ANNUAL REPORT
2023

FROM HERE
TO THE WORLDSPECIALISEDDAIRYTatua Annual Report 2023

CONTENTS
Year in Review
Highlights

2

Report from the Chair and Chief Executive Officer

4

From Here to the World

8

Diversified and Specialised Growth

12

Building Resilience and Sustainability

14

Financial Statements
Financial Performance Summary

21

Statutory Information

24

Balance Sheet

28

Statement of Comprehensive Income

29

Statement of Changes in Equity

30

Statement of Cash Flows

31

Notes to the Financial Statements

33

Audit Report

57

Directory

61

The Tatua Co-operative Dairy Company Limited
3434 State Highway 26, Tatuanui, Morrinsville 3374, New Zealand2

Tatua Annual Report 2023

Tatua Annual Report 2023

HIGHLIGHTS
Total Underlying
Revenue

Specialised Products
Revenue

$535m

$211m

Kilograms of Qualifying
Milksolids received from
Shareholders

Total Earnings
per kilogram of
Qualifying Milksolids

Change in Total
Underlying Revenue

Revenue via
Subsidiary Offices

14.8m$15.20+20%

45%

Cash Payout toShareholders per
kilogram of Qualifying
Milksolids

Reinvestment per
kilogram of Qualifying
Milksolids

Proportion of
Products Exported

Gearing Ratio$12.30

$2.90

90%

16%

3

4

Tatua Annual Report 2023

REPORT FROM THE
CHAIR AND CHIEF
EXECUTIVE OFFICEROver the dairy season from
June through to the end ofMay, we processed 14.85
million kilograms of Tatua
shareholder supplied
milksolids.
As a farmer owned co-operative, thesemilksolids are the basis for distributing
the earnings generated over thefinancial year, less any funds retained
for reinvestment.
Wet conditions and lack of sunshine
early in the season severely impacted
milk supply, with milk received
over the peak September/October
period 6.6% behind the previous
season. Fortunately, those same wet
conditions helped boost milk supply
later in the season, to be 22% aheadin April and 110% ahead in May.
The overall quantity of shareholder
supplied milksolids ended 1.0% higher
than the previous season.
Tatua shareholder supplied milk
was supplemented by milksolids
purchased from other processors
throughout the season, whose
ongoing cooperation we continue tovalue. Other procured dairy and nondairy ingredients were also utilised in
the manufacture of our rangeof dairy and non-dairy specialised
ingredient products.

The total milk and cream solids
processed from all sources was
2.65 million kilograms higher thanthe previous season, which flowed
through to total production of
39,948 metric tonnes.
Our Ingredients business, consistingof caseinate, whey protein concentrate(WPC) and anhydrous milkfat (AMF)
typically contributes around 50% of
our Group revenue. During the year,
global caseinate prices lifted sharply
from the already elevated prices of theprevious year, to reach unprecedented
highs in January, before sharply
declining to more typical levels by
year-end.
The pricing effect of caseinate, andto some extent WPC, combined with
AMF sales volumes being higher thanusual, resulted in our Ingredientsbusiness revenue increasing to 60%
of Group sales revenue. We consider
this to be an exceptional combinationof circumstances that has provided anotable uplift in earnings.
Revenue from our more specialised
Nutritionals, Foods, and Flavours
businesses, together, also increased
over the previous year, despite being
capacity constrained in some areas.
Our well diversified mix of specialised
ingredients, and consumer andfoodservice products, continue toserve the business well, including
providing some buffering from theimpact of dairy commodity pricecycles on overall earnings.

We are pleased to report record
total underlying revenue of $535
million and earnings of $225 million
for the year. Our earnings equate to$15.20 per kilogram of Shareholder
supplied milksolids before retention
for reinvestment. We elected to retain$2.90 per kilogram of milksolids,
leaving a cash payout to Shareholders
of $12.30 per kilogram of milksolids.
When finalising our cash payout,
we were very conscious of the needto balance the requirements of our
Shareholders and their farming
operations with the need for ongoinginvestment in the business. This isespecially important when on-farm
input costs have increased wellbeyond general inflation, and interest
rates on lending are the highest they
have been in recent times.
We seek to maintain strength andstability in our balance sheet so wehave the ability to respond to theunexpected when necessary, as wellas invest in projects that support ourlong-term sustainability, and earnings
generation. Our gearing (debt divided
by debt plus equity) averaged 22.7%
for the year, reducing to 16% at yearend balance date.
Through the year we progressively
and cautiously unwound most of
the Covid-19 protocols we have hadin place to protect our people andthe business from transmission of
the virus.

6Tatua Annual Report 2023

“Tatua is an innovative, ambitious and agile business committed to offering
specialised dairy solutions all while ensuring we care for our people, animals,
environment and communities.”

This has allowed greater in-person
work interactions across our various
teams as well as the reinstatement ofCompany-organised social occasions
that assist to build familiarity,connectivity, and our ability to work
well together across all functions.
We remain well prepared to reinstate
Covid-19 protocols if the need arises.
A comprehensive review of ourCompany Constitution was completed
during the year with the proposedchanges adopted at a Special Meetingof the Shareholders in May. This
represented the culmination of over
two years of careful considerationthat clarified and strengthened somekey constitutional areas, including
providing greater optionality aroundmilk sourcing.

OUTLOOK
With the rebalancing of global supply
and demand, and return of caseinate
and WPC prices to more typical levels,
the returns from exceptional global
caseinate pricing in particular, arebeing reversed. This is reflected in
our forecast reduced Bulk Ingredientsrevenue for the financial year ahead.
Nevertheless, we remain positive
that, with steady demand at
normalised prices, Ingredients willcontinue to be an important part ofthe business overall.

We are forecasting further growthof our specialised products as we
commercialise new products in theareas we have available production
capacity. In response to demand
for some products outstripping ourability to supply we are progressing
with an assessment of the viability ofinvesting in further capacity to growthe specialty business. This would
see milksolids re-allocated from
commodity manufacture.
Over recent years we have invested
heavily in systems to treat ourwastewater to a very high standard, as
our highest sustainability priority. We
have also assessed our greenhousegas emissions profile as a processor,
and more broadly as a co-operative.
We acknowledge this is an area wewill increasingly need to focus as low
carbon technologies become available
and economically viable.
We remain very positive about theopportunities we have to further
develop and improve all aspects ofthe business over the year ahead, andfurther into the future.

Thank you also to our Shareholders
for your full and continued supportof the Co-operative, and the ongoinghigh quality of the milk you supply.
We would also like to thank thediverse range of individuals andorganisations that have partnered withus across all aspects of the businessthroughout the year. We endeavour tobe straight forward and uncomplicatedin our interactions and dealings, andsincerely hope this has been yourexperience in working with us.
Finally, a very sincere thank you to allof our customers in all of our markets
for your ongoing business. It has
been a pleasure to be able to resumeinternational travel and reconnect
with many of you and we look forward
to continuing to strengthen our
relationships over the year ahead.
Our sincerest thanks to you all.

Stephen AllenChair

ACKNOWLEDGEMENTS
Thank you everyone working at Tatua,
from milk collection through to ourteams in market, and all those inbetween. While acknowledging ourfull-year result has been buoyed byfavourable market conditions for our
product mix, there is no doubt it is thecoming together of everyone’s efforts
and inputs that has fully enabled theyear that we have had.

Brendhan Greaney
Chief Executive Officer

8

Tatua Annual Report 2023

Tatua Annual Report 2023

FROM HERE TO THE WORLDOur global connections reach far and wide – fromour farming families supplying fresh milk to ourprocessing facility at Tatuanui, New Zealand, toour distribution partners and in-market teams
collaborating closely with our customers in 38
countries around the world. We value strong
connections, many of which have been nurtured
over decades. With the lifting of Covid-19 related
travel restrictions, our sales teams have valued theTatua Japanability to connect in person with our customers
in multiple markets and to explore new business
opportunities. During the year we were also able tohost customers to our site in New Zealand for the
first time in three years.
Our team in Japan welcomed Charles Wilson to
the role of President during the year, and in China,
Daniel Young was appointed President to lead ourShanghai-based team.
Based in Tokyo, Tatua Japan’s business focus is nutritional
ingredients for human and microbial applications, bulk
ingredients including caseinates and whey protein
concentrate, dairy flavour ingredients, and specialty
cream products for foodservice and food & beverage
manufacturing.
The 2023 financial year saw the end of Japanese
Government Covid-19 counter measures and a broader
re-opening of the border and economy. Tourism numbers
rebounded and Tatua Japan welcomed the return of faceto-face customer interactions.
Like many other global economies, Japan faced economic
challenges in the wake of Covid-19 and other international
events. Inflation reached uncharacteristic highs, impacting
consumer demand and presenting additional challenges
for local food manufacturers, particularly those reliant on
imported raw materials and energy.
In an attempt to break years of deflation and promote
wage growth, the Central Bank of Japan maintainedinterest rates below zero. This was in contrast to mostother global economies and saw the Japanese yen at
multidecade lows against major currencies.
Despite the various challenges, our Japanese businessweathered the year very well. Caseinate prices reachedrecord levels as buyers brought forward demand andbuilt inventories to help mitigate the risks of supply chain
uncertainty. In other parts of our business, including dairy
ingredients, volumes and prices were supported by robust
demand in consumer products, and in foodservice, in
response to increased community and tourist activity.

9

10

Tatua Annual Report 2023

Tatua Annual Report 2023

Tatua Shanghai

Tatua USA

Based in Shanghai, our China team’s business focus ison ingredients for human and microbial nutrition, flavour
ingredients, specialty cream products for foodservice andretail, and bulk ingredients including caseinates, whey
protein concentrate and anhydrous milkfat.

Based in Bethlehem, Pennsylvania, our USA team’s focus
is ingredients for human and microbial nutrition, and bulk
ingredients including caseinates, whey protein concentrate
and anhydrous milkfat. Our USA team also collaborateclosely in supplying our customers in Europe.

Following China’s transition from its zero Covid-19 strategy
at the beginning of 2023, the anticipated quick market
rebound did not come to fruition as we had expected.
Consumption of dairy has been steady, but with many
manufacturers actively reducing their inventories as supply
chains normalised, demand for additional product fell away.
A consequence of this rebalancing was that commodity
dairy prices softened – in some cases dramatically.

The financial year began with US inflation running at over
8%, having just begun to retreat from its peak in May 2022.
This impacted consumer buying patterns and motivatedcustomers to work down stock levels to reduce working
capital exposure. As the year progressed, inflation dropped
to near 4%, and we began to see consumer sentiment
improve.

Despite the falling commodity prices, Tatua Shanghai’s
diversified product offering provided some stability, leading
to a successful year overall, with revenues slightly ahead ofprior year.

As with our other subsidiaries, post-Covid-19 supply chain
recovery and economic adjustment saw Tatua USA achieve
high caseinate pricing in the first half of the year, followed
by a rapid demand decline in the second half. This reduction
was partly due to customers having secured higher stocklevels earlier in the year to ensure supply, and was coupledwith a cautious outlook on demand thereafter, due toeconomic and interest rate uncertainties.
In contrast to the demand swings seen for caseinate, our
specialised added value products generally remained stable,
while our bionutrients business grew strongly.

11

12

Tatua Annual Report 2023

Tatua Annual Report 2023

DIVERSIFIED AND
SPECIALISED GROWTH

We were pleased to have achieved a new milestone for Tatua this season, with total
underlying revenue exceeding $500 million for the first time. This was largely the result ofour bulk ingredients business, where unique market conditions led to increased revenue
for our caseinates and anhydrous milkfat products in particular.

$535m
Record Total Underlying Revenue

+11%

$211m

+19%

Whey Protein
Concentrate Revenue

Specialised Products Revenue

Aerosol Cream Revenue$320m
Record Bulk Ingredients Revenue

+22%

+68%

Caseinate Revenue

Anhydrous Milkfat Revenue

+18%

+7%

Specialty Cream Revenue

Flavour Pastes Revenue

13

14

Tatua Annual Report 2023

BUILDING RESILIENCEAND SUSTAINABILITY
Resilience and sustainability are core to the future of ourbusiness, and this year we have taken important steps to refine
our approach to both.

ENVIRONMENTAL RESPONSIBILITY
Promoting Responsible Farming
Through our Tatua 360 stewardship programme
we strive to enhance biodiversity, preserve natural
resources, and ensure the long-term sustainability of
our on-farm operations. This is principally achieved
through a farm planning process.
Back in 2017 we introduced the concept of farmplans to our dairy farmer shareholders, and in
2018 began working with 20 shareholders on thedevelopment of their farm specific plans. Since then,we have progressed this work, with around 20% of
shareholders completing their farm plans each year.
During this time, we learned what worked well andidentified areas for improvement, and combining
feedback from shareholders with evolving Farm
planning regulations, we fine-tuned our processes
and outputs. We now have a process that ensures
the plans produced are relevant to our farmers
as well as fulfilling current and future regulatory
requirements.

Many shareholders have already made good
progress in implementing the opportunities identified
through this process, and over time, we may lookto broaden these plans beyond the current scopeof water, soil, biodiversity, and greenhouse gas
emissions, to include other aspects of farm operation.
In the meantime, we are proud to have reached themilestone of having all of our shareholders operatingwith a comprehensive farm plan. We know, however,that this is just the beginning, and that there will
always be more we can do.

All Tatua farms have:
An annual greenhouse emissions profile
Biosecurity Plans
Farm Environment Plans
Animal Health & Wellbeing Plans
An Independent Food Safety assessment
Farm specific Health & Safety Plans

16

Tatua Annual Report 2023

Improving Environmental Sustainability
Through innovative processes and recycling initiatives,
we aim to reduce our environmental impact, work
toward closed-loop systems, and contribute to amore sustainable future. We prioritise environmental
stewardship by reducing our footprint and promoting
sustainability in our supply chain and wider policies.

Some 2023 initiatives include:– Water reduction projects resulted in afurther 21 million litres of water saving acrossour manufacturing site

– Continuation of carbon footprint tracking andmeasurement– Development of a sustainable procurement policy– Plastic pallet wrap recycling programme– Progressing consent to establish a solar farm that will
supply 1/3 of site electricity requirements– Commissioning of new treated wastewater dischargeline to improve management of irrigation loads– Anaerobic digestion of selected waste streams,
with utilisation of resulting heat and biogas

18

Tatua Annual Report 2023

Tatua Annual Report 2023

19

SOCIAL RESPONSIBILITY
Through professional development opportunities,
promoting a positive work-life balance andprioritising employee safety, we endeavour for ourteams to thrive both professionally and personally.
People are essential to the success of our
co-operative, from our shareholder farmers to ouroperations, technical, administration and sales
teams on site, and our sales teams in Japan,
China and the USA.

Supporting our Community

Caring for our People
We aim to create a positive and healthy work
environment that fosters innovation, creativity andgrowth, by prioritising the needs and interests of ourpeople– including a culture of inclusion and highperformance, and a focus on developing future trusted
leaders.

Some 2023 initiatives include:– Family fun day for shareholders and Tatua employees– Wellbeing committee organised events – photocompetition, financial wellbeing seminars, bootcamp
classes, Round the Bridges fun run and walk, support of
employee social sports teams– Regular audits to provide assurance that we continue
to achieve high standards of employment practices andhealth and safety within our business– Baking for our farmers – employees baked and delivered
fresh home-baking to our supply farms in July
– Employee training and development programme

By sharing knowledge, resources and fostering mutual
trust, we aim to promote positive social, environmental
and economic impact ensuring that our business supports
community development.

– Sales development training for sales team– Annual team events – winter function, Christmas
barbeque and team building– Redesigned Leadership Development Programme– Piloted Mindset Training which will be rolled out to thebusiness in 2024
– Clifton Strengths Coaching and Team Sessions– Refreshed Development Conversations Programme– Regular Leadership Forum

Some initiatives this year include:– Tatuanui School native plant nursery support – children
grow and nurture native plants and help with community
planting events on local farms– Donation to Rural Support Trust to support ruralcommunities affected by Cyclone Gabrielle– Supported community wellbeing evening held with
Sir John Kirwan– Provided funds for sports, technology and educational
activities to our four local schools– Charity Fundraising – Tatua employees held fundraising
events to support Cancer Society Daffodil Day and local
Community House– Hosted career days for schools to support the next
generation– Participated in speaking engagements and presentations
with local schools and community organisations

Tatua Annual Report 2023

21

FINANCIALPERFORMANCESUMMARY22

Tatua Annual Report 2023

Tatua Annual Report 2023

23

2022/23 IN REVIEW
Total Underlying Revenue
165,204,629

164,292,606

Qualifying Milksolids Received from Suppliers (kilograms)

14,821,502

14,703,629

Total Underlying Revenue ($)

535,184,738

444,336,892

Group Profit Before Payout & Tax (cents/kilogram qualifying Milksolids)

1,520

1,265

Cash Payout to Suppliers (cents/kilogram qualifying Milksolids)

1,230

1,130

Group Depreciation (cents/kilogram qualifying Milksolids)

115

105

Capital Expenditure ($)

19,236,678

27,112,470

Group Assets ($)

365,415,207

339,604,724

Year-End Gearing Ratio: (% Debt to debt plus members funds)

16

27

1200

200
0
2020/212021/22

Gearing (% Debt to debt plus members funds)

1130
925
2020/212021/222022/23

220

211

120
100

20.1

20%

140

27.3

25%

5%
0%
2018/192019/20

2020/212021/2260$ Millions

10%

2017/18

2020/21

80

15.9

15%

177

180
160

23.9

+9%

2019/20

0

200

26.8

cents/kg
qualifying
milksolids

30%

2018/19200

Members Funds

40%
35%

2017/18400

2022/23

36.7$12.302019/20

600

174

Payout to Shareholders

2018/19

800

870

400

2017/18

1000

160

600

1043

800

996

1000

Cents/kg qualifying milksolids

1265

1200

1230

1400

1520

1400

966

+20%

1600

862

cents/kg
qualifying
milksolids

Payout – Income Equivalent

850

Group Surplus before Payout and Tax

Cents/kg qualifying milksolids$15.20Total Milk Received from Suppliers (litres)

135

Group Surplus

2021/22810+20%2022/23

121

$535m

Summary2021/222022/2340
2002017/18

2018/192019/202022/23

24

Tatua Annual Report 2023

Tatua Annual Report 2023

25

STATUTORY INFORMATION
for the year ended 31 July 2023

Principal Activities

Board Composition

Directors’ Remuneration

Employees’ Remuneration

The principal activity of the Group is the collection of milk fromshareholders and processing this milk into a diverse range of
products for sale in domestic and international markets.

Pursuant to clause 20.1 of the Constitution of the Company, thenumber of Directors, including any Appointed Director(s), shall be
not less than six nor more than nine. One third of elected directors
retire by rotation each year and are eligible for re-election, while
appointed directors are appointed for a term not longer than three
years, after which they may be re-appointed for a further three year
term. Elected directors Louise Cullen and Julie Langley were reelected during the year. 		

Directors’ remuneration is approved by Shareholder resolution at
the Annual General Meeting based upon a recommendation fromthe Directors’ Remuneration Committee, which is comprised of
non-Director Shareholders. The following persons held office as
Director during the year and received the following remuneration:

During the year to 31 July 2023 the following number of employeesof the Group received total remuneration of at least $100,000 NZD:
Total remuneration includes salaries, bonus payments, and otherbenefits received in the capacity as an employee during the year,
e.g. company vehicles, insurance and superannuation. Bonus
payments may relate to multiple years.

Board Meetings Held During the Year

Co-operative Group
The Board of Directors resolved on 25 July 2023 that, in theopinion of the Board, the Group has been a co-operative company
during the year ended 31 July 2023 because its principal activity
has been processing and marketing products derived from milk
supplied by its shareholders and because 100% of the voting rights
in the Group are held by those shareholders.

Board Members

Meetings Attended

Stephen Allen$128,333

Louise Cullen$80,667

Remuneration

Mark Dewdney$62,667$100,000 - $109,999

31

Julie Langley$62,667$110,000 - $119,999

40

Richard Luxton$80,667$120,000 - $129,999

51
46

Number of Employees

Role of the Board

Stephen Allen (Chair)

9David Muggeridge$62,667$130,000 - $139,999

Tatua’s Board of Directors is committed to managing the Group in
an ethical and professional manner, and in the best interests of theGroup and its Shareholders.

Louise Cullen

9Peter Schuyt$62,083$140,000 - $149,999

33$80,874$150,000 - $159,999

21$ 620,624$160,000 - $169,999

12

Key responsibilities of the Board include:
—
—
—
—
—
—
—

Setting strategic direction and establishing policies to support
the effective management of the Group;
Appointing and reviewing the performance of the CEO;
Setting the terms of CEO and executive management
employment;
Monitoring the financial performance of the Group, andTatua’s risk management;
Ensuring that Tatua has robust corporate governancepractices;
Ensuring Tatua’s regulatory and legislative compliance; andEnsuring Tatua has robust health, safety and wellbeing
processes which protect all people associated with the Group.

The Board and Management are committed to continuous
improvement and achieving governance practices whichmeet best practice.
Framework
The Board delegates the day-to-day operations of the Group to the
CEO through a framework of formal delegations.
The Group’s corporate governance framework includes theCompany’s Constitution, Charter, Terms of Reference for the
Board’s Committees and a range of policies including Ethics, Risk
Management, Food Safety, Environment, Health and Safety, andpolicies and procedures for employees.

Mark Dewdney

9

Julie Langley

8Richard Luxton

9$170,000 - $179,999

13David Muggeridge

9

Directors’ Shareholdings$180,000 - $189,999

6Peter Schuyt

7

At 31 July 2023 Directors held the following shares in the Group:$190,000 - $199,999

3David Walsh

8$200,000 - $209,999

6

Board Meetings Held

9$210,000 - $219,999

4$220,000 - $229,999

2$230,000 - $239,999

2$240,000 - $249,999

1$250,000 - $259,999

2$260,000 - $269,999

2$270,000 - $279,999

1$290,000 - $299,999

1$300,000 - $309,999

1$320,000 - $329,999

1$380,000 - $389,999

1$390,000 - $399,999

1$460,000 - $469,999

1$540,000 - $549,999

1$560,000 - $569,999

1$1,230,000 - $1,239,999

1David Walsh

BeneficiallyNon-

Held By

Held

Beneficially

Associated

Held

Persons

Board Committees
People and Remuneration Committee: Membership comprises
Louise Cullen (Chair), Stephen Allen, Mark Dewdney, Richard
Luxton and Peter Schuyt. The function of the Committee
is to assist the Board in ensuring the organisation fulfils its
remuneration, performance management and organisational
development needs. It also assists with senior management
appointments.
Audit, Risk and Compliance Committee: Membership comprises
David Walsh (Chair), Louise Cullen, Mark Dewdney, Julie Langley,
Richard Luxton, David Muggeridge and Peter Schuyt. The functionof the Committee is to assist the Board in ensuring the organisation
fulfils its audit, legal, financial and risk management obligations andresponsibilities. Approval of the annual accounts is undertaken by
the full Board.
Responsible Farming Committee: Membership comprises Richard
Luxton (Chair), Stephen Allen, Louise Cullen, Julie Langley, andDavid Muggeridge. The function of the Committee is to assist
the Board in ensuring the Group fulfils its governance and related
responsibilities in regard to the farming activities of the Group andits supplying shareholders.

Stephen Allen

2,129,440-

892,310

Louise Cullen

3,128,540--

Mark Dewdney

2,548,970--

Julie Langley873,190--

Richard Luxton

3,988,350--

David Muggeridge

1,277,840--

Directors’ Insurance
The Group paid insurance premiums during the year for Directors
and Officers Liability Insurance as permitted by the Constitution
and the Companies Act 1993. This insurance provides coveragainst costs and expenses involved in defending legal actions
and any resulting payments arising from a liability to persons(other than the Group or related body corporate) incurred in theircapacity as Director or executive employee unless the conduct
involves a wilful breach of duty or an improper use of inside
information or position to gain advantage.

285

Donations & Grants
Donations and grants for the year ended 31 July 2023 were$247,000 (Cyclone Relief Support and Educational Support)(2022: $40,000).

26

Tatua Annual Report 2023

Tatua Annual Report 2023

27

DISCLOSURE OF INTERESTS
Directors have declared that they are to be regarded as having aninterest in any contract that may be made with entities below by
virtue of their directorship or membership of those entities.

All elected Directors, in their capacity as Supplying Shareholders,
conduct business with the Group. Directors who hold shares in theGroup do so on the basis that they are Supplying Shareholders.

Director

Position

Company

Stephen Allen

Director

Rangitata GP Ltd

Position

Company

Director, Shareholder

KM & JL Langley Limited

Claybrook Farms Ltd

Shareholder

Langley Trading Ltd

Director, Shareholder

Claybrook No 7 Ltd

Shareholder

Langley Foods Ltd

Director, Shareholder

Claybrook South Ltd

Director, Shareholder

Cheadle Farms Ltd

Director, Shareholder

Louise CullenMark Dewdney

Director, Shareholder

Allen Children Ltd

TrusteeSarah Ethne Allen Trust

TrusteeSB & BL Allen Family Trust

TrusteeDavid Johnstone Charitable Trust

Trustee

JES Allen Estate

Trustee

JR Allen Estate

TrusteeAnnandale Trust

PartnerRangitata Dairies LP

Trustee

Cheadle Trust

Director

Farmers’ Mutual Group (FMG)

Director

Farmers’ Mutual Insurance Ltd (FMIL)

Director

Mowata GP Ltd

Director
Julie Langley

Richard Luxton

David Muggeridge

Peter Schuyt

Director, Shareholder

Aslan Farms Ltd

Director

MDLP General Partner Ltd

Director

Marire General Partner Ltd

Director

Marire Holdings Ltd

Partner

Marire LP

Partner

Matangi Dairies LP

Director, Shareholder

Muggeridge Farms Ltd

Trustee

DP & MA Muggeridge Family Trust

Director

Tax Management NZ Ltd

Director

Foodstuffs North Island Ltd

Director, Shareholder

Ahikouka Holdings Ltd

Director, Shareholder

Greenleaf Fresh Ltd

Director, Shareholder

Schuyt Investments Ltd

Director

AgResearch Ltd

TrusteeSchuyt Family Trust

Director

Waikato Valley Cricket Association

Director (Retired Oct 22)

DairyNZ Inc.

Director, Shareholder

Cookson Trust Farms Ltd

Director, Shareholder

Balachraggan Farms Ltd

Director, Shareholder

Capra Farming Ltd

Director, Shareholder

Acorn Goats Ltd

David Walsh

Director

Datam Ltd

Director

New Zealand Post Holdings Ltd

Director

Fliway Group Ltd

Director

Fliway Holdings Ltd

Director

Fliway International Ltd

TrusteeAcorn Trust

Independent Chair

New Zealand King Salmon Ltd & Subsidiaries

Director

Fliway Logistics Ltd

Director

Marire General Partner Ltd

Director

Fliway Transport Ltd

Director, Shareholder

MDLP General Partner Ltd

Director

Supply Chain Solutions Ltd

Trustee/Beneficiary

Dewdney Family Trust

Director

New Zealand Post Finance Ltd

Trustee

Marvic Family Trust

TrusteeMark Dewdney Family Trust

TrusteeVicki Dewdney Trust

Partner

Matangi Dairies LP

Director (Retired Sept 22)

Dairy Goat Co-operative

Director (Retired Oct 22)

Nicholson United Autos Ltd

28

Tatua Annual Report 2023

Tatua Annual Report 2023

BALANCE SHEETSTATEMENT OF COMPREHENSIVE INCOME

as at 31 July 2023

for the Year Ended 31 July 2023
GROUP
Note

2023 ($)

GROUP
Note

2022 ($)

Cash and Cash Equivalents

14

34,455,110

10,540,247

Revenue from Contracts with Customers

Derivatives

18

6,668,769

2,362,517

less Payments for Own Milk Supplied

Receivables and Prepayments

13

58,548,446

51,226,559

317,758

62,657

107,610,206

107,617,744

Tax Receivable
12

Biological Assets
Total Current Assets

617,144790,263

208,217,433

172,599,987

538,535,453

436,471,888(166,246,123)less Other Cost of Sales(247,111,187)(208,422,246)

Gross Profit

108,923,709

61,803,519

plus Other Income

33less Sales and Marketing Expenses
4

Surplus from Operating Activities

Property, Plant and Equipment

9144,719,154

151,224,283

Investment Property

11

1,475,000

2,236,000

Intangible Assets

10

3,431,367

3,898,000

Finance Income

6

Derivatives

18

2,409,295

1,949,243

less Finance Expenses

6

Deferred Tax Asset

8

4,275,375

7,031,993

Net Finance Expense

887,583

665,218

Equity Accounted Investments
Total Non Current Assets

157,197,774

167,004,737

Surplus before Income Tax

Total Assets

365,415,207

339,604,724

less Income Tax Expense

8,761,918

41,472,191

Current Liabilities
Loans and Borrowings

16

Derivatives

18

3,645,710

11,486,242

Accounts Payable and Accruals

17

28,002,502

32,137,690

Tax Payable

11,231,821

1,775,060

Owing to Suppliers

36,844,236

37,053,517

Total Current Liabilities

88,486,187

123,924,700

Non Current Liabilities
Loans and Borrowings

16

65,708,658

35,365,483

Derivatives

18

36,127

3,783,402

Total Non Current Liabilities

65,744,785

39,148,885

Total Liabilities Excluding Co-operative Shares

154,230,972

163,073,585

Classified as a Liability
74,136,046

72,285,666

Total Liabilities

228,367,018

235,359,251

Net Assets

137,048,189

104,245,473

Retained Earnings

123,228,938

92,859,949

15

Reserves

13,819,251

11,385,524

Equity137,048,189

104,245,473

74,136,046

72,285,666

123,228,938

92,859,949

Members Funds Memorandum Account:
Co-operative Shares Classified as a Liability
Retained Earnings

15

Reserves

13,819,251

11,385,524

Total Members Funds

211,184,235

176,531,139

For and on behalf of the Board:
SB Allen Chair of Directors
09 October 2023

Year Ended 31 July 2022 ($)(182,500,557)

less Administration Expenses

Non Current Assets

PLUS Co-operative SharesYear Ended 31 July 2023 ($)

Profit or Loss Items

Current Assets

Inventories

29

DJ Walsh Chair of Audit, Risk and Compliance Committee
09 October 2023

7

Net Profit

876,255

1,622,408(36,126,985)(29,436,942)(14,886,442)(13,285,484)

58,786,537

20,703,501

555,842

1,932,167(16,300,085)(2,787,168)(15,744,243)(855,001)

43,042,294

19,848,500(12,673,305)(5,562,227)

30,368,989

14,286,273

Other Comprehensive Income
Movement in Land Revaluation Reserve(7,785,470)

2,580,653

Change in Fair Value of Cash Flow Hedges

15,372,565(15,225,437)

Movement in Foreign Exchange Reserve(853,346)

545,613

Income Tax on Other Comprehensive Income(4,300,022)

4,263,122

Other Comprehensive Income for the Year2,433,727(7,836,049)

Total Comprehensive Income

32,802,716

6,450,224

The accompanying notes form part of and are to be read in conjunction with these financial statements.

30

Tatua Annual Report 2023

Tatua Annual Report 2023

STATEMENT OF CHANGES IN EQUITYSTATEMENT OF CASH FLOWS

for the Year Ended 31 July 2023

for the Year Ended 31 July 2023

GROUP
Balance at 1 August 2021

Translation

Hedging

Revaluation

Retained

Total

Reserve ($)

Reserve ($)

Reserve ($)

Earnings ($)

Equity ($)

113,409

3,641,398

15,466,766

78,573,676

97,795,249

31

GROUP
Note

Year Ended 31 July 2023 ($)

Year Ended 31 July 2022 ($)

519,861,618

433,280,948

Cash Flows From Operating Activities
Cash was provided from:
Receipts from Customers

Other Comprehensive Income

Interest Received

555,842

9,654

520,417,460

433,290,602

Movement in Foreign Exchange Reserve545,613---545,613

Movement in Land Revaluation Reserve--

2,580,653-

2,580,653

Movement in Hedging Reserve, Net of Tax-(10,962,315)--(10,962,315)

Cash was applied to:545,613(10,962,315)

2,580,653-(7,836,049)

Payments for Milk

(182,709,837)(164,328,321)

Payments to Creditors and Employees(284,138,952)(254,070,375)

Total Other Comprehensive Income
Profit for the Period
Total Comprehensive Income

-

-

-

14,286,273

14,286,273

Interest Paid

(5,269,088)(2,980,091)

545,613(10,962,315)

2,580,653

14,286,273

6,450,224

Taxation Paid

(5,015,049)(4,565,248)(477,132,926)(425,944,035)

43,284,534

7,346,567

99,43135,870Net Cash Flows From / (Applied To)

Transactions with owners of Group
Issue of ordinary shares

-

-

-

-

-

Balance at 31 July 2022

659,022(7,320,917)

18,047,419

92,859,949

104,245,473

Operating Activities

20

Cash Flows From Investing Activities
Cash was provided from:

Balance at 1 August 2022

659,022(7,320,917)

18,047,419

92,859,949

104,245,473

Proceeds From Sale of Property, Plant and Equipment
Proceeds From Sale of Investments

Other Comprehensive Income
Movement in Foreign Exchange Reserve(853,346)---(853,346)

Cash was applied to:Movement in Land Revaluation Reserve--(7,785,470)-(7,785,470)

Acquisition of Property, Plant and Equipment

Movement in Hedging Reserve, Net of Tax
Total Other Comprehensive Income
Profit for the Period
Total Comprehensive Income(18,077,402)(26,345,509)(516,202)-

11,072,543--

11,072,543

Acquisition of Intangible Assets(884,983)

11,072,543(7,785,470)-

2,433,727

Purchase of Share Investments--(18,962,385)(26,861,711)(18,852,954)(26,498,268)

3,226,545

1,788,840(2,367,097)

14,652,374

859,448

16,441,214(1,376,165)(5,252,420)--(1,376,165)(5,252,420)

Financing Activities(516,717)

11,188,794

Net Increase / (Decrease) in Cash and Cash Equivalents

23,914,863(7,962,907)

-

-

-

30,368,989

30,368,989

Net Cash Flows From / (Applied To)(853,346)

11,072,543(7,785,470)

30,368,989

32,802,716

Investing Activities

-

-

-

-

-

Cash Flows From Financing Activities
Cash was provided from:
Increase in Co-operative Shares

Balance at 31 July 2023

327,573363,443(853,346)

Transactions with owners of Group
Issue of ordinary shares

10,000109,431(194,324)

3,751,626

10,261,949

123,228,938

137,048,189

15

Proceeds from Borrowings
Cash was applied to:
Decrease in Co-operative Shares

The accompanying notes form part of and are to be read in conjunction with these financial statements.

15

Repayment of Borrowings
Net Cash Flows From / (Applied To)

Add: Opening Cash and Cash Equivalents Balance
Closing Cash and Cash Equivalents Balance

14

The accompanying notes form part of and are to be read in conjunction with these financial statements.

10,540,247

18,503,154

34,455,110

10,540,247

Tatua Annual Report 2023

33

NOTES TO THE
FINANCIAL STATEMENTS
1

Reporting Entity

2

Basis of Preparation

3

Operating Revenue & Other Income

4

Administration Expenses

5

Personnel Expenses

6

Finance Income & Expense

7

Income Tax Expense

8

Deferred Tax Assets & Liabilities

9

Property, Plant & Equipment

10

Intangible Assets

11

Investment Property

12

Inventories

13

Receivables & Prepayments

14

Cash & Cash Equivalents

15

Members Funds

16

Loans & Borrowings

17

Accounts Payable & Accruals

18

Derivatives

19

Financial Risk Management

20

Reconciliation of Cash Flows
from Operating Activities

21

Related Party Transactions

22

Group Entities

23

Subsequent Events

34

Tatua Annual Report 2023

Tatua Annual Report 2023

3 — OPERATING REVENUE & OTHER INCOME

1 — REPORTING ENTITY
The Tatua Co-operative Dairy Company Limited (“Tatua”) is a cooperative company domiciled and incorporated in New Zealand,
and registered under the Co-operative Companies Act 1996 andthe Companies Act 1993. Tatua is an FMC reporting entity for the
purposes of the Financial Markets Conduct Act 2013.

These financial statements set out the performance, position andcash flows of Tatua and its subsidiaries (the “Group”) for the year
ended 31 July 2023. At 31 July 2023 the Group consists of The
Tatua Co-operative Dairy Company Ltd and its subsidiaries Tatua
Japan Co. Ltd, Tatua Dairy Products (Shanghai) Co., Ltd and Tatua
USA Ltd. The Group is a producer and marketer of dairy productswith sales to both domestic and export markets.

GROUP
2023 ($)

2022 ($)

538,535,453

436,471,888

Rental Income from Investment Property

75,00075,000Rental Income from Residential Property

59,15956,881(761,000)

538,000

Revenue from contracts with customers
Other Income

Fair Value movement in Investment Property

2 — BASIS OF PREPARATION
The financial statements have been prepared on a going
concern basis.
(a) Statement of Compliance and Basis of Preparation
The financial statements have been prepared in accordance with
Generally Accepted Accounting Practice in New Zealand (NZ
GAAP) as appropriate for Tier 1, for-profit entities, NZIFRS andIFRS. Accounting policies have been applied consistently to all
periods presented in these financial statements. The financial
statements were approved by the Board of Directors on
9 October 2023.
(b) Basis of Measurement
The financial statements are prepared on the historical cost basis
except for the following:—Land is measured at fair value. Refer to Note 9.

—

Biological assets are measured at fair value less point-of-salecosts.

—

Investment property is measured at fair value. Refer to Note 11.

——

Derivative financial instruments are measured at fair value.
Refer to Note 18.
The carrying value of financial instruments measured atamortised cost equals their fair values.

(c) Functional and Presentation Currency
The financial statements are presented in New Zealand dollars(NZD), which is the Group’s functional currency. Monetary assets
and liabilities denominated in foreign currencies at the reporting
dates are retranslated to the functional currency at the exchange
rate at that date. All financial information presented has beenrounded to the nearest dollar.
(d) Use of Estimates and Judgement
The preparation of financial statements requires management
to make judgements, estimates and assumptions that affect the

35

Insurance Claim Proceeds

application of accounting policies and the reported amounts ofassets, liabilities, income, and expenses. Actual results may differ
from these estimates.
Estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognisedin the period in which the estimate is revised and in any future
periods affected. In particular, information about significant areasof estimation, uncertainty and critical judgements in applying
accounting policies that have the most significant effect on theamount recognised in the financial statements are described in thefollowing notes:
Note 12. - Milk cost included in inventory.
(e) Goods and Services Tax
The financial statements have been prepared on a GST exclusive
basis, except for Accounts Receivable and Accounts Payable which
are stated inclusive of GST.
(f) New Standards and Interpretations(i) New and amended standards adopted by the GroupNo new or amended standards were adopted that had a material
impact on the Group’s financial statements.
(ii) New and amended standards issued but not yet effective
There are no new and revised standards, amendments orinterpretations that have been issued but are not yet effective,that are expected to have a significant impact on the Group’s
consolidated financial statements.

-

38,909MilkTest NZ LP Income

232,434

213,721

Sundry Income

1,270,662

699,897

Total Other Income

876,255

1,622,408

539,411,708

438,094,296

Total Revenue

GROUP
Analysis of revenue from contracts with customers

2023 ($)

2022 ($)

536,355,339

434,682,083

Nature of Revenue
Sale of goods
Royalties/Commissions

2,180,114

1,789,805

538,535,453

436,471,888

518,612,282

418,609,292

Timing of revenue recognition
At a point in time
Over time

19,923,171

17,862,596

538,535,453

436,471,888

Disaggregation of Revenue
Australasia (NZ and AUS)

163,054,460

126,108,247

Asia / Pacific

290,600,014

244,259,855

Americas / Europe

84,880,979

63,806,206

Other

-

2,297,580

538,535,453

436,471,888

36Tatua Annual Report 2023

Tatua Annual Report 2023

5 — PERSONNEL EXPENSES

POLICY(a) Revenue from contracts with customers(b) Other Income

Revenue from the sale of goods is measured based on theconsideration specified in a contract with customers, net of returns.

Sundry income is measured at the fair value of consideration
received or receivable.

Revenue recognised at a point in time(c) Non-GAAP Measure: Total Underlying Revenue

The Group has assessed that its contracts include two
performance obligations, being the supply of goods and thearrangement of and payment for shipping on behalf of thecustomer. The amount of revenue recorded excludes the amountattributable to shipping costs incurred on behalf of the customerthat constitute an agency arrangement.

The Group uses a non-GAAP measure when discussing total
revenue. This measure is not prepared in accordance with NZ IFRS.

Revenue is recognised when the performance obligation, being the
supply of goods, has been satisfied and control has passed to thecustomer. Transfer of control varies depending on the individual
terms of the contract of sale but for the majority of the Group’s
export sales, revenue is recognised at the point in time when the
goods have been loaded onto a ship at the port of departure. In
respect of the majority of domestic sales within New Zealand,
control is considered to be transferred to the customer when the
goods have dispatched the Tatua warehouse.
Revenue recognised over time
Revenue relating to contract manufacturing is recognised overtime. Under these contracts the product is made to a customer’s
specifications using customer’s intellectual property, and if thecontract is terminated by the customer then the Group is entitled
to reimbursement of the costs incurred to date, including areasonable margin.

GROUP

Wages and Salaries

Management believes that this measure provides useful
information as it provides valuable insight on the underlying
performance of the business as a whole. It may be used internallyto evaluate the underlying performance of individual business units
and to analyse trends. This measure is not uniformly defined orutilised by all companies and accordingly may not be comparablewith similarly titled measures used by other companies. Non-GAAP
measures should not be viewed in isolation nor considered as a
substitute for measures in accordance with NZ IFRS.

Note2023 ($)

2022 ($)

3

538,535,453

436,471,888

Other Income

3876,255

1,622,408

Net Foreign Exchange Loss

6

(11,358,198)

1,922,513

7,131,228

4,320,083

535,184,738

444,336,892

Agency Shipping costs offset
Total Underlying Revenue

48,021,500

5,352,315

4,740,577

Change in Liability for Short-term Employee Benefits (Annual Leave
and Days in Lieu)

2,054,149

1,137,108

59,802,704

53,899,185

Personnel expenses are included in cost of sales, sales
and marketing expenses and administration expenses.

POLICY — Employee Benefits
Defined Contribution Plans

Short-term Benefits

Obligations for contributions to defined contribution pension plans
are recognised as an expense in profit or loss when they are due.

Short-term employee benefit obligations are measured on an
undiscounted basis and are expensed as the related service isprovided. A liability is recognised for the amount expected to be
paid if the Group has a present legal or constructive obligation
to pay this amount as a result of past service provided by theemployee and the obligation can be estimated reliably.

6 — FINANCE INCOME & EXPENSE
GROUP
Recognised in Profit or Loss

2023 ($)

2022 ($)

Interest Income

555,8429,654

Net Foreign Exchange Gain

Net Foreign Exchange Loss
Financial Overheads

4 — ADMINISTRATION EXPENSES
GROUP
2022 ($)

Directors' Fees

620,624

570,500

Directors' Expenses*

53,542

17,974

The following items are included in administration expenses:* Directors expenses include costs incurred by the company on behalf ofdirectors, in the course of carrying out their duties and obligations as
directors. The expenses include development, industry and customer
meetings and associated travel cost.
Auditors Remuneration (KPMG)
Audit of Financial Statements

277,463

235,480

Other Services**

38,39967,926-

1,922,513

555,842

1,932,167(11,358,198)(22,263)(23,374)(4,919,624)(2,763,794)

Total Finance Expense(16,300,085)(2,787,168)

Net Finance Income / (Expense)(15,744,243)(855,001)

Interest Expense on External Borrowings
2023 ($)

2022 ($)

52,396,240

A reconciliation from the NZ IFRS measure of revenue to theGroup’s non-GAAP measure is detailed below:

Revenue from Contracts with Customers

2023 ($)

Superannuation Contributions and Other Employee Related Expenses

Total Finance Income** Other services are in relation to advice on operational tax matters such astransfer pricing, as well as a share registry assurance engagement.

37

POLICY(a) Finance Income and Expense(b) Foreign Currency Transactions

Interest income is recognised as it accrues, using the effective
interest method.

Transactions in foreign currencies are translated to NZD at
exchange rates at the dates of the transactions. Foreign currency
differences arising on translation are recognised in profit or loss.

All borrowing costs are recognised in profit or loss using theeffective interest method, except for those that are directly
attributable to the acquisition, construction or production of aqualifying asset, in which case they are capitalised as part of thecost of that asset.

38

Tatua Annual Report 2023

Tatua Annual Report 2023

7 — INCOME TAX EXPENSEPOLICYGROUP

Income Tax Recognised in Profit or Loss

2023 ($)

2022 ($)

14,570,455

5,854,608

Current Tax Expense
Current Period
Adjustment for Prior Periods(353,747)(1,949,069)

14,216,708

3,905,539(1,873,332)(483,184)

329,929

2,139,872(1,543,403)

1,656,688

12,673,305

5,562,227

Deferred Tax Expense
Origination and Reversal of Temporary Differences
Adjustment for Prior Periods
Total Income Tax Expense

8 — DEFERRED TAX ASSETS & LIABILITIESRecognised Deferred Tax Assets and Liabilities –AssetsGroup

2023 ($)

2022 (%)

2022 ($)

1,728,479

2,304,748

2,103,670--

2,304,748

2,103,670-

19,848,500

Income Tax Using the Group’s Domestic Tax Rate

28.0

12,036,917

28.0

5,557,580

Movement in Temporary Differences

Impact of Tax Rate in Foreign Countries

0.9

379,881(0.3)(64,446)

During The YearTax Exempt Income

0.5

213,080(0.8)(150,640)

-

0.0

-

0.0

-

0.0

-

Under/(Over) Provided in Prior Periods(0.1)(23,819)1.0

190,803

29.4

12,673,305

28.0

5,562,227

Income Tax Recognised Directly in Other Comprehensive Income

2023 ($)

2022 ($)(4,300,022)

4,263,122---

172,412-

7,109,192(1,530,197)(77,199)

4,275,374

7,031,993

Balance

Recognised in

Recognised in

Balance

Recognised in

Recognised in

Balance31 July
2021($)

Profit or
Loss($)

Other Comprehensive
Income($)

31 July
2022($)

Profit or
Loss($)

Other Comprehensive
Income($)

31 July2023($)

2,673,541(2,243,522)-

430,019

153,102-583,121(83,558)

6,359-(77,199)

0-(77,199)(1,416,098)-

4,263,122

2,847,024-(4,300,022)(1,452,998)

attributable to the following:
Property, Plant and Equipment
Investment Property
Inventory

1,596,165

132,314-

1,728,479

1,016,811-

2,745,290

Provisions and Accruals

1,655,509

448,161-

2,103,670

201,078-

2,304,748

-

-

-

-

172,412-

172,4124,425,559(1,656,688)

4,263,122

7,031,993

1,543,403(4,300,022)

4,275,374

Other items
Deferred Tax Assets /(Liabilities)

Income Tax on Derivatives

172,4125,805,571

Deferred tax assets and liabilities are

Derivatives
GROUP

2,847,024

Provisions and Accruals

43,042,294

0.0(77,199)

2,745,290-

Recognition of Previously Unrecognised Tax Losses

430,019(77,199)(1,452,998)

Other items

Tax Credits on Dividend Income

583,121(77,199)-

Tax Assets /(Liabilities)

35,289-(77,199)-

5,562,227(6,359)---14,286,273

0.2

430,019-(1,452,998)-

0.0

583,121

1,728,479-

110,506

2022 ($)

2,847,024

12,673,305(43,260)2023 ($)-

30,368,989

0.3

2022 ($)

2,745,290

-

(0.1)

2022 ($)

Derivatives-

Legislative Change of Depreciation on Buildings

2023 ($)

Inventory

Total Income Tax Expense

Non-deductible Expenses

2023 ($)

Net

are attributable to the following:

Profit for the Period
Profit Excluding Income Tax

Liabilities

Deferred tax assets (liabilities)
Property, Plant and Equipment

2023 (%)

Current tax is the expected tax payable on the taxable income forthe year, using tax rates enacted or substantially enacted at thereporting date, and any adjustment to tax payable in respect ofprevious years.					Income tax expense comprises current and deferred tax. Income
tax expense is recognised in profit or loss except to the extent
that it relates to items recognised directly in equity or in othercomprehensive income, in which case it is recognised in equity
or in other comprehensive income.

Investment Property

GROUP
Reconciliation of Effective Tax Rate

39

POLICYGROUP
Imputation Credits
Imputation Credits Available for use in Subsequent Reporting Periods

2023 ($)

2022($)

42,901,268

39,981,302

Deferred tax is recognised in respect of temporary differences
between the carrying amounts of assets and liabilities forfinancial reporting purposes and the amounts used for taxation
purposes.
A deferred tax asset is recognised to the extent that it is probablethat future taxable profits will be available against which temporary

differences can be utilised based on the ability of the Groupto record taxable profits through retentions or through thereclassification of payout. Deferred tax assets are reviewed at eachreporting date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realised.

40

Tatua Annual Report 2023

Tatua Annual Report 2023

9 — PROPERTY, PLANT & EQUIPMENTGROUP

POLICY

Land

Land

Buildings

Plant &

VehiclesCapital Work

Right-of-

Total

($)

Improve-($)

Equipment($)

in Progress

use assets

($)

($)

($)

ments

($)

($)
COST OR DEEMED COST
Balance at 1 August 2021
Additions

19,843,347

3,919,469

57,518,185

211,988,477

3,712,338

22,661,769

1,917,500

321,561,085
51,154,522-

18,924

5,083,003

18,961,834

151,965

26,163,955

774,841

2,580,653

-

-

-

-

-

-

2,580,653

Disposals---(1,717,952)(37,622)-(595,361)(2,350,935)

Capitalisation of Work in Progress

-

-

-

-

-

(24,558,255)-(24,558,255)

Effect of Movement in Exchange Rates

-

-

-

(13,561)--

14,168607

Balance at 31 July 2022

22,424,000

3,938,393

62,601,188

229,218,798

3,826,681

24,267,469

2,111,148

348,387,677

Balance at 1 August 2022

22,424,000

3,938,393

62,601,188

229,218,798

3,826,681

24,267,469

2,111,148

348,387,677-

19,5096,233,751

23,064,420

181,622

18,867,834

188,446

48,555,583(7,765,000)

-

-

-

-

-

-

(7,765,000)

-

-

-

(420,798)(103,531)-(529,703)

Revaluation of Land to Fair Value

Additions
Revaluation of Land to Fair Value
Disposals
Capitalisation of Work in Progress
Effect of Movement in Exchange Rates
Balance at 31 July 2023

41

(30,203,890)(1,054,030)(30,203,890)

-

-

-

(17,267)--(18,250)(35,518)

14,659,000

3,957,902

68,834,939

251,845,153

3,904,772

12,931,413

1,751,644

357,884,823(a) Recognition and Measurement of Assets at Cost(d) Recognition and Measurement of Assets at Fair Value

Items of property, plant and equipment (except land andimprovements) are measured at cost less accumulated
depreciation and impairment losses. Purchased software that is
integral to the functionality of the related equipment is capitalised
as part of that equipment.

Land is stated at its fair value (Improvements are excluded
from this valuation). The fair value of land within property, plantand equipment is based on market values determined by anindependent valuer.

Borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset are capitalised aspart of the cost of the asset. Borrowing costs capitalised during theyear were $349,464 (2022: $216,297).
When parts of an item of property, plant and equipment havedifferent useful lives, they are accounted for as separate items(major components) of property, plant and equipment.
(b) Depreciation
Depreciation is recognised in profit and loss on a straight line basis
over the estimated useful lives of the items of plant, property andequipment. Land is not depreciated. Depreciation is recognisedas part of other cost of sales in the Profit or Loss. Depreciation
methods, useful lives and residual values are reassessed at thereporting date.

Balance at 1 August 2021-

2,103,363

19,969,238

158,272,507

2,642,639-

948,932

183,936,679

Depreciation-

177,297

1,702,009

12,758,454

349,279-

476,351

15,463,390

Disposals---(1,659,268)(35,114)-(539,388)(2,233,770)

Land Improvements – 10 to 20 years—

Buildings – 5 to 50 years—

Plant and Equipment – 2.5 to 20 years—

Vehicles – 5 to 10 years							—

Right-of-use Assets – 1 to 13 years

Effect of Movement in Exchange Rates

-

-

-

(17,621)--

14,716(2,905)-2,280,660

21,671,247

169,354,072

2,956,804-

900,611

197,163,394

Balance at 1 August 2022-

2,280,660

21,671,247

169,354,072

2,956,804-

900,611

197,163,394(c) Impairment
At each reporting date, the Group reviews its assets to determine
whether there is any indication of impairment. At 31 July 2023 theGroup has determined that no indication of impairment exists.

Depreciation-

174,037

1,914,679

14,186,308

350,401-

476,273

17,101,698

-

-

-

(399,849)(79,652)-(615,634)(1,095,135)

Effect of Movement in Exchange Rates

-

-

-

(962)

-

-

(3,326)(4,288)

Balance at 31 July 2023-

2,454,697

23,585,926

183,139,569

3,227,553-

757,924

213,165,669

At 1 August 2021

19,843,347

1,816,106

37,548,947

53,715,970

1,069,699

22,661,769

968,568

137,624,406

CARRYING AMOUNTSAt 31 July 2022

22,424,000

1,657,733

40,929,941

59,864,726

869,877

24,267,469

1,210,537

151,224,283

At 1 August 2022

22,424,000

1,657,733

40,929,941

59,864,726

869,877

24,267,469

1,210,537

151,224,283

At 31 July 2023

14,659,000

1,503,205

45,249,013

68,705,584

677,219

12,931,413

993,720

144,719,154

Capital Commitments—

Balance at 31 July 2022

Disposals

Property, Plant and Equipment is categorised within level 2 of thefair value hierarchy.

During the period ended 31 July 2022, the Group enteredinto contracts to purchase plant and equipment. The balance
outstanding at balance date is $907,347 (2022: $5,978,987).
These commitments are expected to be settled in the following
financial year.								The Group has established the following useful lives:

DEPRECIATION AND IMPAIRMENTS

A revaluation was undertaken as at 31 July 2023 by Property
Advisory Limited and Savills (NZ) Limited, independent registeredvaluers. The land was valued at $14.659m, a decrease of $7.765m
from the last valuation undertaken as at 31 July 2022. The valuation
established a market value using a direct sales comparison
approach and was undertaken in accordance with the Property
Institute of New Zealand (PINZ) International Valuation Standards.
Any gain on revaluation is recognised in other comprehensive
income and held in equity and any loss is recognised in profit andloss, unless there is a credit balance existing in the revaluation
surplus. The value of the land at cost is $4,397,051(2022: $4,397,051).

42

Tatua Annual Report 2023

Tatua Annual Report 2023

10 — INTANGIBLE ASSETS

43

11 — INVESTMENT PROPERTY
GROUP

GROUP

Software ($)

Total ($)

2023 ($)

2022 ($)

10,890,802

10,890,802

Balance at 1 August

2,236,000

1,698,000

Change in Fair Value(761,000)

538,000

Additions

516,203516,203

Disposals--

Balance at 31 July

1,475,000

2,236,000

Balance at 31 July 2022

11,407,005

11,407,005

Balance at 1 August 2022

11,407,005

11,407,005

Additions

884,983

884,983

Disposals--

12,291,988

12,291,988

Balance at 1 August 2021

6,251,097

6,251,097

Amortisation for the Year

1,257,908

1,257,908--

Balance at 31 July 2022

7,509,005

7,509,005

Balance at 1 August 2022

7,509,005

7,509,005

Finished Goods

Amortisation for the Year

1,351,616

1,351,616

Raw Materials

19,516,573

18,644,615

Total Inventories

107,610,206

107,617,744

COST
Balance at 1 August 2021

Balance at 31 July 2023

POLICY
Investment property is held either to earn rental income or forcapital appreciation or for both. Investment property is measured
at fair value with any change therein recognised in profit or loss
and included in ‘Other Income’. Investment property comprises landand buildings that are leased to PGG Wrightson Ltd. The fair valueof investment property was determined by Savills New Zealand,

independent registered valuers, having appropriate recognised
professional qualifications and recent experience in the locationand category of the property being valued.
Investment property is categorised within level 2 of the fairvalue hierarchy.

AMORTISATION AND IMPAIRMENT LOSSES

Disposals

Disposals
Balance at 31 July 2023--

8,860,621

8,860,621

CARRYING AMOUNTS
At 1 August 2021

4,639,705

4,639,705

At 31 July 2022

3,898,000

3,898,000

At 1 August 2022

3,898,000

3,898,000

At 31 July 2023

3,431,367

3,431,367

POLICY(a) Recognition and Measurement(b) Amortisation

Intangible assets that are acquired by the Group which have finite
useful lives are measured at cost less accumulated amortisation
and accumulated impairment losses.

Amortisation is recognised in profit or loss on a straight-line basis
over the estimated useful lives of intangible assets from the datethat they are available for use. The amortisation is recognised aspart of administration expenses in the Profit or Loss. The estimateduseful lives for the current and comparative periods are as follows:—

Software – 2.5 to 10 years

12 — INVENTORIES
GROUP
2023 ($)

2022 ($)

88,093,633

88,973,129

POLICY
Inventories are measured at the lower of cost or net realisablevalue. The cost of inventories is based on weighted average cost,and includes expenditure incurred in acquiring the inventories andbringing them to their existing location and condition. In the caseof manufactured inventories and work in progress, cost includes
an appropriate share of production overheads based on normal
operating capacity. Net realisable value is the estimated selling
price in the ordinary course of business, less the estimated costs ofcompletion and selling expenses.

Impairment

The cost of milk within inventory is a key judgement as it involves anumber of inputs and estimations. The cost of milk within inventory
is based on a weighted average of both shareholder supplied
milk and third party supplied milk. Shareholder supplied milk is
calculated in accordance with the Farmgate Milk Price Manual. The
weighted average cost of milk is then separated into three coreingredients, Fat, Whey Protein and Casein Protein, with the Valued
Component Ratio (value of fat to protein) being a key input tocalculate the separation.

realisable value included

Inventories are reviewed for impairment based on their age and/or
condition. If any impairment exists the asset is written down to its
net realisable value (if any). At balance date there was a provisional
write down of $3,077,459 (2022: $2,869,384) relating to inventory
that had a net realisable value less than its cost of manufacture.
GROUP

2023 ($)

2022 ($)

2,265,083

2,071,294

Inventory valued at net
in finished goods above:44

Tatua Annual Report 2023

Tatua Annual Report 2023

45

15 — MEMBERS FUNDS

13 — RECEIVABLES & PREPAYMENTS
GROUP
2023 ($)

2022 ($)

Trade Receivables

54,672,675

46,985,308

Prepayments and Sundries

3,875,771

4,241,251

58,548,446

51,226,559

USD ($)AUD ($)JPY (¥)CNY (¥)

2023

14,745,178

3,936,049

1,372,461,773

24,087,1812022

8,820,426

1,474,427

1,589,741,813

34,721,730

POLICY

Voting Rights – Under the Company Constitution, voting may
take place by show of hands, voice or poll. On a poll, one vote may
be cast for every whole 1,000kg of qualifying milksolids held. No
Shareholder shall cast votes exceeding 5% of the total votes which
could be cast if all Shareholders were present and voting.

Shares in the co-operative are held in proportion to the current or
expected milk supply. The share standard is ten 50 cent sharesfor every kilogram of qualifying milksolids. Shares are issued orredeemed annually to ensure compliance with the share standard.
Due to their redemption nature, shares are classified as a liability
in the balance sheet. When the group performs a bonus shareissue, with new shares issued at the same rate as existing shares,
retained earnings is decreased to match the increase in cooperative shares.

Redemption Features – Shares are redeemed at nominal value of
50 cents, or paid up value if lower.

Trade Receivables Denominatedin Foreign Currencies

Movements in the Group’s Issued Shares were as follows:		
2023

2022

Shares($)

Shares($)

Shares at the beginning of the Year

144,571,330

72,285,666

151,498,490

75,749,246

Shares Issued

6,453,090

3,226,545

3,577,680

1,788,840

Shares Repurchased(2,752,330)(1,376,165)(10,504,840)(5,252,420)

Fully Paid Shares at the end of the Year

148,272,090

74,136,046

144,571,330

72,285,666

POLICYThe trade receivables are classed as a financial asset
at amortised cost. As all receivables are current they are
not discounted.

The Group is required to assess for impairment loss on receivablesat the time that revenue is recognised. Management has performed
an assessment of receivables under the expected loss model andconcluded there are no material impairments to be recorded.

Treasury Stock

14 — CASH & CASH EQUIVALENTS

4,037,805

7,738,565

RESERVES

Cash and Cash Equivalents comprise cash balances and bankoverdrafts that are repayable on demand and form an integral partof the Group’s cash management. Cash and Cash Equivalents areclassified as a financial asset at amortised cost.
GROUP

Translation Reserve

Retained Earnings

The translation reserve comprises all foreign currency differences
arising from the translation of the financial statements of foreign
operations.

All retained earnings are attributable to equity holders of
the Group.

Hedging Reserve2023 ($)

2022 ($)

JPY Bank Deposits

9,411,650

1,747,305

USD Bank Deposits

433,769

436,110CNY Bank Deposits

6,950,662

7,784,740

NZD Bank Deposits

17,659,029

572,092

Cash and Cash Equivalents in the Statement of Cash Flows

34,455,110

10,540,247

The hedging reserve comprises the effective portion of the
cumulative net change in the fair value of cash flow hedging
instruments related to hedged transactions that have notyet occurred.
Revaluation Reserve
The revaluation reserve relates to the revaluation of land andimprovements.

Treasury Stock
When shares recognised as members funds are repurchased,
the amount of the consideration paid, which includes directly
attributable costs, is recognised as a deduction from members
funds. Repurchased shares are classified as treasury shares. Whentreasury shares are sold or reissued subsequently, the amountreceived is recognised as an increase in members funds.

46

Tatua Annual Report 2023

Tatua Annual Report 2023

16 — LOANS & BORROWINGSInterest-bearing borrowings are classified as financial
liabilities and are measured at amortised cost using theeffective interest rate.
2023 ($)

2022 ($)

The Group’s bank loans are secured by registered first mortgages,
preferred security interest in all present and after acquired
property, and an interlocking guarantee from companies within theGroup. The Group’s borrowings are subject to various covenants
such as minimum equity, interest cover ratio and gearing ratio and
the Group was in compliance with the various covenants.

47

The Group has committed (but undrawn) facilities with expiry
dates through to 2026 of NZD $40 million, JPY 690 million(2022: NZD $25.5 million, JPY 690 million and USD $1.5 million).
The JPY and USD loans are held by the respective subsidiaires.

Current
JPY Bank Loans

3,559,536

3,697,519

USD Bank Loans

4,863,025

2,383,601

NZD Bank Loans-

35,000,000

Lease Liabilities

339,357

391,071

8,761,918

41,472,191

Non Current
NZD Bank Loans

65,000,000

34,500,000

Lease Liabilities

708,658

865,483

65,708,658

35,365,483

74,470,576

76,837,674

Total Loans and Borrowings

2023

Currency

Nominal Interest Rate

Year of Maturity

Face Value

Carrying Amount(NZD)

Current

Non Current

2022

JPY

1.07% - 1.325%

2023

310,000,000

3,559,536

USD

6.34%

2023

3,000,000

4,863,025

NZD

7.52%

2023

-

-

NZD

2.94% - 4.15%

2023

339,357

339,357

NZD

6.57% - 6.82%

2025 - 2026

65,000,000

65,000,000

NZD

2.94% - 4.15%

2024 - 2033

708,658

708,658

Nominal Interest Rate

Year of Maturity

Face Value

Carrying AmountCurrency(NZD)

Current

Non Current

JPY

1.09% - 1.325%

2023

310,000,000

3,697,519

USD

2.33%

2023

1,500,000

2,383,601

NZD

3.09%

2023

35,000,000

35,000,000

NZD

2.94% - 4.15%

2023

391,071

391,071

NZD

3.23% - 4.52%

2024 - 2025

34,500,000

34,500,000

NZD

2.94% - 4.15%

2024 - 2033

865,483

865,483

17 — ACCOUNTS PAYABLE & ACCRUALS
GROUP
2023 ($)

2022 ($)

Trade Payables

11,664,873

12,955,811

Employee Entitlements

11,018,429

8,964,280

Income in Advance

447,015

1,652,949

Accruals

4,872,185

8,564,650

28,002,502

32,137,690

Total Accounts Payable and Accruals

POLICY
Trade payables are recognised at the amount invoiced, and are notdiscounted due to their short-term nature. Employee entitlements
which remain unused at balance date, and amounts expected to be
paid under short-term cash bonus plans are accrued for.

48

Tatua Annual Report 2023

Tatua Annual Report 2023

18 — DERIVATIVESInterest Rate Hedges						The Group has a policy of monitoring interest rate movements
and where appropriate taking out interest rate cover. The Groupcurrently has a number of interest rate swaps in place.		
Notional Amounts									Less than 12 Months

More than 12 Months

Total2023 Interest Rate Hedges

12,000,000

20,000,000

32,000,000

2022 Interest Rate Hedges

5,000,000

32,000,000

37,000,000

GROUP
2023 ($)

2022 ($)

Current Liabilities--

Non Current Liabilities--

Current Assets

340,420

7,141

Non Current Assets

893,261

853,334

Net Fair Value of Interest Rate Hedges

1,233,681

860,475

Fair Value

Foreign Currency Hedges
The Group’s foreign exchange rate contracts and options notionalamounts and fair values are presented below. The Group uses zero
cost collar structures for option contracts. All options are bought
options. Exposure is covered in Note 19.				
					
2023
Foreign Exchange Contracts

Option Contracts

Option Contracts

Fair Value

2023 ($)

2022 ($)

Current Assets

6,328,348

2,355,376

Non Current Assets

1,516,034

1,095,909

Current Liabilities(3,645,710)(11,486,242)

Non Current Liabilities(36,127)(3,783,402)

Net Fair Value of Foreign Currency Hedges

4,162,545(11,818,359)

POLICY
Derivatives are recognised at fair value at the date a derivative
contract is entered into and are subsequently remeasured to theirfair value at each balance sheet date. The resulting gain or loss
is recognised in profit or loss immediately unless the derivative isdesignated into an effective hedge relationship.
The Group’s derivatives are classified as being within Level 2 of thefair value hierachy. The fair value of forward exchange contracts isdetermined using forward exchange rates at balance sheet date,with the resulting value discounted back to present value. The fairvalue of option contracts is determined using forward exchange
rates and other inputs required for the Black Scholes option
pricing model. The fair value of interest rate swaps is calculated
as the present value of the estimated future cash flows based on
observable yield curves.

Hedge Accounting
All derivatives are classified as cash flow hedges.
The effective portion of changes in the fair value of the hedging
instruments are recognised in other comprehensive income andaccumulated in the hedging reserve.
The following are recognised in profit or loss:—

any gain or loss relating to the ineffective portion of thehedging instrument; and—fair value changes in the hedging instrument previously
accumulated in other comprehensive income, in the periods
when the hedged item is recognised in profit
or loss.

Once hedging is discontinued, any cumulative gain or loss
previously recognised in other comprehensive income isrecognised in profit or loss either:Less than 12 Months

More than 12 Months

Total

Buy

267,600,230

63,897,169

331,497,399

Sell

-

-

-

Call

6,590,240-

6,590,240

Put(6,226,780)-(6,226,780)

Less than 12 Months

More than 12 Months

Total

Buy

271,165,759

108,457,345

379,623,104

Sell

-

-

-

2022
Foreign Exchange Contracts							
		

49

Call

31,907,475

6,226,780

38,134,255

Put(32,754,783)(6,590,240)(39,345,023)—

at the same time as the forecast transaction; or—immediately if the transaction is no longer expected
to occur.

The amount reclassified from other comprehensive income toprofit or loss on settlement of the derivatives in the 2023 financial
year was a loss of $9,575,391 (2022: loss of $45,388).

50

Tatua Annual Report 2023

19 — FINANCIAL RISK MANAGEMENT
a. Credit Risk

The Group’s members funds include co-operative shares, reserves
and retained earnings. The Group’s policy is to maintain a strong
members funds base so as to maintain Shareholder, creditor
and market confidence and to sustain future development of
the business.

The Group’s exposure to credit risk is mainly influenced by its
customer base. There is no risk concentration either geographicallyor by sector.

The Board primarily monitors capital on the basis of the gearing
ratio. As at 31 July 2023 the gearing ratio was 15.86% (2022:
27.3%). This ratio is calculated as net interest bearing debt divided
by total capital. Net interest bearing debt is calculated as totalborrowings less cash and cash equivalents. Total capital iscalculated as members funds plus net interest bearing debt. Tatua
is a co-operative company, and as such, members funds change inproportion to milk supplied (Refer Note 15). The Group is required
to meet certain ratios under its bank covenants, which have beenmet, including a requirement that Group members funds be notless than $70,000,000 (2022: $70,000,000). The Group is not
subject to any other externally imposed capital requirements.
There have been no material changes in the Group’s managementof capital during the period.
Quantitative Disclosures

Tatua has a credit policy under which each customer is assessed
for credit worthiness and assigned a credit limit. Where available
the Group reviews external credit reports for both country andcustomer risk. Credit limits are reviewed on a regular basis. The
Group’s credit policy requires certain risk mitigations such as
insurance, letters of credit or prepayment depending on the
country and/or customer.

Gross Receivable

Impairment

Gross Receivable

Impairment

2023 ($)

2023 ($)

2022 ($)

2022 ($)

Not Past Due

48,008,665-

39,343,152-

Past Due 0-30 days

6,654,826-

7,415,745-

Past Due 31-120 days

9,184

-

-

-

54,672,675-

46,758,897-

Total Trade Receivables (Note 13)

b. Liquidity Risk

The Group does not require collateral for trade and otherreceivables. However, where practicable, purchase money security
interests over New Zealand-based customers are registered on the
Personal Property and Securities Register.
The Group is required to assess for impairment loss on receivablesat the time that revenue is recognised. Management has performed
an assessment of receivables under the expected loss model andconcluded that as the Group’s control over receivables has resulted
in very few bad debts, expected losses are not material.
The carrying amount of financial assets represents the Group’s
maximum credit exposure. The Group has not renegotiated theterms of any financial assets which would result in the carrying
amount no longer being past due or avoid a possible past due
status. The Group’s maximum exposure to credit risk for trade andother receivables, by geographic region, is as follows:

Liquidity risk represents the Group’s ability to meet its contractual obligations. The Group evaluates its liquidity requirements on an ongoingbasis. In general, the Group generates sufficient cash flows from its operating activities to meet its obligations arising from financial liabilities
and has credit lines in place to cover any timing differences.
The following table sets out the contractual cash flows for all financial liabilities that are settled on a gross cash flow basis.
GROUP

Contractual Cash
Flows ($)

Less than
12 Months($)

1-2 Years($)

More Than
2 Years($)(67,604,420)

Non-Derivative Financial Liabilities

Note

Loans and Borrowings

16(74,470,576)(85,415,302)(13,427,315)(4,383,566)

Accounts Payable and Accruals

17(16,537,058)(16,537,058)(16,537,058)--(36,844,236)(36,844,236)(36,844,236)--

Owing to Suppliers
Co-operative Shares(74,136,046)(74,136,046)(74,136,046)--

Total Non-Derivative Financial Liabilities(201,987,916)(212,932,642)(140,944,656)(4,383,566)(67,604,420)

Derivative Financial Liabilities
Interest Rate Swaps

-

-

-

-

-

Options Contracts(516,486)(516,486)(516,486)--(3,165,351)(103,687,166)(89,713,546)(13,973,620)--

100,521,815

86,584,321

13,937,493-(3,681,837)(3,681,838)(3,645,712)(36,126)-- Outflow- Inflow
Total Derivative Financial Liabilities

Carrying Amount2023 ($)

2022 ($)

Australasia (NZ and AUS)

15,910,196

7,314,496

Asia / Pacific

26,925,759

33,630,512

Americas / Europe

11,807,118

5,807,697

29,602

6,192

54,672,675

46,758,897

Total Trade Receivables (Note 13)2023 Balance
Sheet
($)

Forward Exchange Contracts

Exposure to credit, liquidity, foreign currency and interest rate risksarises in the normal course of the Group’s business.

Other

51

The status of the Group trade receivables at the reporting date is as follows:

Capital Management

The Group’s objective is to provide returns for Shareholders and tomaintain an optimal capital structure to reduce the cost of capital.
The Group distributes its surplus by way of payout. However, inorder to retain or modify the capital structure, the Group may
decide to retain profits within the business.

Tatua Annual Report 2023

52

Tatua Annual Report 2023

GROUP

Tatua Annual Report 2023

2022 Balance
Sheet
($)

Contractual Cash
Flows ($)

Less than
12 Months($)

1-2 Years($)

More Than
2 Years($)(31,488,970)

Non-Derivative Financial Liabilities

Note

Loans and Borrowings

16(76,837,674)(80,725,994)(43,506,136)(5,730,888)

Accounts Payable and Accruals

17(21,520,461)(21,520,461)(21,520,461)--

Owing to Suppliers(37,053,517)(37,053,517)(37,053,517)--

Co-operative Shares(72,285,666)(72,285,666)(72,285,666)--

Total Non-Derivative Financial Liabilities(207,697,318)(211,585,638)(174,365,780)(5,730,888)(31,488,970)

Derivative Financial Liabilities
Interest Rate Swaps

-

-

-

-

-

Options Contracts(1,564,356)(1,564,356)(1,167,978)(396,377)-(13,705,288)(325,490,489)(223,137,067)(102,353,422)--

311,785,201

212,718,020

99,067,181-

53

d. Interest Rate Risk – Repricing Analysis
Interest rate risk is the risk that the value of the Group’s assets andliabilities will fluctuate due to changes in market interest rates. The
Group is exposed to interest rate risk primarily through its cash
balances and advances, bank overdraft and borrowings. Interest
rate swaps have been entered into to achieve an appropriate mix of
fixed and floating rate exposure within the Group’s policy.
The Group’s exposure to interest rate risk can be summarised
as follows:2023

NZD ($)USD ($)AUD ($)CNY (¥)JPY (¥)EUR (€)Cash and Cash Equivalents

14,707,772

246,953

273,040

6,360,127

836,237,428

428,616

Forward Exchange Contracts- Outflow- Inflow
Total Derivative Financial Liabilities(15,269,644)(15,269,644)(11,587,025)(3,682,618)-

c. Foreign Currency Exchange Risk

The Group has a policy of maintaining a level of foreign currency
hedging that allows for a degree of certainty in its future cash flows
and to help protect it against sudden movements in the value of
the New Zealand dollar against the United States dollar, Japanese2023

less Foreign Exchange Contracts and Options
Net Unhedged Exposure(65,000,000)(3,000,000)--(310,000,000)-

32,000,000

-

-

-

-

-

Net Unhedged Exposure(18,292,228)(2,753,047)

273,040

6,360,127

526,237,428

428,616NZD ($)USD ($)AUD ($)CNY (¥)JPY (¥)EUR (€)
480,227

2022

The Group is exposed to foreign currency risk predominantly onsales that are denominated in a currency other than the Group’sfunctional currency. The New Zealand dollar is the presentation
currency of the Group. The currencies in which transactions areprimarily denominated are United States dollars, Japanese yen andAustralian dollars.

Net Cash Flow Exposure Before Hedging

Loans and Borrowings
Interest Rate Swaps

USD ($)

yen and Australian dollar. The Group uses forward exchange
contracts and currency options to hedge its foreign currency
exposure. All of the forward exchange contracts and options
have maturities of less than two years at balance date.

Cash and Cash Equivalents

The Group classifies its forward exchange and option contracts,
which are hedging forecast transactions, as cash flow hedges.

CNY (¥)JPY (¥ - 000’s)

121,681,454

31,848,981

334,735,664

5,134,115(24,000,000)(217,500,000)(3,300,000)

24,681,454

7,848,981

117,235,664

1,834,115

USD ($)AUD ($)CNY (¥)JPY (¥ - 000’s)

Net Cash Flow Exposure Before Hedging

103,094,914

52,289,977

436,836,358

5,472,994

less Foreign Exchange Contracts and Options(94,000,000)(42,000,000)(315,000,000)(3,150,000)

9,094,914

10,289,977

121,836,358

2,322,994

Net Unhedged Exposure

The Group also has foreign currency loans in foreign currency
operations to minimise the translation risk in those locations.

7,105

33,130,203

164,510,268(1,500,000)--(310,000,000)-

Interest Rate Swaps

37,000,000

-

-

-

-

-

Net Unhedged Exposure(33,020,073)(1,258,887)

7,105

33,130,203(145,489,732)

480,227

In managing interest rate and currency risks the Group aims
to reduce the impact of short-term fluctuations on the Group’s
earnings. Over the longer-term, however, permanent changes inforeign exchange and interest rates will have an impact on profit.

(97,000,000)

2022

241,113(69,500,000)

e. Sensitivity Analysis

The Group’s exposure to foreign currency risk for the next
12 months can be summarised as follows:

AUD ($)(520,073)

Loans and Borrowings

Interest Rates:
At 31 July 2023 it is estimated that a general increase of one
percentage point in NZ interest rates would decrease Group profit
before income tax by approximately $532,356 (2022: $395,880).
Interest rate swaps have been included in this calculation.

Foreign Exchange Rates:
The Group has a foreign exchange policy to mitigate the risk
associated with the fluctuations in the value of the New Zealand
Dollar. At 31 July 2023 it is estimated that a general decreaseof one cent in the NZD/USD exchange rate would increase theGroup’s total comprehensive income by $4,416,731 (2022: increaseby $6,009,037). Foreign exchange hedging has been included inthis calculation.

54

Tatua Annual Report 2023

Tatua Annual Report 2023

20 — RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIESProfit (Loss) for the Year55

21 — RELATED PARTY TRANSACTIONSYear Ended 31 July 2023 ($)

Year Ended 31 July 2022 ($)

30,368,989

14,286,273

Adjustments for Non Cash Items

Directors and Shareholders

Transactions and Balances with Key Management Personnel

Directors and Shareholders may conduct business with the Groupin the normal course of their business.

Key management personnel may conduct business with
the Group.

Key Management Personnel

The aggregate value of transactions and outstanding balances
relating to key management personnel and entities over which they
have control or significant influence were as follows: Nil (2022: Nil).

Depreciation

17,101,694

15,463,390

Amortisation of Intangible Assets

1,351,616

1,257,908

Movement in Deferred Tax

2,756,618(2,606,434)

Revaluation of Investment Property

761,000(538,000)

Short Term Employee Benefits

2,801,307

2,137,353

Revaluation of Biological Assets(289,387)(393,287)

Long Term Employee Benefits--

Movement in Investments(232,366)(213,711)

2,801,307

2,137,353

Loss/(Gain) on Sale of Property, Plant and Equipment(54,603)

43,322

Total Non Cash Items

21,394,572

13,013,188

Compensation

Year Ended 31

Year Ended 31

July 2023 ($)

July 2022 ($)

Transactions and Balances with Other Related Parties
Elected directors conduct business with the Group in the normal
course of their business activities.
The Group has paid directors’ fees of $620,624 (2022: $570,550),
which is separately disclosed within the directors’ report.
The following entities are considered related parties because they
have common directors:

Movements in Working Capital
Trade and Other Receivables(7,576,988)

Derivatives – Assets(4,766,303)

4,818,654

Amounts Paid

PayableAmounts Received

Receivable

Derivatives – Liabilities(11,587,807)

11,722,647($)

31 July 2023 ($)($)

31 July 2023 ($)

7,538(21,192,540)

Related Party

Director

Biological Assets

462,507

102,193

Foodstuffs North Island

Peter Schuyt

357,252

21,624

6,255,810

661,545

Owing to Suppliers(209,280)

1,917,803

AgResearch Limited

Louise Cullen-

82,455--Trade and Other Payables

5,321,573

1,464,655

357,252

104,079

6,255,810

661,545(18,348,760)(9,319,895)

9,869,733(10,632,999)

43,284,534

7,346,567

Inventories

Total Movements in Working Capital
Items Classified as Investing / Financing Activities
Net Cash Flows From/(Applied to) Operating Activities(8,153,307)

Tax Management NZ Ltd (Peter Schuyt) - During the year the grouputilised the services of Tax Management NZ Ltd to make tax payments
through to the IRD in the ordinary course of business.

Items classified as Investing/Financing Activities relate to
movements in the hedging reserve and translation reserve as
well as amounts owing for the repurchase of shares.

Directors’ Farm Supply(included in Owing to Suppliers)

Value of Transactions

Balance Outstanding

Value of Transactions

Balance Outstanding

2023 ($)

31 July 2023 ($)

2022 ($)

31 July 2022 ($)

17,616,122

3,283,670

14,421,970

2,933,830

56

Tatua Annual Report 2023

57

Independent Auditor’s Report
22 — GROUP ENTITIESTo the shareholders of The Tatua Co-operative Dairy Company Limited
Country of Incorporation

Report on the audit of the consolidated financial statements

Ownership Interest
2023

2022

Subsidiaries
Tatua Japan Limited

Japan

100%

100%

Tatua USA Limited

USA

100%

100%

Tatua Dairy Products (Shanghai) Co., Ltd

China

100%

100%

Equity Accounted Investee
MilkTest NZ LP

New Zealand

10%

10%

POLICY(a) Basis of Consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists
when the Group has rights or exposure to variable returns from its
involvement with the entity, and the ability to use its power overthe entity to affect the amount of the entity’s return. In assessing
control, potential voting rights are only considered if the rights aresubstantive. The financial statements of subsidiaries are includedin the consolidated financial statements from the date that control
commences until the date that control ceases.
Equity Accounted Investees (Joint Ventures)
Joint ventures are those arrangements in which the Group has
contractually agreed to share control and where the Group hasrights to the net assets rather than rights to the assets andobligations for the liabilities. Joint ventures are initially recognised
at cost (including any goodwill identified on acquisition).
Subsequent to initial recognition they are accounted for using
the equity method in the consolidated financial statements. The
consolidated financial statements include the Group’s share of the
profit or loss after tax of joint ventures after adjustments to alignthe accounting policies of the Group, from the date that significant
influence or joint control commences until the date that significant
influence or joint control ceases.

OpinionIn our opinion, the consolidated financial statementsof The Tatua Co-operative Dairy Company Limited(the ’company’) and its subsidiaries (the 'group') on
pages 922to– 25
56 present fairly, in all material respects:

We have audited the accompanying consolidated
financial statements which comprise:i. The group’s financial position as at 31 July 2023
and its financial performance and cash flows forthe year ended on that date; in accordance withNew Zealand Equivalents to International
Financial Reporting Standards and International
Financial Reporting Standards.

— The consolidated statements of comprehensive— The consolidated balance sheet as at 31 July2023;

income, changes in equity and cash flows forthe year then ended; and— Notes, including a summary of significant
accounting policies.

Transactions Eliminated on Consolidation
Intra-group balances, and any unrealised income and expenses
arising from intra-group transactions, are eliminated in preparing
the consolidated financial statements.
(b) Foreign Currency

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

The assets and liabilities of foreign operations, including goodwill
and fair value adjustments arising on acquisition, are translated to
New Zealand dollars at exchange rates at the reporting date. The
income and expenses of foreign operations are translated to New
Zealand dollars at exchange rates at the dates of the transactions.

We are independent of the group in accordance with Professional and Ethical Standard 1 International Code of
Ethics for Assurance Practitioners (Including International Independence Standards) (New Zealand) issued by
the New Zealand Auditing and Assurance Standards Board and the International Ethics Standards Board for
Accountants’ International Code of Ethics for Professional Accountants (including International IndependenceStandards) (‘IESBA Code’), and we have fulfilled our other ethical responsibilities in accordance with theserequirements and the IESBA Code.

Foreign currency differences are recognised in the foreign currencytranslation reserve (FCTR). When a foreign operation is disposedof, in part or in full, the relevant amount in the FCTR is transferred
to profit or loss as part of the gain or loss on disposal.

Our responsibilities under ISAs (NZ) are further described in the Auditor’s responsibilities for the audit of theconsolidated financial statements section of our report.
Our firm has also provided other services to the group in relation to tax advice and a share registry assurance
engagement. Subject to certain restrictions, partners and employees of our firm may also deal with the group on
normal terms within the ordinary course of trading activities of the business of the group. These matters have not
impaired our independence as auditor of the group. The firm has no other relationship with, or interest in, thegroup.

23 — SUBSEQUENT EVENTS
There were no material events subsequent to 31 July 2023 thatwould impact these financial statements.

Materiality
The scope of our audit was influenced by our application of materiality. Materiality helped us to determine thenature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individuallyand on the consolidated financial statements as a whole. The materiality for the consolidated financial statements
as a whole was set at $4.7m determined with reference to a benchmark of group total revenue. We chose thebenchmark because, in our view, this is a key measure of the group’s performance.

© 2023 KPMG, a New Zealand Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited
by guarantee. All rights reserved.

Page 26

58

59

Use of this independent auditor’s report

Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the consolidated financial statements in the current period. We summarise below those matters and our key audit
procedures to address those matters in order that the shareholders as a body may better understand the process
by which we arrived at our audit opinion. Our procedures were undertaken in the context of and solely for the
purpose of our statutory audit opinion on the consolidated financial statements as a whole and we do not express
discrete opinions on separate elements of the consolidated financial statements.

The key audit matter

This independent auditor’s report is made solely to the shareholders as a body. Our audit work has been
undertaken so that we might state to the shareholders those matters we are required to state to them in the
independent auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept orassume responsibility to anyone other than the shareholders as a body for our audit work, this independent
auditor’s report, or any of the opinions we have formed.

How the matter was addressed in our audit

Responsibilities of the Directors for the consolidated
financial statements

Inventory – Milk Cost
Refer to Note 12 of the financial statements.
The group has inventory of $108 million (2022: 108
million) which represents 29.4% of total assets.
A significant portion of the cost of finished goods inventory
is represented by an estimated cost for milk solids
supplied by co-operative shareholders and actual cost for
milk produced by other suppliers.
The group has determined that the estimated cost of
the milk solids supplied from co-operative shareholders isbest represented by the Farmgate Milk Price calculated inaccordance with the Farmgate Milk Price Manual.
A model is prepared to calculate the weighted average
cost of milk solids supplied from both co-operative
shareholders and other suppliers. The weighted
average cost of milk solids supplied is then split into
the individual cost for three core product ingredients(Fat, Whey protein and Casein protein). The model
incorporates a number of significant inputs, including
the Farmgate Milk Price, purchased milk cost fromother suppliers, and a valued component ratio of fat toprotein.
The judgment required to consider these variabilities
and uncertainties are the reason we have considered
this a key audit matter.

Our audit procedures included, among others,
challenge of management’s significant input
assumptions in the model.

The Directors, on behalf of the company, are responsible for:

— The preparation and fair presentation of the consolidated financial statements in accordance with generally

We considered the appropriateness ofmanagement’s use of the Farmgate Milk Price as
the best estimate of the cost of milk solids supplied
from the co-operative shareholders.
We compared the Farmgate Milk Price used to the
publicised rate for the 2022/23 season.
We compared a sample of purchased wholemilk
and cream from other parties to their respective
invoices.

accepted accounting practice in New Zealand (being New Zealand Equivalents to International Financial
Reporting Standards) issued by the New Zealand Accounting Standards Board;— Implementing necessary internal control to enable the preparation of a consolidated set of financial
statements that is free from material misstatement, whether due to fraud or error; and— Assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless they either intend to liquidate or tocease operations or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the consolidated
financial statements

We compared the valued component ratio of fat toprotein in the model to the ratio that was physicallypaid to farmers based on their fat and protein
supply split during the 2022/23 season.
We checked that the split of protein into its casein
and whey components was calculated correctly.
We checked that the mechanics of the model were
calculating correctly and were consistent with theprior year.
We did not identify material exceptions from theprocedures performed and found the judgements
and assumptions to be balanced and consistent.

Other information

Our objective is:— To obtain reasonable assurance about whether the consolidated financial statements as a whole are freefrom material misstatement, whether due to fraud or error; and— To issue an independent auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordancewith ISAs NZ will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
A further description of our responsibilities for the audit of these consolidated financial statements is located at
the External Reporting Board (XRB) website at:

The Directors, on behalf of the group, are responsible for the other information included in the entity’s Annual
Report. Other information includes Directory, 2022 / 2023 In Review and Statutory Information. Our opinion on the
consolidated financial statements does not cover any other information and we do not express any form ofassurance conclusion thereon.
In connection with our audit of the consolidated financial statements our responsibility is to read the otherinformation and, in doing so, consider whether the other information is materially inconsistent with the consolidated
financial statements, or our knowledge obtained in the audit or otherwise appears materially misstated. If, basedon the work we have performed, we conclude that there is a material misstatement of this other information, weare required to report that fact. We have nothing to report in this regard.

Page 27

http://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/
This description forms part of our independent auditor’s report.
The engagement partner on the audit resulting in this independent auditor's report is Murray Dunn.

KPMG
Hamilton
9 October 2023
Page 28

60

Tatua Annual Report 2023

Tatua Annual Report 2023

DIRECTORY

Registered OfficeChair3434 State Highway 26
TatuanuiMorrinsville 3374
NEW ZEALAND

SB Allen

Postal Address
Private Bag 800
Morrinsville 3340
NEW ZEALAND

Directors
Dr. LE Cullen
MBN Dewdney
JL Langley
RJ Luxton
DP Muggeridge
PM Schuyt
DJ Walsh

Telephone

Chief Executive Officer+64 7 889 3999

BA Greaney

Websitewww.tatua.com

General Manager Finance and Administration
ML Bull
General Manager Operations

Auditors
KPMG

TA Keir
General Manager Marketing and Sales

Bankers

SJ Rolfe

Bank of New Zealand Ltd

General Manager Co-operative Affairs

Insurance Brokers
Willis Towers Watson Ltd

PJ van Boheemen
General Manager Strategic Projects
TA Winter
Head of People and Capability
PA Pilkington

61

FROM HERE
TO THE WORLDtatua.com