New Zealand Professional Investment Services Firm, Forsyth Barr

Forsyth Barr

New Zealand Professional Investment Services Firm

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

Equity Bottom-Up

Fonterra Shareholders Fund / Equity Bottom-Up

<ul><li>Fonterra's 1H25 result was strong with normalized earnings ahead of the robust prior comparable period, featuring stronger margins in Ingredients and resilient Consumer margins.</li><li>Despite a record high interim dividend of NZ22cps, the key negative was weak free cash flow (~-NZ$2.1bn), which is expected to reverse in 2H25.</li><li>The key catalyst moving forward is updates on Mainland Group, with expectations of a trade sale and capital proceeds between NZ$2.5bn to NZ$3.0bn, although uncertainty persists.</li></ul>

Fonterra's 1H25 result was strong with normalized earnings ahead of the robust prior comparable period, featuring stronger margins in Ingredients and resilient Consumer margins.Despite a record high interim dividend of NZ22cps, the key negative was weak free cash flow (~-NZ$2.1bn), which is expected to reverse in 2H25.The key catalyst moving forward is updates on Mainland Group, with expectations of a trade sale and capital proceeds between NZ$2.5bn to NZ$3.0bn, although uncertainty persists.

⬛ Fonterra ⬛ 1H25 Result — More of the Same

<ul><li>Fonterra reported a strong 1H25 result, with earnings exceeding expectations and a higher interim dividend of NZ22cps compared to the forecast of NZ20cps.</li><li>The company's Ingredients gross profit saw stronger margins, while Consumer margins remained resilient despite high milk prices.</li><li>Free cash flow was notably weak at approximately -NZ$2.1bn, due in part to stronger farmer advanced payment rates.</li></ul>

Fonterra reported a strong 1H25 result, with earnings exceeding expectations and a higher interim dividend of NZ22cps compared to the forecast of NZ20cps.The company's Ingredients gross profit saw stronger margins, while Consumer margins remained resilient despite high milk prices.Free cash flow was notably weak at approximately -NZ$2.1bn, due in part to stronger farmer advanced payment rates.

Fonterra: 1H25 Result – Initial Impressions

<ul><li>Record-high milk prices and stabilizing costs are driving unprecedented on-farm returns for NZ dairy farmers.</li><li>China, NZ's key export market, faces sluggish dairy imports, posing a risk to NZ's dairy sector.</li><li>On-farm profitability spread is expected to reach an all-time high in 2024/25, with strong farmer confidence and improving export trends.</li></ul>

Record-high milk prices and stabilizing costs are driving unprecedented on-farm returns for NZ dairy farmers.China, NZ's key export market, faces sluggish dairy imports, posing a risk to NZ's dairy sector.On-farm profitability spread is expected to reach an all-time high in 2024/25, with strong farmer confidence and improving export trends.

⬛ Forsyth Barr Milk Memo ⬛ Heady Times

<ul><li>Fonterra has upgraded its FY25 EPS guidance from the upper half of NZ40-60cps to NZ55-75cps, reflecting a 16% increase, driven by Ingredients strength and Consumer channel resilience.</li><li>The company's Consumer sale update includes a presentation ahead of IPO roadshow meetings, targeting a significant capital return if a sale is successful.</li><li>Fonterra's revised dividend payout ratio implies a strong dividend yield of approximately 9% on the current FSF price.</li></ul>

Fonterra has upgraded its FY25 EPS guidance from the upper half of NZ40-60cps to NZ55-75cps, reflecting a 16% increase, driven by Ingredients strength and Consumer channel resilience.The company's Consumer sale update includes a presentation ahead of IPO roadshow meetings, targeting a significant capital return if a sale is successful.Fonterra's revised dividend payout ratio implies a strong dividend yield of approximately 9% on the current FSF price.

Fonterra: More Positive News + Consumer Sale Update

<ul><li>Record-high milk prices, boosted by a weak NZD, robust Fonterra dividends, and stabilizing costs are driving on-farm returns to unprecedented levels.</li><li>China, a key export market for NZ, remains under pressure with sluggish dairy imports, presenting risks for the industry.</li><li>On-farm profitability is expected to reach an all-time high in 2024/25, supported by moderating on-farm inflation and strong farmgate milk prices.</li></ul>

Record-high milk prices, boosted by a weak NZD, robust Fonterra dividends, and stabilizing costs are driving on-farm returns to unprecedented levels.China, a key export market for NZ, remains under pressure with sluggish dairy imports, presenting risks for the industry.On-farm profitability is expected to reach an all-time high in 2024/25, supported by moderating on-farm inflation and strong farmgate milk prices.

⬛ Forsyth Barr Milk Memo ⬛ Heady Times *Missing images replaced*

New Zealand

Fonterra Cooperative Group Ltd is a New Zealand multinational dairy co-operative and its farmer shareholders are the suppliers of milk to Fonterra in New Zealand. The Company operates Fonterra Shareholders' Fund, which provides additional financial flexibility for farmer shareholders who would have the opportunity to sell economic rights of shares to the fund.

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Fonterra Shareholders Fund (FSF NZ)

⬛ Fonterra ⬛ 1H25 Result — More of the Same

Fonterra's 1H25 result was strong with normalized earnings ahead of the robust prior comparable period, featuring stronger margins in Ingredients...

Forsyth Barr

Fonterra: 1H25 Result – Initial Impressions

Fonterra reported a strong 1H25 result, with earnings exceeding expectations and a higher interim dividend of NZ22cps compared to the forecast of...

Forsyth Barr

⬛ Forsyth Barr Milk Memo ⬛ Heady Times

Record-high milk prices and stabilizing costs are driving unprecedented on-farm returns for NZ dairy farmers. China, NZ's key export market, faces...

Forsyth Barr

Fonterra: More Positive News + Consumer Sale Update

Fonterra has upgraded its FY25 EPS guidance from the upper half of NZ40-60cps to NZ55-75cps, reflecting a 16% increase, driven by Ingredients...

Forsyth Barr

⬛ Forsyth Barr Milk Memo ⬛ Heady Times Missing images replaced

Record-high milk prices, boosted by a weak NZD, robust Fonterra dividends, and stabilizing costs are driving on-farm returns to unprecedented...

Forsyth Barr

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