ANNUAL REPORT 2020

TOGETHER WE ARE
BUILDING THE FUTURE
OF SPECIALISED DAIRYOURYEAR IN
REVIEW

Tatua Annual Report

2020

CONTENTS
Year in Review

Financial Statements

An Exceptional Year – 2020 Key Highlights

01

Report from the Chairman and Chief Executive Officer

03

Tatua Together

07

From NZ to the World

09

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

Statistics

55

Directory56

01

Tatua Annual Report 2020

Year in Review

AN EXCEPTIONAL YEAR

2020 KEY HIGHLIGHTSTOTAL UNDERLYING REVENUEHIGHEST EVER SPECIALTY
ADDED VALUE REVENUE

$381m

$186m

TOTAL EARNINGS PERKG MILKSOLIDS

CASH PAYOUT TO SHAREHOLDERSPER KG MILKSOLIDSMILKSOLIDS RECEIVED
FROM SUPPLIERS (KG)

SUPPLY FARMS

$9.96

$8.70

15.1m

107

TOTAL UNDERLYING REVENUEREINVESTMENT PER KG
MILKSOLIDS% OF PRODUCTS EXPORTEDGEARING RATIO

91%

24%

+4%

126c

02

03

Tatua Annual Report 2020

Year in Review

REPORT FROM THE
CHAIRMAN AND CHIEF
EXECUTIVE OFFICER
The emergence ofCovid-19 early in2020 marked an
unprecedented
financial year.
We acknowledge the hardshipfaced by many businesses andindividuals as a result of the virus
and know we were fortunate tohave continued to operate as an
essential service through all stagesof our collective response.
As the seriousness of Covid-19
revealed itself, we sought to ensure
the welfare of our people and toprovide them with as much clarity
and certainty as we could as thesituation rapidly evolved. With thefull co-operation of everyone acrossthe business, we reacted swiftly to
implement Covid-19 protocols andhave as many of our office-based
teams working from home as possible.
All of our people at Tatua, including
those in our offshore subsidiaries,
demonstrated exceptional
commitment to supporting eachother and taking care of the business,through one of the most challenging
and uncertain times we can recall.
Notwithstanding the challenges of
Covid-19, we are pleased to report
another very positive year, achieving
record underlying revenue of $381
million, and earnings of $151 million.
We processed 15.15 million kilogramsof milksolids supplied by our Tatua

Shareholders, which as a co-operative,
is our divisor for earnings. Milk
supply was slightly higher than theprevious year and was supplemented
by milksolids purchased from otherprocessors, whose ongoing cooperation and partnership we value.
Our Group earnings of $151 million
equated to $9.96 per kilogram ofmilksolids, before retentions forreinvestment and taxation. This wasan improvement on the previous
year earnings of $9.66 per kilogramof milksolids. We elected to retain$1.26 per kilogram of milksolids forreinvestment, leaving a cash payout of$8.70 per kilogram of milksolids.
Demand for our bulk ingredientproducts of caseinate, whey protein
concentrate and anhydrous milkfat
remained steady across the season.
Increased sales volumes at global
prices that were overall attractive, led
to record revenue from this importantpart of our business.
Sales of our more specialised
products which include nutritional
ingredient powders, bionutrients,
flavour ingredients and cream-based
consumer and foodservice products
also increased overall. This was
despite a Covid-19 related slowdown
in our foodservice business that lasted
for several months.
Diversification across markets,
product lines and customers served
the business well. Slower sales insome areas released capacity within

our manufacturing facilities that
was able to be redeployed to supply
growth in other areas at short notice.
Covid-19 caused significant disruption
and delays within the international
shipping environment. Through ahighly collaborative effort across
our operations, warehouse andinternational trade teams, we wereable to avoid delays and ensure our
products reached our customers withminimal disruption.
Having very capable and dedicatedteams in our subsidiaries in Japan,
China and the USA was also especiallyvaluable in facilitating the ongoingsupply and support for our customers
in these important markets.
Construction works on our new
Engineering Services facility andthe next phase of our wastewater
treatment plant was suspended
through the Covid-19 lockdown
period. With the support of ourprimary contractors, both of theseimportant capital projects wererestarted when it was safe to do so
and are on course to be completedwith minimal financial impact.
Over the last several years there havebeen widespread media reports of
New Zealand companies that haveincorrectly interpreted the provisionsof the Holidays Act 2003 whencalculating holiday pay. At Tatua we
discovered we also had this problem.

“2020 has been an exceptional year”
Stephen Allen
Chairman04

05

Tatua Annual Report 2020

In June, following an extensive review
of our historical payroll system, we
notified over 400 of our past andpresent employees in order to makeremedial payments of $1.6 million,
including interest and superannuation
contributions, covering a thirteenyear period. Only a small number ofpayments remain outstanding forpast employees we have so far been
unable to contact.
Through our 106-year history there
have been many changes in the way
our supply farms operate, and wehave no doubt they will continue to
evolve as we play our part in further
reducing dairy’s environmental
footprint. Together with otherprimary sector organisations, wehave been actively engaged in thedevelopment of national and regional
environmental policies to help
ensure that environmental benefits
can be achieved in a pragmatic andeconomically sustainable manner.
With the full co-operation of our
Shareholders, our Tatua 360
Responsible Farming Programme
continues to develop and to provide
the framework for supporting andprogressing on-farm sustainability,
including capturing evolving
environmental policy requirements.
All waterways on Tatua farms arefenced. After just two years, over 40%
of our Shareholders farms have farmenvironmental plans in place.
An updated and expanded animalcare programme for our farmers wasintroduced during the year. This isdelivered by local veterinarians andaims to help our farmers identify andimplement actions to enhance animalcare outcomes.

Year in Review

Tatua 360 also focuses on actions
to enhance the profile of dairying
as a safe and rewarding career. To
support this goal, we are engaging
with our farmers to help ensure they
fully understand their opportunities
and responsibilities relating toemployment practices and health andsafety systems on farm.
While acknowledging there is still
more to do, we are confident theframework provided by Tatua 360 ismaking a positive contribution to our
farmer’s individual businesses and thedairy industry more broadly.
Unfortunately, due to Covid-19, wewere unable to deliver our annual
programme of site visits for schools
and universities, or the annual
social events for our people onsite that support collaboration andconnectedness across the business.
We look forward to being able toresume these valuable communityand social interactions over theyear ahead.
Outlook
We will continue with our programme
to improve environmental outcomes,
especially in the area of wastewater
management, where we haveinvested more than $20 million overthe last four years. In addition to
our environmental priorities, ourcapital investment programme will
include ongoing investment in ourfacilities and systems as well as
capacity for further growth of our
specialist products.
With the ongoing threat of theCovid-19 global pandemic and theuncertainty around its long-term
impact, we will remain cautious

in our outlook. This is despite thesuccessful year that we have had
and the positive demand signals we
continue to experience through all of
our markets.
Acknowledgements
Firstly, we thank all of our people
at Tatua who have demonstrated
enormous commitment and resiliencethrough a very challenging anduncertain year. Your willingness andability to adapt to the many changes
we made at short notice, while doing
everything to support each otherand keep the business moving, hasbeen a highlight.

Essential Service Contribution
Our Tatua farmer suppliers were
proud to have been able to support
New Zealand’s economy throughthe Covid-19 lockdown as an
essential service, while operating
within social distancing protocols.

Thank you to our Shareholders. Your
continued trust and support of the
co-operative and our people as wenavigated through the challenges of
Covid-19 has been widely appreciated.
We would also like to thank thediverse range of organisations who
have partnered with us over the lasttwelve months through all aspects ofour business and in so many ways.
Finally, a very sincere thank you to allof our customers, in all of our markets,for your continuing support. We
remain a customer led organisationand look forward to continuing tostrengthen the relationships that are
the foundation of our business.
Our sincerest thanks to you all.

Stephen Allen
Chairman

Brendhan Greaney
Chief Executive Officer

Welcome toJulie Langley
Julie Langley joined the Board of
Directors in November 2019, following
Dr. Kevin Old’s retirement. Julie isa fourth generation Tatua farmer,
becoming a shareholder in 2015.
Julie has had a career in advertising,including sales and marketing of
Tatua consumer products. She
also operates a dairy farming
business with her husband through50/50 sharemilking and farmownership. Julie holds a Bachelorof Communication Studies from the
University of Waikato.

To have been widely acknowledged
as being part of New Zealand’s
economic backbone, as well as
playing a valuable role in the
country’s economic recovery,
has been inspiring and motivating
for farmers.

The whole New Zealand primarysector, including dairy, sheep andbeef, horticulture and fisheries,
has proven to be resilient, andcan rightfully feel proud of thecontribution it continues to make.

06

07

Tatua Annual Report 2020

Year in Review

TATUA TOGETHEROver 100 years of dairy innovation andco-operative spirit is at the heart ofeverything we do.

Farming Excellence

Our 107 shareholder farms and 380
employees in New Zealand, Japan,
China and USA are committed tobuilding the future of specialised dairy.

Covid-19 Challenges
Together our team showed incredible co-operation andresilience during the Covid-19 disruptions. Thanks to all
our people, shareholder farmers, customers and business
partners throughout our supply chain who helped us
achieve this season’s success.

Award Winners – Stevenson Farming
Limited – Tatua Suppliers
Sarah and Aidan Stevenson, NZ Share Farmer of the Yearand Waikato Regional Share Farmer of the Year Winners
2020. Sarah and Aidan have been 50/50 sharemilkers on
Sue Williams’ Tatua farm since 2013.

“Tatua looked after its employees
very well. Open communication
was the key. I felt safe and secure
working for Tatua during lockdown.”

They also won the following merit awards at the NZ Dairy
Industry Awards 2020 – DairyNZ Human ResourcesAward, Honda Farm Safety, Health and Biosecurity Award,
Ravensdown Pasture Performance Award, Westpac
Business Performance Award and DeLaval Interview Award.
Congratulations Sarah and Aidan on achieving a highstandard of farming excellence.

“We are determined to live
our mission of ‘farming for the
future’ ensuring we care for thesafety of our team and act as
guardians of the land for future
generations of our family”.
— Sarah Stevenson— Tatua Employee, Covid-19 Employee Survey Results

Clifton Strengths
Tatua implemented Clifton Strengths
assessments as an employee
development tool this season. CliftonStrengths identifies a person’s natural
talents and capabilities.
180 employees across New Zealand,
China, Japan and the USA have now
completed their Clifton Strengths
assessments.

08

09

Tatua Annual Report 2020

Year in Review

FROM
NZ

TO THEWORLD

Since 1914, we have been developing andproducing dairy products at Tatuanui,in the heart of New Zealand’s largest
dairying region – the Waikato. Our
mild climate, rich soils and consistent
rainfall create a perfect environment
for growing grass.

Tatua is a globally recognised leader inthe development and production of highquality, specialised dairy products.

Australia /New Zealand

Tatua Japan

Tatua Shanghai

Tatua USA & Europe

23% of global revenue.

Established 2004.
16% of global revenue.

Established 2014.
18% of global revenue.

Established 2014.
14% of global revenue.

Other Asia

South East Asia

Middle East & Africa

Latin America

13% of global revenue.

13% of global revenue.

2% of global revenue.

1% of global revenue.

10

11

Tatua Annual Report 2020

Year in Review

BUILDING THE FUTURE
OF SPECIALISED DAIRY

$381m
+4%

+20%

Total underlying revenue

Dairy Ingredientsrevenue growth+4%
Dairy Whip
revenue growth$186m
Record Specialty
Added Value revenue

+26%

+8%

Dairy Flavours
revenue growth

Specialty Cream Products revenue sold in Ecolean packaging

+66%

+25%

Specialty Proteinsrevenue growth

Nutritional products
revenue growth in Japan

+30%

$67m

Revenue growthin China

Highest ever Specialty
Nutritionals revenue

12

13

Tatua Annual Report 2020

Year in Review

INVESTING FOR
A BETTER FUTURE
Our purpose is in our name

Tatua 360

A tatua is a strong, durable, woven flax belt that was wornby a Maori chief or warrior to carry their most prized
possessions and tools. For us it symbolises knowledge, skills,
connectedness, strength and the protection of all that isgood. Traditionally handed down from one generation to thenext, the Tatua represents the protection and advancementof both current and future generations.

Roll-out of our Tatua 360 responsible
farming programme has continued.
This year we focused on supporting
good farm employment practices on
our shareholder farms.
42% of Tatua farms have acomprehensive farm environment
plan in place. Our farm environment
plan development process involves
us working together with individual
shareholders to identify improvement
opportunities and develop pragmatic
solutions. All farms will have a farmenvironment plan in place by 2023.

Our ongoing commitment to sustainability focusses on
the things we do every day to protect and care for ourenvironment, our animals, our people and our communities.

We continue to actively support andparticipate in wider industry initiatives
including Dairy Tomorrow and He
Waka Eke Noa.

Good Farming Practice
All Tatua farms have:–an annual food safety systems
assessment and daily milk quality/
safety monitoring– a biosecurity plan in place tomanage animal disease and plant
pest risks– an annual nutrient budget preparedand nutrient loss performance
information and advice provided

Water
9 major water savings projects
completed in this year, will save 37
million litres of water annually.
6.7% decrease in total sitewater usage.
$15m Wastewater Treatment Plant on
track for completion in early 2021.

– greenhouse gas emissions assessed
and reported annually– an annual independent animal careassessment of their dairy herd
– farm effluent infrastructure in place
to eliminate the need to spray
irrigate when conditions are notsuitable. Many farms have made asignificant financial investment toachieve this14

Financial Statements

KEY FINANCIALPERFORMANCE SUMMARY

16

17

Tatua Annual Report 2020

Financial Statements

18

2019/20 IN REVIEW
Total Underlying Revenue
163,244,553

Milksolids Received from Suppliers (kgs)

15,145,593

14,458,814

Total Underlying Revenue ($)

380,745,235

364,708,789

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

996

966

Group Depreciation (cts/kg m’solids)

97

95

Cash Payout to Suppliers (cts/kg m’solids)

870

850

Capital Expenditure ($)

18,200,763

9,676,146

Group Assets ($)

298,126,579

255,763,421

Gearing: Debt to Debt + Equity (%)

24

27Group Surplus before Payout and Tax

1000

200

0

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

80
60

10%

40
$ Millions

15%

5%
0%
2018/19 2019/20

870
160

135

121

100

23.9

26.8

120

126

36.7

35.3

35.7

36.6

140

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

2018/19 2019/20

Members Funds

35%

20%

710

0

160

25%

+2%

200

40%

30%

cents/kg
milksolids

400

2018/19 2019/20

Gearing (%Debt to Debt plus Members Funds)

630

810
Cents/kg milksolids

400

850

996

966

760

600

117

Payout to Suppliers

800

641

+3%

773

600

cents/kg
milksolids

862

800

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

870

Payout – Income Equivalent

1000

Cents/kg milksolids

996

2018/19

169,703,701

710Group Surplus+4%

2019/20

Milk Received from Suppliers (litres)

100

$381m

Summary

200
2014/15 2015/16 2016/17 2017/18

2018/19 2019/20

19Tatua Annual Report 2020

Financial Statements

20

STATUTORY INFORMATION
for the year ended 31 July 2020
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 for re-appointment for a further three year
term. Kevin Old did not stand for re-election and Julie Langley
was elected to the position. Elected directors, Louise Cullen
and Kevin Old retired by rotation during the year. Louise Cullen
was re-elected.		

Directors’ remuneration is approved by shareholder resolution
at the Annual General Meeting based upon a recommendationfrom the Directors’ Remuneration Committee, which iscomprised of non-Director shareholders. The following persons
held office as Director during the year and received thefollowing remuneration:

During the year to 31 July 2020 the following number of
employees of the Group received total remuneration of atleast $100,000: Total remuneration includes salaries, bonus
payments, and other benefits received in the capacity as an
employee during the year, e.g. company vehicles, insurance andsuperannuation. Bonus payments may relate to multiple years,
but paid in one lump sum.

Co-operative Company
The Board of Directors resolved on 29 July 2020 that, in theopinion of the Board, the Company has been a co-operative
company during the year ended 31 July 2020 because
its principal activity has been processing and marketingproducts derived from milk supplied by its shareholders andbecause 100% of the voting rights in the Company are heldby those shareholders.
Role of the Board
Tatua’s Board of Directors is committed to managing the Groupin an ethical and professional manner, and in the best interestsof the Company and its shareholders.
		
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; andEnsuring 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
and procedures for employees.

Board Meetings Held During the Year
Board Members

Meetings Attended

Stephen Allen (Chairman)

8

Louise Cullen

8Mark Dewdney

8

Julie Langley (elected Nov 2019)6

Richard Luxton

8

David Muggeridge

8

Kevin Old (retired Nov 2019)2

Peter Schuyt

8

Ross Townshend

8

Board Meetings Held

8

Board Committees
People and Remuneration Committee: Membership comprises
Mark Dewdney (Chairman), Stephen Allen, Louise Cullen,
Richard Luxton and Ross Townshend. The function of thecommittee is to assist the Board in ensuring the organisation
fulfils its remuneration, performance management andorganisational development needs. It also assists with senior
management appointments.
Audit, Risk and Compliance Committee: Membership comprisesPeter Schuyt (Chairman), Mark Dewdney, Richard Luxton,
David Muggeridge and Ross Townshend. The function of thecommittee is to assist the Board in ensuring the organisation
fulfils its audit, legal, financial and risk management obligations
and responsibilities. Approval of the annual accounts isundertaken by the full Board.
Responsible Farming Committee: Membership comprises Louise
Cullen (Chairwoman), Stephen Allen, Julie Langley, Richard
Luxton and David Muggeridge. The function of the committee
is to assist the Board in ensuring the Company fulfils its
governance and related responsibilities in regard to the farming
activities of the Company and its supplying shareholders.

Stephen Allen$119,000Louise Cullen$63,167

Remuneration

Mark Dewdney$63,167$100,000 - $109,999

45

Julie Langley (elected Nov 2019)$32,000$110,000 - $119,999

52

Richard Luxton$47,500$120,000 - $129,999

40David Muggeridge$47,500$130,000 - $139,999

21

Kevin Old (retired Nov 2019)$15,500$140,000 - $149,999

21Peter Schuyt$63,167$150,000 - $159,999

9Ross Townshend$47,500$160,000 - $169,999

6$498,500$170,000 - $179,999

5$180,000 - $189,999

2

Number of Employees

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

5

At 31 July 2020 Directors held the following shares in
the Company:$200,000 - $209,999

6$210,000 - $219,999

2$220,000 - $229,999

1$230,000 - $239,999

2$240,000 - $249,999

1$250,000 - $259,999

1$290,000 - $299,999

1$300,000 - $309,999

1

Beneficially
Held

NonBeneficially
Held

Held By
Associated
Persons

Stephen Allen

2,095,680-

851,590

Louise Cullen

2,908,740--

Mark Dewdney

2,245,170--

Julie Langley

834,820--

Richard Luxton

3,763,220--$330,000 - $339,999

1David Muggeridge

1,157,300--$340,000 - $349,999

1$430,000 - $439,999

1$460,000 - $469,999

1$490,000 - $499,999

1$500,000 - $509,999

1

Directors’ Insurance
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 indefending legal actions and any resulting payments arisingfrom a liability to persons (other than the Company or related
body corporate) incurred in their capacity as Director or
executive employee unless the conduct involves a wilful breachof duty or an improper use of inside information or position to
gain advantage.

$1,040,000 - $1,049,999

1
228

Donations & Grants
Donations and grants for the year ended 31 July 2020 were
$20,000 (2019: $10,005).

21

Tatua Annual Report 2020

Financial Statements

Director

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

Director
Stephen AllenLouise CullenMark Dewdney

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

Julie Langley

Richard Luxton

22

Position

Company

Director, Shareholder

KM & JL Langley Limited

Shareholder

Langley Trading Ltd

Director

Wallace Hybrid General Partner Ltd

Director

Templeview Dairies Ltd

Director, Shareholder

Aslan Farms Ltd

Director

Kotare Pastoral Ltd

Director

J.D. & R.D. Wallace (1951) Ltd

Position

Company

Director, Shareholder

Claybrook Farms Ltd

Director

JD & RD Wallace General Partner Ltd

Director, Shareholder

Claybrook No 7 Ltd

Director

Luxton Group General Partner Ltd

Director, Shareholder

Claybrook South Ltd

Director

Pukekara Ltd

PartnerRangitata Dairies LP Ltd

Director

Tui Dale Ltd

Director

Rangitata GP Ltd

Shareholder

Marire Holdings Ltd

Director

Mowata GP Ltd

Director

MDLP General Partner Limited

Director, Shareholder

Cheadle Farms Ltd

Director, Shareholder

Allen Children Ltd

Director, Shareholder

Muggeridge Farms Ltd

David Muggeridge

Director

Farmers' Mutual Group (FMG)

Director

TSB Bank Ltd

Director

Farmers' Mutual Insurance Ltd (FMIL)

Director, Shareholder

Dairy Investment Fund Ltd

TrusteeSarah Ethne Allen Trust

Director

Tax Management NZ Ltd

TrusteeSB & BL Allen Family Trust

Director

Foodstuffs North Island Ltd

Trustee

Cheadle Trust

Director

DairyNZ Inc.

TrusteeDavid Johnstone Charitable Trust

Director

Alliance Group Ltd

Trustee

JES Allen Estate

Director, Shareholder

Ahikouka Holdings Ltd

Trustee

JR Allen Estate

Director, Shareholder

Greenleaf Fresh Ltd

Director, Shareholder

Cookson Trust Farms Ltd

TrusteeSchuyt Family Trust

Director, Shareholder

Balachraggan Farms Ltd

Chairman

MSC Consulting Group Ltd

Director, Shareholder

Capra Farming Ltd

Chairman

Robert Monk Transport Ltd

Director, Shareholder

Acorn Goats Ltd

Chairman

Bector Automation RML Pvt Ltd (India)

Trustee

Te Aroha Free Kindergarten Association Inc

Chairman

RML Engineering Ltd (and subsidiaries)

Director

AgResearch Ltd

Director, Shareholder

Ranworth Farm Ltd

Director

Yanakie Farm Management Pty Ltd

Director, Shareholder

Townshend Holdings (2015) Ltd

Director

Dairy Goat Co-operative

Trustee, Beneficiary

Dewdney Family Trust

Trustee

Marvic Family Trust

TrusteeMark Dewdney Family Trust

Director, Shareholder

Namaste Farming Pty Ltd

Director, Shareholder

Namaste Land Pty Ltd

TrusteeVicki Dewdney Trust

Director

Nicholson United Autos Ltd

Director

Genera Australia Pty Ltd

Director

Genera New Zealand Ltd

Partner

Matangi Dairies LP Ltd

Director, Shareholder

MDLP General Partner LimitedPeter Schuyt

Ross Townshend

Director, Shareholder

Townshend Developments Ltd

Shareholder

Pukete Holdings Hamilton Limited

Shareholder

Elanza Technologies Ltd

Shareholder

Architectural Investments Ltd

Consultant

Walter & Wild Ltd

Consultant

Build Northland Management Ltd

Consultant

Ora Foods Ltd

Consultant

Merit Meats Ltd

23

Tatua Annual Report 2020

Financial Statements

BALANCE SHEETSTATEMENT OF COMPREHENSIVE INCOME

as at 31 July 2020

for the Year Ended 31 July 2020
GROUP
Note

2020 ($)

24

GROUP
2019 ($)

Current Assets

Note

Year Ended 31 July 2020 ($)

Year Ended 31 July 2019 ($)

Profit or Loss Items

Cash and Cash Equivalents

14

27,933,985

12,914,511

Revenue from Contracts with Customers

389,747,657

364,281,708

Derivatives

18

3,462,833

692,385less Payments for Own Milk Supplied(131,707,570)(122,858,294)

Receivables and Prepayments

13

48,480,204

48,842,867

less Other Cost of Sales(189,140,228)(184,437,293)

59,664-

68,899,859

56,986,121

69,894,524

51,004,174

Tax Receivable
Inventories

12

Biological Assets

1,042,877

714,767

150,874,087

114,168,705

9

131,660,265

126,338,873

Total Current Assets
Property, Plant and Equipment

Gross Profit
plus Other Income

3less Sales and Marketing Expenses
less Administration Expenses

Non Current Assets

3

4Surplus from Operating Activities

1,337,047

1,372,496(23,347,115)(21,970,705)(11,528,829)(13,030,247)

35,360,962

23,357,665

Investment Property

11

1,698,000

1,586,000

Intangible Assets

10

5,087,732

5,540,900

Finance Income

676,166

41,607

Derivatives

18

3,856,354

465,934

less Finance Expenses

6(16,220,121)(6,562,344)

Deferred Tax Asset

8

4,090,543

6,613,365

Net Finance Expense(16,143,955)(6,520,737)

Equity Accounted Investments

859,598

1,049,646

Total Non Current Assets

147,252,492

141,594,719

Surplus before Income Tax

Total Assets

298,126,579

255,763,423

less Income Tax Expense

Current Liabilities
Loans and Borrowings

16

12,237,259

37,442,563

Derivatives

18

1,733,876

5,598,730

Accounts Payable and Accruals

17

27,971,094

23,788,865

92,383

2,383,574

Tax Payable
Owing to Suppliers

27,794,997

23,591,197

Total Current Liabilities

69,829,609

92,804,930

65,892,839

24,850,000

Non Current Liabilities
Loans and Borrowings

16

Derivatives

18

2,351,349

3,363,308

Total Non Current Liabilities

68,244,188

28,213,308

Total Liabilities Excluding Co-operative Shares

138,073,797

121,018,238

Classified as a Liability
PLUS Co-operative Shares

75,996,631

73,450,586

Total Liabilities

214,070,428

194,468,824

Net Assets

84,056,151

61,294,598

Retained Earnings

65,677,278

50,755,867

Reserves

18,378,873

10,538,731

Equity84,056,151

61,294,598

Members Funds Memorandum Account:
75,996,631

73,450,586

Retained Earnings

Co-operative Shares Classified as a Liability

65,677,278

50,755,867

Reserves

18,378,873

10,538,731

160,052,782

134,745,184

Total Members Funds

15

For and on behalf of the Board:
SB Allen Chairman of Directors
6 November 2020

PM Schuyt Chairman of Audit, Risk and Compliance Committee
6 November 2020

Net Surplus

7

19,217,007

16,836,928(4,295,597)(4,541,505)

14,921,410

12,295,423

Other Comprehensive Income
Movement in Land Revaluation Reserve

355,000

3,133,928

Change in Fair Value of Cash Flow Hedges

10,479,999(3,014,825)

Movement in Foreign Exchange Reserve(60,456)

389,513

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

844,152

Other Comprehensive Income for the Year

7,840,143

1,352,768

Total Comprehensive Income

22,761,553

13,648,191* The Group has initially applied NZ IFRS 16 at 1 August 2019.
Under the transition methods chosen, comparative information
has not been restated, refer to Note 2(g)(i)The accompanying notes form part of and are to be read in
conjunction with these financial statements.

25

Tatua Annual Report 2020

Financial Statements

STATEMENT OF CHANGES IN EQUITYSTATEMENT OF CASH FLOWS

for the Year Ended 31 July 2020

for the Year Ended 31 July 2020

Group

26

GROUP

Translation
Reserve ($)

Hedging
Reserve ($)

Revaluation
Reserve ($)

Retained
Earnings ($)

Total
Equity ($)

274,610(3,066,484)

11,977,838

38,853,679

48,039,643

Cash Flows From Operating Activities

-

-

-

(393,234)(393,234)

Cash was provided from:Movement in Foreign Exchange Reserve389,512---389,512Dividends Received

1,825

285

Movement in Land Revaluation Reserve--

3,133,928-

3,133,928

Interest Received

76,166

41,607

377,657,295

361,496,673

Balance at 1 August 2018
Adjustment on initial application of IFRS 15, Net of Tax
Other Comprehensive Income

Movement in Hedging Reserve, Net of Tax
Restated Total Other Comprehensive Income
Tax Paid Surplus/(Deficit)
Total Comprehensive Income

Note

Receipts from Customers

Year Ended 31 July 2020 ($)

Year Ended 31 July 2019 ($)

377,579,305

361,454,781-(2,170,674)--(2,170,674)

389,512(2,170,674)

3,133,928(393,234)

959,533

Payments for Milk

(127,503,771)(121,826,632)

-

-

-

12,295,423

12,295,423

Payments to Creditors and Employees(223,484,803)(201,480,628)

389,512(2,170,674)

3,133,928

11,902,189

13,254,955

Interest Paid

(3,256,910)(3,687,326)

Cash was applied to:

Taxation Paid
Transactions with owners of Company
Issue of ordinary shares

-

-

-

-

-

Balance at 31 July 2019

664,122(5,237,158)

15,111,766

50,755,868

61,294,598

Balance at 1 August 2019

664,122(5,237,158)

15,111,766

50,755,868

61,294,598(60,456)---(60,456)(7,058,030)(4,931,839)(361,303,514)(331,926,425)

16,353,781

29,570,248

Net Cash Flows From / (Applied To)
Operating Activities

20

Cash Flows From Investing Activities
Other Comprehensive Income
Movement in Foreign Exchange Reserve

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

111,698

77,871

Proceeds From Sale of Investments

513,348

62,159625,046

140,030(18,200,761)(9,676,149)(487,655)(234,987)

Movement in Land Revaluation Reserve--

355,000-

355,000

Movement in Hedging Reserve, Net of Tax-

7,545,599--

7,545,599

Cash was applied to:(60,456)

7,545,599

355,000-

7,840,143

Acquisition of Property, Plant and Equipment

Total Other Comprehensive Income

Acquisition of Intangible Assets
Tax Paid Surplus/(Deficit)
Total Comprehensive Income

-

-

-

14,921,410

14,921,410(60,456)

7,545,599

355,000

14,921,410

22,761,553

Purchase of Share Investments--(18,688,416)(9,911,136)(18,063,370)(9,771,106)

4,175,220

3,261,981

Net Cash Flows From / (Applied To)
Transactions with owners of Company

Investing Activities

Issue of ordinary shares

-

-

-

-

-

Balance at 31 July 2020

603,666

2,308,441

15,466,766

65,677,278

84,056,151

Cash Flows From Financing Activities
Cash was provided from:
Increase in Co-operative Shares
The accompanying notes form part of and are to be readin conjunction with these financial statements.

15

Proceeds from Borrowings

14,183,018-

18,358,238

3,261,981

Cash was applied to:
Decrease in Co-operative Shares(1,629,175)(2,414,425)-(17,034,346)(1,629,175)(19,448,771)

Financing Activities

16,729,063(16,186,790)

Net Increase / (Decrease) in Cash and Cash Equivalents

15,019,474

3,612,352

Add: Opening Cash and Cash Equivalents Balance

12,914,511

9,302,159

27,933,985

12,914,511

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

Closing Cash and Cash Equivalents Balance

14

27

Tatua Annual Report 2020

Financial Statements

NOTES TO THE FINANCIAL STATEMENTS
1—

Reporting Entity

2—

Basis of Preparation

3—

Operating Revenue & Other Income

4—

Administration Expenses

5—

Personnel Expenses

6—

Finance Income & Expense

7—

Income Tax Expense

8—

Deferred Tax Assets & Liabilities

9—

Property, Plant & Equipment

10—

Intangible Assets

11—

Investment Property

12—

Inventories

13—

Receivables & Prepayments

1—REPORTING ENTITY
The Tatua Co-operative Dairy Company Limited (theparent company) is a co-operative company domiciled andincorporated in New Zealand, and registered under the Cooperative Companies Act 1996 and the Companies Act 1993.
At 31 July 2020 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.

Tatua is an FMC reporting entity in terms of the Financial
Markets Conduct Act. The Group is a producer and marketer ofdairy products with sales to both domestic and export markets.
These financial statements are for the year ended 31 July 2020.

2—BASIS OF PREPARATION
The financial statements have been prepared on a going
concern basis.

at the exchange rate at that date. All financial information
presented has been rounded to the nearest dollar.

(a) Statement of Compliance and Basis of Preparation(d) Use of Estimates and Judgement

The financial statements have been prepared in accordancewith Generally Accepted Accounting Practice in New Zealand(NZ GAAP). They comply with New Zealand equivalents toInternational Financial Reporting Standards (NZ IFRS) and otherapplicable Financial Reporting Standards, as appropriate for
profit oriented entities. These financial statements also comply
with International Financial Reporting Standards (IFRS).

The preparation of financial statements requires management
to make judgements, estimates and assumptions that affect theapplication of accounting policies and the reported amountsof assets, liabilities, income, and expenses. Actual results may
differ from these estimates.

These accounting policies have been applied consistently to all
periods presented in these financial statements except as notedin Note 2(g)(i).
These financial statements were approved by the Board of
Directors on 6 November 2020, and have been prepared inaccordance with the New Zealand Companies Act 1993 and the
Financial Reporting Act 2013.

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(c) Functional and Presentation Currency

23—

Subsequent Events

The financial statements are presented in New Zealand dollars(NZD), which is the Company’s functional currency. Monetary
assets and liabilities denominated in foreign currencies at thereporting dates are retranslated to the functional currency

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
areas of estimation, uncertainty and critical judgements inapplying accounting policies that have the most significant
effect on the amount recognised in the financial statements aredescribed in the following notes:
Note 12. – Milk cost included in inventory(b) Basis of Measurement(e) Goods and Services Tax

The financial statements are prepared on the historical costbasis except for the following:

The financial statements have been prepared on a GST
exclusive basis, except for Accounts Receivable and Accounts
Payable which are stated inclusive of GST.

Land is measured at fair value. Refer to Note 9.
Biological assets are measured at fair value less point-ofsale costs.
Investment property is measured at fair value. Refer toNote 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.

(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
are appropriately recognized.
(g) New Standards and Interpretations(i) New and amended standards adopted by the Group

28

29

Tatua Annual Report 2020

Financial Statements

3—OPERATING REVENUE & OTHER INCOME

NZ IFRS 16 – Leases
The Group has initially applied NZ IFRS 16 effective from 1
August 2019 using the modified retrospective approach andtherefore the comparative information has not been restated.
The details of the changes in accounting policies are disclosed
below. Additionally, the disclosure requirements in NZ IFRS 16
have not generally been applied to comparative information.
(a) Definition of a lease
Previously, the Group determined at contract inception whether
an arrangement was or contained a lease under NZ IFRIC 4 –Determining whether an arrangement contains a lease. The
Group now assesses whether a contract is or contains a lease
based on the definition of a lease as per NZ IFRS 16. A contractis, or contains a lease if the contract conveys the right to control
the use of an identified asset for a period of time in exchange
for consideration.
On transition to NZ IFRS 16, the Group elected to apply thepractical expedient to grandfather the assessment of whichtransactions are leases. The Group applied NZ IFRS 16 only tocontracts that were previously identified as leases. Contracts
that were not identified as leases under NZ IAS 17 and NZ IFRIC
4 were not reassessed for whether there is a lease under NZ
IFRS 16. Therefore, the definition of a lease under NZ IFRS 16
was applied only to contracts entered into or changed on orafter 1 August 2019.

On transition, for these leases, lease liabilities were measured at
the present value of the remaining lease payments, discounted
at the Group’s incremental borrowing rate as at 1 August 2019(see note 2(g)(i)(c)). Right-of-use assets are measured at an
amount equal to the lease liability, adjusted by the amount ofany prepaid or accrued lease payments: the Group has applied
this approach to all leases.
The Group has tested its right-of-use assets for impairment
on the date of transition and has concluded that there is no
indication that the right-of-use assets are impaired.
The Group used a number of practical expedients when
applying NZ IFRS 16 to leases previously classified as operatingleases under NZ IAS 17. In particular, the Group:———

did not recognise right-of-use assets and liabilities forleases for which the lease term ends within 12 months ofthe date of initial application;
did not recognise right-of-use assets and liabilities forleases of low value assets; andused hindsight when determining the lease term.

At commencement or on modification of a contract that
contains a lease component, the Group allocates theconsideration in the contract to each lease component on thebasis of its relative stand-alone price.

GROUP
Revenue from contracts with customers

2020 ($)

2019 ($)

389,747,657

364,281,708

75,00075,000

Other Income
Rental Income from Investment Property
Rental Income from Farm Houses

58,71948,970Fair Value movement in Investment Property

112,000

411,000

Insurance Claim Proceeds

2,411

111,145

MilkTest NZ Ltd Income

326,290

338,347

Sundry Income

762,627

388,034

1,337,047

1,372,496

391,084,704

365,654,204

Total Revenue

GROUP
Analysis of revenue from contracts with customers

2020 ($)

2019 ($)

385,360,454

350,955,687

4,387,203

13,326,021

389,747,657

364,281,708

At a point in time

372,518,701

345,405,864

Over time

17,228,956

18,875,844

389,747,657

364,281,708

Nature of Revenue(c) Transition

Sale of goods

On transition to NZ IFRS 16, the Group recognised additionalright-of-use assets and lease liabilities. The impact on transitionis summarised below:
1 August 2019(b) Leases in which the Group is a lessee
As a lessee, the Group leases many assets including property,
plant & equipment, vehicles and IT equipment. The Grouppreviously classified leases as operating leases based on its
assessment of whether the lease transferred significantly all of
the risks and rewards incidental to ownership of the underlying
asset to the Group. Under NZ IFRS 16, the Group recognises
right-of-use assets and lease liabilities for most of these leases– i.e. these leases are on-balance sheet.

30

Right-of-use assets

1,654,517

Lease liabilities

1,654,517

When measuring lease liabilities for leases that were classified
as operating leases, the Group discounted lease payments using
the Group’s incremental borrowing rate at 1 August 2019. The
incremental borrowing rate applied is 3.35%.

Royalties/Commissions
Timing of revenue recognition

Disaggregation of Revenue
Australasia (NZ and AUS)

101,664,712

105,197,985

Asia / Pacific229,643,367

184,425,203

Americas / Europe

55,898,909

71,932,976

Other

2,540,669

2,725,544

389,747,657

364,281,708

31Tatua Annual Report 2020

Financial Statements

5—PERSONNEL EXPENSES

Policy(a) Revenue from contracts with customers
Revenue from the sale of goods is measured based on theconsideration specified in a contract with customers, net of
returns and allowances, trade discounts and volume rebates.
Revenue recognised at a point in time
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 theamount attributable to shipping costs on behalf of the customer
as that is an agency arrangement.
Revenue is recognised when the performance obligation,
being the supply of goods, has been satisfied and control has
passed to the customer. Transfer of control varies dependingon 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 ontoa ship at the port of departure. In respect of the majority ofdomestic sales within New Zealand, control is considered to betransferred 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
the contract is terminated by the customer then the Groupis entitled to reimbursement of the costs incurred to date,including a reasonable margin.

32(b) Other Income

GROUP
2020 ($)

2019 ($)

Wages and Salaries

43,311,614

43,491,570

Superannuation Contributions and Other Employee Related Expenses

3,879,821

3,725,203--

Sundry income is measured at the fair value of consideration
received or receivable.
(c) Non-GAAP Measure: Total Underlying Revenue
The Group uses a non-GAAP measure when discussing
total revenue. This measure is not prepared in accordancewith NZ IFRS.

Increase in Liability for Short-term Employee Benefits

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 usedinternally to evaluate the underlying performance of individual
business units and to analyse trends. This measure is not
uniformly defined or utilised by all companies and accordingly
may not be comparable with similarly titled measures used byother companies. Non-GAAP measures should not be viewed
in isolation nor considered as a substitute for measures inaccordance with NZ IFRS.

Personnel expenses are included in cost of sales, sales(Annual Leave and Days in Lieu)

Note2020 ($)

PolicyEmployee Benefits

Short-term Benefits

Defined Contribution Plans

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.

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

2019 ($)

3

1,337,047

1,372,496

Net Foreign Exchange Loss

6

(12,930,361)(2,855,193)

2,590,891

1,909,778

Non-GAAP measure: Total Underlying Revenue

6—FINANCE INCOME & EXPENSE

389,747,657 364,281,708

Other Income

Agency Shipping costs offset

1,844,290
49,061,063

and marketing expenses and administration expenses.

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

NZ IFRS Revenue from Contracts with Customers 3(994,242)
46,197,193

380,745,235 364,708,789

GROUP
Recognised in Profit or Loss
Interest Income
Net Foreign Exchange Gain
Total Finance Income

Agency shipping costs offset represents shipping proceeds
received on behalf of customers that are offset with shipping
costs under an agency arrangement as detailed in note 3(a).

Net Foreign Exchange Loss
Financial Overheads

4—ADMINISTRATION EXPENSES

2020 ($)

2019 ($)

76,166

41,607--

76,166

41,607(12,930,361)(2,855,193)(32,850)(19,825)

Interest Expense on External Borrowings(3,256,910)(3,687,326)

Total Finance Expense(16,220,121)(6,562,344)

Net Finance Income / (Expense)(16,143,955)(6,520,737)

GROUP
2020 ($)

2019 ($)

The following items are included in administration expenses:

PolicyAuditors Remuneration (KPMG)
Audit of Financial Statements

184,183

171,479

Other Services*

34,5508,275

Directors' Fees

498,500

482,667

3,997

3,650

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

(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 2020

Financial Statements

7—INCOME TAX EXPENSE

PolicyGROUP

Income Tax Recognised in Profit or Loss

2020 ($)

2019 ($)

Current Tax Expense
Current Period

5,653,195

40,799(134,265)

4,707,174

5,518,930

Origination and Reversal of Temporary Differences(376,526)(1,116,559)

Adjustment for Prior Periods(35,051)

139,134

Deferred tax assets and liabilities(411,577)(977,425)

are attributable to the following:

4,295,597

4,541,505

Property, Plant and Equipment

8—DEFERRED TAX ASSETS & LIABILITIES
Reconciliation of Effective Tax Rate

Deferred Tax Expense

Total Income Tax Expense

GROUP

2019 ($)

2020 ($)

2019 ($)

2,039,222

1,165,030--

2,039,222

1,165,030--(83,558)(81,014)(83,558)(81,014)2,036,673(897,727)-(897,727)

2,036,673

-

-

-

-

-

-

Inventory

Biological Assets

1,371,646

1,602,526--

1,371,646

1,602,526

Provisions and Accruals

1,660,960

1,890,150--

1,660,960

1,890,150

-

-

-

-

6,694,379(981,285)(81,014)4,090,543

6,613,3652019 ($)

Profit for the Period-

14,921,410-

12,295,423

Other items

Total Income Tax Expense-

4,295,597-

4,541,505

Tax Assets /(Liabilities)

Profit Excluding Income Tax-

19,217,007-

16,836,928

28.0

5,380,762

28.0

4,714,339(0.5)(97,103)(0.1)(10,609)

Tax Exempt Income(0.2)(30,619)(0.7)(116,511)(50,503)

Non-deductible Expenses

0.2

39,772(0.3)

Legislative change of Depreciation on Buildings(5.2)(1,002,452)

0.0-

Tax Credits on Dividend Income

(0.0)

(511)

(0.0)

(80)

Recognition of Previously Unrecognised Tax Losses

0.0

-

0.0

-

Under/(Over) Provided in Prior Periods

0.0

5,748

0.0

4,869

22.4

4,295,597

27.0

4,541,505

Movement in Temporary Differences

2020 ($)

2019 ($)

Derivatives(2,934,400)

844,152

Total Income Tax Recognised Directly in Other Comprehensive Income(2,934,400)

844,152

5,071,828

Balance

Recognisedin

Recognisedin

RecognisedinBalance

Recognisedin

RecognisedinBalance1 August
2018($)

Opening
Retaining
Earnings($)

Profit or
Loss($)

Other Comprehensive
Income($)

31 July
2019($)

Profit or
Loss($)

Other Comprehensive
Income($)

31 July
2020($)

1,351,007-(185,977)-

1,165,030

874,192(2,544)

During The Year

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

Derivatives

1,018,641-

173,880

844,152

2,036,673

Biological Assets
GROUP

Net

2020 ($)-

2019 (%)

Impact of Tax Rate in Foreign Countries

Liabilities
2019 ($)

Investment Property

2020 ($)

Income Tax Recognised Directly in Other Comprehensive Income

Assets2020 ($)

Derivatives
2020 (%)

Income Tax Using the Group’s Domestic Tax Rate

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

4,666,375

Adjustment for Prior Periods

Reconciliation of Effective Tax Rate

34

2,039,222(83,558)(2,934,400)(897,727)

-

-

-

-

-

Inventory

1,119,482

137,843

345,201-

1,602,526(230,880)

1,371,646-

Provisions and Accruals

1,245,830-

644,320-

1,890,150(229,190)

1,660,960

Other items

-

-

-

-

-

Tax Loss Carry-forwards

-

-

-

-

-

Tax Assets /(Liabilities)

4,653,946

137,843

977,425

844,152

6,613,365

411,579(2,934,400)

4,090,543

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

2020 ($)

2019 ($)

34,669,221

27,369,425

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

which temporary differences can be utilised based on theability of the Company to record taxable profits throughretentions or through the reclassification of payout. Deferred
tax assets are reviewed at each reporting 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 2020

Financial Statements

9—PROPERTY, PLANT & EQUIPMENTGROUP

Policy

Land
($)

Land
Improvements($)

Buildings($)

Plant &
Equipment($)

Vehicles($)

CapitalWork in
Progress($)

Right-ofuse assets
($)

Total
($)

15,372,071

3,818,590

50,532,081

189,213,227

3,386,909

8,008,859-

270,331,737--

608,939

11,594,108

365,923(2,892,824)-

9,676,146

Cost of Deemed Cost
Balance at 1 August 2018
Additions

3,133,929

-

-

-

-

-

-

3,133,929

Disposals

Revaluation of Land to Fair Value--(161,921)(207,006)(364,725)--(733,653)

Effect of Movement in Exchange Rates

-

-

-

-

-

-

-

-

Balance at 31 July 201918,506,000

3,818,590

50,979,098

200,600,329

3,388,107

5,116,035-

282,408,159

Balance at 1 August 201918,506,000

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

6,726,982

1,016,918

9,119,843

111,946

18,200,763

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
Balance at 31 July 2020

355,000

-

-

-

-

-

-

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

-

-

-

-

-

-

-

-

18,861,000

3,818,590

52,178,718

206,604,088

3,654,311

14,235,878

1,766,463

301,119,048(a) Recognition and Measurement for Assets at Cost
Items of property, plant and equipment (except land andimprovements) are measured at cost less accumulated
depreciation and impairment losses. Purchased software thatis integral to the functionality of the related equipment is
capitalised as part of that equipment.
Borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset are capitalised
as part of the cost of the asset. Borrowing costs capitalised
during the year were nil (2019: 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
Depreciation is recognised in profit and loss on a straight line
basis over the estimated useful lives of the items of plant,
property and equipment. Land is not depreciated. Depreciationis recognised as part of other cost of sales in the Profit or Loss.
Depreciation methods, useful lives and residual values arereassessed at the reporting date.
The Group has established the following useful lives:

Depreciation and Impairment Losses
Balance at 1 August 2018-

1,583,880

15,897,639

122,613,701

2,830,275--

142,925,495

Depreciation-

174,198

1,308,637

12,037,490

180,434--

13,700,760

Disposals--(160,284)(130,464)(266,220)--(556,968)

Effect of Movement in Exchange Rates

-

-

-

-

-

-

-

-

Balance at 31 July 2019-

1,758,078

17,045,992

134,520,727

2,744,489--

156,069,286

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(1,315,204)

Disposals--(25,454)(600,512)(689,238)--

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

—
—
—
—
—

Land Improvements – 10 to 20 years
Buildings – 3 to 50 years
Plant and Equipment – 2.5 to 20 years
Vehicles – 5 to 10 years
Right-of-use Assets – 1 to 13 years(c) Impairment
At each reporting date, the Group reviews its assets todetermine whether there is any indication of impairment. If any
such indication exists, the recoverable amount of the asset (orany cash generating unit it belongs to) is estimated in order todetermine the extent of the impairment loss (if any).
Recoverable amount is the higher of fair value less costs to selland value in use (estimated future cashflows).

Carrying Amounts
At 1 August 201815,372,071

2,234,710

34,634,442

66,599,526

556,634

8,008,859-

127,406,242
126,338,873

At 31 July 201918,506,000

2,060,512

33,933,106

66,079,602

643,618

5,116,035-

At 1 August 201918,506,000

2,060,512

33,933,106

66,079,602

643,618

5,116,035

1,654,517

127,993,389

At 31 July 2020

18,861,000

1,887,211

33,601,158

60,514,785

1,283,728

14,235,878

1,276,505

131,660,265

If the recoverable amount of an asset is estimated to beless than its carrying amount, the carrying amount of theasset is reduced to its recoverable amount. An impairment
loss is recognised in the Statement of Comprehensive
Income immediately.

Impairment losses recognised in prior periods are assessedat each reporting date for any indications that the loss has
decreased or no longer exists. An impairment loss is reversed
if there has been a change in the estimates used to determine
the recoverable amount (other than goodwill). An impairment
loss is reversed only to the extent that the assets carrying
amount does not exceed the carrying amount that would havebeen determined, net of depreciation or amortisation, if noimpairment loss had been recognised.
(d) Recognition and Measurement for Assets at Fair Value
Land and improvements are stated at their fair value. The fairvalue of land within property, plant and equipment is based onmarket values determined by an independent valuer.
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 fromthe 2019 year. The valuation established a market value using
a direct sales comparison approach and was undertaken inaccordance with the Property Institute of New Zealand (PINZ)International Valuation Standards.
The value of the land at cost is $3,414,704 (2019: $3,414,704).
Any gain on remeasurement is recognised in othercomprehensive income and held in equity, any loss is recognised
in profit and loss, unless there is a credit balance existing in therevaluation surplus.
Property, Plant and Equipment is categorised within level 2 ofthe fair value hierarchy.
Capital Commitments
During the period ended 31 July 2020, the Group enteredinto contracts to purchase plant and equipment. The balance
outstanding at balance date is $13,817,253 (2019: $1,286,314).
These commitments are expected to be settled in the following
financial year.

36

37

Tatua Annual Report 2020

Financial Statements

10—INTANGIBLE ASSETS

38

11—INVESTMENT PROPERTY
GROUP

GROUP

Software ($)

Total ($)

2020 ($)

2019 ($)

9,536,835

9,536,835

Balance at 1 August

1,586,000

1,175,000

Change in Fair Value

112,000

234,987

234,987

Balance at 31 July

411,000

1,698,000

1,586,000

Cost
Balance at 1 August 2018
Additions
Disposals--

Balance at 31 July 2019

9,771,822

9,771,822

Balance at 1 August 2019

9,771,822

9,771,822

Additions

487,655

487,655

Disposals
Balance at 31 July 2020

(7,619)(7,619)10,251,858

10,251,858

PolicyInvestment property is held either to earn rental income orfor capital appreciation or for both. Investment property ismeasured at fair value with any change therein recognised
in profit or loss and included in ‘Other Income’. Investment
property comprises the land and buildings that are leased to
PGG Wrightson Ltd.

Amortisation and Impairment Losses
Balance at 1 August 2018

3,382,563

3,382,563

Amortisation for the Year

848,360

848,360

Disposals--

Balance at 31 July 2019

4,230,923

4,230,923

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
Carrying Amounts
At 1 August 2018

6,154,272

6,154,272

At 31 July 20195,540,900

5,540,900

At 1 August 20195,540,900

5,540,900

At 31 July 2020

5,087,731

5,087,731

Policy(a) Recognition and Measurement(b) Amortisation

Intangible assets that are acquired by the Group which havefinite 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 fromthe date that they are available for use. The amortisation isrecognised as part of administration expenses in the Profit or
Loss. The estimated useful lives for the current and comparative
periods are as follows:—

Software – 2.5 to 10 years

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

12—INVENTORIES
GROUP
2020 ($)

2019 ($)

Finished Goods

58,157,934

40,925,785

Raw Materials

11,736,590

10,078,389

69,894,524

51,004,174

PolicyImpairment

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 theinventories and bringing them to their existing location andcondition. In the case of manufactured inventories and workin progress, cost includes an appropriate share of production
overheads based on normal operating capacity. Net realisablevalue is the estimated selling price in the ordinary courseof business, less the estimated costs of completion andselling expenses.

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).

The cost of milk within inventory is a key judgement as it
involves a number of inputs and estimations. The cost of
milk within inventory is based on a weighted average of bothshareholder 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 core ingredients, Fat, Whey Protein
and Casein Protein, with the Valued Component Ratio (value offat to protein) being a key input to calculate the separation.

There was a write down of $3,146,514 during the period (2019:$2,512,251) relating to inventory that had a net realisable valueless than its cost of manufacture.
GROUP

2020 ($)

2019 ($)

4,704,291

918,010Inventory valued at net
realisable value includedin finished goods above:

39

Tatua Annual Report 2020

Financial Statements

13—RECEIVABLES & PREPAYMENTS
GROUP

Trade Receivables
Prepayments and Sundries

2020 ($)

2019 ($)

43,244,026

42,505,472

5,236,178

6,337,395

48,480,204

48,842,867

15—MEMBERS FUNDS

PolicyVoting 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 centshares for every kilogram of milksolids. Shares are issued
or redeemed annually to ensure compliance with the sharestandard. Due to their redemption nature, shares are classified
as a liability in the balance sheet. When the group performs abonus share issue, with new shares issued at the same rate asexisting shares, retained earnings is decreased to match theincrease in co-operative shares.

Redemption Features – Shares are redeemed at nominal valueof 50 cents, or paid up value if lower.
USD ($)AUD ($)

JPN (¥)EUR (€)

2020

11,740,250

2,307,385

824,066,470-

29,661,194

2019

10,648,777

2,271,279

1,024,834,588

12,783

26,517,369

40

CNY (¥)

Movements in the Company’s Issued Shares were as follows:		

Trade Receivables Denominatedin Foreign Currencies

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

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

14—CASH & CASH EQUIVALENTS
Cash and Cash Equivalents comprise cash balances. Bank
overdrafts that are repayable on demand and form an integral
part of the Group’s cash management are included as acomponent of Cash and Cash Equivalents for the purpose of
the statement of cash flows.

2020
Shares($)

Shares($)

Shares at the beginning of the Year

146,901,172

73,450,586

145,206,060

72,603,030

Shares Issued

8,350,440

4,175,220

6,523,962

3,261,981

Shares Repurchased(3,258,350)(1,629,175)(4,828,850)(2,414,425)

Fully Paid Shares at the end of the Year

151,993,262

75,996,631

146,901,172

73,450,586

Treasury Stock

GROUP
2019 ($)

JPY Bank Deposits

2,366,514

5,818,772

USD Bank Deposits

2,818,688

249,292

CNY Bank Deposits

10,155,002

6,688,815

NZD Bank Deposits

12,593,781

157,632

Cash and Cash Equivalents in the Statement of Cash Flows

27,933,985

12,914,511

5,408,723

Retained Earnings

Translation Reserve

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

Hedging Reserve

2020 ($)

316,633

Reserves

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

Cash and Cash Equivalents are classified as a financial asset
at amortised cost.

2019

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

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.
When treasury shares are sold or reissued subsequently, theamount received is recognised as an increase in members funds.

41

Tatua Annual Report 2020

Financial Statements

16—LOANS & BORROWINGSInterest-bearing borrowings are classified as financial
liabilities and are measured at amortised cost using theeffective interest rate.
2020 ($)

2019 ($)

Current
JPY Bank Loans

7,306,590

9,881,698

USD Bank Loans

4,512,636

7,560,865

NZD Bank Loans-

20,000,000

Lease Liabilities

418,033-

12,237,259

37,442,563

Non Current
JPY Bank Loans--NZD Bank Loans

65,000,000

24,850,000

Lease Liabilities

Total

2020

Currency

Current

JPY

Non Current

892,839-

65,892,839

24,850,000

78,130,098

62,292,563

Nominal Interest Rate

Year of Maturity

Face Value

Carrying Amount
(NZD)

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

Nominal Interest Rate

Year of Maturity

Face Value

Carrying Amount
(NZD)

2019

Currency

Current

JPY

1.32%

2020

¥710,000,000$9,881,698

USD

3.45%

2020

$5,000,000$7,560,865

NZD

2.70%

2020

$20,000,000$20,000,000

Non Current

NZD

3.45%

2021

$350,000$350,000

NZD

2.88%

2022

$24,500,000$24,500,000

The Group’s bank loans are secured by registered firstmortgages, preferred security interest in all present andafter acquired property, and an interlocking guarantee fromcompanies within the Group. The Group’s borrowings are
subject to various covenants such as minimum equity, interest
cover ratio and gearing ratio and the Group was in compliancewith the various covenants.

42

The Group has committed (but undrawn) facilities with expiry
dates through to 2023 of NZD $35.0 million, JPY ¥540 million
and USD $4 million (2019: NZD $55.2 million, JPY ¥1,050 million
and USD $2 million). The JPY and USD loans are held by therespective subsidiaries.

17—ACCOUNTS PAYABLE & ACCRUALS
GROUP
2020 ($)

2019 ($)

Trade Payables

10,262,639

8,142,162

Employee Entitlements

7,441,755

8,435,997

Income in AdvanceAccruals--

10,266,700

7,210,706

27,971,094

23,788,865

PolicyTrade payables and accruals

Employee entitlements

Trade payables are recognised at fair value and measured atcost and classed as other financial liabilities.

Employee benefits which remain unused at balance date, andamounts expected to be paid under short-term cash bonus
plans are accrued for.

43

Tatua Annual Report 2020

Financial Statements

18—DERIVATIVES						

Interest 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.		

									

GROUPInterest Rate Swaps
Notional Contract Amount2020 ($)

2019 ($)

42,000,000

32,000,000

Fair Value
Current Liabilities(215,176)(355,848)

Non Current Liabilities(1,802,469)(1,382,481)

Net Fair Value(2,017,645)(1,738,329)

Less than 12 Months

More than 12 Months

Total2020 Interest Rate Hedges

10,000,000

32,000,000

42,000,000

2019 Interest Rate Hedges-

32,000,000

32,000,000

Foreign Currency Hedges
The Group’s foreign exchange rate contracts and options
notional amounts 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.		
						
2020
Foreign Exchange Contracts

Option Contracts									Less than 12 Months

More than 12 Months

Total

Buy

133,639,316

67,546,330

201,185,646

Sell

-

-

-

Call

49,717,218

14,009,209

63,726,427

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

Buy

151,223,957

50,051,560

201,275,517

Sell

-

-

-

2019
Foreign Exchange Contracts

Option Contracts

44

Call

44,673,309

23,693,680

68,366,989

Put(47,078,502)(25,271,843)(72,350,345)

Fair Value

2020 ($)

Current Assets

3,462,833

692,385

Non Current Assets

3,856,354

465,934

Current Liabilities(1,518,700)(5,242,882)

Non Current Liabilities(548,880)(1,980,827)

Net Fair Value

5,251,607(6,065,390)

PolicyHedge Accounting

Derivatives are recognised at fair value at the date a derivative
contract is entered into and are subsequently remeasured totheir fair value at each balance sheet date. The resulting gainor loss is recognised in profit or loss immediately unless thederivative is designated into an effective hedge relationship.

All derivatives are classified as cash flow hedges.

The Group’s derivatives are classified as being within Level 2of the fair value hierarchy. The fair value of forward exchange
contracts is determined using forward exchange rates atbalance sheet date, with the resulting value discounted back topresent value. The fair value of option contracts is determinedusing forward exchange rates and other inputs required for theBlack Scholes option pricing model. The fair value of interest
rate swaps is calculated as the present value of the estimatedfuture cash flows based on observable yield curves.

2019 ($)

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; andfair value changes in the hedging instrument previously
accumulated in other comprehensive income, in the
periods when the hedged item is recognised in profit
or loss.

Once hedging is discontinued, any cumulative gain or loss
previously recognised in other comprehensive income isrecognised in profit or loss either:——at the same time as the forecast transaction; orimmediately if the transaction is no longer expected
to occur.

The amount reclassified from other comprehensive income
to profit or loss on settlement of the derivatives in the 2020
financial was a loss of $4,956,562 (2019: loss of $2,199,518).

45

Tatua Annual Report 2020

19—FINANCIAL RISK MANAGEMENT
Quantitative Disclosures

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

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

The Board primarily monitors capital on the basis of the gearing
ratio. For the period ending 31 July 2020 the gearing ratio was
24% (2019: 27%). This ratio is calculated as net interest bearing
debt divided by total capital. Net interest bearing debt iscalculated as total borrowings less cash and cash equivalents.
Total capital is calculated as members funds plus net interest
bearing debt. Tatua is a co-operative company, and as such,members funds change in proportion to milk supplied. Refer toNote 15. The Group is required to meet certain ratios under its
bank covenants, which have been met, including a requirementthat Group members funds be not less than $70,000,000 (2019:$70,000,000), but otherwise the Group is not subject to any
externally imposed capital requirements.
There have been no material changes in the Group’s
management of capital during the period.

46

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

Capital Management

The Group’s objective is to provide returns for shareholders
and to maintain an optimal capital structure to reduce the costof capital. The Group distributes its surplus by way of payout.
However, in order to retain or modify the capital structure, theGroup may decide to retain profits within the business.

Financial Statements

a. Credit Risk
The Group’s exposure to credit risk is mainly influenced
by its customer base. There is no risk concentration either
geographically or by sector.

Gross Receivable2020 ($)

Impairment
2020 ($)

Gross Receivable2019 ($)

Impairment
2019 ($)

Not Past Due

40,963,366-

39,882,643-

Past Due 0-30 days

2,275,249-

2,353,290-

Past Due 31-120 days

5,411

-

269,539-

43,244,026-

42,505,472-

b. Liquidity Risk

Tatua has a credit policy under which each customer isassessed for credit worthiness and assigned a credit limit.
Where available the Group reviews external credit reports forboth country and customer risk. Credit limits are reviewed ona 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.

Liquidity risk represents the Group’s ability to meet its
contractual obligations. The Group evaluates its liquidity
requirements on an ongoing basis. In general, the Groupgenerates sufficient cash flows from its operating activities tomeet its obligations arising from financial liabilities and has
credit lines in place to cover any timing differences.

The Group does not require collateral for trade and otherreceivables. However, where practicable, purchase money
security interests over New Zealand-based customers areregistered on the Personal Property and Securities Register.

The following table sets out the contractual cash flows for all
financial liabilities that are settled on a gross cash flow basis.
GROUP

The Group is required to assess for impairment loss onreceivables at the time that revenue is recognised. Management
has performed an assessment of receivables under the
expected loss model and concluded 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 tradeand other receivables, by geographic region, is as follows:2020 Balance
Sheet
($)

ContractualCash Flows($)

Less than
6 Months($)

6-12 Months($)

1-2 Years($)

More Than
2 Years($)

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

-

-

-

Derivative Liabilities

18548,880

2,067,580

825,423

693,277

548,880-

Owing to Suppliers

27,794,997

27,794,997

27,794,997

-

-

-

Co-operative Shares

75,996,631

75,996,631-

75,996,631--

Total Non-derivative Liabilities

210,441,700

211,960,400

56,811,343

88,707,337

30,803,341

35,638,378

GROUP

2019 Balance
Sheet
($)

ContractualCash Flows($)

Less than
6 Months($)

6-12 Months($)

1-2 Years($)

More Than
2 Years($)

Note
Carrying Amount2020 ($)

2019 ($)

Loans and Borrowings

16

62,292,563

62,292,563-

37,442,563

350,000

24,500,000

Accounts Payable and Accruals

17

23,788,865

23,788,865

23,788,865

-

-

-

Derivative Liabilities

18

1,980,827

7,223,709

3,046,032

2,552,698

1,624,979-

Australasia (NZ and AUS)

6,754,513

7,408,941

Owing to Suppliers

23,591,197

23,591,197

23,591,197

-

-

-

Asia / Pacific

30,971,626

25,223,319

Co-operative Shares

73,450,586

73,450,586-

73,450,586--

Americas / Europe

4,616,361

9,872,602

Total Non-derivative Liabilities

185,104,038

190,346,920

50,426,094

113,445,847

1,974,979

24,500,000

Other

901,526

610

43,244,026

42,505,472

47Tatua Annual Report 2020

Financial Statements

48

c. Foreign Currency Exchange Risk
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
and Australian dollars.
The Group has a policy of maintaining a level of foreign currency
hedging that allows for a degree of certainty in its future cash
flows and to help protect it against sudden increases in thevalue of the New Zealand dollar against the United States dollar,
Japanese yen and Australian dollar.
2020
Net Cash Flow Exposure Before Hedging
less Foreign Exchange Contracts and Options
Net Unhedged Exposure
2019
Net Cash Flow Exposure Before Hedging
less Foreign Exchange Contracts and Options

The Group uses forward exchange contracts and currency
options to hedge its foreign currency exposure. All of theforward exchange contracts and options have maturities of lessthan two years at balance date.

2020

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

Interest Rate Swaps

42,000,000

-

-

-

-

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

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

NZD ($)USD ($)AUD ($)CNY (¥)JPY (¥)

82,131

173,310

18,24030,484,543

420,553,356(44,850,000)(5,000,000)--(710,000,000)

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

Cash and Cash Equivalents
Loans and Borrowings

2019
Cash and Cash Equivalents
Loans and Borrowings

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

USD ($)AUD ($)CNY (¥)JPY (¥ - 000’s)

79,670,495

19,541,962

288,605,176

4,984,829(68,500,000)(11,000,000)(167,000,000)(3,600,000)

11,170,495

8,541,962

121,605,176

1,384,829

NZD ($)USD ($)AUD ($)CNY (¥)

12,369,695

1,885,144

58,39947,153,075

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

Interest Rate Swaps

32,000,000

-

-

-

-

Net Unhedged Exposure(12,767,869)(4,826,690)

18,24030,484,543(289,446,644)

e. Sensitivity Analysis
In managing interest rate and currency risks the Groupaims to reduce the impact of short-term fluctuations on theGroup’s earnings. Over the longer-term, however, permanentchanges in foreign exchange and interest rates will have an
impact on profit.

d. Interest Rate Risk – Repricing Analysis

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 $407,380(2019: $427,224). Interest rate swaps have been included inthis calculation.

Interest rate risk is the risk that the value of the Group’s assets
and liabilities will fluctuate due to changes in market interest
rates. The Group is exposed to interest rate risk primarily
through its cash balances and advances, bank overdraft andborrowings. Interest rate swaps have been entered into toachieve an appropriate mix of fixed and floating rate exposure
within the Group’s policy.

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
cent in the NZD/USD exchange rate would increase the Group’s
profit by $153,209 (2019: decrease profit by $869,430). Foreignexchange hedging has been included in this calculation.

Net Unhedged Exposure

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

The Group’s exposure to interest rate risk can be summarised
as follows:

JPY (¥)

49

Tatua Annual Report 2020

Financial Statements

21—RELATED PARTY TRANSACTIONS

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

Year Ended 31 July 2020 ($)

Year Ended 31 July 2019 ($)

14,921,410

12,295,423

14,704,701

13,700,759

Amortisation of Intangible Assets

940,823

848,360

Movement in Deferred Tax

2,522,822(1,959,419)

Revaluation of Investment Property(112,000)(411,000)

Revaluation of Biological Assets(443,688)(185,754)

Movement in Investments(323,299)(342,611)

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

72,48998,81432,283,258

24,044,572

302,999(336,568)(6,160,868)

482,442

Movements in Working Capital
Trade and Other Receivables
Derivatives – Assets
Derivatives – Liabilities(4,876,813)

2,776,771

Inventories(18,890,349)

3,864,478

Biological Assets

115,578(91,732)

Owing to Suppliers

4,203,800

1,031,662

Trade and Other Payables

1,891,037(26,982)(23,414,616)

7,700,071

7,485,139(2,174,395)

16,353,781

29,570,248

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

The following entities are considered related parties because
they have common directors:

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

—

Key Management Personnel

Adjustments for Non Cash Items
Depreciation

50

Compensation

Year Ended 31
July 2020 ($)

Year Ended 31
July 2019 ($)

Short Term Employee Benefits

2,125,257

2,089,761

Long Term Employee Benefits

-

-

—

—
Transactions and Balances with Key Management Personnel
Key management personnel may conduct business with
the Group.

—

The aggregate value of transactions and outstanding balances
relating to key management personnel and entities over which
they have control or significant influence were as follows: Nil(2019: Nil).

—

Transactions and Balances with Other Related Parties—

Elected directors conduct business with the Group in the normal
course of their business activities.

Tax Management NZ Ltd (Peter Schuyt) – During the year
the group utilised the services of Tax Management Limited
to make tax payments through to the IRD in the ordinary
course of business.
Foodstuffs North Island Ltd (Peter Schuyt) – Net sales
during the year (GST inclusive) $2,668,910 (2019:$3,443,575), Receivable at year end (GST inclusive)$388,944 (2019: $291,567).
DairyNZ Ltd (Peter Schuyt) – Amounts paid during theyear (GST inclusive) $7,686 (2019: $10,031), Payable at theyear end (GST inclusive) $nil (2019: $10,031).
RML Engineering Ltd (Ross Townshend) – Amounts paid
during the year (GST inclusive) $41,849 (2019: $18,063),
Payable at year end (GST inclusive) $8,998 (2019: $7,152)
Nicholson United Autos Ltd (Mark Dewdney) – Amounts
paid during the year (GST inclusive) $32,160 (2019:$140,184), Payable at year end (GST inclusive) $nil (2019:$1,353).
AgResearch Limited (Louise Cullen) – Amounts paid
during the year (GST inclusive) $83,318, Payable at theyear end (GST inclusive) $35,190.

The Group has paid directors’ fees of $498,500(2019: $482,667), which is separately disclosed within the
directors’ report.

Items classified as Investing/Financing Activities relate to
movements in the hedging reserve and translation reserve as
well as amounts owing for the repurchase of shares.
Directors’ Farm Supply(included in Owing to Suppliers)

Value ofTransactions 19/20($)

Balance Outstanding
31 July 2020($)

Value ofTransactions 18/19($)

Balance Outstanding
31 July 2019($)

9,399,364

1,835,191

9,865,100

1,738,913

51

Tatua Annual Report 202052

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

22—GROUP ENTITIESCountry Of
Incorporation

Report on the audit of the consolidated financial statements
Ownership Interest
2020

2019

Subsidiaries
Tatua Japan Limited

Japan

100%

100%

Tatua USA Limited

USA

100%

100%

Tatua Dairy Products (Shanghai) Co., Ltd

China

100%

100%

Milktest New Zealand Limited

New Zealand

PolicyThe consolidated financial statements include the Group’s shareof the profit or loss after tax of joint ventures after adjustments
to align the accounting policies of the Group, from the date thatsignificant influence or joint control commences until the datethat significant influence or joint control ceases.

Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists
when the Group has the power over the entity, exposure or
rights to variable returns from its involvement with the entity,
and the ability to use its power over the entity to affect theamount of the entity’s return. In assessing control, potential
voting rights are only considered if the rights are substantive.
The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control
commences until the date that control ceases.
Equity Accounted Investees (Joint Ventures)
Joint ventures are those arrangements in which the Grouphas contractually agreed to share control and where theGroup has rights to the net assets rather than rights to theassets and obligations for the liabilities. Joint ventures are
initially recognised at cost (including any goodwill identified
on acquisition). Subsequent to initial recognition they areaccounted for using the equity method in the consolidated
financial statements.

In our opinion, the accompanying consolidated
financial statements of The Tatua Co-operative Dairy
Company Limited (the ’Company’) and its subsidiaries(the'Group') on pages 23 to 51:

We have audited the accompanying consolidated
financial statements which comprise:— the consolidated balance sheet as at 31 July
2020;

— present fairly in all material respects the Group’s

Equity Accounted Investee(a) Basis of Consolidation

Opinion10%

10%— the consolidated statements of comprehensive

financial position as at 31 July 2020 and its
financial performance and cash flows for the year
ended on that date; andincome, changes in equity and cash flows for theyear then ended; and— notes, including a summary of significant— comply with New Zealand Equivalents toaccounting policies and other explanatory
information.

International Financial Reporting Standards andInternational Financial Reporting Standards.

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.

Basis for opinion(b) Foreign Currency

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

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

We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised) Code of
Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance Standards Board and theInternational Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (‘IESBA
Code’), and we have fulfilled our other ethical responsibilities in accordance with these requirements and the
IESBA Code. Our responsibilities under ISAs (NZ) are further described in the auditor’s responsibilities for theaudit of the consolidated financial statements section of our report.

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

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.

23—SUBSEQUENT EVENTS
There were no material events subsequent to 31 July 2020 thatwould impact these financial statements.

Materiality
The scope of our audit was influenced by our application of materiality. Materiality helped us to determine thenature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individuallyand on the consolidated financial statements as a whole. The materiality for the consolidated financial
statements as a whole was set at $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, to them, above $135,000 as well as misstatements below that amount that in our view,
warranted reporting for qualitative reasons.

52

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

statements

Refer to Note 12 of the financial statements.

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

The Group has inventory of $70 million (2019: $51
million) which represents 23% of total assets.

We considered the appropriateness of management’s
use of the Farmgate Milk Price as the best estimateof the cost of milk solids supplied from the cooperative shareholders.

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.

We compared the Farmgate Milk Price used to thelatest publicised rate for the 2019/20 season.

The Group has determined that the estimated cost of
the milk solids supplied from co-operative
shareholders is best represented by the Farmgate Milk
Price calculated in accordance with the Farmgate Milk
Price Manual.

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

statements that is fairly presented and free from material misstatement, whether due to fraud or error; and— assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related

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

We compared a sample of purchased wholemilk andcream (quality and value) from other parties to theirrespective invoices.

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.

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 2019/20 season.
We checked that the split of protein into its casein
and whey components was calculated correctly. We
checked that the mechanics of the model were
calculating correctly and were consistent with theprior year.
We did not identify material exceptions from theprocedures performed and found the judgements andassumptions to be balanced and consistent.

The judgment required to consider these variabilities
and uncertainties are the reason we have considered
this a key audit matter.

Auditor’s responsibilities for the audit of the consolidated financial
statements
Our objective is:— to obtain reasonable assurance about whether the consolidated financial statements as a whole are freefrom material misstatement, whether due to fraud or error; and— to issue an independent auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordancewith ISAs NZ will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
A further description of our responsibilities for the audit of these consolidated financial statements is located at
the External Reporting Board (XRB) website at:
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 the 2020 Key Highlights, Report from the Chairman & Chief Executive
Officer, Tatua Together, From NZ to the World, Building the Future of Specialised Dairy, Investing for a Better
Future, Key Financial Performance Summary, Statutory Information, Statistics and Directory. Our opinion on the
consolidated financial statements does not cover any other information and we do not express any form ofassurance conclusion thereon.

The engagement partner on the audit resulting in this independent auditor's report is Murray Dunn.

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.

Hamilton53

For and on behalf of

6th November 2020

54

55

Tatua Annual Report 2020

Financial Statements

STATISTICSDIRECTORY

2019/20

2018/192017/18

2016/172015/16

2014/15

2013/14

Milk Received from Suppliers
Litres169,703,701

163,244,553

165,693,452

166,517,809

173,184,398

173,353,171

147,647,758

Milksolids

15,145,593

14,458,814

14,686,362

14,968,366

15,568,586

15,663,949

13,223,427

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

870.0

850.0

810.0

710.0

630.0

710.0

900.0

Total Income Equivalent Payout

870.0

850.0

810.0

710.0

630.0

710.0

900.0

Registered Office

Chairman

3434 State Highway 26
TatuanuiMorrinsville 3374
NEW ZEALAND

SB Allen

Postal Address
Private Bag 800
Morrinsville 3340
NEW ZEALAND

Telephone
Summary of Milk Payment Rates

2019/20
Cents / kg
Fat

2018/19
Cents / kg
ProteinCents / kg
Fat

+64 7 889 3999

2017/18
Cents / kg
ProteinCents / kg
Fat

Cents / kg
Protein

Website Address
www.tatua.com

Advance Rate

20 July

383.0

539.0

406.0

507.0

347.0

518.0

Retrospective Increase

20 December

20.0

29.0

22.0

28.0

21.0

31.0

Retrospective Increase

20 March

35.0

49.0

37.0

46.0

34.0

50.0

Retrospective Increase

20 April

34.0

48.0

36.0

46.0

33.0

50.0

Auditors
KPMG

Solicitors

Retrospective Increase

20 May

34.0

48.0

37.0

45.0

33.0

49.0

Retrospective Increase

20 June

43.0

60.0

45.0

57.0

33.0

50.0

Harkness Henry & Co

Retrospective Increase

20 July

42.0

60.0

45.0

56.0

49.0

74.0

Retrospective Increase

20 August

43.0

60.0

45.0

57.0

50.0

74.0

Bankers

Retrospective Increase

20 September

42.0

60.0

45.0

56.0

33.0

49.0

Final Payment

20 October

59.791083.325445.409656.262033.0032

49.0347

Total Payout Averaged Over All Grades735.791

1,036.325

763.410954.262666.003994.035

Bank of New Zealand Ltd

Insurance Brokers
Willis Towers Watson Ltd

Directors
Dr. LE Cullen
MBN Dewdney
JL Langley
RJ Luxton
DP Muggeridge
PM Schuyt
RE Townshend

Chief Executive Officer
BA Greaney

General Manager Marketing & SalesSJ Rolfe

General Manager Operations
TA Keir

General Manager Finance& Corporate Administration
ML Bull

General Manager Co-operative Affairs
PJ van Boheemen

General Manager Strategic Projects
TA Winter

Head of People and Capability
PA Pilkington

56tatua.com