Tatua gears up for looming infrastructure investment

By Paul McBeth

Oct. 1 (BusinessDesk) - Tatua Cooperative Dairy notched up record revenue and earnings in the latest season, although it will hold on to a greater share of that income to pay for infrastructure upgrades.

Earnings before tax and retentions climbed to $140 million in the 12 months ended July 31 from $127 million a year earlier, while revenue nudged up 2 percent to $364 million. That was from a smaller volume of milk solids processed at 14.5 million kilograms, down from 14.7 million kg a year earlier.

Tatua's board confirmed a cash payout of $8.50 per kilogram of milk solids, up from $8.10/kgMS a year earlier, and will retain $1.16/kgMS of earnings compared to 52 cents/kgMS.

"In deciding our payout, we have aimed to achieve a balance between the needs of our shareholder’s farming businesses and Tatua’s requirements for reinvesting in our long term environmental, financial and social sustainability," chair Steve Allen and chief executive Brendhan Greaney said in a statement.

"For the coming year, this will include the development of a new engineering support facility and a major investment in wastewater treatment infrastructure."

The niche milk processor reduced its gearing ratio to 27 percent from 32 percent a year earlier, saying it remains cautious about managing its borrowings.

Much larger rival Fonterra Cooperative Group has been flogging off assets to get its debt under control. Its net debt of $5.7 billion represented a gearing ratio of 48.2 percent.

Fonterra reported a loss attributable to shareholders of $557 million in the 2019 season, paying $6.35/kgMS to its suppliers.

Tatua's Allen and Greaney said they are optimistic about the outlook for dairy in the season ahead, however, that was tempered by heightened volatility in global trade.

"In addition, uncertainty around emerging domestic policies on both climate change and freshwater management, have real potential to undermine investment confidence. Alongside our shareholders, we will nonetheless embrace these challenges constructively," they said.

Rabobank's September quarter rural confidence survey showed a sharp decline confidence among dairy farmers, with government policy a key concern.

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