Tatua beats Fonterra again

Fonterra's payout was $8.50/kgMS including a 10c dividend. Tatua, with 109 suppliers, achieved a group operating revenue of $266 million and earnings before tax of $136.4 million in 2013/14. This equates to earnings of $10.32/kgMS prior to retentions and taxation.

The board decided that payout for the 2013/14 season would be $9kg/MS to its suppliers and in addition declared a pre-tax retention of 132c per kilogram of milksolids. This retention will ensure the company retains the financial strength necessary to invest in new plant and equipment to support its strategy of growing its specialised added value business, the company says in a statement.

This is a record result for Tatua in its 100th year of operation.

Prices for our bulk ingredient products were elevated in the first half of the year but came under more pressure as dairy commodity prices began retreating quickly from February 2014.

Tatua is investing in a new specialised powders dryer approved by shareholders at the 2013 annual general meeting. Construction has started, with an expected cost for the dryer of $65.5 million. This is a significant project for the company and will be defining for Tatua for many years to come. The dryer is on-time and on-budget for commissioning in April 2015.

The company's gearing ratio (of debt divided by debt plus equity) improved to 25% from 28% at the end of the previous year.

Foreign exchange management continued to be a challenge with the New Zealand dollar remaining elevated throughout the year, the company says. Foreign exchange hedging policies have mitigated the impact of this.

Milk supply from Tatua Suppliers was 13.2 million kgMS, compared to 12.5 million kgMS in 2012/13. "Milk quality from our farmers was outstanding with the best quality milk collected in the company's history.," the company says.

Tatua's Vision is to build a future in specialised dairy. It continues to implement its four strategic themes of:

1. Grow Tatua's earnings premium over the New Zealand milk price.
2. Making its business more sustainable.
3. "One Team" through a common purpose, vision and values.
4. Attract, develop and retain great people.

"In announcing a very strong result for 2013/14, we are mindful that the 2014/15 year will be more challenging," the company says. "Prices have fallen significantly and the market tone is weak. Nevertheless, we expect our focus on specialised added value products to hold us in good stead versus milkpowder and other commodities.

"Tatua continues to focus on all aspects of sustainability; environmental, financial and social. Our 100 year old company is made up of 87 farming families and 300 employees and their respective families. Long-term confidence and stability for our farming families, staff and our customers is paramount, to allow Tatua to continue its strategy of adding value to our shareholders milk."