Fonterra 2025 Special Meeting Materials

FONTERRA SPECIAL MEETING
30 OCTOBER 2025
CHAIR’S ADDRESS

I want to start off this morning by thanking farmers for their engagement in this
discussion, especially over the past month or so when the full details have been
available.

We have had excellent numbers attend the webinars and a strong turn out at the 42
roadshow meetings held across the country.

A number of farmers have also taken advantage of the director-led drop-in days at
their local Farm Source store, or had 1-1 conversations with the management team,
directors, or Co-op Councillors.

As you know, the Board has unanimously recommended you support the proposed
sale to Lactalis.

I appreciate that there’s been a lot of information and opinions coming at you,
and it’s been a lot to take in. But it’s been important you had all of the answers you
needed to make an informed decision.

The decision to divest the Consumer and associated businesses is significant and one
the Board did not take lightly.

We have examined the strategic context we operate in, our strengths, and how as a
Co-op we create value for our owners.

By far, we do this best through our business-to-business (B2B) Ingredients and
Foodservice channels, which collectively generate the majority of our returns to
Shareholders through both the Farmgate Milk Price and dividends.

It is in this context that the Board commenced a process to explore divestment options
for our global Consumer and associated businesses.

We have thoroughly tested the terms and value of both a trade sale and initial public
offering as divestment options.

Following a highly competitive sale process with multiple interested bidders, your
Board is confident that a sale to Lactalis is the highest value option for the Co-op,
including over the long term.

The $4.22 billion price now on the table from Lactalis exceeds all
of the initial independent valuations and estimates, and I want to acknowledge
Management and our advisors for their hard work on behalf of shareholders.

The sale allows for a full divestment of these assets, is lower risk, and enables a faster
return of capital to the Co-op’s owners. It is also significantly value accretive when
compared with an IPO.

I know many of you have an emotional connection to the brands and may be mourning
their potential change of ownership.

But it is a fantastic deal, where our Co-op gains a lot more than just $4.22 billion.

In Lactalis we gain one of our most significant Ingredients customers who we’ll partner
with through a long-term supply relationship.

We also stand to gain a much deeper, more trusted relationship with our other large
B2B customers that can now truly call us a partner, and not a competitor.

We expect that their consumer insights will be much deeper than what we ever had.
Combined with our century of dairy science, I think together we’ll innovate much
faster.

Fonterra’s own R&D spend will now be concentrated on Ingredients and Foodservice,
accelerating our own innovation pipeline.

We will have a simplified and more focused business. The value of this cannot be
overstated.

Fonterra’s relative success in recent years comes from understanding where we have
a comparative advantage that can deliver real value back to our farmers through the
milk price or earnings.

The divestment will usher in an exciting new phase for the Co-op. We will be able to
focus Fonterra’s energy and efforts on where we do our best work and enabling the
consumer brands to be fostered by a true global consumer giant for mutual gain.

The deal is not without risk and it’s important that we acknowledge that.

The ingredients supply agreement is not exclusive. There is a risk that, in time, Lactalis
may choose a different supplier for some ingredients.

Customer loyalty cannot be written into a contract forever. It’s earned.

Lactalis is proud to partner with us for the long-term. They will be investing significantly
in brands that are founded on high-quality Fonterra milk from New Zealand.

A number of you have also raised questions around the risk of less diversification.

Our geographic diversification is materially unchanged following divestment.

Through our Ingredients and Foodservice businesses, we will continue to sell products
derived from New Zealand milk to more than 100 countries around the world.

And lastly, given it utilises less than 8% of our New Zealand milk, the Consumer
business is not, and never will be, an effective hedge against the risk of milk price
volatility.

The two most precious things in this Co-op are your milk and your capital.

The far greater risk to our Co-op is continuing to put scarce farmer capital into lower
returning Consumer products.

Consumer is a riskier business. It requires much higher operational expenditure and
is still well below our target return on capital.

This whole process has been about strategy – what Fonterra can be the best in the
world at. Then having the focus and discipline to deliver on that.

The hard work of our farmers and global teams over many years has Fonterra in a
position of real strength. That gives us choices.

We choose to focus on B2B Ingredients and Foodservice because we have a proven
competitive advantage and global reach. We are confident this is the best option for
our farmers’ futures, and therefore New Zealand.

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FONTERRA SPECIAL MEETING
30 OCTOBER 2025
CEO’S ADDRESS

As Peter has set out, our decision to pursue this divestment is grounded in an
understanding of how we best create value for farmers and New Zealand.

Our strengths lie in our global Ingredients business, NZMP, and our global
Foodservice business, Anchor Food Professionals.

These are world leading brands, known for their New Zealand provenance and high-
quality, innovative products.

By focusing on these businesses, we will be a B2B provider of high-quality dairy to the
world, from our home base here in New Zealand.

To support continued value growth through Ingredients and
Foodservice, we’re investing in new manufacturing capacity to meet growing
demand.

Construction is underway on an advanced protein plant at Studholme and new UHT
cream capacity at Edendale, with products expected to come online in the 2026
calendar year.

Looking ahead, we have plans to invest up to 1 billion dollars over the next three to
four years in projects to generate further value.

Last week, we announced a $75 million expansion of our butter plant at Clandeboye,
the first in this next phase of strategic investments.

We have a pipeline for further projects that we’re assessing, and we’ll share details on
these as they are confirmed.

As Peter has shared, a divestment of Mainland Group unleashes the Co-op, allowing
us to focus on what we do best.

Through focused execution of our strategy, we know that we can deliver greater value
for farmers while also maintaining the financial discipline that has got us into the
strong position we’re in today.

Our business plans are designed to drive a performance lift in our Ingredients and
Foodservice businesses and generate operational cost efficiencies.

We have set out the post-divestment financial shape of the Co-op and confirmed that
the targets and policy settings we released alongside our strategy last year are
unchanged.

Specifically, we are targeting:

• An average return on capital of 10-12%, above our 5-year average.

• Maintaining the highest sustainable Farmgate Milk Price.

• Earnings to be back at FY25 levels within three years, offsetting the earnings
impact of divestment.

• And returning more of the Co-op’s earnings to Shareholders, through a dividend
policy of 60-80%.

Please keep in mind these numbers are targets, and they are subject to a number
of risks and assumptions.

Ultimately, post-divestment we’ll be a more focused business with a lower cost base
delivering a better return to farmers.

We have a clear plan for the Co-op’s future that will build end-to-end value for
generations of farmers to come.

If today’s vote is successful, the next steps are to secure the regulatory
approvals required for the divestment and separate the Mainland Group business from
Fonterra.

We’re targeting a tax-free capital return of 2 dollars per share to shareholders and unit
holders, equivalent to $3.2 billion, once the sale is complete.
Another shareholder vote will be required for the payment of the capital return. The
process for that capital return is expected to be by way of a scheme of arrangement
under Part 15 of the Companies Act 1993.
We plan to provide more detail on the timing and process for the capital return in early
December.

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Fonterra Co-operative Group
Special Meeting 2025
10.30am on Thursday, 30 October 2025
Online

Agenda
Welcome
Chairman’s Address
Chief Executive Officer’s Address
Chair of Fonterra Co-operative Council’s
Address
Resolution: Approval of sale of Mainland Group
Questions
Voting
Closing

Peter McBride
Chair’s address

How we create end-to-end value for farmers

Divestment Proposal
• Lactalis to purchase:
• Consumer business (excluding Greater China)
• Integrated businesses in Oceania and Sri Lanka
• Middle East & Africa Foodservice business
5
Purchase Price
$4.22b
Proposed Tax-Free Capital Return
$2.00per share
Shareholder Vote
30 Oct
Key terms of sale agreement
• Includes long term agreements for milk supply,
ingredients and other products to the divested business
• Sale is subject to separation of the business from
Fonterra and approval from:
• Fonterra shareholders by ordinary resolution
• OIO in New Zealand, FIRB in Australia and certain
competition authorities

Unleashing our Ingredients engine
•One of the largest product ranges in the global
dairy industry
•From core high-quality dairy ingredients to sophisticated,
functional components
•Over 1,000 customers in more than 100 countries
•Offices in13 global locations,with a strong
partnership network
•Vital for formulas and recipes to some of the world’s
most important food and nutrition brands
B2B dairy expertise that leads the world
Keep momentum in Foodservice
•High performing dairy products covering cream, cheese,
butter and cream cheese
•Customers in over 50 countries
•500 cities across Greater China and 6
application centres
•50,000 food operators across Southeast Asia
•Accelerating growth in other markets such as Mexico,
Japan, Korea and Taiwan
100+ products50+ products
NZMP and Anchor Food Professionals are world leading product and solutions brands
6

7
A significant and diverse B2B presence globally
China
EMPLOYEES (FTE)
620
Rest of
Asia Pacific
EMPLOYEES (FTE)
320
New Zealand
EMPLOYEES (FTE)
10,620
MANUFACTURING SITES
24
Americas
EMPLOYEES (FTE)
100
Markets we export toRevenue
Employees
~11,850
Revenue (NZD)
~24b
$7
billion
$3
billion
$3
billion
$3
billion
Rest of AMENA
EMPLOYEES (FTE)
40
Europe
EMPLOYEES (FTE)
150
MANUFACTURING SITES
1
$1
billion
$7
billion

46%
47%
44%
43%
33%
33%
34%
33%
13%13%
14%
16%
8%
7%
8%
8%
2022202320242025
Milk PriceAdvanced & SpecialtyFoodserviceConsumer
8
Why divest Mainland?
5%
5%
5%
5%
15%
32%
16%
19%
6%
16%
20%
12%
(0%)
(4%)
7%
9%
Channel performance
Channel allocation of milk solids
79%
80%
78%
76%
•Ingredients generates the Farmgate Milk
Price and, alongside Foodservice,
contributes majority of Co-op’s earnings
•Divestment of Mainland would allow
Fonterra to focus on what it does best –
being a B2B provider of dairy to the world
•Farmers’ capital invested into the
consumer business comes at the
expense of options for our Ingredients
and Foodservice businesses
•Lactalis identified significant potential in
the Mainland business and considers it
has the experience and global scale
required to take it to the next level
Return on Capital
Advanced & Specialty
Foodservice
Consumer
Milk Price
Ingredients

CEO’s address
Miles Hurrell

10
Investing to support strategy
Whareroa expansion
FIRST STAGE COMPLETED
•8 new cool stores increasing
storage capacity by 5,000 MT,
enabling storage of up to 26,000
MT of cheese
Early 2026
Edendale expansion
COMPLETED
• $150m investment in new UHT plant
• Unlocking up to 20m kgMS additional UHT
cream processing capacity
FY26 includes a strong pipeline of investments continuing to unlock capacity for higher margin products
Studholme expansion
COMPLETED
• $75m investment into
high-value proteins
MayAugustOctober
Whareroa expansion
FINAL STAGE COMPLETED
20262027
Milkfat processing expansion
BEGINS
• Adding value to milkfat through butter
and cream cheese investments
• Pastry butter sheet capacity expansion
to support Foodservice growth

OUTCOMES
TARGETS& POLICYSETTINGSFY19-24AVERAGE
Strong
Shareholder
returns
Stable
balancesheet
Enduring
Co-op
10 -12%
8.2%
Returnoncapital
1
60 -80%
62%
Dividendpolicy
Capitalinvestment
requirements
$660m
Emissionsreduction
by2030
2
AbsoluteScope1 & 2 Energy
& IndustrialGHG emissions
Scope1 andScope3 FLAGGHG
emissions intensity from dairy
3
50.4%
30.0%
Gearingratio
30 -40%
38%
Debtto EBITDA
< 3x
~$1+billion
perannum
in Essential,Sustainability,Growth
2.7x
GuidedbyResourceAllocationFramework
Capitaldistributions
1.AverageReturnonCapitalFY24-30
2.FromanFY18baseyear
3.Forest, Land and Agricultural emissions pertonneoffat-and-protein-correctedmilk
Delivering on strategy targets

Chair, Fonterra Co-operative Council
John Stevenson

Resolution
That the sale of all the shares in
Mainland Group Holdings Limited
pursuant to the sale and purchase
agreement with B.S.A. SAS dated 22
August 2025 as described in the
Explanatory Notes, is approved,
including for the purposes of NZX
Listing Rule 5.1.1(b).

Questions
Fonterra Co-operative Group

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Close of Business
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Special Meeting 2025 has now closed. Thank you.
Fonterra Co-operative Group