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1 Murray Gulburn FY17 full year results 22 August 2017

2 Disclaimer Frward lking statements This presentatin has been prepared by Murray Gulburn C-perative C. Limited (MG). The infrmatin cntained in this presentatin is fr infrmatinal purpses nly and is nt investment r financial prduct advice and is nt intended t be used as the basis fr making an investment decisin. This presentatin has been prepared withut taking int accunt the investment bjectives, financial situatin r particular needs f any particular persn. N representatin r warranty, express r implied, is made as t the fairness, accuracy, cmpleteness r crrectness f the infrmatin, pinins and cnclusins cntained in this presentatin. T the maximum extent permitted by law, nne f MG, its cntrlled entities, their directrs, emplyees r agents, nr any ther persn accepts any liability, including, withut limitatin, any liability arising ut f fault r negligence, fr any lss arising frm the use f the infrmatin cntained in this presentatin. In particular, n representatin r warranty, express r implied, is given as t the accuracy, cmpleteness r crrectness, likelihd f achievement r reasnableness f any frecasts, prspects r returns cntained in this presentatin. Such frecasts, prspects r returns are by their nature subject t significant uncertainties and cntingencies. Befre making an investment decisin, yu shuld cnsider, with r withut the assistance f a financial adviser, whether an investment is apprpriate in light f yur particular investment needs, bjectives and financial circumstances. Past perfrmance is n guarantee f future perfrmance. Nn-Internatinal Financial Reprting Standards (Nn-IFRS) infrmatin This presentatin makes reference t certain nn-ifrs financial infrmatin. Management uses this infrmatin t measure the perating perfrmance f the business and it has been presented as this may be useful fr investrs. This infrmatin has nt been reviewed by the MG grup s auditr. Frecast infrmatin has been estimated n the same measurement basis as actual results. Page 2

3 FY17 year in review Financial results reflect a difficult year Business initiatives FY17 farmgate milk price (FMP) f $ per kilgram f milk slids (/kg MS) Underlying FY17 FMP 2 f $4.60/kg MS Milk intake f 2.7 billin litres, dwn 22% Revenue f $2.5 billin, dwn 10% Underlying NPAT 2 f $34.7 millin, dwn 15% Excludes pst tax ne-ff csts f $405 millin assciated with Milk Supply Supprt Package (MSSP) and ftprint ratinalisatin Net debt f $445 millin, 8% reductin Delivered targeted cst savings Cnsumer cheese plant in cmmercial prductin New SAP system implemented Other majr capital prjects cancelled MSSP de-recgnised Ftprint review finalised New management structure in place Strategic review cmmenced Page 3 1. All references t FMP refer t Available weighted average Suthern Milk Regin Farmgate Milk Price. Including balance sheet supprted step-ups annunced n 27 Octber 2016 and ne-ff adjustments annunced n 2 May Underlying result excludes deviatins frm the Prfit Sharing Mechanism. See nte 3 in MG s financial reprt fr the year ended 30 June 2017 fr further detail.

4 FY17 results summary FY17 FY16 (%) Available Suthern Milk Regin FMP ($/kg MS) Actual Suthern Milk Regin FMP ($/kg MS) Sales ($m) 2,491 2, % Distributable Milk Pl ($m) 991 1, % Applicable NPAT allcatin per prfit sharing mechanism 3.50% 3.50% 0bp Underlying NPAT 2 ($m) % Net impact f deviatins 3 ($m) (405.5) - nm Prfit (Lss) fr the year ($m) (370.8) 39.8 nm Cash flw befre financing 4 ($m) 52.2 (269) nm Net debt ($m) % Equity ($m) 735 1, % Gearing (%) 38% 29% Final dividend/distributin (cents per share/unit) nm Page 4 1. Including balance sheet supprted step-ups annunced n 27 Octber 2016 and ne-ff adjustments annunced n 2 May Underlying NPAT excludes deviatins frm the Prfit Sharing Mechanism. See nte 3 in MG s financial reprt fr the year ended 30 June 2017 fr further detail. 3. On 27 Octber 2016 MG annunced a deviatin frm the Prfit Sharing Mechanism f $81.8 millin pre-tax cmprising an impairment f the MSSP and balance sheet supprted step-up payments t suppliers. On 2 May 2017, MG annunced further deviatins frm the Prfit Sharing Mechanism f up t $410 millin pre-tax assciated with the de-recgnitin f the MSSP, ratinalisatin f manufacturing ftprint, asset write-dwns and the exclusin f ne-ff csts. 4. See page 20 f MG s financial reprt fr the year ended 30 June 2017 fr further detail.

5 Dairy Fds Ttal Dairy Fds revenue f $1.2 billin, dwn 8.0% Dmestic Dairy Fds revenue (AUD$m) Devndale brand revenue f $502 millin dwn 14% primarily due t lwer adult milk pwder (AMP) sales Dmestic sales (excluding AMP) up 0.8% t $967 millin Perfrmance excluding AMP sales remains stable AMP sales decreased by $93 millin as a result f lwer crss brder sales 1,200 1,100 1, ,106 1,000 1, FY15 FY16 FY17 Dmestic Dairy Fds Dmestic Adult Milk Pwder Internatinal sales dwn 9.1% t $201 millin Internatinal Dairy Fds revenue (AUD$m) Butter vlumes allcated away frm internatinal t dmestic cntracts AMP sales grew acrss Suth East Asia while China remained in line with FY FY15 FY16 FY17 Page 5 Intl. Dairy Fds Intl. Adult Milk Pwder

6 Ingredients and Nutritinals Ingredients revenue dwn thrugh lwer milk allcatin, mitigated by imprved cmmdity prices Ingredients revenue (AUD$m) Ingredients revenue dwn 7% t $824 millin Decrease in Ingredients revenue driven by lwer milk intake vlume Average $/MT increased 12% t $3,200 driven by higher cmmdity prices 1,500 1,300 1, ,809 1,203 3,200 2, ,2 3,7 3,2 2,7 2,2 1,7 1, (100) FY15 FY16 FY17 (30 Revenue Average $/MT Nutritinals revenue dwn 34.6% t $135 millin Majr custmer increasingly self-sufficient Market remains cautius given future regulatry changes in China Nutritinals revenue (AUD$m) Page 6 - FY15 FY16 FY17

7 Strategic review

8 Strategic review: Current status and strategic directin Current status Strategic directin Cmmercial challenges Structurally cmprmised Capital discipline Immediate fcus n FY18 FMP Restre the lng-term cmpetitive prfile f the business Future funding alternatives Unfcused grwth agenda Clearly define areas fr investment and milk allcatin Instil disciplined cmmercial apprach t decisins Clear understanding f end-t-end value chain Operating mdel misaligned t milk intake Ensure apprpriate capability acrss the business Prcesses, peple and systems Leverage skills and talent Page 8

9 Strategic review has cmmenced acrss three wrkflws Strategic review Cmmercial review Prject Spnsr Cmmercial Directr Key fcus areas Imprve earnings thrugh: Margin delivery Reducing cst-t-serve Future grwth ptins Business imprvement prgram Prject Spnsr Chief Financial Officer Key fcus areas Addressing cst base t supprt cmmercial strategy Align structure t business bjectives Structural review Prject Spnsr Bard f Directrs Key fcus areas Crprate structure Capital structure Ability t access capital as required Update t be prvided at MG s Annual General Meeting Page 9

10 Fcus areas fr cmmercial review and business imprvement prgram Immediate actins Cmmercial review Business imprvement Discretinary spend Freeze all spending Prduct prfitability Ensure milk is allcated t highest returning streams Supply chain Inbund lgistics expenditure Warehusing ptimisatin Prcurement Inventry and planning Advisry fees and cnsultants Travel 30% reductin 20% reductin Brand return Channel prfitability Optimise brand returns thrugh revenue management Imprve channel prfitability Fcus n cst t serve Prductin Manufacturing structure Manufacturing ftprint Engineering and prduct testing csts General ffice expenses 10% reductin SKU ratinalisatin Eliminate large tail f sub-scale prducts Crprate Reduce IT spend Brad based head ffice cst review Immediate cnstraint n spending Imprved sales returns and margins Cst base efficiency thrugh lwer cst t manufacture and deliver Page 10

11 Brad based structural review Prfit Sharing Mechanism Limits cmmercial flexibility Unintended cnsequences becming apparent (ne-ff items, nn-cash expenses, etc.) Future capital requirements Refresh asset base Technlgy enhancements Grwth bjectives Access t capital Breadth f surces Flexibility Certainty Crprate structure Durable and sustainable Brad array f ptins Unslicited inbund interest Deutsche Bank engaging Unit Trust Significant stakehlder Disclsure and cmpliance requirements Page 11

12 Financials

13 Imprvement in glbal dairy cmmdity markets Full cream milk pwder 1 6,000 5,000 4,000 3,000 2,000 1, Whle milk pwder (WMP) WMP 10 year average Average prices acrss key cmmdities 2 Full cream milk pwder (FCMP) prices recvered t 10 year average during FY17 Average market prices acrss key cmmdities rse Recrd high butter prices ffset by skim milk pwder (SMP) remaining belw lngterm average Eurpean interventin levels remained high USD$m AUD$m Cmmdity FY16 FY17 Variance FY16 FY17 Variance FCMP 2,258 3, % 3,107 4, % SMP 1,971 2, % 2,710 3, % Butter 3,150 4, % 4,329 5, % Cheddar 3,213 3, % 4,415 4, % Page Surce: Dairy Australia: FOB USD/MT 10 years t June Surce: Dairy Australia. Prices are bserved, nt MG s achieved prices.

14 FY17 DMP impacted by under recvery f fixed csts due t reduced milk intake FMP 1 per kg MS FY17 vs FY16 $4.80 ($0.36) $0.50 ($0.22) Lwer AMP sales $0.35 $4.95 (0.16) ($0.10) (0.06) ($0.07) $0.06 $4.60 FY16 FMP Milk lss and net underrecveries FX impact Ingredients and Nutritinal segment Dairy Fds cntributin Other Segment Cst initiatives Underlying cntributin 2 FY17 FMP Balance sheet supprt Ttal FY17 FMP Page 14 Nte: See appendix fr FY16 and FY17 SMR milk slids, Distributable Milk Pl, Segment price mvements include milk revaluatin expense. One-ff csts included in the deviatin frm the Prfit Sharing Mechanism have been allcated acrss the perating segments. 1. Available weighted average Suthern Milk Regin (SMR) 2. Cntains cntributin frm MG Trading and Milk Brking

15 Cnslidated Prfit and Lss Statutry FY17 Deviatins FY17 Underlying FY17 FY16 Available Suthern Milk Regin FMP ($/kg MS) Sales ($m) 2, , ,777.7 Cst f Sales ($m) (2,169.2) 70.4 (2,098.8) (2,366.6) Grss Prfit ($m) Other Incme ($m) Share f Prfit (Lss) f Assciates ($m) (0.6) - (0.6) (1.6) Distributin Expenses ($m) (167.4) - (167.4) (194.3) Selling & Marketing Expenses ($m) (83.8) 0.2 (83.6) (93.1) Administratin Expenses ($m) (119.3) 50.6 (68.7) (59.7) Finance Csts ($m) (24.9) - (24.9) (23.4) Other Expenses ($m) (355.8) (11.5) (4.9) Pst Tax Deviatins ($m) Incme Tax ($m) 49.8 (138.1) (88.3) (17.7) Net Prfit (Lss) After Tax ($m) (370.8) Nn-cntrlling interest ($m) (0.7) NPAT attributable t Sharehlders and Unithlders ($m) (370.8) Grup revenue dwn 10.3% Revenue decline crrelated with reduced milk intake in FY17 FY16 ther incme includes $17.3 millin prfit frm asset dispsal Underlying cst f sales reflects $4.60/kg MS FMP which excludes debt-funded milk payments and ne-ff csts Underlying perating expenses have increased Administratin expenses increase driven by IT licences and SAP depreciatin Lwer distributin expenses in line with reduced milk intake Other expenses includes legal and advisry NPAT reflects lwer allcatin under Prfit Sharing Mechanism (at 3.5% f distributable milk pl) Page 15

16 Segment cntributins Reduced revenue acrss all segments as a result f lwer milk intake FY17 1 ($m) FY16 ($m) Change % Available Suthern Milk Regin FMP ($/kg MS) % Revenue Dairy Fds ($m) 1, ,326.5 (7.9%) Ingredients and Nutritinals ,092.5 (12.3%) Other (28.4%) Inter segment revenue (9.4) (89.6) (89.5%) Ttal revenue 2, ,777.7 (10.3%) Segment Cntributin Dairy Fds (48.8%) Ingredients and Nutritinals (32.5) (81.5) (60.2%) Other (70.3%) Ttal segment cntributin (44.1%) Crprate csts (37.3) (38.2) (2.2%) Finance csts (24.9) (23.4) 6.1% Share f prfit/(lss) f assciates (0.6) (1.6) (61.0%) PBT befre ne-ff items (5.0) 40.2 (112.5%) One-ff items (415.6) 17.3 nm PBT (420.6) 57.5 nm Dairy Fds cntributin f $84.2 millin Decreased cntributin driven by: AMP sales decline in dmestic Dairy Fds frm peak in FY16 Lwer vlumes thrugh marginal channels Ingredients and Nutritinals lss f $32.5 millin Imprvement driven by recvery in glbal milk pwder and butter cmmdity prices Other Segment cntributin f $6.1 millin Lwer vlumes f milk traded Less feed sld thrugh MG Trading stres Page FY17 results use the statutry result which includes an FMP f $4.95/kg MS which excludes deviatins frm the Prfit Sharing Mechanism. See nte 3 in MG s financial reprt fr the year ended 30 June 2017 fr further detail.

17 Milk allcatin by prduct and segment Milk use by prduct Milk use by segment Nutritinal pwders and prteins FY17 prductin 1 UHT Daily pasteurised Ingredients Cnsumer gds (Dairy Fds) Skim milk pwders and fats (butter) Full cream milk pwders Cheese and cream cheese Milk cncentrates Nutritinals Page 17

18 Significant fcus n debt reductin Balance sheet FY17 FY16 Receivables ($m) Inventries ($m) Other current assets ($m) Nn-current assets ($m) 893 1,166 Ttal assets ($m) 1,676 2,178 Ttal equity ($m) 735 1,176 Ttal debt ($m) Cash and cash equivalents ($m) Net debt ($m) Gearing (debt/(debt+ equity)) 37.7% 29.0% Net $164 millin imprvement in wrking capital Lwer inventry hldings in FY17 115,000 MT versus 153,200 MT in FY16 Lwer receivables driven by strng cllectins Net wrking capital imprvements -31% Reduced net debt was driven by imprved wrking capital, ffset by capital investment f $108 millin including cnsumer cheese plant and SAP implementatin Equity reduced as a result f asset write-dwns relating t business review and ftprint ratinalisatin FY14 1H15 FY15 1H16 FY16 1H17 FY17 Page 18

19 Cash flw Imprved wrking capital drve grwth in perating cash flw FY17 ($m) FY16 ($m) Reprted EBITDA (336) 138 Other nn-cash items in EBITDA 343 (30) Net cash EBITDA Cash changes in wrking capital 152 (22) Operating cash flw befre capital expenditure Capital expenditure Strategic/prject capital (65) (136) Other capital expenditure (43) (56) Other 1 21 MSSP 0 (183) Cash flw befre financing 52 (269) Strng perating perfrmance reflects: $152 millin cash input frm wrking capital imprvements driven by lwer inventry hldings and strng cllectins in trade receivables Nn-cash items includes MSSP de-recgnitin f $179.8 millin and asset write-dwns included in the Prfit Sharing Mechanism deviatin Strategic capital expenditure included the cnsumer cheese plant, SAP implementatin and an upgrade t pwder capability Other capital expenditure related t maintenance capital expenditure n existing asset base Page 19

20 Cnclusin

21 FY18 FMP drivers MG maintains pening FY18 FMP f $5.20/kg MS. Final FMP abve $5.20/kg MS is subject t factrs including favurable mvements in exchange rates and dairy cmmdity prices and retaining apprpriate milk intake. Early indicatins fr FY18 FMP Milk intake Current intake expectatins apprximately 2 billin litres Cmmdity prices Butterfat prduct prices have cntinued t increase Australian dllar Efficiencies PSM deviatin AUD:USD exchange rate higher Immediate fcus f cmmercial review fr FY18 Ftprint ratinalisatin n track t deliver $10 millin t $15 millin Further cst savings realised Access f up t $100 millin, if required, t pay FMP f $5.20/kg MS Page 21

22 Summary FY17 Difficult and challenging year New management structure in place Significant decisins taken and implemented Further substantive initiatives prgressing Strategic review accelerating Strength f MG s future remains fcused n stability in milk intake FY18 Prtect milk intake Cmmunicate with suppliers and unithlders Strategic review t prvide capital and structure utcme Cntinued business imprvement t supprt FMP Page 22

23 Appendix

24 Other segment Revenue ($m) Ttal Other revenue f $321 millin Milk Brking revenue declined $83.8 millin due t reduced milk intake MG Trading revenue declined 16.6% due t lwer feed requirement and impact f April 2016 reductin in pening FMP FY15 FY16 FY17 Others TDP Tasmanian Dairy Prducts was cnslidated int the Ingredients and Nutritinals segment in FY16 when it became a fully-wned subsidiary Page 24

25 Prfit Sharing Mechanism recnciliatin FY17 FY16 Full year Available Suthern Milk Regin FMP ($/kg MS) NPAT allcatin percentage under the Prfit Sharing Mechanism 3.5% 3.5% Allcatin f Distributable Milk Pl: Distributable Milk Pl ($m) ,156.6 Milk Payments (Suthern Milk Regin) ($m) (946.2) (1,098.4) Nn-cntrlling interests ($m) - (0.7) Prfit Befre Tax - Prfit Sharing Mechanism ($m) Incme Tax ($m) (10.3) (17.7) Add back: Nn-cntrlling interests ($m) NPAT - Sharehlders and Unithlders PSM ($m) Pst Tax Adjustments ($m): MSSP de-recgnised (125.9) - Ratinalisatin f manufacturing facilities (91.5) - Write-dwn f ther assets (46.2) - Write-dwn f wrking capital assets (10.4) - Nn-recurring csts (18.5) - Additinal milk payment (35.0) - Write-dwn f tax assets (78.0) - NPAT attributable t equity hlders f the parent ($m) (370.8) 40.6 Page 25

26 Key perating and financial metrics FY17 FY16 Ttal milk intake (millin litres) 2,732 3,491 Suthern Milk Regin milk intake (millin litres) 1 2,541 3,077 Suthern Milk Regin milk intake (millin kg MS) Full year Available Suthern Milk Regin FMP ($/kg MS) Weighted Average Suthern Milk Regin based n Prfit Sharing Mechanism ($/kg MS) Ingredients and Nutritinals sales vlume ( 000 metric tnnes) Dairy Fds sales vlume ( 000 metric tnnes) Average revenue per metric tnne - Ingredients and Nutritinals ($) 3,351 3,197 Average revenue per metric tnne - Dairy Fds ($) 2,022 1,968 Revenue mix 2 Ingredients and Nutritinals (%) 38% 38% Revenue mix 2 Dairy Fds (%) 49% 46% Revenue mix 2 Other (%) 13% 16% Ttal milk payments as a % f revenue 38% 40% Operating expenses as a % f revenue 29% 12% Grss prfit margin (%) 13% 15% Page FY17 Suthern Milk Regin includes milk supplied frm Tasmanian suppliers. Tasmanian suppliers were nt included in the Suthern Milk Regin in Revenue mix excludes adjustment fr intersegment revenue

27 Recnciliatin f reprted NPAT and underlying NPAT Deviatins $m 2017 Statutry Result MSSP derecgnised Ratinalisatin f manufacturing facilities Write-dwn f ther assets Wrking capital write-dwns One-ff csts Debt funded step-up 2017 Underlying Result Sales revenue 2, ,491.1 Cst f sales (2,169.2) (2,098.8) Grss prfit Other incme Share f assciates lsses (0.6) (0.6) Distributin expenses (167.4) (167.4) Selling and marketing expenses (83.8) (83.6) Administratin expenses (119.3) (68.7) Finance csts (24.9) (24.9) Other expenses (355.8) (11.5) Prfit/(Lss) befre incme tax (420.6) Pst Tax Deviatins Incme tax expense/(benefit) 49.8 (53.9) (39.2) (17.5) (4.5) (7.9) (15.0) (88.3) Prfit/(Lss) fr the year (370.8) Page 27

28 Glssary Term Actual Weighted Average Suthern Milk Regin FMP AMP Available Suthern Milk Regin FMP Dairy Fds FCMP FMP Ingredients and Nutritinals NPAT Other PSM SMP SMR WMP Definitin ttal Milk Payments t Suppliers in the Suthern Milk Regin in a given financial year divided by the Suthern Milk Regin milk intake (milk slids) fr the same perid adult milk pwder the Actual Weighted Average Suthern Milk Regin FMP plus the add-back f quality adjustments accrued frm the supply f nn-premium milk an perating segment f MG which manufactures and supplies dairy prducts such as fresh milk, UHT milk, cheese, butter, creams and milk pwders in markets thrughut Australia, China, Suth East Asia, the Middle East and the Pacific full cream milk pwder the farmgate milk price paid t a supplier fr their raw milk an perating segment f MG which manufactures and supplies custmised dairy ingredients and nutritinal milk pwders, primarily t the key markets f Nrth Asia, Suth East Asia, Australia, Sri Lanka and USA Net prfit after tax an perating segment f MG which includes MG Trading and Milk Brking Prfit Sharing Mechanism skim milk pwders Suthern Milk Regin (SMR) includes the fllwing regins: eastern Suth Australia and western dairy regin in Victria and Tasmania (West); the Gippsland dairy regin in Victria (Gippsland); and the Murray dairy regin in central and nrthern Victria and suthern NSW (Nrth) whle milk pwders Page 28

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