Jim Woulfe of Dairygold, Presentation at Irish Agri Event in Fermoy 2014

1. 1st May 2014
Realising the Opportunity
in a Sustainable Manner
Jim Woulfe, CEO Dairygold
Realising the Opportunity 1
Realising the Opportunity in a Sustainable Manner
Jim Woulfe
CEO, Dairygold
1 May 2014

2. 2
• Dairy Industry - 2014
• Dairy Opportunities:
— Global Trends
— Dairy Market Supply & Demand
• Realising the Opportunities - Dairygold
• Summary
Contents

3. EU27 Ireland
Milk Production billion litres 138.7 5.5
Dairy Cows million 23.1 1.1
Average Milk Yield kg/year 6,669 5,355
% of World Wide
Milk Production
% 24.4% 0.9%
Exported Volume % 10% 85%
Globally 625 billion litres Milk Produced (Cows)
Dairy Statistics
3

4. Global Trade
54.0
billion litres
c. 8½%
Reference: FH 2020 and Fonterra
Ireland Dairygold
4.7 billion litres 0.95 billion litres
Global Dairy Traded Market
4

5. Growing Demand for Food
By 2050 the world
needs twice as much
food as today
Reference UN/FAO
5

6. Virtually all population growth is
in developing countries
Reference: United Nations Population Division, World Urbanisation Prospects
Macro Data Indicated Population Growth
6

7. (200) 0 200 400 600 800 1,000 1,200 1,400
Asia
Sub-Saharan Africa
Latam
N America
Europe
Reference: Population Reference Bureau, 2010 World Population Data Sheet
Population Millions
Population Growth by Region to 2050
7

8. “In Developing World – e.g.
China, urban dwellers consume
6 times more dairy products
than rural dwellers”. FAO
In 1950 -
c. 80% Rural :
20% Urban
In 2000 -
c. 50% Rural :
50% Urban
In 2050 -
c. 30% Rural :
70% Urban
Reference: United Nations Population Division, World Urbanisation Prospects
Population Growth – Urbanisation Shift
8

9. 4,000
6,000
8,000
10,000
12,000
GDP/Capita (US$)
Reference: CIA World Fact Book
Growth of Middle
Class consumers
Macro Data Indicated Income Growth
9

10. Adding as many as 1,000 new locations
in Europe during 2014.
Plans to open 1,500 new stores in 2014
- half of them will be in Asia
Source: Bloomberg
Source: Bloomberg
Source: Bloomberg
Will add at least 700 new outlets in
China this year
Changing Consumption Habits
– Leading Global Brands Capitalising
10

11. 0%
1%
1%
2%
2%
3%
3%
4%
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012-15
2015-20
Growth%
Reference: IDF
2.5% 2.4%
Global Dairy Demand Growth Rates
11

12. 0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
China Russia Mexico Brazil Korea Indonesia
Self Sufficiency Rates
Emerging Markets have a Supply Deficit
12

13. Reference: Global Trade Atlas (GTA)
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
2008 2009 2010 2011 2012 2013
Whole Milk Powder (WMP) Imports - China
13

14. N America
<1%
LATAM
2%
< 1%
Europe
4%
MENA
India
10%
China
7%
1%
OCEANIA
1%
2%
2%
1%
7%
4%
2%
Demand Growth Milk Supply Growth
Reference: Fonterra 2013
Demand Growth & Supply By Region to 2020
14

15. Global Trade
Reference: FH 2020 and Fonterra
Ireland Dairygold
54.0 billion
litres
c. 8½%
80 billion litres
by 2020
8.25 billion
litres by 2020
4.7 billion litres 0.95 billion
litres
1.5 billion litres
by 2020
Global Dairy Traded Market to 2020
15

16. • Global demand growth for dairy c. 2.5% per annum and
projected to remain at this level to 2020.
• Demand growth will be dominated by emerging economies
which are also predominantly milk deficit regions.
• Global Supply Trend will match demand but with greater
volatility.
• Temperate climate countries with surplus dairy supply will
benefit from this growth.
Global Dairy Market
16

17. Realising the
Opportunity
Dairygold -
“Sourcing Locally &
Supplying Globally”
17

18. Ensure a growing and sustainable Dairygold.
• Develop the required infrastructure and optimal processing
capacity
• Ensure a sustainable financial plan
• Retain Member Control over the business
• Develop a robust strategic plan that is flexible, focussed on
growth, while minimising risk.
“Our single purpose is to maximise our Member Suppliers’ income from
farming, by maximising the value we add to current and future milk and
grain supply and by minimising the cost of farm inputs, while growing
the Net Asset Value of the Business.”
Objective
18

19. 5 Year Financial Performace Overview
19

20. 941 916
959
0
200
400
600
800
1000
1200
1400
1600
Millions
941 916
959
1000
1169
1239
1295
1353
1414
1478
0
200
400
600
800
1000
1200
1400
1600
Millions
+537m Litres
Milk Supply – Members’ Forecasts to 2020
20

21. 0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
2011/13
Grass based production with February Incentive
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
2011/13
Future
Dairygold’s Milk Supply Profile
21

22. Additional Volume
Product Sector Markets
% Milk
Volume
Cheese 35%
Milk Powders 65%
Additional Volume R2M
Product Sector Markets
% Milk
Volume
Cheese
Demin Whey
Powder
UK, Mainland EU, MENA
and Russia.
Ireland, EU and China
35%
Milk Powders
WMP / FFMP / IMF
Base
Infant Milk Formula
& IMF Ingredients
EU, Middle East, North
Africa, Latin America,
China / Asia
Asia & Baby Food sector
65%
2013 Product Portfolio/Additional Volume R2M
22

23. 33.4
21.8
29.4
33.6
30.9
38.1
CentsperLitre
6 Year Weighted Average
Price of c. 31.5 CPL
Market Returns/Dairygold’s Milk Price Tracker
2008-2013
23

24. 2015/’16
+ 7.5 ML
2020
52.9 ML
2019/’20
+ 7.5 ML
2011
29.0 ML
2012-13
+3.7 ML
2014
+5.2 ML
Cheese & Whey
Processing
Phase I
Mitchelstown
Phase II
Mallow Stage A
Phase III
Mallow Stage B
Peak Week Processing - Million Litres (ML)
Involves €200m Capital Investment over seven years to 2020
Increasing Processing Capacity by 23.9 MLToday
Expansion Programme
24

25. • Market Returns / Milk Price Volatility
• Financing & Cashflow Management
• Land Availability & Mobility
• Sustainable Dairy Assurance Scheme
Dairygold is working with Industry Stakeholders to address the above
issues and is progressing initiatives to support its Milk Suppliers
Key Challenges Faced by Expanding
Milk Producers
25

26. Mitchelstown
HQ - 2013
Mallow
Development
– 2014/15
Castlefarm
– 2014
Shaping our Future Together
26

27. • World Dairy Demand is projected to continue to grow.
• Ireland’s natural competitive advantages positions us to take advantage of
the increasing demand.
• Dairygold:
• is well prepared to avail of the opportunities.
• expansion plans are modular and aligned to Milk Supplier Forecasts,
• has the appropriate financing in place (Members and Banks).
• Investments are focussed on availing of value added opportunities.
• The increased volumes will generate c. €200m additional revenue for
Dairygold Milk Suppliers and a total of c. €350m to the wider community.
Summary
27

28. 28
“Looking forward with optimism”
Thank You