Fonterra Shareholders Fd

Good day and thank you for standing by. Welcome to the Fonterra Cooperative Group fiscal year 2023 Q3 investor call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you will need to press star 1-1 on your telephone. You will then hear a message advising your hand is raised. To withdraw the question, simply press star 1-1 again. and the advice that today's conference is being recorded. Now, it's my pleasure to turn the call over to Myles Horrell. Please go ahead.

Good morning. Thank you. I joined here this morning with Neil Beaumont, CFO, and Simon Till, Capital Markets, and looking forward to taking you through our Q3 results that we released to the markets. If we start quickly on slide two, we are pleased to report that the co-op has continued its strong performance that we reported at half-year. Profit after tax for the first nine months of F23 is $1.326 billion, up $854 million on the prior year, and that does include the gain on sale for prolae. Excluding the gain on sale of the divestment of $248 million, normalised profit is $1.078 billion, which is equivalent to $0.65 for the nine months. In terms of full-year earnings, we've also lifted our guidance for the full year from $55.75 up to $0.65 to $0.80 per share, mainly on the back of those ongoing favourable price relativities, but also the improvements we are seeing through consumer and food service. On the milk price, we have both narrowed the range and reduced the midpoint for the current season to $8.20 midpoint from $8.30 per kilogram. And for the season ahead, gone back out to a wide range given the early part of the season, $7.25 to $8.75 with a midpoint of $8. The next slide just provides a bit of an update on how we're going against our strategy and a couple of comments. Firstly, we did complete the sale of Soprole during the quarter, which we've well documented, and the proposed capital return of $800 million have made the decision to bring that forward into late August this year, which is pleasing. Of course, we have transitioned to the new flexible shareholding structure, and the on-market buyback has been in place to support liquidity since the end of March. We have a very small portion of the allocated funds that have been used, and the market maker continues to operate. As part of the regular capital management programme, we continue to evaluate opportunities for on-market buybacks at the same time. We also continue to progress sustainability, both on and off farm. We expect to announce a scope three on-farm emissions target around the middle of the year. And also pleasing to see the Centre for Climate Action joint venture we have with industry and government is now up and running and has made its first investment. Neil will take us through a couple of the numbers, and then I'll come back towards Ian to talk a little bit.

Thanks, Myles, and good afternoon, everyone. As Myles mentioned, the co-op has delivered a strong result for the first nine months. Looking at some of our key numbers, profit after tax of $0.81 per share, excluding the gain on divestments, our earnings per share reduces to $0.55. And I think quite importantly, it's that underlying earnings per share of $0.65 that our dividend policy is based on. Looking at free cash flow, a key metric for us, just over $1.6 billion, and this is up more than $3 billion from the prior year. Key drivers, obviously, being the net proceeds from the sale of Soprole, the higher earnings, and critically, the selling down of our investment in inventory to more what I would call historical levels. Higher earnings remain the key driver to our improved return on capital for the last 12 months, which is tracking at 11.7%, up from 5.7%. You will certainly be familiar with the price relativities graph on slide five, and we use this graph a lot to illustrate the relative price movements between reference and the non-reference products, which really directly impact our earnings. The strong pricing in our non-reference product portfolio has lasted longer than we initially anticipated, and these favorable price relativities continue to drive our higher margins, particularly in the ingredients channel. and are the key contributors to the earnings that we're reporting today. Looking at our total group performance on slide six, overall the drivers of our performance are similar to what we reported at the interim results, with the key points being sales volumes remain slightly up on last year, reflecting the sell-down of additional 22-year-end inventory. Gross margin, gross profit are up, mainly due to the favorable price relativities I just spoke of. And then our operating expenses are also up. reflecting the impairments we recognize in our interim results. And like most businesses, we are certainly experiencing ongoing inflation. Moving to slide seven, this presents a matrix view of our business with our business segments across the top and our product channels down the side. I want to highlight a few key points. The favorable price relativities discussed earlier can be seen across the ingredients channel, particularly in our group operations segments. Our food service channel EBIT increased as we continue to adjust our in-market product prices, as well as increases in sales volume. And finally, during the third quarter, input costs within the consumer channel actually started to ease, lifting margins, but the overall channel result remains impacted by the impairments that we spoke about at interim. With that, I'll hand it back to you, Myles.