ANNUAL REPORT 202 2

DELIVERING SPECIALISEDDAIRY SOLUTIONS

Tatua Annual Report 2022

CONTENTS
Year in Review

Financial Statements

2022 Highlights

2

Report from the Chairman and Chief Executive Officer

4

Together through Covid-19

8Strong and Diversified Demand

10

Investing for a Sustainable Future

12

Financial Performance Summary

17

Statutory Information

20

Balance Sheet

24

Statement of Comprehensive Income

25Statement of Changes in Equity

26

Statement of Cash Flows

27

Notes to the Financial Statements

28

Audit Report

53

Directory

57

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

Tatua Annual Report 2022

Tatua Annual Report 2022

2022 HIGHLIGHTS
Total Underlying
Revenue

Specialised Products
Revenue

$444m

$193m

Kilograms of Qualifying
Milksolids received from
Suppliers

Total Earnings
per kilogram of
Qualifying Milksolids

Change in Total
Underlying Revenue

Revenue via
Subsidiary Offices

14.7m$12.65+12%

44%

Cash Payout toShareholders per
kilogram of Qualifying
Milksolids

Reinvestment per
kilogram of Qualifying
Milksolids

Proportion of
Products Exported

Average Gearing
Ratio$11.30

$1.35

92%

21%

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Tatua Annual Report 2022

Tatua Annual Report 2022

A YEAR TO REMEMBER... THANK YOU TO OURPEOPLE AT TATUA, OUR CUSTOMERS AND OUR
BUSINESS PARTNERS FOR YOUR CONTINUEDCOLLABORATION AND CO-OPERATION.

REPORT FROM THE
CHAIRMAN AND CHIEF
EXECUTIVE OFFICER
The 2022 year wasboth challenging andrewarding for Tatua.
Despite being punctuatedby further Covid-19
related disruptions, theyear also turned out tobe memorable for the
positive financial result
we achieved, and the way
all of our people worked
together to protect eachother and the business.

– Maximising shift and work groupsegregation, including suspending
call-backs and shift handovers /overlaps– Segregated meal break facilities for
those working on-site– Wearing masks in all but exceptional
circumstances and in some cases
gloveswork limited days in the office. Despite
the restrictions, their local presence
continued to be a valuable enabler inclosely partnering and supporting therequirements of our customers in thoseimportant markets.

Business Performance

Milk supply from our Shareholders wastrue to forecast for the first half of the– Daily Rapid Antigen Testing, andyear, but fell away later in the season
health and temperature monitoring
as ongoing dry weather impacted
for everyone working on-site, including feed supply. The result was a seasonal
contractors
milksolids supply of 14.71 million
kilograms, which was 6% behind the
Despite managing to avoid significant
previous season.
business impacts, some productivity waslost due to the isolation requirements for Shareholder supplied milksolids were
Covid-19 positive, household, and close
supplemented by milk and creamcontact cases. In most cases, absences
purchases from other processors.
were able to be managed through the
However, the total milksolids processed
Covid-19
additional effort of other team members from all sources still ended up being
The arrival of the Omicron variant inwhich we acknowledge as a positive
2.2 million kilograms lower than theJanuary 2022, and the resulting onset of reflection of commitment to the business previous season. This flowed throughwidespread community transmission, led and each other.
to lower total production of 37,063
us to reconsider our business priorities,
metric tonnes.
While we encouraged all of our employeeswith a focus on protecting our milk
to be Covid-19 vaccinated, we took the
Our Ingredients business, that contributes
processing and other core operations.
decision not to mandate vaccination
approximately 50% of our revenue from
This included planning for incremental
within the business. This followed athe sale of caseinate, whey protein
suspension of our processing plants inperiod of consultation and also reflected concentrate and anhydrous milkfat,
the event of widespread transmission
the high level of vaccination that already benefitted from record global commodity
among our employees.
existed within the business at the time.
prices, significantly contributing to our
Fortunately, the strict protocols we had
The decision was no doubt contentious
overall earnings result.
in place worked well, and were successful but we believe it was validated as being
Revenue from our more specialised
in preventing transmission of the virus
the right one for Tatua.
Nutritionals, Flavours, and Foods
through the business. These included:
Our subsidiary teams in Japan, China, and businesses was also ahead overall,– Having as many of our people working the USA were also impacted by Covid-19 despite Covid-19 related slowdowns infrom home as possible
and spent a large part of their year
some markets and segments throughout
either working from home or rostered to the year. Our deliberate strategy of5

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Tatua Annual Report 2022

Tatua Annual Report 2022

We continue to focus on the development and commercialisationof our specialist product opportunities and remain positive in ouroutlook for dairy.

remaining well diversified across our range works programmes, were continuouslyof products, customers, and markets,risk assessed for potential Covid-19
continued to serve the business well.
disruption and carefully managed andreprioritised, as required, to achieve
We are pleased to report record Group
successful outcomes.
income of $444 million and earnings
of $186 million. Our earnings equate
We remain engaged in industry related
to $12.65 per kilogram of Shareholder
policy matters, including the He Waka
supplied milksolids before retention for
Eke Noa Primary Sector Climate Action
reinvestment and taxation. We elected
Partnership, in a spirit of seeking
to retain $1.35 per kilogram of milksolids productive and well-balanced outcomes.
from total earnings for reinvestment,
We are deeply concerned about theleaving a cash pay-out to Shareholders of potential consequences of policy$11.30 per kilogram of milksolids.
uncertainties and ideologically driven
outcomes on the viability of our primary
We strongly believe in maintaining
sector, and the wellbeing of farmers andbalance sheet strength and stability
their rural communities.
within the business, especially during
the current period of heightened global
Outlook
uncertainty. However, we were very
conscious of balancing the needs of our Demand for our bulk ingredients remains
Shareholder’s farming operations with the firm, with pricing holding up at historicallyhigh levels. We are well contracted
requirement for continued investment
against our current inventory, andin the business when deciding our cash
our expected production through thepayout from earnings.
remainder of the year.
Our gearing (debt divided by debt plus
equity) averaged 21% for the year, which We are forecasting a notable increase
in revenue from our more specialised
was consistent with the previous year
average, but lifted to 27% at balance date. dairy products as we seek to fully utilise
our recent investments in capacity andThis reflected our higher than typicalcapability.
inventory carryover value at year end.

processing capacity where we have thepotential to further transition milksolids
from commodity ingredient manufacture
into more complex and higher value
products.
We remain cautiously optimistic thatmost of the challenges and disruptions
we have experienced through Covid-19
are behind us and we hope to soon step
down some of the protocols we put
in place through the peak periods ofcommunity transmission. Nevertheless,
we remain well prepared should there bea resurgence.
Shipping schedules and pricing havebeen reported to be improving in someparts of the world, but we have yet toexperience a material improvement
locally. Nevertheless, we continue towork closely with our shipping partners
to best meet our customer requirements
and look forward to seeing this situation
change through the course of the year.

Acknowledgements

Firstly, we would like to thank everyone in
our team at Tatua, for your perseverance,
resilience and commitment in a yearthat has been especially challenging.
Whether it be the uncertainty createdWe will continue to focus on
In addition to Covid-19 challenges andby community transmission of thediversification across our portfolio of
positive business growth, the year
Omicron variant, changes to the way
markets, products and channels. This will
was also marked by the successful
we have worked, remaining connectedsupport the achievement of consistentconstruction of a new hypoallergenic
with colleagues, working short-handed
powder ingredients packing line, capacity and sustainable returns, and our ability
at times, or any of the other related
to continue as a dependable, reliable andupgrades in our Foods and Permeate
challenges, thank you for staying the
responsive supply partner to our many
plants, and the completion of a pipeline
course and for all that has been achieved.
global customers.
for the discharge of highly treatedThank you also to our Shareholders
wastewater during periods when irrigation
Over the coming year we will further
for your full and continued support
is suboptimal.
develop our manufacturing plants andof the Co-operative, including your
These projects, along with our processing facilities. We are actively considering
acknowledgement of the hard work ofadditional investments in specialist
plant winter maintenance and capital

our team, and your appreciation of thegood milksolids return that has helped
offset rising on-farm costs.
We would also like to thank theindividuals and organisations who havepartnered with us, across all aspectsof the business. We endeavour to be
uncomplicated and easy to work with,and we sincerely hope this has been
your experience in interacting with us.
Finally, a very sincere thank you to allof our customers, in all of our markets,for your business and understanding
as we have navigated the disruptions
over the last year. We are a customer
led organisation and look forward tocontinuing to work with you to further
strengthen our relationships over theyear ahead.
Our sincerest thanks to you all.

Stephen Allen
Chairman

Welcome David Walsh
Brendhan Greaney
Chief Executive Officer

David Walsh joined the Tatua
Board in December 2021 as anindependent director.
David has experience in a wide
range of organisations, including
businesses with complex
infrastructure, and consumer
products and services, and has
led large change projects.
He has a background in financial
and corporate affairs includingroles as Chief Financial Officer at
NZ Post Group, GM Corporate

and Finance at KiwiRail, Chief
Operating and Chief Financial
Officer at the New Zealand Racing
Board, and senior finance roles
at Fonterra and TransAlta. He iscurrently Chief Executive Officer
of NZ Post Group, a position hehas held since May 2017.
As well as being part of theTatua Board, David is Chair ofTatua’s Audit, Risk & Compliance
Committee. On behalf of everyone
at Tatua, we welcome David.

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Tatua Annual Report 2022

Tatua Annual Report 2022

TOGETHER THROUGH COVID-19
Our teams across the business have worked tirelessly to produce and deliver
high-quality dairy solutions to our customers, whilst ensuring the safety of ourpeople and products.

International shipping challenges
We successfully navigated global shipping
challenges. Disruptions through port congestion,
vessel delays and container availability, have beenongoing. Exceptional resilience, commitment andteamwork from our teams in New Zealand, Japan,
China and the USA, and our logistics partners, has
ensured the impact to customer deliveries was kept
to a minimum.

RESPONDING TO COVID-19

Covid-19 on-site protocols
and working from home

Subsidiaries
Our subsidiary sales teams in Japan, China
and the USA have maintained their valuable
connections with customers. They have worked
through lockdowns and maintained flexible working
arrangements as Covid-19 restrictions evolved ineach of their markets. Toward the end of the year,
international travel resumed, allowing a numberof our New Zealand-based sales team to visit
customers for the first time in two and a half years.

To minimise the chance of Covid-19 transmission,daily rapid antigen testing, temperature monitoring,mask wearing and segregated teams became
normal procedure for our operations teams on site,while those who could work from home, did so for
more than nine months. Although challenging attimes, it proved to be a successful strategy.

Wellbeing
Business continuity online
Whilst our teams were physically segregated, ourbusiness continued online. Online meetings became
the norm, with our online platforms providing
successful tools for business continuity. The
Business Solutions and ICT Infrastructure teams
worked diligently throughout, ensuring our systems
continued to function well.

Despite the Covid-19 challenges our focus on
wellbeing continued. Large group events werecancelled in favour of online initiatives thatencouraged connectivity within our wider global
team. These included online “Coffee with the CEO”
sessions, financial wellbeing seminars, online “dropin” rooms, small group team building events, and awellbeing focused photo competition.

9

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Tatua Annual Report 2022

STRONG AND DIVERSIFIED DEMAND+55%
Ingredients Revenue
in Japan

Favourable demand for our dairy nutrition has continued this year. Despite
the challenges, we have focused on providing timely and reliable supplyof our specialised nutritional ingredients and dairy products to meet theneeds of our customers worldwide.

$444m
Total Underlying Revenue

+34%

+16%

+41%

Flavour Ingredients
Revenue in China

Flavour Ingredients Revenue

Caseinate Revenue$193m
Record Specialty Products Revenue+24%
Specialty Cream Products Revenue –Sold in Ecolean Packaging

+28%

+10%

+40%

Ingredients Revenue

Nutritionals Revenue
in the USA

Microbial Nutrition Revenue

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Tatua Annual Report 2022

Tatua Annual Report 2022

INVESTING FOR A
SUSTAINABLE FUTURE
We continue to pursue opportunities for long-term investment to support
the sustainability of our business. In 2022, this included investment in our
manufacturing capabilities and efficiencies, improved environmental, quality andsafety outcomes, and supporting our farmers to improve farming practices.

ENVIRONMENTALSUSTAINABILITY
We have a dedicated and capable environmental
team who continue to focus on improving ourenvironmental performance.

New packing line forhypoallergenic powders

Wastewater treatment
Our new wastewater treatment plant was
successfully commissioned. The plant utilises
natural bacteria and gravity to remove
organic content and nutrients from ourwastewater. A treated wastewater discharge
pipeline to the Waitoa River was consented
and installed. We are grateful to the four
landowners whose properties the pipelinecrosses. Clarified, filtered UV treated, water
can now be sent to our irrigation platform, orto the Waitoa River when irrigation conditions
are not suitable.

A new $9.8 million packing line for hypoallergenic
and reduced allergen powders for Nutritionals
customers was installed.

Increased specialty cream capacity
The installation of an upgraded $4.3 million
specialty cream filling line including robotic
palletising increased our production capacity tosupport our Foodservice customers.

High solids milk permeate plant
A high solids upgrade of our milk permeate plant
was completed to improve supply of lactose
ingredients to our customers.

Waste minimisation
Development of a sustainable procurement
policy for purchasing raw materials andpackaging was completed. Rationalisingand redesigning product packaging has
significantly reduced waste and improved
environmental outcomes.

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Tatua Annual Report 2022

Tatua Annual Report 2022

TATUA 360RESPONSIBLE
FARMINGPROGRAMME

Water Saving
Seventeen initiatives were completed acrossthe site that reduced water use by a further
2.7%. This adds to a total of 17% watersavings over the past five years.

We continued to support our farmers to
improve their farming practices as part of
our Tatua 360 responsible farming programme.
Key achievements include:

Community
Tatua supported the following community
initiatives this year:– Helped establish a native plant nursery at
Tatuanui School. In future the children willplant these native plants on Tatua supply
farms to support future generations.

– More than 75% of Tatua supply farms have
Farm Environment Plans in place, with theremainder to be completed in the comingyear.
– We supported our farmers to consistently
supply premium quality milk.
– A series of workshops on greenhouse gas
emissions and farm environment plans heldon Tatua farms.

– Provided funds for educational, technology
and sports activities to our four local schools.
– Participated in speaking engagements
and presentations with local schools andcommunity organisations.

All Tatua farms have:– Animal care and welfare monitored throughannual veterinary consultation.
– An annual nutrient budget completed to
improve efficiencies and reduce any losses.
– Farm effluent infrastructure in place toeliminate the need to spray irrigate whenconditions are not suitable. Farm effluent
systems are monitored annually through an
independent assessment.
– A biosecurity plan in place to reduce the riskof animal disease and plant pest incursions.
– Annual farm dairy assessments carried out tomonitor food safety systems and procedures.
– Greenhouse gas emissions modelled andreported annually.

EnergyWe completed a comprehensive review ofoptions for decarbonising our manufacturingsite, including upgrades to improve efficiency of
existing plant, equipment and processes. We willcontinue our involvement in local and regional
carbon reduction initiatives and technologies.

Sustainable on-farm practices
We actively support and engage in wider dairy
industry initiatives including He Waka Eke Noa
and Dairy Tomorrow to work towards a sharedvision for the future of dairying in New Zealand.

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Tatua Annual Report 2022

Tatua Annual Report 2022

FINANCIAL PERFORMANCESUMMARY

Note: Photograph is placeholder

17

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Tatua Annual Report 2022

Tatua Annual Report 202219

2021/22 IN REVIEW
Total Underlying Revenue
Total Milk Received from Suppliers (litres)

164,292,606

174,377,146

Qualifying Milksolids Received from Suppliers (kilograms)

14,703,629

15,198,804

Total Underlying Revenue ($)

444,336,892

395,023,052

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

1265

1043

Group Depreciation (cents/kilogram qualifying Milksolids)

105

101

Cash Payout to Shareholders (cents/kilogram qualifying Milksolids)

1130

925

Capital Expenditure ($)

51,154,522

21,404,265

Group Assets ($)

339,604,724

306,860,602

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

27

20

35%

160

27.3

100
80

20.1

23.9

26.8

20%
15%

925

1130

120

25%

135

140

177

180

30%

2018/19 2019/20 2020/21 2021/22

Members Funds

36.7

60

10%

40
$ Millions+22%

2016/17 2017/18

40%

35.3

1130

0

2018/19 2019/20 2020/21 2021/22

Gearing (% Debt to debt plus members funds)

cents/kg
qualifying
milksolids

200

174

0

400

160

200

600

121

Payout to Shareholders

1043

400

2016/17 2017/18

800
Cents/kg qualifying milksolids

600

996

800

966

1000

870

1000

850

1200

1265

1200

862

+21%

1400

760

cents/kg
qualifying
milksolids

Payout – Income Equivalent

810

Group Surplus before Payout and Tax

Cents/kg qualifying milksolids

1265

2020/21710

Group Surplus

2021/22126$444m +12%

Summary

5%0%
2016/17 2017/18

2018/19 2019/20 2020/21 2021/22

20
0
2016/17 2017/18

2018/19 2019/20 2020/21 2021/22

20Tatua Annual Report 2022

Tatua Annual Report 2022

21

STATUTORY INFORMATION
for the year ended 31 July 2022

Principal Activities

Board Composition

Directors’ Remuneration

Employees’ Remuneration‘The principal activity of the Group is the collection of milk from
Shareholders and processing this milk into a diverse range of
products for sale 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
Mark Dewdney and Richard Luxton were re-elected during theyear. Appointed director Ross Townshend resigned. David Walsh
was appointed and Peter Schuyt was re-appointed as directors
during the year.		

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

During the year to 31 July 2022 the following number of employeesof the Group received total remuneration of at least $100,000
NZD: Total remuneration includes salaries, bonus payments, andother benefits received in the capacity as an employee during theyear, e.g. company vehicles, insurance and superannuation. Bonus
payments may relate to multiple years.

Board Meetings Held During the Year

Co-operative Group
The Board of Directors resolved on 27 July 2022 that, in theopinion of the Board, the Group has been a co-operative company
during the year ended 31 July 2022 because its principal activity
has been processing and marketing products derived from milk
supplied by its Shareholders and because 100% of the voting rights
in the Group are held by those Shareholders.
Role of the Board
Tatua’s Board of Directors is committed to managing the Group in
an ethical and professional manner, and in the best interests of theGroup and its Shareholders.

Board Members

Meetings Attended

Stephen Allen (Chairman)

7

Louise Cullen

7Mark Dewdney

6

Julie Langley

7

Setting the strategic direction for Tatua and establishingpolicies to support the effective management of the Group;

Richard Luxton

7

David Muggeridge

7—

Appointing and reviewing the performance of the CEO;Peter Schuyt

7—

Setting the terms of CEO and executive management
employment;

Ross Townshend

1

David Walsh

6

Key responsibilities of the Board include:
—

—
—
—
—

Monitoring the financial performance of the Group, andTatua’s risk management;
Ensuring that Tatua has robust corporate governancepractices;
Ensuring Tatua’s regulatory and legislative compliance; andEnsuring Tatua has robust health and safety and wellbeing
processes which protect all people associated with the Group.

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

Board Meetings Held

$123,333

Louise Cullen$72,000

Remuneration

Mark Dewdney$54,667$100,000 - $109,999

50

Julie Langley$54,667$110,000 - $119,999

61

Richard Luxton$72,000$120,000 - $129,999

48

David Muggeridge$54,667$130,000 - $139,999

25

Peter Schuyt$60,500$140,000 - $149,999

21

Ross Townshend$16,000$150,000 - $159,999

14David Walsh$62,667$160,000 - $169,999

11$ 570,500$170,000 - $179,999

3$180,000 - $189,999

2People and Remuneration Committee: Membership comprises
Louise Cullen (Chair), Stephen Allen, Mark Dewdney, Richard
Luxton and Peter Schuyt. The function of the Committee
is to assist the Board in ensuring the organisation fulfils its
remuneration, performance management and organisational
development needs. It also assists with senior management
appointments.
Audit, Risk and Compliance Committee: Membership comprises
David Walsh (Chair), Louise Cullen, Mark Dewdney, Julie Langley,
Richard Luxton, David Muggeridge and Peter Schuyt. The functionof the Committee is to assist the Board in ensuring the organisation
fulfils its audit, legal, financial, and risk management obligations
and responsibilities. Approval of the annual accounts is undertakenby the full Board.

Number of Employees

Directors’ Shareholdings$190,000 - $199,999

7

At 31 July 2022 Directors held the following shares in the Group:$200,000 - $209,999

3

Beneficially Held

7

Board Committees

Responsible Farming Committee: Membership comprises Richard
Luxton (Chair), Stephen Allen, Louise Cullen, Julie Langley, andDavid Muggeridge. The function of the Committee is to assist
the Board in ensuring the Group fulfils its governance and related
responsibilities in regard to the farming activities of the Group andits supplying Shareholders.

Stephen Allen

Non-

Held By

Beneficially

Associated

Held

Persons

Stephen Allen

2,064,940-

844,960

Louise Cullen

2,917,860--

Mark Dewdney

2,414,470--

Julie Langley

856,030--

Richard Luxton

3,762,980--

David Muggeridge

1,087,450-

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

-$210,000 - $219,999

1$220,000 - $229,999

2$230,000 - $239,999

2$240,000 - $249,999

1$250,000 - $259,999

2$260,000 - $269,999

1$300,000 - $309,999

1$320,000 - $329,999

1$360,000 - $369,999

2$380,000 - $389,999

1$470,000 - $479,999

1$510,000 - $519,999

1$530,000 - $539,999

2$1,150,000 - $1,159,999

1
264

Donations & Grants
Donations and grants for the year ended 31 July 2022 were$40,000 (2021: $30,200).

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Tatua Annual Report 2022

Tatua Annual Report 2022

Director

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

Director
Stephen AllenLouise CullenMark Dewdney

Julie Langley

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

Position

Company

Director, Shareholder

Claybrook Farms Ltd

Director, Shareholder

Claybrook No 7 Ltd

Director, Shareholder

Claybrook South Ltd

Director, Shareholder

Cheadle Farms Ltd

Director, Shareholder

Allen Children Ltd

Director

Farmers’ Mutual Group (FMG)

Director

Farmers’ Mutual Insurance Ltd (FMIL)

Richard Luxton

David Muggeridge

Peter Schuyt

Position

23

Company

Director, Shareholder

Aslan Farms Ltd

Director

MDLP General Partner Ltd

Director

Marire General Partner Ltd

Director

Marire Limited Partnership Ltd

Partner

Matangi Dairies LP Ltd

TrusteeMeat the Need

Director, Shareholder

Muggeridge Farms Ltd

Trustee

DP & MA Muggeridge Family Trust

Director, Shareholder

Ahikouka Holdings Ltd

Director, Shareholder

Greenleaf Fresh Ltd

Director, Shareholder

Schuyt Investments Ltd

Director

TSB Bank Ltd

Director

Tax Management NZ Ltd

Director

Foodstuffs North Island Ltd

Director

Mowata GP Ltd

Director

Rangitata GP Ltd

TrusteeSarah Ethne Allen Trust

TrusteeSB & BL Allen Family Trust

Trustee

Cheadle Trust

TrusteeDavid Johnstone Charitable Trust

Trustee

JES Allen Estate

Chairman

MSC Consulting Group Ltd

Trustee

JR Allen Estate

Chairman

Robert Monk Transport Ltd

PartnerRangitata Dairies LP Ltd

Director, Shareholder

Ranworth Farm Ltd

Director, Shareholder

Townshend Holdings (2015) Ltd

Ross Townshend
Resigned 15 November 2021

Director

DairyNZ Inc.

TrusteeSchuyt Family Trust

Chairman, Shareholder

RML Engineering Ltd (and subsidiaries)

Chairman

Bector Automation RML Pvt Ltd (India)

Director, Shareholder

Cookson Trust Farms Ltd

Director, Shareholder

Balachraggan Farms Ltd

Director, Shareholder

Capra Farming Ltd

Director, Shareholder

Acorn Goats Ltd

Director

AgResearch Ltd

Director

Waikato Valley Cricket Association

TrusteeAcorn Trust

Director, Shareholder

MDLP General Partner Ltd

Director
Director
Director

Marire General Partner Ltd

Trustee, Beneficiary

Dewdney Family Trust

Trustee

Marvic Family Trust

TrusteeMark Dewdney Family Trust

TrusteeVicki Dewdney Trust

Partner

Matangi Dairies LP Ltd

Director, Shareholder

KM & JL Langley Limited

Shareholder

Langley Trading Ltd

Director

Fliway Transport Ltd

Shareholder

Langley Foods Ltd

Director

Supply Chain Solutions Ltd

Director

Riverside Farms Ltd

Director

Sunny Downs Farm Ltd

Director

Tirohanga Fruit Co Ltd

Shareholder

Architectural Investments Ltd

Shareholder

Elanza Technologies Ltd

Shareholder

Pukete Holdings Hamilton Limited

Consultant

Ariston Group Ltd

Consultant

Merit Meats Ltd

Dairy Goat Co-operative

Consultant

Oaktree Capital

Nicholson United Autos Ltd

Consultant

Ora Foods Ltd

Consultant

Walter & Wild Ltd

David Walsh

Director

Datam Ltd

Commenced 16 November 2021

Director

New Zealand Post Holdings Ltd

Director

Fliway Group Ltd

Director

Fliway Holdings Ltd

Director

Fliway International Ltd

Director

Fliway Logistics Ltd

24

Tatua Annual Report 2022

Tatua Annual Report 2022

BALANCE SHEETSTATEMENT OF COMPREHENSIVE INCOME

as at 31 July 2022

for the Year Ended 31 July 2022
GROUP
Note

2022 ($)

25

GROUP
Note

2021 ($)

Year Ended 31 July 2022 ($)

Year Ended 31 July 2021 ($)

Profit or Loss Items

Current Assets
Cash and Cash Equivalents

14

10,540,247

18,503,154

Revenue from Contracts with Customers

436,471,888

383,654,521

Derivatives

18

2,362,517

7,968,532

less Payments for Own Milk Supplied(166,246,123)(143,612,148)Receivables and Prepayments

13

51,226,559

43,098,021

less Other Cost of Sales(208,422,246)(192,033,325)

62,65737,88761,803,519

48,009,048

107,617,744

86,425,204

Tax Receivable
Inventories

12

Biological Assets
Total Current Assets

790,263499,172

172,599,987

156,531,970

Gross Profit
plus Other Income

Property, Plant and Equipment

9151,224,283

137,624,406

Investment Property

112,236,000

1,698,000

Intangible Assets

10

3,898,000

4,639,705

Derivatives

18

1,949,243

Deferred Tax Asset

8

7,031,993
665,218

779,079

Equity Accounted Investments

1,161,883

less Finance Expenses

6(2,787,168)(2,383,142)

Net Finance Expense(855,001)

5,617,167

Surplus before Income Taxless Income Tax Expense

41,472,191

36,513,000

Current Liabilities
Loans and Borrowings

16

Derivatives

18

11,486,242

1,754,504

Accounts Payable and Accruals

17

32,137,690

30,038,097

Tax Payable

1,775,060

2,409,999

Owing to Suppliers

37,053,517

35,135,714

Total Current Liabilities

123,924,700

105,851,314

Non Current Liabilities
Loans and Borrowings

16

35,365,483

25,672,300

Derivatives

18

3,783,402

1,792,493

Total Non Current Liabilities

39,148,885

27,464,793

Total Liabilities Excluding Co-operative Shares

163,073,585

133,316,107

Classified as a Liability
72,285,666

75,749,246

Total Liabilities

235,359,251

209,065,353

Net Assets

104,245,473

97,795,249

Retained Earnings

92,859,949

78,573,676

Reserves

11,385,524

19,221,573

Equity104,245,473

97,795,249

72,285,666

75,749,246

Retained Earnings

92,859,949

78,573,676

Reserves

11,385,524

19,221,573

Total Members Funds

176,531,139

173,544,495

Members Funds Memorandum Account:

DJ Walsh Chairman of Audit, Risk and Compliance Committee
14 October 2022

12,301,012

4,425,559
150,328,632

SB Allen Chairman of Directors
14 October 2022

(12,106,260)

20,703,501

8,000,309

306,860,602

For and on behalf of the Board:(13,285,484)

1,932,167

167,004,737

15

975,675(24,577,451)

6

339,604,724

Co-operative Shares Classified as a Liability

1,622,408(29,436,942)

Finance Income

Total Assets

15

4Surplus from Operating Activities

Total Non Current Assets

PLUS Co-operative Shares

3

less Sales and Marketing Expenses
less Administration Expenses

Non Current Assets

3

Net Surplus

719,848,500

17,918,179(5,562,227)(5,021,781)

14,286,273

12,896,398

Other Comprehensive Income
Movement in Land Revaluation Reserve

2,580,653-

Change in Fair Value of Cash Flow Hedges(15,225,437)

1,851,327

Movement in Foreign Exchange Reserve545,613(490,257)

Income Tax on Other Comprehensive Income

4,263,122(518,371)

Other Comprehensive Income for the Year

(7,836,049)

842,699

Total Comprehensive Income

6,450,224

13,739,097

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

26

Tatua Annual Report 2022

Tatua Annual Report 2022

STATEMENT OF CHANGES IN EQUITYSTATEMENT OF CASH FLOWS

for the Year Ended 31 July 2022

for the Year Ended 31 July 2022

GROUP
Balance at 1 August 2020

Translation

Hedging

Revaluation

Retained

Total

Reserve ($)

Reserve ($)

Reserve ($)

Earnings ($)

Equity ($)

603,666

2,308,441

15,466,766

65,677,278

84,056,151

27

GROUP
Note

Year Ended 31 July 2022 ($)

Year Ended 31 July 2021 ($)

433,280,948

394,936,192

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

Other Comprehensive Income
Movement in Foreign Exchange Reserve(490,257)---(490,257)

Movement in Land Revaluation Reserve

-

-

-

-

-

Movement in Hedging Reserve, Net of Tax-

1,332,956--

1,332,956

Total Other Comprehensive Income
Profit for the Period
Total Comprehensive Income(490,257)

1,332,956--

842,699

Dividends Received

-

2,119

9,654

54,123433,290,602

394,992,434

Payments for Milk

(164,328,321)(136,271,431)(254,070,375)(226,760,744)

Interest Received
Cash was applied to:

-

-

-

12,896,398

12,896,398

Payments to Creditors and Employees(490,257)

1,332,956-

12,896,398

13,739,097

Interest Paid

(2,980,091)(488,748)

Taxation Paid

(4,565,248)(3,535,775)(425,944,035)(367,056,698)

7,346,567

27,935,736

Transactions with owners of Group
Issue of ordinary shares

-

-

-

-

-

Balance at 31 July 2021

113,409

3,641,398

15,466,766

78,573,676

97,795,249

Net Cash Flows From / (Applied To)
Operating Activities

20

Cash Flows From Investing Activities
Balance at 1 August 2021

113,409

3,641,398

15,466,766

78,573,676

97,795,249

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

Movement in Land Revaluation Reserve--

2,580,653-

2,580,653

Other Comprehensive Income

Movement in Hedging Reserve, Net of Tax
Total Other Comprehensive Income
Profit for the Period
Total Comprehensive Income

Cash was provided from:
Proceeds From Sale of Property, Plant and Equipment

35,870119,861

Proceeds From Sale of Investments

327,573

228,163

363,443

348,024-(10,962,315)--(10,962,315)

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

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

Acquisition of Property, Plant and Equipment

545,613(10,962,315)

2,580,653

14,286,273
14,286,273

14,286,273(26,345,509)(20,883,464)

Acquisition of Intangible Assets(516,202)(638,944)

Purchase of Share Investments--(26,861,711)(21,522,408)(26,498,268)(21,174,384)

1,788,840

2,835,090

6,450,224
Net Cash Flows From / (Applied To)
Investing Activities

Transactions with owners of Group
Issue of ordinary shares

-

-

-

-

Cash Flows From Financing Activities

Balance at 31 July 2022

659,022(7,320,917)

18,047,419

92,859,949

104,245,473

Cash was provided from:
Increase in Co-operative Shares

15

Proceeds from Borrowings
The accompanying notes form part of and are to be readin conjunction with these financial statements.

14,652,374-

16,441,214

2,835,090(5,252,420)(3,082,475)

Cash was applied to:
Decrease in Co-operative Shares

15

Repayment of Borrowings-(15,944,798)(5,252,420)(19,027,273)

Financing Activities

11,188,794(16,192,183)

Net Increase / (Decrease) in Cash and Cash Equivalents(7,962,907)(9,430,831)

Add: Opening Cash and Cash Equivalents Balance

18,503,154

27,933,985

10,540,247

18,503,154

Net Cash Flows From / (Applied To)

Closing Cash and Cash Equivalents Balance

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

14

28

Tatua Annual Report 2022

NOTES TO THE FINANCIAL
STATEMENTS

Tatua Annual Report 2022

1

Reporting Entity

2

Basis of Preparation

3

Operating Revenue & Other Income

4

Administration Expenses

5

Personnel Expenses

6

Finance Income & Expense

7

Income Tax Expense

8

Deferred Tax Assets & Liabilities

9

Property, Plant & Equipment

10

Intangible Assets

11

Investment Property

12

Inventories

13

Receivables & Prepayments

14

Cash & Cash Equivalents

15

Members Funds

16

Loans & Borrowings

17

Accounts Payable & Accruals

18

Derivatives

19

Financial Risk Management

20

Reconciliation of Cash Flows from Operating Activities

21

Related Party Transactions

22

Group Entities

23

Subsequent Events

29

30

Tatua Annual Report 2022

Tatua Annual Report 2022

3 — OPERATING REVENUE & OTHER INCOME

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

These financial statements set out the performance, position andcash flows of Tatua and its subsidiaries (the “Group”) for the year
ended 31 July 2022. At 31 July 2022 the Group consists of The
Tatua Co-operative Dairy Company Ltd and its subsidiaries Tatua
Japan Co. Ltd, Tatua Dairy Products (Shanghai) Co., Ltd and Tatua
USA Ltd. The Group is a producer and marketer of dairy productswith sales to both domestic and export markets.

2 — BASIS OF PREPARATION
The financial statements have been prepared on a going
concern basis.
(a) Statement of Compliance and Basis of Preparation
The financial statements have been prepared in accordancewith Generally Accepted Accounting Practice in New Zealand(NZ GAAP) as appropriate for Tier 1, for-profit entities, NZIFRS
and IFRS. Accounting policies have been applied consistently
to all periods presented in these financial statements. The
financial statements were approved by the Board of Directors
on 21 October 2022.
(b) Basis of Measurement
The financial statements are prepared on the historical cost basis
except for the following:—Land is measured at fair value. Refer to Note 9.

—

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

—

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

——

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

application of accounting policies and the reported amounts ofassets, liabilities, income, and expenses. Actual results may differ
from these estimates.
Estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognisedin the period in which the estimate is revised and in any future
periods affected. In particular, information about significant areasof estimation, uncertainty and critical judgements in applying
accounting policies that have the most significant effect on theamount recognised in the financial statements are described in thefollowing notes:
Note 12. - Milk cost included in inventory.
(e) Goods and Services Tax
The financial statements have been prepared on a GST exclusive
basis, except for Accounts Receivable and Accounts Payable which
are stated inclusive of GST.
(f) Impact of Covid-19
In preparing these financial statements, the directors haveconsidered the potential impacts of COVID-19 on future revenues,
asset values and other areas, and believe any impacts areappropriately recognise.
(g) New Standards and Interpretations(c) Functional and Presentation Currency(i) New and amended standards adopted by the GroupThe financial statements are presented in New Zealand dollars(NZD), which is the Group’s functional currency. Monetary assets
and liabilities denominated in foreign currencies at the reporting
dates are retranslated to the functional currency at the exchange
rate at that date. All financial information presented has beenrounded to the nearest dollar.

No new or amended standards were adopted that had amaterial impact on the Group’s financial statements.

(d) Use of Estimates and Judgement
The preparation of financial statements requires management
to make judgements, estimates and assumptions that affect the31(ii) New and amended standards issued but not yet effective
There are no new and revised standards, amendments orinterpretations that have been issued but are not yet effective,that are expected to have a significant impact on the Group’s
consolidated financial statements.

GROUP
2022 ($)

2021 ($)

436,471,888

383,654,521

Rental Income from Investment Property

75,00075,000Rental Income from Farm Houses

56,881

58,109Fair Value movement in Investment Property

538,000-

Insurance Claim Proceeds

38,909-MilkTest NZ LP Income

213,721271,656

Revenue from contracts with customers
Other Income

Sundry Income

Total Revenue

699,897

570,910

1,622,408

975,675

438,094,296

384,630,196

GROUP
Analysis of revenue from contracts with customers

2022 ($)

2021 ($)

434,682,083

381,427,287

Nature of Revenue
Sale of goods
Royalties/Commissions

1,789,805

2,227,234

436,471,888

383,654,521

418,609,292

365,231,350

Timing of revenue recognition
At a point in time
Over time

17,862,596

18,423,171

436,471,888

383,654,521

Australasia (NZ and AUS)

126,108,247

108,242,652

Asia / Pacific244,259,855

217,259,627

Americas / Europe

63,806,206

55,927,085

Other

2,297,580

2,225,157

436,471,888

383,654,521

Disaggregation of Revenue

32

Tatua Annual Report 2022

Tatua Annual Report 2022

5 — PERSONNEL EXPENSES

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

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

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

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

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

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

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

33

GROUP

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

2022 ($)

2021 ($)

Wages and Salaries

48,021,500

46,093,155

Superannuation Contributions and Other Employee Related Expenses

4,740,577

4,312,874

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

1,137,108

385,418

53,899,185

50,791,447

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

POLICY — Employee Benefits
Defined Contribution Plans

Short-term Benefits

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

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

A reconciliation from the NZ IFRS measure of revenue to theGroup’s non-GAAP measure is detailed below:
Note2022 ($)

2021 ($)

NZ IFRS Revenue from Contracts with Customers

3

Other Income

3

1,622,408

975,675

Net Foreign Exchange Loss

6

1,922,513

7,946,186

Agency Shipping costs offset

436,471,888 383,654,521

4,320,083

Non-GAAP measure: Total Underlying Revenue

2,446,670

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

2022 ($)

2021 ($)

444,336,892 395,023,052
Interest Income

9,654

54,123

Net Foreign Exchange Gain

1,922,513

7,946,186

Total Finance Income

1,932,167

8,000,309

Financial Overheads

4 — ADMINISTRATION EXPENSES(23,374)(34,811)

Interest Expense on External Borrowings(2,763,794)(2,348,331)

Total Finance Expense(2,787,168)(2,383,142)

Net Finance Income / (Expense)(855,001)

5,617,167

GROUP
2022 ($)

2021 ($)

570,500

504,000

17,97433,946

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

235,480

236,038

Other Services**

67,926

38,608** Other services are in relation to advice on operational tax matters such astransfer pricing, as well as a share registry assurance engagement.

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

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

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

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

34

Tatua Annual Report 2022

Tatua Annual Report 2022

7 — INCOME TAX EXPENSEPOLICYGROUP

Income Tax Recognised in Profit or Loss

2022 ($)

2021 ($)

Current Period

5,854,608

5,894,576

Adjustment for Prior Periods(1,949,069)(19,408)

3,905,539

5,875,168

Origination and Reversal of Temporary Differences(483,184)(845,697)

Adjustment for Prior Periods

2,139,872(7,690)1,656,688(853,387)

Total Income Tax Expense

5,562,227

5,021,781

Current Tax Expense

Deferred Tax Expense

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

2022 (%)

2022 ($)

2021 (%)

2021 ($)

Profit for the Period-

14,286,273-

12,896,398

Total Income Tax Expense-

5,562,227-

5,021,781

Profit Excluding Income Tax-

19,848,500-

17,918,179

28.0

5,557,580

28.0

5,017,090

Impact of Tax Rate in Foreign Countries(0.3)(64,446)(0.9)(168,855)

Tax Exempt Income(0.8)(150,640)

0.0

201,239

Non-deductible Expenses

0.2

35,2891.1

Legislative Change of Depreciation on Buildings

0.0(6,359)

(0.0)

(0)

Tax Credits on Dividend Income

0.0

-

(0.0)

(593)

Recognition of Previously Unrecognised Tax Losses

0.0

-

0.0

-

Under/(Over) Provided in Prior Periods

1.0

190,803(0.2)(27,100)

28.0

5,562,227

28.0

5,021,781

GROUP

Property, Plant and Equipment

2022 ($)

2021 ($)

Income Tax on Derivatives

4,263,122(518,371)

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

2022 ($)

2021 ($)

39,981,302

37,498,277

2022 ($)

2021 ($)

2021 ($)

2022 ($)

2021 ($)

430,019

2,673,541---(77,199)-

430,019

2,673,541(83,558)(77,199)

2,847,024--(1,416,099)(83,558)

2,847,024(1,416,099)

Inventory

1,728,479

1,596,165--

1,728,479

1,596,165

Provisions and Accruals

2,103,670

1,655,509--

2,103,670

1,655,509

Other items

-

-

-

-

-

-

7,109,192

5,925,215(77,199)(1,499,657)

7,031,993

4,425,558

Balance

Recognised in

Recognised in

Balance

Recognised in

Recognised in

Balance1 August
2020($)

Profit or
Loss($)

Other Comprehensive
Income($)

31 July
2021($)

Profit or
Loss($)

Other Comprehensive
Income($)

31 July
2022($)

2,039,222

634,319-

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

430,019

Investment Property(83,558)--(83,558)

6,359-(77,199)

Derivatives(897,727)-(518,371)(1,416,098)-

4,263,122

2,847,024

Inventory

1,371,646

224,519-

1,596,165

132,314-

1,728,479

Provisions and Accruals

1,660,960(5,451)-

1,655,509

448,161-

2,103,670

-

-

-

-

-

-

-

4,090,543

853,387(518,371)

4,425,559(1,656,688)

4,263,122

7,031,993

Tax Assets /(Liabilities)

During The Year

Deferred tax assets and liabilities are
attributable to the following:
Property, Plant and Equipment

Other items

Income Tax Recognised Directly in Other Comprehensive Income

2022 ($)

Net

are attributable to the following:

Movement in Temporary Differences
Income Tax Using the Group’s Domestic Tax Rate

Liabilities

Deferred tax assets and liabilities

Derivatives

GROUP

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

Investment Property

Reconciliation of Effective Tax Rate

35

Deferred Tax Assets /(Liabilities)

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

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

36

Tatua Annual Report 2022

Tatua Annual Report 2022

9 — PROPERTY, PLANT & EQUIPMENTGROUP

POLICY

Land

Land

Buildings

Plant &

VehiclesCapital Work

Right-of-

Total

($)

Improve-($)

Equipment($)

in Progress

use assets

($)

($)

($)

ments

($)

($)
COST OR DEEMED COST
Balance at 1 August 2020
Additions

18,861,000

3,818,590

52,178,718

206,604,089

3,654,311

14,235,878

1,766,463

301,119,049

982,347

100,879

5,486,552

5,983,871

234,182

21,373,404

190,543

34,351,778

Revaluation of Land to Fair Value

-

-

-

-

-

-

-

-

Disposals--(147,085)(603,706)(176,155)--(926,946)

-

-

-

4,223

-

-

(39,506)(35,283)

Balance at 31 July 2021

19,843,347

3,919,469

57,518,185

211,988,477

3,712,338

22,661,769

1,917,500

321,561,085

Balance at 1 August 2021

19,843,347

3,919,469

57,518,185

211,988,477

3,712,338

22,661,769

1,917,500

321,561,085-

18,924

5,083,003

18,961,834

151,965

26,163,955

774,841

51,154,522

2,580,653

-

-

-

-

-

-

2,580,653

Capitalisation of Work in Progress
Effect of Movement in Exchange Rates

Additions
Revaluation of Land to Fair Value(12,947,513)(12,947,513)

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

Capitalisation of Work in Progress

-

-

-

-

-

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

Effect of Movement in Exchange Rates
Balance at 31 July 2022

-

-

-

(13,561)--

14,168607

22,424,000

3,938,393

62,601,188

229,218,798

3,826,681

24,267,469

2,111,148

348,387,677(a) Recognition and Measurement of Assets at Cost(d) Recognition and Measurement of Assets at Fair Value

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

Land and improvements are stated at their fair value. The fair valueof land within property, plant and equipment is based on market
values determined by an independent valuer.

Borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset are capitalised aspart of the cost of the asset. Borrowing costs capitalised during theyear were $216,297 (2021: $488,748).
When parts of an item of property, plant and equipment havedifferent useful lives, they are accounted for as separate items(major components) of property, plant and equipment.
(b) Depreciation
Depreciation is recognised in profit and loss on a straight line basis
over the estimated useful lives of the items of plant, property andequipment. Land is not depreciated. Depreciation is recognisedas part of other cost of sales in the Profit or Loss. Depreciation
methods, useful lives and residual values are reassessed at thereporting date.
The Group has established the following useful lives:

DEPRECIATION AND IMPAIRMENTS
Balance at 1 August 2020-

1,931,379

18,577,560

146,089,303

2,370,583-

489,958

169,458,783

Depreciation-

171,984

1,538,763

12,737,982

348,572-

478,256

15,275,557

Disposals--(147,085)(570,832)(76,516)--(794,433)—

Land Improvements – 10 to 20 years—

Buildings – 5 to 50 years—

Plant and Equipment – 2.5 to 20 years—

Vehicles – 5 to 10 years—

Right-of-use Assets – 1 to 13 years

Effect of Movement in Exchange Rates

-

-

-

16,054--(19,282)(3,228)

Balance at 31 July 2021-

2,103,363

19,969,238

158,272,507

2,642,639-

948,932

183,936,679

Balance at 1 August 2021-

2,103,363

19,969,238

158,272,507

2,642,639-

948,932

183,936,679(c) Impairment
At each reporting date, the Group reviews its assets to determine
whether there is any indication of impairment. At 31 July 2022 theGroup has determined that no indication of impairment exists.

Depreciation-

177,297

1,702,009

12,758,454

349,279-

476,351

15,463,390

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

Effect of Movement in Exchange Rates

-

-

-

(17,621)--

14,716(2,905)

Balance at 31 July 2022-

2,280,660

21,671,247

169,354,072

2,956,804-

900,611

197,163,394

At 1 August 2020

18,861,000

1,887,211

33,601,158

60,514,786

1,283,728

14,235,878

1,276,505

131,660,266

CARRYING AMOUNTSAt 31 July 2021

19,843,347

1,816,106

37,548,947

53,715,970

1,069,699

22,661,769

968,568

137,624,406

At 1 August 2021

19,843,347

1,816,106

37,548,947

53,715,970

1,069,699

22,661,769

968,568

137,624,406

At 31 July 2022

22,424,000

1,657,733

40,929,941

59,864,726

869,877

24,267,469

1,210,537

151,224,283

A revaluation was undertaken as at 31 July 2022 by Fergusson
Lockwood and Associates Ltd, independent registered valuers. The
land was valued at $22.424m, an increase of $2.581m from the last
valuation undertaken as at 31 July 2020. The valuation establisheda market value using a direct sales comparison approach andwas undertaken in accordance with the Property Institute of New
Zealand (PINZ) International Valuation Standards. Any gain on
revaluation is recognised in other comprehensive income and heldin equity and any loss is recognised in profit and loss, unless there
is a credit balance existing in the revaluation surplus. The value ofland at cost when purchased was $4,397,051.
Property, Plant and Equipment is categorised within level 2 of thefair value hierarchy.
Capital Commitments
During the period ended 31 July 2022, the Group enteredinto contracts to purchase plant and equipment. The balance
outstanding at balance date is $5,978,987 (2021: $3,293,076).
These commitments are expected to be settled in the following
financial year.

37

38

Tatua Annual Report 2022

Tatua Annual Report 2022

10 — INTANGIBLE ASSETS

39

11 — INVESTMENT PROPERTY
GROUP

GROUP

Software ($)

Total ($)

10,251,859

10,251,859

Additions

638,943638,943

Disposals--

Balance at 31 July 2021

10,890,802

10,890,802

Balance at 1 August 2021

10,890,802

10,890,802

Additions

516,203516,203

Disposals--

11,407,005

11,407,005

2022 ($)

2021 ($)

Balance at 1 August

1,698,000

1,698,000

Change in Fair Value

538,000-

Balance at 31 July

2,236,000

1,698,000

COST
Balance at 1 August 2020

Balance at 31 July 2022

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

AMORTISATION AND IMPAIRMENT LOSSES

Lockwood and Associates Ltd, independent registered valuers,
having appropriate recognised professional qualifications andrecent experience in the location and category of the property
being valued.
Investment property is categorised within level 2 of the fair value
hierarchy.

12 — INVENTORIES

Balance at 1 August 2020

5,164,127

5,164,127

Amortisation for the Year

1,086,970

1,086,970--

Balance at 31 July 2021

6,251,097

6,251,097

Balance at 1 August 2021

6,251,097

6,251,097

Finished Goods

Amortisation for the Year

1,257,908

1,257,908

Raw Materials

18,644,615

13,487,742

Total Inventories

107,617,744

86,425,204

Disposals

Disposals
Balance at 31 July 2022--

7,509,005

7,509,005

CARRYING AMOUNTS
At 1 August 2020

5,087,732

5,087,732

At 31 July 2021

4,639,705

4,639,705

At 1 August 2021

4,639,705

4,639,705

At 31 July 2022

3,898,000

3,898,000

POLICY(a) Recognition and Measurement(b) Amortisation

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

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

Software – 2.5 to 10 years

GROUP
2022 ($)

2021 ($)

88,973,129

72,937,462

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

Impairment

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

realisable value included

Inventories are reviewed for impairment based on their age and/or
condition. If any impairment exists the asset is written down to its
net realisable value (if any). At balance date there was a provisional
write down of $2,869,384 (2021: $1,831,939) relating to inventory
that had a net realisable value less than its cost of manufacture.
GROUP

2022 ($)

2021 ($)

2,071,294

676,262

Inventory valued at net
in finished goods above:

40

Tatua Annual Report 2022

Tatua Annual Report 2022

41

15 — MEMBERS FUNDS

13 — RECEIVABLES & PREPAYMENTS
GROUP

Trade Receivables
Prepayments and Sundries

2022 ($)

2021 ($)

46,985,308

38,763,140

4,241,251

4,334,882

51,226,559

43,098,021

USD ($)AUD ($)JPY (¥)CNY (¥)

2022

8,820,426

1,474,427

1,589,741,813

34,721,730

2021

10,096,409

3,046,240

790,831,588

33,389,415

POLICY

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

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

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

Trade Receivables Denominatedin Foreign Currencies

Movements in the Group’s Issued Shares were as follows:		
2022

2021

Shares($)

Shares($)

151,498,490

75,749,246

151,993,262

75,996,631

3,577,680

1,788,840

5,670,180

2,835,090

Shares Repurchased(10,504,840)(5,252,420)(6,164,952)(3,082,475)

Fully Paid Shares at the end of the Year

144,571,330

72,285,666

151,498,490

75,749,246

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

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

Shares at the beginning of the Year
Shares Issued

Treasury Stock

14 — CASH & CASH EQUIVALENTS

811,405

RESERVES

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

Translation Reserve

Retained Earnings

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

All retained earnings are attributable to equity holders of theGroup.

Hedging Reserve2022 ($)

2021 ($)

JPY Bank Deposits

1,747,305

3,828,704

USD Bank Deposits

436,110

1,206,465

CNY Bank Deposits

7,784,740

4,957,646

NZD Bank Deposits

572,092

8,510,339

Revaluation Reserve

10,540,247

18,503,154

The revaluation reserve relates to the revaluation of land andimprovements.

Cash and Cash Equivalents in the Statement of Cash Flows

7,738,565

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.

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

42

Tatua Annual Report 2022

Tatua Annual Report 2022

16 — LOANS & BORROWINGSInterest-bearing borrowings are classified as financial
liabilities and are measured at amortised cost using theeffective interest rate.
2022 ($)

2021 ($)

JPY Bank Loans

3,697,519

4,031,044

USD Bank Loans

2,383,601

2,134,240

NZD Bank Loans

35,000,000

30,000,000

Lease Liabilities

391,071347,716

41,472,191

36,513,000

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

43

The Group has committed (but undrawn) facilities with expiry
dates through to 2025 of NZD $25.5 million, JPY ¥690 million
and USD $1.5 million (2021: NZD $45.0 million, JPY ¥1,090 million
and USD $1.5 million). The JPY and USD loans are held by therespective subsidiaires.

Current

Non Current
NZD Bank Loans

34,500,000

25,000,000

Lease Liabilities

865,483

672,300

35,365,483

25,672,300

76,837,674

62,185,300

Total Loans and Borrowings

2022

Currency

Nominal Interest Rate

Year of Maturity

Face Value

Carrying Amount(NZD)

Current

Non Current

2021

JPY

1.09%-1.325%

2023

310,000,000

3,697,519

USD

2.33%

2023

1,500,000

2,383,601

NZD

3.09%

2023

35,000,000

35,000,000

NZD

2.94%-4.15%

2023

391,071

391,071

NZD

3.23%-4.52%

2024 - 2025

34,500,000

34,500,000

NZD

2.94%-4.15%

2024 - 2033

865,483

865,483

Nominal Interest Rate

Year of Maturity

Face Value

Carrying AmountCurrency(NZD)

Current

Non Current

JPY

0.825%-1.08%

2022

310,000,000

USD

0.97%

2022

1,500,000

4,031,044
2,134,240

NZD

1.50%

2022

30,000,000

30,000,000

NZD

3.35%-4.15%

2022

347,716

347,716

NZD

1.55%

2023

25,000,000

25,000,000

NZD

3.35%-4.15%

2023 - 2033

672,300

672,300

17 — ACCOUNTS PAYABLE & ACCRUALS
GROUP
2022 ($)

2021 ($)

Trade Payables

12,955,811

9,771,035

Employee Entitlements

8,964,280

7,827,172

Income in Advance

1,652,949

1,148,439

Accruals

8,564,650

11,291,451

Total Accounts Payable and Accruals

32,137,690

30,038,097

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

44

Tatua Annual Report 2022

Tatua Annual Report 2022

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

More than 12 Months

Total

2022 Interest Rate Hedges

5,000,000

32,000,000

37,000,000

2021 Interest Rate Hedges

5,000,000

27,000,000

32,000,000

GROUP
2022 ($)

2021 ($)

Current Liabilities-(88,058)

Non Current Liabilities-(723,223)

7,141

-

Non Current Assets

853,334

198,767

Net Fair Value of Interest Rate Hedges

860,475(612,514)

Fair Value

Current Assets

Foreign Currency Hedges
The Group’s foreign exchange rate contracts and options notionalamounts and fair values are presented below. The Group uses zero
cost collar structures for option contracts. All options are bought
options. Exposure is covered in Note 19.				
					
2022
Foreign Exchange Contracts

Option Contracts

Option Contracts

Fair Value

2022 ($)

2021 ($)

Current Assets

2,355,376

7,968,532

Non Current Assets

1,095,909

963,116

Current Liabilities(11,486,242)(1,666,446)

Non Current Liabilities(3,783,402)(1,069,270)

Net Fair Value of Foreign Currency Hedges(11,818,359)

6,195,932

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

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

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

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

More than 12 Months

Total

Buy

271,165,759

108,457,345

379,623,104

Sell

-

-

-

Call

31,907,475

6,226,780

38,134,255

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

Less than 12 Months

More than 12 Months

Total

Buy

189,221,954

45,622,713

234,844,667

Sell

-

-

-

2021
Foreign Exchange Contracts							
		

45

Call

19,916,631

18,177,452

38,094,083

Put(18,960,703)(18,031,638)(36,992,341)—

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

The amount reclassified from other comprehensive income toprofit or loss on settlement of the derivatives in the 2022 financial
year was a loss of $45,388 (2021: gain of $8,036,513).

46

Tatua Annual Report 2022

19 — FINANCIAL RISK MANAGEMENT
a. Credit Risk

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

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

The Board primarily monitors capital on the basis of the gearing
ratio. As at 31 July 2022 the gearing ratio was 27.3% (2021: 20.1%).
This ratio is calculated as net interest bearing debt divided bytotal capital. Net interest bearing debt is calculated as totalborrowings less cash and cash equivalents. Total capital iscalculated as members funds plus net interest bearing debt. Tatua
is a co-operative company, and as such, members funds change inproportion to milk supplied (Refer Note 15). The Group is required
to meet certain ratios under its bank covenants, which have beenmet, including a requirement that Group members funds be notless than $70,000,000 (2021: $70,000,000). The Group is not
subject to any other externally imposed capital requirements.
There have been no material changes in the Group’s managementof capital during the period.
Quantitative Disclosures

Tatua has a credit policy under which each customer is assessed
for credit worthiness and assigned a credit limit. Where available
the Group reviews external credit reports for both country andcustomer risk. Credit limits are reviewed on a regular basis. The
Group’s credit policy requires certain risk mitigations such as
insurance, letters of credit or prepayment depending on the
country and/or customer.
The Group does not require collateral for trade and otherreceivables. However, where practicable, purchase money security
interests over New Zealand-based customers are registered on the
Personal Property and Securities Register.
The Group is required to assess for impairment loss on receivablesat the time that revenue is recognised. Management has performed
an assessment of receivables under the expected loss model andconcluded that as the Group’s control over receivables has resulted
in very few bad debts, expected losses are not material.
The carrying amount of financial assets represents the Group’s
maximum credit exposure. The Group has not renegotiated theterms of any financial assets which would result in the carrying
amount no longer being past due or avoid a possible past due
status. The Group’s maximum exposure to credit risk for trade andother receivables, by geographic region, is as follows:

Gross Receivable

Impairment

Gross Receivable

Impairment

2022 ($)

2022 ($)

2021 ($)

2021 ($)

Not Past Due

39,343,152-

36,796,052-

Past Due 0-30 days

7,415,745-

1,948,010-

Past Due 31-120 days--

19,078-46,758,897-

38,763,140-

Total Trade Receivables (Note 13)

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

ContractualCash Flows($)

Less than
6 Months($)

6-12 Months($)

1-2 Years($)

More Than
2 Years($)

Non-Derivative Financial Liabilities

Note

Loans and Borrowings

16(76,837,674)(76,837,674)(217,775)(41,254,416)(4,763,388)(30,602,095)

Accounts Payable and Accruals

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

-

-

-

(37,053,516)(37,053,516)(37,053,516)

-

-

-

Owing to Suppliers
Co-operative Shares(72,285,666)(72,285,666)-(72,285,666)--

Total Non-Derivative Financial Liabilities(207,697,317)(207,697,317)(58,791,752)(113,540,082)(4,763,388)(30,602,095)

Derivative Financial Liabilities
Interest Rate Swaps

-

-

-

-

-

-

Options Contracts(1,564,356)(1,564,356)(900,222)(267,757)(396,377)-(13,705,288)(325,490,489)(131,340,988)(91,796,079)(102,353,422)--

311,785,201

125,031,137

87,686,883

99,067,181-(15,269,644)(15,269,644)(7,210,073)(4,376,953)(3,682,618)-- Outflow- Inflow
Total Derivative Financial Liabilities

Carrying Amount2022 ($)

2021 ($)

Australasia (NZ and AUS)

7,314,496

9,565,358

Asia / Pacific

33,630,512

21,607,025

Americas / Europe

5,807,697

6,879,171

6,192

711,586

46,758,897

38,763,140

Total Trade Receivables (Note 13)

2022 Balance
Sheet
($)

Forward Exchange Contracts

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

Other

47

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

Capital Management

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

Tatua Annual Report 2022

48

Tatua Annual Report 2022

GROUP

Tatua Annual Report 2022

2021 Balance
Sheet
($)

ContractualCash Flows($)

Less than
6 Months($)

6-12 Months($)

1-2 Years($)

More Than
2 Years($)

Non-Derivative Financial Liabilities

Note

Loans and Borrowings

16(62,185,300)(62,185,300)(211,877)(36,301,123)(25,116,672)(555,628)

Accounts Payable and Accruals

17(21,062,486)(21,062,486)(21,062,486)

-

-

-

Owing to Suppliers(35,135,714)(35,135,714)(35,135,714)

-

-

-

Co-operative Shares(75,749,246)(75,749,246)-(75,749,246)--

Total Non-Derivative Financial Liabilities(194,132,746)(194,132,746)(56,410,077)(112,050,369)(25,116,672)(555,628)

Derivative Financial Liabilities
Interest Rate Swaps(811,281)(811,281)(275,354)(187,295)(326,945)(21,687)

Options Contracts(669,108)(669,108)(77,626)(44,392)(547,090)-(2,066,608)(115,728,317)(55,052,538)(29,198,939)(31,476,840)--

113,661,709

54,043,741

28,663,308

30,954,660-

49

d. Interest Rate Risk – Repricing Analysis
Interest rate risk is the risk that the value of the Group’s assets andliabilities will fluctuate due to changes in market interest rates. The
Group is exposed to interest rate risk primarily through its cash
balances and advances, bank overdraft and borrowings. Interest
rate swaps have been entered into to achieve an appropriate mix of
fixed and floating rate exposure within the Group’s policy.
The Group’s exposure to interest rate risk can be summarised asfollows:2022

NZD ($)USD ($)AUD ($)CNY (¥)JPY (¥)EUR (€)Cash and Cash Equivalents(520,073)

241,113

7,105

33,130,203

164,510,268

480,227

Forward Exchange Contracts- Outflow- Inflow
Total Derivative Financial Liabilities(3,546,997)(3,546,997)(1,361,777)(767,318)(1,396,215)(21,687)

c. Foreign Currency Exchange Risk

The Group has a policy of maintaining a level of foreign currency
hedging that allows for a degree of certainty in its future cash flows
and to help protect it against sudden movements in the value of
the New Zealand dollar against the United States dollar, Japanese2022

USD ($)

yen and Australian dollar. The Group uses forward exchange
contracts and currency options to hedge its foreign currency
exposure. All of the forward exchange contracts and options
have maturities of less than two years at balance date.
The Group classifies its forward exchange and option contracts,
which are hedging forecast transactions, as cash flow hedges.

-(310,000,000)

-

-

-

-

-

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

7,105

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

480,227NZD ($)USD ($)AUD ($)CNY (¥)JPY (¥)EUR (€)
116,353

AUD ($)CNY (¥)JPY (¥ - 000’s)

52,289,977

436,836,358

5,472,994(63,000,000)(315,000,000)(3,150,000)

Net Unhedged Exposure(23,905,086)(10,710,023)

121,836,358

2,322,994

USD ($)AUD ($)CNY (¥)JPY (¥ - 000’s)

2021

94,844,788

31,592,955

372,295,700

3,339,541(68,000,000)(16,000,000)(258,000,000)(2,400,000)

26,844,788

15,592,955

114,295,700

939,541

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

8,032,648

126,535

7,912

22,818,535

595,388

Loans and Borrowings(55,000,000)(1,500,000)--(310,000,000)-

Interest Rate Swaps

32,000,000

-

-

-

-

-

Net Unhedged Exposure(14,967,352)(1,373,465)

7,912

22,818,535(309,404,612)

116,353

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

103,094,914

Net Unhedged Exposure--e. Sensitivity Analysis

The Group’s exposure to foreign currency risk for the next
12 months can be summarised as follows:(127,000,000)

less Foreign Exchange Contracts and Options(1,500,000)

37,000,000

Cash and Cash Equivalents

less Foreign Exchange Contracts and Options

Net Cash Flow Exposure Before Hedging(69,500,000)

2021

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

Net Cash Flow Exposure Before Hedging

Loans and Borrowings
Interest Rate Swaps

Interest Rates:
At 31 July 2022 it is estimated that a general increase of one
percentage point in NZ interest rates would decrease Group profit
before income tax by approximately $395,880 (2021: $318,762).
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 NZD. At 31
July 2022 it is estimated that a general increase of one centin the NZD/USD exchange rate would increase the Group’s
total comprehensive income by $6,009,037 (2021: increase by$2,921,506). Foreign exchange hedging has been included in thiscalculation.

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Tatua Annual Report 2022

Tatua Annual Report 2022

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

21 — RELATED PARTY TRANSACTIONSYear Ended 31 July 2022 ($)

Year Ended 31 July 2021 ($)

14,286,273

12,896,398

Adjustments for Non Cash Items

Directors and Shareholders

Transactions and Balances with Key Management Personnel

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

Key management personnel may conduct business with
the Group.

Key Management Personnel

The aggregate value of transactions and outstanding balances
relating to key management personnel and entities over which they
have control or significant influence were as follows: Nil (2021: Nil).

Depreciation

15,463,390

15,275,557

Amortisation of Intangible Assets

1,257,908

1,086,970

Movement in Deferred Tax(2,606,434)(335,016)

Revaluation of Investment Property(538,000)-

Short Term Employee Benefits

2,137,353

2,296,221

Revaluation of Biological Assets(393,287)(203,666)

Long Term Employee Benefits--

Movement in Investments(213,711)(147,644)

2,137,353

2,296,221

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

43,322

12,65313,013,188

15,688,854

Total Non Cash Items

51

Compensation

Year Ended 31

Year Ended 31

July 2022 ($)

July 2021 ($)

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 $570,500 (2021: $504,000),
which is separately disclosed within the directors’ report.
The following entities are considered related parties because they
have common directors:

Movements in Working Capital
Trade and Other Receivables(8,153,307)

5,403,960

Derivatives – Assets

4,818,654(1,811,228)

Amounts Paid

PayableAmounts Received

Receivable

Derivatives – Liabilities

11,722,647(538,227)($)

31 July 2022 ($)($)

31 July 2022 ($)(21,192,540)(16,530,680)

Biological Assets

102,193

747,371

Owing to Suppliers

1,917,803

Trade and Other Payables
Total Movements in Working Capital

Inventories

Items Classified as Investing / Financing Activities
Net Cash Flows From/(Applied to) Operating Activities

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

Related Party

Director

Foodstuffs North Island

Peter Schuyt--

5,839,369

521,554

7,340,717

DairyNZ

Peter Schuyt

-

-

-

-

1,464,655

4,384,618

RML Engineering Ltd

Ross Townshend

3,159,888

41,560--(9,319,895)(1,003,469)

Nicholson United Autos Ltd

Mark Dewdney

3,069

-

-

-

AgResearch Limited

Louise Cullen

6,210

-

-

-

3,169,167

41,5605,839,369

521,554(10,632,999)

353,953

7,346,567

27,935,736

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

Directors’ Farm Supply(included in Owing to Suppliers)

Value of Transactions

Balance Outstanding

Value of Transactions

Balance Outstanding

2022 ($)

31 July 2022 ($)

2021 ($)

31 July 2021 ($)

14,167,140

2,679,000

10,665,892

2,472,105

52

Tatua Annual Report 2022

Tatua Annual Report 2022

53

Independent Auditor’s Report
To the shareholders of The Tatua Co-operative Dairy Company Limited

22 — GROUP ENTITIES

Report on the audit of the consolidated financial statements
Country of Incorporation

Ownership Interest
2022

2021

Subsidiaries
Tatua Japan Limited

Japan

100%

100%

Tatua USA Limited

USA

100%

100%

Tatua Dairy Products (Shanghai) Co., Ltd

China

100%

100%

Equity Accounted Investee
MilkTest NZ LP

New Zealand

10%

10%

POLICY(a) Basis of Consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists
when the Group has rights or exposure to variable returns from its
involvement with the entity, and the ability to use its power overthe entity to affect the amount of the entity’s return. In assessing
control, potential voting rights are only considered if the rights aresubstantive. The financial statements of subsidiaries are includedin the consolidated financial statements from the date that control
commences until the date that control ceases.
Equity Accounted Investees (Joint Ventures)
Joint ventures are those arrangements in which the Group has
contractually agreed to share control and where the Group hasrights to the net assets rather than rights to the assets andobligations for the liabilities. Joint ventures are initially recognised
at cost (including any goodwill identified on acquisition).
Subsequent to initial recognition they are accounted for using
the equity method in the consolidated financial statements. The
consolidated financial statements include the Group’s share of the
profit or loss after tax of joint ventures after adjustments to align23 — SUBSEQUENT EVENTS
There were no material events subsequent to 31 July 2022 thatwould impact these financial statements.

the accounting policies of the Group, from the date that significant
influence or joint control commences until the date that significant
influence or joint control ceases.
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 currencytranslation reserve (FCTR). When a foreign operation is disposedof, in part or in full, the relevant amount in the FCTR is transferred
to profit or loss as part of the gain or loss on disposal.

OpinionIn our opinion, the consolidated financial
statements of The Tatua Co-operative Dairy
Company Limited (the ’company’) and its
52:
subsidiaries (the 'group') on pages 24
9 toto25:

We have audited the accompanying consolidated
financial statements which comprise:i. Present fairly in all material respects the group’s
financial position as at 31 July 2022 and its
financial performance and cash flows for theyear ended on that date in accordance with New
Zealand Equivalents to International Financial
Reporting Standards and International Financial
Reporting Standards.

— The consolidated statements of comprehensive— The consolidated balance sheet as at 31 July2022;

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

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the group in accordance with Professional and Ethical Standard 1 International Code of
Ethics for Assurance Practitioners (Including International Independence Standards) (New Zealand) issued by the
New Zealand Auditing and Assurance Standards Board and the International Ethics Standards Board for
Accountants’ International Code of Ethics for Professional Accountants (including International IndependenceStandards) (‘IESBA Code’), and we have fulfilled our other ethical responsibilities in accordance with theserequirements and the IESBA Code.
Our responsibilities under ISAs (NZ) are further described in the Auditor’s responsibilities for the audit of theconsolidated financial statements section of our report.
Our firm has also provided other services to the group in relation to tax advice and a share registry assurance
engagement. Subject to certain restrictions, partners and employees of our firm may also deal with the group on
normal terms within the ordinary course of trading activities of the business of the group. These matters havenot impaired our independence as auditor of the group. The firm has no other relationship with, or interest in, thegroup.

Materiality
The scope of our audit was influenced by our application of materiality. Materiality helped us to determine thenature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individuallyand on the consolidated financial statements as a whole. The materiality for the consolidated financial
statements as a whole was set at $3.7m determined with reference to a benchmark of group total revenue. We
chose the benchmark because, in our view, this is a key measure of the group’s performance.

Page 26

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Tatua Annual Report 2022

Tatua Annual Report 2022

Use of this independent auditor’s report

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

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

How the matter was addressed in our audit

Responsibilities of the Directors for the consolidated financial

Inventory - Milk Cost
Refer to Note 12 of the financial statements.
The group has inventory of $108 million (2021: $86
million) which represents 32% of total assets.
A significant portion of the cost of finished goods
inventory is represented by an estimated cost for milksolids supplied by co-operative shareholders and actual
cost for milk produced by other suppliers.
The group has determined that the estimated cost of
the milk solids supplied from co-operative
shareholders is best represented by the Farmgate Milk
Price calculated in accordance with the Farmgate Milk
Price Manual.
A model is prepared to calculate the weighted average
cost of milk solids supplied from both co-operative
shareholders and other suppliers. The weighted
average cost of milk solids supplied is then split into
the individual cost for three core product ingredients(Fat, Whey protein and Casein protein). The model
incorporates a number of significant inputs, including
the Farmgate Milk Price, purchased milk cost fromother suppliers, and a valued component ratio of fat toprotein.
The judgment required to consider these variabilities
and uncertainties are the reason we have considered
this a key audit matter.

55

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

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

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

We considered the appropriateness of management’s
use of the Farmgate Milk Price as the best estimateof the cost of milk solids supplied from the cooperative shareholders.
We compared the Farmgate Milk Price used to thelatest publicised rate for the 2021/22 season.
We compared a sample of purchased wholemilk andcream from other parties to their respective invoices.

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.

We compared the valued component ratio of fat toprotein in the model to the ratio that was physicallypaid to farmers based on their fat and protein supply
split during the 2021/22 season.
We checked that the split of protein into its casein
and whey components was calculated correctly.
We checked that the mechanics of the model were
calculating correctly and were consistent with theprior year.
We did not identify material exceptions from theprocedures performed and found the judgements andassumptions to be balanced and consistent.

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

Other information
The Directors, on behalf of the group, are responsible for the other information included in the entity’s Annual
Report. Other information includes Directory, 2021 / 2022 In Review and Statutory Information. Our opinion on
the consolidated financial statements does not cover any other information and we do not express any form ofassurance conclusion thereon.
In connection with our audit of the consolidated financial statements our responsibility is to read the otherinformation and, in doing so, consider whether the other information is materially inconsistent with 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 thisother information, we are required to report that fact. We have nothing to report in this regard.

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

KPMG
Hamilton
21 October 2022
Page 28

Page 27

Tatua Annual Report 2022

DIRECTORY

Registered Office

Chairman

3434 State Highway 26
TatuanuiMorrinsville 3374
NEW ZEALAND

SB Allen

Postal Address
Private Bag 800
Morrinsville 3340
NEW ZEALAND
Telephone+64 7 889 3999

Directors
SB Allen
Dr. LE Cullen
MBN Dewdney
JL Langley
RJ Luxton
DP Muggeridge
PM Schuyt
DJ Walsh
Chief Executive Officer
BA Greaney

Websitewww.tatua.com
Auditors
KPMG

General Manager Finance& Corporate Administration
ML Bull
General Manager Operations
TA Keir

Solicitors
Harkness Henry & Co
Minter Ellison Rudd Watts

General Manager Marketing & SalesSJ Rolfe
General Manager Co-operative Affairs

Bankers

PJ van Boheemen

Bank of New Zealand Ltd

General Manager Strategic Projects

Insurance Brokers
Willis Towers Watson Ltd

TA Winter
Head of People and Capability
PA Pilkington

57

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