ANNUAL REPORT 202 1

TOGETHER WE ARE
BUILDING THE FUTURE
OF SPECIALISED DAIRYTatua Annual Report 2021

CONTENTS
Year in Review

Financial Statements

2021 Highlights

1

Report from the Chairman and Chief Executive Officer

3

Tatua Together

7

Our Global Connections

9

Building the Future of Specialised Dairy

11

Investing for a Better Future

13

Key Financial Performance Summary

16

Statutory Information

19

Balance Sheet

23

Statement of Comprehensive Income

24Statement of Changes in Equity

25

Statement of Cash Flows

26

Notes to the Financial Statements

27

Audit Report

52

Directory

56

The Tatua Co-operative Dairy Company Limited
3434 State Highway 26, Tatuanui, Morrinsville 3374, New Zealand1

Tatua Annual Report 2021

Tatua Annual Report 2021

2021 HIGHLIGHTS

Building the Future of Specialised Dairy

Total Underlying
Revenue

Specialty Added
Value Revenue

$395m

$188m

Total Earnings
per kilogram of
Qualifying Milksolids

Cash Payout toShareholders per
kilogram of Qualifying
Milksolids

Milksolids Received
from Suppliers (kg)Revenue via
Subsidiary Offices$10.43

$9.25

15.7m

47%

Total Underlying
Revenue

Reinvestment p erkilogram of Milksolids

Proportion of
Products Exported

Average Gearing
Ratio

+4%

$1.18

89%

20.5%

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Tatua Annual Report 2021

Tatua Annual Report 2021

TATUA HAS ACHIEVED A GREATRESULT IN WHAT HAS BEEN
ANOTHER CHALLENGING YEAR.

REPORT FROM THE
CHAIRMAN AND CHIEF
EXECUTIVE OFFICER
The 2020/21 year was
notable for the ongoing
impacts of the global
Covid-19 pandemic.
Over the course of the year, our teamin New Zealand transitioned in andout of Covid-19 Alert Level 2 on threeoccasions, but fortunately were notrequired to move into full lockdown as
we did the previous year. The situation
was more challenging for our teams
in market, where, in some cases, there
were severe and prolonged restrictions.
Covid-19 related global shipping
disruption was a notable challengethroughout the year. The way ourInternational Trade and Supply Chain
teams worked with the wider business,and managed through the ongoingsituation, has been a highlight.
Despite the challenges, we fully
acknowledge that many businesses
and individuals have faced far greater
hardships, and that we have been
fortunate to operate as we have,achieving another solid financial
performance.
Our Tatua Shareholder seasonal
milksolids supply of 15.65 million
kilograms was ahead of both theprevious season, and our limit of
15.20 million kilograms of qualifying
milksolids used for distribution of the
co-operative earnings. Discounted
pricing applies to excess milk supplied.

Shareholder supplied milk was
supplemented by milk and creampurchases from other processors,whose ongoing cooperation andpartnership we continue to appreciate
and value.
Total milksolids processed, from all
sources, was less than the previous
year. However, due to the growth of our
specialist products and corresponding
increase in procured non-liquid
ingredients, annual production volumes
were our highest ever.
We are pleased to report record
Group income and earnings of $395
million and $162 million respectively.
This equated to $10.43 per kilogramof milksolids before retentions forreinvestment and taxation. We elected
to retain $1.18 per kilogram of milksolids
from total earnings for reinvestment,leaving a cash payout to Shareholders
of $9.25 per kilogram of milksolids.
In deciding our cash payout, we werevery conscious of balancing the needsof our Shareholders, and the challenges
they are facing in their farming
operations, against the requirement forcontinued investment in the business.
We also sought to maintain a levelof debt we consider sensible in thecurrent uncertain economic and global
trade environment.
Our gearing (debt divided by debt plus
equity) averaged 20.5% for the year,
which was lower than the previous year
average.

Total revenue from our caseinate, whey
protein concentrate, and anhydrous
milkfat dairy ingredient products was
slightly behind the previous year, on asimilar sales volume. This was mainly
due to the foreign exchange impact onexport revenue from the year-on-year
strengthening of the New Zealanddollar against our three main tradedcurrencies.
Despite also being impacted by theunfavourable currency effect, revenue
from our specialised value-add
businesses was ahead of the previous
year. This was largely the result of
increased sales volumes of both newand existing products, as we continue
to focus on value-add growth.
Our foreign exchange hedging
programme, that we report
independently from our revenue, waseffective in offsetting the unfavourable
currency impact on exports, therebysmoothing export revenues.
We remained well diversified across
our product lines, customers, andexport markets. We were fortunate tohave well established and very capablesubsidiaries in three of our key markets,
enabling ongoing close interaction
and collaboration with many of ourcustomers. Outside of our subsidiaries,
our commercial teams have worked
hard to remain connected remotely,when many would otherwise have been
travelling to meet in person.

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Tatua Annual Report 2021

Tatua Annual Report 2021

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

Our new Engineering Services
workshop was completed on time andwithin budget, despite works being
suspended early in the project during
the previous year’s Covid-19 lockdown.
This positive outcome was a credit
to all involved, including the primarycontractor.
The larger scale wastewater treatment
plant project that commenced ataround the same time was more
severely impacted by Covid-19 delays,
unfavourable weather conditions,and other complications that
followed. However, the plant will becommissioned in October 2021 for an
overall positive outcome of being highquality infrastructure that will treat
process wastewater to near drinking
water standard.
A capacity upgrade of our Foods plant,
where cream-based consumer andfoodservice products are produced,
was completed and successfullycommissioned in July, ahead of the
new supply season. This will enable
continued growth of this valueadd business over the coming year
while further capacity upgrades arecompleted.
During the year, we launched an
online employee feedback platform
called Joyous, that allows us toconnect and receive open and honest
feedback from our teams on a “little
and often” basis. This replaces theanonymous engagement surveys that
we have historically run every otheryear and found difficult to utilise ina meaningful way.

We have also further progressed
our CliftonStrengths personal
development programme. Over 90% of
our people have completed strengths
assessments, and individual and teamdevelopment coaching is now wellestablished.
The strength assessments promote anindividual’s natural talents and enable
collective awareness of the different
strengths within our various teams
so that team dynamics are better
understood, leading to a more effective
and rewarding work environment.
Our Tatua 360 Responsible Farming
Programme continues to effectively
provide the framework for progressing
on-farm sustainability and best practice
initiatives, as well as capturing evolving
policy requirements. More than halfof our Shareholder farms now have anapproved farm environmental plan inplace and we are on track to have planscompleted for all farms by June 2023.
We have developed and implemented
new farm environmental planningsoftware that meets our requirements
and enables more efficient, in-house,roll-out of the remaining farm plans.
We remain engaged on industry policy
matters in collaboration with otherprocessors and industry organisations.
We are concerned at the rate of policychanges and the impact this has on our
farming families and their businesses,
and value the opportunities we haveto constructively share our views onthese matters through consultation
processes.

OutlookAcknowledgements

As we move into the new financial
year, demand and pricing for our dairy
ingredients is favourable and we are wellcontracted. We continue to focus on thedevelopment and commercialisation of
our specialist product opportunities andremain positive in our outlook for dairy.

Firstly, we would like to thank all our
people at Tatua for your dedication andcommitment to the business throughanother challenging and uncertain year.
The financial result is only one indicatorof the contributions you have made to
everything that has been achieved.

We will continue to be quite deliberate
in diversifying the business, to help limit
our commercial exposure to any single
product line or market, while continuing
to work closely in support of ourexisting customers.

Thank you to our Shareholders foryour full and continued support of the
Co-operative, the way you acknowledge
the efforts of our teams, the work you
do to keep your farm businesses at theforefront of sustainable practice, andthe high-quality milk you consistently
supply.

Over the coming year, we will continue
to invest in the capacity and capabilityof our value-add businesses while also
acknowledging the importance of ourmore generic dairy ingredients business,that remains a significant contributor to
our overall performance.
We are expecting global shipping tocontinue to be a challenge for sometime, but look forward to when we canstart to see a return to more consistent
operations. In the meantime, we work
closely with our shipping partners, andremain as agile as we can, in order tomeet our customer commitments in all
markets.
The spread of the Covid-19 Delta
variant beyond the elimination phaseof New Zealand’s pandemic response
is a serious concern for us. We remain
focussed on taking all precautions
that we reasonably can to protect ourpeople and the business as the situation
continues to evolve.

We would also like to thank the diverse
range of individuals and organisations
who have partnered with us, across all
aspects of the business. We endeavour
to be straight forward, uncomplicated,and good to work with, and we
sincerely hope this has been yourexperience in interacting with us.
Finally, a very sincere thank you to
our customers in all of our markets forboth your business, and understanding,as we have navigated the challenges
over the last year. We look forward tocontinuing to work with you to further
strengthen our relationships over theyear ahead.
Our sincerest thanks to you all.

Stephen Allen
Chairman

Brendhan Greaney
Chief Executive Officer

Farewell Peter Schuyt
After 12 years of outstanding
service as an Independent
Director and Chairman of Tatua’s
Audit, Risk and Compliance
Committee, Peter Schuyt isretiring from Tatua’s Board. Peter
joined the Board in February 2009,
having completed a distinguishedexecutive career, including being
Chief Financial Officer at the NZ
Dairy Board, and Group Chief
Financial Officer at NZ Post.
Peter’s governance career
has included a broad range ofdirectorships across the primarysector, food, co-operatives, andbanking. He is currently a Directorof DairyNZ, Tax Management
NZ Ltd, Foodstuffs North Island
Ltd, Ahikouka Holdings Ltd andGreenleaf Fresh Ltd.
During Peter’s time at Tatua hehas made a valuable contribution
to a range of significant
investments in new and advanced
processing facilities, information

systems, and other sustainability
related infrastructure, suchas our wastewater treatment
plant. In addition, Tatua’srisk and compliance policies
and processes have evolved
substantially under his leadership.
We have been very fortunate
to have had Peter’s experience,
wisdom, and sound judgement
as we transitioned to a new
Chief Executive (Brendhan
Greaney) five years ago. Peter’s
thoughtful, passionate andinsightful contribution to Tatua’speople, strategy, and financial
management have been greatly
appreciated.
On behalf of the Board and thepeople of Tatua, we extend oursincere thanks to Peter. You havealways had Tatua’s best interests
at heart, we will miss you greatly.
We wish you the very best for the
next chapter of your life.

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Tatua Annual Report 2021

Tatua Annual Report 2021

TATUA TOGETHERInternational Shipping Challenges

Innovation, quality and co-operative spirit are at the heart of everything
we do. Together, our farmers and our employees are committed tobuilding the future of specialised dairy.

Since the start of the Covid-19 pandemic in 2020,
international shipping has been significantly disrupted
through port congestion, container bottlenecks andoperational delays. This ever-changing environment
has significantly increased the complexity of ourexport supply chain. Despite the many challenges,
our teams in New Zealand, Japan, China and the USA
have ensured that Tatua’s customers can continue torely on our ability to get product to market.

ENVIRONMENTAL EXCELLENCE

Customs Secure Export Scheme
Air Freight Partner
Tatua is the first dairy company in New Zealand to receive the NZ Customs
Secure Export Scheme (SES) Certification for Air Freight. Tatua is now
an approved SES partner for both sea freight and air freight. The SES
certification allows export through approved and audited secure supply
chains and minimises customs processing delays for our products atinternational borders.

Award Winning Farmers —Waiorongomai Valley Farms
LimitedContinuously working to reduce their environmental
impact and balance sustainability alongsideprofitability has paid off for Tatua’ shareholders, thevan Ras family, who won the 2021 Ballance Farm
Environment Waikato Regional Supreme Award.

People & Capability
Family business partners, Johan and Kylie van Ras
together with Johan’s parents, Richard and Truus
van Ras, also won the Ballance Agri-Nutrients
Soil Management Award; DairyNZ Sustainability
and Stewardship Award; Waterforce Integrated
Management Award and the Synlait Future LeadersAward.
These awards showcase their family collaborationand leadership in environmental excellence and farmmanagement practises as they continue to focus
on protecting and enhancing the environment andadding value to their business and community.

“We are always looking for new ideas
to both improve our farming businessand enhance our environment.”
Johan van Ras

Tatua continued the roll out of CliftonStrengths assessments this year. This
personal development tool was introduced in 2019 and is a starting point
for discussions around what our employees naturally do best. Ninety five
percent of Tatua employees have now completed their CliftonStrengths
assessments. To support our goal of making Tatua an even greater place towork, we launched Joyous, an online feedback platform, to encourage quick
regular and open feedback within the team.

Wellbeing
Despite Covid-19 restrictions, we were fortunate to see the return of many
wellbeing initiatives this year:– Family Day – shareholders andemployees joined the annual
activities and barbeque lunch– Physical Wellbeing throughFitness classes, Round theBridges Fun Run and walk, andsocial basketball competitions– Financial Wellbeing webinars andinformation sessions focusedon superannuation, banking andfinancial fitness– Annual Winter function– Christmas barbeque89Tatua Annual Report 2021

Tatua Annual Report 2021

OUR GLOBAL CONNECTIONS

Tatua Shanghai
Office in Shanghai, opened in 2015

The development of subsidiary offices in Japan, China and the USA
has been instrumental to the growth of our business in recent years(47% revenue in 2020/21). Our subsidiaries have proven particularly
valuable in maintaining in-market customer connections during theCovid-19 pandemic when international travel has not been possible.

Key business categories:
Nutritional Ingredients,
Dairy Ingredients, Foodservice
and Consumer products,
Flavour Ingredients
Total: 23% of global revenue

Tatua USA
Office in Bethlehem, Pennsylvania,
opened in 2015
Key business categories:
Nutritional Ingredients,
Dairy Ingredients
Total: 8% of global revenue

Tatua Japan
Office in Tokyo, opened in 2004
Key business categories:
Nutritional Ingredients, Dairy
Ingredients, Foodservice products,
Flavour Ingredients
Total: 16% of global revenue

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Tatua Annual Report 2021

Tatua Annual Report 2021

BUILDING THE FUTURE
OF SPECIALISED DAIRY

Tatua is a globally recognised leader in the development
and production of specialised, added value dairy products.

$395m
Total Underlying Revenue

+11%

+17%

Revenue Growthin the USA

Aerosol Cream Revenue Growth+15%
Flavour Ingredients
Revenue Growth in China$188m
Record Specialty Added Value Revenue+28%
Revenue Growth in China

+38%

+19%

Hydrolysates
Revenue Growth

Specialty Cream Products
Revenue - Sold in Ecolean packaging

+53%

+10%

Nutritionals Revenue
Growth in USA

Hydrolysates Revenue
Growth in Japan+192%
Hydrolysates Revenue
Growth in USA

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Tatua Annual Report 2021

Tatua Annual Report 2021

INVESTING FOR
A SUSTAINABLE FUTURE“We intend to progressively improve our overall environmental
performance as part of our broader sustainability platform.”
STEPHEN ALLEN – CHAIRMAN

Our purpose is in our nameWater

A tatua is a belt woven from harakeke (flax).
It was traditionally worn by a Māori chief or
warrior to carry their most prized and special
tools. It sits across the abdomen, and as such,
symbolises the protection and enrichment of
future generations.

Our goal is to have wastewater leave our processing
facilities at least as clean as the water that we havereceived.

For us, the tatua symbolises knowledge, skills,
connectedness, strength and the protectionof all that is valuable. Traditionally handed
down from one generation to the next, thetatua represents the protection and sustainedadvancement of both current and future
generations.
Our commitment to sustainability recognises
the needs and expectations of our shareholder
farmers, employees, customers, consumers,
suppliers, strategic partners and thecommunities within which we operate.
Solid progress was made on a number of key
sustainability initiatives in 2020/21 and we arelooking forward to making further progress inthe coming year and beyond.

The development of our $15 million wastewater
treatment plant is progressing well, with completion
slightly delayed due to Covid-19 restrictions.
Despite the delays, it will be commissioned in
October 2021. The wastewater treatment plant
project has involved building a secondary andtertiary plant (primary plant completed in 2019)
which will provide significant improvements to thewastewater discharged from site.

Refining On-Farm Practices
We are committed to working with and supporting
our farmers to achieve good farming practises.
The Tatua 360 Responsible Farming Programme
is now fully rolled out.

Investing for Sustainability
Investment in Tatua’s longer-term sustainability
continues to be a focus for us. The Company’s robust
position provides a strong platform for continued
growth and we make considered decisions to invest
where it is strategic to do so. From an operational
perspective, this has included further investment in
our wastewater treatment and disposal systems aswell as making incremental capacity and functionality
improvements across all of our manufacturing plants.

Tatua farms have:
Farm Environment Plans in place on half of ourfarms – with the remaining to be completed by 2023.
An annual food safety systems assessment and daily
milk quality / safety monitoring.
Animal care and welfare are monitored throughannual veterinary herd assessments.
An annual nutrient budget completed to improve
efficiencies and reduce any losses.
Farm effluent infrastructure in place to eliminate
the need to spray irrigate when conditions are
not suitable. Farm effluent systems are monitored
annually through an independent assessment.
A biosecurity plan in place to manage animal
disease and plant pest risks.
Greenhouse Gas annual assessments and modellingon all farms.

Climate Change
We continue to actively support and engage in wider
industry initiatives including Dairy Tomorrow and He
Waka Eke Noa as we work towards a shared vision of
the future of dairy. This includes an understandingof the risks and opportunities associated with amove towards a lower carbon footprint and thedevelopment of practical solutions to reduce
emissions and build farming resilience.

14

Tatua Annual Report 2021

KEY FINANCIALPERFORMANCE SUMMARY

16

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Tatua Annual Report 2021

Tatua Annual Report 2021

18

2020/21 IN REVIEW
Total Underlying Revenue
2019/20

Total Milk Received from Suppliers (litres)

174,377,146

169,703,701

Qualifying Milksolids Received from Suppliers (kgs)

15,198,804

15,145,593

Total Underlying Revenue ($)

395,023,052

380,745,235

Group Surplus Before Payout & Tax (cents/kg qualifying m’solids)

1043

996

Group Depreciation (cents/kg qualifying m’solids)

101

97

Cash Payout to Shareholders (cents/kg qualifying m’solids)

925

870

Capital Expenditure ($)

21,404,265

18,200,763

Group Assets ($)

306,860,602

298,126,579

Year-End Gearing Ratio: (% Debt to Debt Plus Members Funds)

20

24

Group Surplus before Payout and Tax

810
100

23.9

26.8

15%

925

80

20.1

20%

121

120

135

140

174

160

160

35%

25%

2018/19 2019/20 2020/21

Members Funds
180

30%

710

0
2015/16 2016/17 2017/18

36.7

60

10%

40
$ Millions

+6%

200

40%

35.3

cents/kg
qualifying
milksolids

400

2018/19 2019/20 2020/21

Gearing (%Debt to Debt plus Members Funds)

35.7

925

1043

0

600

126

Payout to Shareholders

996

200

2015/16 2016/17 2017/18

800

Cents/kg qualifying milksolids

400

862

600

760

+5%

800

641

cents/kg
qualifying
milksolids

966

1000

870

1000

850

1200

Cents/kg qualifying milksolids

1043

Payout – Income Equivalent

630

Group Surplus

2020/21117$395m +4%

Summary

5%0%
2015/16 2016/17 2017/18

2018/19 2019/20 2020/21

200
2015/16 2016/17 2017/18

2018/19 2019/20 2020/21

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Tatua Annual Report 2021

Tatua Annual Report 2021

20

STATUTORY INFORMATION
for the year ended 31 July 2021

Principal Activities

Board Composition

Directors’ Remuneration

Employees’ Remuneration

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

The Board can have up to seven elected directors from
Shareholders, and up to three appointed directors. Pursuant to
the Constitution of the Company, one third of elected directors
retire by rotation each year, while appointed directors areappointed for a term not longer than three years, after which
they are eligible to re-appointment for a further three-year term.
Elected directors Stephen Allen and David Muggeridge werere-elected 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 2021 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 Company
The Board of Directors resolved on 21 July 2021 that, in the opinionof the Board, the Company has been a co-operative company
during the year ended 31 July 2021 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 Company are held by those shareholders.

Board Members

Meetings Attended

Stephen Allen$120,000Louise Cullen$64,000

Remuneration

Mark Dewdney$53,333$100,000 - $109,999

48

Julie Langley$48,000$110,000 - $119,999

63

Richard Luxton$58,667$120,000 - $129,999

41
38

Number of Employees

Role of the Board

Stephen Allen (Chairman)

7

David Muggeridge$48,000$130,000 - $139,999

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

Louise Cullen

7Peter Schuyt$64,000$140,000 - $149,999

15$48,000$150,000 - $159,999

8$504,000$160,000 - $169,999

6

Key responsibilities of the Board include:—

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

Appointing and reviewing the performance of the CEO;—

Setting the terms of CEO and executive management
employment;——

Monitoring the financial performance of the Company, andTatua’s risk management;
Ensuring that Tatua has robust corporate governancepractices;—

Ensuring Tatua’s regulatory and legislative compliance; and—Ensuring Tatua has robust health and safety processes which
protect all people associated with the Company.

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

Mark Dewdney

6

Julie Langley

7

Richard Luxton

7$170,000 - $179,999

5David Muggeridge

7

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

5Peter Schuyt

7

1

7

At 31 July 2021 Directors held the following shares in
the Company:$190,000 - $199,999

Ross Townshend$200,000 - $209,999

5

Board Meetings Held

7

Ross Townshend

Beneficially Held

Board Committees
People and Remuneration Committee: Membership comprises
Louise Cullen (Chair), Stephen Allen, Mark Dewdney, Richard
Luxton and Ross Townshend. 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 comprisesPeter Schuyt (Chair), Louise Cullen, Mark Dewdney, Julie Langley,
Richard Luxton, David Muggeridge and Ross Townshend. The
function of the Committee is to assist the Board in ensuring theorganisation fulfils its audit, legal, financial and risk management
obligations and responsibilities. Approval of the annual accounts isundertaken by the full Board.
Responsible Farming Committee: Membership comprises Richard
Luxton (Chair), Stephen Allen, Louise Cullen, Julie Langley, andDavid Muggeridge. The function of the Committee is to assist theBoard in ensuring the Company fulfils its governance and related
responsibilities in regard to the farming activities of the Company
and its supplying shareholders.

Non-

Held By

Beneficially

Associated

Held

Persons$210,000 - $219,999

2$220,000 - $229,999

3$230,000 - $239,999

2$240,000 - $249,999

1$250,000 - $259,999

1$290,000 - $299,999

1$310,000 - $319,999

1

Stephen Allen

2,187,630-

901,520

Louise Cullen

3,116,970--

Mark Dewdney

2,447,070--

Julie Langley

870,900--

Richard Luxton

3,949,060--$330,000 - $339,999

1-$340,000 - $349,999

1David Muggeridge

1,277,840-$350,000 - $359,999

1

Directors’ Insurance$400,000 - $409,999

1

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

$470,000 - $479,999

1$490,000 - $499,999

1$510,000 - $519,999

1$1,090,000 - $1,099,999

1
254

Donations & Grants
Donations and grants for the year ended 31 July 2021 were$30,200 (2020: $20,000).

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Tatua Annual Report 2021

Tatua Annual Report 2021

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 Allen

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

Position

Mark Dewdney

Richard Luxton

Company

Position

Company

Director, Shareholder

KM & JL Langley Limited

Shareholder

Langley Trading Ltd

Director, Shareholder

Aslan Farms Ltd

Director

Wallace Hybrid General Partner Ltd

Director

Templeview Dairies Ltd

Director

Kotare Pastoral Ltd

Director

J.D. & R.D. Wallace (1951) Ltd
JD & RD Wallace General Partner Ltd

Director, Shareholder

Claybrook Farms Ltd

Director

Director, Shareholder

Claybrook No 7 Ltd

Director

Luxton Group General Partner Ltd

Director, Shareholder

Claybrook South Ltd

Director

Pukekara Ltd

Cheadle Farms Ltd

Director

Tui Dale Ltd

Director, Shareholder

Allen Children Ltd

Director

MDLP General Partner Limited

Director

Farmers’ Mutual Group (FMG)

Shareholder

Marire Holdings Ltd

Director

Farmers’ Mutual Insurance Ltd (FMIL)

Director

Mowata GP Ltd

Director, Shareholder

Louise Cullen

Julie Langley

22David Muggeridge

Director, Shareholder

Muggeridge Farms Ltd

Trustee

DP & MA Muggeridge Family Trust

Director, Shareholder

Dairy Investment Fund Ltd

Director

Rangitata GP Ltd

TrusteeSarah Ethne Allen Trust

TrusteeSB & BL Allen Family Trust

Director, Shareholder

Ahikouka Holdings Ltd

Trustee

Cheadle Trust

Director, Shareholder

Greenleaf Fresh Ltd

TrusteeDavid Johnstone Charitable Trust

Director, Shareholder

Schuyt Investments Ltd

Trustee

JES Allen Estate

Director

TSB Bank Ltd

Trustee

JR Allen Estate

Director

Tax Management NZ Ltd

PartnerRangitata Dairies LP Ltd

Director

Foodstuffs North Island Ltd

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, Shareholder

MDLP General Partner Ltd

Director, Shareholder

Namaste Farming Pty Ltd

Director, Shareholder

Namaste Land Pty Ltd

Director

Dairy Goat Co-operative

Director

Nicholson United Autos Ltd

Director

Genera Australia Pty Ltd

Director

Genera New Zealand Ltd

Trustee, Beneficiary

Dewdney Family Trust

Trustee

Marvic Family Trust

TrusteeMark Dewdney Family Trust

TrusteeVicki Dewdney Trust

Partner

Matangi Dairies LP Ltd

Peter Schuyt

Ross Townshend

Director

DairyNZ Inc.

Director

Alliance Group Ltd

TrusteeSchuyt Family Trust

Chairman, Shareholder

RML Engineering Ltd (and subsidiaries)

Chairman

Bector Automation RML Pvt Ltd (India)

Chairman

MSC Consulting Group Ltd

Chairman

Robert Monk Transport Ltd

Director, Shareholder

Ranworth Farm Ltd

Director, Shareholder

Townshend Holdings (2015) 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

Consultant

Oaktree Capital

Consultant

Ora Foods Ltd

Consultant

Walter & Wild Ltd

23Tatua Annual Report 2021

Tatua Annual Report 2021

BALANCE SHEETSTATEMENT OF COMPREHENSIVE INCOME

as at 31 July 2021

for the Year Ended 31 July 2021
GROUP
Note

2021 ($)

24

GROUP
Note

2020 ($)

Year Ended 31 July 2021 ($)

Year Ended 31 July 2020 ($)

Profit or Loss Items

Current Assets
Cash and Cash Equivalents

14

18,503,154

27,933,985

Revenue from Contracts with Customers

383,654,521

389,747,657

Derivatives

18

7,968,532

3,462,833

less Payments for Own Milk Supplied(143,612,148)(131,707,570)

Receivables and Prepayments

13

43,098,021

48,480,204

less Other Cost of Sales(192,033,325)(189,140,228)

37,88759,66448,009,048

68,899,859

86,425,204

69,894,524

Tax Receivable
Inventories

12

Biological Assets
Total Current Assets

499,172

1,042,877

156,531,970

150,874,087

Gross Profit
plus Other Income

3less Sales and Marketing Expenses
less Administration Expenses

Non Current Assets

3

4Surplus from Operating Activities

975,675

1,337,047(24,577,451)(23,347,115)(12,106,260)(11,528,829)

12,301,012

35,360,962
76,166

Property, Plant and Equipment

9137,624,406

131,660,265

Investment Property

11

1,698,000

1,698,000

Intangible Assets

10

4,639,705

5,087,732

Finance Income

68,000,309

Derivatives

18

1,161,883

3,856,354

less Finance Expenses

6(2,383,142)(16,220,121)

Deferred Tax Asset

8

4,425,559

4,090,543

Net Finance Expense

5,617,167(16,143,955)

Equity Accounted Investments

779,079

859,598

Total Non Current Assets

150,328,632

147,252,492

Surplus before Income Tax

Total Assets

306,860,602

298,126,579

less Income Tax Expense

36,513,000

12,237,259

Current Liabilities
Loans and Borrowings

16

Derivatives

18

1,754,504

1,733,876

Accounts Payable and Accruals

1730,038,097

27,971,094

Tax Payable

2,409,999

92,383

Owing to Suppliers

35,135,714

27,794,997

Total Current Liabilities

105,851,314

69,829,609

Non Current Liabilities
Loans and Borrowings

16

25,672,300

65,892,839

Derivatives

18

1,792,493

2,351,349

Total Non Current Liabilities

27,464,793

68,244,188

Total Liabilities Excluding Co-operative Shares

133,316,107

138,073,797

Classified as a Liability
PLUS Co-operative Shares

75,749,246

75,996,631

Total Liabilities

209,065,353

214,070,428

Net Assets

97,795,249

84,056,151

Retained Earnings

78,573,676

65,677,278

Reserves

19,221,573

18,378,873

Equity97,795,249

84,056,151

75,749,246

75,996,631

Retained Earnings

78,573,676

65,677,278

Reserves

19,221,573

18,378,873

173,544,495

160,052,782

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

Total Members Funds

15

For and on behalf of the Board:
SB Allen Chairman of Directors
15 October 2021

PM Schuyt Chairman of Audit, Risk and Compliance Committee
15 October 2021

Net Surplus

717,918,179

19,217,007(5,021,781)(4,295,597)

12,896,398

14,921,410

Other Comprehensive Income
Movement in Land Revaluation Reserve-

355,000

Change in Fair Value of Cash Flow Hedges

1,851,327

10,479,999

Movement in Foreign Exchange Reserve(490,257)(60,456)

Income Tax on Other Comprehensive Income(518,371)(2,934,400)

Other Comprehensive Income for the Year842,699

7,840,143

13,739,097

22,761,553

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

25

Tatua Annual Report 2021

Tatua Annual Report 2021

STATEMENT OF CHANGES IN EQUITYSTATEMENT OF CASH FLOWS

for the Year Ended 31 July 2021

for the Year Ended 31 July 2021

GROUP
Balance at 1 August 2019

Translation

Hedging

Revaluation

Retained

Total

Reserve ($)

Reserve ($)

Reserve ($)

Earnings ($)

Equity ($)

664,122(5,237,158)

15,111,766

50,755,868

61,294,598

26

GROUP
Note

Year Ended 31 July 2021 ($)

Year Ended 31 July 2020 ($)

394,936,192

377,579,305

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

Other Comprehensive Income
Movement in Foreign Exchange Reserve(60,456)---(60,456)

Dividends Received

2,119

1,825

Movement in Land Revaluation Reserve--

355,000-

355,000

Interest Received

54,12376,166

Movement in Hedging Reserve, Net of Tax-

7,545,599--

7,545,599

394,992,434

377,657,295

Payments for Milk

(136,271,431)(127,503,771)(226,760,744)(223,484,803)

Restated Total Other Comprehensive Income
Profit for the Period
Total Comprehensive Income(60,456)

7,545,599

355,000-

7,840,143

Cash was applied to:

-

-

-

14,921,410

14,921,410

Payments to Creditors and Employees(60,456)

7,545,599

355,000

14,921,410

22,761,553

Interest Paid

(488,748)(3,256,910)

Taxation Paid

(3,535,775)(7,058,030)(367,056,698)(361,303,514)

27,935,736

16,353,781

Transactions with owners of Company
Issue of ordinary shares

-

-

-

-

-

Balance at 31 July 2020

603,666

2,308,441

15,466,766

65,677,278

84,056,151

Net Cash Flows From / (Applied To)
Operating Activities

20

Cash Flows From Investing Activities
Balance at 1 August 2020

603,666

2,308,441

15,466,766

65,677,278

84,056,151

Movement in Foreign Exchange Reserve(490,257)---(490,257)

Movement in Land Revaluation Reserve

-

-

-

-

-

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

119,861

111,698

Proceeds From Sale of Investments

228,163

513,348

348,024

625,046-

1,332,956--

1,332,956

Cash was applied to:(490,257)

1,332,956--

842,699

Acquisition of Property, Plant and Equipment(490,257)

1,332,956-

12,896,398
12,896,398

12,896,398(20,883,464)(18,200,761)

Acquisition of Intangible Assets(638,944)(487,655)

Purchase of Share Investments--(21,522,408)(18,688,416)(21,174,384)(18,063,370)

13,739,097
Net Cash Flows From / (Applied To)
Investing Activities

Transactions with owners of Company
Issue of ordinary shares

-

-

-

-

Cash Flows From Financing Activities

Balance at 31 July 2021

113,409

3,641,398

15,466,766

78,573,676

97,795,249

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.

2,835,090

4,175,220-

14,183,018

2,835,090

18,358,238(3,082,475)(1,629,175)

Cash was applied to:
Decrease in Co-operative Shares

15

Repayment of Borrowings(15,944,798)-(19,027,273)(1,629,175)

Financing Activities(16,192,183)

16,729,063

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

15,019,474

Add: Opening Cash and Cash Equivalents Balance

27,933,985

12,914,511

18,503,154

27,933,985

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

27

Tatua Annual Report 2021

NOTES TO THE FINANCIAL
STATEMENTS

Tatua Annual Report 2021

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

28

29

Tatua Annual Report 2021

Tatua Annual Report 2021

3 — OPERATING REVENUE & OTHER INCOME

1 — REPORTING ENTITY
The Tatua Co-operative Dairy Company Limited (“Tatua”) is a
co-operative 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 2021. At 31 July 2021 the Group consists of The
Tatua Co-operative Dairy Company Ltd and its subsidiaries Tatua
Japan Co. Ltd, Tatua Dairy Products (Shanghai) Co., Ltd and Tatua
USA Ltd. The Group is a producer and marketer of dairy productswith sales to both domestic and export markets.

GROUP
2021 ($)

2020 ($)

383,654,521

389,747,657

Rental Income from Investment Property

75,00075,000Rental Income from Farm Houses

58,10958,719-112,000

Revenue from contracts with customers
Other Income

Fair Value movement in Investment Property

2 — BASIS OF PREPARATION
The financial statements have been prepared on a going concern
basis.
(a) Statement of Compliance and Basis of Preparation
The financial statements have been prepared in accordance with
Generally Accepted Accounting Practice in New Zealand (NZ
GAAP) as appropriate for Tier 1, for-profit entities, NZIFRS andIFRS. Accounting policies have been applied consistently to all
periods presented in these financial statements. The financial
statements were approved by the Board of Directors on 15 October
2021.
(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.

Insurance Claim Proceeds

application of accounting policies and the reported amounts ofassets, liabilities, income, and expenses. Actual results may differ
from these estimates.
Estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognisedin the period in which the estimate is revised and in any future
periods affected. In particular, information about significant areasof estimation, uncertainty and critical judgements in applying
accounting policies that have the most significant effect on theamount recognised in the financial statements are described in thefollowing notes:
Note 12. – Milk cost included in inventory(e) Goods and Services Tax
The financial statements have been prepared on a GST exclusive
basis, except for Accounts Receivable and Accounts Payable which
are stated inclusive of GST.
(f) 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 recognised.
(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 Company’s functional currency. Monetary
assets and liabilities denominated in foreign currencies at thereporting dates are retranslated to the functional currency at theexchange rate at that date. All financial information presented has
been rounded 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 the30(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.

MilkTest NZ LP Income
Sundry Income

Total Revenue

-

2,411

271,656

326,290

570,910762,627

975,675

1,337,047

384,630,196

391,084,704

GROUP
Analysis of revenue from contracts with customers

2021 ($)

2020 ($)

381,427,287

385,360,454

Nature of Revenue
Sale of goods
Royalties/Commissions

2,227,234

4,387,203

383,654,521

389,747,657

365,231,350

372,518,701

Timing of revenue recognition
At a point in time
Over time

18,423,171

17,228,956

383,654,521

389,747,657

Disaggregation of Revenue
Australasia (NZ and AUS)

108,242,652

101,664,712

Asia / Pacific

217,259,627

229,643,367

Americas / Europe

55,927,085

55,898,909

Other

2,225,157

2,540,669

383,654,521

389,747,657

31Tatua Annual Report 2021

Tatua Annual Report 2021

5 — PERSONNEL EXPENSES

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

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

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

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

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

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

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

GROUP

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.

2021 ($)

2020 ($)

Wages and Salaries

46,093,155

43,311,614

Superannuation Contributions and Other Employee Related Expenses

4,312,874

3,879,821

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

385,418(994,242)

50,791,447

46,197,193

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:
Note2021 ($)

2020 ($)

NZ IFRS Revenue from Contracts with Customers

3

Other Income

3975,675

Net Foreign Exchange Loss

6

7,946,186 (12,930,361)

Agency Shipping costs offset

383,654,521 389,747,657

2,446,670

Non-GAAP measure: Total Underlying Revenue

1,337,047

2,590,891

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

GROUP
2021 ($)

2020 ($)

504,000

498,500

33,94645,609The following items are included in administration expenses:* Directors expenses include costs incurred by the company on behalf ofdirectors, in the course of carrying out their duties and obligations as
directors. The expenses include development, industry and customer
meetings and associated travel cost.
Auditors Remuneration (KPMG)
Audit of Financial Statements

236,038

184,183

Other Services**

38,60834,550** Other services are in relation to advice on operational tax matters such astransfer pricing, as well as a share registry assurance engagement.

2020 ($)

54,12376,166Net Foreign Exchange Gain

7,946,186-

Total Finance Income

8,000,309

76,166-(12,930,361)

Financial Overheads

4 — ADMINISTRATION EXPENSES

Directors' Expenses*

2021 ($)

395,023,052 380,745,235

Net Foreign Exchange Loss

Directors' Fees

32

(34,811)(32,850)

Interest Expense on External Borrowings(2,348,331)(3,256,910)

Total Finance Expense(2,383,142)(16,220,121)

Net Finance Income / (Expense)

5,617,167(16,143,955)

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.

33

Tatua Annual Report 2021

Tatua Annual Report 2021

7 — INCOME TAX EXPENSEPOLICYGROUP

Income Tax Recognised in Profit or Loss

2021 ($)

2020 ($)

5,894,576

4,666,375

Current Tax Expense
Current Period
Adjustment for Prior Periods(19,408)

40,7995,875,168

4,707,174(845,697)(376,526)(7,690)(35,051)

Deferred Tax Expense
Origination and Reversal of Temporary Differences
Adjustment for Prior Periods
Total Income Tax Expense(853,387)(411,577)

5,021,781

4,295,597

GROUP
Reconciliation of Effective Tax Rate

2021 (%)

2021 ($)

2020 (%)

2020 ($)

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.

Recognised Deferred Tax Assets and Liabilities –Group

Property, Plant and Equipment-

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

Derivatives--(1,416,099)(897,727)(1,416,099)(897,727)

Inventory

1,596,165

1,371,646--

1,596,165

1,371,646

Provisions and Accruals

1,655,509

1,660,960--

1,655,509

1,660,960

Other items
Tax Assets /(Liabilities)

Profit Excluding Income Tax-

17,918,179-

19,217,007

Income Tax Using the Group’s Domestic Tax Rate

28.0

5,017,090

28.0

5,380,762

Impact of Tax Rate in Foreign Countries(0.9)(168,855)(0.5)(97,103)

Tax Exempt Income

0.0

-

(0.2)

(30,619)

Movement in Temporary Differences

Tax Credits on Dividend Income

(0.0)

(593)

(0.0)

(511)

Recognition of Previously Unrecognised Tax Losses

0.0

-

0.0

-

Under/(Over) Provided in Prior Periods(0.2)(27,100)

0.0

5,748

28.0

5,021,781

22.4

4,295,597

GROUP
2021 ($)

2020 ($)

Income Tax on Derivatives(518,371)(2,934,400)

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

2021 ($)

2020 ($)

37,498,277

34,669,221

-

-

-

-

-

-

5,925,215

5,071,828(1,499,657)(981,285)

4,425,559

4,090,543

Balance

Recognised in

Recognised in

Balance

Recognised in

Recognised in

Balance1 August
2019($)

Profit or
Loss($)

Other Comprehensive
Income($)

31 July
2020($)

Profit or
Loss($)

Other Comprehensive
Income($)

31 July2021($)

1,165,030

874,192-

2,039,222

634,319-

2,673,541(2,544)-(83,558)--(83,558)(2,934,400)(897,727)-(518,371)(1,416,098)

During The Year

Deferred tax assets and liabilities are
attributable to the following:
Property, Plant and Equipment
Investment Property(81,014)

Derivatives

2,036,673

Inventory

1,602,526(230,880)-

1,371,646

224,519-

1,596,165

Provisions and Accruals

1,890,150(229,190)-

1,660,960(5,451)-

1,655,509

-

-

-

-

-

(2,934,400)

4,090,543

853,387(518,371)

4,425,559

Other items

Income Tax Recognised Directly in Other Comprehensive Income

2,039,222-

4,295,597

39,7722020 ($)(83,558)

14,921,410(1,002,452)

2021 ($)

-

-

0.2

2020 ($)

2,039,222

-

(5.2)

2021 ($)-

5,021,781(0)2020 ($)

2,673,541

12,896,398

201,2392021 ($)

Net

Investment Property-

1.1

Liabilities

are attributable to the following:

-

(0.0)

AssetsDeferred tax assets and liabilities

Total Income Tax Expense

Legislative Change of Depreciation on Buildings

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.					8 — DEFERRED TAX ASSETS & LIABILITIESProfit for the Period

Non-deductible Expenses

34

Deferred Tax Assets /(Liabilities)

6,613,365

411,578

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 Company

to 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.

35

Tatua Annual Report 2021

Tatua Annual Report 2021

9 — PROPERTY, PLANT & EQUIPMENTGROUP

POLICY

Land

Land

Buildings

Plant &

VehiclesCapitalRight-of-

Total

($)

Improve-($)

Equipment($)

Work inuse assets($)

Progress

($)

ments

($)

($)

($)

COST OR DEEMED COST
Balance at 1 August 2019
Recognition of right-of-use asset
Adjusted balance at 1 August 2019
Additions
Revaluation of Land to Fair Value
Disposals
Effect of Movement in Exchange Rates

18,506,000

3,818,590

50,979,098

200,600,329

3,388,107

5,116,035-

282,408,159

-

-

-

-

-

-

1,654,517

1,654,517

18,506,000

3,818,590

50,979,098

200,600,329

3,388,107

5,116,035

1,654,517

284,062,676--

1,225,074

6,726,983

1,016,918

9,119,843

111,946

18,200,764

355,000

-

-

-

-

-

-

355,000--(25,454)(723,223)(750,714)--(1,499,391)

-

-

-

-

-

-

-

-

Balance at 31 July 2020

18,861,000

3,818,590

52,178,718

206,604,089

3,654,311

14,235,878

1,766,463

301,119,049

Balance at 1 August 2020

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

8,425,891

190,543

21,404,265(a) Recognition and Measurement for Assets at Cost(d) Recognition and Measurement for 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.

A revaluation was undertaken as at 31 July 2020 by Fergusson
Lockwood and Associates Ltd, independent registered valuers.
The land was valued at $18.861m, an increase of $0.36m from the2019 year. The valuation established a market value using a direct
sales comparison approach and was undertaken in accordancewith the Property Institute of New Zealand (PINZ) International
Valuation Standards. Any gain on revaluation is recognised inother comprehensive income and held in equity and any loss
is recognised in profit and loss, unless there is a credit balance
existing in the revaluation surplus. The value of the land at cost is$3,414,704 (2020: $3,414,704).

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 $488,748 (2020: nil).
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

Additions
Revaluation of Land to Fair Value

-

-

-

-

-

-

-

-

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

Effect of Movement in Exchange Rates
Balance at 31 July 2021

-

-

-

4,223

-

-

(39,506)(35,283)

19,843,347

3,919,469

57,518,185

211,988,477

3,712,338

22,661,769

1,917,500

321,561,085

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 2019-

1,758,078

17,045,992

134,520,727

2,744,489--

156,069,286

Depreciation-

173,301

1,557,022

12,169,088

315,332-

489,958

14,704,701

Disposals--(25,454)(600,512)(689,238)--(1,315,204)—

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

-

-

-

-

-

-

-

-

Balance at 31 July 2020-

1,931,379

18,577,560

146,089,303

2,370,583-

489,958

169,458,783

Balance at 1 August 2020-

1,931,379

18,577,560

146,089,303

2,370,583-

489,958

169,458,783(c) Impairment
At each reporting date, the Group reviews its assets to determine
whether there is any indication of impairment. At 31 July 2021 theGroup has determined that no indication of impairment exists.

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)

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

At 1 August 201918,506,000

2,060,512

33,933,106

66,079,602

643,618

5,116,035

1,654,517

127,993,390
131,660,266

CARRYING AMOUNTSAt 31 July 2020

18,861,000

1,887,211

33,601,158

60,514,786

1,283,728

14,235,878

1,276,505

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

At 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

Property, Plant and Equipment is categorised within level 2 of thefair value hierarchy.
Capital Commitments
During the period ended 31 July 2021, the Group entered into
contracts to purchase plant and equipment. The balance
outstanding at balance date is $3,293,076 (2020: $13,817,253).
These commitments are expected to be settled in the following
financial year.

36

37

Tatua Annual Report 2021

Tatua Annual Report 2021

10 — INTANGIBLE ASSETS

38

11 — INVESTMENT PROPERTY
GROUP

GROUP

Software ($)

Total ($)

2021 ($)

2020 ($)

Balance at 1 August 2019

9,771,822

9,771,822

Balance at 1 August

1,698,000

1,586,000

Change in Fair Value-

112,000

Additions

487,656

487,656

Balance at 31 July

Disposals(7,619)(7,619)1,698,000

1,698,000

Balance at 31 July 2020

10,251,859

10,251,859

Balance at 1 August 2020

10,251,859

10,251,859

Additions

638,943638,943

Disposals--

10,890,802

10,890,802

COST

Balance at 31 July 2021

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 theland and buildings that are leased to PGG Wrightson Ltd.

The fair value of investment property was determined by
Fergusson Lockwood and Associates Ltd, independent registeredvaluers, having appropriate recognised professional qualifications
and recent experience in the location and category of the property
being valued.
Investment property is categorised within level 2 of the fair value
hierarchy.

AMORTISATION AND IMPAIRMENT LOSSES
Balance at 1 August 2019

4,230,923

4,230,923

Amortisation for the Year

940,823

940,823

Disposals(7,619)(7,619)5,164,127

5,164,127

Balance at 31 July 2020

12 — INVENTORIES
GROUP
2021 ($)

2020 ($)

72,937,462

58,157,934

Balance at 1 August 2020

5,164,127

5,164,127

Amortisation for the Year

1,086,970

1,086,970

Finished Goods--

Raw Materials

13,487,742

11,736,590

Total Inventories

86,425,204

69,894,524

Disposals
Balance at 31 July 2021

6,251,097

6,251,097

POLICYCARRYING AMOUNTS
At 1 August 20195,540,899

5,540,899

At 31 July 2020

5,087,732

5,087,732

At 1 August 2020

5,087,732

5,087,732

At 31 July 2021

4,639,705

4,639,705

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

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). There was a write down of $1,831,939
during the period (2020: $3,145,514) relating to inventory that had a
net realisable value less than its cost of manufacture.
GROUP

2021 ($)

2020 ($)

676,262

4,704,291

Inventory valued at net
in finished goods above:

39

Tatua Annual Report 2021

Tatua Annual Report 2021

40

15 — MEMBERS FUNDS

13 — RECEIVABLES & PREPAYMENTS
GROUP
2021 ($)

2020 ($)

Trade Receivables

38,763,140

43,244,026

Prepayments and Sundries

4,334,882

5,236,178

43,098,021

48,480,204

USD ($)AUD ($)JPY (¥)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 milksolids. Shares are issued or redeemed
annually to ensure compliance with the share standard. Due totheir redemption nature, shares are classified as a liability in thebalance sheet. When the group performs a bonus share issue, withnew shares issued at the same rate as existing shares, retained
earnings is decreased to match the increase in co-operative shares.

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

CNY (¥)

Trade Receivables DenominatedMovements in the Company’s Issued Shares were as follows:		

in Foreign Currencies
2021

10,096,409

3,046,240

790,831,588

33,389,415

2020

11,740,250

2,307,385

824,066,470

29,661,194
Shares at the beginning of the Year

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

2021

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.

2020

Shares($)

Shares($)
73,450,586

151,993,262

75,996,631

146,901,172

Shares Issued

5,670,180

2,835,090

8,350,440

4,175,220

Shares Repurchased(6,164,952)(3,082,475)(3,258,350)(1,629,175)

Fully Paid Shares at the end of the Year

151,498,490

75,749,246

151,993,262

75,996,631

Treasury Stock811,405

316,633

RESERVES

14 — CASH & CASH EQUIVALENTS
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.

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 theCompany.

Hedging Reserve
GROUP
2021 ($)

2020 ($)

JPY Bank Deposits

3,828,704

2,366,514

USD Bank Deposits

1,206,465

2,818,688

CNY Bank Deposits

4,957,646

10,155,002

NZD Bank Deposits

8,510,339

12,593,781

Cash and Cash Equivalents in the Statement of Cash Flows

18,503,154

27,933,985

The hedging reserve comprises the effective portion of the
cumulative net change in the fair value of cash flow hedging
instruments related to hedged transactions that have not yet
occurred.
Revaluation Reserve
The revaluation reserve relates to the revaluation of land andimprovements.

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

41

Tatua Annual Report 2021

Tatua Annual Report 2021

16 — LOANS & BORROWINGSInterest-bearing borrowings are classified as financial
liabilities and are measured at amortised cost using theeffective interest rate.
2021 ($)

2020 ($)

JPY Bank Loans

4,031,044

7,306,590

USD Bank Loans

2,134,240

4,512,636

NZD Bank Loans

30,000,000-

Lease Liabilities

347,716

418,033

36,513,000

12,237,259

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.

42

The Group has committed (but undrawn) facilities with expiry
dates through to 2024 of NZD $45.0 million, JPY 1,090 million and
USD $1.5 million (2020: NZD $35.0 million, JPY 540 million and
USD $4 million). The JPY and USD loans are held by the respective
subsidiaires.

Current

Non Current
JPY Bank Loans--NZD Bank Loans

25,000,000

65,000,000

Lease Liabilities

Total Loans and Borrowings

2021

Currency

Nominal Interest Rate

Year of Maturity

672,300

892,839

25,672,300

65,892,839

62,185,300

78,130,098

Face Value

Carrying Amount(NZD)

Current

Non Current

2020

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

Nominal Interest Rate

Year of Maturity

Face Value

Carrying AmountCurrency(NZD)

Current

Non Current

JPY

0.83%

2021

510,000,000

7,306,590

USD

1.30%

2021

3,000,000

4,512,636

NZD

3.35%-4.15%

2021

418,033

418,033

NZD

1.43%

2022

30,000,000

30,000,000

NZD

1.48%

2023

35,000,000

35,000,000

NZD

3.35%-4.15%

2022 - 2033

892,839

892,839

17 — ACCOUNTS PAYABLE & ACCRUALS
GROUP
2021 ($)

2020 ($)

Trade Payables

9,771,035

10,262,639

Employee Entitlements

7,827,172

7,441,755

Income in Advance

1,148,439-

Accruals

11,291,451

10,266,700

30,038,097

27,971,094

Total Accounts Payable and Accruals

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

43

Tatua Annual Report 2021

Tatua Annual Report 2021

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

2021 Interest Rate Hedges

5,000,000

27,000,000

32,000,000

2020 Interest Rate Hedges

10,000,000

32,000,000

42,000,000

GROUP
2021 ($)

2020 ($)

Current Liabilities(88,058)(215,176)

Non Current Liabilities(723,223)(1,802,469)

Non Current Assets

198,767-

Net Fair Value of Interest Rate Hedges(612,514)(2,017,645)

Fair Value

Foreign Currency Hedges
The Group’s foreign exchange rate contracts and options notionalamounts and fair values are presented below. The Group uses zero
cost collar structures for option contracts. All options are bought
options. Exposure is covered in Note 19.				
					
2021
Foreign Exchange Contracts

Option Contracts									

Option Contracts

Fair Value

2021 ($)

2020 ($)

Current Assets

7,968,532

3,462,833

Non Current Assets

963,116

3,856,354

Current Liabilities(1,666,446)(1,518,700)

Non Current Liabilities(1,069,270)(548,880)

Net Fair Value of Foreign Currency Hedges

6,195,932

5,251,607

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

189,221,954

45,622,713

234,844,667

Sell

-

-

-

Call

19,916,631

18,177,452

38,094,083

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

Buy

133,639,316

67,546,330

201,185,646

Sell

-

-

-

2020
Foreign Exchange Contracts

44

Call

49,717,218

14,009,209

63,726,427

Put(48,717,565)(13,413,547)(62,131,112)—

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 2021 financial
year was a gain of $8,036,513 (2020: loss of $11,286,911).

45

Tatua Annual Report 2021

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. For the period ending 31 July 2021 the gearing ratio was 20%(2020: 24%). This ratio is calculated as net interest bearing debt
divided by total capital. Net interest bearing debt is calculated
as total borrowings less cash and cash equivalents. Total capitalis calculated as members funds plus net interest bearing debt.
Tatua is a co-operative company, and as such, members fundschange in proportion to milk supplied (Refer Note 15). The Groupis required to meet certain ratios under its bank covenants, whichhave been met, including a requirement that Group members funds
be not less than $70,000,000 (2020: $70,000,000), but otherwise
the Group is not subject to any externally imposed capitalrequirements.
There have been no material changes in the Group’s managementof capital during the period.

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:

Quantitative Disclosures

Gross Receivable

Impairment

Gross Receivable

Impairment

2021 ($)

2021 ($)

2020 ($)

2020 ($)

Not Past Due

36,796,052-

40,963,366-

Past Due 0-30 days

1,948,010-

2,275,249-

Past Due 31-120 days

19,078

-

5,411

-

38,763,140-

43,244,026-

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

Accounts Payable and Accruals

17(30,038,097)(30,038,097)(30,038,097)

-

-

-

(35,135,714)(35,135,714)(35,135,714)

-

-

-

Owing to Suppliers
Co-operative Shares(75,749,246)(75,749,246)-(75,749,246)--

Total Non-Derivative Financial Liabilities(203,108,357)(203,108,357)(65,385,688)(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-(3,546,997)(3,546,997)(1,361,777)(767,318)(1,396,215)(21,687)- Outflow- Inflow
Total Derivative Financial Liabilities

Carrying Amount2021 ($)

2020 ($)

Australasia (NZ and AUS)

9,565,358

6,754,513

Asia / Pacific21,607,025

30,971,626

Americas / Europe

6,879,171

4,616,361

Total Trade Receivables (Note 13)

2021 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

46

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 2021

711,586

901,526

38,763,140

43,244,026

47

Tatua Annual Report 2021

GROUP

Tatua Annual Report 2021

2020 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(78,130,098)(78,130,098)(219,830)(12,017,429)(30,254,461)(35,638,378)

Accounts Payable and Accruals

17(27,971,094)(27,971,094)(27,971,094)

-

-

-

Owing to Suppliers(27,794,997)(27,794,997)(27,794,997)

-

-

-

Co-operative Shares(75,996,631)(75,996,631)-(75,996,631)--(209,892,820)(209,892,820)(55,985,921)(88,014,060)(30,254,461)(35,638,378)

Interest Rate Swaps(2,017,645)(2,017,645)(502,240)(431,385)(580,127)(503,893)

Options Contracts(1,374,871)(1,374,871)(387,423)(556,523)(430,925)-(692,708)(48,121,347)(28,173,989)(13,096,501)(6,850,857)--

47,428,639

27,735,990

12,959,747

6,732,902-

Total Non-Derivative Financial Liabilities
Derivative Financial Liabilities

48

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:
2021

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

8,032,648

126,535

7,912

22,818,535

595,388

116,353

Forward Exchange Contracts- Outflow- Inflow
Total Derivative Financial Liabilities(4,085,224)(4,085,224)(1,327,662)(1,124,662)(1,129,007)(503,893)

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, Japanese2021

less Foreign Exchange Contracts and Options
Net Unhedged Exposure

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.

(1,500,000)--(310,000,000)-

32,000,000

-

-

-

-

-

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

7,912

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

116,353NZD ($)USD ($)AUD ($)CNY (¥)JPY (¥)Cash and Cash Equivalents

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

AUD ($)CNY (¥)JPY (¥ - 000’s)

31,592,955

372,295,700

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

26,844,788

15,592,955

114,295,700

939,541

USD ($)AUD ($)CNY (¥)JPY (¥ - 000’s)

81,252,141

22,305,968

266,338,112

3,808,867(59,500,000)(14,000,000)(164,000,000)(2,950,000)

21,752,141

8,305,968

102,338,112

858,867

Net Unhedged Exposure

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

1,885,144

58,39947,153,075

174,559,366(65,000,000)(3,000,000)--(510,000,000)

Interest Rate Swaps

42,000,000

-

-

-

-

Net Unhedged Exposure(10,630,305)(1,114,856)

58,39947,153,075(335,440,634)

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.

94,844,788

Net Cash Flow Exposure Before Hedging

12,369,695

Loans and Borrowings

e. Sensitivity Analysis

The Group’s exposure to foreign currency risk for the next
12 months can be summarised as follows:(68,000,000)

2020

less Foreign Exchange Contracts and Options(55,000,000)

2020

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 it is estimated that a general increase of one percentage
point in NZ interest rates would decrease Group profit before
income tax by approximately $318,762 (2020: $407,380). Interest
rate swaps have been included in this calculation.

Foreign Exchange Rates:
The Group has a foreign exchange policy to mitigate the risk
associated with the fluctuations in the value of the New Zealand
Dollar. At 31 July it is estimated that a general increase of one centin the NZD/USD exchange rate would increase the Group’s total
comprehensive income by $2,921,506 (2020: increase by $153,209).
Foreign exchange hedging has been included in this calculation.

49

Tatua Annual Report 2021

Tatua Annual Report 2021

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

21 — RELATED PARTY TRANSACTIONSYear Ended 31 July 2021 ($)

Year Ended 31 July 2020 ($)

12,896,398

14,921,410

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 (2020: Nil).

Depreciation

15,275,557

14,704,701

Amortisation of Intangible Assets

1,086,970

940,823

Movement in Deferred Tax(335,016)

2,522,822-(112,000)

Short Term Employee Benefits

2,296,221

2,125,257

Revaluation of Biological Assets(203,666)(443,688)

Long Term Employee Benefits--

Movement in Investments(147,644)(323,299)

2,296,221

2,125,257

12,653

72,48915,688,854

17,361,849

Revaluation of Investment Property

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

50

Compensation

Year Ended 31

Year Ended 31

July 2021 ($)

July 2020 ($)

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 $504,000 (2020: $498,500),
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

5,403,960

302,999

Derivatives – Assets(1,811,228)(6,160,868)

Amounts Paid

PayableAmounts Received

Receivable

Derivatives – Liabilities(538,227)(4,876,813)($)

31 July 2021 ($)($)

31 July 2021 ($)(16,530,680)(18,890,349)

Biological Assets

747,371

115,578

Owing to Suppliers

7,340,717

Trade and Other Payables

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--

5,207,688

461,930

4,203,800

DairyNZ

Peter Schuyt

-

-

-

-

4,384,618

1,891,037

RML Engineering Ltd

Ross Townshend

15,911

7,824

-

-

(1,003,469)(23,414,616)

Nicholson United Autos Ltd

Mark Dewdney

50,511

635--

AgResearch Limited

Louise Cullen

42,694---

109,116

8,459

5,207,688

461,930

353,953

7,485,139

27,935,736

16,353,781

Tax Management NZ Ltd (Peter Schuyt) - During the year the grouputilised the services of Tax Management Limited 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

2021 ($)

31 July 2021 ($)

2020 ($)

31 July 2020 ($)

10,665,892

2,472,105

9,399,364

1,835,191

51

Tatua Annual Report 2021

52

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

22 — GROUP ENTITIES

Report on the audit of the financial statements
Country of Incorporation

Ownership Interest
2021

2020

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 New Zealand Limited

New Zealand

10%

10%

Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists
when the Group has the power over the entity, exposure or rights
to variable returns from its involvement with the entity, and theability to use its power over the entity to affect the amount of theentity’s return. In assessing control, potential voting rights are only
considered if the rights are substantive. The financial statements ofsubsidiaries are included in the consolidated financial statementsfrom 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

23 — SUBSEQUENT EVENTS
There were no material events subsequent to 31 July 2021 thatwould impact these financial statements.

In our opinion, the accompanying financial statementsof The Tatua Co-operative Dairy Company Limited(the ‘Company’) and its subsidiaries (the ‘Group’) on
pages 23 to 51:— present fairly in all material respects the Group’s

financial position as at 31 July 2021 and its
financial performance and cash flows for the year
ended on that date; and— comply with New Zealand Equivalents to

POLICY(a) Basis of Consolidation

Opinionprofit or loss after tax of joint ventures after adjustments to alignthe accounting policies of the Group, from the date that significant
influence or joint control commences until the date that significant
influence or joint control ceases.

International Financial Reporting Standards andInternational Financial Reporting Standards.

We have audited the accompanying financial
statements which comprise:— the consolidated balance sheet as at 31 July2021;

— the consolidated statements of comprehensive

income, changes in equity and cash flows for theyear then ended; and— notes, including a summary of significant

accounting policies and other explanatory
information.

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.

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 thefinancial 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,
the Group.

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 $2.7m 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. We agreed with
the Audit, Risk and Compliance Committee that we would report misstatements identified during our audit, tothem, above $135,000 as well as misstatements below that amount that in our view, warranted reporting for
qualitative reasons.
Page 26

54

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 $86 million (2020: $70
million) which represents 28% 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 Pricecalculated 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.

statements

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

The Directors, on behalf of the Company, are responsible for:— the preparation and fair presentation of the financial statements in accordance with generally accepted

We considered the appropriateness ofmanagement’s use of the Farmgate Milk Price as
the best estimate of the cost of milk solids supplied
from the cooperative shareholders.
We compared the Farmgate Milk Price used to thelatest publicised rate for the 2020/21 season.
We compared a sample of purchased wholemilk
and cream from other parties to their respective
invoices.
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 2020/21 season.
We checked that the split of protein into its casein
and whey components was calculated correctly.
We checked that the mechanics of the model were
calculating correctly and were consistent with theprior year.
We did not identify material exceptions from theprocedures performed and found the judgements
and assumptions to be balanced and consistent.

accounting practice in New Zealand (being New Zealand Equivalents to International Financial ReportingStandards) and International Financial Reporting Standards;— implementing necessary internal control to enable the preparation of a set of financial statements that isfairly presented and free from material misstatement, whether due to fraud or error; and— assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related

to going concern and using the going concern basis of accounting unless they either intend to liquidate or tocease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements
Our objective is:— to obtain reasonable assurance about whether the financial statements as a whole are free from 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 thesefinancial statements.
A further description of our responsibilities for the audit of these financial statements is located at the External
Reporting Board (XRB) website at:
http://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/

Other information

This description forms part of our independent auditor’s report.

The Directors, on behalf of the Group, are responsible for the other information included in the entity’s Annual
Report. Other information includes Directory, 2020 / 2021 Key Highlights, 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.

Page 27

The engagement partner on the audit resulting in this independent auditor's report is Murray Dunn.
For and on behalf ofHamilton
15 October 2021

Page 28

Tatua Annual Report 2021

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
RE Townshend
Chief Executive Officer
BA Greaney

Website Address
www.tatua.com

General Manager Marketing & SalesSJ Rolfe

Auditors

General Manager Operations

KPMG

TA Keir

Solicitors

General Manager Finance& Corporate Administration

Harkness Henry & Co

ML Bull

Bankers

General Manager Co-operative Affairs

Bank of New Zealand Ltd

PJ van Boheemen

Insurance Brokers
Willis Towers Watson Ltd

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

56tatua.com