Chief executive Paul McGilvary said the premium achieved by Tatua over Fonterra was the biggest in recent history save one more than a decade ago that contained an extraordinary foreign exchange benefit.
Despite the fall in world milk powder prices exceeding 40% during the year, Tatua’s product mix of caseinate, whey protein concentrate and anhydrous milk fat sold well and the value-add margins had increased.
Group operating revenue increased by $20 million to $286m while milk collection went up by 19% to 15.7m kgs, compared with Fonterra’s 1520m kgs, nearly 100 times larger.
Average milk production per Tatua farm increased by 15% because some shareholders purchased adjoining land which then came into the collection area.
Also a bonus share issue had encouraged farmers to milk on as long as possible, to the extent that 500,000kgs had been collected in excess of the 15.2m milk supply entitlement (MSE) level.
Under its terms of supply, that milk was paid only $5/kg instead of $7.10.
In addition to the 190m litres of its own milk, Tatua processed 40m litres on behalf of Open Country Dairy.
Tatua’s earnings before tax of $121.2m equated to $7.73/kg, of which the directors decided to retain 63c to ensure the company had financial strength to invest in new plant and equipment.
A $65m speciality products drier had been commissioned and the gearing ratio, debt-to-debt-plus-equity, rose from 25% to 36.4%.
McGilvray said that ratio historically was around 30% and the business case for the new drier had anticipated an increase to 40%, so he was very pleased that 36.4% at balance date had been the result.
“It was due to tight credit control, with no bad debts, and some deferring of payments on the new drier,” he said.
The new season would be challenging, McGilvary and chairman Stephen Allen said.
“Demand remains fragile, climatic conditions are uncertain and we anticipate continuing volatility in prices and exchange rates.
“Despite this, we expect our focus on specialised added value products to continue to hold us in good stead.
“Recent upturns in prices on the GlobalDairyTrade auction are positive, but global milk supply continues to exceed demand.
“Until this corrects, further upward price movements may be limited.”
Tatua farmers had been advised to budget on $6/kg, McGilvary added.
