333 Presentation

7/31/2019 333 Presentation

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Group mates: Jeffery Zou(21103428)

Tran Thi Hong Dugen(21101041)

Huang Ting(21103974)Ajey Thomas (21104180)


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Fonterra Co-operative Group Limited is a New Zealand multinational dairy

co-operative owned by almost 10,500 New Zealand farmers.

The company is responsible for approximate 30% of worlds dairy export

(National Business Review, 2009) and with revenue exceeding NZ$19.87

billion (Fonterra Annual Report 2010, 2011), is New Zealands largest

company.

Different types of matrix including SWOT Matrix, SPACE Matrix and

QSPM Matrix will be used to analyze the report. Lastly, the report

provides a recommendation for investment decision based on the above

analysis performed.


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+ Their vision is to be the natural source of dairy nutrition for everybody, everywhere,

every day.

+ Consumer demand for products offering health and nutritional benefits and

convenience.

+ Demand from customers for partnerships that offer technical support, intellectual

property and lower-cost supply chains in addition to product.+ The economics of New Zealand sourced milk supply, with New Zealand needing to

maintain its place as the lowest-cost dairy exporter.

Strategy refresh:

Grow volumes and value, while improving working capital

Drive an improved return on capital

Improve Shareholder value.


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+ Fonterras mission builds on their considerable strengths: access to efficiently

produced, high-quality milk; an integrated business model; strong global reach;

established customer relationships; strong consumer brand positions in selected

markets; and great people. Looking forward, they have sharpened their focus

and made choices around the geographies and product portfolios that will

deliver the best growth opportunities, particularly those in the emerging

markets.


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+ Fonterras mission focuses on seven key areas:

+ Optimize their New Zealand milk business by improving their asset base, managing

risk, maximizing sales value, and driving speed and agility along their supply chain.

+ Build and grow beyond their current consumer positions in by leveraging their

leadership positions and investing in new growth markets.

+ Deliver on foodservice potential by concentrating on the key emerging markets of

China, Asia and Latin America.

+ Grow their position in mobility by strengthening the leadership position of specific

products across Asian markets through portfolio expansion, driving growth in

China.+ Selectively invest in milk pools to maintain their global relevance and protect their

New Zealand milk business.

+ Align their business and organization to ensure that they are highly efficient with

the right cost base and aligned to reflect their focus and priorities.


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+ Got a strong customer base around the world

+ It controls onethird of the world dairy business

+ The company supplies 20 million litres of organic milk annually according to the

most stringent standards

+

Milk brands meant for pregnant women got high visibility and consumer supportrate

+ It produces world's seven major international infant formula brands

+ New Zealand as the main milk source base, harmless natural green environment,

raises cows milk quality assurance+ Fonterras history makes it a fully integrated supply chain and a high degree of

stability in the dairy supply


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+ -New Zealands location- overseas trading is having an impact to product sales and

product quality

+ Due to high cost of transportation Fonterras products are sold overseas at a high

price+ The less population of New Zealand had affected the increased production.

+ Cultural differences


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+

Several finance concepts considered to be crucial to strategy implementation ofFonterra i.e., acquiring needed capital, developing projected financial statements,

preparing financial budgets and evaluating the worth of the company.

Acquiring Capital to implement Strategies:

+ Fonterra is functioning on co-operative principles, 90% of its shareholders are

farmers. Now the company feels that, it is time now to consider further capital

structure changes that retain 100% farmer control and ownership as well as

strengthen the Co-operative to compete in a more volatile and competitive

environment.

+ Step One, Strengthening the Share Structure, gave farmers greater flexibility in the

number of shares they can own, up to 120% of their current or expected production.

+ Step Two, Restricted Share Value, involved changing the way Fonterra shares are

valued to recognize the market is restricted to Fonterra farmers only.


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+

A possible third step, trading among Farmers, is now being considered. Under thisstep, the obligation of Fonterra to redeem shares would end. Instead, farmers would

trade shares among themselves on a Fonterra Shareholders Market. This is

considered to eliminate redemption risk.

+ Step Four, Further Evolution. The Board has ruled out considering whether Fonterra

should allow the public to own shares (voting or non-voting) via a public listing.

Projected Financial Statements:

+ All institutions require at least three years of projected financial statements

whenever a business seeks capital. A projected income statement and balance sheet

allow an organization to compute projected financial ratios under various strategies

implementation scenarios. When compared to prior years and to industry averages,

financial ratios provide valuable insights into the feasibility of various strategies

implementation approaches.


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+ The SWOT analysis is a good indicator of the strengths, weaknesses, opportunities

and threats of Fonterra.

+ They have strong background and history therefore it is not hard for them to enter

the new market+ Transportation and shipping cost increase, lead to their product prices increase, and

with small population, their productivity is limited.

+ They should open their manufacturing in other countries to reduce shipping cost

and product prices.


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Internal Summary

+ Good reputation and image

+ Loyalty customers

+

Products are good resources and revenue, especially with the baby infant formula+ Technology is used to improve products

External Summary

+ Karicare and Yi Ly are big competitors

+

However, the emerging countries develop more and faster, which give Fonterra a lotof opportunities to join the new markets.


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Fonterras Financial Reports ($

million)Nov 2007 Jan 2009 Change

between

periods

Change per

Fonterra shareValue per share

Jan 2009

Assets 16,005 17,960 1,905 $1.57 $12.76Liabilities 11,059 14,170 3,111 $2.56 $11.64Equity 4,996 3,790 (1,206) ($0.99) $3.11Equity less intangible 2,505 943 (1,562) ($1.28) $0.77Liabilities + Equity 68.9% 78.9%


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+ Fonterra is in the process of building a state of the art milk powder processing

plant, located just outside Darfield.

+ Fonterra has signed an agreement with the Government of China to develop a new

dairy farm in Yutian County, Hebei Province.+ It is expected to increase Fonterras overall milk production in China to around 90

million liters or 360 million cups of fresh milk every year.


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+ To match our mission and vision

statement, that can gives us a motive

to accomplish and also give us the

time frame. Motivation would drive

the Fonterra to achieve these goals

+ Minimal the weakness & threats and

maximal the strength & opportunities


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+ Although there are many factors beyond the control of Fonterra that may affect this

years Farm Milk Price and profit, the efforts of the last decade have put Fonterra in

a great place. The opportunities for dairy across both emerging and developed

markets are immense. Fonterra is having a strong business footprint across these

markets and a sound strategy to build on the best opportunities for future growth.

333 Presentation

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