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 WoulfeCEO, Dairygold

1 May 2014

2

• Dairy Industry - 2014

• Dairy Opportunities:— Global Trends— Dairy Market Supply & Demand

• Realising the Opportunities - Dairygold

• Summary

Contents

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

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

Growing Demand for Food

By 2050 the world needs twice as much

food as today

Reference UN/FAO

5

Virtually all population growth is in developing countries

Reference: United Nations Population Division, World Urbanisation Prospects

Macro Data Indicated Population Growth

6

(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

“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

19992000

20012002

20032004

20052006

20072008

20092010

20114,000

6,000

8,000

10,000

12,000GDP/Capita (US$)

Reference: CIA World Fact Book

Growth of Middle Class consumers

Macro Data Indicated Income Growth

9

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

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

-15

2015

-200%

1%

2%

3%

4%G

row

th %

Reference: IDF

2.5% 2.4%

Global Dairy Demand Growth Rates

11

China Russia Mexico Brazil Korea Indonesia0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

Self Sufficiency Rates

Emerging Markets have a Supply Deficit

12

Reference: Global Trade Atlas (GTA)

2008 2009 2010 2011 2012 2013 0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Whole Milk Powder (WMP) Imports - China

13

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

Global Trade

Reference: FH 2020 and Fonterra

Ireland Dairygold

54.0 billion litres

c. 8½%

80 billion litresby 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

• 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

Realising the Opportunity

Dairygold -“Sourcing Locally & Supplying Globally”

17

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

5 Year Financial Performace Overview

19

941 916 959

0

200

400

600

800

1000

1200

1400

1600

Mill

ions

941 916 959 1000

11691239

12951353

14141478

0

200

400

600

800

1000

1200

1400

1600

Mill

ions +537m Litres

Milk Supply – Members’ Forecasts to 2020

20

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

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Additional Volume

Product Sector Markets % MilkVolume

Cheese 35%

Milk Powders 65%

Additional Volume R2M

Product Sector Markets% MilkVolume

Cheese

Demin Whey Powder

UK, Mainland EU, MENA and Russia.

Ireland, EU and China

35%

Milk PowdersWMP / 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

20082009

20102011

20122013

20

22

24

26

28

30

32

34

36

38

40

33.4

21.8

29.4

33.6

30.9

38.1

Cen

ts p

er L

itre

6 Year Weighted AveragePrice of c. 31.5 CPL

Market Returns/Dairygold’s Milk Price Tracker 2008-2013

23

2015/’16+ 7.5 ML

2020

52.9 ML

2019/’20+ 7.5 ML2011

29.0 ML

2012-13 +3.7 ML

2014+5.2 ML

Cheese & Whey Processing

Phase IMitchelstown

Phase IIMallow Stage A

Phase IIIMallow Stage B

Peak Week Processing - Million Litres (ML)

Involves €200m Capital Investment over seven years to 2020

Increasing Processing Capacity by 23.9 MLTo

day

Expansion Programme

24

• 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

Mitchelstown HQ - 2013

Mallow Development

– 2014/15

Castlefarm – 2014

Shaping our Future Together

26

• 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

“Looking forward with optimism”

Thank You