Corporates Food, Beverage & Tobacco

Ratings

Royal FrieslandCampina NV Last rating Rating type Rating Outlook action Long-Term BBB+ Stable Affirmed IDR 3 May 2021

Short-Term F2 Affirmed IDR 3 May 2021

Click here for full list of ratings The recent Outlook revision to Stable reflects Fitch Ratings’ expectation that Royal

FrieslandCampina NV’s (RFC) restructuring programme will help achieve a sustained EBITDA improvement and reduce leverage from 2022. It also assumes that profits will grow from their low 2020 levels due to a recovery in the foodservice channel, a new market approach for and reduced volatility in prices for commoditised dairy products.

As we project no rating headroom in 2021, slower-than-expected EBITDA recovery or heightened execution risks related to restructuring programme may still cause negative pressure on RFC’s ratings.

The ‘BBB+’ Issuer Default Rating (IDR) remains underpinned by RFC’s large scale in the global dairy market and balanced geographic footprint across developed and emerging markets. The rating also reflects management’s initiatives to protect the balance sheet and our expectation that RFC will maintain a conservative financial policy and apply proceeds from potential non-core asset divestments to debt repayment.

Key Rating Drivers Restructuring to Improve Profitability: We view the restructuring programme announced in November 2020 as positive for RFC’s credit profile. It focuses on optimisation of the production network, support functions and the organisational structure and, despite restructuring costs and higher capex, will drive more than EUR100 million EBITDA growth over 2021-2023. This will help to structurally enhance profitability, which has been under pressure over the past four years.

We project the EBITDA margin to improve to above 8% in 2022 (2020: 6.4%), still in the low end of Applicable Criteria

what is deemed compatible with the current rating given the sector. Corporate Rating Criteria (December 2020)

Corporate Hybrids Treatment and Notching New Market Approach for Hong Kong: The rating assumes that a new distribution model, a greater Criteria (November 2020) focus on e-commerce and new product launches will help to recover revenue and profits in Hong Corporates Recovery Ratings and Instrument Kong, albeit not to pre-2020 levels. Ratings Criteria (April 2021)

In 2020, the loss of a single distributor and closure of the border between China and Hong Kong put Related Research

substantial pressure on RFC’s profitability and forced the company to reconsider its business model Fitch Ratings 2021 Outlook: U.S. and EMEA in the market. These, together with pandemic-related challenges, drove more than a EUR100 million Food, Beverage and Tobacco, Consumer and reduction in EBITDA in 2020, which we see more as one-off events. Restaurants (December 2020) Packaged Food: Ratings Navigator Companion China and Hong Kong Important Markets: China and Hong Kong remain important markets for (April 2021) RFC, accounting for a substantial part of its EBITDA due to sales being skewed towards high value- added infant nutrition. Therefore, a turnaround in Hong Kong and maintaining a competitive market Analysts

position in China through product innovations, new sales channels and widening distribution are Giulio Lombardi critical for ratings. Slower-than-expected EBITDA recovery or further challenges in these markets +39 02 879087 214 may put pressure on RFC’s ratings. [email protected]

Anna Zhdanova, CFA +7 495 956 2403 [email protected]

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Corporates Food, Beverage & Tobacco Netherlands

Negative Free Cash Flow (FCF): We expect RFC’s FCF to turn negative in 2021 due to restructuring costs and to remain negative over 2022-2023 on high capex, including for the construction of new production facilities in and . However, once large expansionary projects are completed, capex will reduce, allowing RFC to resume positive FCF generation from 2024. We also assume that the company will maintain a disciplined approach to supplementary milk payments to its members, which Fitch treats as dividends.

Leverage to Reduce After Restructuring: RFC’s funds from operations (FFO) net leverage increased to 2.1x in 2020 (2019: 1.9x), just slightly above our negative rating sensitivity of 2.0x. The EBITDA decline in 2020 did not drive a greater leverage increase due to RFC’s debt refinancing with hybrid securities (to which we apply a 50% equity credit) and sound working-capital management. We project leverage to increase to 2.3x in 2021 due to high restructuring costs (essentially being a transitional year) but to reduce to below 2x in 2022-2024 as EBITDA improves.

Conservative Financial Policy: A conservative financial policy underpins RFC’s ‘BBB+’ rating. The company proved its commitment to a conservative capital structure over 2017-2020, when its operational performance faced various challenges. This was demonstrated by non-core asset disposals, capex cuts, a debut issue of subordinated hybrid securities and, most recently, a cancellation of supplementary payments.

As rating headroom remains limited, we expect RFC will continue to prudently manage its debt position and apply proceeds from further potential asset divestments towards debt repayment in order to support its rating.

Global Dairy Producer: RFC is the world’s seventh-largest dairy producer, with well-known brands in the Netherlands and various developing markets. It benefits from a wide range of dairy-based products from commoditised cheese and butter to high-value-added specialised nutrition, including infant formula.

RFC also has geographic diversification across emerging markets and, especially Asia and Africa, where the supply of products of reliable quality is a competitive advantage and long-term growth fundamentals are strong. We view this as credit-positive, even though profits from these countries can be volatile.

Milk Payment Subordination: We view the mechanism of subordination of milk payments to senior creditors, which the cooperative introduced in its statute in July 2020, as a confirmation of members’ commitment to protect the credit quality of the cooperative. At the ‘BBB+’ rating it does not result in an uplift to the rating as the subordination mechanism is designed to come into effect only in the event of liquidation. Fitch would consider an uplift to the senior unsecured debt rating if the IDR moves down the rating scale sufficiently to reflect a close-to-default risk.

Cooperative Set-Up Neutral to Rating: Fitch assesses RFC’s ownership by a cooperative as neutral for the rating. We recognise the benefits of a reliable and stable supply of high-quality raw materials from cooperative members, but this is balanced by RFC’s obligation to collect and purchase all the milk produced by member farmers. Milk supplies in excess of production capacity may lead to an inability to fully process milk into value-added products. However, RFC has been able to maintain a balance between its capacity and supplies from member farmers.

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Corporates Food, Beverage & Tobacco Netherlands

Financial Summary

Royal FrieslandCampina NV (EURm) Dec 18 Dec 19 Dec 20 Dec 21F Dec 22F Gross revenue 11,553 11,297 11,140 10,788 10,901 Operating EBITDA (before income from associates) 769 872 716 797 906 Operating EBITDA margin (%) 6.7 7.7 6.4 7.4 8.3 FCF margin (%) 0.3 0.4 1.6 -1.0 -0.4 FFO net leverage (x) 2.4 1.9 2.1 2.3 1.8 F – Forecast Source: Fitch Ratings, Fitch Solutions

Rating Derivation Relative to Peers The dairy market is inherently volatile as raw-milk prices and selling prices for dairy products are largely outside producers’ control. Market volatility leads to instability in dairy companies’ profits and working capital. RFC’s high share of value-added products in sales helps the company achieve greater control over selling prices and stronger profit margins than industry peers but does not fully isolate it from high sector risks. Fitch therefore expects RFC to adhere to a more conservative capital structure than similarly rated peers in the packaged food sector.

RFC is not fully comparable with other rated peers operating in the dairy market, such as Nestle SA (A+/Stable), Fonterra Co-operative Group Limited (A/Stable) and Dairy Farmers of America, Inc. (DFA; BBB/Stable). RFC’s credit profile is characterised by higher volatility than Nestle due to the company’s substantially higher exposure to commoditised products and more limited diversification across product categories and geographies. Furthermore, RFC’s scale in the global food sector is substantially smaller than Nestle.

Similar to RFC’s, the operations of Fonterra and DFA are concentrated on dairy products produced under a cooperative set-up. The companies have similar business scales. However, Fonterra’s and DFA’s ratings benefit from a stronger mechanism of subordination of milk payments to debt principal and interest obligations (and other costs), as specified in their by-laws. This allows them to operate with higher leverage than RFC. RFC’s stronger profitability and geographic diversification than DFA’s contributes to RFC’s higher rating than its American peer.

No Country Ceiling, parent-subsidiary linkage or operating-environment aspects affect RFC’s rating.

Navigator Peer Comparison

Issuer Business profile Financial profile

Management and Operating Corporate Operational Growth Financial Financial IDR/Outlook Environment Governance Scale Potential Business Profile Diversification Profitability Structure Flexibility Fonterra Co-operative Group Limited A/Sta aa- n a n a- n bbb n a n a- n bbb- n a n a- n Land O Lakes Inc BBB-/Sta aa n bbb n bb+ n bbb- n bbb n bbb n b+ n bbb n bbb- n Nestle SA A+/Sta a n aa- n aa+ n a+ n aa n aa n a+ n a n aa- n Royal FrieslandCampina NV BBB+/Sta a n bbb+ n bbb- n bbb n bbb- n bbb n b+ n a n bbb+ n Source: Fitch Ratings. Importance Higher Moderate Lower n n n

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Corporates Food, Beverage & Tobacco Netherlands

Rating Sensitivities Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade:

• An increase of scale in profitable and stable businesses, enhancing product and geographic diversification and reducing the proportion of sales from the more volatile dairy essentials division • Further improvement in product or geographic diversification and/or a leaner cost structure driving the EBITDA margin sustainably above 12% and the FCF margin consistently above 2% • FFO net leverage below 1.0x on a sustained basis

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade:

• Evidence that the earning profile is subject to increased volatility on a sustained basis • Inability to recover EBITDA margin to 8% • Negative FCF in the low single digits for more than two years, driven by weak operating performance, and an aggressive financial policy • FFO net leverage above 2.0x on a sustained basis

Liquidity and Debt Structure Adequate Liquidity: At end-2020, RFC had around EUR1.1 billion of available liquidity, of which EUR156 million was Fitch-adjusted readily available cash and EUR990 million was an undrawn portion under a EUR1 billion credit facility maturing in October 2024. Liquidity was sufficient to cover short-term debt of EUR423 million (excluding lease liabilities) and expected negative FCF in 2021.

We assume that RFC will be able to repatriate around EUR100 million of cash from , out of EUR216 million we have restricted at end-2020 due to the limited availability of US dollars in the country.

ESG Considerations Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of ‘3’. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch’s ESG Relevance Scores, visit www.fitchratings.com/esg.

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Corporates Food, Beverage & Tobacco Netherlands

Liquidity and Debt Maturity Scenario with No Refinancing Royal FrieslandCampina NV – Liquidity Analysis45657 (EURm) 2021F 2022F 2023F 2024F Available liquidity Beginning cash balance 156 -297 -487 -784 Rating-case FCF after acquisitions and divestitures -30 -93 -89 -6 Total available liquidity (A) 127 -390 -576 -789

Liquidity uses Debt maturities -423 -97 -208 -181 Total liquidity uses (B) -423 -97 -208 -181

Liquidity calculation Ending cash balance (A+B) -297 -487 -784 -970 Revolver availability 990 990 990 0 Ending liquidity 693 503 206 -970 Liquidity score (x) 3 6 2 -4

F – Forecast Source: Fitch Ratings, Fitch Solutions, Royal FrieslandCampina NV

Scheduled Debt Maturities Original (EURm) 31 December 2020 2021 423 2022 97 2023 208 2024 181 2025 431 Thereafter 0 Total 1,340

Source: Fitch Ratings, Fitch Solutions, Royal FrieslandCampina NV

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Corporates Food, Beverage & Tobacco Netherlands

Key Assumptions Fitch’s Key Assumptions Within its Rating Case for the Issuer:

• Revenue growth in low single digits over the next four years, supported by growth in sales of value-added products; • EBITDA growth in 2021-2022, resulting from a new distribution model in Hong Kong, reduced volatility in the dairy essentials division and a recovery in the foodservice channel; • Restructuring programme driving EBITDA improvement of more than EUR100 million over 2021-2024; restructuring cash costs not exceeding EUR115 million in 2021; • Supplementary cash payments of around EUR270 million in total over 2021-2024; • Cumulative capex of EUR2 billion over 2021-2024; • EUR100 million proceeds from non-core asset disposals in 2021; • M&A spending not exceeding EUR250 million in total over 2021-2024.

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Corporates Food, Beverage & Tobacco Netherlands

Financial Data

Royal FrieslandCampina NV How to Interpret the Forecast Presented

Historical Forecast The forecast presented is based on Fitch Ratings’ (EURm) Dec 18 Dec 19 Dec 20 Dec 21 Dec 22 Dec 23 internally produced, conservative rating case forecast. It does not represent the forecast of the Summary income statement rated issuer. The forecast set out above is only Gross revenue 11,553 11,297 11,140 10,788 10,901 11,048 one component used by Fitch Ratings to assign a Revenue growth (%) -4.6 -2.2 -1.4 -3.0 1.0 1.0 rating or determine a rating outlook, and the Operating EBITDA (before income from associates) 769 872 716 797 906 946 information in the forecast reflects material but Operating EBITDA margin (%) 6.7 7.7 6.4 7.4 8.3 8.6 not exhaustive elements of Fitch Ratings’ rating Operating EBITDAR 829 937 780 862 971 1,011 assumptions for the issuer’s financial performance. As such, it cannot be used to Operating EBITDAR margin (%) 7.2 8.3 7.0 8.0 8.9 9.2 establish a rating, and it should not be relied on Operating EBIT 407 492 321 402 511 551 for that purpose. Fitch Ratings’ forecasts are Operating EBIT margin (%) 3.5 4.4 2.9 3.7 4.7 5.0 constructed using a proprietary internal Gross interest expense -34 -33 -37 -40 -41 -43 forecasting tool, which employs Fitch Ratings’ Pretax income (including associate income/loss) 357 426 238 298 396 422 own assumptions on operating and financial performance that may not reflect the Summary balance sheet assumptions that you would make. Fitch Ratings’ Readily available cash and equivalents 240 196 156 203 213 216 own definitions of financial terms such as Total debt with equity credit 1,651 1,406 1,338 1,315 1,418 1,510 EBITDA, debt or free cash flow may differ from Total adjusted debt with equity credit 2,131 1,926 1,850 1,835 1,938 2,030 your own such definitions. Fitch Ratings may be Net debt 1,411 1,210 1,182 1,112 1,205 1,294 granted access, from time to time, to confidential Summary cash flow statement information on certain elements of the issuer’s forward planning. Certain elements of such Operating EBITDA 769 872 716 797 906 946 information may be omitted from this forecast, Cash interest paid -40 -39 -47 -40 -41 -43 even where they are included in Fitch Ratings’ Cash tax -120 -145 -131 -141 -150 -159 own internal deliberations, where Fitch Ratings, Dividends received less dividends paid to minorities (inflow/(out)flow) -40 -20 -48 -42 -42 -42 at its sole discretion, considers the data may be Other items before FFO -8 -74 16 -174 -92 -92 potentially sensitive in a commercial, legal or regulatory context. The forecast (as with the Funds flow from operations 523 563 473 410 592 619 entirety of this report) is produced strictly FFO margin (%) 4.5 5.0 4.3 3.8 5.4 5.6 subject to the disclaimers set out at the end of Change in working capital 131 -47 184 -6 -11 -14 this report. Fitch Ratings may update the Cash flow from operations (Fitch defined) 654 516 657 404 581 605 forecast in future reports but assumes no Total non-operating/non-recurring cash flow 0 0 0 responsibility to do so. Original financial Capital expenditure -485 -372 -391 statement data for historical periods is processed by Fitch Solutions on behalf of Fitch Ratings. Key Capital intensity (capex/revenue) % 4.2 3.3 3.5 financial adjustments and all financial forecasts Common dividends -140 -97 -89 credited to Fitch Ratings are generated by rating Free cash flow 29 47 177 agency staff. Net acquisitions and divestitures -24 161 -22 Other investing and financing cash flow items 18 36 -65 100 0 0 Net debt proceeds 8 -191 51 -23 103 92 Net equity proceeds 0 0 -80 0 0 0 Total change in cash 31 53 61 47 10 3 Leverage ratios Total net debt with equity credit/operating EBITDA (x) 1.9 1.4 1.8 1.5 1.4 1.4 Total adjusted debt/operating EBITDAR (x) 2.7 2.1 2.5 2.2 2.1 2.1 Total adjusted net debt/operating EBITDAR (x) 2.4 1.9 2.3 2.0 1.9 1.9 Total debt with equity credit/operating EBITDA (x) 2.3 1.7 2.0 1.7 1.6 1.7 FFO adjusted leverage (x) 3.2 2.8 3.0 3.3 2.6 2.7 FFO adjusted net leverage (x) 2.9 2.5 2.8 3.0 2.4 2.4 FFO leverage (x) 2.8 2.2 2.4 2.7 2.1 2.2 FFO net leverage (x) 2.4 1.9 2.1 2.3 1.8 1.9 Calculations for forecast publication Capex, dividends, acquisitions and other items before FCF -649 -308 -502 -434 -674 -694 Free cash flow after acquisitions and divestitures 5 208 155 -30 -93 -89 Free cash flow margin (after net acquisitions) (%) 0.0 1.8 1.4 -0.3 -0.9 -0.8 Coverage ratios FFO interest coverage (x) 6.9 7.3 5.9 5.6 7.6 7.7 FFO fixed-charge coverage (x) 4.5 4.6 3.9 3.6 4.8 4.9 Operating EBITDAR/interest paid + rents (x) 7.9 8.8 6.6 7.8 8.8 8.9 Operating EBITDA/interest paid (x) 18.2 21.9 14.2 18.9 21.1 20.8 Additional metrics CFO-capex/total debt with equity credit (%) 10.2 10.2 19.9 -5.9 0.8 5.2 CFO-capex/total net debt with equity credit (%) 12.0 11.9 22.5 -7.0 0.9 6.1 Source: Fitch Ratings, Fitch Solutions.

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Corporates Food, Beverage & Tobacco Netherlands

Ratings Navigator

ESG Relevance: Corporates Ratings Navigator Royal FrieslandCampina NV Packaged Food Business Profile Financial Profile Factor Sector Risk Profile Operating Environment Management and Issuer Default Rating Levels Market Position Growth Potential Brand Strength Diversification Profitability Financial Structure Financial Flexibility Corporate Governance

aaa AAA Stable

aa+ AA+ Stable

aa AA Stable

aa- AA- Stable

a+ A+ Stable

a A Stable

a- A- Stable

bbb+ BBB+ Stable

bbb BBB Stable

bbb- BBB- Stable

bb+ BB+ Stable

bb BB Stable

bb- BB- Stable

b+ B+ Stable

b B Stable

b- B- Stable

ccc+ CCC+ Stable

ccc CCC Stable

ccc- CCC- Stable

cc CC Stable

c C Stable d or rd D or RD Stable

Bar Chart Legend: Vertical Bars = Range of Rating Factor Bar Arrows = Rating Factor Outlook Bar Colours = Relative Importance  Positive n Higher Importance  Negative n Average Importance  Evolving n Lower Importance  Stable

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Corporates Food, Beverage & Tobacco Netherlands

Corporates Ratings Navigator Royal FrieslandCampina NV Packaged Food

Operating Environment Management and Corporate Governance Average combination of countries where economic value is created and where assets are Economic Environment Management Strategy Strategy may include opportunistic elements but soundly implemented. a+ bbb located. a bbb Very strong combination of issuer specific funding characteristics and of the strength of the Experienced board exercising effective check and balances. Ownership can be concentrated among Financial Access Governance Structure a aa relevant local financial market. a- a several shareholders. Systemic governance (eg rule of law, corruption; government effectiveness) of the issuer’s Systemic Governance Group Structure Group structure shows some complexity but mitigated by transparent reporting. aa country of incorporation consistent with 'aa'. bbb+ a Good quality reporting without significant failing. Consistent with the average of listed companies in major Financial Transparency b- bbb bbb exchanges.

ccc+ bbb-

Market Position Growth Potential

bbb+ Size bb EBITDA >$500 million a- Organic Growth bbb Organic growth tends to be average.

Number one or number two market share in some categories, with overall brand portfolio Innovation pipeline of new products allows stable market share and offsets declines in other parts of the Market Share Innovation bbb bbb maintaining market share bbb+ bbb porfolio. Good presence and positioning across relevant distribution channels, including physical retail Distribution Channel bbb- bbb and online formats bbb

bb+ bbb-

bb bb+

Brand Strength Diversification

bbb+ Brand Quality bbb Strong brand portfolio with good awareness. a- Geographic bbb Moderate geographical diversification.

bbb Price Leadership bbb Lead pricing in a few categories, follow pricing actions in others. bbb+ Products bbb Moderate portfolio diversity.

Good breadth of price points providing sufficient flexibility to manage portfolio favorably through different Price Points bbb- bbb bbb points in the economic cycle.

bb+ bbb-

bb bb+

Profitability Financial Structure

bb FFO Margin b 5% aa- FFO Leverage aa 2.0x

bb- EBITDA Margin b 8% a+ FFO Net Leverage aa 1.5x Total Debt With Equity Credit/Op. b+ FCF Margin 0.01 a aa 1.5x b EBITDA Total Net Debt With Equity Credit/Op. b Volatility of Profitability bb Volatility of profit higher than industry average. a- a 2.0x EBITDA (CFO-Capex)/Total Debt With Equity b- bbb+ b 2.5% Credit

Financial Flexibility Credit-Relevant ESG Derivation Overall ESG

a Financial Discipline a Clear commitment to maintain a conservative policy with only modest deviations allowed. Royal FrieslandCampina NV has 11 ESG potential rating drivers key driver 0 issues 5 One year liquidity ratio above 1.25x. Well-spread maturity schedule of debt but funding may be a- Liquidity bbb Emissions from operations and distribution less diversified.  driver 0 issues 4 bbb+ Op. EBITDA/Interest Paid aa 11.0x  Water used in manufacturing process

bbb FFO Interest Coverage bbb 6.0x Impact of product waste and packaging; supply chain management - agricultural materials potential 11 issues  driver 3 FX exposure on profitability and/or debt/cash flow match. Some hedging in place but only partly bbb- FX Exposure bb Effect of climate change and extreme weather on crop availability and pricing effective.  1 issues 2  Safe, healthy and nutritious products; product labeling and marketing not a rating How to Read This Page: The left column shows the three-notch band assessment for the overall Factor, illustrated by a bar. The right Impact of labor negotiations and employee (dis)satisfaction driver column breaks down the Factor into Sub-Factors, with a description appropriate for each Sub-Factor and its corresponding category.  2 issues 1 Showing top 6 issues For further details on Credit-Relevant ESG scoring, see page 3.

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Corporates Food, Beverage & Tobacco Netherlands

Corporates Ratings Navigator Royal FrieslandCampina NV Packaged Food

Credit-Relevant ESG Derivation Overall ESG Scale

Royal FrieslandCampina NV has 11 ESG potential rating drivers key driver 0 issues 5  Royal FrieslandCampina NV has exposure to emissions regulatory risk but this has very low impact on the rating. driver 0 issues 4  Royal FrieslandCampina NV has exposure to water management risk but this has very low impact on the rating. Royal FrieslandCampina NV has exposure to waste & impact management risk and supply chain management risk but this has very low impact on the rating.  potential driver 11 issues 3  Royal FrieslandCampina NV has exposure to extreme weather events but this has very low impact on the rating. 1 issues 2  Royal FrieslandCampina NV has exposure to customer accountability risk but this has very low impact on the rating. not a rating driver Royal FrieslandCampina NV has exposure to labor relations & practices risk but this has very low impact on the rating.  2 issues 1 Showing top 6 issues

Environmental (E) General Issues E Score Sector-Specific Issues Reference E Scale How to Read This Page GHG Emissions & Air Quality 3 Emissions from operations and distribution Profitability 5 ESG scores range from 1 to 5 based on a 15-level color gradation. Red (5) is most relevant and green (1) is least relevant.

Energy Management 2 Energy and fuel use in manufacturing and distribution Profitability; Financial Structure; Financial Flexibility 4 The Environmental (E), Social (S) and Governance (G) tables break out the individual components of the scale. The right-hand box shows the aggregate E, S, Diversification; Business Profile; Profitability; Financial or G score. General Issues are relevant across all markets with Sector-Specific Water & Wastewater Management 3 Water used in manufacturing process 3 Structure; Financial Flexibility Issues unique to a particular industry group. Scores are assigned to each sector- specific issue. These scores signify the credit-relevance of the sector-specific Waste & Hazardous Materials Management; Impact of product waste and packaging; supply chain management - issues to the issuing entity's overall credit rating. The Reference box highlights the 3 Business Profile; Growth Potential; Operational Scale 2 Ecological Impacts agricultural materials factor(s) within which the corresponding ESG issues are captured in Fitch's credit analysis. Effect of climate change and extreme weather on crop availability and Diversification; Profitability; Financial Structure; Exposure to Environmental Impacts 3 1 pricing Financial Flexibility The Credit-Relevant ESG Derivation table shows the overall ESG score. This score signifies the credit relevance of combined E, S and G issues to the entity's Social (S) credit rating. The three columns to the left of the overall ESG score summarize the issuing entity's sub-component ESG scores. The box on the far left identifies the General Issues S Score Sector-Specific Issues Reference S Scale some of the main ESG issues that are drivers or potential drivers of the issuing Human Rights, Community Relations, Access entity's credit rating (corresponding with scores of 3, 4 or 5) and provides a brief 1 n.a. n.a. 5 & Affordability explanation for the score.

Customer Welfare - Fair Messaging, Privacy & Diversification; Business Profile; Profitability; Financial Classification of ESG issues has been developed from Fitch's sector ratings 3 Safe, healthy and nutritious products; product labeling and marketing 4 Data Security Structure; Financial Flexibility criteria. The General Issues and Sector-Specific Issues draw on the classification standards published by the United Nations Principles for Responsible Investing Operational Scale; Business Profile; Profitability; (PRI) and the Sustainability Accounting Standards Board (SASB). Labor Relations & Practices 3 Impact of labor negotiations and employee (dis)satisfaction 3 Financial Structure; Financial Flexibility

Employee Wellbeing 1 n.a. n.a. 2

Operational Scale; Business Profile; Profitability; Exposure to Social Impacts 3 Shift in consumer preferences 1 Financial Structure; Financial Flexibility

Governance (G) CREDIT-RELEVANT ESG SCALE General Issues G Score Sector-Specific Issues Reference G Scale How relevant are E, S and G issues to the overall credit rating?

Highly relevant, a key rating driver that has a significant impact on the rating on an Management Strategy 3 Strategy development and implementation Management and Corporate Governance 5 5 individual basis. Equivalent to "higher" relative importance within Navigator.

Relevant to rating, not a key rating driver but has an impact on the rating in Governance Structure 3 Board independence and effectiveness; ownership concentration Management and Corporate Governance 4 4 combination with other factors. Equivalent to "moderate" relative importance within Navigator.

Minimally relevant to rating, either very low impact or actively managed in a way that Group Structure 3 Complexity, transparency and related-party transactions Management and Corporate Governance 3 3 results in no impact on the entity rating. Equivalent to "lower" relative importance within Navigator.

Financial Transparency 3 Quality and timing of financial disclosure Management and Corporate Governance 2 2 Irrelevant to the entity rating but relevant to the sector.

1 1 Irrelevant to the entity rating and irrelevant to the sector.

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Corporates Food, Beverage & Tobacco Netherlands

Simplified Group Structure Diagram

Source: Fitch Ratings, Fitch Solutions, Royal FrieslandCampina NV, as of 31 December 2020.

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Corporates Food, Beverage & Tobacco Netherlands

Peer Financial Summary Operating EBITDA (before Operating Financial Gross income from EBITDA FCF FFO net statement revenue associates) margin margin leverage Company IDR date (EURm) (EURm) (%) (%) (x) Royal FrieslandCampina BBB+ NV BBB+ 2020 11,140 716 6.4 1.6 2.1 BBB+ 2019 11,297 872 7.7 0.4 1.9 BBB+ 2018 11,553 769 6.7 0.3 2.4 Fonterra Co-operative A Group Limited A 2020 11,642 831 7.1 2.8 3.0 A 2019 11,842 798 6.7 0.3 5.3 A 2018 12,138 831 6.8 -1.8 4.7 Nestle SA A+ A+ 2020 79,234 16,121 20.3 1.6 2.1 A+ 2019 83,504 16,156 19.3 3.3 1.6 AA- 2018 79,478 15,093 19.0 2.9 1.9 Ingredion Incorporated BBB BBB 2020 5,255 772 14.7 5.2 2.0 BBB 2019 5,547 840 15.1 2.9 2.0 BBB 2018 4,951 869 17.5 2.9 2.0 WH Group Limited BBB+ BBB+ 2020 22,461 1,971 8.8 3.2 0.1 BBB+ 2019 21,532 2,235 10.4 0.7 0.9 BBB+ 2018 19,160 1,826 9.5 -1.5 1.4 Flowers Foods, Inc. BBB BBB 2021 3,850 462 12.0 4.1 1.5 BBB 2019 3,683 377 10.2 2.3 2.3 BBB 2018 3,349 353 10.6 1.2 3.0

Source: Fitch Ratings, Fitch Solutions.

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Corporates Food, Beverage & Tobacco Netherlands

Fitch Adjusted Financials

Preferred dividends, associates and Reported Sum of minorities cash CORP - lease Other Adjusted Notes and formulas values adjustments adjustments treatment adjustments values 31 December 2020 Income Statement Summary Revenue 11,140 11,140 Operating EBITDAR 761 19 19 780 Operating EBITDAR After Associates and Minorities (a) 713 19 19 732 Operating Lease Expense (b) 0 64 64 64 Operating EBITDA (c) 761 -45 -64 19 716 Operating EBITDA After Associates and Minorities (d) = (a-b) 713 -45 -64 19 668 Operating EBIT (e) 305 16 -3 19 321 Debt and Cash Summary Total Debt with Equity Credit (f) 1,403 -65 -215 150 1,338 Lease-Equivalent Debt (g) 0 512 512 512 Other Off-Balance-Sheet Debt (h) 0 0 Total Adjusted Debt with Equity Credit (i) = (f+g+h) 1,403 447 297 150 1,850 Readily Available Cash and Equivalents (j) 432 -276 156 Not Readily Available Cash and Equivalents 34 276 310 Cash Flow Summary Operating EBITDA After Associates and Minorities (d) = (a-b) 713 -45 -64 19 668 Preferred Dividends (Paid) (k) -43 -4 -4 -47 Interest Received (l) 14 14 Interest (Paid) (m) -50 3 3 -47 Cash Tax (Paid) -131 -131 Other Items Before FFO 35 -19 -19 16 Funds from Operations (FFO) (n) 538 -65 -4 -61 473 Change in Working Capital (Fitch-Defined) 91 93 93 184 Cash Flow from Operations (CFO) (o) 629 28 -4 -61 93 657 Non-Operating/Nonrecurring Cash Flow 0 0 Capital (Expenditures) (p) -391 -391 Common Dividends (Paid) 0 -89 -89 -89 Free Cash Flow (FCF) 238 -61 -4 -61 4 177 Gross Leverage (x) a Total Adjusted Debt/Operating EBITDAR (i/a) 2.0 2.5 FFO Adjusted Leverage (i/(n-m-l-k+b)) 2.3 3.0 FFO Leverage (i-g)/(n-m-l-k) 2.3 2.4 a Total Debt with Equity Credit/Operating EBITDA (i-g)/d 2.0 2.0 (CFO-Capex)/Total Debt with Equity Credit (%) (o+p)/(i-g) 17.0% 19.9% Net Leverage (x) a Total Adjusted Net Debt/Operating EBITDAR (i-j)/a 1.4 2.3 FFO Adjusted Net Leverage (i-j)/(n-m-l-k+b) 1.6 2.8 FFO Net Leverage (i-g-j)/(n-m-l-k) 1.6 2.1 a Total Net Debt with Equity Credit/Operating EBITDA (i-g-j)/d 1.4 1.8 (CFO-Capex)/Total Net Debt with Equity Credit (%) (o+p)/(i-g-j) 24.5% 22.5% Coverage (x) a Operating EBITDA/(Interest Paid + Lease Expense) a/(-m+b) 14.3 6.6 a Operating EBITDA/Interest Paid d/(-m) 14.3 14.2 FFO Fixed-Charge Coverage (n-l-m-k+b)/(-m-k+b) 6.6 3.9 FFO Interest Coverage (n-l-m-k)/(-m-k) 6.6 5.9 aEBITDA/R after dividends to associates and minorities.

Royal FrieslandCampina NV Rating Report │ 14 May 2021 fitchratings.com 13

Corporates Food, Beverage & Tobacco Netherlands

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Royal FrieslandCampina NV Rating Report │ 14 May 2021 fitchratings.com 14