Presentation - Bega Cheese

Bega Cheese Limited
Octa Phillip
Agribusiness Conference
Barry Irvin AM
Executive Chairman
Co-Manager

Building a Bridge to a Sustainable Future
Bega Cheese Limited

If you want a receipt, you’ll
have to wait until I close. I’m
right handed.
Markets

Australian dairy – a brief history
2000 Complete deregulation and
implementation of DSAP
1983 CER agreement with NZ
1986 Kerin Plan implemented
1997-1999 The states review
drinking milk regulations
1996 DMS Scheme implemented
with sunset date of June 2000
Bega Cheese Limited

Australian industry market mix
12,000
10,000
8,000
6,000
4,000
2,000
0
Domestic Export Share exported (right axis)
90/91 92/93 94/95 96/97 98/99 00/01 02/03 04/05 06/07 08/09 10/11
(e)
60%
50%
40%
30%
20%
10%
0%
5

Comparison of producers/exporters
EU 27 New Zealand Australia US Brazil
Population* 503 mill 4 mill 22 mill 309 mill 195 mill
GDP –
economy
size*
Milk
production
Share
exported
Share of
trade
17,960 bill 131 bill 916 bill 14,582 bill 2,172 bill
148 bill l 17 bill l 9.3 bill l 86 bill l 28 bill l
11% 94% 43% 6% 3%
34% 34% 8% 11% 2%
*2010 figures Sources: CIA World Factbook, OECD, World Bank, ZMP

Drivers of the global market
• Demand
– Retail, foodservice and industrial
– Internal demand vs export availability
– Economic activity and disposable incomes
– Substitute fat & protein prices
• Supply
– Milk production and product mix
– Inventory levels (commercial and Government)
– Feed grain prices (US)
• Dairy Policy
– Market support
– Market access
– Other government intervention
• Wildcards
– Weather
– Exchange rates

Food weighting in CPI
Price sensitivity in
developing markets

Long range global scenario
Driven by the
developing world
9

• Ingredients
• Retailers
Defining the Market –
Australian Perspective
– Branded consumer products
– Private label
– Convenience stores
• Out of home dining
– Quick service restaurants
– Hotels, restaurants, catering

Defining the Market –
Australian Perspective
Bega Cheese Limited

Product Range and Infrastructure
• Cheddar & Processed Cheese
• Mozzarella
• Cream Cheese
• Nutritional Powders
• Nutraceuticals
• Milk Powders
• Whey Powders

Product Range
Nutritionals

Dairy Nutritionals
Market Dynamics and Evolution
World Market for Infant Formula (2009)
SE Asia 25%
The world market for infant
formula is dominated by Asia
with about 53% of volume.
India 7%
China 24%
Japan
4%
Source: The CIA World Fact Book, Euromonitor

Market Dynamics
The major forces driving category growth relate to the increasing recognition of the
importance of nutrition, increasing purchasing power of women, growing middle
class and longer life spans.
Increasing
Middle Class
&
Births
Increasing
Purchasing
Power of
Women
Increasing
Importance
of Nutrition
25%
Longer Life Span
&
Ageing
Population
26%
Source: Mead Johnson 2010 Investor Report
Source: Baby food U&A study 2007 , (2) IM U&A Online Survey, Dec 2008 Heinz Study

Market Dynamics
Consumption of Milk Formula by volume (2010)
Consumption
(g/infant/day)
Thailand
Malaysia
France
Germany
USA
The wealth of nations
(measured by GDP per
capita) is also a strong
driver of consumption
of nutritional products.
Vietnam
Indonesia
Mexico
Philippines
China
Average World Consumption = 31 g/infant/day
GDP per Capita ($US)
Source: The CIA World Fact Book, Euromonitor, My Decker Capital (“Infant Formula Industry in China”, Dec. 2010)
Note: Bubble area proportional to population

Market Dynamics
Asia Demand for Life-Stage Dairy Nutritionals
Growth (% pa 2005 – 2010) Value ($US ‘00 M – 2010)
The value of Life-Stage Dairy
Nutritionals within Asia is
estimated at $US14B and
has grown at about 15%
over the 2005 to 2010
period.
Source: Euromonitor

Australian & International
Market Profile
Australian Market
• Major supermarkets
Food Service
• Ingredients
International Market
• North Asia
• Japan
• Korea
• Asia
• Middle East

Australian Market Trends
Grocery $ Performance by Type | MAT to 02/10/11
• From a historic perspective, there is a strong inverse relationship between value
growth between Cafes, Restaurants and Takeaways and private Label Food
• Stable economic times see PL performance decline
• The latest 3 qtrs show PL starting to strengthen
Bega Cheese Limited

Market Trends
Grocery $ Performance by Type | MAT to 02/10/11
• As consumer Confidence drops Total Food increases, P/L seeing a significantly greater boost than
Branded
• Consumers discretionary spend will shift from Cafes & Restaurants into Grocery Food retailing
Bega Cheese Limited

Retail – Private Label

Bega Cheese Limited
Retail – Private Label: Dairy

Retail - Brands
Brand Investment
• Quality
• Delivery on brand promise
• Customer experience
• New product development
• Value
• Providence
Bega Cheese Limited

Defining the Markets
Customer Investment
• International customers
• Business to business customers
• Retailers
• Quick service restaurants
• Consumers
Quality
Delivery on brand promise
Customer experience
New product development
Value
Providence
Bega Cheese Limited

Leadership
• Trade
• Infrastructure
• Research & Development
• Working environment
• Market investment
• Staying the course
Bega Cheese Limited

Significant Investment in Infrastructure
• Five plants with well developed technologies
including robotics and automated processing
lines
• Continual investment in technologies to ensure a
high level of production efficiency is maintained
• Unutilised manufacturing capacity at plants
allows for efficient increases in levels of
production
• Strong commitment to environmental
management and sustainability
Map of Facilities
Bega
Tatura
Strathmerton
Coburg
Bega Cheese Limited

Diversified Earnings Across Businesses
Overview from the receipt of milk and other raw material and the processing by the Bega Cheese
Note: The size of boxes and arrows in the above chart does not reflect the relative size of each business

High quality business model with diversified
earnings across businesses and geographies
• Diversified earnings across both the manufacturing and the cutting, packaging and processing of dairy products
• Diversified earnings across a wide variety of dairy products
• Earnings spread across geographic regions with a growing global market presence
• Strong relationships with major FMCG customers whose long term contracts operate on a cost-plus margin basis
• On-going royalty income from Australian trade mark licence of the Bega brand
Bega Cheese Group FY2011F
Revenue by Destination
Bega Cheese Group FY2011F
Revenue by Business Unit

Group Sales & Assets
Sales
Consolidated Assets
1,000,000
900,000
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
500,000
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
Bega Cheese Limited

1H 2012 Results highlights*
• EBITDA increase 12.3% to $32.8m
• PBT increase 31% to $18.6m
• EPS down 3.6% - new share capital issued 16%
• Interim dividend of 3.0 cents per share fully franked
• Milk intake increase 16% to 411m litres
• Increase in total production of 7% to 104,000t
• Capital expenditure $12.2m
*Comparison to prior corresponding period
Bega Cheese Limited

Down on the Farm
• 100 dairy farms in NSW
• 400 dairy farms in Victoria

South Australia 7% Qld 7%
Western Australia 4%
NSW 8%
Victoria 64%
Tasmania 7%
Bega Cheese Limited

Australian Milk Production Trends
12,000
M. litres
Share Exported
70%
10,000
60%
8,000
6,000
4,000
2,000
Exports
Australia
50%
40%
30%
20%
10%
0
0%
Australia exports approx. 45% of milk production - total value in 2009/10 of $A 2.4 billion

Long term trends
1980 1990 2000 2011
Farms 21,994 15,396 12,896 6,883
Milk produced
(mill litres)
5,432 6,262 10,847 9,101
Cows (‘000) 1,880 1,654 2,171 1,600
Av herd size 85 107 168 232
Share of milk
exported
22% 31% 54% 45%

Making our own way!
BEMS
Purpose: To secure milk supply by helping our suppliers
to improve management practices associated with
sustainability issues, both real and perceived, identified
by our customers, the dairy industry and the community
as being important.
Key assumption: By encouraging our farmers to adopt
industry acceptable management practices our farmers
are most likely to be minimising their impact on the
natural environment and operating in a sustainable
manner.

BEMS Sustainability Assessment
BEMS Sustainability Issues
Soil Management
Nutrient Management
Effluent Management
Irrigation Management
Greenhouse gas emissions
Biodiversity & Waterways
Energy & Water in the dairy
Pest & Weeds
Chemical use management
Farm Wastes
People management
Exceptional Circumstances & OH&S
Animal Health
Animal welfare

BEMS Priority Areas for Improvement
The priority NRM sustainability issues identified in the original BEMS Pilot were;
Effluent
MGT
Irrigation
MGT
Nutrient
MGT
Native Veg
&
Waterways
Soil MGT
GHG’s
Water &
Energy
Chemicals Wastes Pests

BEMS Sustainability Assessment
Initial results from 17 farms across 2 supplier regions

BEMS Achievements
to date
• 42 effluent systems upgraded enabling the reuse of 160ML
water 12,000 tonnes of effluent to be reused over 280ha
of dairy pasture.
• 20 stream crossing, 28 laneway upgrades and 37 erosion
sites remediated preventing 300 tonnes of effluent and
140 tonnes of sediment entering waterways
• Soil tests & nutrient maps produced for 84 farms
(15,000ha)

BEMS Achievements to date
• 127km of fencing, 145ha of revegetation protecting &
enhancing 98km of river frontage, 184ha of wetlands and
23ha of terrestrial vegetation
• 38 dairy shed energy audits completed, 12 farms
completed energy efficiency upgrades saving $27,133 and
110 tonnes Co2 emissions per year

Bega Cheese Limited
Australian Agriculture

Thank you