Australian Dairy ry Nutritionals Group Growing Local, Going Global CE CEO Pres esen entation Peter er Sken ene Annual Gen eneral l Mee eetin ing 29 November 2019
Consistently delivering on Group Strategy AHF is is tr transit itionin ing fr from a a contracted pac acker to o a a verticall lly in integrated man anufacturer an and producer of of premiu ium or organic products an and brands, with ith a a lar large focus s on on or organic in infant formula la Key ach chie ievements Key Ach chievements ✓ All farms in process of conversion to organic ✓ Camperdown Dairy now producing organic dairy production products across milk, yoghurt and butter categories ✓ “ Yaringa ” farm successfully fully certified organic on 22 ✓ 6 year exclusive contract with The Collective for a November 2019 material volume of yoghurt products sold nationally ✓ Infant formula plant arrived in Camperdown and ✓ Development of new ranges of Infant formula well building construction expected to commence in progressed January 2020 ✓ Ongoing discussions with major retailers in relation to ✓ Successful capital raise for $12 million (before costs) both own brand and contract manufacturing completed in August 2019 to fund construction of opportunities (fresh dairy and infant formula) infant formula plant and working capital 2
General Outlook ▪ Western Victoria has largely avoided drought conditions with all farms experiencing good rainfall and strong pasture growth in 1HFY20 ▪ Successful organic certification of Yaringa farm on 22 November 2019 with other farms on track for certification in 2021 5 ▪ Retail markets remain extremely competitive with a large number of players competing for ranging of fresh dairy products particularly yoghurts ▪ Developing brand recognition and customer loyalty particularly for ‘Camperdown Dairy’ milk ▪ Positive discussions with both major retailers in relation to own brand and contract manufacturing opportunities (fresh dairy/infant formula) ▪ Martin Bryant has joined as Deputy Chairman of the Group, bringing extensive strategic and operational experience particularly in Asia including China 3
AHF at a Gla lance Focused on Well positioned A vertically developing higher to capitalise on integrated margin owned the growing business model brands and products shortfall of guarantees ability including organic organic milk to supply versus Australi lian Dair iry infant formula supply competitors Nutrit itio ionals ls Group is is 2 years in ye into th the jou journey of f bec ecomin ing th the sec second Export permits, Board and Strong domestic largest premiu lar ium organic ic certification and management distribution with customer have the track major brand owner and milk ilk relationships are record and supermarket all in place experience to chain producer in in Australi lia take the business forward 4
Why are we Transforming? AHF is is tr transit itionin ing fr from a a contracted pac acker to o a a verticall lly in integrated man anufacturer an and producer of of premiu ium or organic products an and brands, with ith a a lar large focus s on on or organic in infant formula la Why move e to o Organic? Why vert ertic ical in integ egrati tion and own branded ed products? ✓ In Australia, 9 billion litres of milk is produced annually, ✓ Higher value and margins across all speciality but only 60 million litres is organic products ✓ Domestic demand for organic products is projected to ✓ Brand equity in new and existing “own brands” continue to grow strongly due to awareness of clean, developed safe food. ✓ A diversified revenue stream ✓ In Australia organic milk achieves a price premium of ✓ Lower customer concentration 42% and organic yoghurt 32%, over conventional products ✓ Ultimate control and security over supply with ✓ By 2023, annual global demand for organic infant company owned cows, farms, factory, tinning and formula is expected to reach US$7.75B, CAGR of 14.1% brands 5 Source: KPMG – Global Organic Milk ; Citi – Infant formula reportet Report
Product Div iversification Product 2018 2018 2017 2017 Tar arget gross ss pr prod oduct Mar Margin ins s FY FY20 2021 ▪ ▪ Milk Milk Form ormula 35% - 45% ▪ ▪ Butter Butter ▪ ▪ Yoghurt Yoghurt But utter 10% - 15% New Ad Additions Yog oghurt / Kefi fir 15% - 30% ▪ Kefir ▪ Premium Mil ilk Rang Range Bot ottled Mil ilk 10% - 25% ▪ Paed aediatric Form ormula 2019 2019 2020 & 21 2020 21 Target Category Value Splits Forecast Category Value Splits ▪ ▪ Milk Milk ▪ 100% ▪ Butter Premium Milk Range ▪ 90% ▪ Yoghurt Butter ▪ ▪ 80% Kefir Yoghurt ▪ ▪ 70% Smoothies Kefir ▪ 60% Cream New Ad Additions 50% New Ad Additions ▪ Organic Pouc ouches s ▪ 40% Cul ultured Dr Drinks ▪ Probiotic Yog oghurts ▪ 30% Flavoured Fr Fla Fres esh ▪ Organic Mil ilk ▪ Infant Form ormula 20% ▪ Organic Cream 10% ▪ Organic Ski Skim Mil ilk Powders 0% 2015 2016 2017 2018 2019f 2020f 2021f ▪ Who hole Mil ilk Powders Formula Butter Yoghurt / Kefir Bottled Milk 6
Form rmula Pla lan STAGE E 1 1 – INTRODUCTORY FORM RMULA PLA LANT STAGE E 2 2 – LAR LARGE FORM RMULA PLAN LANT & CAN ANNING 2 Stage Process CAPEX ~$45.0m CAPEX ~$5.0 m Inpu nputs Milk plus IF ingredients Inpu nputs Milk plus IF ingredients Cap apacity ity Dryer 12,000 – 20,000 Kg/ day Cap apacity ity 2,000 Kg – 2,800 Kg/ day Blendin ing and d tinn nnin ing >10,000,000 + cans/ tines/ capacit ity year Prod oducts Organic Skim Milk Powder, Prod oducts Organic Skim Milk Powder, Organic Infant Formula, Organic Infant Formula, Organic Butter Organic Butter Tar arget t Build uild Date Aug 2019 – Mar 2020 Tar arget t Build uild Date 2020/21 (TBC) AHF has acquired an EXPANSION PLAN TARGETS introductory formula Stage 1 1 FY2 Y21F FY2 Y22F FY2 Y23F Stage 2 Year ar 1 Year ar 2 Year ar 3 contrib ibutio tion contrib ibutio tion plant to fast-track Revenues $5m >$10m >$12m Revenue >$5m >$30m >$50m production, build own brand equity and stage EBITDA $0.5m >$1.5m >$2.5m EBITDA >$0.5m >$8m >$15m CAPEX over a 2 step Note tes • The formula plan does not include current earnings • strategy Stage 2 formula targets are in addition to Stage 1 formula targets • Stage 2 large formula plant and canning facilities are subject to board approval, final due diligence, planning approvals and funding • Expansion plan targets are estimates based on information currently available to the Group and assume: • building and construction timelines are achieved for both plants (revenues for stage 1 FY21F are estimated on a slow ramp-up) • product and brand development and launch timelines achieved • the Group achieves domestic retail listings and other channel distribution opportunities (dependent on product) 7
Form rmula Pla lan STAGE E 1 1 – INTRODUCTORY FORM RMULA PLA LANT STAGE E 2 2 – LAR LARGE FORM RMULA PLAN LANT & Tim imeline CAN ANNING CAPEX ~$45.0m CAPEX ~$5.0 m Inpu nputs Milk plus IF ingredients Inpu nputs Milk plus IF ingredients Cap apacity ity Dryer 12,000 – 20,000 Kg/ day Cap apacity ity 2,000 Kg – 2,800 Kg/ day Blendin ing and d tinn nnin ing >10,000,000 + cans/ tines/ capacit ity year Prod oducts Organic Skim Milk Powder, Prod oducts Organic Skim Milk Powder, Organic Infant Formula, Organic Infant Formula, Organic Butter Organic Butter Tar arget t Build uild Date Aug 2019 – Mar 2020 Tar arget t Build uild Date 2020/21 (TBC) AHF has acquired an introductory formula St Stage 1 In Infant Form ormula Pl Plant Tim imeline plant to fast-track production, build own • 3QFY20: Com 3QF Commence construction of of infant form ormula pla plant bu buil ilding brand equity and stage • 4QF 4QFY20: Re-commissio ioning of of infant form ormula pla plant CAPEX over a 2 step strategy • 1H 1HFY21: Production of of who hole le an and ski skim milk lk po powders foll ollowed by y infant form ormula 8
Pla lacement Su Successful capital rai aising In June 2019 AHF successfully raised A$12 million (before costs) via a share placement to sophisticated investors Us Use e of of Fu Funds ▪ Acquisition and relocation of the infant formula plant (including mixing plant, dryer and evaporator) - $1.5m ▪ New building for the installation of the infant formula plant, CDC expansion and associated services – $5m – $6.5m ▪ Launch of new Infant formula and other nutritional products – $1.0m ▪ Working capital for Infant formula, CDC and other business opportunities – $3m 9
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