Annual Report 2018

Building thefuture together

4

2018
key highlights
Together we are building
the future of specialised dairy

Group operating
revenue of349$

million$8.10
Cash payout toshareholders per
kg/milksolids

The Tatua Co-operative Dairy Company Limited Annual Report 2018$

8.62
Total earnings
per kg/milksolids

Contents
4-5

Key Highlights and Contents

7-11

Report from the Chairman
and Chief Executive Officer

12-13

Farewell John Powell, Colin Foster
and Bruce Wilton

14

Welcome Tim Keir, Susanne Rolfeand Michelle Bull

Financial Statements
18

Key Financial Performance Summary

19-21

Statutory Information

22

Balance Sheet

23

Statement of Comprehensive Income

24Statement of Changes in Equity

25

Statement of Cash Flows

26-47

Notes to the Financial Statements
Reinvestment of52¢

per kg/milksolids

48-49

Independent Auditor’s Report50

Statistics and Progress Table

51

Directory

5

6

STEPHEN ALLEN
Chairman

BRENDHAN GREANEY
Chief Executive Officer

The Tatua Co-operative Dairy Company Limited Annual Report 20182018 THE YEAR IN REVIEW

Report from the Chairman
and Chief Executive Officer
Over the past 100 years Tatua has developed a deep
understanding of the connection between land, people
and utilisation of milk to create specialised dairy products.
This understanding inspires everything we do, from theproduction of high quality grass fed milk by our farmers,
through to our enduring relationships with customers inmore than 60 countries around the world.

7

82018 THE YEAR IN REVIEW

Report from The Chairman
and Chief Executive Officer

Tatua’s grass fed milk supply was
impacted for the second year runningby especially wet spring weather
conditions, resulting in a 2% reduction in
annual shareholder supplied milksolids
to 14.69 million kilograms. Despite thechallenging conditions and lower
volumes, milk quality remained high.
Global commodity prices remained favourable for our bulk
ingredient product mix of caseinate, whey protein concentrate
and anhydrous milkfat. This was despite some softening of
the record anhydrous milkfat prices during the year.
Continued development of our more specialised products,
alongside our bulk ingredients business, contributed favourably
to increased revenue and our full year result.
The growth of our specialised products was in response tostrong demand across a number of our product groups andkey markets, including Australia, China, Japan, USA, andSouth East Asia. Many of these products are based on
externally procured dry ingredients, enabling production
growth without milk collection expansion.
Total income for the Group grew to a record $357 million.
This equated to total earnings of $8.62 per kilogram ofshareholder supplied milksolids, before retentions and taxation.
A decision was taken to retain 52 cents per kilogram ofmilksolids for reinvestment in the business, resulting in a cash
payout to shareholders of $8.10 per kilogram of milksolids.
In line with our strategic priorities we are increasing oursustainability focus across our entire supply chain. This has
included the establishment of a wastewater management
roadmap for our manufacturing site, and with the support ofour farmers, development and introduction of the Tatua 360
responsible farming programme.

There has been much discussion within the industry andmedia relating to the environment, genetic modification,
alternative proteins and disruptive food technologies.
We remain aware of these developments and the need
to be well positioned strategically to respond as appropriate.
Climate change has emerged as a potentially significant issue
for ruminant animal based agriculture. We have actively
engaged in the conversation on the future shape of a zerocarbon economy and how we can best contribute toward thisas a dairy based business.
We will continue to develop and evolve our sustainability
initiatives with a long term view, and for the benefit of our
future generations.
We welcomed Tim Keir as our General Manager Operations
that had been vacant for over 12 months. Tim joined us
from Fonterra in January.
We farewelled John Powell, General Manager Marketingand Sales in February, and were fortunate to have
Susanne Rolfe from Mondelez International join us as
John’s replacement in April.
Colin Foster, General Manager Finance and Administration
departed Tatua at year end. Michelle Bull was internallyappointed to this role from her previous roleas Financial Controller.
Tributes to John and Colin and introductions to Tim,
Susanne and Michelle are included in this report.
Our new Enterprise Resource Planning system was
implemented at the beginning of the year. This represented
significant change for many of our people and impacted
most in some way. It is generally acknowledged the system
has simplified work in a number of areas and provides
a sound foundation on which we will continue tobuild functionality.

The Tatua Co-operative Dairy Company Limited Annual Report 20189

“We were never going to be thebiggest, so we embarked on a niche
strategy of adding value to our milk to
be a specialised food and ingredients
producer for the rest of the world.
Our success has been a great teameffort by an incredibly passionate
and dedicated team of people.”
Stephen Allen | Chairman

102018 THE YEAR IN REVIEW

Report from The Chairman
and Chief Executive Officer

Tatua 360 is our on-farm responsible farming programme. It includes the coreelements of environmental custodianship, animal care, farm systems,
milk quality and central to the programme is the welfare, wellbeing and developmentof our people. The programme is consistent with the range of commitments
included in the New Zealand dairy industry’s Dairy Tomorrow strategy.

Our People programme
includes training anddevelopment, welfare
and wellbeing of people.

Our Milk Quality
programme includes
management and qualityof milk supply.

Our Animal Care
programme involves
the health, welfare,wellbeing andmanagement of animals.

Our Farm Systems
programme includes
biosecurity, biodiversity
and sustainablesystems.

Our Environment
programme involves
environmental
sustainability of land,
waterways and climate.

The Tatua Co-operative Dairy Company Limited Annual Report 2018

Tatua 360

Outlook

Tatua has historically concentrated its added value activities
within the business, working collaboratively with our customers
to design and produce specialist food ingredient solutions.
While we expect that this will continue in future, we are mindfulthat our customers are increasingly interested in the provenanceof their food and food ingredient products.

Our capital investment for the year ahead will be broadly
in line with our depreciation and will be focussed on plant
upgrades, sustainability and infrastructure projects.

In acknowledgement of both customer and consumer
interest in activities and practices behind the farm gate we
spent much of the past year engaging with our farmers on
how we could best respond. The outcome of this process
was the Tatua 360 responsible farming programme.
The Tatua 360 programme has the core components
of environmental custodianship, animal care, farm systems
including biosecurity, and milk quality. Central to thesecomponents is the welfare, wellbeing and developmentof people.
Tatua 360 will be progressively implemented on farm overcoming years and will continue to be developed alongside
our farmers, customers, and community.
In time, we anticipate Tatua 360 will become an integral
part of our value add proposition.

11

The investments we have made in processing equipment
and support systems over the past several years havegiven us capacity for volume growth of our specialist
products. We will utilise this to achieve value growth fromadditional sales volume across our markets, as well as
further product mix optimisation.
We will need to remain agile to respond to the volatility anduncertainty that we expect will continue in our global markets.
Despite this, we remain optimistic in our outlook for thebusiness for the year ahead.

Acknowledgements
Firstly, thank you to all of our people at Tatua for yourcommitment, dedication and hard work in all that has beenachieved in a very productive and transformational year.
A solid financial result does not fully reflect all that has beenachieved through your efforts.
Thank you to our Shareholders. Your full and continued
support and engagement with the co-operative and ourpeople is both valued and appreciated, along with the highquality of milk that you continue to supply.
We would also like to thank our suppliers and providersof goods and services. Across our supply chain you are vitalto our ongoing success.
Thank you to our customers in all of our markets. We value
the trust that you place in us as a supplier and the relationshipsthat we have with each of you that are so important to us.

Stephen Allen | Chairman

Brendhan Greaney | Chief Executive Officer

12

FarewellDuring the year we said farewell to two key members of our leadershipteam, John Powell and Colin Foster. In March, after 15 years’ service,
we farewelled John Powell, General Manager Marketing and Sales andin July we farewelled General Manager Finance and Administration,
Colin Foster after 23 years’ service to Tatua.

John PowellColin Foster

John led Tatua’s customer facing teams for over 15 years,
initially as General Manager Nutritionals from 2002 – 2007,
and then General Manager Marketing and Sales from 2007
until March 2018.

Colin joined Tatua in 1995 as Financial Accountant before
becoming General Manager Finance and Administrationfrom 2001. He held that role until July 2018.

The business developed considerably over this period,
becoming a fully integrated global food ingredient supplierwith subsidiaries in Japan, China and the USA, and withcustomers in more than 60 countries.
When John became General Manager of Marketing and Sales,
he reorganised the commercial division into six business units
to enable and support the growth of the specialised productstreams that we have today, and that remain integral to Tatua’s
proposition as a supplier of specialised dairy ingredients.
John was highly respected for his knowledge of the markets
and customers, and his deep understanding of dairy. His “bigpicture” thinking and extensive network of valued relationships
throughout the industry have been instrumental in shaping
the business we have today.
We would like to thank John for his contribution to thesuccess of Tatua and wish him the very best for whatever
he chooses as his next challenge.

He has been a well-respected constant through all of thechanges that have occurred at Tatua over his 23 years ofservice. Over this time the business has grown from revenueof $63 million to more than $350 million, and has become
considerably more complex in all areas including Financeand Administration.
In his time at Tatua he worked with three Chief Executives who
have especially valued his analytical capabilities, his leadershipof treasury and his deep understanding of the business andthe industry.
Colin was highly respected within Tatua and by our finance,
insurance, legal and other professional service providers.
We take this opportunity to thank Colin for his commitment
and contribution to Tatua throughout his tenure and wish himvery well for the future.

The Tatua Co-operative Dairy Company Limited Annual Report 201813

Bruce Wilton
2018 is Bruce Wilton’s final year as a Tatua Director.
The Wilton family’s association as shareholders of Tatua
goes back over 100 years.
Bruce’s 15 years of service as a board member has included
contributions to the People and Remuneration Committee,
as well as serving on the Finance, Audit and Risk and Farm
Advisory Committees. Bruce also led the inaugural Emerging
Leaders Programme for the development of future directors
and leaders. This programme has been hugely successful
for Tatua and continues to evolve today.

With an extensive background in the fertiliser industry,
Bruce was a recipient of a FAME Scholarship and thishas resulted in extensive study of the international
agricultural food sector.
When Bruce joined the Tatua Board in 2003 the Company
was in the very early stages of deregulation and operation
as a standalone fully independent company, after havingexited the New Zealand Dairy Board in 2001.
Bruce has been part of a board which has overseen
the development of Tatua’s international marketing andsales operations, including the establishment of our threesubsidiaries. He has worked with three Chief Executives andbeen part of the decision making that has seen significant
investment in Tatua’s manufacturing and logistics capabilities.
Bruce has always held both Tatua and its shareholders
interests and wellbeing at the forefront of his thinking.
His empathy with people, calm demeanour and friendshipwill be greatly missed. Fortunately he will remain with us
as a shareholder amongst the Tatua family, continuing theWilton family’s association with Tatua.

14

WelcomeDuring this financial year we welcomed three new members into the Tatua Leadership
Team. Tim Keir joined the Company in January 2018, as General Manager Operations,and Susanne Rolfe joined the team as General Manager Marketing and Sales in
April 2018, following the departure of John Powell. Michelle Bull joined the team in
August 2018, following Colin Foster’s departure.

Tim Keir
Tim Keir joined Tatua in January after an extensive career with
Fonterra and New Zealand Dairy Group. Tim leads Tatua’s
manufacturing, technical services, engineering, supply chain,procurement and waste water teams.
Tim’s dairy experience includes working in commodity andhigh value nutrition areas, engineering and milk collection.
He has spent time in NZ, Asia, USA, Europe and the Middle
East working with vendors and customers optimising value
streams. Tim holds a Master’s degree in Dairy Scienceand Technology, and a Bachelor of Technology majoring inEnvironmental Engineering from Massey University.

Susanne Rolfe
Susanne was appointed General Manager Marketing andSales in April. She leads Tatua’s marketing and sales teamwhich includes the NZ based business units and the subsidiary
offices in Japan, China and the USA.
Susanne has extensive experience leading marketing andcommercial teams for Nestle, Coca-Cola Amatil, Danone
and Mondelez International. Over the course of her career
she has led the development and growth of successful local,
regional and global brands and businesses and has lived andworked in Australia, Indonesia, Malaysia, Russia, Switzerland
and Singapore. She holds a Master’s degree in Business
Administration (MBA) from Insead, Paris and a Bachelor ofManagement Studies degree majoring in Marketing and
Finance, from the University of Waikato.

Michelle Bull
Michelle was appointed General Manager Finance andAdministration in August. She leads Tatua’s financeand ICT team. Her previous role was as Financial Controller,a position which she held for 16 years. She worked for Audit
New Zealand and Waikato DHB in Hamilton prior to joining
the Finance team as the Management Accountant for
Tatua Nutritionals in 1996. She has worked for three Chief
Executives during her time at Tatua and was a key member ofthe ERP implementation team. Michelle holds a Bachelor ofManagement Studies degree, majoring in Accounting, fromthe University of Waikato.

The Tatua Co-operative Dairy Company Limited Annual Report 201815

“Like every family, we haveour challenges; we lookafter each other and takethese on together.”
Brendhan Greaney | Chief Executive Officer

16

The Tatua Co-operative Dairy Company Limited Annual Report 2018

17

18

KEY FINANCIAL PERFORMANCE SUMMARY
2017/ 2018 in Review

Summary
Milk Received from Suppliers
Milksolids Received from SuppliersGroup Operating Revenue
Group Surplus Before Payout & Tax
Group Depreciation
Cash Payout to Suppliers
Capital Expenditure
Group Assets
Gearing: Debt to Debt + Equity

litreskgs$
cts/kg m'solids
cts/kg m'solids
cts/kg m'solids$$%

2017/18

2016/17

165,693,452
14,686,362$349,039,451
862
84
810
$15,159,139$254,913,805
37%

166,517,809
14,968,366$327,992,294
760
75
710
$10,922,953$250,038,701
35%

Payout – Income EquivalentGroup Surplus Before Payout And Tax
900

1000

800

500
400

810

200

710

300
630

862

641

773

200

760

400

600

710

600

900

cents/kg milksolids

700

1032

cents/kg milksolids

800

100
0

0

2013/14 2014/15 2015/16 2016/17 2017/18

2013/14 2014/15 2015/16 2016/17 2017/18

Gearing (%Debt To Debt Plus Members Funds)

Members Funds

40%

140

35%

120

30%

100

$121m

40

$126m

60
$117m

37%

35%

36%

37%

10%

25%

15%

80

$100m

20%

$106m

$ millions

25%

20

5%
0

0
2013/14 2014/15 2015/16 2016/17 2017/18

2013/14 2014/15 2015/16 2016/17 2017/18

The Tatua Co-operative Dairy Company Limited Annual Report 201819

STATUTORY INFORMATION
For the Year Ended 31 July 2018

PRINCIPAL ACTIVITIESBOARD COMPOSITION

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

The Board can have up to seven elected directors from
Shareholders, and up to three appointed directors. Pursuant to theConstitution of the Company, one third of elected directors retireby rotation each year, while appointed directors are appointed fora term not longer than three years, after which they are eligible
for re-appointment for a further three year term. Elected directors,
Stephen Allen and David Muggeridge retired by rotation during theyear and were re-elected.

CO-OPERATIVE COMPANY
The Board of Directors resolved on the 27th July 2018 that,in the opinion of the Board, the Company has been a
co-operative company during the year ended 31st July 2018
because its principal activity has been processing and marketingproducts derived from milk supplied by its shareholders andbecause 100% of the voting rights in the Company are held bythose shareholders.

ROLE OF THE BOARD
Tatua’s Board of Directors is committed to managing the Groupin an ethical and professional manner, and in the best interests ofthe company and its shareholders.
Key responsibilities of the Board include:• Setting the strategic direction for Tatua and establishingpolicies to support the effective management of the company;• Appointing and reviewing the performance of the CEO;• Setting the terms of CEO and executive management
employment;• Monitoring the financial performance of the Company, andTatua’s risk management;• Ensuring that Tatua has robust corporate governance practices;• Ensuring Tatua’s regulatory and legislative compliance; and• Ensuring Tatua has robust health and safety processes which
protect all people associated with the company.
The Board and Management are committed to continuous
improvement and achieving governance practices whichmeet best practice.

FRAMEWORKThe Board delegates the day-to-day operations of the Company
to the CEO through a framework of formal delegations.
The Company’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, Environment, Health & Safety, and policies
and procedures for employees.

BOARD MEETINGS HELD DURING THE YEAR
Meetings Attended
Stephen Allen (Chairman)
Louise CullenMark Dewdney
David Muggeridge
Kevin Old
Peter Schuyt
Ross Townshend
Bruce Wilton
Board Meetings Held

7
7
7
7
7
7
7
6
7

BOARD COMMITTEES
People and Remuneration Committee: Membership comprises
Mark Dewdney (Chairman), Stephen Allen, Louise Cullen, Ross
Townshend, and Bruce Wilton. The function of the committee is toassist the Board in ensuring the organisation fulfils its remuneration,
performance management and organisational development needs.
It also assists with senior management appointments.
Finance, Audit and Risk Committee: Membership comprises Peter
Schuyt (Chairman), Mark Dewdney, David Muggeridge, Kevin Old,and Ross Townshend. The function of the committee is to assist
the Board in ensuring the organisation fulfils its audit, legal, financial
and risk management obligations and responsibilities. Approval of
the annual accounts is undertaken by the full Board.
Farm Advisory Committee: Membership comprises David
Muggeridge (Chairman), Stephen Allen, Louise Cullen,
Kevin Old, and Bruce Wilton. The function of the committee
is to assist and advise the Board on the effectiveness, integrity andcompliance of Tatua’s responsible farming programme - Tatua 360.

20

STATUTORY INFORMATION
For the Year Ended 31 July 2018

DIRECTORS’ REMUNERATIONDISCLOSURE OF INTERESTS

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:

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

Stephen Allen
Mark Dewdney
Louise Cullen
David Muggeridge
Kevin Old
Peter Schuyt
Ross Townshend
Bruce Wilton$112,000$50,917$44,905$59,667$53,417$59,667$44,667$44,667$469,905

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

Position

Company

Stephen Allen

Director,
Shareholder
Director,
Shareholder
Director,
Shareholder
Director
Director
Director,
Shareholder
Director,
Shareholder
Director
Trustee
Trustee
Trustee
Trustee

Claybrook Farms Ltd

DIRECTORS’ SHAREHOLDINGSAt 31 July 2018 Directors held the following shares in the company:

Stephen AllenDavid Muggeridge
Kevin Old
Mark Dewdney
Bruce Wilton
Louise Cullen

Beneficially
Held

NonBeneficially
Held

Held By
Associated
Persons

2,003,920
1,064,260
1,143,000
2,241,640
1,350,790
3,049,360

–
–
–
–
–
–

733,300
2,682,790-

TrusteeLouise Cullen

DIRECTORS’ INSURANCE
The company 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 cover against
costs and expenses involved in defending legal actions and any
resulting payments arising from a liability to persons (other than thecompany or related body corporate) incurred in their capacity as
Director or executive employee unless the conduct involves a wilfulbreach of duty or an improper use of inside information or position
to gain advantage.

Mark Dewdney

Claybrook No 7 Ltd
Claybrook South Ltd
RDGP Ltd
Mowata GP Ltd
Cheadle Farms Ltd
Allen Children Ltd
FMG Insurance Ltd
Sarah Ethne Allen Trust
SB & BL Allen Family Trust
Cheadle TrustDavid Johnstone
Charitable Trust
JES Allen Estate

Director,
Shareholder
Director,
Shareholder
Director,
Shareholder
TrusteeCookson Trust Farms Ltd

Director

Yanakie Farm Management
Pty Ltd
Dairy Goat Co-operative
Dewdney Family Trust

Director
Trustee/
Beneficiary
Trustee
TrusteeDirector,
Shareholder
Director,
Shareholder
Trustee

Balachraggan Farms Ltd
Capra Farming Ltd
Te Aroha Free Kindergarten
Association Incorporated

Marvic Family Trust
Mark Dewdney Family Trust
Namaste Farming Pty Ltd
Namaste Land Pty Ltd
V Dewdney Trust

The Tatua Co-operative Dairy Company Limited Annual Report 2018

Director

Position

CompanyDavid Muggeridge Director,
Shareholder

Muggeridge Farms Ltd

Kevin Old

Director,
Shareholder
Director,
Shareholder
Trustee
Trustee/
Beneficiary

Kold Holdings Ltd

Director
Director,
Shareholder
Director

TSB Bank Ltd
Dairy Investments Fund Ltd

Peter Schuyt

Director
Director
Director
Director
Director,
Shareholder
Trustee
Ross Townshend

Chairman
Chairman
Chairman
Executive
Chairman
Director,
Shareholder
Director,
Shareholder
Director,
Shareholder
Director,
Shareholder
Shareholder
Shareholder
Consultant
Consultant

Bruce Wilton

Director
Director
Director
Shareholder

VGO Ltd

EMPLOYEES’ REMUNERATION
During the year to 31 July 2018 the following number of employeesof the Group received total remuneration of at least $100,000:
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, but paid in one lump sum.

VGO Trust
CR & AL Old Trust

Pumpkin Patch Ltd(In Receivership)
Tax Management NZ Ltd
Foodstuffs North Island Ltd
DairyNZ Ltd
Alliance Group Ltd
Ahikouka Holdings Ltd
Schuyt Family Trust
MSC Consulting Group Ltd
Robert Monk Transport Ltd
Bector Automation RML Pvt
Ltd (India)
RML Engineering Ltd(and subsidiaries)
Ranworth Farm Ltd
Townshend Holdings(2015) Ltd
Townshend Developments
Ltd
Townshend Aviation Ltd
Elanza Technologies Ltd
Architectural Investments Ltd
Murray Goulburn
Co-operative Company Ltd
Rank Group Ltd
Brandmar Ltd
Fernwater Investments
2013 Ltd
Fernwater Investments
2017 Ltd
Fernwater Investments Ltd

21$100,000 - $109,999$110,000 - $119,999$120,000 - $129,999$130,000 - $139,999$140,000 - $149,999$150,000 - $159,999$160,000 - $169,999$170,000 - $179,999$180,000 - $189,999$190,000 - $199,999$200,000 - $209,999$210,000 - $219,999$220,000 - $229,999$230,000 - $239,999$240,000 - $249,999$250,000 - $259,999$300,000 - $309,999$320,000 - $329,999$330,000 - $339,999$400,000 - $409,999$450,000 - $459,999$700,000 - $749,999

DONATIONS AND GRANTS
Donations and grants for the year ended 31 July 2018
were $0 (2017: less than $24,558).

Number of
Employees
Group
53
19
14
11
3
5
7
3
2
6
1
2
1
1
1
2
1
1
1
1
1
1
137

22

BALANCE SHEETAs at 31 July 2018

GROUP
2018
($)

2017
($)

9,302,159
1,640,760
48,506,299
54,868,652
437,281
114,755,151

6,925,407
16,796,500
43,520,709
30,02949,839,017
137,125
117,248,787

127,406,241
1,175,000
6,154,272
4,653,946
769,195
140,158,654

124,730,322
1,175,000
6,236,466
648,126
132,789,914

254,913,805

250,038,701

16
18
17

56,176,909
6,185,267
24,540,780
1,658,641
22,559,535
111,121,132

10,030,200
2,247,256
23,970,221
923,205
19,404,831
56,575,713

16
8

23,150,000
23,150,000

66,000,000
969,365
66,969,365

TOTAL Liabilities Excluding Co-operative Shares Classified as a Liability

134,271,132

123,545,078

PLUS Co-operative Shares
Total Liabilities

72,603,030
206,874,162

72,583,474
196,128,552

Net Assets

48,039,643

53,910,149

Retained Earnings
Reserves
Equity38,406,559
9,633,084
48,039,643

33,025,471
20,884,678
53,910,149

72,603,030
38,406,559
9,633,084
120,642,673

72,583,474
33,025,471
20,884,678
126,493,623

NoteCurrent Assets
Cash & Cash Equivalents
Derivatives
Receivables & Prepayments
Tax Receivable
Inventories
Biological Assets
Total Current Assets

14
18
13
12

Non Current Assets
Property, Plant & Equipment
Investment Property
Intangible Assets
Deferred Tax Asset
Investments
Total Non Current Assets

9
11
10
8

Total Assets
Current Liabilities
Loans & Borrowings
Derivatives
Accounts Payable & Accruals
Tax Payable
Owing to Suppliers
Total Current Liabilities
Non Current Liabilities
Loans & Borrowings
Deferred Tax Liability
Total Non Current Liabilities

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

15

For and on behalf of the Board:
SB Allen
Chairman of Directors
9 November 2018

PM Schuyt
Chairman of Finance, Audit & Risk Committee
9 November 2018

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

The Tatua Co-operative Dairy Company Limited Annual Report 201823

STATEMENT OF COMPREHENSIVE INCOME
For the Year Ended 31 July 2018

GROUP

Note
Profit or Loss Items
Total Operating Revenue
less Payments for Milk Supplied
less Other Cost of Sales
Gross Profit
plus Other Income
less Sales & Marketing Expenses
less Administration Expenses
Surplus from Operating Activities
Finance Income
less Finance Expenses
Net Finance Income

3
4

6
6

Surplus before Income Taxless Income Tax (Expense)
Net Surplus
Other Comprehensive Income
Movement in Land Revaluation Reserve
Change in Fair Value of Cash Flow Hedges
Movement in Foreign Exchange Reserve
Income Tax on Other Comprehensive Income

7Year Ended
31 July
2018($)

Year Ended
31 July
2017($)

349,039,451(118,919,379)(190,731,005)
39,389,067

327,992,294(106,241,424)(185,956,125)
35,794,745

2,090,242(24,116,040)(11,879,693)
5,483,576

1,476,705(21,073,612)(10,092,059)
6,105,779

5,930,427(3,683,148)
2,247,279

5,319,583(3,860,015)
1,459,568

7,730,855

7,565,347(2,349,767)(2,003,318)

5,381,088

5,562,029(16,705,769)
776,560
4,677,615

11,313,897(738,730)(3,167,891)(11,251,594)

7,407,276(5,870,506)

12,969,305

Other Comprehensive Income for the Year

Total Comprehensive Income

24

STATEMENT OF CHANGES IN EQUITY
For the Year Ended 31 July 2018

Translation
Reserve ($)
236,780

Hedging
Reserve ($)
1,262,784

Revaluation
Reserve ($)
11,977,838

Retained
Earnings ($)
27,463,442

Total
Equity ($)
40,940,844(738,730)(738,730)

8,146,006
8,146,006--(738,730)
8,146,006
7,407,276(738,730)

8,146,006-

5,562,029
5,562,029

5,562,029
12,969,305

-

-

-

-

-

Balance at 31 July 2017

(501,950)

9,408,790

11,977,838

33,025,471

53,910,149

Balance at 1 August 2017
Other Comprehensive Income
Movement in Foreign Exchange Reserve
Movement in Land Revaluation Reserve
Movement in Hedging Reserve, Net of Tax
Total Other Comprehensive Income(501,950)

9,408,790

11,977,838

33,025,471

53,910,149

776,560
776,560(12,028,154)(12,028,154)--

776,560(12,028,154)(11,251,594)

Tax Paid Surplus/(Deficit)
Total Comprehensive Income

776,560(12,028,154)-

5,381,088
5,381,088

5,381,088(5,870,506)

-

-

-

-

-

274,610(2,619,364)

11,977,838

38,406,559

48,039,643

GROUP
Balance at 1 August 2016
Other Comprehensive Income
Movement in Foreign Exchange Reserve
Movement in Land Revaluation Reserve
Movement in Hedging Reserve, Net of Tax
Total Other Comprehensive Income
Tax Paid Surplus/(Deficit)
Total Comprehensive Income
Transactions with owners of Company
Issue of ordinary shares under bonus share issue

Transactions with owners of Company
Issue of ordinary shares under bonus share issue
Balance at 31 July 2018

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

The Tatua Co-operative Dairy Company Limited Annual Report 201825

STATEMENT OF CASH FLOWSFor the Year Ended 31 July 2018

GROUP
Year Ended
31 July
2018($)

Year Ended
31 July
2017($)

354,839,216
330
29,186354,868,732

326,557,311
105,500
326,662,811(114,476,309)(217,525,397)(3,657,425)(2,529,998)(338,189,129)(106,297,631)(201,996,366)(3,829,358)(354,804)(312,478,159)

16,679,603

14,184,652

131,723
131,723

241,261
41,973
283,234(16,341,404)(121,069)(16,462,473)(10,848,305)(5,883,194)(16,731,499)(16,330,750)(16,448,265)

19,556
3,296,709
3,316,265

1,136,735
519,330
1,656,065(1,288,366)(1,288,366)(3,193,565)(3,193,565)

Net Cash Flows From/(Applied To) Financing Activities

2,027,899(1,537,500)

Net Increase/(Decrease) in Cash & Cash Equivalents
Add: Opening Cash & Cash Equivalents Balance
Closing Cash & Cash Equivalents Balance

2,376,752
6,925,407
9,302,159(3,801,113)
10,726,520
6,925,407

NoteCash Flows From Operating Activities
Cash was provided from:
Receipts from Customers
Dividends Received
Interest Received
Cash was applied to:
Payments for Milk
Payments to Creditors & Employees
Interest Paid
Taxation Paid

Net Cash Flows From/(Applied To)
Operating Activities

21

Cash Flows From Investing Activities
Cash was provided from:
Proceeds From Sale of Property, Plant & Equipment
Proceeds From Investments
Cash was applied to:
Acquisition of Property, Plant & Equipment
Acquisition of Intangible Assets
Purchase of Share Investments

Net Cash Flows From/(Applied To) Investing Activities
Cash Flows From Financing Activities
Cash was provided from:
Increase in Co-operative Shares
Proceeds from Borrowings

15

Cash was applied to:
Decrease in Co-operative Shares
Repayment of Borrowings

14

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

26

NOTES TOTHE FINANCIAL
STATEMENTS
1

Reporting Entity

2

Basis Of Preparation

3

Operating Revenue and Other Income

4

Administration Expenses

5

Personnel Expenses

6

Finance Income and Expenses

7

Income Tax Expense

8

Deferred Tax Assets and Liabilities

9

Property, Plant and Equipment

10

Intangible Assets

11

Investment Property

12

Inventories

13

Receivables and Prepayments

14

Cash and Cash Equivalents

15

Members Funds

16

Loans and Borrowings

17

Accounts Payable and Accruals

18

Derivatives

19

Financial Risk Management

20

Leases21

Reconciliation Of Cash Flows From Operating Activities

22

Related Party Transactions

23

Group Entities

24

Subsequent Events

The Tatua Co-operative Dairy Company Limited Annual Report 2018

1. REPORTING ENTITY
The Tatua Co-operative Dairy Company Limited (the parent company) is a co-operative company domiciled and incorporated in
New Zealand, and registered under the Co-operative Companies Act 1996 and the Companies Act 1993. At 31 July 2018 theGroup 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.
Tatua is an FMC reporting entity in terms of the Financial Markets Conduct Act.
The Group is a producer and marketer of dairy products with sales to both domestic and export markets.
These financial statements are for the year ended 31 July 2018.

2. BASIS OF PREPARATION
The financial statements have been prepared on a going concern basis, and the accounting policies have been consistently
applied throughout the period.
(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). They comply with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) and otherapplicable Financial Reporting Standards, as appropriate for profit oriented entities. These financial statements also comply
with International Financial Reporting Standards (IFRS).
These accounting policies have been applied consistently to all periods presented in these financial statements.
These financial statements were approved by the Board of Directors on 9 November 2018, and have been prepared inaccordance with the New Zealand Companies Act 1993 and the Financial Reporting Act 2013.

(b)

Basis of Measurement
The financial statements are prepared on the historical cost basis except for the following:••••Land and improvements are valued at fair value. Refer to Note 9Biological assets are measured at fair value less point-of-sale costs.
Investment property is measured at fair value. Refer to Note 11
Derivative financial instruments are measured at fair value. Refer to Note 18(c)Functional and Presentation Currency
The financial statements are presented in New Zealand dollars (NZD), which is the Company’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 been rounded 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 application of accounting policies and the reported amounts of assets, 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 arerecognised in the period in which the estimate is revised and in any future periods affected. In particular, information
about significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have themost significant effect on the amount recognised in the financial statements are described in the following 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 andAccounts Payable which are stated inclusive of GST.

27

28

2. BASIS OF PREPARATION (CONTINUED)(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
The Group has not early adopted the following new and revised standards, amendments or interpretations
that have been issued but are not yet effective:(i)

NZ IFRS 15 ‘Revenue from contracts with customers’ (effective for the 2019 financial statements). This standard will replace
the current revenue recognition guidance in NZ IAS 18 Revenue and NZ IAS 11 Construction contracts and is applicable
to all entities with revenue. It sets out a 5 step model for revenue recognition to depict the transfer of promised goods orservices to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange forthose goods or services. The Group has yet to fully assess NZ IFRS 15’s impact.

(ii) NZ IFRS 9 `Financial instruments’ (effective for the 2019 financial statements). NZ IFRS 9 will replace IAS 39 Financial
instruments and will simplify the mixed measurement model as well as establish three primary measurement categories
for financial assets: amortised cost, fair value through other comprehensive income and fair value through financial
performance. The Group has yet to fully assess the impact of this standard.
(iii) NZ IFRS 16 `Leases’ (effective for the 2020 financial statements). This standard will replace all existing guidance on leases,
including NZ IAS 17 Leases. The standard introduces a single, on balance sheet accounting model for leases that is similar
to current financial lease accounting. The Group has yet to fully assess NZ IFRS 16’s full impact.

3. OPERATING REVENUE AND OTHER INCOME
GROUP

Operating Revenue
Other Income
Sundry Asset Sales/Gain on Disposal of Property, Plant & Equipment
Rental Income from Investment Property
Rental Income from Farm Houses
Insurance Claim Proceeds
MilkTest NZ Ltd Income
Royalties/Commission
Sundry Income

Operating Revenue and Other Income

2018
($)

2017
($)

349,039,451

327,992,294

33,08275,00052,338239,823
949,519
740,480
2,090,242

3,680
97,00038,781
79,234
244,684
655,910357,416
1,476,705

351,129,693

329,468,999

Policy(a)Operating Revenue
Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns andallowances, trade discounts and volume rebates. Revenue is recognised when the significant risks and rewards of ownershiphave been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods
can be estimated reliably, and there is no continuing management involvement with the goods. Transfers of risks and rewards
vary depending on the individual terms of the contract of sale.
(b)

Other Income
Rental income from investment property is recognised in profit or loss on a straight-line basis over the term of the lease.
Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease.
Sundry income is measured at the fair value of consideration received or receivable.

The Tatua Co-operative Dairy Company Limited Annual Report 201829

4. ADMINISTRATION EXPENSES
GROUP
2018
($)

2017
($)

Auditors Remuneration (KPMG)
Audit of Financial Statements
Other Services

143,864
6,275

129,851
28,500

Directors' Fees
Directors' Expenses

469,905
5,548

472,000
4,383

The following items are included in administration expenses:

Other services are in relation to advice on operational tax matters, as well as a share registry audit.

5. PERSONNEL EXPENSES
GROUP

Wages and Salaries
Superannuation Contributions and Other Employee Related Expenses
Increase in Liability for Short-term Employee Benefits (Annual Leave and Days in Lieu)

2018
($)

2017
($)

39,708,369
3,831,486
542,55444,082,409

36,537,252
3,825,325
135,707
40,498,284

Personnel expenses are included in cost of sales, sales & marketing expenses and administration expenses.
PolicyEmployee Benefits• Defined Contribution Plans
Obligations for contributions to defined contribution pension plans are recognised as an expense in profit or loss when they are due.
•Short-term Benefits
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 the employee and the obligation can be estimated reliably.

30

6. FINANCE INCOME AND EXPENSES
GROUP
2018
($)

2017
($)

Recognised in Profit or Loss
Interest Income
Net Foreign Exchange Gain
Net Change in Fair Value of Derivatives
Total Finance Income

29,186
5,901,241
5,930,427

105,500
3,744,606
1,469,477
5,319,583

Net Foreign Exchange Loss
Financial Overheads
Net Change in Fair Value of Derivatives
Interest Expense on External Borrowings
Total Finance Expenses(25,723)(3,657,425)(3,683,148)(30,657)(3,829,358)(3,860,015)

Net Finance Income/(Expenses)

2,247,279

1,459,568

Policy(a)Finance Income and Expenses
Interest income is recognised as it accrues, using the effective interest method.
All borrowing costs are recognised in profit or loss using the effective interest method, except for those that are directly
attributable to the acquisition, construction or production of a qualifying asset, in which case they are capitalised as partof the cost of that asset.
(b)Foreign Currency Transactions
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.

7. INCOME TAX EXPENSE
GROUP

Income Tax Recognised in Profit or Loss
Current Tax Expense
Current Period
Adjustment for Prior Periods
Deferred Tax Expense
Origination and Reversal of Temporary Differences
Adjustment for Prior Periods

Total Income Tax Expense

2018
($)

2017
($)

3,286,358
9,105
3,295,463

1,222,019(96,584)
1,125,435(978,885)
33,188(945,697)

780,612
97,271
877,883

2,349,766

2,003,318

The Tatua Co-operative Dairy Company Limited Annual Report 201831

7. INCOME TAX EXPENSE (CONTINUED)
GROUP
2018
(%)
Reconciliation of Effective Tax Rate
Profit for the Period
Total Income Tax Expense
Profit Excluding Income Tax
Income Tax Using the Group’s Domestic Tax Rate
Impact of Tax Rate in Foreign Countries
Tax Exempt Income
Non-deductible Expenses
Tax Credits Converted to Losses
Recognition of Previously Unrecognised Tax Losses
Under/(Over) Provided in Prior Periods

GROUP
2018
($)

2017
(%)

5,381,088
2,349,767
7,730,855
28.0%(0.7%)(0.0%)
3.4%(0.0%)(0.8%)
0.5%
30.4%

2,164,640(56,812)(3,357)
263,386(92)(60,291)
42,293
2,349,767

2017($)
5,562,029
2,003,318
7,565,347

28.0%(0.2%)(0.2%)(0.2%)(0.0%)(0.8%)
0.0%
26.5%

2,118,298(18,740)(16,800)(16,868)(92)(63,165)685
2,003,318

GROUP

Income Tax Recognised Directly in Other Comprehensive Income
Derivatives
Total Income Tax Recognised Directly in Other Comprehensive Income

2018
($)

2017
($)

4,677,615(3,167,891)

4,677,615(3,167,891)

GROUP

Imputation Credits
Imputation Credits Available for use in Subsequent Reporting Periods

2018
($)

2017
($)

24,329,569

22,620,804

PolicyIncome tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to theextent that it relates to items recognised directly in equity or in other comprehensive income, in which case it is recognised inequity or in other comprehensive income.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted
at the reporting date, and any adjustment to tax payable in respect of previous years.

32

8. DEFERRED TAX ASSETS AND LIABILITIESRecognised Deferred Tax Assets and Liabilities – GROUP
AssetsDeferred tax assets andliabilities are attributable
to the following:
Property, Plant andEquipment
Investment Property
Derivatives
Biological Assets
Inventory
Provisions and Accruals
Other items
Tax Assets/(Liabilities)

Liabilities

Net

2018
($)

2017
($)

2018
($)

2017
($)

2018
($)

2017
($)

1,351,007
1,018,641
1,119,482
1,245,830
4,734,960

1,195,703
443,907
1,134,750
2,774,360(81,014)(81,014)(81,014)(3,658,974)(3,736)(3,743,724)

1,351,007(81,014)1,018,641
1,119,482
1,245,830
4,653,946

1,195,703(81,014)(3,658,974)
443,907
1,134,750(3,736)(969,364)

Movement in Temporary Differences During The Year

Deferred tax assets andliabilities are attributable
to the following:
Property, Plant andEquipment
Investment Property
Derivatives
Biological Assets
Inventory
Provisions and Accruals
Other Items
Tax Assets/(Liabilities)

Balance1 August
2016($)

Recognised
in Profit or
Loss
($)

Recognisedin Other
Comprehensive
Income($)

Balance31 July
2017($)

Recognised
in Profit or
Loss
($)

Recognisedin Other
Comprehensive
Income($)

Balance31 July
2018($)

885,688(81,014)(491,083)
1,243,159
1,514,925
4,734
3,076,409

310,015(799,252)(380,175)(8,470)(877,882)(3,167,891)(3,167,891)

1,195,703(81,014)(3,658,974)
443,907
1,134,750(3,736)(969,364)

155,304
675,575
111,080
3,736
945,695

4,677,615
4,677,615

1,351,007(81,014)1,018,641
1,119,482
1,245,830
4,653,946

PolicyDeferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which
temporary differences can be utilised based on the ability of the company to record taxable profits through retentions or throughthe reclassification of payout. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is nolonger probable that the related tax benefit will be realised.

The Tatua Co-operative Dairy Company Limited Annual Report 201833

9. PROPERTY, PLANT AND EQUIPMENT
Land &
Improvements($)

Buildings($)

Plant &
Equipment($)

Vehicles($)

Capital WorkIn Progress
($)

Total
($)

19,108,226
82,43549,684,894
177,961

166,273,183
3,841,310

3,931,032
102,251

6,959,077
6,718,996

245,956,142
10,922,953

19,190,661(20,014)49,842,841(701,691)
169,412,532(471,084)
3,562,199

13,678,073(1,192,789)
255,686,306

19,190,661-

49,842,841
689,242

169,412,532
20,011,897

3,562,199
127,217

13,678,073(5,669,214)

255,686,306
15,159,140

19,190,661

50,532,083(211,202)
189,213,227(302,507)
3,386,909

8,008,859(513,709)
270,331,737

Depreciation andImpairment Losses
Balance at 1 August 2016
Depreciation
Disposals
Balance at 31 July 2017

1,231,086
177,496
1,408,582

13,355,719
1,294,974(17,659)
14,633,034

103,203,079
9,574,372(618,733)
112,158,718

2,871,045
183,866(299,261)
2,755,650-

120,660,929
11,230,708(935,653)
130,955,984

Balance at 1 August 2017
Depreciation
Disposals
Balance at 31 July 2018

1,408,582
175,298
1,583,880

14,633,034
1,264,606
15,897,640

112,035,681
10,775,039(197,019)
122,613,701

2,878,687
186,541(234,953)
2,830,275-

130,955,984
12,401,483(431,972)
142,925,495

Carrying Amounts
At 1 August 2016
At 31 July 2017
At 1 August 2017
At 31 July 2018

17,877,140
17,782,079
17,782,079
17,606,781

36,329,175
35,209,807
35,209,807
34,634,444

63,330,610
57,514,590
57,514,590
66,599,526

799,211545,773545,773556,634

6,959,077
13,678,073
13,678,073
8,008,859

125,295,213
124,730,322
124,730,322
127,406,241

GROUP
Cost or Deemed Cost
Balance at 1 August 2016
Additions
Revaluation of Land andImprovements to Fair Value
Disposals
Balance at 31 July 2017
Balance at 1 August 2017
Additions
Revaluation of Land andImprovements to Fair Value
Disposals
Balance at 31 July 2018

Policy(a)
Recognition and Measurement for Assets at Cost
Items of property, plant and equipment (except land and improvements) 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.
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset arecapitalised as part of the cost of the asset. Borrowing costs capitalised during the year were nil (2017: nil).
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate
items (major components) of property, plant and equipment.

34

9. PROPERTY, PLANT AND EQUIPMENTPOLICY (CONTINUED)(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 and equipment. Land is not depreciated. Depreciation is recognised as part of other cost of sales in the Profit or Loss.
Depreciation methods, useful lives and residual values are reassessed at the reporting date.
The Group has established the following useful lives:
•
•
•
•

(c)

Land improvements - 10 to 20 years
Buildings - 3 to 40 years
Plant and equipment - 2 to 20 years
Vehicles - 3 to 5 years

Impairment
At each reporting date, the Group reviews its assets to determine whether there is any indication of impairment. If any such
indication exists, the recoverable amount of the asset (or any cash generating unit it belongs to) is estimated in order todetermine the extent of the impairment loss (if any).
Recoverable amount is the higher of fair value less costs to sell and value in use (estimated future cash flows).
If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is
reduced to its recoverable amount. An impairment loss is recognised in the Statement of Comprehensive Income immediately.
Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has
decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine
the recoverable amount (other than goodwill). An impairment loss is reversed only to the extent that the assets carrying amount
does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment
loss had been recognised.

(d)

Recognition and Measurement for Assets at Fair Value
Land and improvements are stated at their fair value. The fair value of land within property, plant and equipment is based onmarket values determined by an independent valuer.
The last revaluation was undertaken as at 31 July 2016 by Fergusson Lockwood and Associates Ltd, independent registeredvaluers. The land and improvements were valued at $15.374m, an increase of $1.292m from the 2015 year. The valuation
established a market value and was undertaken in accordance with the Property Institute of New Zealand (PINZ) International
Valuation Standards. Market value is the estimated amount for which a property should exchange on the date of valuation
between a willing buyer and a willing seller in an arms length transaction.
The value of the land and improvements at cost is $7,233,294 (2017: $5,305,121).
Any gain on remeasurement is recognised in other comprehensive income and held in equity, any loss is recognised in profit
and loss, unless there is a credit balance existing in the revaluation surplus.
The Board determined that a third party valuation of land and improvements as at 31 July 2018 was not required.
This was after performing an analysis on current industry data which suggested that land prices had not changed materially.

Capital Commitments
During the period ended 31 July 2018, the Group entered into contracts to purchase plant and equipment. The balance outstandingat balance date is $982,617 (2017: $4,284,506). These commitments are expected to be settled in the following financial year.

The Tatua Co-operative Dairy Company Limited Annual Report 201835

10. INTANGIBLE ASSETS
GROUP
Software
($)

Total
($)

2,859,486
5,883,194
8,742,680

2,859,486
5,883,194
8,742,680

8,742,680
794,155

8,742,680
794,155

9,536,835

9,536,835

Amortisation and Impairment Losses
Balance at 1 August 2016
Amortisation for the Year
Disposals
Balance at 31 July 2017

2,244,809
261,4052,506,214

2,244,809
261,4052,506,214

Balance at 1 August 2017
Amortisation for the Year
Disposals
Balance at 31 July 2018

2,506,214876,349
3,382,563

2,506,214876,349
3,382,563

Carrying Amounts
At 1 August 2016
At 31 July 2017614,677
6,236,466

614,677
6,236,466

At 1 August 2017
At 31 July 2018

6,236,466
6,154,272

6,236,466
6,154,272

Cost
Balance at 1 August 2016
Additions
Disposals
Balance at 31 July 2017
Balance at 1 August 2017
Additions
Disposals
Balance at 31 July 2018

Policy(a)
Recognition and Measurement
Intangible assets that are acquired by the Group which have finite useful lives are measured at cost less accumulated
amortisation and accumulated impairment losses.
(b)

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

Software – 2.5 to 10 years
Resource Consent – 15 years

36

11. INVESTMENT PROPERTY
GROUPBalance at 1 August
Change in Fair Value
Balance at 31 July

2018
($)

2017
($)

1,175,000
1,175,000

1,175,000
1,175,000

PolicyInvestment property is held either to earn rental income or for capital appreciation or for both. Investment property is measured at fairvalue with any change therein recognised in profit or loss. Investment property comprises the land and buildings that are leased to
PGG Wrightsons Ltd.
The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of thevaluation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each
acted knowledgeably, prudently and without compulsion.
Investment property is categorised within level 2 of the fair value hierarchy.

12. INVENTORIESGROUP

Finished Goods
Raw Materials

2018
($)

2017
($)

44,908,284
9,960,368
54,868,652

36,898,556
12,940,461
49,839,017

PolicyInventories are measured at the lower of cost or net realisable value. The cost of inventories is based on weighted average cost,and includes expenditure incurred in acquiring the inventories and bringing 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.
The cost of milk within inventory is a key judgement as it involves a number 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 valued at
the Farmgate milk price rate. The weighted average cost of milk is then separated into three core ingredients, Fat, Whey Protein andCasein Protein, with the Valued Component Ratio (value of fat to protein) being a key input to calculate the separation.
Impairment
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).
There was a write down of $769,305 during the period (2017: $421,569) relating to inventory that had a net realisable value less thanits cost of manufacture.

GROUP

Inventory valued at net realisable value included in finished goods above:

($)

($)

2018

2017

581,991

5,612,525

The Tatua Co-operative Dairy Company Limited Annual Report 201837

13. RECEIVABLES AND PREPAYMENTS
GROUP

Trade Receivables
Prepayments and Sundries

2018
($)

2017
($)

45,450,324
3,055,975
48,506,299

40,576,258
2,944,451
43,520,709

EUR(€)
126,400

CNY(¥)
13,952,164
32,847,405

GROUP
Trade Receivables Denominated in
Foreign Currencies
2018
2017

USD
($)
8,451,164
12,391,795

AUD($)
2,391,783
3,819,245

JPY(¥)
1,655,592,518
738,528,619

PolicyThe recoverable amount of the Group’s receivables carried at amortised cost is calculated as the present value of estimated future
cash flows. Since all receivables are current they are not discounted.
Trade Receivables are classed as a loans and receivables financial asset.

14. CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash balances. Bank overdrafts that are repayable on demand and form an integral part of theGroup’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
Cash and cash equivalents are classified as loans and receivables or other non-derivative financial liabilities.

GROUP
2018
($)

2017
($)

JPY Bank Deposits
USD Bank Deposits
CNY Bank Deposits
NZD Bank Deposits
Bank Deposits
Bank Overdrafts Used for Cash Management Purposes

646,962
1,586,421
2,921,000
4,147,776
9,302,159-

2,215,628
1,687,269
2,849,178
212,601
6,964,676(39,269)

Cash and Cash Equivalents in the Statement of Cash Flows

9,302,159

6,925,407

15. MEMBERS FUNDS
Voting Rights - Under the Company Constitution, voting may take place by show of hands, voice or poll. On a poll, one vote may becast 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.
Redemption Features - Shares are redeemed at nominal value of 50 cents, or paid up value if lower.
PolicyShares 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 milksolids. Shares are issued or redeemed annually to ensure compliance with the share standard. Due to theirredemption nature, shares are classified as a liability in the balance sheet. When the group performs a bonus share issue, with newshares issued at the same rate as existing shares, retained earnings is decreased to match the increase in co-operative shares.

38

15. MEMBERS FUNDS (CONTINUED)
Movements in the Company’s Issued Shares were as follows:
2018
SharesShares at the beginning of the Year
Shares Issued
Shares Repurchased
Fully Paid Shares at the end of the Year
Treasury Stock

145,146,947
6,394,993(6,335,880)
145,206,060
7,103,835($)
72,573,474
3,197,497(3,167,940)
72,603,030

2017
Shares151,837,339
2,273,470(8,963,862)
145,146,947
7,162,948

Reserves
Translation Reserve
The translation reserve comprises all foreign currency differences arising from the translation of the financial statementsof foreign operations.
Hedging Reserve
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 not yet occurred.
Revaluation Reserve
The revaluation reserve relates to the revaluation of land and improvements.
Retained Earnings
All retained earnings are attributable to equity holders of the Company.

($)
75,918,670
1,136,735(4,481,931)
72,573,474

The Tatua Co-operative Dairy Company Limited Annual Report 201839

16. LOANS AND BORROWINGSInterest-bearing borrowings are classified as other non-derivative financial liabilities and are measured at amortised costusing the effective interest rate.

GROUP
2018
($)

2017
($)

13,854,120
7,322,789
35,000,000
56,176,909

6,130,200
3,900,000
10,030,200

23,150,000
23,150,000
79,326,909

66,000,000
66,000,000
76,030,200

Year ofMaturity
Face Value
2019 ¥1,050,000,000
2019$5,000,000
2019$35,000,000

Carrying
Amount (NZD)$13,854,120$7,322,789$35,000,000

Current
JPY Bank Loans
USD Bank LoansNZD Bank Loans
Non Current
JPY Bank LoansNZD Bank Loans
Total

2018
Current Bank Loans

Currency
JPY
USD
NZD

NominalInterest Rate
1.04%
3.28%
3.7%

NZD
NZD

2.98%
2.73%

2020
2021

$20,000,000$3,150,000$20,000,000$3,150,000

Currency
JPY
NZD

NominalInterest Rate
1.11%
3.3%

Year ofMaturity
2018
2018

Face Value¥510,000,000$3,900,000

Carrying
Amount (NZD)$6,130,200$3,900,000

NZD
NZD

2.72%
2.97%

2019
2020

$31,000,000$35,000,000$31,000,000$35,000,000

Non Current Bank Loans

2017
Current Bank Loans

Non Current Bank Loans

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 the Group. 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.
The Group has committed (but undrawn) facilities with expiry dates through to 2021 of NZD $56.8 million, JPY ¥JPY 350 million and
USD $2 million.

17. ACCOUNTS PAYABLE AND ACCRUALS
GROUP

Trade Payables
Employee Entitlements
Income in AdvanceAccruals

2018
($)

2017
($)

9,053,003
6,591,707
8,896,070
24,540,780

10,786,142
6,049,153
7,134,926
23,970,221

PolicyTrade payables and accruals - Trade payables are recognised at cost and classed as other amortised cost financial liabilities.
Employee entitlements - Employee benefits which remain unused at balance date, and amounts expected to be paid
under short-term cash bonus plans are accrued for.

40

18. DERIVATIVESInterest Rate Hedges
The Group has a policy of monitoring interest rate movements and where appropriate taking
out interest rate cover. The Group currently has a number of interest rate swaps in place.

GROUP

Interest Rate Swaps
Notional Contract Amount
Fair Value
AssetsLiabilities
Net Fair Value

2018
($)

2017
($)

44,000,000

47,000,000(945,392)(945,392)(1,175,295)(1,175,295)

2018
Interest Rate Hedges

Less than
12 Months
12,000,000

More than
12 Months
32,000,000

Total
44,000,000

2017
Interest Rate Hedges

Less than
12 Months
15,000,000

More than
12 Months
32,000,000

Total
47,000,000

Foreign Currency Hedges
The Group and Parent’s foreign exchange rate contracts and options notional amounts and fair values are presented below.
Less than
12 Months

More than
12 Months

Total

Buy
Sell

92,582,615-

43,387,388-

135,970,003
-

Call
Put

80,321,705(85,436,541)

18,850,171(19,836,985)

99,171,876(105,273,526)

Less than
12 Months

More than
12 Months

Total

Buy
Sell

106,779,711-

28,801,887-

135,581,598
-

Call
Put

62,992,206(67,133,473)

33,446,889(36,153,597)

96,439,095(103,287,070)

2018
($)

2017
($)

1,640,760(5,239,875)(3,599,115)

16,796,500(1,071,961)
15,724,539

2018
Foreign Exchange Contracts:

Option Contracts:

2017
Foreign Exchange Contracts:

Option Contracts:

Fair Value
AssetsLiabilities
Net Fair Value

41

The Tatua Co-operative Dairy Company Limited Annual Report 201818. DERIVATIVES (CONTINUED)
Interest Rates Used for Determining Fair ValueThe Group uses the government yield curve as of 31 July 2018, plus an appropriate credit spread to discount financial instruments.
The interest rates for determining fair values are as described in note 16.
PolicyDerivatives 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 and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the natureof the hedge relationship.
The groups derivatives are classified as being within Level 2 of the fair value hierarchy. The fair value of forward exchange and option
contracts is determined using forward exchange rates at balance sheet date, with the resulting value discounted back to present
value. 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.
The following are recognised in profit or loss:••

any gain or loss relating to the ineffective portion of the hedging instrument; andfair 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 is recognised
in profit or loss either:••at the same time as the forecast transaction; orimmediately if the transaction is no longer expected to occur

Offsetting of Financial Assets and Liabilities
The Group enters into derivative transactions under International Swaps and Derivatives Association (ISDA) master netting agreements.
In certain circumstances - e.g. when a credit event such as a default occurs, all outstanding transactions under the agreement are
terminated, the termination value is assessed and only a single net amount is payable in settlement of all transactions. The ISDA
agreements do not meet the criteria for offsetting in the statement of financial position. This is because the Group does not have any
currently legally enforceable right to offset recognised amounts, because the right to offset is enforceable only on the occurrence of
future events such as a default on bank loans or other credit events. The following table sets out the carrying amounts of recognised
financial instruments that are subject to the above agreements.

GROUP
2018
Derivative Financial Assets
Derivative Financial Liabilities

2017
Derivative Financial Assets
Derivative Financial Liabilities

Financial
Assets/(Liabilities)
Presented

Amounts
Not Offset

Net

1,640,760(6,185,267)(4,544,507)(1,640,760)
1,640,760-(4,544,507)(4,544,507)

16,796,500(2,247,256)
14,549,244(2,247,256)
2,247,256-

14,549,244
14,549,244

42

19. FINANCIAL RISK MANAGEMENT
Capital Management
The Group’s members funds includes 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 objective is to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital.
The Group distributes its surplus by way of payout. However, in order to retain or modify the capital structure, the Group may decideto retain profits within the business.
The Board primarily monitors capital on the basis of the gearing ratio. For the period ending 31 July 2018 the gearing ratio was 37%(2017: 35%). This ratio is calculated as net interest bearing debt divided by total capital. Net interest bearing debt is calculated as
total borrowings less cash and cash equivalents. Total capital is calculated as members funds plus net interest bearing debt. Tatua isa co-operative company, and as such, members funds change in proportion to milk supplied. Refer to Note 15. The Group is required
to meet certain ratios under its bank covenants, which have been met, including a requirement that Group members funds be not lessthan $70,000,000 (2017:$70,000,000), but otherwise the Group is not subject to any externally imposed capital requirements.
There have been no material changes in the Group’s management of capital during the period.
Quantitative Disclosures
Exposure to credit, liquidity, foreign currency and interest rate risks arises in the normal course of the Group’s business.
(a)Credit Risk
The Group’s exposure to credit risk is mainly influenced by its customer base. There is no risk concentration either
geographically or by sector.
Tatua has a credit policy under which each customer is assessed for credit worthiness and assigned a credit limit. Whereavailable the Group reviews external credit reports for both country and customer risk. Credit limits are reviewed on a regularbasis. The Group’s credit policy requires certain risk mitigations such as insurance, letters of credit or prepayment depending on
the country and/or customer.
The Group does not require collateral for trade and other receivables. However, where practicable, purchase money security
interests over New Zealand-based customers are registered on the Personal Property and Securities Register.
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 and other receivables, by geographic region, is as follows:

GROUP

Australasia (NZ and AUS)
Asia/ Pacific
Americas/Europe
Other

Carrying
Amount2018($)

Carrying
Amount2017($)

7,879,660
28,979,514
8,591,149
45,450,323

8,689,016
22,095,727
9,667,201
124,31440,576,258

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

Not Past Due
Past Due 0-30 days
Past Due 31-120 days

Gross
Receivable
2018
($)

Impairment
2018
($)

Gross
Receivable
2017
($)

Impairment
2017
($)

42,722,118
1,828,371
899,834
45,450,323-

37,291,817
3,128,120
156,32140,576,258-

The Tatua Co-operative Dairy Company Limited Annual Report 201843

19. FINANCIAL RISK MANAGEMENT (CONTINUED)(b)

Liquidity Risk
Liquidity risk represents the Group’s ability to meet its contractual obligations. The Group evaluates its liquidity requirements
on an ongoing basis. 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.		
							GROUPLoans andBorrowings (note 16)
Accounts Payable
and Accruals(note 17)
Owing to Suppliers
Co-operative Shares
Total Non-derivative
Liabilities

GROUP
Loans andBorrowings (note 16)
Accounts Payable
and Accruals(note 17)
Owing to Suppliers
Co-operative Shares
Total Non-derivative
Liabilities

2018
Balance Sheet($)

ContractualCash Flows($)

Less than
6 Months($)

6-12
Months
($)

1-2
Years
($)

More Than
2 Years($)

79,326,909

79,326,909-

56,176,909

20,000,000

3,150,000

24,540,780
22,559,535
72,603,030

24,540,780
22,559,535
72,603,030

24,540,780
22,559,535-

72,603,030--

199,030,254

199,030,254

47,100,315

128,779,939

20,000,000

3,150,000

2017
Balance Sheet($)

ContractualCash Flows($)

Less than
6 Months($)

6-12
Months
($)

1-2
Years
($)

More Than
2 Years($)

76,030,200

76,030,200-

10,030,200

31,000,000

35,000,000

23,970,221
19,404,831
72,583,474

23,970,221
19,404,831
72,583,474

23,970,221
19,404,831-

72,583,474--

191,988,726

191,988,726

43,375,052

82,613,674

31,000,000

35,000,000

44

19. FINANCIAL RISK MANAGEMENT (CONTINUED)(c)

Foreign Currency Exchange Risk
The Group is exposed to foreign currency risk predominantly on sales 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
are primarily denominated are United States dollars, Japanese Yen and Australian dollars.
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 increases in the value of the New Zealand dollar against the United States dollar,
Japanese 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.
The Group classifies its forward exchange and option contracts, which are hedging forecast transactions, as cash flow hedges.
								(d)2018Net Cash Flow Exposure Before Hedging
less Foreign Exchange Contracts and Options (next 12 months)

USD($)
101,730,258(88,000,000)

AUD($)
20,504,000(12,000,000)

JPY(¥ - 000’s)
5,105,625(3,400,000)

Net Unhedged Exposure

13,730,258

8,504,000

1,705,625

2017
Net Cash Flow Exposure Before Hedging
less Foreign Exchange Contracts and Options (next 12 months)

USD($)
134,100,000(82,500,000)

AUD($)
20,300,000(9,000,000)

JPY(¥- 000’s)
3,953,000(3,100,000)

Net Unhedged Exposure

51,600,000

11,300,000

853,000

Interest Rate Risk – Repricing Analysis
Interest rate risk is the risk that the value of the Group’s assets and liabilities 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 andborrowings. Interest rate swaps have been entered into to achieve an appropriate mix of fixed and floating rate exposure within
the Group’s policy.		
Variable Rate Instruments (also refer to note 16)								

2018Cash and Cash Equivalents
NZD Bank Loans
USD Bank Loans
JPY Bank Loans
Total

Total
($)
9,302,159(58,150,000)(7,322,789)(13,854,120)(70,024,750)

6 Months
or Less($)
9,302,159
9,302,159

6-12Months($)(35,000,000)(7,322,789)(13,854,120)(56,176,909)

1-2
Years
($)
(20,000,000)(20,000,000)

More Than
2 Years($)(3,150,000)(3,150,000)

2017
Cash and Cash Equivalents
NZD Bank Loans
JPY Bank Loans
Total

Total
($)
6,925,407(69,900,000)(6,130,200)(69,104,793)

6 Months
or Less($)
6,925,407
6,925,407

6-12Months($)(3,900,000)(6,130,200)(10,030,200)

1-2
Years
($)
(31,000,000)(31,000,000)

More Than
2 Years($)(35,000,000)(35,000,000)

The Tatua Co-operative Dairy Company Limited Annual Report 201845

19. FINANCIAL RISK MANAGEMENT (CONTINUED)(e)

Sensitivity Analysis
In managing interest rate and currency risks the Group aims to reduce the impact of short-term fluctuations on theGroup’s earnings. Over the longer-term, however, permanent changes in foreign exchange and interest rates will have an
impact on profit. 							Interest Rates:									At 31 July it is estimated that a general increase of one percentage point in NZ interest rates would decrease Group profit
before income tax by approximately $425,993 (2017: $503,000). 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 Zealanddollar. At 31 July, it is estimated that a general increase of one cent in the Group’s most significant foreign exchange exposure(NZD/USD), would decrease the Group’s profit by $1,802,026 (2017: $2,273,000). Foreign exchange hedging has been
included in this calculation.		

20. LEASESOperating Leases
Leases As Lessor
The Group leases out its investment property held under an operating lease.
The future minimum lease payments under non-cancellable leases are as follows:						
			

GROUP

Less Than 1 Year1 - 5 Years
More Than 5 Years

2018
($)

2017
($)

(108,000)(108,000)(108,000)(108,000)

During the year ended 31 July 2018, $127,338 was recognised as rental income in the income statement (2017: $135,781).
Repairs and maintenance expenses, recognised in the cost of sales, was as follows:

GROUP

Income Generating Property

Year Ended
31 July 2018($)

Year Ended
31 July 2017
($)

2,270

7,407

46

21. RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIESGROUP
31 July 2018($)

31 July 2017($)

5,381,088

5,562,029

12,401,483
876,349(5,623,311)
13,035,610

11,230,708
261,405
4,045,774
41,97314,012
21,155,901(4,955,561)
15,155,740
3,938,011(5,029,635)(300,156)
3,154,704
1,305,995
13,269,098(6,293,945)(7,520,091)(5,263,280)(38,070)
747,375
1,232,159
4,146,454(12,989,398)

Items Classified as Investing/Financing Activities(9,625,105)

6,018,149

Net Cash Flows From/(Applied to) Operating Activities

16,679,603

14,184,652

Profit/(Loss) For The Year
Adjustments for Non Cash Items:
Depreciation
Amortisation of Intangible Assets
Movement in Deferred Tax
Movement in Investment Property
Movement in Livestock Valuation

Movements in Working Capital:
Trade and Other Receivables
Derivatives - Assets
Derivatives - Liabilities
Inventories
Biological Assets
Owing to Suppliers
Trade and Other Payables

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.

22. RELATED PARTY TRANSACTIONS
Directors and Shareholders
Directors and Shareholders may conduct business with the Group in the normal course of their business.		
Key Management Personnel

GROUP

Key Management Personnel Compensation
Short Term Employee Benefits
Long Term Employee Benefits

Year Ended
31 July 2018($)

Year Ended
31 July 2017($)

1,838,776-

1,875,507-

Transactions and Balances with Key Management Personnel
Key management personnel may conduct business with the Group.
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 (2017: Nil).
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 $469,905 (2017: $473,000), which is separately disclosed within the directors report.		
The following entities are considered related parties because they have common directors:•••

Tax Management NZ Ltd (Peter Schuyt) - During the year the group utilised the services of Tax Management Limited
to make tax payments through to the IRD in the ordinary course of business.
Foodstuffs North Island Ltd (Peter Schuyt) - Sales during the year (GST exclusive) $2,658,405 (2017: $1,532,077),
Receivable at year end (GST exclusive) $270,276 (2017: $252,107).
RML Engineering Ltd (Ross Townshend) - Amounts paid during the year (GST inclusive) $32,827 (2017: $13,388),
Payable at year end (GST inclusive) $446 (2017: $25,058).

The Tatua Co-operative Dairy Company Limited Annual Report 201847

22. RELATED PARTY TRANSACTIONS (CONTINUED)
Directors Farm Supply (included in Owing to Suppliers)

Directors’ Farm Supply (including Owing to Suppliers)

Value ofTransactions
17/18
($)

Balance
Outstanding
31 July 2018($)

Value ofTransactions
16/17
($)

Balance
Outstanding
31 July 2017($)

8,477,067

1,463,386

6,908,412

1,071,293

23. GROUP ENTITIESCountry Of
Incorporation

2018

2017

Japan
USA
China

100%
100%
100%

100%
100%
100%

New Zealand

10%

10%

Subsidiaries
Tatua Japan Limited
Tatua USA Limited
Tatua Dairy Products (Shanghai) Co., Limited
Equity Accounted Investee
Milktest New Zealand Limited

Ownership Interest

Policy(a)Basis of Consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power over the entity, exposure or
rights to variable returns from its involvement with the entity, and the ability to use its power over the entity to affect the amountof the entity’s return. In assessing control, potential voting rights are only considered if the rights are substantive. The financial
statements of subsidiaries are included in the consolidated financial statements from the date that control commences until thedate 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 and obligations for the liabilities. Joint ventures are initially recognised atcost (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 align the accounting policies of the Group, from the date that significant influence or joint control commences until the datethat significant influence or joint control ceases.
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
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.
Foreign currency differences are recognised in the foreign currency translation reserve (FCTR). When a foreign operation is
disposed of, 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.

24. SUBSEQUENT EVENTS
There were no material events subsequent to 31 July 2018 that would impact these financial statements.

48

dependent
or’s Report
InIndependent
AudiAudi
tor’s tReport
To the shareholders of The Tatua Co-operative Dairy Company Limited

To the shareholders of The Tatua Co-operative Dairy Company Limited

Report on the consolidated financial statements

Report on the consolidated financial statements

OpinionOpinionIn our opinion, the accompanying consolidated
We have audited the accompanying consolidated
financial statements of The Tatua Co-operative
financial statements which comprise:
In Company
our opinion,the(theaccompanying
consolidated
We have audited the accompanying consolid
Dairy
LimitedCompany) and its— the consolidated balance sheet as at 31 July
subsidiaries
Group) on pages
22 Tatua
to 47: Co-operative
financial(thestatementsof Thefinancial statements which comprise:
2018;
Limitedrespects(the Company)
i. DairypresentCompany
fairly in all material
the Group’sand its
consolidatedbalance sheet as at 31— the consolidatedthe
statementsof comprehensive
subsidiaries(theGroup)
pages
22 to 47:
financial position
as at
31 Julyon
2018
and its
income, changes2018;
in equity and cash flows forfinancial performance and cash flows for thethe year then ended; andi. present
in allandmaterial respects the Group’s
year
ended onfairly
that date;the consolidated statements of compre— notes, including a summary of significant
financial position as at 31 July 2018 and its
ii. comply with New Zealand Equivalents toincome, changes in equity and cash flow
accounting policies and other explanatory
financialFinancial
performance
andcash flows
International
ReportingStandards
and for thethe year then ended; andinformation.
year ended
on thatdate;Standards.
andInternational
Financial
Reporting——ii. comply with New Zealand Equivalents toInternational Financial Reporting Standards andBasis for opinion
International
Financial Reporting Standards.

— notes, including a summary of significanaccounting policies and other explanatorinformation.

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.

We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised) Code of
Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance Standards Board and theInternational Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA
We andconducted
our auditin accordancewith International
Standards
Auditing (New
Code),
we have fulfilled
our other
ethical responsibilities
in accordancewith theseon
requirements
and theZealand) (‘ISAs (NIESBA
Code.that the audit evidence we have obtained is sufficient and appropriate to provide a basis for ourbelieve

Basis for opinion

Our responsibilities under ISAs (NZ) are further described in the auditor’s responsibilities for the audit of the
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised) Cod
consolidated financial statements section of our report.

Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance Standards Board

Our firm has also provided other services to the Group in relation to tax advice and a share registry audit. Subject
International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IES
to certain restrictions, partners and employees of our firm may also deal with the Group on normal terms within
weofhavefulfilledourethicalin accordancewith these
theCode),ordinaryand
coursetrading
activitiesof otherthe businessof responsibilities
the Group. These mattershave not impaired
our requirements an
IESBA Code.
independence
as auditor of the Group. The firm has no other relationship with, or interest in, the Group.

Our responsibilities under ISAs (NZ) are further described in the auditor’s responsibilities for the audit oconsolidated
statements section of our report.
Otherfinancial
information

Our
firm hasalso provided
other
the
in relationincluded
to taxinadvice
and Annuala share registry aud
The
Director’s,
on behalfof the Group,
are services
responsibletofor
theGroup
other information
the entity’s
Report.
Other information
includesthe Reportfrom the Chairman
Chief may
Executive
the Key
to certain
restrictions,partners
and employees
of our& firm
alsoOfficer,
deal with
theFinancial
Group on normal term
Performance Summary, Statutory Information, Statistics & Progress Table, and Directory. Our opinion on thethe ordinary course of trading activities of the business of the Group. These matters have not impaired
consolidated financial statements does not cover any other information and we do not express any form of
independence as auditor of the Group. The firm has no other relationship with, or interest in, the Groupassurance 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 theconsolidated financial statements or our knowledge obtained in the audit or otherwise appears materially
misstated. If, based on the work we have performed, we conclude that there is a material misstatement of thisTheinformation,
Director’s,Group,
areWe
responsible
otherincluded in the entity’s
other
weon
arebehalfrequiredoftothe
reportthat fact.
have nothingfor
to thereportin thisinformation
regard.

Other information

Report. Other information includes the Report from the Chairman & Chief Executive Officer, the Key Fi
Performance Summary, Statutory Information, Statistics & Progress Table, and Directory. Our opinion oThe Tatua Co-operative Dairy Company Limited Annual Report 2018

Use of this independent auditor’s report
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
or assume 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.

Responsibilities of the Directors for the consolidated financial
statements
The Director’s, on behalf of the Company, are responsible for:— the preparation and fair presentation of the consolidated financial statements in accordance with generally
accepted accounting practice in New Zealand (being New Zealand Equivalents to International Financial
Reporting Standards) and International Financial Reporting Standards;— implementing necessary internal control to enable the preparation of a consolidated set of financial

statements that is fairly presented and 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
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; andendentauditor’sauditor’sreport reportis independent— to issue an independent auditor’s report that includes our opinion.

madesolelyto thesolely
shareholders
as a body. Our
work
been
r’s reportis madeto the shareholders
as aaudit
body.
Ourhasaudit
work has been
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordanceo the stateshareholders
those matters
we matters
are required
to stateto themin themight
to the shareholders
those
we arerequired
to stateto them in thewith ISAs NZ will always detect a material misstatement when it exists.
no other
purpose.
To purpose.
the fullestToextent
permitted
law, we doport
and forno other
the fullest
extentbypermitted
by notlaw,accept
we do not accept
therthan theshareholders
as a body
auditfraud
work,
independent
to anyone
other
than
the shareholders
asour
a bodyforourorthis
audit
work,
Misstatements
canforarise
fromerror.
Theythis
are independentconsidered material if, individually or in the aggregate,ns
weopinions
have formed.
f the
we have
they formed.
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 atf the Directors
forthe consolidated
financialfinancial
bilitiesof the the
Directors
for the consolidated
External Reporting Board (XRB) website at:nts
http://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-5/

responsiblefor:fpany,of theare
Company,
are responsiblefor:This description forms part of our independent auditor’s report.
ationof the consolidated
financial statements
accordance
generally
fair presentationof the consolidated
financial instatements
in withaccordancewith generally
The engagement partner on the audit resulting in this independent auditor's report is Trevor Newland.
Zealand(beingNew (being
ZealandNew
Equivalents
to International
Financial
gNew
practicein New
Zealand
Zealand Equivalents
to International
Financial
For
andStandards;
onbehalf ofStandards;
ationalFinancial Reportings)and International
Financial
Reportingl control
to enable
thetopreparationa consolidated
set of financial
ssaryinternal
controlenable the ofpreparationof a consolidated
set of financial
ed andfree frommaterial
misstatement,
whether duewhether
to frauddue
or error;andor error; andairly
presented
andfree frommaterial misstatement,
to fraudasa going concern.
This
includesThis
disclosing,applicable,
relatedto continue
as a going
concern.
includesas
disclosing,asmatters
applicable,
matters related
going
concernbasis
of accounting
they unlesseither intend
to liquidate
d using
the going
concernbasis of unlessaccounting
they either
intend or
to toliquidate or toalistic
to do so.but to do so.
havealternative
no realisticbut
alternative
Hamilton
9 November 2018

ibilities
for the auditof theconsolidated
financial financial
responsibilities
for theauditof the consolidated
nts

49

50

STATISTICS
2017/18

2016/172015/16

2014/15

2013/14

165,693,452
14,686,362

166,517,809
14,968,366

173,184,398
15,568,586

173,353,171
15,663,949

147,647,758
13,223,427

Income Equivalent Payout (cents/kgms)
Made up of:Cash Payout

810.0

710.0

630.0

710.0

900.0

Total Income Equivalent Payout

810.0

710.0

630.0

710.0

900.0

Milk Received from Suppliers
LitresMilksolids

Summary of Milk Payment Rates
Advance Rate
Retrospective Increase
Retrospective Increase
Retrospective Increase
Retrospective Increase
Retrospective Increase
Retrospective Increase
Retrospective Increase
Retrospective Increase
Final Payment

20 July
20 December
20 March
20 April
20 May20 June20 July
20 August
20 September
20 OctoberTotal Payout Averaged Over All Grades

2017/18
Cents/kg
Fat

Cents/kg
Protein2016/17
Cents/kg
Fat

Cents/kg
Protein

347.0
21.0
34.0
33.0
33.0
33.0
49.0
50.0
33.0
33.0032

518.0
31.0
50.0
50.0
49.0
50.0
74.0
74.0
49.0
49.0347

252.0
27.0
19.0
16.0
16.0
22.0
22.0
22.0
22.0
25.2675

600.0
64.0
46.0
38.0
38.0
53.0
52.0
52.0
53.0
59.3988666.003994.035

443.268

1,055.399

PROGRESS TABLE

2017/18
2016/172015/16
2014/15
2013/142012/13
2011/122010/11
2005/06
2000/01
1995/96
1990/91
1985/86
1980/81
1975/76
1970/71
1965/66
1960/61
1955/56
1950/51
1945/46
1940/41
1935/36
1930/31
1925/26

PayoutCents/kgms(IncomeEquivalent)

Total
Shareholders
Funds
$

110
113
113
118
109
108
109
111
121
136
146
130
104
87
74
70
70
62
56
49
43
45
46
49
51

14,686,362
14,968,366
15,568,586
15,663,949
13,223,427
12,523,609
13,186,565
12,041,622
12,237,952
8,908,866
7,989,118
6,382,505
5,013,554
3,618,763
2,938,277
2,182,343
1,926,323
1,314,518
1,038,843
916,178
613,418
752,929
763,155
697,178
324,125

810.0
710.0
630.0
710.0
900.0
740.0
750.0
810.0
459.1
552.3
418.7
261.7
241.4
155.2
81.3
48.9
47.0
40.6
42.5
36.1
24.2
19.4
14.3
12.4
20.3

120,642,673
126,493,623
116,869,514
100,371,192
106,167,944
87,044,650
76,825,363
75,438,331
50,988,615
25,376,429
15,082,806
11,604,650
5,611,760
1,738,208
752,270275,015
232,534
157,920
111,051
84,62440,832
37,342
32,11329,78823,213

Commodity Products (tonnes)
Proteins
8,590
9,018
9,645
9,654
7,408
7,168
8,037
6,715
6,718
8,000
7,863
2,705
1,753
971
1,144
1,005
926
474
347
318

Powders

CheeseAMF
8,833
10,735
10,194
9,791
9,535
8,069
9,469
7,288
8,364

761
1,275
609

885
1,112
1,110
1,024
846

Note: For the seasons to 1985/86 milkfat has been converted to “milksolids” using a factor of 1 kg milkfat = 1.74 kg milksolids

TRACTA61307

Year

No. ofSuppliers

Milksolids
From own
Supply(Kg)

The Tatua Co-operative Dairy Company Limited Annual Report 2018

Registered Office3434 State Highway 26
TatuanuiMorrinsville 3374
NEW ZEALAND

Postal Address

Private Bag 800
Morrinsville 3340
NEW ZEALAND

Telephone
Website Address+64 7 889 3999
tatua.com

Chairman

SB Allen, B.Com., Dip.P.E.

Directors

SB Allen, B.Com., Dip.P.E.
LE Cullen, B.Sc.(Hons), Ph.D (Lincoln), Dip. Man.
MBN Dewdney, B.M.S.
DP Muggeridge
KM Old, B.M.S., M.B.A., Ph.D (Waikato).
PM Schuyt, B.Com., C.F. Inst.D.
RE Townshend, B.Tech., AMP (Harvard).
BR Wilton, B.Agr.Sc.

Chief Executive Officer
General Manager Marketing and Sales
General Manager Operations
General Manager Finance and Administration(as of 1 August 2018)
General Manager Co-operative Affairs
General Manager Strategic Projects
Human Resources Manager

BA Greaney, B.M.S.
SJ Rolfe, B.M.S, MBA (Insead).
TA Keir, B.Tech, M.DairyScTech (Massey).
CJ Foster, B.M.S., C.A., Grad.Dip. Treas. & Fin. Mgmt.
ML Bull, B.M.S, C.A.
PJ van Boheemen, B.Sc., PG. Dip. Bus Admin.
TA Winter, B.Sc.(Tech), AMP (Insead).
PA Pilkington, B.Soc.Sc.

Auditor

KPMG (Hamilton)

Solicitor

Harkness Henry & Co

BankerBank of New Zealand Ltd

Insurance Broker

Willis Towers Watson Ltd

51

tatua.com