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30 April 2020

ASX Release

Quarterly Report

For the period ending 31 March 2020

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KEYTONE DAIRY QUARTERLY REPORT

Keytone Dairy Corporation Ltd (ASX:KTD) (“Keytone” or the “Company”) is pleased to provide the

following update on its activities and lodge the Appendix 4C Cash Flow Statement for the quarter ending 31 March 2020. Keytone operates on a 31 March 2020 financial year and consequently, the 31 March 2020 quarter was the fourth and final quarter of its financial year 2020 (“FY20”).

Keytone recorded a record quarter with sales revenue for the quarter increasing to approximately $A8.7 million, being 2,000% of the prior corresponding period’s revenue of $A0.5 million realised in Q4

FY19 (1 January 2019 to 31 March 2019) and 132% of the prior quarter’s revenue (the quarter ending 31 December 2020) of $A6.6 million. Total customer cash receipts for the quarter increased to $A8.4 million, being 111% of the prior quarter’s cash receipts of $A7.6 million.

The key recent developments included the following:

• Keytone achieved record quarterly sales, approximately 20 times higher than those of the prior corresponding quarter in FY19;

• The COVID-19 crisis has had a net positive effect on the Company’s business, with demand for products in the Company’s industry increasing generally, and specifically the demand for the

Company’s products increasing substantially;

• Growth accelerated towards the end of the quarter / the beginning of the current quarter, with a single week in April seeing orders of A$5.2 million - approximately 60% of the March quarter’s

sales;

• Keytone has continued to grow its Asian and Chinese businesses, with substantial new orders coming in from China, including repeat and larger orders from Walmart China;

• Keytone completed the first commercial production run at its new, second New Zealand manufacturing facility, tripling its total name plate product manufacturing capacity in New Zealand on a one shift basis;

• New proprietary products have come onstream, including frozen purees and protein shakes, with meaningful early sales and substantial expected growth;

• Significant orders from both new and existing name private label customers have been secured. Upon releasing the update to the market, Danny Rotman, Keytone Dairy’s Chief Executive Officer,

commented: “This record result in the fourth quarter of FY20 has capped an extraordinary year in the history and development of Keytone Dairy. This has been a transformational year of record results for the Company and the foundations have been set to significantly boost the growth profile of the business even further in FY21 and beyond.”

“While the fourth quarter has been a challenging market globally as a result of the onset of COVID-19, the Australian and New Zealand Governments have classified Keytone Dairy as an essential service, and as such the business has continued to sustain its impressive growth without disruption. We have witnessed significant increases in demand for our shelf stable health and wellness products across all business divisions and our diversified manufacturing capabilities. This trend carried over into the current quarter, with the significant orders recorded in the first weeks of April 2020 in excess of $A5.2m due to be filled in the next quarter.”

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“A further major milestone in the evolution of Keytone was the completion of our state of the art second manufacturing facility in New Zealand late last year with its first commercial production run taking place in recent months as we scale to full commercial production through the forthcoming financial year.

“Additionally, our proprietary brands, KeyDairy, Tonik and SuperCubes, are going from strength to strength, recording significant growth and gaining traction with a growing distribution footprint and the additional roll-out of a significant new product development pipeline as we continue to develop our suite of own-branded products.”

Financial Highlights

The quarter from 1 January 2020 to 31 March 2020 (“Q4 FY20”) is a record and milestone quarter for Keytone and the Company recorded further increases in total sales revenues and cash inflows from customers compared with both the corresponding quarter of the FY19 year and Q3 FY20. In addition to this significant result, the confirmed opening and follow-on orders announced in early April, totalling more than $5.2 million, are not included in the results of the quarter nor are the new product roll-outs

and strong opening orders for the Company’s new proprietary product range, Super Cubes Frozen

Purees and also Tonik Pro, detailed further in the quarterly report. The opening orders for the

Company’s proprietary brands and third-party private label clients announced in the first week of April are on top of the existing sales and business of Keytone.

Further, the second manufacturing facility in New Zealand undertook its first commercial production run at the end of the quarter for its proprietary products, Key Dairy Whole Milk Powder and Skim Milk Powder. As such, the quarterly results were achieved without the inclusion of the additional manufacturing capability and capacity at that facility. Moving forward into the new financial year commencing 1 April 2020, Keytone will work to realise the full benefit of this additional facility as it scales up to full commercial production and multiple shifts in the medium term.

The above opening client orders and growth in the sale of the company’s own-branded products are in addition to the existing business of the Company. As a result, at the balance date, there has been a significant build of raw inventory and finished goods as production is scaled to fulfil large orders for strategic clients, such as Walmart China and leading global protein brands, in addition to the roll-out of

Keytone’s own proprietary brands.

The financial performance highlights for Q4 FY20 quarter (1 January 2020 to 31 March 2020) include: • Total sales revenue increased to approximately $A8.7 million, being 2,000% of the prior

corresponding period’s revenue of $A0.5 million realised in Q4 FY19 (1 January 2019 to 31 March 2019);

• Total sales revenue for the quarter was 132% of the prior quarter’s revenue (the quarter ending 31 December 2020) of $A6.6 million;

• Total customer cash receipts increased to $A8.4 million, being 111% of the prior quarter’s cash receipts of $A7.6 million;

• The sales of the Company’s proprietary products under its Super Cubes and Tonik brands have continued to grow strongly through the quarter and are 165% greater than the prior quarter, while the monthly revenue from Super Cubes specifically is now greater than 4.8x the revenue in the month immediately following the acquisition of the business, being less than six months ago;

• Net cash outflow from operating activities decreased to $A2.1 million in the quarter. While the

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decrease in net cash outflow highlights the initial benefits of scale that are being realised by Keytone and the progression to a position of net cash generation, the level of cash outflow is driven by the scaling up and forward purchasing of raw materials for both new orders and significant follow on orders, as announced in early April 2020 (combined orders totalling $A5.2 million). These orders are for Keytone’s third party private label work and exclude the launch of the new proprietary product ranges which have also contributed to product manufacturing and operating costs for the quarter. Importantly, the corresponding cash receipts for these orders will be received in subsequent quarters;

• By opportunistically forward purchasing raw materials, the Company is improving realised gross margins in the longer term. The increase in raw materials and inventory reflects the fast-growing nature of the business;

• Other cost drivers in the quarter include additional casual labour costs of c.33% of the net cash outflow as the business continues to scale (ultimately casual labour will reduce as non-recurring casual labour was incurred due to the completion of the integration of the Australian operations and training of new staff as well as new customers being integrated into the day-to-day operations ahead of additional permanent shifts being established), and an increase in marketing costs compared with last quarter as Keytone seeks expansion of its proprietary product range and scaling up costs in New Zealand;

• As at 31 March 2020, Keytone had a combined cash balance of $A4.4 million outlined in the accompanying Appendix 4C.

Keytone’s quarterly revenue growth profile

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Capacity Expansion

Second Manufacturing Facility in New Zealand Operational

During calendar 2019, Keytone completed its state-of-the-art, second manufacturing facility in New Zealand and during the last quarter, the Company confirmed it had received all required licensing

approvals from the New Zealand Ministry of Primary Industries (“NZMPI”) and by extension, CNCA registration (Certification and Accreditation Administration of the People’s Republic of China) for the

manufacture and export of formulated dairy nutritional products. During the March quarter, Keytone successfully undertook and completed its first commercial production run for the Company’s own

proprietary KeyDairy brand, specifically, Whole Milk Powder and Skim Milk Powder SKUs.

The additional capacity from the second manufacturing facility will more than triple Keytone Dairy’s

total name plate product manufacturing capacity in New Zealand on a one shift basis and has been implemented given the increased level of demand from that earlier anticipated, given the current outbreak of COVID-19. As previously announced, with the demand from the existing client base for both high-value, high-margin Keytone Dairy proprietary products and third-party private label work, the Company expects to scale up production to multiple shifts over the short to medium term.

Completed, licensed second manufacturing facility in New Zealand

Keytone Dairy is now in a position to manufacture significantly higher volumes of finished product from its New Zealand manufacturing facilities more efficiently across a broader range of the Company’s

proprietary product suite, and re-align the sales mix towards higher value proprietary products, with a view to substantially growing sales and meeting demand of the existing client base. The new facility will also enable Keytone Dairy to better service the demands of clients and leading brands such as Walmart (China), Nouriz (China) and Countdown (Woolworths New Zealand), in addition to winning new large-scale clients and business.

The second facility has been constructed to comply with the highest food grade standards, is fully accredited and licensed by the New Zealand Ministry of Primary Industries (including CNCA registration (Certification and Accreditation Administration of the People’s Republic of China)), is infant formula capable, and incorporates highly automated plant and equipment with technology which is a first of its kind in New Zealand. These attributes are expected to drive operational leverage and efficiencies within the business and further improve gross margins.

Proprietary Product Expansion

Keytone is experiencing a significant increase in inbound demand for its proprietary products as a result of both COVID-19 and the ongoing sales and marketing initiatives of the Company’s in-house team. This increase in demand is being recorded across all business units in Australia and New Zealand and is being driven from both international and domestic markets.

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As the COVID-19 crisis unfolded late in the quarter, the Company’s proprietary KeyDairy formulated

powdered dairy products experienced an increase in demand approximately four times greater than that prior to the outbreak of COVID-19 and this demand is not reflected in the current quarterly results.

As outlined above, Keytone’s second manufacturing facility is now online to service this additional demand. Through the quarter the Company redesigned (with in-market China expertise from a third party marketing partner) and will shortly re-launch its KeyDairy Whole Milk and Skim Milk Powders to better align with customer trends, appeal to an increased market and further drive sales. The new KeyDairy logo and packaging will be rolled out across the KeyDairy product range in the months to come.

Redesigned KeyDairy logo and packaging

During the quarter, Keytone successfully commenced the first production runs of two of its new and innovative proprietary products being bought to market, specifically as follows:

1. SuperFoods Frozen Purees

Sold and marketed under the Company’s wholly-owned Super Cubes brand, the purees range was developed with the in-house expertise of the Company’s new product development team

and was demand-driven by national supermarket chain, Woolworths, to be ranged nationally throughout Australia in large format stores.

Minimum sales of $2,500,000 are expected over 12 months. Woolworths submitted opening orders of $180,000, which were fulfilled subsequent to the end of the quarter. Following these initial orders and under Woolworths 5 week rolling demand forecast, the indicative demand on a 5-week basis is greater than 2.5x the value of the opening orders. Whilst the provided indicative demand forecasts are not confirmed purchase orders at this point, the demand points to a significantly higher run rate. The minimum sales of $2,500,000 are for Woolworths only and exclude all other distribution channels, such as the independent grocers, petrol and convenience channels as well as direct orders through the Super Cubes website.

The range has been expanded from an initial launch of 3 flavours to 4 flavours and includes Strawberry, Mango, Banana and Passionfruit - all with a 4.5 Star Health Rating. The products are targeted at health-conscious, time-poor consumers who are looking for healthy snacking

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options for themselves and their families with universal appeal across all age groups and categories. Three of the four flavours will be ranged in the freezer aisle in Woolworths nationally, whilst all four will be available at Woolworths online from late April/early May.

Keytone’s newly launched SuperFoods Frozen Purees and Tonik Pro Ranges

2. Tonik Pro

Tonik Pro is the latest range in the Company’s ready-to-drink, functional and better-for-you lifestyle beverages, developed in-house and manufactured under the Company’s successful

Tonik brand. Tonik Pro is a dairy-based protein shake range, aimed at the active health-conscious consumer coming in six different flavours. This new range is to build on the success of Tonik Active, the flagship product first launched under the Tonik range last year. Ahead of the first production run of Tonik Pro, which was valued at approximately $150,000 and completed at the end of the quarter, the majority of the opening run was pre-sold into distribution channels including EzyMart, Metro Petroleum and select BP fuel stations. These opening orders have not been recognized in the financials of Q4 FY20 quarter and will be recognised in Q1 FY21.

The Company’s in-house and experienced sales team secured further national distribution through the quarter, including a concentrated push into the petrol and convenience channels including Freedom Fuels and select distribution in BP fuel stations for Tonik Pro. National distribution in domestic markets is a key component of the Company’s successful strategy to validate the credentials and demand for the products in New Zealand and Australia, whilst simultaneously building brand awareness through

“can-in-hand” sampling and advertising. This domestic validation subsequently leverages the

Company’s credentials in international export markets, in particular China and the broader South-East Asia region.

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Keytone’s proprietary product, Tonik Pro, fully ranged at select BP Petrol Stations

Private Label Clients

The quarter was another significant period for the Company’s private label division, where significant work was undertaken with material existing and new private label clients. This detailed business development work including the development and expert formulations of client’s products is a unique point of difference and long-term value driver to Keytone. The in-house expertise coupled with the scale of the diversified manufacturing base offers a one-stop shop for both existing and new clients. Following the completion of the integration of the Company’s facilities in Melbourne and the

commissioning of the second purpose built facility in New Zealand, the group has the ability to service significantly larger orders for multiple material clients in addition to the existing large customer base. As a result of the business development work undertaken in the fourth quarter, combined orders of more than $5.2 million were received during the early weeks of April 2020, including for Walmart and Nouriz in China for their private label milk powders. Notwithstanding the record fourth quarter achieved by the Company, these orders are not included in the results of the quarter and will be recorded over the coming quarters as product is manufactured and dispatched.

The sales pipeline continues to grow and the Company is working on a number of tenders for new strategic clients which the Company will update the market on in due course. The growth in the realised sales and future sales pipeline in both Keytone’s proprietary brands and private label portfolio represent significant steps in the evolution of the company to a leading and diversified health and wellness company. The Company will continue to leverage its diversified manufacturing base, product range capability and growing distribution footprint as it continues to increase sales month-on-month, quarter-on-quarter as it has done over the past twelve months, notwithstanding the major capex initiatives to complete the second purpose-built facility in New Zealand and integration of its Australian based operations.

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Other

During the quarter, Mr. Peter Hobman retired from the board of directors of the Company, reducing the size of the board to six members.

Payments to executive and non-executive directors totalled approximately $276,000 for salaries and wages in the period, as outlined in section 6.1 of the accompanying Appendix 4C.

As at 31 March 2020, 119,267,442 Performance Shares are on issue. No performance share vesting or conversion milestones were met during the period, and no performance shares were redeemed during the period. Performance Shares on issue at start of period or issued through the period (A) Performance Shares converted to KTD shares during the period (B)

Performance Shares expired during the period

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Performance Shares on issue at the end of the period (A) – (B) – (C) Class A1 _16,500,000 ₀ ₀ _16,500,000 Class B2 _16,500,000 ₀ ₀ _16,500,000 Class C3 _16,500,000 ₀ ₀ _16,500,000 Class D4 _23,255,814 ₀ ₀ _23,255,814 Class E5 _23,255,814 ₀ ₀ _23,255,814 Class F6 _23,255,814 ₀ ₀ _23,255,814 Total 119,267,442 0 0 119,267,442

The release of this announcement was authorised by the Non-Executive Chairman, Mr. Peter James on behalf of the board.

* * * * * * *

1 Each Class A Performance Share will convert into one share upon Keytone Enterprises (NZ) Company Limited achieving, $3,000,000 of earnings before interest, taxes, depreciation and amortisation (EBITDA) in any financial year occurring on or before 31 March 2022. 2 Each Class B Performance Share will convert into one Share upon Keytone Enterprises (NZ) Company Limited achieving, $6,000,000 of EBITDA in any financial year occurring on or before 31 March 2022.

3 Each Class C Performance Share will convert into one share upon (I) the shares achieving a 30-day volume weighted average price per share exceeding $0.30, and (II) Keytone Enterprises (NZ) Company Limited achieving, in relation to Keytone, $6,000,000 of revenue in any financial year occurring on or before 31 March 2022.

4 Each Class D Performance Share will convert into one share upon the Omniblend Pty Limited achieving, in relation to the Omniblend Group, $2,600,000 of earnings before interest, taxes, depreciation and amortisation, in any financial year occurring on or before 31 March 2022

5 Each Class E Performance Share will convert into one share upon the Company achieving a volume weighted average price of its shares over a period of 30 consecutive trading days upon which the shares are traded that exceeds $0.65 and, in relation to the Omniblend Group, $50,000,000 of annual revenue, in any financial year occurring on or before 31 March 2023

6 Each Class F Performance Share will convert into one share upon the Company achieving a volume weighted average price of its Shares over a period of 30 consecutive trading days upon which the Shares are traded exceeding $1.00 and, in relation to the Omniblend Group, $100,000,000 of annual revenue and $7,500,000 of earnings before interest, taxes, depreciation and amortisation, in any financial year occurring on or before 31 March 2023

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Further Information Jourdan Thompson

Chief Financial Officer, Keytone Dairy Corporation Limited Email: [email protected]

Tel: +612 9969 9690

About Keytone Dairy Corporation Limited

Based in Sydney and Melbourne, Australia and Christchurch, New Zealand, Keytone Dairy Corporation Limited is an established manufacturer and exporter of formulated dairy products and health and

wellness products. Keytone Dairy’s wholly-owned subsidiary Omniblend is a leading Australian product developer and manufacturer in the health and wellness sector, with both dry powder and ready to drink health and wellness-based product capability. In addition to Keytone Dairy’s own

brands, the company is a trusted production partner, contract packing for well-known brands in Australia, New Zealand and internationally. The Company’s purpose-built production facilities in Australia and New Zealand offer a wide range of dairy, health and wellness and nutritional packing solutions, meeting the diverse needs of consumers from different markets and cultures. Please visit

www.keytonedairy.com for further information.

ENDS

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Rule 4.7B

ASX Listing Rules Appendix 4C (01/12/19) Page 1

+ See chapter 19 of the ASX Listing Rules for defined terms.

Appendix 4C

Quarterly cash flow report for entities

subject to Listing Rule 4.7B

Name of entity

Keytone Dairy Corporation Limited

ABN Quarter ended (“current quarter”)

49 621 970 652 31 March 2020

Consolidated statement of cash flows Current quarter

$A’000 Year to date (12 months)

$A’000

1. Cash flows from operating activities

8,381 23,872

1.1 Receipts from customers 1.2 Payments for

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(a) research and development

(b) product manufacturing and operating costs

(8,013) (21,211)

(c) advertising and marketing (118) (368)

(d) leased assets (121) (337)

(e) staff costs (1,904) (5,945)

(f) administration and corporate costs (514) (2,846) 1.3 Dividends received(see note 3)

1.4 Interest received 9 91

1.5 Interest and other costs of finance paid (3) (22)

1.6 Income taxes paid - (652)

1.7 Government grants and tax incentives 110 110

1.8 Other (provide details if material) - 8

1.9 Net cash from / (used in) operating

activities (2,173) (7,309)

2. Cash flows from investing activities

- -

2.1 Payments to acquire: (a) entities

(b) businesses - (8,038)

(c) property, plant and equipment (84) (2,507)

(d) investments - (100)

(e) intellectual property - -

(f) other non-current assets - -

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Appendix 4C Quarterly cash flow report for entities subject to Listing Rule 4.7B

$A’000

Year to date (12 months)

$A’000

2.2 Proceeds from disposal of:

- -

(a) entities

(b) businesses - -

(c) property, plant and equipment - -

(d) investments - -

(e) intellectual property (10) (670)

(f) other non-current assets - -

2.3 Cash flows from loans to other entities - -

2.4 Dividends received (see note 3) - -

2.5 Other (provide details if material) - -

2.6 Net cash from / (used in) investing

activities (94) (11,315)

3. Cash flows from financing activities

- 18,000

3.1 Proceeds from issues of equity securities (excluding convertible debt securities) 3.2 Proceeds from issue of convertible debt

securities - -

3.3 Proceeds from exercise of options - -

3.4 Transaction costs related to issues of equity securities or convertible debt securities

- (1,075)

3.5 Proceeds from borrowings - -

3.6 Repayment of borrowings - (3,653)

3.7 Transaction costs related to loans and

borrowings - -

3.8 Dividends paid - -

3.9 Other (provide details if material) - -

3.10 Net cash from / (used in) financing

activities - 13,272

4. Net increase / (decrease) in cash and

cash equivalents for the period

6,650 9,768

4.1 Cash and cash equivalents at beginning of period

4.2 Net cash from / (used in) operating

activities (item 1.9 above) (2,173) (7,309)

4.3 Net cash from / (used in) investing activities

(item 2.6 above) (94) (11,315)

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$A’000

Year to date (12 months)

$A’000

4.4 Net cash from / (used in) financing activities (item 3.10 above)

- 13,272

4.5 Effect of movement in exchange rates on

cash held 6 (27)

4.6 Cash and cash equivalents at end of

period 4,389 4,389

5. Reconciliation of cash and cash

equivalents

at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts

Current quarter $A’000 Previous quarter $A’000 5.1 Bank balances 4,389 6,650 5.2 Call deposits - - 5.3 Bank overdrafts - -

5.4 Other (provide details) - -

5.5 Cash and cash equivalents at end of quarter (should equal item 4.6 above)

4,389 6,650

6. Payments to related parties of the entity and their

associates

Current quarter $A'000 6.1 Aggregate amount of payments to related parties and their

associates included in item 1 276

6.2 Aggregate amount of payments to related parties and their

associates included in item 2 -

Note: if any amounts are shown in items 6.1 or 6.2, your quarterly activity report must include a description of, and an explanation for, such payments

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7. Financingfacilities

Note: the term “facility’ includes all forms of financing arrangements available to the entity.

Add notes as necessary for an understanding of the sources of finance available to the entity.

Total facility amount at quarter end $A’000 Amount drawn at quarter end $A’000 7.1 Loan facilities 1,900 -

7.2 Credit standby arrangements - -

7.3 Other (please specify) - -

7.4 Total financing facilities 1,900 -

7.5 Unused financing facilities available at quarter end 1,900

7.6 Include in the box below a description of each facility above, including the lender, interest rate, maturity date and whether it is secured or unsecured. If any additional financing facilities have been entered into or are proposed to be entered into after quarter end, include a note providing details of those facilities as well.

Jourdan? Carlo?

8. Estimated cash available for future operating activities $A’000

8.1 Net cash from / (used in) operating activities (Item 1.9) (2,173) 8.2 Cash and cash equivalents at quarter end (Item 4.6) 4,389 8.3 Unused finance facilities available at quarter end (Item 7.5) 1,900 8.4 Total available funding (Item 8.2 + Item 8.3) 6,289 8.5 Estimated quarters of funding available (Item 8.4 divided by

Item 8.1)

3 8.6 If Item 8.5 is less than 2 quarters, please provide answers to the following questions:

1. Does the entity expect that it will continue to have the current level of net operating cash flows for the time being and, if not, why not?

Answer: N/A

2. Has the entity taken any steps, or does it propose to take any steps, to raise further cash to fund its operations and, if so, what are those steps and how likely does it believe that they will be successful?

Answer: N/A

3. Does the entity expect to be able to continue its operations and to meet its business objectives and, if so, on what basis?

Answer: N/A

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Compliance statement

1 This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

2 This statement gives a true and fair view of the matters disclosed.

Date: ...

Authorised by: ...

(Name of body or officer authorising release – see note 4)

Notes

1. This quarterly cash flow report and the accompanying activity report provide a basis for informing the market about the entity’s activities for the past quarter, how they have been financed and the effect this has had on its cash position. An entity that wishes to disclose additional information over and above the minimum required under the Listing Rules is encouraged to do so.

2. If this quarterly cash flow report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 107: Statement of Cash Flows apply to this report. If this quarterly cash flow report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standard applies to this report.

3. Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

4. If this report has been authorised for release to the market by your board of directors, you can insert here: “By the board”. If it has been authorised for release to the market by a committee of your board of directors, you can insert here: “By the [name of board committee–eg Audit and Risk Committee]”. If it has been authorised for release to the market by a disclosure committee, you can insert here: “By the Disclosure Committee”.

5. If this report has been authorised for release to the market by your board of directors and you wish to hold yourself out as complying with recommendation 4.2 of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations, the board should have received a declaration from its CEO and CFO that, in their opinion, the financial records of the entity have been properly maintained, that this report complies with the appropriate accounting standards and gives a true and fair view of the cash flows of the entity, and that their opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.