PARTNER SESSION

DISCOVERDISRUPTORS ON THE

DAIRY SECTOR HORIZONS

Thank You to Our PREMIER PARTNER

Kevin BellamyGlobal Sector Head – Dairy

Rabobank

Rabo Securities1

Disruptors on the Dairy Sector Horizons

IDFA Dairy Forum 2018

6 Rabo Securities

Overview of today’s discussions

Introduce Rabobank’s dairy sector coverage team• Sector coverage team organized by Global Sector Head, Global Strategist, and network of six M&A

coordinators globally

• Supported by a strong research team of eight regional analysts

Outlook for commodity markets• Ample milk production has resulted in rising exportable surplus

• Commodity prices anticipated to be below long-term averages

Outlook for M&A activity in North America• Strong valuation levels for specialty branded businesses

• Deal environment likely to be active with several anticipated market situations

Shifting consumer tastes and supply chain dynamics• Premium segments within dairy categories leading growth

• Changing retailer environment and channels will impact supply chain

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Global dairy sector coverage team

Thomas BaileySenior Analyst

Andres PadillaSenior Analyst

Kevin BellamyGlobal Sector Head

Richard ScheperAssociate Analyst

Saskia van BattumAnalyst

Shiva MudgilAnalyst

Sandy ChenSenior Analyst

Michael HarveySenior Analyst

Sao Paulo

Melbourne

Utrecht

Shanghai

Vivek PaiGlobal M&ACoordinator

Yvonne RooijakkersRegional M&ACoordinator

Emma HigginsAnalyst

Christchurch

Sector M&A coverage

Sector research

New York

Mary LedmanGlobal Strategist

Jin SongRegional M&ACoordinator

Fabio MazzoRegional M&ACoordinator

Ashudeep GargRegional M&ACoordinator

Mumbai

Chicago

Alexandre BetziosRegional M&ACoordinator

Aga DobrowolskaSenior Analyst

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Market highlights

Exports have expanded in the face of rising global milk supplies 1

Prices have begun correcting to adjust supply growth2

Demand should pick up in 2018, but not enough to absorb stocks3

As US supply outstrips demand more milk will be pushed into the global markets, and investors from around the world will be eyeing how they might be best positioned to capitalize on the opportunity

5

Low margins will precipitate consolidation and integration along the global dairy supply chain

4

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Global import demand has taken a step back in the face of the growing milk glut.

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Year on year change in global import demand vs. exportable surplus

Demand SupplySource: Rabobank, USDA, GTIS

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China has maintained pace of imports while others have stepped back.

Year on year import change – 3 months to Nov

Source: Rabobank, GTIS

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Falling prices have taken a break from precipitous declines due to NZ drought fears

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Dairy Commodity Export Prices (f.o.b Oceania)

Butter SMP WMP Cheese

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Even with some recovery, our midterm price remains below the 10 year average

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Global WMP prices and forecast

Price Forecast 10 year average

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Global SMP trade EU stocks

NAFTA and other exogenous factors may derail the outlook.

NAFTA withdrawalEU SMP Stocks?

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1.84 mill MT1.83 mill MT

Big 3 relative market access by exported volumes

Source: Rabobank, Twitter, GTIS, USDA

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Investments along the dairy value chain – a US example.

Processor/ Coop Brands Distribution ConsumerRetail/FSDairy

Low margins and disruptors pressuring dairy supply chain

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And investments are responding accordingly.

Brands Distribution ConsumerRetail/FSDairyProcessor

/ Coop

Foreign direct investment

Facing page 15

Return on invested capital boosted by on-trend tailwinds

Source: FACTSET, Rabobank analysisG&O = Grains & Oilseeds ; F&V = Fruits & Vegetables ;Animal protein index includes the following companies: Bachoco, BRF, Cofco Meat, JBS, Hormel, Maple Leaf, WH Group, Marfrig, Minerva, Pilgrim’s Pride, Sanderson Farms, Tyson;G&O index includes the following companies: ADM, Andersons, Glencore, Bunge, Wilmar;F&V index includes the following companies: Fresh Delmonte, Total Produce

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= size of bubble indicates enterprise valueMedian ROIC (2012-2016)

Median EBITDA margin(2012-2016)

Animal protein

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Dairy

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Valuations have been strong, particularly for branded businesses

EV/EBITDA

9.5x 10.5x 10.8x

12.0x

15.0x

16.9x [VALUE]

20.0x 20.0x 20.0x

22.3x

Median: 16.9x

Target

Target country

Buyer

Date announced Oct-17 Jan-18 Jan-17 May-17 Mar-17 Jan-17 Aug-17 Jan-18 Nov-17 Jul-17 Jan-17

EV (USDm) 1,007 580 344 130 80 2,308 1,830 400 265 875 71

B2B businesses Premium / On-trend brands / Emerging market access

Sources: Capital IQ, Mergermarket, press releases, Rabobank estimates

PARTNER SESSION

DISCOVERDISRUPTORS ON THE

DAIRY SECTOR HORIZONS