrive and embed the three opportunities identified to improve overall experience: 1. Grow their operational capability 2. Promote the value they bring to communities 3. Grow their reach in the primary sector Together with the Rural Support Trust we have: • Completed our insights work and identified three opportunities for FY24. • Provided funding for the Time Out Tour which supports rural communities to start the conversation about mental health – 4,000 people have attended 27 events since 2022 with ambassador Matt Chisholm. • Donated over $50K to the trusts through our Farm Source Charitable Giving programme. • Featured Rural Support Trust in the Fonterra tent at Field Days to provide rural communities further access. • Employee Assistance Programme (EAP) available to all Fonterra farmers, indefinitely. 21 Tana & Rosy, Waikato Business performance Gross profit from Core Operations per kgMS $9.85 $7.64 2020 $8.60 $7.52 2021 $9.42 $8.83 $9.21 2022 2023 Actual Inflation Adjusted Cash operating expenses per kgMS $1.39 $1.16 $1.36 $1.18 $1.34 $1.26 $1.39 2020 2021 2022 2023 Actual Inflation Adjusted Return on Capital 12.4% from 6.8% Profit after tax $1,577m from $583m Earnings per share 95c from 36c $9.22 Total Cash Return1 $0.50 $0.50 Capital Return Dividend from 20c $8.22 Farmgate Milk Price from $9.30 22 1. Per share backed kgMS 23 In addition, the Co-operative returned 50 cents per share to shareholders and unit holders in August following the divestment of Soprole. This resulted in a total cash return of $9.22 per share backed kgMS for our farmer owners. Commodity product prices that inform the Farmgate Milk Price (Reference Commodity Products) were down on average 14.2% compared to the prior season and the main reason for the $1.08 per kgMS decline in the Farmgate Milk Price from $9.30 per kgMS last season. Our profit after tax increased $994 million to $1,577 million. Excluding non-controlling interests this is equivalent to 95 cents per share, up from 36 cents per share in the prior period. Excluding the net gain on divestments, our normalised profit after tax is up $738 million to $1,329 million, excluding non-controlling interests this is equivalent to 80 cents per share. The Co-operative’s operating environment continues to improve following the pandemic, and with the global supply chain network stabilising and slowly returning to normal, our inventory levels at year end have improved. Our net debt is $3.2 billion, $2.1 billion lower due to the improved inventory levels, increased earnings and the sale of Soprole for aggregate proceeds of $1.3 billion – of which $804 million was returned to shareholders and unit holders on 18 August 2023. Our increased earnings combined with the strength of our balance sheet has put us in a position to pay a full year dividend of 50 cents per share, comprising of 10 cents per share paid at interim and a final dividend of 40 cents per share. Our New Zealand milk collections increased 2 million kgMS compared with the 2021/22 season due to higher collections in the latter half of the season as a result of more favourable weather which was conducive to stronger pasture growth. Litres and milk solids collected 17,123 16,876 17,121 16,404 16,317 1,523 2019 1,517 2020 1,539 2021 1,478 2022 1,480 2023 kgMS collected (million) Litres collected (million) For the year ended 31 July 2023, our Co-op performed well. We returned $8.22 on average for every kilogram of milk solids our farmer owners supplied us. Combined with a dividend of 50 cents per share, this means a total payout of $8.72 per kgMS. 10 Total Payout1 $7.74 $0.20 $7.19 $0.05 $6.35 $7.14 $7.54 $6.35 $9.50 $0.20 $8.72 $0.50 $9.30 $8.22 2019 2020 2021 2022 2023 Farmgate Milk Price Dividend 1. Refer to the Glossary for definition. Business performance Our profit after tax increased $994 million to $1,577 million. Profit After Tax1 Increased due to favourable margins, particularly for protein and cheese products Increased mainly due to impairments of our New Zealand consumer business and our Asia brands, of $121 million and $101 million, respectively, as well as the impact of inflationary pressures Increased due to a $349 million (before tax) gain on sale of Soprole. The prior year included a $42 million gain on sale of GDT 20 (30) 1,259 (344) 307 (218) 24 Increased due to higher EBIT and capital gains tax on the sale of Soprole 1,577 583 FY22 GROSS PROFIT OPERATING EXPENSES2 GAIN ON DIVESTMENTS OTHER ITEMS FINANCE COSTS TAX FY23 1. Includes amounts attributable to non-controlling interests. 2. Operating expenses includes $11 million net loss on sale related to Hangu China farm and the sale of GDT. 25 Our normalised profit after tax increased 125%, or $738 million, to $1,329 million. We have normalised $260 million related to the gain on sale from Soprole, and a $12 million loss relating to the disposal of Hangu farm in China. Consistent with our strategy to focus on our New Zealand milk, we’ve made progress divesting our operations in Chile, Brazil and China. In November 2022, we announced the agreement to sell Soprole to Gloria Foods – JORB S.A – a consumer dairy market leader in Peru. The divestment was completed on 31 March 2023. The aggregate proceeds (including pre- settlement dividends) before tax, hedging and transaction costs were $1.3 billion, of which $804 million was returned to shareholders and unit holders on 18 August 2023. In December 2022, Fonterra and Nestlé agreed the sale of DPA Brazil to French dairy company Lactalis for BRL 700 million. The proceeds at completion will be subject to closing transaction adjustments. Fonterra’s 51% share of the DPA Brazil sale proceeds will be used to repay our share of debt held directly by DPA Brazil. Breakdown of Total Group Performance FOR THE YEAR ENDED 31 JULY 2022 31 JULY 2023 NZD MILLION Sales volume ('000 MT) Revenue Cost of goods sold Gross profit Gross margin (%) Operating expenses Other2 EBIT Net finance costs Tax expense Profit after tax CONTINUING OPERATIONS1 DISCONTINUED OPERATIONS1 TOTAL GROUP CONTINUING OPERATIONS1 DISCONTINUED OPERATIONS1 TOTAL GROUP 3,318 21,901 (18,992) 2,909 13.3% (2,065) 102 946 (194) (131) 621 606 1,524 (1,093) 431 28.3% (390) (11) 30 (37) (31) (38) 3,924 23,425 (20,085) 3,340 14.3% (2,455) 91 976 (231) (162) 583 3,497 24,580 (20,399) 4,181 17.0% (2,496) 70 1,755 (211) (303) 1,241 476 1,466 (1,048) 418 28.5% (303) 348 463 (50) (77) 336 3,973 26,046 (21,447) 4,599 17.7% (2,799) 418 2,218 (261) (380) 1,577 1. Refer to Note 1a and 2c of the FY23 Financial Statements. Comparative information has been re-presented for consistency with the current period. 2. Consists of other operating income, net foreign exchange gains/(losses) and share of profit or loss on equity accounted investees. The sale is subject to several conditions including receipt of regulatory approvals from competition authorities. The Brazilian competition regulator released its first report on the proposed sale in late July 2023. The parties are engaging with authorities to understand and address the matters raised in relation to limited parts of the business and expect the sale to be completed within one year of balance date. We also finalised our exit of China Farms, following the sale of our Hangu China farm. 26 Reportable Segments Fonterra’s reportable segments are presented on a continuing operations basis and are Core Operations and the two customer-facing regional business units, Global Markets and Greater China as presented to the right. Core Operations Global Markets Greater China Total External sales volume (‘000 MT) 2,517 10% 980 5% 3,497 5% Profit after tax contribution from continuing operations Ingredients Foodservice Consumer Total $602m $429m $133m $1,164m $459m $114m $13m $586m $(12)m $72m $50m $53m $203m $241m $46m $171m $(18)m $(94)m $(52)m $(164)m $1m $90m $48m $137m $572m $385m $284m $1,241m $532m $77m $11m $620m Note: Figures are for the year ended 31 July 2023 Prepared on a continuing operations basis. Comparative information has been restated and re-presented for consistency with the current period. Financing Costs are allocated based on the average capital employed by each segment and channel. The effective tax rates applied are based on which country the entity, within a segment or channel, generates the income in. 27 Financial Discipline To assist our long-term discipline and focus on reducing operating expenses from continuing operations to around $2 billion, we have introduced a new efficiency metric of cash operating expenses per kgMS. This metric monitors the actual cash cost base having regard to changing milk volumes, and adjusts for inflation so underlying efficiency gains/losses are transparent. After removing the impact of inflation and non-cash costs, our operating expenses on a per kgMS basis increased from $1.34 to $1.39 per kgMS. The increase mainly reflects increased staff costs and storage and distribution costs. To assist our long-term discipline on efficient New Zealand operations we have introduced a new efficiency metric of gross profit from Core Operations per kgMS. This metric monitors the cash cost base having regard to changing milk volumes, and adjusts for inflation so underlying efficiency gains/losses are transparent. The metric is calculated at a gross profit level to take into account the net result of maximising value generated from every milk solid, which can increase the cost base. After removing the impact of inflation and non- cash costs, our gross profit from Core Operations on a kgMS basis improved from $8.83 to $9.21 per kgMS. The increase reflects favourable price relativities. Cash operating expenses per kgMS $1.39 $1.16 $1.36 $1.18 $1.34 $1.26 $1.39 2020 2021 2022 2023 Actual Inflation Adjusted Gross profit from Core Operations per kgMS $9.85 $7.64 2020 $9.21 $9.42 $8.83 2022 2023 $8.60 $7.52 2021 Actual Inflation Adjusted – Core Operations’ profit after tax was $572 million, an increase of $532 million on the prior comparable period. A key driver of Core Operations profit after tax is the relative price difference between product prices that inform the Farmgate Milk Price, referred to as Reference Products, and the product prices of Non-Reference Products. – Global Markets’ profit after tax increased $77 million to $385 million, mainly due to the Ingredients channel in-market profit after tax increasing by $114 million as a result of improved pricing and higher sales volumes. Performance also improved in the Foodservice channel as our in-market sales teams were able to adjust sales prices to compensate for higher input costs. This was partially offset by impairments in Global Markets’ Consumer channel of our New Zealand Consumer business and our Asia brands (Anmum™, Anlene™ and Chesdale™). – Greater China profit after tax increased $11 million to $284 million due to the Foodservice channel earnings increasing by $46 million, reflecting our in-market prices adjusting to higher input costs. However, this was partially offset by an impairment in Greater China’s Consumer channel of our Asia brands. Looking at our business by product channel: – Our Ingredients channel profit after tax increased $586 million, or 101%, to $1,164 million, due to continued favourable margins in our protein and cheese portfolio, as well as higher sales volumes due to the sell down of additional inventory held at 2022 financial year-end. – Our Foodservice channel profit after tax increased $171 million, or 244%, to $241 million, due to improved gross margins combined with higher sales volumes. – Our Consumer channel profit after tax decreased $137 million to a loss of $164 million, mainly due to impairments of our domestic New Zealand Consumer business and our Asia brands. 28 Our Total Group free cash flow was $3.9 billion higher than last year at $3.3 billion, and is before the $804 million capital return payment to shareholders and unit holders. The increase reflects: — strong earnings performance resulting in underlying cash flow from earnings increasing by $0.8 billion, — an improvement in working capital cash flows of $2.5 billion over the year, and — an increase in net cash received from divestments of $0.8 billion, due to the sale of Soprole during the year, partially offset by an increase in capital expenditure and other investing cash flows of $0.2 billion. The strong free cash performance supports the payment of the capital return of 50 cents per share and a 2023 full year dividend of 50 cents per share. Cash Flows Movements in Free Cash Flow ($ million) 2,469 (166) 815 3,314 (621) 2022 817 EARNINGS NET WORKING CAPITAL1 CAPEX & OTHER DIVESTMENTS 2023 1. Includes amounts owing to suppliers. Free Cash Flow1 ($ million) 1,433 1,109 668 2019 2020 2021 1. Refer to the Glossary for definition. Note: Comparative information has been re-presented for consistency with the current period. (621) 2022 3,314 2023 Balance Sheet Return on Capital 29 Net debt has decreased by $2.1 billion reflecting higher earnings, a reduction in working capital and the divestment of Soprole. This enabled an increase in cash dividends paid during the year and the capital return paid in August 2023. The improvement in the Gearing Ratio from 42.4% to 28.8% reflects the lower level of debt coupled with the higher equity from our increased earnings. Debt to EBITDA has improved from 3.2x to 1.3x due to lower net debt combined with higher earnings for the year. Non- GAAP measures are not subject to audit unless they are included in Fonterra’s audited annual financial statements. Net Debt1 ($ billion) 6.0 5.2 5.3 4.3 3.2 2019 2020 2021 2022 2023 1 Refer to the Glossary for definition. Leverage Metrics 4.3 49.5% 3.3 44.2% 3.2 2.7 38.5% 42.4% 1.3 28.8% 2019 2020 2021 2022 2023 Gearing Ratio1 (%) Debt to EBITDA1 (x) 1 Refer to the Glossary for definition. Total Group Return on Capital improved from 6.8% to 12.4% Our improved return on capital was due to the increase in our normalised EBIT. We have normalised $349 million related to the gain on sale from Soprole, as well as normalising a $12 million loss related to the divestment of Hangu China farm. The impairments of $248 million, mainly recognised in our Consumer channel, have not been normalised. The impact of the improved EBIT was partially offset by higher average levels of capital employed compared to the prior year. This was mainly driven by higher average working capital levels due to additional inventory carried forward from the prior year. Return on Capital 13,419 12,313 12,281 12,356 12,774 12.4% 5.6% 6.6% 6.6% 6.8% 812 879 952 991 1,881 2019 2020 2021 2022 2023 Total Group normalised EBIT1 ($ million) Average capital employed1 ($ million) Return on capital1 (%) 1 Refer to the Glossary for definition. On-farm We seek to work with farmers to build the collective strength of our Co-operative. The aim is to deliver them maximum sustainable returns while bringing value to our customers, consumers and communities. We believe Aotearoa New Zealand has the world’s best milk. Currently, our natural advantages, grass-fed approach and efficient farming methods combine to make our dairy farm emissions one third the global average. The work we’re doing with farmers to reduce emissions on an intensity basis is an important part of keeping our Co-op resilient for the future, as we look to ensure there is continued demand for our farmers’ milk. This includes supporting them with insights, tools and the most up-to-date advice, while also working to save them costs across our network of Farm Source stores. We want farming in Aotearoa New Zealand to continue for generations to come, which is why we are committed to farming in a way that regenerates the environment. The value we create by processing our farmers’ premium, sustainable milk into a range of products helps to sustain regional New Zealand, with almost 50 cents of every dollar earned by a farmer spent in their local community. 30 William, Southland 31 The Co-operative Difference is our framework for enabling our on-farm practices to support the delivery of our strategy to protect and grow the value of our sustainable, nutritious, New Zealand milk. This is done by identifying and considering what we need to do today, what we need to be thinking about for tomorrow and what we need to consider in the longer term. The Co-operative Difference is about getting ready for emerging issues that are either opportunities to create new value and/or risks to existing value. It provides farmers with the confidence to invest on farm at a pace that works for them and their business. The framework is broken down into five performance areas – Environment, Animals, People & Community, Co-op & Prosperity and Milk. Up to 10 cents of a farmer’s milk payment is influenced through fulfilling the key practices within each of these areas. The Co-operative Difference has three levels of achievement: – Te Pūtake – achieving this first step is all about looking after people, animals, the environment and our Co-op. Farmers who meet the Te Pūtake requirements receive 7 cents per kgMS for all milk supplied during the season. – Te Puku – once Te Pūtake is achieved, the next step is Te Puku, which is all about milk quality. To achieve Te Puku, a farm must achieve milk quality excellence for at least 30 days during the season. Once this has been achieved, farmers receive 3 cents per kgMS for all milk supplied during the season that meets the milk quality excellence standard. – Te Tihi – once Te Puku is achieved, the next step is Te Tihi, which continues to focus on milk quality. To achieve Te Tihi, a farm must achieve milk quality excellence for at least 90% of days supplied in the season. Te Tihi is all about recognition of our leaders in the Co-operative and does not bring any additional financial recognition. Farms that sustainably produce higher quality milk help to increase the value of all our milk. Getting the best returns for our farmers’ milk is determined by our ability to access opportunities, markets, and premium prices. It is also important that the wider community values our role and our approach to farming, animal wellbeing and guardianship of the land, so that dairy farming is seen as an attractive and respected career choice for future generations. This means staying at the forefront of issues such as quality, safety and sustainability. That’s what The Co-operative Difference is all about. Te Tihi - The summit of the mountain 718 up from 638 Te Puku - The mid point 4,522 5,038 up from 5,038 Te Pūtake - The start of the journey William, Southland 1,383 up from 1,155 Supporting farmers through Farm Source As the farmer-facing part of the Co-op, Farm Source plays an important role in getting alongside farmers to help them continue to lead the way in sustainable, efficient dairy farming. The team is guided by what farmers have said they’re looking for from their Co-op, grouped into four key areas: – Co-operative leadership: including advocating on behalf of farmers and helping to foster a sense of connection and pride in the Co-op among farmers, our rural communities and the wider public. – My Co-operative and business: engaging with farmers in a way that suits their individual business needs so that they get the support they need, in a way that works for them. – Support to get better: working alongside farmers to further improve the efficiency and productivity of their farming businesses, including to meet on-farm standards and regulations of today and prepare for any that may be coming in the future so that we’re continuing to build resilience in the Co-op. – Products and solutions: providing products and solutions to help drive improvements, with a consistent and welcoming experience when farmers interact with the Farm Source team – whether in store or on farm – and offering competitive prices. One of the top priorities for our Farm Source retail business is to reduce costs for farmers, including mitigating inflationary impacts as much as we can. 32 The team looks to leverage the Co-op’s purchasing power and partnerships to deliver products and services at competitive prices. A practical example is the partnership we announced with 2degrees in November 2022, which offers farmers market leading rates on plans built to suit their telecommunication needs. Farm Source offers a number of other market-leading offers – from up to 21 cents off a litre at Mobil for Fonterra suppliers, exclusive Power deals through Genesis, through to trade prices at Bunnings – and enables all Farm Source account holders to earn and redeem Farm Source Reward Dollars, contributing to further savings. We also play a critical role in helping to ensure farmers have a reliable supply of key farm inputs, as recently demonstrated when the country experienced supply shortages during COVID-19. On top of the network of more than 60 stores across the country, Farm Source also brings market leading innovation like Allflex animal collars or Effluex to farmers. This is supported by industry- leading tools and services that are delivered in a personalised way to farmers. In July 2023 we confirmed changes to our Farm Source team aimed at improving how the Co-op supports farmers today and into the future. It followed a genuine consultation process, with the original proposal changing based on feedback from our people. We also took onboard views shared by farmers during this time. The focus is on three key areas – improving our local support, improving our phone and digital tools to make things easier, and endeavouring to see that we are all doing everything we can to maintain, and grow, sustainable milk supply for the Co-op. The new structure came into effect in August and we’ve been working to ensure farmers know how Farm Source has evolved and why. Karlson, Bay of Plenty 33 Adjusting our Advance Rate Reducing on-farm emissions In May we announced that we would start the 2023/24 season with a new Advance Rate guideline. The key driver for this decision was to respond to the pressure farmers had been under, particularly in terms of cashflow. The opening Advance Rate is now set at 75%, up from 65%, and steps up to 80% in March paid April, rather than May paid June. This helps gets cash to farmers sooner, and it is a change we were able to make due to our strong balance sheet. Our intent is to use this new guideline for future seasons, starting with 2023/24. When setting the Advance Rate, we balance getting farmers as much of their milk payment as early as possible, while also maintaining a strong balance sheet and having the necessary cashflow to operate day-to-day. As a result of this approach, we will need to review our Farmgate Milk Price more frequently. As another way to get cash to farmers sooner, we announced in May 2023 that we were bringing forward the payment to shareholders of the capital return of 50 cents per share related to the sale of Soprole from October to August 2023. Throughout the year, we’ve had conversations with our farmers about the need for Fonterra to introduce a Scope 3, or on-farm, emissions reduction target. We held in person and online meetings across the country to hear farmers’ views. We also released a comprehensive on-farm emissions booklet in April which was designed to help with those conversations as well as being a practical how-to guide. We initially indicated that we would announce the target in the middle of 2023. However, timing is important, and we acknowledge that farmers have been under a lot of pressure right now. With this in mind, we decided to delay introducing a Scope 3 target by a few months. We now expect to announce our target before the end of the calendar year. There is no one solution to reducing on-farm emissions. It will require a combination of best farming practices as well as new technology and innovation to reduce methane, which is one of the biggest challenges the dairy industry faces, while also representing a significant opportunity for us. We’re investing in our own research and development as well as partnering with others to try and find breakthroughs that will further support farmers. Two examples are included on the next page. Making it easier for farmers to join & stay with the Co-op In March, we implemented our new Flexible Shareholding capital structure, which makes it easier for new farmers to join our Co-op and for existing farmers to remain, by allowing greater flexibility in the level of investment required. We believe the changes help us make further progress on our strategy by supporting a sustainable milk supply and stable balance sheet, while also protecting farmer ownership and control. Under the new structure, farmers can now hold up to 4x their milk supply in shares or a minimum of 33% of their supply. In addition, exit provisions were extended and more types of farmers can be part of our Co-op. Sharemilkers, contract milkers and farm lessors can apply to become what we’ve termed Associated Shareholders and Secondary Shareholders. Meanwhile, ceased farmers are able to transfer shares to their relatives and related parties, who are known as Permitted Transferees. Under the new structure, farmers can now hold up to 4x their milk supply in shares or a minimum of 33% of their supply. 34 Exploring solutions to reduce methane KowbuchaTM AgriZeroNZ One potential solution is our own development, KowbuchaTM. KowbuchaTM is probiotics derived from Fonterra’s large bacterial culture collection that are designed to reduce the methane produced by cows. KowbuchaTM has produced promising results with some trials showing up to a 20% reduction in methane without compromising productivity, but further work is needed to validate these effects. As well as the potential to produce a methane reduction solution for use on farm, the KowbuchaTM venture could generate commercial returns for the Co-op. This is why we are creating a more formal structure around its potential commercialisation – starting with the appointment of a CEO in early July 2023. Fonterra appointed Dr Ben Russell to lead the development of our KowbuchaTM business venture. He will focus on establishing the KowbuchaTM business through further development, validation, and commercialisation of Fonterra’s world-leading probiotic technology both within New Zealand and internationally. We are also investing in partnership with other agricultural companies and Government. AgriZeroNZ is an investment fund established between Government and major agribusiness companies to make sure New Zealand pasture-based farmers have equitable access to affordable and effective tools and technology to reduce their agricultural emissions, while maintaining efficiency, production and profitability. Fonterra will contribute up to $50 million over four years. Since launching in February, AgriZeroNZ has announced investments of: – $4 million in a methane measurement facility that will be constructed at the Massey University dairy research farm in Palmerston North and will house 12 new cattle respiration chambers and associated infrastructure. – $1.8 million for a stake in Ruminant Biotech, a New Zealand-based start-up that is developing a slow-release, biodegradable methane-inhibiting bolus for livestock. – $2.5 million to support the continuation of research underway in New Zealand toward developing a methane vaccine and methane inhibitor for use in livestock. 35 Our industry leading farmers Fonterra Dairy Woman of The Year Donna Cram Young Farmer of The Year Emma Poole Dairy Industry Awards Co-op farmers continued their strong history in the New Zealand Dairy Industry Awards, winning all three 2023 national titles at a gala dinner in Auckland in May. Hayden and Bridget Goble from Taranaki won the 2023 New Zealand Share Farmer of the Year title, Canterbury/North Otago’s Jack Symes became the 2023 New Zealand Dairy Manager of the Year and Bill Hamilton from Northland was announced the 2023 New Zealand Dairy Trainee of the Year. Hayden and Bridget are 20% VO equity partners together with Bridget Mooney, Kevin Goble and Diane Goble on their 200ha, 565-cow New Plymouth property. Jack is farm manager on Judy and Brian Symes’ 160ha, 630-cow property at Southbridge and Bill is farm assistant on Richard and Sharon Booth’s 395-cow, 174ha property at Titoki, employed by Andrew and Vicky Booth. Taranaki farmer Donna Cram won the 2023 Fonterra Dairy Woman of the Year award. Facilitated by Dairy Women’s Network, the award recognises an outstanding woman who has contributed to the dairy sector with passion, drive, innovation and leadership and no other award in New Zealand specifically celebrates the capability and success of women in the dairy industry. Donna is a fourth-generation dairy farmer and influences locally and nationally through a large range of positions. She is well known within our Co-op and is an outstanding ambassador for the industry. Her leadership qualities, community engagement and commitment to sustainability represent some of the best attributes of Kiwi dairy farmers. Along with the award Donna received a scholarship from Fonterra of up to $20,000 for an approved and personally chosen development programme, or professional/business coaching and/or learning experience. Waikato/Bay of Plenty Young Farmer and Co-op supplier Emma Poole was “absolutely buzzing” after being named the 2023 FMG Young Farmer of the Year in early July. Emma is the contest’s first-ever female champion and secured the win following three days of gruelling challenges against six other Grand Finalists. Contestants’ farming skills and general knowledge were put to the test with tasks that included repairing farm machinery, creating a hydroponic system and an intense race-style challenge with multiple tasks that saw points awarded for both skill and speed. As Emma accepted the award, Tim Dangen, her brother, mentor and last year’s FMG Young Farmer of the Year was there to congratulate her as she said “we’ve finally knocked the grass ceiling off the roof”. 36 Legend Farming entities that achieved Grade Free for at least the last 10 seasons Abacus Dairy Limited Alton Pastures Limited Milkwell Limited MR & TJ Frost Ltd Ashgrove Dairy Farms Limited Owhango Farms Limited Black & White Cow Company Limited C E & D L Rogers C J & C J McKenzie Limited Caskey Farms Farmer Fred Ltd Fowler Family Prosperity Trust Glen Eden Otago Ltd Golden Mile Farms Limited Hillcrest at Fairfax Ltd J & LM Van Burgsteden Kainui Peatlands Ltd Kemra Farm Ltd P H & W F Iorns Pharlee Trust R & S Singh R S & R D Gordon Rainbowcreek Farms Limited S & S Iorns Schorn Trust T D & J A Rhind The D & A Roberts Family Trust W J & J G Pile Family Trust Waiotu Farms Ltd Whenuakura Farm Limited Willcox Farms Ltd Axtens Farm, Bay of Plenty Honour roll for on-farm excellence Thank you to all our farmers who have worked hard in the 2022/23 season to provide safe, high-quality milk. In addition to the honour roll, we acknowledge the efforts of all our farmers for their commitment to on- farm excellence and producing the best possible milk. Te Tihi Farming entities that achieved The Co-operative Difference Te Tihi (Level 3) A–C 46 South Limited A T & J L Hughes Trust 4RJ Aguilar Dairy Limited AAEJHM Family Trust 4Smiths Limited 99 South Limited A & A Renes Limited A & H Ahlers Limited A & J Mitchell Partnership A & M Lopes Limited A & R Gibson Trusts Partnership A B Lime Limited A H Baxter Limited A J & Est L R Arnet A J & P T Bryant A J & V A D McLellan AAR Farming Aaron and Marcia Flay Partnership Aaron Brown Aaron Gopperth Trust AB Dairies Limited Abbott Trusts Partnership ABR Family Trust ABR Farms Limited ACG Enterprises Limited ADDR Limited Aerodrome Farm Limited Aghern Holdings Limited A J Porteous No. 2 Trust Agromilk Limited A L & S E Hunter Family Trust AGVenture Farms Limited A L & W A Mullan Ahipaipa Farms Limited A Mackinnon & A L Aitchison Ahipene Farming Limited A P Jones & J G Craw Ahol Trust Alley Farms Limited B J & J R Goodwin Birds Meadow Limited Bullot Family Trust Allison Family Farms Limited B J & S R Morell Biz-E Farming Limited Burnell Farms Limited 37 Altura Dairy Amtink Limited B L & D J Haylock B M & J M Durcan Andrew Marshall Family Trust B M & R M Sarten BJ Caird Limited BJ & TJ Bennett Limited Burness Partnership BJ & TM Verryt Limited Burtlea Limited Burton Farm Trust Andrew Phipps Aotearoa Kaitiaki Limited T/A Te Mania Farm AP & TM Davis T/A Bushvalley Farm AQA Agriculture Aramaunga Farms Limited Ardendale Farm Trust Ardmore Farm Trust Armer Farms (N I) Limited Arrow Dairy Limited Ashton Farming Limited Ashvale Jerseys Limited Aston Green Limited AT Mills Partnership Avon Downs Limited B C & H J McLellan B C McIntyre B D & K M Sterritt B D & M R Gray Trust Partnership B D Hiestand Trust & V J Hiestand Trust B F & R E Sanford Limited B F & S J Gordon B H & L J Bourne B N & E L Simmons B R & S P Churstain B W & S J Phillips B W E Binnie BAA Family Trust Bailetresna Limited Bailey Partnership Blandyco Trusts Partnership Bushmills Trust Blimar Dairies Limited BLL Farm Trust Bluegum Farms Ltd BW Dairy Limited Byrne Tribe Limited C & A Dairies Limited BM & GI Watson Limited C & R Ashcroft Partnership Bobcat Trust Bolton Walker Limited C & R M Moir C A & E A Brown Baldwin & Bourke Limited Bonezco Farms Limited C A Rowe Barcia Dairies Limited Bosbry Trust C and J Piggott Limited Barnscroft Dairy Limited Braebid Limited Barnsdale Farms 2014 Limited Brasen Trust Barridge Farms Baucke Family Trust Beckett Family Trust Brats Farms Limited Braylor Farms Limited Brenick Limited Beechbank Dairies Limited Brittany Trust Partnership Beith Farm Limited Brohen Farms Limited Belbrook Farming Limited Brok Farming Limited Belfield Dairies Limited Brookdale Dairy Farm Limited Bell Family Farms Limited Brooklyn Dairy Farm Limited Belmac Enterprises Limited Broughshane Limited Ben Callum Investments Limited Benmore Downs Limited Berry Dairy Farming Limited Beyond The Gate Limited BH Growth Limited Bruski Farms 2001 Limited Bryant Silviculture Limited Brymac Farms Limited BS Farming Limited Bula Dairy Farming Limited C D Farms C G & J A Venn C H Land Limited C J & M D Blackwell Family Trust C J & S J Coll Family Trust C J & V K Taylor C J Neustroski & P T Bucknell C J Smyth & O R H Malone C M Tanner C P Baldwin & M A Bourke C Porter & O Mitchell-Bettles C.J. & N.A. Williams Limited Caiseal Partnership Calcium Dairies Limited Calsi Farms Limited Camaro Trust Cambourn Farm Limited Avery Partnership (Te Hawera) Beckett Farm Limited Brentworth Dairying Limited Axtens Farm, Bay of Plenty A S & G L Noble Alderbrook Farms Limited B J & D A Verryt Family Trust Alkington Limited Collingwood Farm Trust D J & J A Veen Delarbe Farm Limited Ealing Dairies Limited Fonterra -Te Rapa Farm 38 D J & L J McDrury D J & N J Williams D J Brook D J Conlan D J Wohlers Family Trust D L & P Wilson D M & C E L Turnbull D M & D L Bourke D M & J C Brogden D M J & A J U Smith D M J S Trust D P & T M Stephens D R & E M Henman D R & J E Gilchrist D R & L M Locke Ltd D S & R R Carey D W & M E Kidd D.C Clark Limited DA & ER Reid Daisy Dairying Ltd Dalmm Dairy Limited Daniel & Tracey Limited Te Tihi C–G Cameron McLellan Cameron Richards Family Trust Cantley Developments Limited No 1 Cantley Developments Ltd T/A Sunrise Properties Caskey Farms Cavafarm Trust Ceamour Farms Limited Ceylandia Dairies Limited Chelu Limited Childs Creek Limited Chisnall Farms Limited Churi Farms Partnership Claremont Trusts Partnership Clark & Everitt Partnership Clarke Farms (2016) Ltd Clarknic Farms Clemcorp Ltd Clover Bell Limited Clutha Lea Ltd CMP Dairies Limited Colhaven Limited Collingwood Dairy Limited Collins & Murphy Farming Limited Contra Trusts Copeland Farming 2012 Ltd Cordyline Farms Limited Cornik Farms Limited Corona Farms Ltd Cotlands Ltd Countrywise Limited Cowley Ltd CPX Limited CQ Farming Limited Craigower Farms Ltd CRB Farming Limited Creekside Pastures Ltd Cressey Dairies Ltd Crossipol Ltd Croydon Agri Ltd Croydon Dairy Limited Cummings Family Trust Cupsville Limited Cutting Edge Dairies Limited D & A Cooper Limited D & D Alexander Trust D & D M Coupe Trust D & E Beckett Limited D & M Earl Limited D & T Farming Limited D B & N L Hinz Partnership D B & T A Wyber D D & D M Galletly Denis J Crookenden & Bronwyn F Bax Dennley Farms Ltd Des Conlan Trust DG Farming Limited Diamond Family Trust Dillon & Co 2020 Limited DJ & AJ Williams Ltd DJAS Partnership DNR Farms Dobbie Farms Ltd East Chatton Farms Limited Friendly Cow Farms Limited Ebbett Agri Partnership Full Moon Farming Edale Farms Ltd G & L Farming Limited Edge Holdings Limited G & M Moore Partnership Elamar Trust G & P Russenberger Est of M F Blake & M Blake G & R Ward Family Trust Estate E A Bonner Estate John Harold & Muriel Mary Watt Estate M J Abbott Estate of T D & N M Miller G & T Sloper Limited G A & J M Hall Limited G A & K T Lynch G A & W A Knight G A W & M C Van Rossum G B & D G Hodges Trust G Bearman & W Reid Partnership G D & C J Alexander Dogterom Farming Limited Estee Holdings Limited Donald Pearson Farm Ltd Evans Partners Ltd Doneve Agriculture Limited Excel Farming Limited Donnelly Trust Eyretonlea Partnership Double A Oaks Limited F A & R C M Smits Ltd G G Green Acres Limited DPN Farming Fairfax Stonehouse Farm Ltd G G Ring DR & PJ Hannah Ltd Falcon Farms Trust Draw Farming Limited Farm Partners Limited Farmer Fred Ltd G I Norgate G J & E L Pinny G J Borst Drought & Kalin Family Trusts Partnership Drumderg Farm Ltd Drumoak Trust Farnley Tyas (2018) Limited G K S Cows Limited Faull Contracting Limited Faybo Limited G L & G F Bell G L & R L Burr Feenstra & Bouwmeester Trust G M & J M Zydenbos Fern Flat Limited G P & D J Wolvers Family Trust Fernley Farm Limited G P S 2007 Ltd Firdale Farms Limited G R & K L Lovelock Flaxwood Farm Flaxwood South G R & L M Heywood G S & L J Rowe Fleming Family Trust Galloway Enterprises Ltd Flo New Zealand Limited Gambles Farm Ltd Danz Farm Limited Partnership Dryden Farming Limited David & Corina Youle Trust Drylands Trust David & Lynley Ecclestone Drysdale Holdings Ltd David Leng DB & MJ Kalma Ltd DDB Dairy Enterprises Limited Debnar Farms Limited Deebury Pastoral Partnership E A White Ltd E C Briden & Sons Ltd E J & A M Kiser E L Mitchell E O'Brien E T De La Rue Hitchcox Farming Ltd J G Cochrane Hoe-o-Tainui Farms Ltd J H & H R Smyth Jomar Farm Ltd Joshua Lyon Kelly Farming Limited Kelvin Vickers Family Trust 39 Hogsback Limited Hollands Farm Limited J J & T A Hickman Family Trust Partnership J J Bailey J L & K S Gwerder Family Trust JS & KJ Lorimer trading as Laurel Hill Farm Juffermans Dairy Company Ltd JP & DJ Hurley Partnership Kemra Farm Ltd Te Tihi G–L Greenhart Limited Greg Dawson Greg Low Limited Gregory Farms Ltd GST Investments Limited Holmleigh Trust Partnership Guthrie Farms Limited Hororata Dairy Farm Limited Guyon Farm Limited Huntly Road Dairies Ltd Gwen-May Trust Hwitan Tune Holdings Ltd Gavin Lozell Farming Limited GB Dairies Partnership GD & CJ Alexander Ltd Gema J Limited Geordie Farms Limited Gibbs G Trust Gillett Farms Ltd GKW Farms Ltd Gladvale Farms Limited Glanton Holdings Limited Glenarne Limited Glenkerry Farm Limited Glennevis Dairies Ltd GM & AM Woolley H E Argyle and Estate of L A Argyle H J & A M Van Hout H L & J E Wallace H Q Partnership H S Phillips Hahn Trading Limited Haket Trust Hamilton & Keene Sharemilking Ltd Hammens Limited Hann Bros Harakeke Dairy Ltd Partnership Haswell Farm Limited Haumako Farm Limited Golden Mile Farms Limited Haurere Farms Ltd I G Haigh I H & D J Bryant I J & H E Mitchell I J Sutherland Partnership Ingram Farming (2003) Limited Intensive Agriculture Ltd Inveraray Dairy Limited Ivy Plains Ltd J & C Gray Family Trust J & E Hansen J & L Delgado J & O Sergiychuk J & P S Malcolm J & R Ferguson Ltd J & S Belton Gordon Dale Farms (2006) Ltd Heartland Holdings (2008) Ltd J & S Nicholas Limited GPN Holdings Ltd Graejo Trust Partnership Granite Farms Ltd Grantley Trust Green Pastures Dairy Ltd Green Sky Dairies Limited Greenan Farms Limited Heavenly Moos Limited Henderson Partnership Farm Henmar Trust Heywood Trust Highland Downs Limited Hill Biddles Limited Hillcrest at Fairfax Ltd J A & E Fraser J A Rhind J C Rossiter J E & A E Watson J E & D L Morell J G & J M Wright J G & L M Mills J M Mellow Jurassic Farms Ltd J McKay & A Brown K A & N J Riddington Ltd J P & A M McEwan Ltd K G Reeve J S Dairy Limited J Turner Limited J W & A M Steeghs J W & T L McElligott K J & H A Dravitzki K J & H Chalmers Ltd K J & L M Goodwin K J & S R Crowley Jackson Partnership Ltd K J Thompson & M Sataka Jacob Abbott Jacob Olsson K R Vollebregt K W & D J Hall Jaeger Dairies Limited K W & S H Smart Trust James Lyttle K W Laing Janssen & Sons Limited K&M C Farms Limited Jareem Trust Kahikatea Dairy Ltd Kerr Road Dairies Limited Kes Farming Limited Kevin Fleming Ltd Keystone Dairies Limited Kiekie Farms Ltd Kilfinan Farm Ltd Kilkenny Farm Ltd Kilkerran Farm Ltd Killinchy Dairies Limited Kinkora Farm Ltd Kirson Farms Ltd KJ&HL Uhlenberg(Waitui) Fam Tr. P'Ship KM & BM Muller Knapdale Farms Ltd Kohi Partnership Kohi Rose Ltd Jareem Trust Partnership Kainui Farms Limited Kohinoor Farms Ltd Jascas Trust Jaska Farm Trust Jaydee Farm Limited JBHILLS Limited JBT Farming Limited JC Beattie Trust JCB Farms Limited Kaitiaki Whenua Farming Limited Kaiwhio Dairies Limited Partnership Kaja Limited Kanuka Terrace Limited Kapuka Investments Limited Karl Robert Peace JCDAF Dairy Farms Limited Kavanagh Trust Partnership Jersey Girl Ltd Jerzey Rock Farm Ltd JF & LM Le Fleming Family Trust Keelinn Farms Limited Keitra Farms Limited Kelbretar Trusts Partnership Koning Dairies Limited Koroa Group Limited Korotawa Limited Kuklinski Family Trusts Partnership Kuriger Farms Kyle Farm (2005) Limited Kywaybre Farms Ltd L & M Wild River Limited L B & S A Udy L D & R M Barry L E Hill Te Tihi L–O L G & H R Miller L H & K M Bonnar L J Hodges L M Farms L P & C L McClintock Limited L P & I Bylsma L Ross & A Parry L S & K A Phipps L.J. Fleming & Co. Limited LA Farms Limited Lakeside Farm (2010) Ltd Lamb Dairy Limited Landcorp Farming Limited Lavender Dairies limited Lawson Farms LB Dairies Limited Le Emari Trust T/A Willowbridge Dairies Le Prou Family Trust Leona Green Leondale Trust Lepperton Farms 2021 Limited Lethol Farms Ltd No.1 Lillburn Valley Dairies Ltd Lisdale Dairies Limited Little Mate 88 Farming Company Limited Livcon Farms Ltd Lizlyn Dairies Limited Lobblinn Farms Limited Lochbuie Limited M F & D C Robinson Trust Partnership M J & D R McFetridge M J & M J Manley M J Adams Trust M J Robertson M L & K I Clark Family Trust M P & V M J Joyce Trusts P/Ship M R & K J Luke Ltd M S & P M Davey M S Dobson M T & J Torrie Lochhead Holdings Limited Maandonks Farm Limited Lochiel Sharemilking Limited Maandonks Pastoral Limited Lochlea Partnership Lockinge Farms Ltd Macarm Farms Ltd Macedonian Properties Limited LR and SJ Hammond Limited Macken Farm Ltd Ludell Limited MacWilliams Dairies Limited Ludimac Dairying Ltd Mahunga Farm Limited Luscombe Partnership Majestech Farms Limited Lynbrook Farm Limited Majuba Farms Ltd Lynwood Dairies Limited Maken Milk Ltd M & A Bulanhagui Limited Malandra Downs Limited M & A Schrader Family Trust Manaki Dairy Farms Limited M & D Padrutt Family Trust Mangakiri Ltd M & G Askin Family Trust Mangaroa Farms M & M Kidd Partnership Mangatoki Partnership Legendairy Contracting Ltd M A Watt Family Trust Mangawhiri Farms Ltd Legrayle Farm Limited Lenek Farms Limited Leningrad Farm Ltd Lenssen Farming Partnership M C & J P Fisher M D Hammond Mangin Dairying Ltd Manuka Downs Farm Limited M E Hunt & Son Ltd Mardell Graham Limited Mark & Nerida Dodge Ltd Marshlie Partnership Martindale Trust Marua Partnership Mary Rose Trust Milk Drops Ltd Milk Power Ltd Milk Tap Limited Milka Dairies Limited Mattajude Family Trust Milkin It 2020 Limited Maude Peak Farm Trust Mavora Farms Ltd Maxlands Farms Limited McBeth Dairy Ltd McCheesey Farming Limited McClan Ltd McConnell Ag Ltd McCoote Farms Limited McCullough Family 2008 Ltd McCullough Orakau Farm Trusts Partnership McDonnell Farming Company (Ohau) Ltd McDonnell Farming Limited McKay Creek Farms Limited McKinnon Dairy Limited McSwag Limited Mehroop Trading Limited Melgan Ltd Melrose Dairy Ltd Merivale Partnership Merrybent Limited MG Farms Limited Michael Clark Ltd Michael Kiser Mid Island Farms Limited Miedema Farms Limited Milestone Trust Milky Whey Enterprises Limited Milldale Farm No 2 Limited Mills Road Estate Limited Minus 1 Trust Mish (2012) Ltd MJ & CD Beattie MJ Henderson Farming Limited MJG Limited MKJ Farms Limited Mokka Limited Molehill Farm Ltd Monte Vista Farms Moo Juice Limited Moo2U Ltd Mooi Dairies Ltd Mooi Farms Ltd MooJuice Dairies Limited Moonlight Farms Trust Ltd Moore Farming 2020 Limited Morag Farm Limited Morana Farms Limited Morelands Pastoral Ltd Moss Lane Limited Mount View Trust Mt Winchmore Farm Limited Mullerwhero Farming Ltd 40 Murdoch Southern Farms Ltd Murphy Farms Limited N & J A Lodge N & S Ganderton N A & K M McColl N G & B D Simmons N K Burgoyne Nadash Partners Nellnate Partnership Netherland Holdings Limited Newera Dairies Limited Newman & Clarke Limited Newman & Clarke Limited No 2 Ngahape Valley Farm Ltd Ngai Tahu Farming Ngariki Trust Ngatahi Trust Ngatitu Whanau Trust Nikorima Trust Nilock & Camole Trusts Nimbalkar Farms Limited Nippyfarm Limited NNL Dairying Limited - NO 2 Northland Agricultural Research Farm Incorporated Nottingham Farms Limited NZSF Canterbury Farms Limited - Lowry NZSF Rural Holdings Ltd O J & A J Williams O'Connell Dairy Ltd Old Kookaburra Farms Limited One Arrow Ltd P J & M E Gamble Family Trust Pollock Dairies Limited R W & H A Trotter Riverside Dairying Limited Rylock Farms Limited 41 Te Tihi O–S P Jones Family Trust P L & R E Berryman P M & K F Westenra P R & R F Mossman P S & H J Wilson P T & E A Kelly Pahau Dairy Ltd Pomona Farming Limited R W & K M Powell Trust Riverside Sharemilking Limited S & A Novo Limited Ponga & Pukeko Farms Ltd RA & L Lash RJ & KB Smyth S & A Wheeler Farms Limited Port Molyneux Dairies Limited RA Borst & MG Henderson Robertson Allen Limited S & G Chick Pourakino Valley Trust Radcliffe Rugby Road Limited Robren Farms Ltd S & R Pastoral Ltd Premier Dairies Limited Raelene Williams Rockhaven Farm Partnership S & S Iorns Roger L Brook T/A Rosebrook S B & Y M Thompson Prima Farms Limited PT & CA Shearer Family Trust Opadadus Farming Ltd Pahau Flats Dairy Limited Pukerua Farm Ltd Openside Farms Ltd Oporo Farms Ltd Oraka Farms Limited O'Reilly Family Trust Papakauri Farms Limited Puketaria Limited Paton Farms Limited Pynewood Farm Limited Paton Trading Company Ltd Q F & H J Sherriff Paton Trading Company Ltd Quirke Family Trust Orini Downs Station Limited Patterson Farming Limited QZL Farms Limited Orongo Meadows Ltd Orwell Dairies Limited Oscar Farming Co Ltd OSK Limited Otira Farm Ltd Owen & Robyn Ruddell Partnership Owhango Farms Limited P & D M Miedema P & G Mulholland P & S De Lange P B & E J Chick P D & S F Smith Patterson Rawson Trusts Partnership Paul Kay Family Trust PB & CF Purdie Family Trust Pebble River Farms Ltd Pedestal Farms Limited Perks Farm Limited R & M King R & P McIntosh Ltd R A & K J Feaver R B & G E Potter R B & S M Grant Farming Limited R G & C K Chubb Peron Farming Limited R G King Ltd Peter Reeve Pharlee Trust Philmara Ltd Pidgeon Pastures Ltd Pindar Farms Limited R H & G H Smith R J Beckett R L & F M Hurley R L & S F Thompson R N & D A Schmidt R N & R C E Duncan Family Trust R N Van Der Fits Family Trust R P & C J Ballantine Family Trust P G & M A Cashmere Pine Bush Grazing Limited P G O'Rorke Family Trust Pineridge Partnership P H & W F Iorns P J & H M Butler P J & K J Henderson PKW Farms LP Platinum Dairies Ltd Poharu 2020 Limited Rangitata Island Dairy Limited Rollett Farms Ltd Rakaia Incorporation (Pahau) Limited Rangatira 8A17A5 Trust Rangeview 2021 Limited Rangitata Island Dairy Partnership Ltd Rata Hill Farm Red Fox Farms Limited Redhawk Trust Reesby Family Farms Limited Regent Farms Limited Retell Holdings Limited Reuver Limited Reynard Fields Limited Rich Feet Limited Richfield & Gee Ltd Ridge View Dairies Limited Ridgedale Limited Ridgevale Dairy Limited Riley Glen Collinge Rimoo Farm Limited Riverbend Farmlands Limited Riverhill Farming Limited Riverlands Ko-Torp Ltd Riverlock Land and Property Limited Rogers Family Trusts Partnership Rolfe Farms Limited Rollinson Farms Limited Rombouts Farm Ltd Rooney Farms Limited Rooster Dairy Limited Rose Fern Farms Ltd Rosebrae Farm Limited Rosevale Limited Roslyn Plains Limited Ross & Louise Fieten Family Trust Rostov Dairies (NZ) Ltd Rout Dairies Limited Rowlands 2022 Limited Partnership RP & KJ Willans Family Trust S E & S A Nicholas Family Trusts S G McKenzie S J & D L Smith S J & J L Fevre Trusts Partnership S J Bruce Family Trust S M & S A Field S R & C J Baucke S.V. & M.L. Helms Sailing Away Family Trust Sam Hunter & Amy Crofts Partnership Sanddale Farm Ltd Sandow Farming Limited Sarnia Farms Limited Sayer Severn Limited Sayer Trust Partnership SB & AM Gold Limited Rua Fox Limited Schorn Trust Ruakiwi Dairies Limited Schouten Dairies Ltd Rubu Partnership Ruthe Farms Limited Rydal Farm Trust Ryelands Farm Company Limited Schouten Dairies Ltd Scott Evans Sharemilking Limited Scott Mark & Rachel May Ireland SD & CB Farming Limited Te Tihi S–Z Settler's Inn Trust Steward Dairy Ltd Stewartwood Limited Stichbury Farms Limited Stoked Enterprises Limited Stolzenberg Farms Ltd Stonebrook Dairy Farm Limited Stonedale Farming Limited Stoneleigh Park Limited Stonylea Dairies Limited Sfarmer Partnership Limited Stornaway Farm Ltd Shady Farming Limited Streamline Limited Partnership Shawlink Ltd Sheenfield Farms Ltd Shenandoah Trust Siberia Farm Limited Sidewayz Farming Limited Simon Maxwell Limited Sisley Farms Ltd SJ Bond & DJ Phillips Small Trading Ltd Smit Dairies Limited Sutherland Dairy Co Limited Swim Farms Ltd T H Davies Farming Limited T K & H K Guthrie T M & H D Green T M Mcdowall T R Bongers Trust T S Curtis Tablelands Dairy Limited Taikatu Plains Limited Smith Enterprises Limited Tamac Farms Limited Snaplulu Ltd Snip Snap Farming Sole Farms Ltd South Hilton Ltd Southern View Limited Springdale Farms Trust Tamatea Two Limited Tamlaght Farm Partnership Taranga Town Supply Tata Dairy Ltd Tayco Farm Limited 42 Tor View Ltd W S & K M Fleck Whitestone Dairies Limited Te Puna Wai Dairy Farm Limited Te Whanake Enterprises Ltd Te Whanake Joint Venture Torehape Sharemilking Co Limited Torran Moor Ltd W.A & H.R Simpson Farming Ltd Wade Industries Ltd Te Whenua O Matata Limited Trenberth Family Trust Waikatland Telesis Trust Ternstone Limited Trinity Lands Limited Waimak Dairies Limited TRK Farm Limited Waimarama Farming Ltd Terrace Farms 2016 Limited Tronnoco Farming Co Ltd Waimate Fields Ltd Terrace Top Dairy Ltd True Blue Trusts The D & A Roberts Family Trust TS Dairies Limited The Grange Ltd Tuki Tuki Awa Ltd Wainui Dairies Waiongona Flats Ltd Waiotu Farms Ltd The Herewahine Trust Turpin Dairies Limited Wairakau Farm Trust Wilcock Farming Limited Willans Holdings Ltd Willbound Farm Limited Williamson Trust Partnership Willowbrook Farms Ltd Willowcreek Trust Willowfields Limited Willowhaugh Enterprises Limited Willowview Pastures Limited Wilmat Farms Limited Wilson Produce Limited The Isaac Conservation & Wildlife Trust (ICWT) The White Gold Farm 2022 Limited Thornehayes Farm Ltd Three Bells Ltd Three Daughters (2018) Limited Tiaki Farm Limited Partnership Tiger Hill Farm Ltd Tiroroa Farms Limited Titipua Limited Partnership TJ Gray & BA Johnston TK & MG Wright TL & SL Taylor Ltd Tobruk Farms Ltd Toggenburg Trust Tussocky Road Dairy Farm Limited Twin Creeks Partnership Tyndale Family Trust Tyndale Trust Tyrone Trust P/Ship Upper Balmoral Limited Uruwhenua Farms Ltd V & B Kalin Limited V & J Ralph Ltd V E & D M Grant Vale Green Services Limited Valley Views Southland Ltd Van De Pas Trust VDP Limited Waitago Farms Ltd Waitoru Farm Limited Windsor Park Dairies Limited Waituna Investments Ltd Windy Hills Farms Ltd Waiwira Holdings Ltd Winter Farms (2004) Ltd Walker Holdings Taupiri Ltd Wiremu Trusts Walsh Enterprises Limited Withco Holdings Ltd Watford Trust Wattle Downs Limited Webber Farm Limited Wolff Farms Limited Woodlaw Farm Ltd Woodside Dairying Ltd Webster Farming Limited Woody's Charters Limited Welsh Family Farms Limited West Mains Farm Ltd Westbrook Farming Company Limited Western Heights Partnership WP & KA Myers Family Trusts Partnership Wynyard Dairies Ltd Youngish Farming Partnership Zagri Dairies Limited Taylor Family Enterprises Ltd Tokoroa Pastoral Ltd Ventura Dairies Limited Westridge Farm Limited Zeldon View Limited St Helena Farms Limited Te Awa Pararahi Limited St Helena Trust Te Kiri Beers Limited Steele & Sons Limited Te Ngutu Land Holding Co Ltd Stevenson S R & J A Trust Tom Hargreaves Farms Ltd W & C Gibberd Whakahora Farm Ltd Zoetermeer Agriculture Ltd Tomclan Holdings Ltd Tomco Limited W A & D P McKenzie Whakatupu Farming Limited W R & D J Little Wharepapa Trust Ventsha Farms Limited Westmere Co (2007) Ltd Zeeland Dairies Limited Fonterra Annual Review 2023 43 43 Off-farm Off-farm High inflation and global recessionary pressures have made this a volatile year. While our Co-op hasn’t been immune to these impacts, our earnings have benefited from our ability to capture favourable margins in our protein portfolio, while our Farmgate Milk Price has been impacted by reduced demand for powders. 44 We’ve made good progress on key strategic initiatives, including refining our asset portfolio, reducing our emissions, and growing our innovation portfolio. Fonterra returns capital to shareholders When we released our long term strategy in 2021, we committed to return capital to shareholders pending the outcome of the sale of our Chilean Soprole business. We are pleased to have completed divestment of the business in FY23, putting us in the position to return $804m, or 50 cents per share, to shareholders and unit holders. On July 26, farmers voted in favour of the capital return with payment subsequently made on 18 August 2023. As well as completing the divestment of Soprole, we completed the sale of our last remaining China Farm and agreed the sale of DPA Brazil, our joint venture with Nestlé, to Lactalis. Fonterra increases emissions reduction ambitions Fonterra’s Scope 1&2 emissions largely come from our manufacturing operations and supply chain. Strengthening our emissions reduction target supports our ambition to be net zero by 2050. Achieving our new emissions reduction target will require Fonterra to continue to undertake energy efficiency improvements and fuel switching to renewable energy source activities across our milk collection fleet and manufacturing sites, with a focus on the seven that use coal. To do this, Fonterra is forecasting an investment of approximately $790 million, including a government contribution of up to $90 million through the Government Investment in Decarbonising Industry (GIDI) fund. The decarbonisation plan will see Fonterra build on current and completed work at five of its manufacturing sites and explore multiple technologies to assist us selecting the most efficient transition to renewable energy across our manufacturing sites, while building resilience into our operations. Accelerating these plans will help Fonterra continue to present customers with the world’s lowest carbon dairy at scale1. It will also contribute to New Zealand meeting its climate targets while delivering benefits across regional New Zealand, such as job opportunities in local communities, from our decarbonisation projects. NZ’s largest cool distribution centre November marked the completion of over two years of construction, installation and commissioning to create our first and only retro fitted automated distribution centre in New Zealand. It is the largest automated Cool Distribution Centre (DC) in New Zealand, located in Hamilton. The upgraded DC will improve site efficiency, reduce energy consumption, and reduce product and infrastructure damage through the automation of 40,000 pallet spaces, resulting in an expected savings of $4 million per year for the Co-op. 1 DairyNZ, February 2021: Mapping the carbon footprint of milk for dairy cows 45 Fonterra Te Awamutu Decarbonising our operations Nutrition Science Solutions Stirling site running on renewable thermal energy The Stirling wood biomass boiler fired up for the first time in April, marking the next step on the site’s transition to be totally reliant on renewable energy for its process heat. Changing to this boiler will reduce the annual carbon emissions forecast by 18,500 tonnes – the equivalent of taking approximately 7,700 cars off New Zealand’s roads. Hautapu converting to wood biomass The Co-operative will convert coal boilers at its Hautapu site to wood pellets. Once complete in early 2024 the Hautapu site will reduce our carbon emissions by a forecast 15,785 tonnes per annum - the equivalent of taking about 6,500 cars off New Zealand’s roads. Waitoa installs new biomass boiler The new Waitoa wood biomass boiler, due to be operational in November 2023, will reduce the site’s annual carbon emissions by approximately 48,000 tonnes, the equivalent of taking approximately 20,000 cars off New Zealand’s roads. Fonterra launches nutrition science venture arm Fonterra has taken another step in implementing its strategy to be a leader in dairy innovation and science with the launch of a new nutrition sciences venture arm. The business – provisionally named Nutrition Science Solutions (NSS) – will operate as a standalone business within Fonterra with its own board and CEO. The NSS Board consists of two Independent Directors, William Fu-wei Liao (Chair) and Rodolphe Barrangou, and two Directors from the Fonterra Management Team, Mike Cronin and Komal Mistry-Mehta. NSS will incubate and scale a portfolio of disruptive ventures by developing solutions that combine science, nutrition and technology to seek to make a real impact on human health. The first investment made through NSS was US$10 million for a minority shareholding in San Francisco based Pendulum, a biotech company pioneering the next frontier of metabolic health through its microbiome-targeted products. Products & customers We believe our New Zealand pasture- based farming produces the best milk in the world, a testament to the care and attention our farmers give to their animals and the land. This high level of focus means that our on-farm carbon footprint is amongst the lowest in the world. As our customers and consumers become more interested in the provenance of their food, our sustainability credentials are more important than ever. 46 Ruby, Southland 47 We play an important part in the development of new dairy innovations, helping customers as they look to nutrition solutions to help them live longer and healthier lives. As the world changes, we change with it, adapting to the evolving needs and desires of our customers and consumers. Using our extensive dairy expertise, we are creating new value- add products to cater to the changing tastes of consumers around the world. Through these innovations, we seek to maximise value for both our customers and farmer owners, while looking to utilise every single drop of milk. Innovating close to customers Fonterra and DSM’s new venture: Vivici In April, we launched Fonterra’s Shenzhen Application Center (FAC) focused on beverage innovation. With continued population growth, the world needs new nutritional and functional food options. Strategically located in the heart of the “New Capital of Beverages,” Shenzhen, it is our fifth FAC in China following Shanghai, Beijing, Chengdu, and Guangzhou. China is a highly competitive beverage market, with consumers constantly seeking the next best drink. Last year, 1,434 new kinds of non-alcoholic beverages were launched in China by key tea and beverage brands. Businesses must adapt quickly to market trends and continuously create novel products that typically combine traditional tea ingredients, dairy and fruit products. The Shenzhen application centre provides a new platform to explore the diverse use of Fonterra products in beverages and provide innovative application solutions to meet the local needs of Chinese consumers. A team of technical experts and experienced chefs are stationed at the centre and help to create an interactive, experiential space for customers, through product development seminars, demonstrations, and virtual live teachings. In July, Prime Minister of New Zealand, Chris Hipkins, visited our application centre in Shanghai as part of his state visit to China. The Shanghai centre is the Co-op’s first, established in 2014. Based on this vision, Vivici is a new startup company founded by DSM Venturing and Fonterra. It builds on a multi-year joint research development agreement of DSM and Fonterra which led to promising outcomes. Vivici obtained IP rights and exclusive commercial rights from Fonterra and DSM for developing and commercialisation of precision fermentation-derived proteins. The startup combines DSM’s world-leading expertise in precision fermentation science and technology with Fonterra’s world-leading dairy science and technology. Since it was launched in August 2022, Vivici has cemented its structure and defined its mission ‘to meet the world’s growing need for sustainable, nutritious and great tasting proteins.’ These new sources of protein will meet demand that is expected to double by 2050, driven by a growing and more affluent global population, demand which the planet is not expected to be able to meet through existing production. It provides potential opportunity for Fonterra to extend our farmers’ milk into products, categories and markets we’re not currently participating in. Vivici will target broad food and beverage markets and plans to be open for customer collaboration later in 2023. Fonterra Application Centre, Shenzhen Ruby, Southland 48 Products & customers Collaborating with customers to align on sustainability challenges Fonterra and Mars benefit from shared values around innovation and sustainability which underpins our deepening global strategic partnership. Together, we ran a candy drop, where over 1,000 of our tanker drivers delivered Mars chocolates to our farmers thanking them for the work they’re doing to improve on-farm sustainability practices. At the end of 2022 we signed a Global Supply Agreement with Mars, where we will supply skim milk power, whole milk powder and anhydrous milk fat with Fonterra’s share of wallet scaling significantly through 2025. This deep partnering with our customers around shared innovation and climate goals is a powerful way forward for both of our businesses. Australia responds to consumer trends Our Australian business is responding to consumer preferences for sustainable products. The team launched a Mainland re-closeable snacking product, which keeps biscuits and cheese fresh in the fridge. This caters to the ever-growing in-home snacking market by providing 16 slices of cheese along with two options for crackers. This innovation means less waste and gives consumers more choice for their snacking budget. Premium Nutrition Our innovation teams have launched numerous novel applications as we seek to extract maximum value out of NZ milk this year. Two examples are the Power Up high protein coffee milk solution and high protein yoghurts. In the first example, Fonterra offers an Intellectual Property formulation, process know-how and ingredients package. This accelerates and de-risks our customers’ ability to launch a high protein coffee milk, in a UHT format, that is designed to remain stable during shelf life. This is challenging as the acidity from the coffee in a protein packed system can cause sedimentation over the long shelf life expected of a UHT product. For high protein yoghurts, Fonterra has a range of ingredients that allow unrivalled protein enrichment and enable a wide range of textures, including drinking, spoonable and set; without compromising flavour and mouthfeel. This is a significant unlock and has proven difficult for competitors to replicate and further demonstrates the quality ingredients, application and processing knowledge held by the Co-op. So far, these yoghurt innovations have seen success in USA, Korea and Japan, to name a few. 49 Drysdale Farm, Hawkes Bay Fonterra Management Team 50 Miles Hurrell Neil Beaumont Judith Swales Chief Executive Officer Miles was appointed Chief Executive in 2018. He is responsible for leading the organisation, delivering strategy and financial performance, and engaging with our farmer owners, employees, customers and shareholders. As Chief Executive, Miles has led the Co-operative through strategic reviews into a new growth phase focused on New Zealand’s pasture-based milk, dairy innovation and science and sustainability. Previously, Miles held the role of Chief Operating Officer, Farm Source, with responsibility for farmer services and engagement, milk sourcing and the operation of New Zealand’s 70 Farm Source™ retail stores. Miles has also held a number of leadership roles across the Co- op, including Group Co-operative Affairs Director and General Manager Middle East, Africa, Russia and Eastern Europe where he led a period of sustained growth across the region. Earlier in his career, Miles worked as the General Manager of Global Sourcing, building relationships with many of our global partners of today. Miles has completed management programmes at INSEAD (International Executive Development), London Business School (Finance), Kellogg’s NorthWestern University (Global Sales) and IMD Switzerland (Global Marketing). Chief Financial Officer Neil Beaumont joined Fonterra in 2023 and is responsible for the Co-operative’s finances, its financial portfolios, as well as mergers and acquisitions. He is a highly accomplished Chief Financial Officer with 25+ years of diverse and global finance leadership experience, having lived and worked in Canada, Australia, and Chile. Most recently, Neil was Group CFRO of Canada’s largest investment fund – the Canadian Pension Plan Investment Board (CPPIB) – responsible for finance, risk, and strategic planning of this C$500B+ organisation. Prior to that, he had a six-year career with Australian multinational resources company BHP, where he spent time in both Group Finance and as CFO for the Minerals Americas region. Neil also spent over ten years as a Senior Partner with KPMG operating as Business Unit Leader for Canada’s Western region, with broad-reaching leadership across 13 offices and industry client responsibility across agriculture, resources, technology, and oil and gas. He is a Chartered Professional Accountant and holds a Bachelor of Commerce degree from the University of Saskatchewan. Chief Executive Officer, Global Markets Judith Swales leads Fonterra’s Global Markets region. Responsible for our Consumer, Foodservice and Ingredients channels across the region, Judith and her team lead the global strategy to help bring the goodness of dairy to generations of customers and consumers. Prior to this Judith was Fonterra’s CEO for Asia Pacific, and earlier led the Global Consumer and Foodservice business, and the Innovation and Transformation business unit. Judith joined the Co-operative originally in 2013 as Managing Director Australia and Fonterra Oceania. The daughter of a milkman, Judith grew up helping her father on his daily milk run. She has extensive experience in senior management and business turnarounds. Before joining Fonterra, she was Managing Director of Heinz Australia, CEO and Managing Director of Goodyear Dunlop, Australia and New Zealand, and Managing Director of Angus and Robertson. She currently serves as a Non-Executive Director for Super Retail Group and has served on the boards of Virgin Australia, DuluxGroup and Fosters. Judith has a Bachelor of Science (Honours) in Microbiology and Virology and is a graduate member of the Australian Institute of Company Directors. 51 Teh-han Chow Kate Daly Mike Cronin Chief Executive Officer, Greater China Teh-han oversees the Co-op’s business in the Greater China region, including Ingredients, Foodservice and Consumer Brands. The region is one of the largest markets for Fonterra, accounting for roughly a third of the Co-op’s total business. Prior to his appointment as Chief Executive Officer of the Greater China region in 2020, Teh-han was President of Fonterra’s ingredients business, NZMP, in Greater China, and South and East Asia. Teh-han has over 20 years of experience in China across a variety of industries and functions, including marketing, public relations, advertising, sales, and management roles in food, agriculture, commodities, FMCG, luxury goods, and hospitality sectors. Prior to joining Fonterra in 2015, Teh-han was Chief Executive Officer of Louis Dreyfus Commodities China, where he doubled the business, expanded the company’s business lines, built and acquired production facilities, and was involved in establishing multiple joint-ventures including COFCO Agricultural Industry Investment Fund. Prior to Louis Dreyfus, Teh-han was Managing Director for Greater China for J.R. Simplot, a United States- based diversified agribusiness with farming and food processing operations in China. Teh-han has a Bachelor’s degree in Marketing from California State University Northridge, and a Master’s degree, with honours, in International Management from Thunderbird Graduate School of International Management. Managing Director, People and Culture Kate was appointed as Managing Director People and Culture in August 2021. She has oversight of the teams responsible for facilitating Fonterra’s people strategy including Culture, Employment Relations, Leadership Development, Talent and Future Capabilities, Rewards and Global Mobility. Kate first joined Fonterra in December 2020, making significant contribution to the Co-operative as Director of HR for COO, where she held responsibility for leading the HR function for Fonterra across NZ Manufacturing, Technical Excellence, Global Supply Chain, Global Sustainability, Global Quality & Safety, Category Strategy & Innovation and Information Technology. Prior to joining Fonterra, Kate had extensive experience in Human Resources and Communications leadership, having held senior roles across these portfolios since 2001. Kate previously led a transformation of the People and Culture function at the BNZ. She also was appointed as the Chief People and Communications Officer with Fletcher Building Ltd. Kate was awarded the HRINZ HR person of the year in 2018 in recognition for her contribution to Fletcher Building. Kate has a Bachelor of Commerce in Economics and International Finance and a Bachelor of Science in Pharmacology, both from the University of Auckland. Managing Director, Co-operative Affairs Mike Cronin oversees Co-operative Affairs which includes Governance, Risk and Audit, Farm Source, Global Sustainability, Stakeholder Affairs and Trade, Legal, Inclusion and Māori Strategy. Mike joined Fonterra in 2002 and has been a member of teams that have contributed to some of Fonterra’s key initiatives, including Trading Among Farmers, the Governance and Representation Review, the Fonterra Purpose, The Co-operative Difference and Flexible Shareholding. Prior to 2014 when he joined the Fonterra Management Team, Mike was the General Manager of Strategy Deployment and then Group Director Governance and Legal. Mike has a Bachelor of Laws and Bachelor of Arts from the University of Auckland. 52 Information about the Board of Directors can be found in the Governance & Statutory Disclosures. Komal Mistry-Mehta Emma Parsons Anna Palairet Chief Innovation and Brand Officer Komal leads Fonterra’s innovation, research and development functions along with the Co-operative’s brand and communications activities. This includes shaping the future of Fonterra by developing and commercialising innovation, technologies and new business models. In addition, Komal oversees the Active Living Business Unit, and has responsibility for setting the global strategy for Core Dairy, Foodservice and the Nutrition Science portfolio. Prior to joining the Fonterra Management Team in August 2022, Komal led Fonterra’s high-value global ingredients business Active Living, unlocking growth through developing and commercialising science-backed health and wellness solutions. In her prior role, Komal’s work establishing and developing Fonterra Ventures earned her the title of New Zealand’s Young Executive of the Year in the 2017 Deloitte Top 200 Awards. Prior to joining Fonterra in 2011, Komal worked for Deloitte in Europe. She is known for her leadership in developing people and her strong advocacy for diversity and inclusion. Komal has completed the Executive Program at Stanford University School of Business and holds Bachelor of Laws and Bachelor of Management degrees from the University of Waikato. She is a Barrister and Solicitor of the High Court of New Zealand as well as a member of the New Zealand Institute of Chartered Accountants. Managing Director, Strategy and Optimisation Emma leads Fonterra’s work on strategy and optimisation, overseeing the product portfolio management function, and the development and implementation of strategy. Prior to August 2022 when Emma joined the Fonterra Management Team, she was the General Manager of Capital Strategy and Chief Executive Officer of Agrigate, a joint venture between Fonterra and Livestock Improvement Corporation (LIC), GM Responsible Dairying, and had roles in Brazil and Argentina where she developed the Co-operative’s export relationships and supply chain integration across Latin America. Before joining Fonterra in 2001, Emma worked for the New Zealand Dairy Board and Kiwi Dairies. She has a Master of Business Administration, with First Class Honours, from Massey University, and Bachelor of Science and Bachelor of Commerce degrees from Victoria University of Wellington. Chief Operating Officer (Acting) Anna is currently the Chief Operating Officer (Acting) for Fonterra, responsible for our New Zealand manufacturing sites and global supply chain operations, technical excellence, and global safety, quality and regulatory teams. She re-joined the dairy industry in October 2022 as the Director, Global Supply Chain before moving into the Chief Operating Officer (Acting) role in June 2023. She is also Chair of Kotahi Logistics. Anna is an experienced business leader with a career spanning some of Australasia’s largest multinational companies across multiple industries including Fonterra, Carter Holt Harvey, Amcor, and Air New Zealand. During her 16 years with Air New Zealand, Anna led commercial portfolios in the company’s Engineering, Group Supply Chain, Operations, Customer and Sales divisions. Positions included GM Air New Zealand Cargo, GM Property and Infrastructure, Head of Sustainability and Head of Procurement. Anna is a past Board Director for the New Zealand Green Building Council (NZGBC) and past Board Trustee of Gladstone Primary School. She has a Bachelor of Science, Genetics and Microbiology degree from Massey University. Information about the Board of Directors can be found in the Governance & Statutory Disclosures. 53 Jack, Maheswary & Bronte, Auckland 54 Reconciliation from profit after tax to total Group normalised EBITDA Profit after tax Net finance costs from continuing operations Net finance costs from discontinued operations Tax expense from continuing operations Tax expense from discontinued operations Depreciation and amortisation from continuing operations Depreciation and amortisation from discontinued operations Total Group EBITDA Gain on sale of Chilean Soprole business Loss on sale of Hangu China farm Gain on sale of Global Dairy Trade Brazil consumer and foodservice business impairment Total normalisation adjustments Total Group normalised EBITDA GROUP $ MILLION 31 JULY 2023 31 JULY 2022 RE-PRESENTED1 1,577 211 50 303 77 654 8 2,880 (349) 12 – – (337) 2,543 583 194 37 131 31 602 33 1,611 – – (42) 57 15 1,626 1 Comparative information has been re-presented for consistency with the current period. Refer to the Notes to the Financial Statements section – Note 20 Re-presentations for further details. Non-GAAP measures Fonterra uses several non-GAAP measures when discussing financial performance. Non-GAAP measures are not defined or specified by NZ IFRS. They are not subject to audit unless they are included in Fonterra’s audited annual financial statements. Management believes that these measures provide useful information as they provide valuable insight on the underlying performance of the business. They may be used internally to evaluate the underlying performance of business units and to analyse trends. These measures are not uniformly defined or utilised by all companies. Accordingly, these measures may not be comparable with similarly titled measures used by other companies. Non-GAAP financial measures should not be viewed in isolation nor considered as a substitute for measures reported in accordance with NZ IFRS. Please refer to the following tables for reconciliations of NZ IFRS to non- GAAP measures, and the Glossary for definitions of non-GAAP measures referred to by Fonterra. Non-GAAP measures are not subject to audit unless they are included in Fonterra’s audited annual financial statements. 55 Reconciliation from profit after tax to total Group normalised EBIT Reconciliation from profit after tax to normalised profit after tax and normalised earnings per share Profit after tax Net finance costs from continuing operations Net finance costs from discontinued operations Tax expense from continuing operations Tax expense from discontinued operations Total Group EBIT Normalisation adjustments (as detailed on previous page) Total Group normalised EBIT GROUP $ MILLION 31 JULY 2023 31 JULY 2022 RE-PRESENTED1 1,577 211 50 303 77 2,218 (337) 1,881 583 194 37 131 31 976 15 991 Profit after tax Normalisation adjustments (as detailed on the previous page) Tax on normalisation adjustments Normalised profit after tax (Profit)/loss attributable to non-controlling interests Normalisation adjustments attributable to non-controlling interests Normalised profit after tax attributable to equity holders of the Co-operative Weighted average number of Co-operative shares (thousands of shares) Normalised earnings per share ($) GROUP $ MILLION 31 JULY 2023 31 JULY 2022 1,577 (337) 89 1,329 (40) – 1,289 583 15 (7) 591 1 (24) 568 1,610,507 0.80 1,613,353 0.35 Reconciliation from gross profit from continuing operations to total Group normalised gross profit Gross profit from continuing operations Gross profit from discontinued operations Total Group normalised gross profit GROUP $ MILLION 31 JULY 2023 31 JULY 2022 RE-PRESENTED1 4,181 418 4,599 2,909 431 3,340 1 Comparative information has been re-presented for consistency with the current period. Refer to the Notes to the Financial Statements section – Note 20 Re-presentations for further details. 56 Glossary Terms Active Living Adjusted net debt Definitions Terms Definitions represents ingredients and solutions sold to businesses who cater to consumers’ health and wellness needs. It addresses three dimensions of wellbeing (Physical, Mental, Inner), extending to meet the nutrition needs of medical patients through to everyday people pursuing active lifestyles. This portfolio includes proteins, specialty ingredients such as probiotics, lactoferrin and lipids, and patented formulations. is calculated as total borrowings, plus bank overdraft, less cash and cash equivalents, plus a cash adjustment for 25% of cash and cash equivalents held by the Group’s subsidiaries, adjusted for derivatives used to manage changes in hedged risks on debt instruments. Amounts relating to disposal groups held for sale are included in the calculation. Cash operating expenses per kgMS is continuing operations operating expenses, less non-cash costs (depreciation, amortisation, right of use asset costs, impairments). Shown by kilogram of New Zealand milk solids collected. Ceased Shareholder is a Shareholder that has given notice of ceasing supply, or is treated as having given such a notice, and whose cease notice has become effective. Consumer is the channel of branded consumer products, such as powders, yoghurts, milk, butter and cheese. Continuing operations means operations of the Group that are not discontinued operations. Associated Shareholder is a Shareholder that is a Farm Lessor, Sharemilker or Contract Milker. Core Operations Attributable to equity holders of the Co- operative Average capital employed Bulk liquids Capital employed Capital expenditure is used to indicate that a measure or sub-total excludes amounts attributable to non-controlling interests. is a 13-month rolling average of capital employed. Custodian Debt to EBITDA means bulk raw milk that has not been processed and bulk separated cream. is adjusted net debt less the cash adjustment (used in calculating adjusted net debt), plus cash and cash equivalents held by subsidiaries for working capital purposes, plus equity excluding hedge reserves and net deferred tax assets. DIRA represents core operating functions including New Zealand milk collection and processing operations and assets, supply chain, Group IT and Sustainability; Fonterra Farm Source™ retail stores; and the Strategy and Optimisation function. means the Fonterra Farmer Custodian, which is the legal holder of the shares in respect of which economic rights are held for the Fund and any Market Makers. is adjusted net debt divided by Total Group normalised earnings before interest, tax, depreciation and amortisation (Total Group normalised EBITDA) excluding share of profit/loss of equity accounted investees, net foreign exchange gains/losses and any normalised EBITDA relating to entities divested during the year. means the Dairy Industry Restructuring Act 2001, which authorised Fonterra’s formation and regulates its activities, subsequent amendments to the Act, and the Dairy Industry Restructuring (Raw Milk) Regulations 2012. is purchases of property (less specific disposals where there is an obligation to repurchase), plant and equipment and intangible assets (excluding purchases of emissions units), net purchases of livestock, and includes amounts relating to disposal groups held for sale. Discontinued operations means a component of the Group that is classified as held for sale (or has been sold) and represents, or is part of a single co-ordinated plan to dispose of, a separate major line of business or geographical area of operations, or is a subsidiary acquired exclusively with a view to resale. Capital invested is capital expenditure plus right of use asset (e.g. leases) additions and business acquisitions, including equity contributions, long-term advances, and investments. Dividend yield is dividends (per share) divided by volume weighted average share price for the period 1 August to 31 July. Earnings before interest and tax (EBIT) Earnings before interest, tax, depreciation and amortisation (EBITDA) Earnings per share (EPS) 57 Terms Definitions Terms Definitions is profit before net finance costs and tax. Free cash flow is the total of net cash flows from operating activities and net cash flows from investing activities. is profit before net finance costs, tax, depreciation and amortisation. Fund is the Fonterra Shareholders’ Fund. is profit after tax attributable to equity holders of the Co-operative divided by the weighted average number of shares on issue for the period. EBIT margin is EBIT divided by revenue from sale of goods. EBITDA margin is EBITDA divided by revenue from sale of goods. Economic rights means the rights to receive dividends and other economic benefits derived from a share, as well as other rights derived from owning a share. Eliminations represents eliminations of inter-business unit sales. Farmgate Milk Price means the average price paid by Fonterra for each kilogram of milk solids (kgMS) supplied by Fonterra’s farmer shareholders under Fonterra’s standard terms of supply. The season refers to the 12-month milk season of 1 June to 31 May. The Farmgate Milk Price is set by the Board, based on the recommendation of the Milk Price Panel. In making that recommendation, the Panel provides assurance to the Board that the Farmgate Milk Price has been calculated in accordance with the Farmgate Milk Price Manual. Fonterra's average NZD/ USD conversion rate is the rate that Fonterra has converted net United States Dollar receipts into New Zealand Dollars including hedge cover in place. Foodservice represents the channel selling to businesses that cater for out-of-home consumption; restaurants, hotels, cafés, airports, catering companies etc. The focus is on customers such as; bakeries, cafés, Italian restaurants, and global quick-service restaurant chains. High performance dairy ingredients including whipping creams, mozzarella, cream cheese and butter sheets, are sold in alongside our business solutions under the Anchor Food Professionals brand. Gearing ratio (%) (adjusted net debt) is adjusted net debt divided by total capital. Total capital is equity excluding hedge reserves, plus adjusted net debt. Global accounts means large scale, multi-national/multi-region customers. Global Dairy Trade (GDT) means the electronic auction platform that is used to sell commodity dairy products. Global Markets Greater China Gross margin represents the Ingredients, Foodservice and Consumer channels outside of Greater China. represents the Ingredients, Foodservice and Consumer channels in Greater China. is gross profit divided by revenue from sale of goods. Gross profit from Core Operations per kgMS is Core Operations business unit (excluding Farmsource) gross profit, less the cost of New Zealand milk sold. Shown per kilogram of New Zealand milk solids sold by Core Operations (continuing business). Growth capital expenditure Held for sale Ingredients is investments to drive business expansion or improvement toward our strategy and generate incremental revenue. This includes organic growth (existing business projects) and inorganic growth (mergers and acquisitions). is an asset or disposal group is classified as held for sale if it is available for immediate sale in its present condition and its sale is highly probable. A disposal group is a group of assets and liabilities to be disposed of (by sale or otherwise) in a single transaction. represents the channel comprising bulk and specialty dairy products such as milk powders, dairy fats, cheese and proteins manufactured in New Zealand, Australia and Europe, or sourced through our global network, and sold to food producers and distributors. 58 Definitions Terms Definitions means kilograms of milk solids, the measure of the amount of fat and protein in the milk supplied to Fonterra. Price Relativities refers to the difference in the weighted average price (in USD) between the Co-op’s Reference Product portfolio and Non-reference Product portfolio. The difference between these two weighted average prices is a key driver of the Co-op’s gross margin. Terms kgMS Market Maker is a third party appointed by the Co-op who is active in making bids and offers on a minimum number of Fonterra Co-operative Group Shares. Maximum Holding is the maximum number of shares a Supplying Shareholder can hold, which is equal to 4 times the Share Standard. Minimum Holding is the minimum number of shares a Supplying Shareholder is required to hold, which is equal to 33% of the Share Standard. New entrants have up to six seasons to meet this. Net debt means adjusted net debt. Net working capital is total trade and other receivables plus inventories, less trade and other payables. It excludes amounts owing to suppliers and employee entitlements. Non-Reference Products means all New Zealand milk solids processed by Core Operations, except for Reference Commodity Products. Non-shareholding farm means a farm where the owning entity is not entitled to hold shares in the Co-operative. As an example, farms supplying MyMilk. Non-supplying Shareholder Normalisation adjustments means all shareholdings that are not Supplying Shareholders. means adjustments made for certain transactions that meet the requirements of the Group’s Normalisation Policy. These transactions are typically unusual in size and nature. Normalisation adjustments are made to assist users in forming a view of the underlying performance of the business. Normalisation adjustments are set out in the Non-GAAP Measures section. Normalised is used to indicate that a measure or sub-total has been adjusted for the impacts of normalisation adjustments. E.g. ‘Normalised EBIT’. Permitted Transferee is a person who has been approved by the Co-op and who is (and remains) related to or associated with a Ceased Shareholder. Product channel Fonterra has three product channels, Ingredients, Foodservice and Consumer. Profit after tax margin is profit after tax attributable to equity holders of the Co-operative, divided by revenue from sale of goods. Reference Commodity Products (also referred to as Reference Products) is commodity specifications of the five Reference Commodity Products (RCPs) which are Whole Milk Powder (WMP) and Skim Milk Powder (SMP), and their by-products Butter, Anhydrous Milk Fat (AMF) and Buttermilk Powder (BMP). These commodity groups are included in the calculation of the Farmgate Milk Price. Reported Retentions is used to indicate a sub-total or total is reported in the Group’s Financial Statements before normalisation adjustments. E.g. ‘Reported profit after tax’. means earnings per share, less dividend per share. Retentions are reported as nil where Fonterra has reported a net loss after tax. Return on Capital (ROC) is calculated as Total Group normalised EBIT including finance income on long-term advances less a notional tax charge, divided by average capital employed. Rules for Shareholding is the Rules for Shareholding adopted by the Fonterra Board from time to time. Season New Zealand: A period of 12 months from 1 June to 31 May. Australia: A period of 12 months from 1 July to 30 June. Secondary Shareholder is a sharemilker as defined in section 34 of the Co-operative Companies Act that holds shares as if they were a Supplying Shareholder, pursuant to section 44 of the Co-operative Companies Act and clause 30.5 of the Constitution. Share Standard means one share per one kgMS supplied, used to calculate a Supplying Shareholder's Minimum Holding and Maximum Holding. Terms Definitions Shareholding farm means a farm where the owning entity of the farm has a minimum required shareholding of at least 1,000 shares in the Co-operative. This includes farms where the owning entity is in the process of sharing up on a Share Up Over Time contract. Supplying Shareholder is a shareholder supplying milk to the Co-op. Sustaining capital expenditure represents investments to maintain the capability of our existing assets from risk management, legislation/regulation commitments, business continuity and capital replacement, as well as projects that drive the Co-operative's sustainability targets. Total Group Total payout is used to indicate that a measure or sub-total comprises continuing operations, discontinued operations and non-controlling interests. E.g. ‘Total Group EBIT’. means the total cash payment per milk solid that is backed by a share, being the sum of the Farmgate Milk Price per kgMS and the dividend per share. Total Shareholder Return (TSR) is the measure of share price movements and all economic distributions (e.g. dividends, capital returns) over a specified period of time, divided by the original investment amount. Expressed as an annualised percentage. Tradeable shares represents shares on issue that are in excess of aggregate minimum shareholding. WACC means weighted average cost of capital. Weighted average share price represents the average price Fonterra Co-operative Group Limited shares traded at, weighted against the trading volume at each price over the reporting period. Working capital days is calculated as 13-month rolling average working capital divided by revenue from the sale of goods (excluding impact of derivative financial instruments) multiplied by the number of days in the period. The working capital days calculation excludes other receivables, prepayments, other payables and includes working capital classified as held for sale. 59 Iso, Auckland Directory Fonterra Board of Directors Registered Office Fonterra Shares & FSF Units Registry Peter McBride Clinton Dines Brent Goldsack Leonie Guiney Bruce Hassall Holly Kramer Andrew Macfarlane John Nicholls Cathy Quinn Scott St John Alison Watters Fonterra Management Team Miles Hurrell Neil Beaumont Judith Swales Teh-han Chow Kate Daly Mike Cronin Komal Mistry-Mehta Emma Parsons Anna Palairet Fonterra Co-operative Group Limited Computershare Investor Services Limited Private Bag 92032 Auckland 1142 New Zealand 109 Fanshawe Street Auckland Central 1010 New Zealand Phone +64 9 374 9000 Private Bag 92119 Auckland 1142 New Zealand Level 2, 159 Hurstmere Road Takapuna Auckland 0622 New Zealand Investor Relations Enquiries Phone +64 9 374 9000 https://www.fonterra.com/nz/en/ investors.html Auditor KPMG 18 Viaduct Harbour Avenue Auckland 1010 New Zealand Farmer shareholder & supplier services Freephone 0800 65 65 68 60 Drysdale Farm, Hawkes Bay 61 Drysdale Farm, Hawkes Bay insightcreative.co.nz FONTERRA116_AR Fonterra Annual Review 2023 Arotake-ā-tau Te Mātāpuna fonterra.com 

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