Fonterra Shareholders Fd

Good afternoon, everyone. Thank you for joining the call. I'm here with Simon Till, Acting CFO and Selena Robb, Director of Capital Markets and M&A. Hopefully you've had a chance to review the information that we released today as part of our quarter one business update. We will intend to go through the slides if you have them in front of you. Just the first slide, just a quick summary. We have had a good start to the year quarter one profit after tax $346 million up, $214 on the prior year, driven by improved margins across all three of those channels, being consumer, food service, and ingredients. Equates to an earnings per share of $0.20, but includes the performance of discontinued operations and the impact of our selling our DPA Brazil business. The co-op's continuing operations earnings per share is $0.24, which is up from $0.13 in the prior year. The strong start has led us to lift our four-year earnings range to $0.50 to $0.65 from $0.45 to $0.60 prior. We've also lifted our farm gate milk price by $0.25 and also narrowed the range. That is now sitting between $7 and $8 with a midpoint of $7.50. Just slide four talks a little bit about some of those drivers on the milk price. Of course, you can see the significant drop in demand from China between 2021 and 2022. but a slow re-emergence, if you like, of China into 23, which is giving us the confidence to see that milk price increase to the 750. The next slide, slide five, you can see reference commodity prices for the quarter are materially lower than the prior year, down around 23%, and well below price level seen in F22. And the graph shows that the non-reference prices have not declined at the same rate as reference product, which are only down 12%. This has driven increased margins in ingredients in particular, and has also contributed, obviously, to the strong start to the year. I'll ask Simon to take us through a couple of detailed slides before we come back for some questions.

Thanks, Miles, and good afternoon, everyone. I'm on the next slide called key performance drivers. So looking at the middle part there of those key drivers for the continuing operations, You can see there that the main one there is the $229 million from margins. And as Myles mentioned, that's been a contribution across all the channels. So when we look at the key drivers there, we've seen both food service and consumer channels in particular. They've managed to keep good pricing in market, but have obviously also benefited from the lower milk price or input costs. Moving across to the right there, you'll see operating expenses, and they are up a bit. That does reflect a couple of key elements. One was the higher storage and distribution costs that we had to facilitate those higher volumes of sales in food service and consumer. There's also some inflation on the wage workforce has been there, and also in terms of the efficiency initiative, some of the upfront costs there. One more bar to the right there, we've got the finance costs, so benefiting from lower levels of debt or overall borrowings, and also you may be aware we hedged the interest rates over time, so that's had a positive impact in terms of interest costs as well. Then obviously paid more tax, but that reflects the fact of higher profits and earnings. So then the last part is just putting that, as Myles mentioned, between the continuing operations and the total group there. So that is a negative, so it covers DPA Brazil. So that includes the trading result, which was actually positive earnings, but there was a release from the Foreign Currency Translation Reserve reflecting effectively the change in the currency over the life of the asset. So net-net, that was a negative. If we move on to the next slide where we provide that channel perspective, and really just want to make the point there, not just an improvement in the margins across the channels, but also the allocation of milk. So you can see there that we've allocated less to the ingredients and more into the higher margin food service and consumer. So that's been part of the improvement we've seen as well. So Myles, back to you.

Yeah, great. Thanks, Simon. Just in terms of where we're at strategically, of course, in the quarter, we're focusing on the leadership and sustainability. We have introduced our 30% reduction for on-farm emissions, so pleased to have that out in front of farmers and working with them on what we can collectively do to achieve that. Of course, we did pay out the $0.50 capital return in the quarter through the sale of Soprola and, of course, the finally completed divestment of DPA, so really pleased to see those But overall, a great start to the year, good momentum built across the organisation and really pleased with how we are facing into the remaining three quarters of the year. Thank you and open up for questions. Thank you.