Fonterra Shareholders' Fund Prospectus and Investment Statement

SECTION 1
About
Fonterra continued
Fonterra is a source of
quality New Zealand milk
A temperate climate and low-density
population make New Zealand well suited to
pasture-based dairy farming.
The relatively low variable cost of production
for farmers underpins New Zealand’s position
as a globally competitive source of dairy
nutrition. The result is that Fonterra can
source a reliable supply of milk from an
efficient and adaptable farming base.
Fonterra’s pre-eminent position with farmers
in New Zealand is supported by a robust and
transparent basis for deriving a milk price
paid to farmers.
Currently, Fonterra collects approximately
89% of milk produced in New Zealand. This is
sourced from its committed co-operative
supplier base of around 10,500 farmers in
New Zealand. The geographical spread of
supply across the North and South Islands
reduces Fonterra’s exposure to climatic risks
and other unforeseen factors.
Fonterra’s milk collection volumes have grown
by nearly 30% over the past decade. However,
over the same period, Fonterra’s share of total
milk collection in New Zealand has decreased
from approximately 96% to 89%. This reflects
overall growth across the industry and an
increase of new entrants to the industry
following a period of de-regulation.
Pasture-based milk production is highly
seasonal. Peak milk production in New Zealand
is in October and November, as illustrated in
the chart below.
The seasonal nature of milk supply in
New Zealand means that, as a general guide,
on average Fonterra processing plants
process a volume of milk that would keep
the plant operating at full capacity for about
200 days per year. However, the extent to
which a particular processing plant is utilised
in a year will generally differ from the
Fonterra average for a range of reasons,
including the plant’s location and size, and
Fonterra’s desired product mix.
NEW ZEALAND
MILK COLLECTION BY SEASON
Source: Fonterra and DairyNZ
New Zealand
• 12 months to May 2012
• Milk collection: 19.1 billion litres
• 11-year growth: 40.6%
• 11-year CAGR: 1 3.5%
Fonterra
• 12 months to May 2012
• Milk collection: 17.0 billion litres
• 11-year growth: 29.1%
• 11-year CAGR: 1 2.6%
1 CAGR refers to compound annual growth rate.
Annual milk collection (billion litres)
20
18
16
14
12
10
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
FONTERRA’S NEW ZEALAND
SEASONAL MILK VOLUME 1
Source: Fonterra
90
80
2009 / 2010 Season
2010 / 2011 Season
2011 / 2012 Season
1 Volumes represent a six-day moving
average of daily production.
Millions of litres per day
70
60
50
40
30
20
10
0
JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN
42