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Annual results 2017 Royal FrieslandCampina N.V. Amersfoort, 22 February 2018 2018 FrieslandCampina
General overview 2018 FrieslandCampina
Higher revenues, lower profit Revenue 12.1 billion euros (2016: 11.0 billion euros) Operating profit 444 million euros (2016: 563 million euros) Profit 227 million euros (2016: 362 million euros) Operating profit before currency effects 480 million euros (2016: 563 million euros) Profit before currency effects 243 million euros (2016: 362 million euros) 4
And strong increase in milk price to 40.01 euro (+24.0%) 32.26 40.01 28.38 37.96 Per 100 kg of milk excl. VAT at 4.41% fat, 3.47% protein and 4.51% lactose Meadow milk and special supplements Member bonds Performance premium 2016 2017 Guaranteed price 5
Value creation decreases to 1.33 euro (-61.3%) due to adjustment profit appropriation and lower profit 40.01 32.26 3.88 0,44 28.38 37.96 1.25 2.19 3.44 2.05 0.72 0.30 1.03 1.33 Per 100 kg of milk excl. VAT at 4.41% fat, 3.47% protein and 4.51% lactose Meadow milk and special supplements Member bonds Performance premium 2016 2017 2016 2017 Guaranteed price 6
Every day we nourish millions of consumers worldwide 7
Nourishing by nature is clear and comprehensive Better nutrition A good living for our farmers Now and for generations to come Better products Responsible marketing Transparent nutritional value labelling Education responsible diets Optimal milk valorisation Economic performance & profitability Dairy Development Programme Climate-neutral growth Sustainable purchasing Sustainable production Animal health & welfare Meadow grazing Biodiversity 8
Better nutrition CORE KPI s 2017 Compared to 2016 Balanced product supply 81% Product portfolio RFC guideline compliance 64% Global Nutritional Standards Balance basic nutritional products and indulgence products Vifit Sport protein-rich sports nutrition 9
Good living for our farmers CORE KPI s 2017 Compared to 2016 Value creation (in euros/100 kilos milk) 1.33 Number of local dairy farmers in DDP 20,347 Local dairy farms with 'satisfactory' rating 54% Big Push-programme in Punjab (Pakistan)
Now and for generations to come CORE KPI s 2017 Compared to 2016 Energy consumption (GJ/tonne product) 2.82 Greenhouse gas emission (kt CO 2 equivalent) 883 Sustainable agricultural raw materials 55% Green electricity 80% Pasture grazing 79.4% Greenhouse gas emissions (kt CO 2 equivalent) 12,098 Solar panels 310 member dairy farms
2017 in perspective Investments for long term growth Market Measures taken 12
2017 in perspective Investments for long term growth Market Measure taken 13
Investments for long term growth Sustainability throughout the chain China Higher compensation for meadow milk Solar panels Increased competition Government regulation New market balance Investment 60 million euros Investment 90 million euros 14
2017 in perspective Investments for long term growth Market Measures taken 15
Record high sales surpassing 12 billion euros, 10.1% increase Higher raw material prices Passed on in sales prices Influence on volume development Higher cost price for milk and other raw materials Largely compensated by higher sales prices But with a negative impact on volume development Cost prices +12.3% Revenue +10.1% Added value -1.9% 16
Mixed performance Volume Indonesia, Vietnam, Thailand and Africa Ingredients Butter China/Hong Kong Benelux and Germany Profitability Asia 17
2017 in perspective Investments for long term growth Market Measures taken 18
Measures taken in Q4 to restore growth and profitability Simplified organisation to gain speed and agility Four new global business groups Decentralised decision making Innovation close to the market New leadership Leaner head office 19
Measures taken in Q4 to restore growth and profitability Simplified organisation Sale activities Riedel Germany Friesland Huishan Dairy 20
Financial headlines 2018 FrieslandCampina
Agenda 1 2 3 4 Key figures Figures in perspective Financial statements Members perspective 22
2017: higher revenue, lower result and higher milk price Volumes Added value volumes Revenue Revenue development Result Operating profit +2.9% -1.9% +10.1% +9.8% -21.1% -14.7% Excl. Engro / Riedel Return to members in euro Underlying growth Value creation in euro/100 kg Before currency effects Milk price in euro/100 kg 4,346m 1.33 40.01 +22.6% -61.3% +24.0% versus 2016 versus 2016 versus 2016 23
Agenda 1 2 3 4 Key figures Figures in perspective Financial statements Members perspective 24
Figures in perspective 1. Structural investments 25
Structural investments for long term growth Sustainability throughout the chain Higher compensation for meadow milk Solar panels China Increased competition Government regulation New market balance Investment 60 million euros Investment 90 million euros 26
Figures in perspective 2. Pricing 27
Revenue 2017 +10.1%; underlying growth 9.8% (in EUR x million) 1,206 233-203 11,001-127 Underlying growth 9.8% 12,110 Revenue 2016 Volume & Mix Selling prices Currency translation Acquisitions and disposals Revenue 2017 28
Gross margin under pressure due to higher cost prices (in EUR x million) 17.5% 1,206 220-31 -77 15.8% 1,926 1,919-1,325-119 million euro Gross profit 2016 Cost prices Selling prices Value creation Other costs Currency translation Gross profit 2017 29
Commodity prices decline in Q4 2017 44 42 40 38 36 34 32 30 28 26 24 22 20 30 Mar Jun Sep Dec Mar Jun Sep Dec 2016 2017 FrieslandCampina Guaranteed price (per 100 kg milk) Kieler Rohstoffwert - index valorisation SMP & Butter
Figures in perspective 3. Incidental items 31
Incidental items impact result with -90 million euros Write off participation China Huishan Dairy Impairment assets JV Friesland Huishan Sale activities Riedel completed Restructuring Germany Restructuring costs Total -90 million euro 32
Agenda 1 2 3 4 Key figures Figures in perspective Financial statements Members perspective 33
Income statement (in EUR x million) 2017 2016 Δ% Revenue 12,110 11,001 10.1% Cost of goods sold -10,191-9,075 Gross profit 1,919 1,926 Marketing spend -536-540 Selling, general and administrative costs -867-810 Other operating costs and income -72-13 Operating profit 444 563-21.1% Finance income and costs -58-41 Share of profit of joint ventures and associates 21 20 Income tax expense -180-180 Profit for the year 227 362-37.3% 34
Capex mainly for growth and efficiency Capital expenditure (in EUR millions) 559 656 564 518 531 Capex 2017 split by nature (in EUR millions) 427 374 402 339 303 305 Replacement 128 Efficiency 181 HY2 276 HY1 152 185 254 225 215 226 Quality/ Safety / Sustainability 80 142 Growth 2012 2013 2014 2015 2016 2017 35
Agenda 1 2 3 4 Key figures Figures in perspective Financial statements Members perspective 36
Milk supply member farmers stable (in kg millions) 9,261 +7.1% -0.5% 6.4% 10,774 2.1% 10,716 10,060 9,453 HY2 4.620 4.634 5.155 5.286 5.281 HY1 4.641 4.819 4.905 5.488 5.435 2013 2014 2015 2016 2017 37
Higher milk price in 2017 (in EUR/100kg) 9.58 24.0% 0.28-1.79-0.32 40.01 32.26 Milk price 2016 Increase Guaranteed Price PP and MB (Prior profit split) Revised profit split Weidegang and other supplements Milk price 2017 38
leads to record high total return to members (in EUR/100kg) 1,033 +22.6% -24 29-228 -8 4,346 3,544 Total return to MF 2016 Increase guaranteed price Decrease milk supply (-0.5%) Perf prem and MB Weidegang +50ct Other Total return to MF 2017 39
Business groups perspective 2018 FrieslandCampina
Consumer Products Europe, Middle East & Africa Positive development Southeast Europe Recovery North- and West Africa Volumes Benelux and Middle East under pressure Germany challenging Volume growth Foodservice Europe Riedel divested Key figures millions of euros, unless stated otherwise 2017 % Revenue 3,518 2.9 Revenue before currency translation effects Operating profit Price effect on revenue 1 Volume trend (percentage) 1-4.8 3,618 5.8 Volume-mix effect on revenue 1-2.8 1 compared to 2016
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Consumer Products Asia Growth in Indonesia, Vietnam, Hong Kong and Thailand Intensified competition by local players Difficult year for Engro Foods in Pakistan Key figures millions of euros unless stated otherwise 2017 % Revenue 2,529 9.0 Revenue excl. acquisition 2,238-3.2 Revenue excl. acquisition and before currency translation effects 2,310-0.1 Operating profit Price effect on revenue 1 Volume trend (percentage) 1 23.8 Volume trend excluding acquisition 1 0.5 Volume-mix effect on revenue 1 0.2 1 Compared to 2016
FrieslandCampina Hongkong #1 in FMCG IFT: #1 with Friso 2 3 4 5 Evaporated Milk: #1 with Black&White Ready to Drink Milk: Co-#1 with Dutch Lady Adult Nutrition: Optimel fastest growing brand in 17 45
Friso Prestige available in Hong Kong 46
Consumer Products China Significant volume growth Friso Prestige Friso Gold market leader digital sales, volume under pressure Dutch Lady, Friso Gold Prestige approved Increasing importance online activation Black&White continued to grow in catering segment Key figures millions of euros, unless stated otherwise 2017 % Revenue 583 1.4 Revenue before currency translation effects Operating profit Price effect on revenue 1 Volume trend 1-3.9 604 5.0 Volume-mix effect on revenue 1 7.4 1 Compared to 2016
Chinese registration certificate for Friso Gold/Prestige and Dutch Ladyinfant nutrition
Cheese, Butter & Milkpowder Volume growth to Private Label Cheese & Zijerveld VLOG Cheese introduction, further growth meadow cheese Sales prices of butter at record high Price fall Q4 impact profitability FrieslandCampina Export under pressure Key figures millions of euros, unless stated otherwise 2017 % Revenue 3,104 21.0 Operating profit 1 Price effect on revenue 1 Volume trend (percentage) 1-4.5 Volume-mix effect on revenue 1-2.3 1 Compared to 2016
Cheese, Butter & Milkpowder highlights Freshlock packaging Milner Gerkesklooster capacity expansion Royal Hollandia for pizza industry 50 VLOG Nature Cheese Grated Cheese expansion Genk Launch Zijerveld Cheesius
Ingredients FrieslandCampina DMV successful in the sale of caseinates and protein-rich specialties for sport nutrition Volume growth FrieslandCampina Domo, result under pressure DFE Pharma experienced growth Competitive creamer market Margin improved due to cost controls and improvements in efficiency Key figures million of euros unless stated otherwise 2017 % Revenue 1,793 7.6 Operating profit ~ Price effect on revenue 1 Volume trend (percentage) 1 0.6 Volume-mix effect on revenue (percentage) 1 0.5 1 Compared to 2016 51
Ingredients New packaging line infant nutrition in Beilen Introduction organic Vivinal GOS Syrup 52
2017 was a challenging year Higher revenue, lower profit and strong increase in milk price Non-recurring costs reduced profits in Q4 Ingredients and China show good progress Pressure on volume in Germany, the Netherlands and Belgium Measures taken: new basis for growth 53
Priorities 2018 Drive our purpose nourishing by nature Improve performance in consumer products Embed new organisation 54
Questions? 55
Annual results 2017 Royal FrieslandCampina N.V. Amersfoort, 22 February 2018 2018 FrieslandCampina