Waikato dairy (huamiraka) company Tatua has reported income of $444 million for the 2021-2022 year, with $186m available in earnings for payout to its 101 farmer (kaimahi pāmu) shareholders.
Those earnings equate to a record $12.65/kg milksolids before retentions for reinvestment, above the previous year’s earnings of $10.43/kg MS.
Milk supply from Tatua’s supplying shareholders was impacted by an extended period of dry weather during the autumn months. This resulted in the 14.71m kilograms of milksolids collected being 6% behind the previous season.
“We have confirmed a cash payout to shareholders of $11.30/kg MS supplied and have retained $1.35/kg MS, equivalent to $19.85m before tax, for reinvestment in the business,” the company’s chief executive, Brendhan Greaney, and chair Stephen Allen said in a statement.
“In deciding our payout, we were very conscious of the sharp increases in on-farm costs being experienced by our shareholders, as well as the requirement for continued investment in the business and maintaining balance sheet resilience in what remains an uncertain economic and global trade environment.”
Greaney said the $19.85m being retained is for re-investing back into the business to keep the balance sheet resilient.
“We weigh that and try to strike the right balance, and the feedback we’ve had from our farmers is broadly supportive of what we have done there.”
He said they have offered an indicative forecast payout for the new season of $10/kg MS.
Tatua’s gearing (debt divided by debt plus equity) averaged 21% for the year, but was slightly higher at year-end, reflecting increased inventory holdings at balance date.
Like other exporters, Tatua was not immune to covid-related challenges around shipping, staffing and cost increases.
This shows in its inventory holdings, he said.
“We’re holding more stock at year end than we typically would and that’s mainly to do with shipping delays.”
He was confident this inventory will be worked down over the coming months.
Tatua’s products are split 50% between commodities/bulk ingredients – caseinate, WPC and AMF powders – and 50% value added including nutritional powders, foods and flavours.
Greaney said it has been a good year across most of its product divisions, with the market for its bulk ingredients particularly strong.
“Like the other processors, we benefited to some extent from commodity prices being where they are and the very strong prices for caseinate and WPC and, to a lesser degree, AMF, have been a good part in the lift in our result.”
Its value-added divisions also performed well, with nutritional powders and flavours finishing ahead from a year-on-year perspective. However, its food service was affected by covid, particularly in China, he said.
“It’s no better example of why you want to be well diversified in products, markets and customers.”
In addition to achieving record income and earnings, good progress has been made in many areas of the business, including a number of significant capital projects and business improvement initiatives.
These projects included a new hypoallergenic packing line on one of its nutritional powder driers, and increasing its capacity in its foods business.
Greaney was cautiously optimistic about the outlook for the season ahead.
“We are still seeing some pretty attractive global commodity price and that’s true as well for our product mix. We’re well contracted into this financial year, and on the value-added side of the business we have some additional capacity now… and overall, the outlook is reasonably positive.
“We say that cautiously because we know stuff can change and one of the ‘watch outs’ for us is if that commodity price tide turns. It came in pretty quickly and if it was to go out, it’s going to put a lot more stress on people. We don’t see signs of that, but we’re aware of it.”
