synlalt ?mg more iron] milk THE POWER OF PARTNERSHIPS EY16 INTERIM REPORT PRESENTATION 31 MARCH 2016 DISCLAIMER This presentation, dated 31 March 2016, provides additional comment on our media release and interim report of the same date. As such, it should be read in conjunction with, and subject to, the explanations and views of our future outlook on market conditions, earnings and activities given in that release and interim report. © SYNLAIT 2015 KEY MESSAGES - Favourable first half (HY16) underlying NPAT of $12.3m ($0.4m HY15). - Infant volumes have grown 155% to 7,498 MT for HY16. - Sufficient milk supply secured to meet forecast growth of nutritional sales in FY17 despite forecast milk production decline. - All growth initiative projects completed with third spray dryer and quality testing laboratory commissioned during HY16. - FY16 profitability on track to be in advance of anything achieved to date. © SYNLAIT 2015 3 DELIVERING ON OUR STRATEGY - Our strategy is to become a trusted supplier of choice to some of the world’s leading milkbased health and nutrition companies. - Category growth driven by increased canned infant formula sales. - 7,498MT of nutritional sales in HY16 accounts for 36% of total FY16 forecast sales. - Continuing to move customers up our value chain with nutritional products accounting for 16% of HY16 sales (7% in HY15). - Nutritional partnership growth directly supports our strategy. - Realised financial benefits of being the sole manufacturer for the a2 Platinum® infant formula range. © SYNLAIT 2015 4 INNOVATIVE PARTNERSHIPS - We work with our a2 Milk™ suppliers to produce milk with only the A2 beta-casein protein. - We continue to work closely with The a2 Milk Company™ and expect this partnership to grow deeper over time. - We also established the Grass Fed™ standard to support the development of Munchkin’s Grass Fed™ infant formula enabling differentiation. - The first trial batches of Grass Fed™ infant formula have been manufactured for clinical studies in the US and the product is due for launch in NZ and Australia in May 2016. - Both a2 Platinum® and Grass Fed™ infant formulas are targeting growth in the respective home markets and in China. © SYNLAIT 2015 5 ACCELERATING FUTURE GROWTH - Three large scale spray dryers and a special milks dryer operating well with excellent plant utilisation and product yield. - Quality testing laboratory completed late 2015 which provides efficient onsite testing capability. - Consumer packaging facility demand exceeding expectations. - Forecast sales to nutritional customers from FY17 likely to accelerate future growth plans. © SYNLAIT 2015 6 PRIORITISING OUR MILK SUPPLIERS - For the second year running, we are advancing a higher proportion of our final milk price than would be normal to support them through a difficult period of cashflow for the businesses. - Supplier premiums for differentiating milk inside the farm gate expected to be $6m in FY16 with more than half of our suppliers receiving a premium payment in FY16. - A lower milk price has impacted milk production as farmers work to reduce costs and we expect FY16 production from our supplying farms to be down 5% on last year. - We have grown our milk supply base by 28 farms to 201 farms for the 2016 / 2017 season. - Sufficient milk supply secured to meet forecast growth of nutritional sales in FY17. © SYNLAIT 2015 7 IMPROVING FINANCIAL RESULTS - Favourable HY16 underlying NPAT of $12.3m ($0.4m HY15). - Continuation of increased nutritional sales from second half of FY15 a key driver in HY16 profitability. - Strengthened balance sheet following completion of initial public offering (IPO) growth initiatives and significant debt reduction. © SYNLAIT 2015 8 SIX MONTH HIGHLIGHTS GROSS PROFIT OPERATING CASH MT a1 .- TOTAL SALES 46.356 NUTRITIONALS SALES (MT) EBITDA NET DEBT l;th 20 2,946 HY15 INGREDIENTS SALES UNDERLYING NPAT 391635 HY15 $u33mm SYN LAIT 2015 So 3on No.5 MAINTAINING MOMENTUM - First half underlying NPAT in line with second half underlying NPAT in FY15. Underlying Net Profit After Tax And Sales Volumes MT 10,000 $ millions 25.0 9,000 7,498 8,000 7,000 5,854 6,000 3,000 12.3 11.8 5,000 4,000 20.0 10.0 2,946 2,000 1,000 15.0 5.0 0.4 - - FY15 H1 FY15 H2 Nutritional Volume © SYNLAIT 2015 FY16 H1 Underlying NPAT 11 MARGIN DRIVING PROFITABILITY Underlying Net Profit after Tax (NPAT) 25 21.0 20 (1.2) (0.7) $ millions (2.4) 15 12.3 (4.9) 10 5 0 0.4 HY15 underlying NPAT Gross Profit Net Overheads Share of Associates Interest © SYNLAIT 2015 Tax HY16 underlying NPAT 12 RETAIL-READY PACKAGING STRONG VOLUME GROWTH a2 Platinum® volumes improving nutritional and domestic sales Sales Volume By Product Category MT 60,000 55,222 50,134 50,000 43,510 40,000 Sales Revenue by Geographic Region 5,854 46,356 3,391 42,581 3,005 14% 7,498 2,946 7% 37% 30,000 49,368 20,000 40,505 39,635 8% Rest of Asia 13% 46,743 5% China 29% 38,858 35% 32% Middle East & Africa New Zealand 20% Rest of World HY15 HY16 10,000 FY14 H1 FY14 H2 Ingredients FY15 H1 Nutritionals FY15 H2 FY16 H1 © SYNLAIT 2015 13 SIGNIFICANT GROWTH IN VALUE-ADD MILK PREMIUMS - Milk Premiums Expect full year value-add premiums to be $6.0m, double that paid in FY15. 2,500 2,240 2,225 80 2,000 - Introduction of Grass Fed™ premiums. - a2 Platinum® premiums have doubled. $'000's 1,500 743 37 19 228 401 1,051 25 209 1,000 695 723 57 500 814 310 0 183 Winter 1,021 513 189 153 FY14 H1 © SYNLAIT 2015 1,045 501 a2 FY14 H2 Gold Plus FY15 H1 Gold Elite FY15 H2 Grass Fed Autumn FY16 H1 Night Milk 14 STRONG GROSS PROFIT / MT Gross profit per metric tonne - 1,200 Gross Profit increased to $996/MT. 1,000 - 996 Strong nutritional performance led by retail-ready packaging volumes. Expected to moderate for full year, however still well above anything achieved to date. 800 NZD / MT - 824 751 701 600 594 400 200 0 FY12 © SYNLAIT 2015 FY13 FY14 FY15 HY16 15 STRONG OPERATING CASH FLOWS Net Debt Net Operating Assets 600 152.4 400 16.8 350 (1.1) 500 300 $ millions $ millions 400 (32.0) 300 531.5 200 395.4 (77.0) (3.7) (16.9) 0.7 250 200 150 82.9 (292.0) (278.0) 100 100 50 0 0 FY15 H1 Net Net Operating CAPEX Spend Operating Working Capital Assets - Asset Revaluation Other investments FY16 H1 Net Operating Assets Growth in net operating assets driven by capital investment. FY15 H1 Net Cashflow from Investment in Other Debt Operating Growth Capex Investments Activities Net Interest Paid Other FY16 H1 Net Debt - $77.0 million cash spend on growth capex funded predominantly through operating cashflow over the last 12 months. © SYNLAIT 2015 16 RECEIVABLES ASSIGNMENT Effective working capital management - We have completed receivables assignment arrangements for FrieslandCampina and The a2 Milk Company™ receivables with the ANZ Bank and the BNZ, respectively. - Results in the transfer of credit risk to the Bank on a non recourse basis enabling balance sheet derecognition of the receivable. - Completed at a lower effective interest rate cost compared to our Bank working capital financing. - Potential to complete process with two further customer receivables, Nestle and Danone prior to year end. © SYNLAIT 2015 17 synlalt @1119; more ?om milk FULL YEAR OUTLOOK EXPECT STRONG SECOND HALF - The investment in customer and product development, people, plant and operating systems is beginning to transform earnings that we can achieve. - Sales of nutritional products growth from 2,946MT (HY15) to 7,498MT (HY16), now contributing 16% of revenue (previously 7%), are the primary driver behind growth of underlying NPAT. - We have committed customer orders to achieve an almost fourfold increase in canned infant formula sales in FY16 with manufacturing capability meeting these expectations. - We expect growth will continue into FY17 as we begin regular manufacturing of Munchkin’s Grass Fed™ infant formula and are currently employing a fourth shift in our consumer packaging facility, which will see it operating 24 / 7. - FY16 profitability on track to be in advance of anything achieved to date. © SYNLAIT 2015 19 THANK YOU Visit our Investor Centre at synlait.com for more information. Media or investor queries can be directed to: Dan Walraven Communications Advisor Synlait Milk Limited P: +64 3 373 3069 E: daniel.walraven@synlait.com © SYNLAIT 2015