Dairy payout leader Tatua is based in the Waikato. Photo / Supplied
Dairy payout leader Tatua is based in the Waikato. Photo / Supplied
New Zealand blue chip dairy company Tatua has reported record earnings available for payout to its farmers, and has retained $18 million towards a heavy capital programme in the new financial year.
Despite the exporting challenges of the shipping crunch, the Waikato co-operative will pay its 105 shareholders $9.25/kg milksolids, while retaining the equivalent of $1.18/kg for reinvestment. Total earnings available for payout before retentions for reinvestment and tax were $162m, $10.6m up on FY20, and equated to $10.43/kg. The previous year's earnings equated to $9.96/kg.
Chief executive Brendhan Greaney said earnings available for payout in the year ended July 31 were a record for the 107-year-old company at Tatuanui near Morrinsville, which exports 90 per cent of the products it makes.
Tatua traditionally leads the country's annual milk payouts. Its limited shares and premium-priced supply land around the Tatua manufacturing site are tightly held.
Group revenue was also a record at $395m, $14m up on FY20.
"Some years you might have one business with an exceptional performance, this year was just good solid all-round performance."
Tatua has a bulk ingredients business, producing caseinates, whey protein concentrates (wpc) and anhydrous milk fat (amf), which is about 50 per cent of its total operations. These commodity products are sold around the world to a raft of sectors from bakers to nutritional product makers.
The other 50 per cent of Tatua's operations is three value-added specialty product businesses - Tatua Nutritionals, Tatua Flavours and Tatua Foods.
Greaney said while Tatua doesn't make whole milk powder, its strong bulk business sales were a reflection of buoyant global wmp prices.
"Our value-add businesses all performed well on top of that foundation. The strengthened New Zealand dollar against the three main currencies we deal in, the US dollar, Japanese yen and Chinese renminbi, had a top line unfavourable impact on revenue, but it was more than offset by a good hedge book position because we hedge those currencies.
"The net of all that is that earnings were higher than last year."
Greaney said the 3 per cent lift in milk supplied was a seasonal variation, and like other industry players, Tatua did not expect milk growth.
"We don't expect milk volumes to increase and in fact, we don't need them to. We can grow the business without expanding our milk collection area."
Ingredients for Tatua's value-added businesses, especially the nutritionals and flavours' operations, were procured from dry ingredients, he said.
"We're not using raw milk to make those products."
Tatua has a nominal $5/kg milksolids share price.
The outlook for FY22 is promising, but "we are taking nothing for granted", said Greaney.
Commodities market indicators were good with Tatua sales well-contracted into the next calendar year.
"Demand is good, so are prices, which is a reflection of the global market situation.
"For the value-added businesses, again the signals are all very positive and we continue to invest in capacity and capability to grow those businesses.
"It's all positive but that said, there is Covid-related risk out there and we tend to be a little bit paranoid about such things. We are taking nothing for granted - we know things can change quickly. Our gearing now of 20.5 per cent is we think a good place to be."
Tatua has a $30m capital investment programme in the year ahead. Last year it invested "in the low $20 millions".
Two projects - one that will increase capacity for specialty nutritionals, the other involving Tatua Foods - will come online in 12 months, Greaney said.
"We're very focused on doing the bulk ingredients well but we continue to invest in our capacity and capability in the more specialised side of the business."
He declined to say how much Tatua invested in R&D a year but said the company was "very focused on continuing to commercialise value-added product".
Tatua does not make infant formula, but sells ingredients for this product to global baby milk manufacturers.
