ANNUAL REPORT 2017

2

WELCOME TO TATUA

4-7
8
10
11-13

Report from the Chairman &Chief Executive Officer
Welcome Brendhan Greaney & Dr. Louise Cullen
Key Financial Performance Summary
Statutory Information

FINANCIAL STATEMENTS
14

Balance Sheet

15

Statement of Comprehensive Income

16

Statement of Changes in Equity

17

Statement of Cash Flows

18-39

Notes to the Financial Statements

40

Audit Report

42

Statistics & Progress Table

43

Directory

The Tatua Co-operative Dairy Company Limited Annual Report 20173

Stephen Allen
Chairman

Brendhan Greaney
Chief Executive Officer

2017 The Year in Review

REPORT FROM THE CHAIRMAN& CHIEF EXECUTIVE OFFICEROver the past 100 years Tatua has developed a deep
understanding of the connection between land, people andutilisation of milk to create specialised dairy products.
This understanding inspires everything we do, from theproduction of high quality grass fed milk by our farmers,
through to our enduring relationships with customers inmore than 60 countries around the world.

4

LEADERSHIP TRANSITION
This year was one of leadership change with the departure ofChief Executive Officer Paul McGilvary in December 2016 andthe appointment of Brendhan Greaney as Tatua’s ninth CEO in
the company’s 103 year history. Prior to his appointment as Chief
Executive Officer, Brendhan had been Tatua’s General Manager
Operations since 2010.
Following Brendhan’s appointment, an extensive search process was
initiated to find the next General Manager of Operations, leading to
the recent appointment of Tim Keir to this role. Tim will join Tatua in
January 2018.

YEAR IN REVIEW
Tatua’s grass fed milk supply is influenced by local weather conditions,and the unusually cold and wet spring led to a 3.9% reduction inshareholder supplied milksolids to 15 million kilograms. Despite thedifficult conditions, the quality of milk supplied remained at the very
high level we have come to expect.
Our bulk ingredient product mix of caseinate, whey protein
concentrate and anhydrous milkfat served the business well in a
global market where anhydrous milkfat prices doubled through thecourse of the year.
Our more specialised products, which have been the focus ofinvestment for some time, have increasingly contributed to the overallbusiness and the annual result. These products are typically batchprocessed from dry ingredients, enabling us to support increased
demand from our customers with minimal requirement for additionalmilk supply.
Increased utilisation of the specialty dryer that we commissioned in
May 2015 has been positive and remains a key focus for the business.
Our subsidiaries in China and the USA completed their establishment
activities during the year and are now positioned to grow Tatua’smarket presence. With our longstanding subsidiary in Japan, they
provide an in-market commitment to work collaboratively with ourcustomers so we are able to increasingly understand and deliver their
specific product requirements.
A new Enterprise Resource Planning System (ERP) was implemented
over the financial year-end period. The project was challenging andhas taken longer than planned, but is expected to increasingly enable
the business. Importantly, Tatua remained a reliable supplier to its
customers through the implementation go-live period, which was
one of our highest priorities.
On the back of record production volumes, increasing milkfat prices
and growth in our specialty businesses, total revenue increased
13% to $328 million. After accounting for operating costs, thisresulted in a 14% increase in earnings before payout, taxation andretentions to $114 million. Year-end gearing was 35% (debt divided
by debt plus equity).
Tatua declared a payout to its shareholders of $7.10 per kilogram ofmilksolids supplied, and retained 50 cents per kilogram of milksolids
before tax to support the capital investment program, including
sustainability initiatives. We consider this to be a solid result.
We are increasingly focussed on sustainability as one of our mainpriorities. We acknowledge the importance of this to our people andfuture generations, our customers, our co-operative shareholders
and suppliers, and our wider community.
An upgrade of our waste water treatment infrastructure was
successfully commissioned during the year and we have earmarked
significant capital to further invest in sustainability across our business.
We have also been working with our supplier shareholders on
improving on-farm sustainability. This has previously focussed on
fulfilling our obligations under the Sustainable Dairying: Water Accord
but we have now commenced development of a responsible farming
programme covering a broad range of farm activities.

The Tatua Co-operative Dairy Company Limited Annual Report 2017

5

COMMUNITY & ENVIRONMENTAL INITIATIVESOver the past year we have undertaken the following initiatives aimed at achieving
positive social and environmental outcomes, as well as economic success.
Social•Partnering with schools, universities and Ngāti Hauā
Mahi Trust to deliver an annual programme of site visits
for school children and young people.

•

Financial assistance to local schools to assist thepurchasing of equipment, facilities and educational tools
beyond their existing budgets.

•

•

6

On farm visits for children of employees to improve theirunderstanding of the farm environment and its link todairy manufacturing.
Professional development of potential future ruralleaders through our Emerging Leaders programme.

Environmental•

Investment in a wastewater treatment plant that will result
in up to 2000 tonnes of dairy solids being recovered andutilised as stockfeed.

•

Transition of Tatua Farm 14 from dairying to a combination
beef and cut & carry unit to improve nutrient management.

•

Leadership of a Sustainable Farming Fund project to better
understand the relationship between the intensity of dairy
farming and a range of potential environmental impacts.

•

Major upgrade of the processing site stormwater
management infrastructure to minimise the risk ofcontaminant discharge and to moderate peak flows.

•

Continuation of riparian enhancements on Tatua Farm 14that will ultimately lead to the retirement and planting ofaround four hectares of Waiharakeke West Stream margin.

PEOPLEACKNOWLEDGEMENTS

Directors, the Hon. John Luxton and Dr Kevin Old retired by rotation
during the year. Dr Old offered himself for re-election but the Hon.
John Luxton decided to step down after three tenures and a total of
24 years as a Tatua Director. Five strong candidates were nominatedfor the two Director vacancies, resulting in the election of Dr Louise
Cullen and re-election of Dr Old.

Firstly, we thank all of our employees at Tatua for your focus anddedication in a transition year, including the challenge of an ERP
implementation, and ultimately delivering a strong financial result that
positively reflects all of your efforts. We will continue to grow as ateam.

As the complexity and capacity of the company has grown, so too
has our employee count. This extra resource ensures we remain wellplaced to meet our customers’ increasing expectations for highly
functional and well supported products, while ensuring that thehighest standards of quality and safety are maintained.
The level of employee development activities has remained highwith almost all participating in some form of training during the year.
This covered a wide range of areas with the aim of providing a safe,
productive and sustainable workplace.
Hosting of various community and educational groups throughout
the year has assisted Tatua to share its history, future plans and thestory of dairy more generally. We especially value the opportunity tointeract with the next generation who are starting to consider their
future careers and life in the workforce, and who are able to benefit
from the knowledge and experience of our people at Tatua.

Thank you to our shareholders. We remain a co-operative to the coreand value the stability and inherent values this brings. Your continued
supply of the highest quality milk as well as your full and continued
support for the business and our people is appreciated and provides
a foundation for our ongoing success.
Suppliers of our goods and services; you are a critical component of
our ability to operate and to meet the requirements of our customers.
We value the relationships we have with you and your willingness towork with us and to support our growth and sustainability.
Thank you to all of our customers in all of our markets. We value yourbusiness, the collaborative relationships we have with you and yourtrust in us as a supplier. We remain dedicated to working with you tomeet your requirements.
Our sincere thanks to you all.

OUTLOOK
The year ahead will be one of modest capital investment. We see
considerable potential within our existing plant and product mix for
both volume and value growth.
We expect the market to remain volatile, particularly against abackground of large intervention stocks, historically high fat pricing,
and the looming possibility of a global financial correction.

Stephen Allen Chairman

Brendhan Greaney Chief Executive Officer

But, as always, there will be opportunities. With our robust financialbase, supportive Board and Shareholders, dedicated Employees
and valued Customers, we maintain an overall positive outlook.

The Tatua Co-operative Dairy Company Limited Annual Report 20177

Welcome

WelcomeCHIEF EXECUTIVE OFFICERDIRECTOR

Brendhan Greaney was appointed to the position of Chief
Executive Officer in December 2016. Prior to his appointment
he was Tatua’s GM Operations for six years. Brendhan
replaced Mr. Paul McGilvary who retired in December afternine years at Tatua.

Louise joined the Tatua Board at the end of 2016. She has
a strong environmental and ecological science backgroundcoupled with hands-on farming experience. Her educational
background includes degrees in Ecology and Botany anda PhD in Forest Ecology from Lincoln University. Louise iscurrently a director of several family-owned dairy farming
enterprises with her husband Richard, continuing their family
farming legacy which began in 1924.

BRENDHAN GREANEY

Brendhan is an experienced Senior Executive with extensive
dairy industry experience. His previous career was with
Fonterra where he held various roles, including commercial
and operational leadership roles in the Middle East and SE
Asia.
Brendhan is qualified with a Bachelor of Management Studies
from The University of Waikato with majors in Accounting and
Finance. Brendhan is Tatua’s ninth CEO, or equivalent leader
in its 103 year history.

8

DR. LOUISE CULLENLouise has worked within a range of industries including
research science, environmental consultancy, and not-forprofit and commercial management. She completed a Diploma
in Management Studies in 2013. She is currently studying
towards a NZ Diploma in Agribusiness Management. Louise isalso a member of the Primary ITO Industry Partnership Group.

The Tatua Co-operative Dairy Company Limited Annual Report 20179

KEY FINANCIAL PERFORMANCE SUMMARY
2016/17 IN REVIEW

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

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

Group Surplus Before Payout And Tax

2016/172015/16

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

173,184,398
15,568,586$289,337,045
641
71
630
$8,163,723$238,810,564
36%

Payout – Income Equivalent

1000

900
800

500
400

710

630

200

710

300
900

760

641

773

200

1032

400

600

740

600

cents / kg milksolids

700

857

cents / kg milksolids

800

100
0

0
2012/13 2013/14 2014/15 2015/16 2016/17

2012/13 2013/14 2014/15 2015/16 2016/17

Gearing (%Debt To Debt Plus Members Funds)

Members Funds

40%

140

35%

120

30%

100

$126m

$117m

40

$100m

60

20

5%
0

0
2012/13 2013/14 2014/15 2015/16 2016/17

10

80

$106m

35.3%

35.7%

36.6%

10%

25.2%

15%

27.8%

20%

$87m

$ millions

25%

2012/13 2013/14 2014/15 2015/16 2016/17

STATUTORY INFORMATION
For the Year Ended 31 July 2017

PRINCIPAL ACTIVITIESBOARD COMPOSITION

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

Directors are elected or appointed. The total number of directors
in office, including any appointed director, shall be no less thansix, and no greater than ten. If there are only six directors, thenat least five of those directors must be elected directors, electedfrom the Company's Supplying Shareholder base. The Company's
Constitution provides that the Board may, from time to time, appoint
any person to be an additional director to the elected directors. The
Board may not use this power to increase the number of directors
beyond the maximum number of ten, and there shall be no more than
three appointed directors in office at any one time. 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. Elected
directors, John Luxton and Kevin Old, retired by rotation during theyear. John Luxton was not available for re-election, and Kevin Old
and Louise Cullen were elected to the Board.

CO-OPERATIVE COMPANY
The Board of Directors resolved on the 2nd August 2017 that, inthe opinion of the Board, the Company has been a co-operative
company during the year ended 31st July 2017 because its principal
activity has been processing and marketing products derived frommilk supplied by its shareholders and because 100% of the voting
rights in the Company are held by those shareholders.

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

FRAMEWORKThe Board delegates the day-to-day operations of the Company to
the CEO through a framework of formal delegations.
The Company’s corporate governance framework includes theCompany’s Constitution, Charter, Terms of Reference for the
Board’s Committees and a range of policies including Ethics, Risk
Management, Environment, Health & Safety, and policies andprocedures for employees.

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

8
6
7
2
8
8
6
8
8
8

* One meeting not attended due to conflict of interest.

BOARD COMMITTEES
People and Remuneration Committee: Membership comprises
Kevin Old (Chairman), Stephen Allen, Louise Cullen, Mark Dewdney,
and Bruce Wilton. The function of the committee is to assist the Board
in ensuring the organisation fulfils its remuneration, performance
management and organisational development needs. It also assists
with senior management appointments.
Finance, Audit and Risk Committee: Membership comprises Peter
Schuyt (Chairman), Mark Dewdney, David Muggeridge, Kevin Old,and Ross Townshend. The function of the committee is to assist theBoard in ensuring the organisation fulfils its audit, legal, financial andrisk management obligations and responsibilities. Approval of theannual accounts is undertaken by the full Board.
Farm Advisory Committee: Membership comprises David
Muggeridge (Chairman), Stephen Allen, Louise Cullen and Bruce
Wilton. The function of the committee is to assist the Board in ensuring
the company fulfils its governance and related responsibilities inregard to company owned land used for farming purposes.
The Tatua Co-operative Dairy Company Limited Annual Report 201711

STATUTORY INFORMATION
For the Year Ended 31 July 2017

DIRECTORS REMUNERATIONDISCLOSURE OF INTERESTS

Directors’ remuneration is approved by shareholder resolution at theAnnual General Meeting based upon a recommendation from the
Directors’ Remuneration Committee, which is comprised of nonDirector shareholders. The following persons held office as Director
during the year and received the following remuneration:

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

Stephen AllenLouise CullenMark Dewdney
John Luxton
David Muggeridge
Kevin Old
Peter Schuyt
Ross Townshend
Bruce Wilton$113,000$29,127$45,000$15,667$60,000$60,000$60,000$45,000$45,000$472,794

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

Position

Company

Stephen Allen

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

RDGP Ltd
Mowata GP Ltd
Farmers’ Mutual Group (FMG)
Claybrook Farms Ltd

DIRECTORS’ SHAREHOLDINGSAt 31 July 2017 Directors held the following shares in the company:

Stephen Allen
Mark Dewdney
Bruce Wilton
David Muggeridge
Kevin Old
Louise Cullen

Beneficially
Held

NonBeneficially
Held

Held By
Associated
Persons

2,006,230
1,330,340
1,306,650
1,042,650
1,202,370
3,204,990

–
–
–
–
–
–

799,260–––
2,704,020–

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

12

TrusteeMark Dewdney

Director
Director
Trustee/
Beneficiary
Trustee
Trustee
Trustee
Trustee
TrusteeLouise Cullen

Director,
Shareholder
Director,
Shareholder
Director,
Shareholder
Trustee

Claybrook No 7 Ltd
Claybrook South Ltd
Cheadle Farms Ltd
Allen Children Ltd
Bendigo Terrace GP Ltd
Sarah Ethne Allen Trust
SB & BL Allen Family Trust
Cheadle TrustDavid Johnstone Charitable
Trust
JES Allen Estate
Yanakie Farm Management
Pty Ltd
PGG Wrightson Ltd Group,and subsidiaries
Dewdney Family Trust
Marvic Family Trust
Mark Dewdney Family Trust
Namaste Farming Pty Ltd
Namaste Land Pty Ltd
Vicki Dewdney Trust
Cookson Trust Farms Ltd
Balachraggan Farms Ltd
Capra Farming Ltd
Te Aroha Free Kindergarten
Assoc Inc

Director

Position

CompanyDavid Muggeridge

Director,
Shareholder

Muggeridge Farms Ltd

Kevin Old

Director,
Shareholder
Director,
Shareholder
Trustee
Trustee/
Beneficiary

Kold Holdings Ltd

Chairman
Chairman
Chairman

MSC Consulting Group Ltd
Robert Monk Transport Ltd
Bector Automation RML Pvt
Ltd (India)
RML Engineering Ltd, andsubsidiaries
Ranworth Farm Ltd

Ross Townshend

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

Peter Schuyt

Director
Director
Director
Director
Director
Director
Director,
Shareholder

Bruce Wilton

Director,
Shareholder
Director,
Shareholder
Director,
Shareholder
Shareholder

VGO Ltd

EMPLOYEES’ REMUNERATION
During the year to 31 July 2017 the following number of employeesof the Group received total remuneration of at least $100,000:
Total remuneration includes salaries, bonus payments, and otherbenefits received in the capacity as an employee during the year, e.g.
company vehicles, insurance and superannuation. Bonus payments
may relate to multiple years, but paid in one lump sum.

VGO Trust
CR & AL Old Family Trust$1,000's
100 - 110
110 - 120
120 - 130
130 - 140
140 - 150
150 - 160
160 - 170
170 - 180
180 - 190
190 - 200
200 - 210
220 - 230
230 - 240
240 - 250
280 - 290
290 - 300
320 - 330
330 - 340
340 - 350
430 - 440
560 - 570

Townshend Holdings (2015)
Ltd
Townshend Developments
Ltd
Townshend Aviation Ltd
Elanza Technologies Ltd
Architectural Investments Ltd
Murray Goulburn Cooperative Company Ltd
TSB Bank Ltd
Dairy Investments Fund Ltd
Ex-PPL Ltd (in receivership &liquidation)
Tax Management NZ Ltd
Foodstuffs North Island Ltd
DairyNZ Ltd
Ahikouka Holdings Ltd

Group
66
25
17
8
4
5
1
6
4
4
3
1
2
1
1
1
1
1
1
1
1

DONATIONS & GRANTS
Donations and grants for the year ended 31 July 2017 were $24,558(2016: $44,836).

Brandmar Ltd
Fernwater Investments 2013
Ltd
Fernwater Investments 2017
Ltd
Fernwater Investments Ltd

The Tatua Co-operative Dairy Company Limited Annual Report 201713

BALANCE SHEETAs at 31 July 2017

GROUP
2017
($)

2016
($)

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

10,726,520
9,276,409
37,124,340
132,453
49,800,947
898,497
107,959,166

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

125,295,213
1,175,000
614,677
3,076,409
690,099
130,851,398

250,038,701

238,810,564

17
19
18

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

44,510,870
7,510,536
20,491,974
254,998
18,172,672
90,941,050

17
8

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

31,000,000
31,000,000

TOTAL Liabilities Excluding Co-operative Shares Classified as a Liability

123,545,078

121,941,050

PLUS Co-operative Shares
Total Liabilities

72,583,474
196,128,552

75,928,670
197,869,720

Net Assets

53,910,149

40,940,844

Retained Earnings
Reserves
Equity33,025,471
20,884,678
53,910,149

27,463,442
13,477,402
40,940,844

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

75,928,670
27,463,442
13,477,402
116,869,514

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

15
19
14
13
11

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

9
12
10
8

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

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

16

For and on behalf of the Board:
SB Allen
Chairman of Directors
20 November 2017

PM Schuyt
Chairman, Finance, Audit & Risk Committee
20 November 2017

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

14

STATEMENT OF COMPREHENSIVE INCOME
For the Year Ended 31 July 2017

GROUP
Year Ended
31 July
2017($)

Year Ended
31 July
2016($)

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

289,337,045(97,679,820)(147,482,221)
44,175,004

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

1,984,558(20,010,048)(10,273,228)
15,876,286

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

4,383,272(18,188,583)(13,805,311)

7,565,347

2,070,975(2,003,318)(469,302)

Net Surplus

5,562,029

1,601,673

Other Comprehensive Income
Movement in Land Revaluation Reserve
Change in Fair Value of Cash Flow Hedges Transferred to Income Statement
Effective Portion of Changes in the Fair Value of Cashflow Hedges
Movement in Foreign Exchange Translation Reserve
Income Tax on Other Comprehensive Income

12,783,374(1,469,477)(738,730)(3,167,891)

1,292,500
23,268,298(4,328,812)
203,997(5,303,056)

Other Comprehensive Income for the Year

7,407,276

15,132,927

Total Comprehensive Income

12,969,305

16,734,600

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

3
4

6
6

Surplus before Income Taxless Income Tax (Expense)

7

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

The Tatua Co-operative Dairy Company Limited Annual Report 201715

STATEMENT OF CHANGES IN EQUITY
For the Year Ended 31 July 2017

Translation
Reserve ($)
32,783

Hedging
Reserve ($)(12,373,646)

Revaluation
Reserve ($)
10,685,338

Retained
Earnings ($)
25,861,769

Total
Equity ($)
24,206,244

203,997
203,997

13,636,430
13,636,430

1,292,500
1,292,500-

203,997
1,292,500
13,636,430
15,132,927

Tax Paid Surplus/(Deficit)
Total Comprehensive Income

203,997

13,636,430

1,292,500

1,601,673
1,601,673

1,601,673
16,734,600

Balance at 31 July 2016

236,780

1,262,784

11,977,838

27,463,442

40,940,844

Balance at 1 August 2016
Other Comprehensive Income
Movement in Foreign Exchange Reserve
Movement in Land Revaluation Reserve
Movement in Hedging Reserve, Net of Tax
Total Other Comprehensive Income

236,780

1,262,784

11,977,838

27,463,442

40,940,844(738,730)(738,730)

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

Tax Paid Surplus/(Deficit)
Total Comprehensive Income(738,730)

8,146,006-

5,562,029
5,562,029

5,562,029
12,969,305

Balance at 31 July 2017

(501,950)

9,408,790

11,977,838

33,025,471

53,910,149

GROUP
Balance at 1 August 2015
Other Comprehensive Income
Movement in Foreign Exchange Reserve
Movement in Land Revaluation Reserve
Movement in Hedging Reserve, Net of Tax
Total Other Comprehensive Income

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

16

STATEMENT OF CASH FLOWSFor the Year Ended 31 July 2017

GROUP
Year Ended
31 July
2017($)

Year Ended
31 July
2016($)

326,557,311
105,500
326,662,811

275,770,663
912
54,460275,826,035(106,297,631)(201,996,366)(3,829,358)(354,804)(312,478,159)(96,802,589)(170,074,190)(3,986,554)(3,585,106)(274,448,439)

14,184,652

1,377,596

241,261
41,973
283,234

207,788277,914
485,702(10,848,305)(5,883,194)(16,731,499)(8,164,108)(334,758)(8,498,866)(16,448,265)(8,013,164)

1,136,735
519,330
1,656,065

2,290,797
22,972,000
25,262,797(3,193,565)(3,193,565)(2,527,075)(21,000,000)(23,527,075)

Net Cash Flows From / (Applied To) Financing Activities(1,537,500)

1,735,722

Net Increase / (Decrease) in Cash & Cash Equivalents
Add: Opening Cash & Cash Equivalents Balance
Closing Cash & Cash Equivalents Balance(3,801,113)
10,726,520
6,925,407(4,899,846)
15,626,366
10,726,520

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

Net Cash Flows From/(Applied To) Operating Activities

22

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

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

16

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

15

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

The Tatua Co-operative Dairy Company Limited Annual Report 201717

NOTES TO THE
FINANCIALSTATEMENTS

18

19

1. Reporting Entity

19

2. Basis Of Preparation

20

3. Operating Revenue And Other Income

21

4. Administration Expenses

21

5. Personnel Expenses

22

6. Finance Income And Expense

22

7. Income Tax Expense

24

8. Deferred Tax Assets And Liabilities

25

9. Property, Plant & Equipment27

10. Intangible Assets

28

11. Biological Assets

28

12. Investment Property

29

13. Inventories

29

14. Receivables & Prepayments

30

15. Cash & Cash Equivalents

30

16. Members Funds

31

17. Loans & Borrowings

31

18. Accounts Payable & Accruals

32

19. Derivatives

34

20. Financial Risk Management37

21. Leases

38

22. Reconciliation Of Cash Flows From Operating Activities

38

23. Related Party Transactions

39

24. Group Entities

39

25. Subsequent Events

1. REPORTING ENTITY
The Tatua Co-operative Dairy Company Limited (the parent company) is a co-operative company domiciled and incorporated in
New Zealand, and registered under the Co-operative Companies Act 1996 and the Companies Act 1993. At 31 July 2017 the Groupconsists 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 became a FMC reporting entity in terms of the Financial Markets Conduct Act on 1 December 2016. This change had nomaterial impact on the Group’s obligation to prepare general purpose financial statements except that there is no longer a requirement
to present separate parent company financial statements.
The Group is a producer and marketer of dairy products with sales to both domestic and export markets.
These financial statements are for the year ended 31 July 2017

2. BASIS OF PREPARATION
These financial statements were approved by the Board of Directors on 20 November 2017, and have been prepared in accordancewith the New Zealand Companies Act 1993 and the Financial Reporting Act 2013.
The financial statements have been prepared on a going concern basis, and the accounting policies have been consistently applied
throughout the period.
(a)Statement of Compliance and Basis of Preparation
The financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand(NZ GAAP). They comply with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) and otherapplicable Financial Reporting Standards, as appropriate for profit oriented entities. These financial statements also comply with
International Financial Reporting Standards (IFRS).
These accounting policies have been applied consistently to all periods presented in these financial statements.

(b)

Basis of Measurement
The financial statements are prepared on the historical cost basis except for the following:••••Land and improvements are valued at fair value. Refer to Note 9Biological assets are measured at fair value less point-of-sale costs. Refer to Note 11
Investment property is measured at fair value. Refer to Note 12
Derivative financial instruments are measured at fair value. Refer to Note 19(c)Functional and Presentation Currency
The financial statements are presented in New Zealand dollars (NZD), which is the Company’s functional currency. Monetary
assets and liabilities denominated in foreign currencies at the reporting dates are retranslated to the functional currency at theexchange rate at that date. All financial information presented has been rounded to the nearest dollar.

(d)

Use of Estimates and Judgement
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect theapplication of accounting policies and the reported amounts of assets, liabilities, income, and expenses. Actual results may
differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised and in any future periods affected. In particular, information about significant areasof estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on theamount recognised in the financial statements are described in the following notes:
•
•
•

(e)

Note 9. Property, Plant & Equipment - Revaluation of Land & Improvements
Note 8. Deferred Tax Assets And Liabilities - Recognition of Deferred Tax Asset
Note 20. Financial Risk Management - Determination of fair values

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

The Tatua Co-operative Dairy Company Limited Annual Report 201719

NOTES TO THE FINANCIAL STATEMENTS

2. BASIS OF PREPARATION (CONTINUED)(f)

New Standards and Interpretations(i) New and amended standards adopted by the GroupNo new or amended standards were adopted that had a material impact on the Group’s financial statements.
(ii) New and amended standards issued but not yet effective
The Group has not early-adopted the following new and revised standards, amendments or interpretations that have been
issued but are not yet effective:(i)

NZ IFRS 15 ‘Revenue from contracts with customers’ (effective for the 2019 financial statements). This standard will replace
the current revenue recognition guidance in NZ IAS 18 Revenue and NZ IAS 11 Construction contracts and is applicable
to all entities with revenue. It sets out a 5 step model for revenue recognition to depict the transfer of promised goods orservices to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange
for those goods or services. The Group has yet to fully assess NZ IFRS 15’s full impact however it is anticipated that thechanges will not be significant.

(ii) NZ IFRS 9 `Financial instruments’ (effective for the 2019 financial statements). NZ IFRS 9 will replace IAS 39 Financial
instruments and will simplify the mixed measurement model as well as establish three primary measurement categories
for financial assets: amortised cost, fair value through other comprehensive income and fair value through financial
performance. The Group has yet to fully assess the impact of this amendment.
(iii) NZ IFRS 16 `Leases’ (effective for the 2020 financial statements).This standard will replace all existing guidance on leases,
including NZ IAS 17 Leases. The standard introduces a single, on balance sheet accounting model for leases that is similar
to current financial lease accounting. The Group has yet to fully assess NZ IFRS 16’s full impact.
There are a number of other standards and interpretations which are not yet effective and management consider they will haveno impact on the Group.

3. OPERATING REVENUE AND OTHER INCOME
GROUP

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

Operating Revenue and Other Income

2017
($)

2016
($)

327,992,294

289,337,045

3,680
97,00038,781
79,234
244,684
1,013,326
1,476,705

31,649108,000
38,14884,769280,491
1,441,501
1,984,558

329,468,999

291,321,603

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

20

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

4. ADMINISTRATION EXPENSES
GROUP
2017
($)

2016
($)

Auditors Remuneration (KPMG)
Audit of Financial Statements
Other Services

129,851
28,500127,022-

Directors’ Fees
Directors’ Expenses

472,000
4,383

463,000
5,441

The following items are included in administration expenses:

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

5. PERSONNEL EXPENSES
GROUP

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

2017
($)

2016
($)

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

34,661,261
3,331,299
581,851
38,574,411

Personnel expenses are included in cost of sales, sales & marketing expenses and administration expenses.
PolicyEmployee Benefits• Defined Contribution Plans
Obligations for contributions to defined contribution pension plans are recognised as an expense in profit or loss when they are due.
•Short-term Benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service isprovided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to
pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

The Tatua Co-operative Dairy Company Limited Annual Report 201721

NOTES TO THE FINANCIAL STATEMENTS

6. FINANCE INCOME AND EXPENSE
GROUP
2017
($)

2016
($)

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

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

54,4604,328,812
4,383,272

Net Foreign Exchange Loss
Financial Overheads
Net Change in Fair Value of Derivatives
Interest Expense on External Borrowings
Total Finance Expenses(30,657)(3,829,358)(3,860,015)(14,165,286)(36,743)(3,986,554)(18,188,583)

Net Finance Income/(Expenses)

1,459,568(13,805,311)

Policy(a)Finance Income and Expenses
Interest income is recognised as it accrues, using the effective interest method.
All borrowing costs are recognised in profit or loss using the effective interest method, except for those that are directly
attributable to the acquisition, construction or production of a qualifying asset, in which case they are capitalised as part of thecost of that asset.
(b)Foreign Currency Transactions
Transactions in foreign currencies are translated to NZD at exchange rates at the dates of the transactions. Foreign currency
differences arising on translation are recognised in profit or loss.

7. INCOME TAX EXPENSE
GROUP

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

Total Income Tax Expense

22

2017
($)

2016
($)

1,222,019(96,584)
1,125,435

918,841(203,043)
715,798

780,612
97,271
877,883(287,845)
41,349(246,496)

2,003,318

469,302

7. INCOME TAX EXPENSE (CONTINUED)
GROUP
2017
(%)

GROUP
2017
($)

2016
(%)

2016
($)

Reconciliation of Effective Tax Rate
Profit for the Period
Total Income Tax Expense
Profit Excluding Income Tax
Income Tax Using the Group’s Domestic Tax Rate
Impact of Tax Rate in Foreign Countries
Tax Exempt Income
Non-deductible Expenses
Tax Credits Converted to Losses
Under/(Over) Provided in Prior Periods

5,562,029
2,003,318
7,565,347
28.0%(0.2%)(0.2%)(1.1%)(0.0%)
0.0%
26.5%

2,118,298(18,740)(16,800)(80,033)(92)
685
2,003,318

1,601,673
469,3022,070,975
28.0%
2.8%
0.0%
(0.3%)(0.0%)(7.8%)
22.7%

579,874
57,123(5,745)(255)(161,695)
469,302

GROUP
2017
($)

2016
($)

Derivatives(3,167,891)(5,303,056)

Total Income Tax Recognised Directly in Other Comprehensive Income(3,167,891)(5,303,056)

Income Tax Recognised Directly in Other Comprehensive Income

GROUP
2017
($)

2016
($)

22,620,804

22,003,716

Imputation Credits
Imputation Credits Available for use in Subsequent Reporting Periods

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

The Tatua Co-operative Dairy Company Limited Annual Report 201723

NOTES TO THE FINANCIAL STATEMENTS

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

Liabilities

Net

2017
($)

2016
($)

2017
($)

2016
($)

2017
($)

2016
($)

1,195,703
443,907
1,134,750
2,774,360

885,688
1,243,159
1,514,925
4,734
3,648,506(81,014)(3,658,974)(3,736)(3,743,724)(81,014)(491,083)(572,097)

1,195,703(81,014)(3,658,974)
443,907
1,134,750(3,736)(969,365)

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

Movement in Temporary Differences During The Year

Deferred tax assets
and liabilities are
attributable to thefollowing:
Property, Plant andEquipment
Investment Property
Derivatives
Inventory
Provisions & Accruals
Other Items
Tax Assets /(Liabilities)

Balance1 August
2015($)

Recognised
in Profit or
Loss
($)

Recognisedin Other
Comprehensive
Income($)

Balance31 July
2016($)

Recognised
in Profit or
Loss
($)

822,951(81,014)
4,811,973
1,065,526
1,516,010(2,477)
8,132,969

62,737
177,633(1,085)
7,211
246,496(5,303,056)(5,303,056)

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

310,015

Recognisedin Other
Comprehensive
Income($)(3,167,891)(799,252)(380,175)(8,470)(877,882)(3,167,891)

Balance31 July
2017($)

1,195,703(81,014)(3,658,974)
443,907
1,134,750(3,736)(969,365)

PolicyDeferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which
temporary differences can be utilised based on the ability of the company to record taxable profits through retentions or through thereclassification 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.

24

9. PROPERTY, PLANT & EQUIPMENTGROUP
Cost or Deemed Cost
Balance at 1 August 2015
Additions
Revaluation of Land &Improvements to Fair Value
Disposals
Balance at 31 July 2016
Balance at 1 August 2016
Additions
Revaluation of Land &Improvements to Fair Value
Disposals
Effect of Movement in
Exchange Rates
Balance at 31 July 2017
Depreciation andImpairment Losses
Balance at 1 August 2015
Depreciation
Disposals
Balance at 31 July 2016
Balance at 1 August 2016
Depreciation
Disposals
Effect of Movement in
Exchange Rates
Balance at 31 July 2017
Carrying Amounts
At 1 August 2015
At 31 July 2016
At 1 August 2016
At 31 July 2017Land &
Improvements($)

Buildings($)

Plant &
Equipment($)

Vehicles($)

Capital WorkIn Progress
($)

Total
($)

15,964,348
1,851,378

28,625,982
21,058,912

121,731,140
44,816,323

3,441,354
594,183

67,116,150(60,157,073)

236,878,974
8,163,723

1,292,500
19,108,226

49,684,894(13,774)
166,533,689(365,281)
3,670,256

6,959,077

1,292,500(379,055)
245,956,142

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

166,533,689
3,841,310

3,670,256
102,251

6,959,077
6,718,996

245,956,142
10,922,953-(20,014)(701,691)(471,084)-(1,192,789)

19,190,661

49,842,841

169,673,308

3,301,423

13,678,073

255,686,306

1,025,544
205,542
1,231,086

12,039,677
1,316,042
13,355,719

93,934,958
9,268,924(803)
103,203,079

2,851,658
200,440(181,053)
2,871,045-

109,851,837
10,990,948(181,856)
120,660,929

1,231,086
177,496-

13,355,719
1,294,974(17,659)

103,203,079
9,574,372(618,733)

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

120,660,929
11,230,708(935,653)

1,408,582

14,633,034

112,158,718

2,755,650-

130,955,984

14,938,804
17,877,140
17,877,140
17,782,079

16,586,305
36,329,175
36,329,175
35,209,807

27,796,182
63,330,610
63,330,610
57,514,590

589,696799,211799,211545,773

67,116,150
6,959,077
6,959,077
13,678,073

127,027,137
125,295,213
125,295,213
124,730,322

Policy(a)
Recognition and Measurement for Assets at Cost
Items of property, plant and equipment (except land and improvements) are measured at cost less accumulated depreciationand impairment losses. Purchased software that is integral to the functionality of the related equipment is capitalised as part ofthat 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 (2016: nil).
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items(major components) of property, plant and equipment.
(b)

Depreciation
Depreciation is recognised in profit and loss on a straight line basis over the estimated useful lives of the items of plant,
property and equipment. Land is not depreciated. Depreciation is recognised as part of other cost of sales in the Profit or Loss.
Depreciation methods, useful lives and residual values are reassessed at the reporting date.
The Group has established the following useful lives:••••

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

The Tatua Co-operative Dairy Company Limited Annual Report 201725

NOTES TO THE FINANCIAL STATEMENTS

9. PROPERTY, PLANT & EQUIPMENT (CONTINUED)(c)

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

(d)

Recognition and Measurement for Assets at Fair Value
Land and improvements are stated at their fair value. The fair value of land within property, plant and equipment is based onmarket values determined by an independent valuer.
The last revaluation was undertaken as at 31 July 2016 by Fergusson Lockwood and Associates Ltd, independent registeredvaluers. The land and improvements were valued at $15.374m, an increase of $1.292m from the 2015 year. The valuation
established a market value and was undertaken in accordance with the Property Institute of New Zealand (PINZ) International
Valuation Standards. Market value is the estimated amount for which a property should exchange on the date of valuation
between a willing buyer and a willing seller in an arms length transaction.
The value of the land and improvements at cost is $5,305,121 (2016: $5,282,686).
Any gain on remeasurement is recognised in other comprehensive income and held in equity, any loss is recognised in profit andloss, unless there is a credit balance existing in the revaluation surplus.
The Board determined that a third party valuation of land and improvements as at 31 July 2017 was not required. This was after
performing an analysis on current industry data which demonstrated that land prices had not changed materially. Therefore thecurrent value of land and land improvements approximated fair value.

Capital Commitments
During the period ended 31 July 2017, the Group entered into contracts to purchase plant and equipment. The balance outstanding atbalance date is $4,284,506 (2016: $3,057,840). These commitments are expected to be settled in the following financial year.

26

10. INTANGIBLE ASSETS
GROUP
Software($)
Cost
Balance at 1 August 2015
Additions
Disposals
Balance at 31 July 2016

2,524,728
334,758
2,859,486

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

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

Amortisation and Impairment Losses
Balance at 1 August 2015
Amortisation for the Year
Disposals
Balance at 31 July 2016

2,040,106
204,7032,244,809

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

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

Carrying Amounts
At 1 August 2015
At 31 July 2016

484,622614,677

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

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

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

Software – 2.5 to 5 years
Resource Consent – 15 years

The Tatua Co-operative Dairy Company Limited Annual Report 201727

NOTES TO THE FINANCIAL STATEMENTS

11. BIOLOGICAL ASSETS
GROUP
2017
($)

2016
($)

Balance at 1 August
Increase due to Acquisitions
Decrease due to Sales
Net Increase due to Births/(Deaths)
Change in Fair Value due to Class Movements
Change in Fair Value less Estimated Point-of-sale Costs
Balance at 31 July

898,497
27,500(747,360)
3,625(25,350)(19,787)
137,125

890,835
33,570(205,190)(6,667)
156,813
29,136
898,497

Non-current
Current

137,125
137,125

898,497
898,497

As at 31 July 2017, livestock held comprised 143 cows, heifers and calves (2016: 760). This livestock is farmed on Tatua’s dairy farm.
Milk production from this farm was 163,113 kilograms milksolids (2016: 180,093).
The Group is exposed to a number of risks related to its livestock:
The Group’s livestock and related milk production is exposed to the risk of damage from climatic changes, diseases and other naturalforces. The Group has standard animal husbandry processes in place aimed at monitoring and mitigating those risks.
Livestock is categorised within level 2 of the fair value hierarchy.
PolicyBiological assets are measured at fair value less point-of-sale costs, with any change therein recognised in profit or loss. Point-ofsale costs include all costs that would be necessary to sell the assets. An independent valuation is used to obtain the fair value ofthese assets. The fair value of livestock is based on the market price of livestock of similar age, breed and genetic make-up, and isdetermined by NZ Farmers Livestock Ltd.

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

2017
($)

2016
($)

1,175,000
1,175,000

1,175,000
1,175,000

PolicyInvestment property is held either to earn rental income or for capital appreciation or for both. Investment property is measured at fairvalue with any change therein recognised in profit or loss.
Investment property comprises the AgCentral land and buildings that are leased to PGG Wrightsons Ltd. The lease was renegotiatedin 2017 for a further three year term ending on 31st March 2020.
The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of thevaluation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each
acted knowledgeably, prudently and without compulsion.
The Investment Property was valued on 31 July 2017 by management. There was no material change in fair value.
Investment property is categorised within level 2 of the fair value hierarchy.

28

13. INVENTORIESGROUP

Finished Goods
Raw Materials

2017
($)

2016
($)

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

38,190,705
11,610,242
49,800,947

PolicyInventories are measured at the lower of cost or net realisable value. The cost of inventories is based on weighted average cost,and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In the caseof manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal
operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs ofcompletion and selling expenses. Shareholder supplied milk included within inventories is valued at the price determined under the
Dairy Industry Restructuring Act 2001 (DIRA) .
Impairment
Inventories are reviewed for impairment based on their age and/or condition. If any impairment exists the asset is written down to its
net realisable value (if any).
There was a write down of $421,569 during the period (2016: $0) relating to inventory that had a net realisable value less than its costof manufacture.

GROUP

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

2017

2016

5,612,525-

14. RECEIVABLES & PREPAYMENTS
GROUP

Trade Receivables
Prepayments and Sundries

2017
($)

2016
($)

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

34,890,721
2,233,619
37,124,340

EUR(€)
126,400
40,000CNY(¥)
32,847,405
21,318,928

GROUP
Trade Receivables Denominated in
Foreign Currencies
2017
2016

USD
($)
12,391,795
7,554,540

AUD($)
3,819,245
2,345,935

JPY(¥)
738,528,619
1,012,885,408

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

The Tatua Co-operative Dairy Company Limited Annual Report 201729

NOTES TO THE FINANCIAL STATEMENTS

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

GROUP
2017
($)

2016
($)

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

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

1,897,297
639,1437,504,869
685,211
10,726,520-

Cash and Cash Equivalents in the Statement of Cash Flows

6,925,407

10,726,520

16. MEMBERS FUNDS
Voting Rights – Under the Company Constitution, voting may take place by show of hands, voice or poll. On a poll, one vote may becast for every whole 1,000kg of qualifying milksolids supplied. No shareholder shall cast votes exceeding 5% of the total votes which
could be cast if all shareholders were present and voting.
Redemption Features – Shares are redeemed at nominal value of 50 cents, or paid up value if lower.
PolicyShares in the co-operative are held in proportion to the current or expected milk supply. The share standard is ten 50 cent shares forevery kilogram of qualifying milksolids. Shares are issued or redeemed annually to ensure compliance with the share standard. Due totheir redemption nature, shares are classified as a liability in the balance sheet. When the group performs a bonus share issue, withnew shares issued at the same rate as existing shares, retained earnings is decreased to match the increase in co-operative shares.
Movements in the Company’s Issued Shares were as follows:

Shares at the beginning of the Year
Shares Issued
Shares Repurchased
Fully Paid Shares at the end of the Year
Treasury Stock

Shares

2017($)

Shares2016($)

151,837,339
2,273,470(8,963,862)
145,146,947

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

152,309,895
4,581,594(5,054,150)
151,837,339

76,154,948
2,290,797(2,527,075)
75,918,670

7,162,948

472,556

Reserves
Translation Reserve
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign
operations.
Hedging Reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments
related to hedged transactions that have not yet occurred.
Revaluation Reserve
The revaluation reserve relates to the revaluation of land and improvements.
Retained Earnings
All retained earnings are attributable to equity holders of the Company.

30

17. LOANS & BORROWINGSInterest-bearing borrowings are classified as other non-derivative financial liabilities and are measured at amortised cost using theeffective interest rate.

GROUP

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

2017
Current Bank Loans

2016
($)

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

9,510,870
35,000,000
44,510,870

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

31,000,000
31,000,000
75,510,870

Currency
JPY
NZD

NominalInterest Rate
1.11%
3.3%

Year ofMaturity
2018
2018

Face Value¥510,000,000$3,900,000

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

NZD
NZD

2.72%
2.97%

2019
2020

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

Currency
JPY
NZD

NominalInterest Rate
1.00%
3.12%

Year ofMaturity
2017
2017

Face Value¥700,000,000$35,000,000

Carrying
Amount (NZD)$9,510,870$35,000,000

NZD

4.33%

2019

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

Non Current Bank Loans

2016
Current Bank Loans

2017
($)

Non Current Bank Loans

The Group’s bank loans are secured by registered first mortgages, preferred security interest in all present and after acquired property,
and an interlocking guarantee from companies within the Group. The Group’s borrowings are subject to various covenants such as
minimum equity, interest cover ratio and gearing ratio and the Group was in compliance with the various covenants.
The Group has committed (but undrawn) facilities with expiry dates through to 2020 of NZD $35.1 million, JPY ¥200 million.

18 ACCOUNTS PAYABLE & ACCRUALS
GROUP

Trade Payables
Employee Entitlements
Income in AdvanceAccruals

2017
($)

2016
($)

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

5,495,816
5,913,446
381,0168,701,696
20,491,974

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

The Tatua Co-operative Dairy Company Limited Annual Report 201731

NOTES TO THE FINANCIAL STATEMENTS

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

GROUP
2017
($)

2016
($)

Notional Contract Amount

47,000,000

54,000,000

Fair Value
AssetsLiabilities
Net Fair Value(1,175,295)(1,175,295)(2,163,434)(2,163,434)

Interest Rate Swaps

2017
Interest Rate Hedges

Less than
12 Months
15,000,000

More than
12 Months
32,000,000

Total
47,000,000

2016
Interest Rate Hedges

Less than
12 Months
12,000,000

More than
12 Months
42,000,000

Total
54,000,000

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

More than
12 Months

Total

Buy
Sell

106,779,711-

28,801,887-

135,581,598
-

Call
Put

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

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

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

Less than
12 Months

More than
12 Months

Total

Buy
Sell

123,631,025-

47,428,214-

171,059,239
-

Call
Put

34,312,034(36,896,519)

12,763,903(13,853,081)

47,075,937(50,749,600)

2017
($)

2016
($)

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

9,276,409(5,347,102)
3,929,3072017
Foreign Exchange Contracts:

Option Contracts:

2016
Foreign Exchange Contracts:

Option Contracts:

Fair Value
AssetsLiabilities
Net Fair Value32

19 DERIVATIVES (CONTINUED)
Interest Rates Used for Determining Fair ValueThe Group uses the government yield curve as of 31 July 2017 plus an appropriate credit spread to discount financial instruments.
The interest rates for determining fair values are as described in note 17.
PolicyDerivatives are recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to theirfair value at each balance sheet date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative isdesignated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of
the hedge relationship.
The groups derivatives are classified as being within Level 2 of the fair value hierachy. The fair value of forward exchange and option
contracts is determined using forward exchange rates at balance sheet date, with the resulting value discounted back to present
value. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable
yield curves.
Hedge Accounting
All derivatives are classified as cash flow hedges.
The effective portion of changes in the fair value of the hedging instruments are recognised in other comprehensive income.
The following are recognised in profit or loss:••

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

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

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

GROUP
2017
Derivative Financial Assets
Derivative Financial Liabilities
2016
Derivative Financial Assets
Derivative Financial Liabilities

Financial
Assets /(Liabilities)
Presented

Amounts
Not Offset

Net

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

14,549,244
14,549,244

9,276,409(7,510,536)
1,765,873(7,510,536)
7,510,536-

1,765,873
1,765,873

The Tatua Co-operative Dairy Company Limited Annual Report 201733

NOTES TO THE FINANCIAL STATEMENTS

20 FINANCIAL RISK MANAGEMENT
Capital Management
The Group’s members funds includes co-operative shares, reserves and retained earnings. The Group’s policy is to maintain astrong members funds base so as to maintain shareholder, creditor and market confidence and to sustain future development of thebusiness.
The Group’s objective is to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital.
The Group distributes its surplus by way of payout. However, in order to retain or modify the capital structure, the Group may decideto retain profits within the business.
The Board primarily monitors capital on the basis of the gearing ratio. For the period ending 31 July 2017 the gearing ratio was 35%(2016: 36%). This ratio is calculated as net interest bearing debt divided by total capital. Net interest bearing debt is calculated as totalborrowings less cash and cash equivalents. Total capital 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 to Note 16. The Group is required
to meet certain ratios under its bank covenants, which have been met, including a requirement that Group members funds be not lessthan $70,000,000 (2016:$70,000,000), but otherwise the Group is not subject to any externally imposed capital requirements.
There have been no material changes in the Group’s management of capital during the period.
Quantitative Disclosures
Exposure to credit, liquidity, foreign currency and interest rate risks arises in the normal course of the Group’s business.
(a)Credit Risk
The Group’s exposure to credit risk is mainly influenced by its customer base. There is no risk concentration either
geographically or by sector.
Tatua has a credit policy under which each customer is assessed for credit worthiness and assigned a credit limit. Whereavailable the Group reviews external credit reports for both country and customer risk. Credit limits are reviewed on a regularbasis. The Group’s credit policy requires certain risk mitigations such as insurance, letters of credit or prepayment depending on
the country and/or customer.
The Group does not require collateral for trade and other receivables. However, where practicable, purchase money security
interests over New Zealand-based customers are registered on the Personal Property and Securities Register.
The carrying amount of financial assets represents the Group’s maximum credit exposure. The Group has not renegotiated theterms of any financial assets which would result in the carrying amount no longer being past due or avoid a possible past due
status. The Group’s maximum exposure to credit risk for trade and other receivables, by geographic region, is as follows:

GROUP

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

Carrying
Amount2017($)

Carrying
Amount2016($)

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

7,190,275
21,144,827
6,011,619
544,000
34,890,721

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

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

34

Gross
Receivable
2017
($)

Impairment
2017
($)

Gross
Receivable
2016
($)

Impairment
2016
($)

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

33,679,175
1,092,800
118,746
34,890,721-

20 FINANCIAL RISK MANAGEMENT (CONTINUED)(b)

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

GROUP
Loans & Borrowings(note 17 )Accounts Payable &Accruals (note 18)
Owing to Suppliers
Co-operative Shares
Total Non-derivative
Liabilities

GROUP
Loans & Borrowings(note 17)
Accounts Payable &Accruals (note 18)
Owing to Suppliers
Co-operative Shares
Total Non-derivative
Liabilities

2017
Balance Sheet($)

ContractualCash Flows($)

Less than
6 Months($)

6-12
Months
($)

1-2
Years
($)

More Than
2 Years($)

76,030,200

76,030,200-

10,030,200

31,000,000

35,000,000

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

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

23,970,221
19,404,831-

72,583,474--

191,988,726

191,988,726

43,375,052

82,613,674

31,000,000

35,000,000

2016
Balance Sheet($)

ContractualCash Flows($)

Less than
6 Months($)

6-12
Months
($)

1-2
Years
($)

More Than
2 Years($)

75,510,870

75,510,870

2,717,392

41,793,478-

31,000,000

20,491,974
18,172,672
75,928,670

20,491,974
18,172,672
75,928,670

20,491,974
18,172,672-

75,928,670--

190,104,186

190,104,186

41,382,038

117,722,148-

31,000,000

The Tatua Co-operative Dairy Company Limited Annual Report 201735

NOTES TO THE FINANCIAL STATEMENTS

20 FINANCIAL RISK MANAGEMENT (CONTINUED)(c)

Foreign Currency Exchange Risk
The Group is exposed to foreign currency risk predominantly on sales that are denominated in a currency other than the Group’sfunctional currency. The New Zealand dollar ($) is the presentation currency of the Group. The currencies in which transactions
are primarily denominated are United States dollars, Japanese Yen and Australian dollars.
The Group has a policy of maintaining a level of foreign currency hedging that allows for a degree of certainty in its future cash
flows and to help protect it against sudden increases in the value of the New Zealand dollar against the United States dollar,
Japanese yen and Australian dollar.
The Group uses forward exchange contracts and currency options to hedge its foreign currency exposure. All of the forward
exchange contracts and options have maturities of less than two years at balance date.
The Group classifies its forward exchange and option contracts, which are hedging forecast transactions, as cash flow hedges.
The Group’s exposure to foreign currency risk can be summarised as follows:

(d)

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

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

AUD
JPY
($)
(¥)
20,300,000 3,953,000,000(9,000,000) (3,100,000,000)

Net Unhedged Exposure

51,600,000

11,300,000

2016
Net Cash Flow Exposure Before Hedging
less Foreign Exchange Contracts and Options (next 12 months)

USD($)
106,500,000(75,000,000)

AUD
JPY
($)
(¥)
20,600,000 3,612,000,000(10,000,000) (2,900,000,000)

Net Unhedged Exposure

31,500,000

10,600,000

853,000,000

712,000,000

Interest Rate Risk – Repricing Analysis
Interest rate risk is the risk that the value of the Group’s assets and liabilities will fluctuate due to changes in market interest
rates. The Group is exposed to interest rate risk primarily through its cash balances and advances, bank overdraft andborrowings. Interest rate swaps have been entered into to achieve an appropriate mix of fixed and floating rate exposure within
the Group’s policy.
Variable Rate Instruments (also refer note 17).

36

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

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

2016
Cash and Cash Equivalents
NZD Bank Loans
JPY Bank Loans
Total

Total
($)
10,726,520(66,000,000)(9,510,870)(64,784,350)

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

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

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

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

6 Months
or Less($)
10,726,520(2,717,392)
8,009,128

6-12Months($)(35,000,000)(6,793,478)(41,793,478)

1-2
Years
($)
-

More Than
2 Years($)(31,000,000)(31,000,000)

20 FINANCIAL RISK MANAGEMENT (CONTINUED)(e)

Sensitivity Analysis
In managing interest rate and currency risks the Group aims to reduce the impact of short-term fluctuations on the Group’s
earnings. Over the longer-term, however, permanent changes in foreign exchange and interest rates will have an impact on
profit.
Interest Rates:
At 31 July it is estimated that a general increase of one percentage point in NZ interest rates would decrease Group profit before
income tax by approximately $503,000 (2016: $548,000). Interest rate swaps have been included in this calculation.
Foreign Exchange Rates:
The Group has a foreign exchange policy to mitigate the risk associated with the fluctuations in the value of the New Zealand
Dollar. At 31 July it is estimated that a general increase of one cent in the NZD/USD exchange rate would decrease the Group’s
profit by $2,273,000 (2016: $695,000). Foreign exchange hedging has been included in this calculation.

21 LEASES
Operating Leases
Leases As Lessor
The Group leases out its investment property held under an operating lease. The future minimum lease payments under noncancellable leases are as follows:

GROUP

Less Than 1 Year1 – 5 Years
More Than 5 Years

2017
($)

2016
($)

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

During the year ended 31 July 2017, $135,781 was recognised as rental income in the income statement (2016: $146,148). Repairs
and maintenance expenses, recognised in the cost of sales, was as follows:

GROUP

Income Generating Property

Year Ended
31 July 2017

Year Ended
31 July 2016

7,407

14,404The Tatua Co-operative Dairy Company Limited Annual Report 201737

NOTES TO THE FINANCIAL STATEMENTS

22 RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIESGROUP
31 July 201731 July 2016

5,562,029

1,601,673

11,230,708
261,405
4,045,774
41,97314,012
21,155,901

10,990,948
204,703
5,056,560(7,662)
17,846,222(6,293,945)(7,520,091)(5,263,280)(38,070)
747,375
1,232,159
4,146,454(12,989,398)(1,599,258)(8,477,847)(14,790,450)
980,138
877,231(7,166,079)(30,176,265)

Items Classified as Investing / Financing Activities

6,018,149

13,707,639

Net Cash Flows From/(Applied to) Operating Activities

14,184,652

1,377,596

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

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

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

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

GROUP

Key management personnel compensation
Short Term Employee Benefits
Long Term Employee Benefits

Year Ended
31 July 2017

Year Ended
31 July 2016

1,875,507-

1,923,639-

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 (2016: Nil).
Transactions and Balances with Other Related Parties
Elected directors conduct business with the Group in the normal course of their business activities.
The Group has paid directors fees of $473,000 (2016: $463,000) which is separately disclosed within the director's report.
The following entities are considered related parties because they have common directors:
•
•
•

38

Tax Management NZ Ltd (Peter Schuyt) – During the year the group utilised the services of Tax Management Limited to make tax
payments through to the IRD in the ordinary course of business.
Foodstuffs North Island Ltd (Peter Schuyt) – Sales during the year (GST exclusive) $1,532,077 (2016: $1,405,694), Receivable atyear end (GST inclusive) $252,107 (2016:$206,022).
RML Engineering Ltd (Ross Townshend) – Amounts paid during the year (GST inclusive) $13,388 (2016: $5,239), Payable at year
end (GST inclusive) $25,058 (2016:$Nil).

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

Directors’ Farm Supply(including Owing to Suppliers)

Value ofTransactions
16/17

Balance
Outstanding
31 July 2017

Value ofTransactions
15/16

Balance
Outstanding
31 July 2016

6,908,412

1,071,293

6,911,808

1,205,667

24 GROUP ENTITIESCountry Of
Incorporation
2017

2016

Japan
USA
China

100%
100%
100%

100%
100%
100%

New Zealand

10%

10%

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

Ownership
Interest

Policy(a)Basis of Consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power over the entity, exposure or
rights to variable returns from its involvement with the entity, and the ability to use its power over the entity to affect the amountof the entity’s return. In assessing control, potential voting rights are only considered if the rights are substantive. The financial
statements of subsidiaries are included in the consolidated financial statements from the date that control commences until thedate that control ceases.
Equity Accounted Investees (Joint Ventures)
Joint ventures are those arrangements in which the Group has contractually agreed to share control and where the Group hasrights to the net assets rather than rights to the assets and obligations for the liabilities. Joint ventures are initially recognised atcost (including any goodwill identified on acquisition). Subsequent to initial recognition they are accounted for using the equity
method in the consolidated financial statements.
The consolidated financial statements include the Group’s share of the profit or loss after tax of joint ventures after adjustments
to align the accounting policies of the Group, from the date that significant influence or joint control commences until the datethat significant influence or joint control ceases.
Transactions Eliminated on Consolidation
Intra-group balances, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing
the consolidated financial statements.
(a)(b) Foreign Currency
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated
to New Zealand dollars at exchange rates at the reporting date. The income and expenses of foreign operations are translated
to New Zealand dollars at exchange rates at the dates of the transactions.
Foreign currency differences are recognised in the foreign currency translation reserve (FCTR). When a foreign operation is
disposed of, in part or in full, the relevant amount in the FCTR is transferred to profit or loss as part of the gain or loss on disposal.

25 SUBSEQUENT EVENTS
There were no material events subsequent to 31 July 2017 that would impact these financial statements.

The Tatua Co-operative Dairy Company Limited Annual Report 2017

39

INDEPENDENT AUDITOR'S REPORTTO THE SHAREHOLDERS OF THE TATUA CO-OPERATIVE DAIRY COMPANY LIMITED
Report on the consolidated financial statements

OpinionIn our opinion, the accompanying consolidated financial
statements of The Tatua Co-operative Dairy Company Limited(the company) and its subsidiaries (the group) on pages 14 to 39:
i. present fairly in all material respects the Group’s financial
position as at 31 July 2017 and its financial performanceand cash flows for the year ended on that date; andii. comply with New Zealand Equivalents to International
Financial Reporting Standards and International Financial
Reporting Standards.

We have audited the accompanying consolidated financial
statements which comprise:• the consolidated balance sheet as at 31 July 2017;• the consolidated statements of comprehensive income,changes in equity and cash flows for the year then ended;and• notes, including a summary of significant accounting
policies and other explanatory information.

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the group in accordance with Professional and Ethical Standard 1 (Revised) Code of Ethics for Assurance
Practitioners issued by the New Zealand Auditing and Assurance Standards Board and the International Ethics Standards Board for
Accountants’ Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the IESBA Code.
Our responsibilities under ISAs (NZ) are further described in the auditor’s responsibilities for the audit of the consolidated financial statements
section of our report.
Our firm has also provided other services to the group in relation to transfer pricing assistance and a share registry audit. 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 activitiesof the business of the group. These matters have not impaired our independence as auditor of the group. The firm has no other relationshipwith, or interest in, the group.
Other information
The Directors, on behalf of the group, are responsible for the other information included in the entity’s Annual Report. Other information
includes the Chairman and Chief Executive Officer’s report, Key Financial performance Summary and Statutory Information. Our opinion
on the consolidated financial statements does not cover any other information and we do not express any form of assurance conclusion
thereon.
In connection with our audit of the consolidated financial statements our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtainedin the audit or otherwise appears materially misstated. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Use of this independent auditor’s report
This 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 report, or any of
the opinions we have formed.

40

Responsibilities of the Directors for the consolidated financial statements
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) and International Financial
Reporting Standards;
implementing necessary internal control to enable the preparation of a consolidated set of financial statements that is fairly presented
and free from material misstatement, whether due to fraud or error; andassessing 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 to cease operations, or have no realistic
alternative but to do so.

Auditor’s responsibilities for the audit of the consolidated financial statements
Our objective is:••

to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement,
whether due to fraud or error; andto 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 accordance with 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:https://www.xrb.govt.nz/Site/Auditing_Assurance_Standards/Current_Standards/Page5.aspx.
This description forms part of our independent auditor’s report.
The engagement partner on the audit resulting in this independent auditor’s report is Trevor Newland.
For and on behalf of

KPMG
Hamilton
20 November 2017

The Tatua Co-operative Dairy Company Limited Annual Report 201741

STATISTICS
2016/172015/16

2014/15

2013/142012/13

166,517,809
14,968,366

173,184,398
15,568,586

173,353,171
15,663,949

147,647,758
13,223,427

140,723,652
12,523,609

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

710.0
-

630.0
-

710.0
-

900.0
-

740.0
-

Total Income Equivalent Payout

710.0

630.0

710.0

900.0

740.0

Cents / kg
Fat

2016/17
Cents / kg
ProteinCents / kg
Fat

2015/16
Cents / kg
Protein

252.0
27.0
19.0
16.0
16.0
22.0
22.0
22.0
22.0
25.2675

600.0
64.0
46.0
38.0
38.0
53.0
52.0
52.0
53.0
59.3988

260.0
9.0
7.0
6.0
19.0
19.0
18.0
19.0
30.5925

635.0
22.0
16.0
16.0
45.0
45.0
46.0
45.0
75.3475

443.268

1,055.399

387.593945.348

Milk Received from Suppliers
LitresMilksolids

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

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

PROGRESSYear

42

No. ofSuppliers

Milksolids
From own
Supply(Kg)

PayoutCents/kg ms(IncomeEquivalent)

Total
Shareholders
Funds$

Commodity Products(tonnes)Proteins

Powders

CheeseAMF

2016/17113
14,968,366
710.0
126,493,623
9,018
2015/16113
15,568,586
630.0
116,869,514
9,645
2014/15118
15,663,949
710.0
100,371,192
9,654
2013/14109
13,223,427
900.0
106,167,944
7,408
2012/13108
12,523,609
740.0
87,044,650
7,168
2011/12109
13,186,565
750.0
76,825,363
8,037
2010/11111
12,041,622
810.0
75,438,331
6,715
2005/06
121
12,237,952
459.1
50,988,615
6,718
2000/01
136
8,908,866
552.3
25,376,429
8,000
1995/96146
7,989,118
418.7
15,082,806
7,863
1990/91130
6,382,505
261.7
11,604,650
2,705
1985/86
104
5,013,554
241.4
5,611,760
1,753
1980/8187
3,618,763
155.2
1,738,208
971
761
1975/7674
2,938,277
81.3
752,270
1,144
1,275
1970/7170
2,182,343
48.9
275,015
1,005
609
1965/6670
1,926,323
47.0
232,534926
1960/6162
1,314,518
40.6
157,920474
1955/56
56
1,038,843
42.5
111,051
347
1950/5149
916,178
36.1
84,624318
1945/4643
613,418
24.2
40,832885
1940/4145
752,929
19.4
37,342
1,112
1935/3646
763,155
14.3
32,113
1,110
1930/3149
697,178
12.4
29,788
1,024
1925/2651
324,125
20.3
23,213846
Note: For the seasons to 1985/86 milkfat has been converted to “milksolids” using a factor of 1 kg milkfat = 1.74 kg milksolids

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

DIRECTORY

Registered Office3434 State Highway 26
TatuanuiMorrinsville 3374
NEW ZEALAND

Postal Address

Private Bag 800
Morrinsville 3340
NEW ZEALAND

Telephone
Website Address+64 7 889 3999
tatua.com

Chairman

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

Directors

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

Chief Executive Officer

BA Greaney, B.M.S.

General Manager Marketing & Sales

JT Powell, B.Sc., Dip. Dairy Sci. & Tech.

Acting General Manager Operations

G Russell, B.Soc.Sci

General Manager Finance & Corporate Administration
Commercial and Technology Development Manager

CJ Foster, B.M.S., C.A., Grad.Dip. Treas. & Fin. Mgmt.
Tim WinterHuman Resources Manager

Pier Pilkington, B.Soc.Sci

Supplier Services Manager

Paul van Boheemen, B.Sc., PG. Dip. Bus. Admin.

Company Secretary

JI Houghting

Auditors

KPMG (Hamilton)

Solicitors

Harkness Henry & Co

Bankers

Bank of New Zealand Ltd

Insurance Brokers

Willis Towers Watson Ltd

tatua.com