Tatua dairy earnings tumble 11pc

Photo / Sarah Ivey

Waikato dairy co-operative Tatua said its annual earnings before tax fell by 11.1 per cent to $121.2 million, reflecting declining commodities prices.

The result equated to earnings of $7.73 per kg of milksolids, before retentions and tax, down from last year's record of $10.32 a kg.

"The 2014/15 year was challenging from a market perspective, with global commodity prices declining for most of the year," Tatua said in a statement.

Benchmark wholemilk powder prices went from US$3,250 a tonne at the beginning of the year, to US$1,850 a tonne by the end of the year, a reduction of 43 per cent.

Tatua's board set its payout for 2014/15 season at $7.10 per kg of milksolids. In addition, it declared a pre-tax retention of 63c per kg.

"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 said.

"Despite market weakness, the company was able to record a strong result due to its product mix of caseinate, whey protein concentrate and anhydrous milk fat remaining preferred throughout the year, and improved margins on its specialised added value businesses as a result of the falling New Zealand milk price," the company said.

Recent upturns in prices on the GlobalDairyTrade auction prices were positive, but global milk supply continued to exceed demand. "Until this corrects, further upward price movements may be limited," it said, adding the coming year would be "challenging".

"Demand remains fragile, climatic conditions are uncertain and we anticipate continuing volatility in prices and exchange rates," Tatua said.

The company's gearing ratio - debt divided by debt plus equity - increased to 36.4 per cent from 25 per cent at the end of the previous year - reflecting the construction of a new specialised powders dryer.

Foreign exchange management continued to be a challenge for the co-op, with the New Zealand dollar falling throughout the year. Hedging policies have achieved an overall conversion rate of US75.70c.

Milk supply from Tatua Suppliers was 15.7 million kilograms of milksolids, compared to 13.2 million kilograms of milksolids in 2013/14. The co-operative is made up of 86 farming families and 330 employees and their families.

Last week, the country's biggest dairy co-operative, Fonterra, last week announced a net profit after tax came to $506 million in the year to July 31, up 183 per cent from the previous year's profit, and raised its forecast payout for the current season.