Global Investor update Royal FrieslandCampina
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Global Investor update Royal FrieslandCampina
Disclaimer This presentation may contain forward-looking statements and projections. There can be no certainty of outcome in relation to the matters to which the forward-looking statements and projections relate. These forward-looking statements and projections involve known and unknown risks, uncertainties, assumptions and other important factors that could cause the actual outcomes to be materially different from the events or results expressed or implied by such statements and projections. Those risks, uncertainties, assumptions and other important factors are not all within the control of Royal FrieslandCampina and its subsidiaries and cannot be predicted by Royal FrieslandCampina. While all reasonable care has been taken in the preparation of this presentation, none of FrieslandCampina or any of its respective subsidiaries, affiliates and associated companies (or any of their respective officers, employees or agents) (Relevant Persons) makes any representation, assurance or guarantee as to the accuracy or completeness of any information in this presentation or likelihood of fulfilment of any forward-looking statement or projection or any outcomes expressed or implied in any forward-looking statement or projection. The forward-looking statements and projections in this report reflect views held only at the date of this presentation. Statements about past performance are not necessarily indicative of future performance. Except as required by applicable law or any applicable Listing Rules, the Relevant Persons disclaim any obligation or undertaking to update any information in this presentation. This presentation does not constitute investment advice. 2
Royal FrieslandCampina H1 2021 global update
Hans Janssen Agenda
CFO
Company overview
Robert ter Borg
Business update H1 2021
Corporate Finance
Results per Business Group
Erna de Jonge
Investor Relations Sustainability
Outlook
David Tillmanns
Treasurer
3
Company overview 4
Our purpose as a starting point
Better nutrition A good living for Now and for
for the world our farmers generations to come
5
We have a clear purpose and mission as compass for our future
Our Purpose Nourishing by Nature: Provide better nutrition for the world, a good living for our
farmers, now and for generations to come
Our 2030 Ambition Royal FrieslandCampina is a leading nutrition company with a core in dairy,
that nourishes our planet and pays an exemplary performance price for member
dairy farmers
Our Plan
Serve the
Win with 24/7 consumer &
nutrition customer
Elevate our Nourishing a
essentials better planet
6 6
WRS 210905 - Valor 2.0 - SB - RFC ...
Five businesses to nourish the world with our highest quality milk
Bakers, chefs, caterers Individuals with special
Families and individual consumers across the globe & confectioners nutritional needs at all stages of life
Food & Beverage Food & Beverage Specialized
Trading Ingredients
Consumer Professional Nutrition
High quality, cost Branded dairy products High quality products to Specialty nutrition Branded end-products for
efficient, basic dairy for the daily nutrition of serve end-consumers ingredients for all human specific nutrition
essentials end-consumers through out-of-home life stages and pharma requirements
– Cheese – Milk, butter, cream & channels applications – Infants and toddlers
– Butter yogurt – Creams, butters for chefs – Early life nutrition – Athletes
– Milk powder – Dutch & foreign cheese and bakeries – Active and performance – In specific life stages
– Condensed, fortified milk – Coffee supplements – Pharma applications (e.g., elderly or
pregnant)
Total
Revenue 596 3,797 618 516 5,527
Profitability¹ -8.7% 3.7% 8.6% 4.1% 2.4%
Note: All amounts are in millions of euros, unless stated otherwise and reflect actual performance of H1 2021.
7 7 1. Profitability is calculated as operating profit as percentage of revenue.
WRS 210905 - Valor 2.0 - SB - RFC ...
Top 10 Top 5
consumer brands ingredients
Excellion Vivinal
GOS
Worldwide Indonesia Asia Caseinate Syrup
Kievit Pharma-
Vana Grasa tose
Nigeria Netherlands and Philippines Creamers DFE
Belgium
Base
powders
Worldwide Thailand Middle East Germany and IFT GuM
Eastern Europe
8
Business update H1 2021 9
Highlights 2021
Recovery Transformation & Difficult market Provision for court
out-of-home Cost savings infant nutrition Asia ruling in Thailand
Improved results Inflation raw
Growth consumer Continued progress
Trading & materials & currency
brands sustainability agenda
Supply Chain translation
10H1 2021 Profit under pressure due to difficult infant nutrition
market and provision for court ruling in Thailand
Revenue Operating profit Profit Free cash flow¹
5,527 130 62 -175
-1.8% -40.4% -42.6% ∆ -84
Revenue Operating profit Profit
Before currency translation effects Before currency translation effects Before currency translation effects
5,674 145 72
+0.8% -33.5% -33.3%
Note: Figures are unaudited and for the six months ended 30 June 2021. All 1. Free cash flow is calculated as net cash flows from operating activities
changes are expressed relative to the performance of H1 2020. Consistent with minus net cash flows used in investing activities
11
the Interim Financial Statements. All amounts are in millions of euros, unless
stated otherwiseRevenue growth Food & Beverage offset by currency translation
and challenging market infant nutrition
0.8%
5,674
5,629 -67 -17 -24
+155 -2 5,527
-147
Infant Nutrition
Revenue Food & Specialised Ingredients Trading Other Revenue H1 Currency Revenue
H1 2020 Beverage Nutrition ex. Currency Translation H1 2021
translation
Note: All amounts are in millions of euros, unless stated otherwise, all changes are expressed relative to the performance of H1 2020
12High commodity inflation
Economic recovery results in significant price increases for raw materials.
Total inflation to be compensated in selling price and cost savings.
Coconut oil Tinplate Milk¹
>15%
>35%
>4%
M’20 J’20 S’20 D’20 M’21 J’21 M’20 J’20 S’20 D’20 M’21 J’21 M’20 J’20 S’20 D’20 M’21 J’21
Note: % increase compares average cost H1 2021 versus average cost full year 2020
13 1. Relates to cost price of milkTransformation on track to deliver 100M savings and build future
proof organization
Continue & accelerate our strategic plan Reset & simplify our business
• Target -1,000 FTE reduction on track
• Continued focus to drive cost savings across the organisation
• Organization more aligned to market opportunities with new • Divestments non-core:
Professional and Trading unit to continue serve the 24/7 consumer • Divestment animal nutrition business
and customer and elevate our essentials. • Divestment Russian subsidiary
• Continued focus on Digital • Optimization milk processing network:
• Closure of facilities in Rijkevoort and the whey and milk powder silo in
• The proposal for future-proof member financing has been
Gerkesklooster in NL.
approved; further increasing our financial strength
• Closure and disposal of facilities in Genk and the milk powder facilities
in Aalter (both in Belgium) are in progress.
14 14
WRS 210905 - Valor 2.0 - SB - RFC ...In close cooperation with the owners the credit profile is protected
2016 2018 2019 2020 2021 2022
Adjustment of Profit Change in milk money Cooperative formalized June 2021: Member Member financing
Adjustment Guaranteed
Appropriation Scheme, regulations agreed, the subordination of Council approved new system effective as of
Price system, realizing a
reducing the ensuring a more balanced milk payments member financing system 1/1/2022
structural EBIT
Performance milk supply & market improvement of
Payments by 10%. demand. This reduces ~50M for FrieslandCampina Member Council endorsed
This is now added to FrieslandCampina’s next preparatory steps
Retained Earnings exposure to unfavorable Hybrid Equity of new Member financing
commodity 300M approved system
volatility (Issued 2020)
15New member financing structure reduces leverage S&P
New member financing structure
• Active members with the right to supply milk to Royal FrieslandCampina will also be obliged to indirectly invest in Royal FrieslandCampina by holding
Milk Certificates (issued at Co-operative level) proportionate to the amount of milk supplied (measured annually at farm level)
• Milk Certificates will indirectly, via the Co-operative, form a permanent part of Royal FrieslandCampina’s capital and will pay no return. However
members will need to hold the requisite number of Milk Certificates at farm level to be able to supply milk from which a profit-based return can be paid
out
• When the membership of a member terminates, its Milk Certificates can be sold in the internal Royal FrieslandCampina market to existing or new
members requiring additional Milk Certificates to match their milk supplies
• The introduction of Milk Certificates has been approved by the Executive Board, the Co-operative Board and by Royal FrieslandCampina members and
will be effective per 1-1-2022
Key terms of Milk certificates (MC)
• Issuer: Co-operative
• No voting rights
• Deep subordinated
• Equity for accounting purposes
• Nominal value: 8ct. Assuming milk supply of ~10bln
kg, total nominal value is ~ 800M
• No return is paid on MC, only gives holder right to
supply milk to FrieslandCampina
16FrieslandCampina capital restructure – Balance Sheet impact
Zuivelcoöperatie FrieslandCampina U.A 2020
2020 1. Co-operative to issue Milk
(Co-operative) Pro Forma¹
Certificates (MC) for ~800M. Final
Milk Certificates - 800 amount is based on actual milk
delivery between Oct 20 – Sept 21
2. Members pay for the MC with the
Koninklijke FrieslandCampina N.V. 2020 exchange of Member Bonds² up to
2020 an expected amount of 635M
Pro Forma¹
3. The shortfall of 165M will remain
Equity attributable to shareholder 1,573 1,573 indebted by the members, this
indebtedness will amortise over the
Additional issued capital (MC) - 635
next 12 years
Buffer capital 1,573 2,208 4. Co-operative will transfer the
Member Bonds received in step 1
Member Bonds 1,533 898 as a capital contribution to
FrieslandCampina
Perpetual Bonds 300 300
5. As a result: amount of Member
Co-operative loan 295 295 Bonds issued will reduce with 635M
and S&P leverage ratio will improve
Equity attributable to other providers of capital 2,128 1,493 with 0.7x-0.8x³
Non-controlling interest shareholder (212) (212) 6. Over the next 12 years the
remaining 165M will be contributed
Other non-controlling interests 300 300 by the Co-operative to
FrieslandCampina as further capital
Total equity 3,789 3,789 contributions
Note: All amounts are in millions of euros, unless stated otherwise
1. After introduction of the new structure per 1/1/2022
2. Members can settle the Milk Certificates by converting member bonds, applying for an extended payment arrangement or pay in
cash. We believe the members will most likely not choose the cash option, and therefore this option is not explained on this page.
17 3. Based on 31/12/2020 actualsResults per business group 18
Food & Beverage
Strong performance driven by recovery out-of-home
• Revenue +1.0%, before currency effects +4.1% driven by
recovery out-of-home channel
• Operating profit +17% (ex. provision Thailand 57M)
• Stable market share key brands
• Positive selling price developments and cost savings are offsetting
inflation of cost base
• Currency translation headwinds Naira and dollar-related
currencies in Asia
• Sale of consumer business in Russia Revenue Operating profit¹ Profitability²
+1.0% 170 4.5%
3,797 vs H1 2020 142 H1 2020 3.7% H1 2020
Note: All amounts are in millions of euros, unless stated otherwise, changes are expressed relative to the performance of H1 2020
19 1. Operating profit H1 2021 includes 57M provision for court ruling Thailand
2. Profitability is calculated as operating profit as percentage of revenueStrong global brands & customers in the recovering out-of-home channel Relaunch Debic butter Debic mix for scoop ice cream Kievit Vana-Monte V98 Bakery Bakery Bakery application for cream and desserts Mix for caramel ice McDonald’s Spraycan for McCafé Base for ice and milkshake KFC Poland Malaysia Spain 20
While we keep investing in our consumer brands Innovation Valess Campina Landliebe Frico Cheese meat replacer Réveil Malin Lecker Schmecker kids resealable packaging Germany France Germany Middle East Olper’s NoyNoy Frisian Flag Amoré economy pouch Gouda bars and dips Primagro New ice-cream flavours Pakistan Greece Indonesia Pakistan 21
Specialised Nutrition – Results under severe pressure,
growth in digital channel
• Global declining birth rate trend (-15% in China¹)
• Persistent border closure between Hong Kong and China and
increased competition local players in China (government target
60% share Chinese IFT players in 2025)
• Lower dollar-related exchange rates and increased raw material
prices
• Improved performance Friso Prestige in growing ultra-premium
segment, decrease Friso Gold in China and Hong Kong
• Strong growth in revenue and Revenue Operating profit Profitability²
market share digital channel
-14.9% 133 21.9%
516 vs H1 2020 21 H1 2020 4.1% H1 2020
Note: All amounts are in millions of euros, unless stated otherwise, changes are expressed relative to the performance of H1 2020
22 1. Expected birth decline ’20-’25
2. Profitability is calculated as operating profit as percentage of revenueStrong growth in digital
• Specialised Nutrition e-commerce • E-commerce growth
more than doubled: +128% in consumer products: +66%
23Ingredients – Results under pressure due to challenging
infant nutrition market
• Result under pressure due to difficult market conditions in
China and Hongkong
• Higher revenue in medical, elderly and sports nutrition
segments
• Increased raw material prices, including 25% increase in whey
powder prices
• Sale of Nutrifeed was completed
Revenue Operating profit Profitability¹
-3.9% 91 14.2%
618 vs H1 2020 53 H1 2020 8.6% H1 2020
Note: All amounts are in millions of euros, unless stated otherwise, changes are expressed relative to the performance of H1 2020
24 1. Profitability is calculated as operating profit as percentage of revenueTrading – benefit from commodity prices and improved
organizational effectiveness
• Trading unit is responsible to valorise basic dairy essentials in a
cost-efficient way
• Improved trading performance, optimization of milk processing
network and increased commodity prices significantly improved
results
• Further growth Cheese sales, partly due to expansion of
mozzarella customer portfolio +17% vs H1 2020
• Lower revenue due to lower milk supply and lower sales of liquid
products
Revenue Operating profit Profitability¹
-3.9% -105 -16.9%
596 vs H1 2020 -52 H1 2020 -8.7% H1 2020
Note: All amounts are in millions of euros, unless stated otherwise, changes are expressed relative to the performance of H1 2020
25 1. Profitability is calculated as operating profit as percentage of revenueSustainability 26
Positive impact on farmers, society and planet Focus on 6 ambitions contributing to the UN Sustainable Development Goals 27
Better Nutrition, affordable for everyone: Better packaging: recyclable plastic PET #3 in Global Access to Nutrition Index bottle packaging for various brands Better packaging: -56% plastic new Campina Better climate: First hydrogen-powered cup packaging milk truck Examples Nourishing a better planet; towards a positive impact on farmers, society and planet 28
Energy Water Waste
100% of all Electricity in Europe is 2% lower water consumption year 90% of waste from our production
green and comes from on year with a target of 25% facilities is recycled with an
FrieslandCampina renewable and reduction in 2025 (vs 2018) ambition of 95% useful re-use
green sources
© 2020 FrieslandCampinaCarbon
Neutral
Monitoring - from grass to glass -
C02 emissions
-33% CO2
Start C02 at all our
reduction at
monitoring 11,476 farms member farms
journey
2011 2015 2018/19 2030 2050
Credible & complete
Acceleration of the
greenhouse gas data
reduction process
member farmers
Integrated approach from grass to glass
30Outlook 31
Key trends and disruptions impacting our business
Positive impact Disruptors
Next billion Health Growth out- Declining birth Chinese local
people awareness of-home rates China players
1B 41% 8% -15% 60%
More people Healthier CAGR out-of- Expected birth Local
by 2035 consumption home market decline ’20-’25 players
Opportunities for Food & Risk to Infant
Beverage and Ingredients Nutrition business
business
32 32
WRS 210905 - Valor 2.0 - SB - RFC ...Continuation of situation in 2nd half of 2021 expected; clear
priorities defined to secure profit delivery
Outlook H2 2021 Priorities H2 2021
• Continuation of situation expected in the 2nd half of • Win market share in recovering out-of-home channel
2021
• Translating price increases into the market
• Cautiously optimistic about the recovery of the
• Invest in growth e-commerce
consumer and out-of-home markets
• Stabilize infant nutrition in Asia
• Asian infant nutrition market is not expected to
recover
• Successfully implement transformation to achieve
structural cost reductions
• Basic dairy prices will continue to hover around
current levels and as a result so will milk prices
• Continue building winning teams
33FrieslandCampina is
committed to deliver
good performance
and protect
our leverage ratioAppendix 35
Perspective per business group
Food & Beverage Specialised Nutrition Ingredients Trading
Revenue +1.0% Revenue -14.9% Revenue -3.9% Revenue -3.9%
Revenue before currency +4.1% Revenue before currency -11.1% Revenue before currency -2.6%
translation effects translation effects translation effects
Operating profit before +51%
+17% Operating profit -84% Operating profit -42% Operating profit
provision Thailand
Recovery out-of-home
and consumer channel Positive result commodity
Difficult market Growth added value
nutrition for elderly prices
Results under pressure due
Recovery not expected
to declining demand infant
nutrition
36
Note: All changes are expressed relative to the performance of H1 2020Operating profit under pressure due to difficult infant nutrition
market and provision for court ruling Thailand
Income statement H1 2021 H1 2020
Revenue 5,527 5,629
Gross profit 854 915
Gross profit % 15.4 16.3
Advertising and promotion costs -243 -239
Selling and general administrative costs -416 -435
Provision court ruling Thailand -57
Other operating costs and income -8 -20
Operating profit 130 221
Finance cost and income & result joint ventures -14 -15
Income tax -54 -98
Profit for the period 62 108
Note: All amounts are in millions of euros, unless stated otherwise
37Basis for calculation value creation is negative, no possibility for
interim supplementary cash payment to members
Income statement H1 2021 H2 2020
Operating profit 130 221
Net finance costs and share JV -14 -15
Profit before tax 116 206
Tax -54 -98
Profit for the period 62 108
Profit attributable to:
Providers of member bonds 22 23
Providers of perpetual bonds 4
Providers of cooperative loan 4 4
Non controlling interests 34 39
Basis for calculation value creation -2 42
Note: All amounts are in millions of euros, unless stated otherwise
38Free cash flow impacted by one-off pension payment 88M
One-off contribution to a
pension plan that was
committed to in 2015
-90
-91 +65 -88
+29
-175
Free Cash Profit Working Pension Other Free Cash
Flow H1 capital One Off Flow H1
2020 2021
Note: All amounts are in millions of euros, unless stated otherwise, all changes are expressed relative to the performance of H1 2020
Free cash flow is calculated as net cash flows from operating activities minus net cash flows used in investing activities
39Thailand court case significantly impacted H1 results,
however FrieslandCampina disagrees and filed an appeal
• Court ruling Thailand in business dispute between FrieslandCampina Thailand and
a client
• Based on its interpretation of the contract, court concluded that
FrieslandCampina has charged too much over a period of 10 years.
• Verdict: FrieslandCampina is required to compensate its client for 57M
• FrieslandCampina disagrees and filed an appeal
• Outcome of appeal is uncertain and therefore the full amount has been included
in H1 2021 result
• Inclusion in the H1 2021 result does not imply that the outcome is final
40Royal FrieslandCampina at a glance
Business overview Revenue breakdown²
For H1 2021
• Royal FrieslandCampina (RFC) is the 7th largest dairy company globally1
⚫ Founded in 2008 through the merger of Friesland Foods and Campina,
companies with 150 years of dairy expertise By geography By business group
• RFC is fully owned by its nearly 17,000 member dairy farmers located
North &
across the Netherlands, Germany and Belgium Africa &
South America Trading
• Full control over the complete dairy production chain: from grass-to- Middle East
glass 4% Netherlands
9% 11%
⚫ Collects milk from dairy farms operated by cooperative member farmers
24% Ingredients
⚫ Processes milk into high-quality branded dairy products
11%
⚫ Sells products to customers in 100+ countries globally
• Broad product portfolio serving different customers, including:
⚫ Consumers: milk, yoghurt, infant nutrition, cheese, desserts Asia & 31% 9% Germany Specialised 11%
⚫ Foodservice (e.g. bakeries/caterers): creams and butters Oceania Nutrition 67%
⚫ Food and pharmaceutical producers: ingredients and semi-finished
Food &
products 23% Beverage
• Employs 23,877 employees across 36 countries globally
Rest of Europe
Key brands
41 1. Source: Rabobank global Dairy Top 20
2. Numbers are based on H1 2021 actuals, unless stated otherwiseOur Brands 42
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