SYNLAIT MILK LIMITED
ANNUAL REPORT 2012
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DELOITTE FAST 50
FOURTH CONSECUTIVE YEAR
$24.6M
E+26%
$6.3M
REVENUE
NET PROFIT
PERFORMANCE
POWDER BUSINESS+130%
M
8
GROSS PROFIT
9
INNOVATION
4
GOAL: WORLD CLASS
NUTRITIONAL
INFANT
FORMULA
M3 ERP SYSTEM
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4TH
YEAR
130T
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S
SHARE CAPITAL
$104 MILLION
OPERATING
CASH FLOW
+105.5%
$377M
REVENUE
ADDED
VALUE
TOTAL
ASSETS
$281M
CHAIRMAN’S REPORT
IT IS A PLEASURE TO REPORT TO SHAREHOLDERS ON
THE 4TH YEAR OF PRODUCTION FOR SYNLAIT MILK LTD.
AS USUAL FOR A FAST GROWING COMPANY FURTHER
MOMENTOUS CHANGE WAS ACHIEVED.
The revenue line increased by 26% to $377 million as the third spray
pleasing, and planned to continue to grow in the years
drier at Dunsandel was commissioned and came on line for the
ahead. Nevertheless, as outlined in the CEO’s report
season. The new plant equipped the company to enter the high
further strongly profitable opportunities have been
end infant nutritionals market, and also to continue to establish
identified which the board is keen to pursue. In order to
ourselves as a supplier of customer specific dairy ingredients to our
maintain a prudent capital structure it is likely that Synlait
growing number of key customers.
“Entering the nutritionals
market is a major strategic
step forward for Synlait Milk.”
Entering the
nutritionals
Milk will approach our two shareholders, Synlait Ltd and
Bright Dairy & Food Co Ltd, within the next 12 months for
further equity before investing in these projects.
market is a major
The board, in its second year of the current configuration
strategic step
has settled well into its task of supporting management
forward for Synlait
in the achievement of what is a bold strategy by any measure. Board
Milk. Nutritional
meetings were held in Shanghai, Manila and Dunsandel during the
customers require
period, allowing for customer visits and a deepening understanding
comprehensive
of each shareholders businesses and key competitive advantages.
product safety
Advantages that we can exploit; from the strong connections to
and quality levels
farms in New Zealand, through to in-depth market knowledge of
which must be audited and verified by them long before product
marketing and distribution in Asia and China specifically.
sales eventuate. It is a credit to all involved that with careful
planning and execution the required capabilities were achieved, and
several thousand tonnes of sales were delivered in the first year of
operation. The market for nutritional formulations, in particular infant
nutritionals, is growing strongly, and so our entry point has been
particularly well timed.
The board would like to acknowledge our skilled and growing
staff led by CEO John Penno. John continues to develop into a
remarkably capable CEO, being recognised and highly regarded
both within the industry and by his peers in New Zealand. During
the year John joined 24 other selected leaders from the primary
sector in San Francisco for a week long think tank at Stanford
More generally the market for dairy products, in particular dairy
University. John also became a recipient of the Prime Minister’s
based ingredients, eased through the year. This was due to short
Business Scholarship and will study at the prestigious international
term supply/demand issues and a bumper production season in
INSEAD Business School in Singapore next year. A high performing
New Zealand. However, as anticipated this is firming in the later part
culture is being developed within the company, and the board
of calendar 2012. Despite these fluctuations and the overall languid
is delighted with the appointment of several key individuals
state of the world economy, we continue to have strong confidence
during the year. Our values of integrity, safety, product quality and
in an increasing demand for our product range in the medium term.
environmental sustainability can only be achieved with a motivated
These developments and further planned capital investments
and highly skilled team.
are accelerating Synlait Milk towards our vision of becoming
While we are a very young company we are now well on the way
the supplier of choice to the worlds best milk based health and
to fulfilling the faith shown in us by our shareholders. Our strategy
nutrition companies. Whilst we are beginning to supply fully finished
calls for reinvestment of earnings, and as signalled previously in
consumer packed products to our customers, our vision is to
this report, further equity, to maintain a prudent capital structure
remain a B2B business servicing the leading brand owners and not
during what is planned to be a period of further capital investment.
competing with them.
Financially, as well as substantially growing the top line the bottom
line also went black this year for the first time, with a $6.3 million
profit after tax. Operating cashflow at just under $30 million is
The board is strongly focused on creating shareholder wealth by
pursuing a continued growth strategy for at least the planning period.
GRAEME MILNE
CHAIRMAN
CEO - REPORT
ANOTHER SERIES OF SIGNIFICANT MILESTONES WERE ACHIEVED BY
SYNLAIT MILK IN THE FINANCIAL YEAR ENDED 31 JULY 2012, IN WHAT
WAS OUR FOURTH YEAR OF PRODUCTION.
The most important result was achieving a solid profit while
In parallel to the new plant development, a significant upgrading
providing a very competitive milk price to our milk supply partners.
of our management and information support system was also
It is pleasing that this came about in a year when our volumes of
completed. A year’s planning and development resulted in the
ingredient powders had grown by 50%, and we were commissioning
commissioning of our new M3 ERP system in August 2011. The
our new infant formula capable drier.
objective was to improve business performance by ensuring that
In anticipation of the new processing capacity, milk volumes grew
from 343m litres in FY11 to 498m litres in FY12, with 40 new farms
being contracted for supply. This additional milk processed lifted
manufactured volumes from 54,414MT in FY11 to 81,398MT in FY12.
Milk prices were lower than those expected at the outset of the
season. Synlait Milk paid a total average milk price of $6.22/kg MS,
comprising a base milk price of $6.14/kg MS, $0.01/kg MS autumn
premium, $0.04/kg MS colostrum and special milk payments and
$0.03/kg MS in winter milk premiums.
everyone making decisions had accurate and timely information
at all times. This was expected to be achieved by ensuring that all
information used to operate and report against the business was
held within a single integrated system.
With help from the right independent experts, the system was
designed to meet the needs of a world class nutritional powder
business. It was designed by the team for the team. While it’s fair to
say that the implementation caused more pain for the team than we
anticipated, by the end of the year most of the problems had been
ironed out, and we are looking forward to reaping the benefits in the
Milk prices were lower than in the previous two years as a result of
years to come.
a strong New Zealand currency and international dairy commodity
prices gradually declining through the season to a low point at year
end. The company chose to carry more stock than planned through
balance date to avoid selling into what became a very soft market
as the 10% increase in milk produced on New Zealand dairy farms
The development of our new adult and infant nutritionals business
holds exciting prospects for the future, however it has been our
value added and consumer ready milk powders business that has
delivered the strong financial result this year.
was cleared late in the season.
In FY12, 93% of our revenue was provided by the SMP, WMP and
The D2 nutritional drier project was completed during the year,
with capital cost savings relative to budget of $2m. The plant was
commissioned on WMP and SMP in September and was running
near capacity almost immediately as the spring flush of milk
approached. As was planned, the infant formula batching kitchen
and wet mix process was commissioned in December allowing
commercial production to commence.
AMF products we broadly categorise as ingredient products.
From the outset we have believed that solid returns would be
achieved by focusing on providing high specification milk powder
and cream ingredients directly to customers who are chosen for
their leadership positions in our target markets. The past year
has provided confirmation of the strength of this clear and simple
strategy, with volumes from our highest returning products and
customers growing significantly. We see this business continuing
Since then our processes and quality systems have been audited
to grow and develop in parallel to the infant and adult nutritionals
by a number of important current and future customers. They
business we are now establishing. The focus will be on continuing
consistently report that our nutritional capability is as good as any in
to lift the proportion of our SMP and WMP in value added categories
the market. While these successful audit results are encouraging, we
sold to our target customers.
see many areas for improving our offering in this category.
Despite the solid financial performance achieved in the past year,
The nutritional drier was not the only capital project during the
the new ERP system and our growing understanding of our business
year. The original D1 plant was upgraded to allow the production
has allowed us to identify several significant opportunities for
of growing up milk powders (GUMPs). The special milks drier was
business improvement by doing basic things better. This has lead to
upgraded with the addition of a small ultra filtration plant allowing
a major internal focus on business performance improvement where
milk protein concentrate manufacture, and a new automated
we are targeting cost savings and efficiency gains through better
packaging plant was commissioned.
planning and execution, eliminating errors and getting things “right
first time”.
“The most important result
was achieving a solid profit
while providing a very
competitive milk price to
our milk supply partners.”
Over the past year
By the close of the financial year total staff numbers had grown to
a major refresh of
130. We have been very fortunate to attract so many highly talented
the Synlait Milk
people, and we continue to learn that people with the right attitude
strategy was
and the ability to learn flourish within Synlait Milk. It’s seldom easy
conducted resulting
working within a fast growing business and again, I acknowledge
in the company
the way our entire team continually faces and overcomes
placing even more
challenges in pursuit of excellence.
emphasis on our vision of becoming the supplier of choice to the
worlds best milk based health and nutrition companies. We are
clearly focused on our value added milk powder and nutritional
powder business, and building a reputation for quality and technical
excellence.
It is clear that to fulfil this vision, and to complete our offering to our
customers, we will need to continue to invest in the company by
creating consumer packaging options, and in time, increased scale
through further processing. Based on this plan, resource consents
are being sort for a blending and canning plant, an additional spray
Finally, I acknowledge the ongoing support and help of our
Chairman Graeme Milne and the Board of Directors. We continue
to be served well by a highly experienced team of directors. After
many years of working together, I continue to learn more from
Graeme than anyone I have ever worked with.
Growing demand for high quality protein from the emerging middle
class in some of the most populous countries in the world underpins
the dairy industries future. New Zealand has many things working in
our favour including our proximity to Asia and our FTA with China.
drier, value added cream processing and additional warehousing.
Synlait Milk is now positioned at the premium
The board is currently considering raising additional capital to
end of the highest value milk protein markets.
support this plan.
One of the most pleasing results of the financial year was achieving
a significant increase in our staff engagement levels, which doubled
between the 2011 and the 2012 Kenexa Best Workplaces Surveys
conducted. This result was brought about by developing a strong
induction program, strengthening our performance management
processes, creating opportunities to celebrate success, and getting
Our partnerships with our customers, milk
suppliers, and staff continue to mature, and
our focus on continuous improvement and
quality is yielding tangible performance
improvements. This has created the solid
business platform that we need to build
our value added business from.
people who don’t work in the same teams together more regularly.
Now that we have this in place, I look forward
to working with our partners and our team to
fulfil our vision of making more from milk in the
years to come.
John Roberts, who was the first full time employee of Synlait Milk,
retired in March 2012. More than any other employee, John has left
an indelible mark on the business that will last for decades to come.
The importance of John’s contribution to the company as it was
forming cannot be underestimated, and I am very grateful to him for
the experience, support and friendship he generously shared with
all of us.
Early in the financial year we appointed Mike Lee to the position of
GM Ingredient Sales and Michael Wan to the new role of Marketing
and Communications Manager. In preparation for John Roberts’s
retirement, Neil Betteridge had been promoted to the role of GM
Manufacturing, Natalie Lombe picked up responsibility for leading
quality, alongside her role as GM Human Resources, and Matthew
Foster was appointed to the role of GM Supply Chain. Alongside,
Nigel Greenwood as CFO and Tony McKenna as GM Nutritionals,
JOHN PENNO
CEO
these changes have significantly increased the capacity of the
Senior Management Team. I would like to acknowledge the
dedication of this team. It is a privilege to lead and work
alongside them.
COMMUNITY
MAKING
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Annual Report 2012 I
CONTENTS
Directors’ Declaration ..................................................................................................................................................
Statement of Financial Position ..................................................................................................................................
Statement of Comprehensive Income .......................................................................................................................
Statement of Changes in Equity .................................................................................................................................
Statement of Cash Flows ..............................................................................................................................................
Notes to the Financial Statements .............................................................................................................................
Audit Report .................................................................................................................................................................
02
03
04
05
06
07
21
page 1
Annual Report 2012 I DIRECTORS’ DECLARATION
In the opinion of the directors of Synlait Milk Limited (“the Company”), the financial statements and notes on pages 3 to 20:
− Comply with New Zealand generally accepted accounting practice and give a true and fair view of the financial position of the Company
as at 31 July 2012 and the results of their operations for the year ended on that date.
− Have been prepared using appropriate accounting policies, which have been consistently applied and supported by reasonable
judgements and estimates.
The directors believe that proper accounting records have been kept which enable, with reasonable accuracy, the determination of the
financial position of the Company and facilitate compliance of the financial statements with the Financial Reporting Act 1993.
The directors consider that they have taken adequate steps to safeguard the assets of the Company and to prevent and detect fraud and
other irregularities. Internal control procedures are also considered to be sufficient to provide reasonable assurance as to the integrity and
reliability of the financial statements.
The directors are pleased to present the financial statements of Synlait Milk Limited for the year ended 31 July 2012.
For and on behalf of the Board of Directors:
GRAEME MILNE
Chairman of the Board
14 November 2012
BEN DINGLE
Director
14 November 2012
page 2 I
Annual Report 2012 IAnnual Report 2012
STATEMENT OF FINANCIAL POSITION
AS AT 31 JULY 2012
In thousands of New Zealand dollars
Assets
Property, plant and equipment
Intangible assets
Derivatives
Total non-current assets
Inventories
Current tax asset
Derivatives
Trade and other receivables
Income accruals and prepayments
Goods and services tax refundable
Cash and cash equivalents
Total current assets
Total assets
Equity
Share capital
Reserves
Retained earnings/(deficit)
Total equity attributable to equity holders of the Company
Liabilities
Deferred tax liabilities
Derivatives
Loans and borrowings
Total non-current liabilities
Bank overdraft
Trade and other payables
Derivatives
Loans and borrowings
Total current liabilities
Total liabilities
Total equity and liabilities
The notes on pages 7 to 20 are an integral part of these financial statements.
Note
11
12
21
14
10
21
15
16
17
17
13
21
19
16
20
21
19
2012
214,099
2,871
-
2011
178,178
318
36
216,970
178,532
33,841
231
4,109
20,884
159
3,492
922
12,468
226
6,680
39,730
508
4,496
2,624
63,638
280,608
66,732
245,264
103,648
8,856
(24,260)
88,244
9,061
1,734
70,768
81,563
2,600
84,619
2,582
21,000
110,801
192,364
280,608
103,648
1,740
(30,570)
74,818
5,746
1,027
63,821
70,594
10,300
76,475
2,077
11,000
99,852
170,446
245,264
page 3
Annual Report 2012 I STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 JULY 2012
In thousands of New Zealand dollars
Revenue
Cost of sales
Gross profit
Other income
Sales and distribution expenses
Administrative expenses
Operating expenses
Results from operating activities
Finance income
Finance expenses
Net financing (costs) / income
Note
5
7
6
7, 8
7, 8
9
9
2012
376,771
(328,143)
48,628
501
(21,337)
(10,641)
(1,076)
16,075
53
(9,218)
(9,165)
2011
298,892
(277,755)
21,137
1,273
(15,074)
(6,799)
(502)
35
81
(4,418)
(4,337)
Profit/(loss) before income tax
6,910
(4,302)
Income tax (expense)/benefit
10
(600)
1,217
Net profit/(loss) for the period
6,310
(3,085)
Other comprehensive income/(loss)
Revaluation of property, plant and equipment
Effective portion of changes in fair value of cash flow hedges
Net change in fair value of cash flow hedges transferred to profit and loss
Income tax on other comprehensive income
10
Other comprehensive income/(loss) for the period, net of income tax
11,056
(1,408)
169
(2,701)
7,116
-
318
(2,238)
662
(1,258)
Total comprehensive income/(loss) for the year
13,426
(4,343)
The notes on pages 7 to 20 are an integral part of these financial statements.
page 4 I
Annual Report 2012 IAnnual Report 2012 STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 JULY 2012
In thousands of New Zealand dollars
Note
Share
Capital
Hedging
Reserve
Revaluation
Reserve
Retained
Earnings
Total Equity
Balance at 1 August 2010
25,000
2,998
(Loss) for the year
Other comprehensive income/(loss)
Effective portion of changes in fair value
of cash flow hedges
Net change in fair value of cash flow
hedges transferred to profit and loss
Income tax on income and expense
recognised directly in equity
Total other comprehensive income/(loss)
-
-
-
-
-
Issue of new shares
Share issue cost
Total contributions by and distributions
to owners
17
17
82,000
(3,352)
78,648
-
318
(2,238)
662
(1,258)
-
-
-
Balance at 31 July 2011
103,648
1,740
Profit for the year
Other comprehensive income
Revaluation of property, plant and
equipment
Effective portion of changes in fair value
of cash flow hedges
Net change in fair value of cash flow
hedges transferred to profit and loss
Income tax on income and expense
recognised directly in equity
Total other comprehensive income
Issue of new shares
Share issue cost
17
17
Total contributions by and distributions
to owners
-
-
-
-
-
-
-
-
-
-
(1,408)
169
347
(3,048)
(892)
8,008
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,056
-
-
(27,485)
513
(3,085)
(3,085)
-
-
-
-
-
-
-
318
(2,238)
662
(1,258)
82,000
(3,352)
78,648
(30,570)
74,818
6,310
6,310
-
-
-
-
-
-
-
-
11,056
(1,408)
169
(2,701)
7,116
-
-
-
Balance at 31 July 2012
103,648
848
8,008
(24,260)
88,244
The notes on pages 7 to 20 are an integral part of these financial statements.
page 5
Annual Report 2012 I STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 JULY 2012
In thousands of New Zealand dollars
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Goods and services tax refunds/(payments)
Income tax refunds/(payments)
Net cash from operating activities
Cash flows from investing activities
Interest received
Acquisition of property, plant and equipment
Disposal/(Acquisition) of intangible assets
Net cash (used in) investing activities
Cash flows from financing activities
Proceeds from issue of shares
Payment of borrowing
Receipt from borrowing
Interest paid
Net cash from financing activities
Net increase in cash and cash equivalents
Net overdraft at beginning of period
Net overdraft at end of period
The notes on pages 7 to 20 are an integral part of these financial statements.
Note
2012
2011
399,048
274,575
(370,241)
(258,220)
1,003
10
29,820
53
(29,499)
(3,260)
(32,706)
-
(11,000)
27,947
(8,063)
8,884
5,998
(7,676)
(1,678)
(1,794)
(53)
14,508
81
(79,125)
(260)
(79,304)
80,440
(81,405)
74,821
(4,418)
69,438
4,642
(12,318)
(7,676)
16
page 6 I
Annual Report 2012 IAnnual Report 2012 NOTES TO THE FINANCIAL STATEMENTS
1. REPORTING ENTITY
(e) Changes in accounting policies
Synlait Milk Limited (the “Company”) is a profit oriented
entity incorporated and domiciled in New Zealand. The
Company is a reporting entity for the purposes of the
Financial Reporting Act 1993 and its financial statements
comply with that Act.
Synlait Milk Limited is primarily involved in the manufacture
and sale of milk powder and milk powder related products.
2. BASIS OF PREPARATION
(a) Statement of Compliance
These financial statements have been prepared in
accordance with New Zealand Generally Accepted
Accounting Practice (“NZ GAAP”). They comply with New
Zealand equivalents to International Financial Reporting
Standards (“NZ IFRS”) and other applicable Financial
Reporting Standards, as appropriate for profit oriented
entities that qualify for and apply differential reporting
concessions.
The financial statements were approved by the Board of
Directors on 14 November 2012.
(b) Basis of measurement
The financial statements have been prepared on the
historical cost basis except for the following:
There have been no changes in accounting policies during
the current year.
(f) Differential reporting
The Company qualifies for differential reporting exemptions
as it is not publically accountable and there is no separation
between the owners and the governing body. The Company
has taken advantage of all available differential reporting
exceptions except for NZ IAS 7 ‘Statement of Cash Flows’
and NZ IAS 12 ‘Income Taxes’.
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have all been applied
consistently to all periods presented in these financial
statements.
(a) Foreign currency
Transactions in foreign currencies are translated to the
functional currency at the exchange rates at the dates
of the transactions. Monetary assets and liabilities
denominated in foreign currencies at the reporting date are
retranslated to the functional currency at the exchange rate
at that date.
(b) Financial instruments
− Land, buildings, plant and equipment
i
Non-derivative financial instruments
− Derivative financial instruments
The methods used to measure fair values are discussed
further in note 4.
(c) Functional and presentation currency
These financial statements are presented in New Zealand
dollars ($), which is the Company’s functional currency and
are rounded to the nearest thousand ($000).
(d) Use of estimates and judgements
The preparation of financial statements requires
management to make judgements, estimates and
assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities,
income and expenses. Actual results may differ from these
estimates.
Estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised
and in any future periods affected.
Loans and receivables:
Trade receivables, loans and other receivables that have
fixed or determinable payments that are not quoted in an
active market are classified as loans and receivables. Loans
and receivables are recognised initially at fair value plus any
directly attributable transaction costs and are subsequently
measured at amortised cost using the effective interest rate
method.
Cash and cash equivalents:
Cash and cash equivalents comprise cash balances, call
deposits, bank overdrafts that are repayable on demand and
form an integral part of the Company’s cash management.
Trade and other payables:
Trade and other payables are recognised when the
Company becomes obliged to make future payments
resulting from the purchase of goods or services. Trade and
other payables are recognised initially at fair value plus any
directly attributable transaction costs and are subsequently
measured at amortised cost using the effective interest rate
method.
page 7
Annual Report 2012 I NOTES TO THE FINANCIAL STATEMENTS CONT...
Loans and borrowings:
Borrowings are recorded initially at fair value, plus
transaction costs.
Subsequent to initial recognition, borrowings are measured
at amortised cost with any difference between the initial
recognised amount and the redemption value being
recognised in profit or loss over the period of the borrowing
using the effective interest rate method.
Recognition and derecognition:
A financial instrument is recognised if the Company
becomes a party to the contractual provisions of the
instrument. Financial assets are derecognised if the
Company’s contractual rights to the cash flows from the
financial assets expire or if the Company transfers the
financial asset to another party without retaining control
or substantially all risks and rewards of the asset. Regular
purchases and sales of financial assets are accounted for
at trade date, i.e. the date that the Company commits
itself to purchase or sell the asset. Financial liabilities are
derecognised if the Company’s obligations specified in the
contract expire or are discharged or cancelled.
ii
Derivative financial instruments
The Company enters into a variety of derivative financial
instruments to manage its exposure to interest rate and
foreign exchange rate risk, including forward exchange
contracts and interest rate swaps.
Derivatves are initially recognised at fair value at the date
a derivative contract is entered into and are subsequently
remeasured to their fair value at each balance sheet date,
The resulting gain or loss is recognised in profit or loss
immediately unless the derivative is designated as effective
as a hedging instrument, in which event the timing of the
recognition in profit or loss depends on th nature of the
hedge relationship. Hedges of highly probable forecast
transactions or hedges of foreign currency risk of firm
commitments are designated as cash flow hedges by the
Company.
A derivative is presented as a non-current asset or a non-
current liability if the remaining maturity of the instrument is
more than 12 months and it is not expected to be realised
or settled within 12 months. Other derivatives are presented
as current assets or current libailities.
Hedge accounting
The Company designates certain hedging instruments in
respect of foreign currency risk as either cash flow hedges,
or fair value hedges. Hedges of foreign currency exchange
risk on firm commitments are accounted for as cash flow
hedges.
At the inception of the hedge relationship, the Company
documents the relationship between the hedging
instrument and the hedged item, along with its risk
management objectives and its strategy for undertaking
various hedge transactions. Furthermmore, at the inception
of the hedge and on an ongoing basis, the Company
documents whether the hedging instrument that is used
in a hedging relationship is highly effective in offsetting
changes in fair values or cash flows of the hedged item.
Cash flow hedges
The effective portion of changes in the fair value of
derivatives that are designated and qualify as cash flow
hedges are recognised in the other comprehensive income
and accumulated as a separate component of equity in the
hedging reserve. The gain or loss relating to the ineffective
portion is recognised immediately in profit or loss, and is
included in the Other Income or Finance Expense line.
Amounts recoginsed in the hedging reserve are classified
from equity to profit or loss (as a reclassification
adjustment) in the periods when the hedged item is
recognised in profit or loss, in the same line as the
recognised hedged item.
Hedge accounting is discountinued when the Company
revokes the hedging relationships, the hedging instrument
expires or is sold, terminated, or excercised, or no longer
qualifies as hedge accounting. Any cumulative gain or loss
recognised in the hedging reserve at that time remains
in equity and is recognised when the forecast transaction
is ultimately recognised in profit or loss. When a forecast
transaction is no longer expected to occur, the cumulative
gain or loss that was recognised in the hedging reserve is
immediately recorded in profit or loss.
(c) Property, plant and equipment
i
Recognition and measurement
Office equipment is measured at cost less accumulated
depreciation.
Cost includes expenditures that are directly attributable to
the acquisition of the asset. The cost of self-constructed
assets includes the cost of materials and direct labour, any
other costs directly attributable to bringing the asset to a
working condition for its intended use, and the costs of
dismantling and removing the items and restoring the site
on which they are located.
When a self-constructed asset meets the definition of
a qualifying asset under NZ IAS 23 ‘Borrowing Costs”,
borrowing costs directly attributable to the construction of
the asset are capitalised until such a time as the asset is
substantially ready for its intended use or sale.
page 8 I
Annual Report 2012 IAnnual Report 2012 When major components of an item of property, plant and
equipment have different useful lives, they are accounted
for as separate items of property, plant and equipment.
ii
Revaluations
Land is stated at valuation as determined on a cyclical
basis, not exceeding three years, by an independent
registered valuer. Buildings and plant and equipment are
stated at valuation as determined on a cyclical basis, not
exceeding three years, by an independent registered valuer
the basis of which valuation is the depreciated replacement
cost method. Any increase in the value of land, buildings,
plant and equipment is recognised in other comprehensive
income and presented in the revaluation reserve in equity
unless it offsets a previous decrease in value recognised in
the profit or loss, in which case it is recognised in the profit
or loss. A decrease in value is recognised in the profit or
loss where it exceeds the increase previously recognised in
equity.
iii
Subsequent costs
The cost of replacing part of an item of property, plant and
equipment is recognised in the carrying amount of the item
if it is probable that the future economic benefits embodied
within the part will flow to the Company and its cost can be
measured reliably. The costs of the day-to-day servicing of
property, plant and equipment are recognised in profit or
loss as incurred.
iv
Depreciation
Depreciation of property, plant and equipment purchased
on new acquisitions is recognised in profit or loss on a
straight line basis over the estimated useful lives of each
part of an item of property, plant and equipment.
Leased assets are depreciated over the shorter of the lease
term and their useful lives. Land is not depreciated.
The estimated useful lives for the current and comparative
periods are as follows:
− Buildings 10-50 years
− Fixtures and fittings 2-20 years
− Plant and equipment 3-33 years
− Vehicles 5-10 years
Depreciation methods, useful lives and residual values are
reassessed at the reporting date.
(d) Leased assets
Leases on terms where the Company assumes substantially
all the risks and rewards of ownership are classified as
finance leases. Upon initial recognition, the leased asset is
measured at an amount equal to the lower of its fair value
and the present value of the minimum lease payments
with a corresponding liability to the lessor included in the
statement of financial position as a finance lease obligation.
Subsequent to initial recognition, the asset is accounted for
in accordance with the accounting policy applicable to that
asset. Lease payments are apportioned between finance
charges and reduction in the lease obligation so as to
achieve a constant rate of interest on the remaining balance
of the liability.
Other leases are operating leases and the leased assets are
not recognised on the Company’s statement of financial
position. Operating lease payments are recognised as an
expense on a straight line basis over the lease term, except
where another systematic basis is more representative of
the time pattern over which economic benefits from leased
assets are consumed.
(e)
Inventories
Inventories are measured at the lower of cost and
net realisable value. The cost of inventories includes
expenditure incurred in acquiring the inventories and
bringing them to their existing location and condition. In
the case of manufactured inventories and work in progress,
cost includes an appropriate share of production overheads
based on normal operating capacity. Net realisable value
is the estimated selling price in the ordinary course of
business, less the estimated costs of completion and selling
expenses.
(f)
Impairment
The carrying amounts of the Company’s assets are reviewed
at each reporting date to determine whether there is any
objective evidence of impairment.
An impairment loss is recognised whenever the carrying
amount of an asset exceeds its recoverable amount.
Impairment losses directly reduce the carrying amount of
assets and are recognised in the profit or loss.
i
Impairment of receivables
The recoverable amount of the Company’s receivables
which are carried at amortised cost is calculated as the
present value of estimated future cash flows, discounted
at the original effective interest rate (i.e. the effective
interest rate computed at initial recognition of these
financial assets). Receivables with a short duration are not
discounted.
Impairment losses on an individual basis are determined
by an evaluation of the exposures on an instrument
by instrument basis. All individual instruments that are
considered significant are subject to this approach.
page 9
Annual Report 2012 I NOTES TO THE FINANCIAL STATEMENTS CONT...
For trade receivables which are not significant on an
individual basis, impairment is assessed on a portfolio basis
based on numbers of days overdue, and taking into account
the historical loss experienced in portfolios with a similar
amount of days overdue.
A provision is recognised for the amount expected to be
paid under short-term cash bonus or profit-sharing plans if
the Company has a present legal or constructive obligation
to pay this amount as a result of past service provided by
the employee and the obligation can be estimated reliably.
ii
Non-financial assets
(i) Revenue
The carrying amounts of the Company’s non-financial
assets are reviewed at each reporting date to determine
whether there is any indication of impairment. If any such
indication exists, then the asset’s recoverable amount is
estimated.
An impairment loss is recognised if the carrying amount of
an asset or its cash-generating unit exceeds its recoverable
amount. A cash-generating unit is the smallest identifiable
asset group that generates cash flows that are largely
independent from other assets and groups. Impairment
losses are recognised in profit or loss.
Impairment losses recognised in respect of cash-generating
units are allocated first to reduce the carrying amount of
any goodwill allocated to the units and then to reduce the
carrying amount of the other assets in the unit (group of
units) on a pro rata basis.
The recoverable amount of an asset or cash-generating unit
is the greater of its value in use and its fair value less costs
to sell. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset.
Impairment losses recognised in prior periods are assessed
at each reporting date for any indications that the loss
has decreased or no longer exists. An impairment loss is
reversed if there has been a change in the estimates used
to determine the recoverable amount. An impairment loss is
reversed only to the extent that the asset’s carrying amount
does not exceed the carrying amount that would have
been determined, net of depreciation or amortisation, if no
impairment loss had been recognised
(g) Research and development
Expenditure on research activities, undertaken with the
prospect of gaining new scientific or technical knowledge
and understanding, is recognised in the profit or loss when
incurred.
(h) Short-term employee benefits
Short-term employee benefit obligations are measured on
an undiscounted basis and are expensed as the related
service is provided.
Sale of Goods:
Revenue from the sale of goods is measured at the fair
value of the consideration received or receivable, net of
returns, discounts and allowances. Revenue is recognised
when the significant risks and rewards of ownership have
been transferred to the buyer, recovery of the consideration
is probable, the associated costs and possible return of
goods can be estimated reliably, and there is no continuing
management involvement with the goods.
Transfers of risks and rewards vary depending on the
individual terms of the contract of sale. For local sales,
transfer occurs at the point the goods are picked up by the
purchaser. For international shipments, transfer occurs upon
loading the goods onto the relevant carrier.
Interest Revenue:
Interest revenue is recognised using the effective interest
rate method.
Effective Interest Method:
The effective interest method is a method of calculating the
amortised cost of a financial asset and of allocating interest
income over the relevant period. The effective interest rate
is the rate that exactly discounts estimated future cash
receipts through the expected life of the financial asset,
or, where appropriate, a shorter period, to the net carrying
amount of the financial asset.
(j) Lease payments
Payments made under operating leases are recognised in
profit or loss on a straight-line basis over the term of the
lease. Lease incentives received are recognised as an integral
part of the total lease expense, over the term of the lease.
(k) Finance income and expenses
Finance income comprises interest income on funds
invested, changes in the fair value of financial assets at fair
value through profit or loss, foreign currency gains, and
gains on hedging instruments that are recognised in profit
or loss. Interest income is recognised as it accrues, using
the effective interest method.
Finance expenses comprise interest expense on borrowings,
foreign currency losses, impairment losses recognised on
financial assets (except for trade receivables and losses on
hedging instruments that are recognised in profit or loss).
page 10 I
Annual Report 2012 IAnnual Report 2012
Borrowing costs are recognised in profit or loss with the
exception of borrowing costs that are attributable to
construction or production of qualifying assets, in these
cases borrowing costs are capitalised as part of that asset.
(l)
Income tax expense
Income tax expense comprises current and deferred tax.
Income tax expense is recognised in profit or loss except to
the extent that it relates to items recognised directly in equity.
Current tax is the expected tax payable on the taxable
income for the year, using tax rates enacted or substantively
enacted at the reporting date, and any adjustment to tax
payable in respect of previous years.
Deferred tax is recognised using the balance sheet method,
providing for temporary differences between the carrying
amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes.
Deferred tax is not recognised for the revaluation of land to
the extent that any revaluation is unlikely to affect the tax
base of the asset. Deferred tax is measured at the tax rates
that are expected to be applied to the temporary differences
when they reverse, based on the laws that have been enacted
or substantively enacted by the reporting date.
A deferred tax asset is recognised to the extent that it is
probable that future taxable profits will be available against
which the temporary difference can be utilised. Deferred tax
assets are reviewed at each reporting date and are reduced
to the extent that it is no longer probable that the related tax
benefit will be realised.
Additional income taxes that arise from the distribution of
dividends are recognised at the same time as the liability to
pay the related dividend is recognised.
(m) Statement of cash flows
For the purpose of the statement of cash flows, cash and
cash equivolents include cash on hand and in banks and
investments in money market instruments, net of outstanding
bank overdrafts. The following terms are used in the
statement of cash flows;
- operating activities are the principle revenue producing
activities of the Company and other activities that are not
investing or financing activities;
-
investing activities are the acquisition and disposal of
long-term assets and other investments not included in
cash equivolents; and
- financing activities are activities that result in changes in
the size and compositon of the contributed equity and
borrowings of the entity. The Company has elected to
show the cost of servicing borrowings in the financing
activities section of the statement of cash flows.
(n) Adoption of new or revised standards and
interpretations
No standards have been adopted during the year which have
had a material impact on these financial statements. We
are not aware of any standards in issue but not yet effective
which would materially impact the amounts recognised or
disclosed in the financial statements.
4. DETERMINATION OF FAIR VALUES
A number of the Company’s accounting policies and
disclosures require the determination of fair value, for both
financial and non-financial assets and liabilities. Fair values
have been determined for measurement and/or disclosure
purposes based on the methods set out below. Where
applicable, further information about the assumptions made
in determining fair values is disclosed in the notes specific to
that asset or liability.
(a) Property, plant and equipment
Land and buildings and plant and equipment, excluding
office equipment, are included in the statement of financial
position at either their depreciated replacement cost (for
buildings and plant and equipment) or market value (for land)
as determined on a cyclical basis, not exceeding three years,
by an independent registered valuer. Fair value is the amount
for which assets could be exchanged between knowledgeable
and willing buyers and sellers in an arms length transaction
at the valuation date. Fair value is determined based on
depreciated replacement cost. The fair values are reviewed at
the end of each reporting period to ensure that the carrying
value of the assets is not materially different from their fair
values.
(b) Trade and other receivables
The fair value of trade and other receivables is estimated as
the present value of future cash flows.
(c) Derivatives
The fair value of forward exchange contracts and interest rate
swaps are measured at the present value of future cashflows
using forward foreign exchange market rates at balance date
and yield curves derived from quoted interest rates matching
maturities of the contracts.
(d) Non-derivative financial liabilities
Fair value, which is determined for disclosure purposes, is
calculated based on the present value of future principal and
interest cash flows, discounted at the market rate of interest
at the reporting date.
page 11
Annual Report 2012 I NOTES TO THE FINANCIAL STATEMENTS CONT...
5. REVENUE
In thousands of New Zealand dollars
Revenue
Milk powder and milk powder related products
Total revenue
6. OTHER INCOME
In thousands of New Zealand dollars
Management fees
Other sundry income
Total other income
7. PERSONNEL EXPENSES
In thousands of New Zealand dollars
Wages and salaries
2012
376,771
376,771
2011
298,892
298,892
2012
113
388
501
2011
1,196
77
1,273
2012
12,584
2011
7,647
The above wages and salaries are included within Cost of Sales, Operating and Administrative expenses.
8. ADMINISTRATIVE AND OPERATING EXPENSES
In thousands of New Zealand dollars
Audit services – Deloitte
Other services provided by Deloitte
The following items of expenditure are included in operating expenses
Research and development expenses
The above items of expenditure are included in administrative expenses.
9.
FINANCE INCOME AND EXPENSE
In thousands of New Zealand dollars
Interest income on bank deposits
Finance income
Interest & facility fees (net of capitalised interest)
Settlement of ineffective portion of cash flow hedges
Ineffective portion of changes in fair value of cash flow hedges
Finance expense
Net finance Income / (expenses)
2012
125
777
1,076
2012
53
53
(10,626)
1,408
-
(9,218)
(9,165)
2011
50
113
502
2011
81
81
(5,069)
3,563
(2,912)
(4,418)
(4,337)
page 12 I
Annual Report 2012 IAnnual Report 2012 10.
INCOME TAX EXPENSE
In thousands of New Zealand dollars
Note
Current period
Adjustment for prior period
Current tax payable
Temporary differences
Prior period adjustments
Additional prior year tax losses brought forward
Other prior year adjustments
Deferred tax (expense) / benefit 13
Total income tax (expense) / benefit
Income tax recognised in other comprehensive income
In thousands of New Zealand dollars
2012
2011
-
14
14
-
-
-
(2,182)
1,277
1,704
(136)
(614)
(600)
-
(20)
1,217
1,217
2012
Tax (expense)
benefit
347
(3,048)
(2,701)
Before tax
(1,239)
11,056
9,817
Net of tax
Before tax
(892)
8,008
7,116
(1,920)
-
(1,920)
2011
Tax (expense)
benefit
662
-
662
Net of tax
(1,258)
-
(1,258)
Cash flow hedges
Revaluation of property, plant and equipment
TOTAL
Reconciliation of effective tax rate
In thousands of New Zealand dollars
Profit (Loss) before income tax
Income tax using the Company’s domestic tax rate – 28% (2011:30%)
Permanent differences
Reduction in tax rate of buildings
Tax exempt income
Other non deductable costs
Prior period adjustments
Additional prior year tax losses brought forward
Other prior year adjustments
Total income tax (expense) / benefit
Imputation credits
In thousands of New Zealand dollars
Imputation credits at 1 June
New Zealand tax payments, net of refunds
Resident withholding tax attached to interest received
Other credits
Imputation credits at end of period
2012
6,910
(1,935)
(41)
(3)
(203)
1,704
(122)
(600)
2012
226
-
5
-
231
2011
(4,302)
1,290
(53)
-
-
-
(20)
1,217
2011
172
-
54
-
226
page 13
Annual Report 2012 I NOTES TO THE FINANCIAL STATEMENTS CONT...
11. PROPERTY, PLANT AND EQUIPMENT
In thousands of New Zealand dollars
Cost or revaluation
Balance at 1 August 2010
Additions
Reclassifications
Balance at 31 July 2011
Additions
Disposals
Reclassification / transfer
Revaluation
Balance at 31 July 2012
Accumulated depreciation
Balance at 1 August 2010
Depreciation for the period
Balance at 31 July 2011
Depreciation for the period
Disposals
Revaluation
Land and
buildings
Plant and
equipment
Office
equipment
Assets under
construction
Total
24,541
224
-
24,765
4,536
(29)
5,229
1,931
82,323
2,942
-
85,265
2,439
(13)
95,795
10,272
1,634
196
-
1,830
566
-
-
-
2,689
77,354
-
80,043
28,450
-
(104,176)
-
111,187
80,716
-
191,903
35,991
(42)
(3,152)
12,203
36,432
193,758
2,396
4,317
236,903
1,486
797
2,283
959
(18)
180
6,745
3,811
10,556
6,720
(10)
967
703
183
886
281
-
-
1,167
944
1,229
-
-
-
-
-
-
-
8,934
4,791
13,725
7,960
(28)
1,147
22,804
77,880
4,317
178,178
214,099
Balance at 31 July 2012
3,404
18,233
Carrying amounts
At 31 July 2011
At 31 July 2012
22,482
33,027
74,709
175,526
Capitalised interest
Revaluations
Assets constructed during the period to 31 July 2012
include the Dryer two milk plant. Capitalised interest of
$2.56m has been recognised in the period to 31 July 2012
(2011: $4.05m).
Impairment
During the period, property, plant and equipment have been
examined for impairment. No indicators of impairment
have been identified and no material items of property,
plant and equipment are considered to be impaired. The
forecasted cashflows support the carrying value of assets.
Security
At 31 July 2012, the carrying value of property, plant and
equipment is subject to a fixed and floating charge securing
bank loans (see note 19).
Land, buildings, plant and equipment were independently
valued as at 31 July 2012 by Jones Lang LaSalle using
either the depreciated replacement cost method (for
buildings and plant and equipment) or market based
valuation (for land). The method applied by the valuer
is described in note 3 (c). Land, buildings, plant and
equipment was valued at $208.6m as at 31 July 2012. If
the cost model had been used, the carrying value of land,
buildings, plant and equipment would have been $197.5m,
resulting in a revaluation of $11.1m.
Revaluations are accounted for by proportionately increasing
both the cost and accumulated depreciation in order to
arrive at the new carrying value.
Asset under construction
Assets under construction include software projects, until
which time as they are commissioned and transferred to
intangible assets.
page 14 I
Annual Report 2012 IAnnual Report 2012 12. INTANGIBLE ASSETS
In thousands of New Zealand dollars
Balance at 31 July 2010
Acquisitions
Amortisation
Balance at 31 July 2011
Transfer from assets under construction
Acquisitions
Amortisation
Balance at 31 July 2012
Trade-marks
Supplier
contracts
Brand
Assets
Software
Total
58
1
-
59
-
6
-
65
-
259
-
259
-
-
(88)
171
-
-
-
-
-
102
-
102
-
-
-
-
3,152
-
(619)
2,533
58
260
-
318
3,152
108
(707)
2,871
13. DEFERRED TAX ASSETS AND LIABILITIES
Recognised tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
In thousands of New Zealand dollars
Property, plant and equipment
Derivatives
Other items
Tax loss carry-forward
Net tax (assets) /liabilities
Assets
Liabilities
Net
2012
2011
2012
2011
2012
-
-
163
4,882
5,045
-
-
417
2,174
2,591
(13,760)
(7,643)
(13,760)
(330)
(16)
-
(677)
(17)
-
(14,106)
(8,337)
(330)
147
4,882
(9,061)
2011
(7,643)
(677)
400
2,174
(5,746)
Movement in temporary differences during the period
In thousands of New Zealand dollars
Balance 1
Aug 2010
Recognised
in profit or
loss
Recognised
in other com-
prehensive
income
Balance 31
July 2011
Recognised
in profit or
loss
Recognised
in other com-
prehensive
income
Balance 31
July 2012
(5,314)
(2,329)
-
(7,643)
(3,069)
(3,048)
(13,760)
(1,861)
(449)
-
522
849
2,174
662
-
-
(677)
400
2,174
-
(253)
2,708
347
-
-
(330)
147
4,882
(7,624)
1,216
662
(5,746)
(614)
(2,701)
(9,061)
Property, plant &
equipment
Derivatives
Other items
Tax loss carry-
forward
Total
page 15
Annual Report 2012 I NOTES TO THE FINANCIAL STATEMENTS CONT...
14.
INVENTORIES
In thousands of New Zealand dollars
Finished goods
Raw materials and consumables
Total inventories
15. TRADE AND OTHER RECEIVABLES
In thousands of New Zealand dollars
Accounts receivable
Total trade and other receivables
2012
22,485
11,356
33,841
2011
6,910
5,558
12,468
2012
20,884
20,884
2011
39,730
39,730
Accounts receivable are amounts incurred in the normal course of business.
Receivables denominated in other currencies other than the functional currency comprise NZ$19.26 m (2011: $32.13m) of
USD denominated trade receivables and accruals.
16. CASH AND CASH EQUIVALENTS
In thousands of New Zealand dollars
Cash and cash equivalents
Bank overdrafts used for cash management purposes (refer to note 19)
Cash and cash equivalents in the statement of cashflows
17. CAPITAL AND RESERVES
Share capital
Number of ordinary shares
On issue at beginning of period
Issue of shares
On issue at end of period
2012
922
(2,600)
(1,678)
2011
2,624
(10,300)
(7,676)
Ordinary shares
2012
2011
51,022,858
25,001,200
-
26,021,658
51,022,858
51,022,858
All issued shares are fully paid and have no par value.
The holders of Ordinary Shares are entitled to receive
dividends as declared from time to time.
Ordinary shares are entitled to one vote per share at
meetings of the Company.
All Ordinary Shares rank equally with regard to the
Company’s residual assets.
Revaluation Reserves
The revaluation reserve arises on the revaluation of land,
buildings, plant and equipment. Where a revalued asset is
sold, that portion of the reserve which relates to that asset,
and is effectively realised, is recognised in retained earnings.
Hedging reserves
The hedging reserve comprises the effective portion of the
cumulative net change in the fair value of cashflow hedging
instruments related to hedged transactions that have not yet
occurred.
Dividends
No dividends were declared by the Company during the year.
page 16 I
Annual Report 2012 IAnnual Report 2012
18. CAPITAL MANAGEMENT
The Company’s capital includes share capital, retained
earnings and reserves.
The Company’s policy is to maintain a sound capital base
so as to maintain investor and creditor confidence and to
sustain future development of the business. The impact of
the level of capital on shareholders’ return is also recognised
and the Company recognises the need to maintain a
balance between the higher returns that might be possible
with greater gearing and the advantages and security
afforded by a sound capital position.
The Company is subject to various security ratios within the
Company bank loans.
The Company’s policies in respect of capital management
and allocation are reviewed by the Board of Directors.
19. LOANS AND BORROWINGS
In thousands of New Zealand dollars
Non-current liabilities
Secured bank loans
Loan facility fees
Balance at end of period
Current liabilities
Secured bank overdraft
Secured bank loans
Balance at end of period
2012
71,230
(462)
70,768
2,600
21,000
23,600
2011
64,625
(804)
63,821
10,300
11,000
21,300
This note provides information about the contractual terms of the Company’s interest-bearing loans and borrowings.
Terms of loans and borrowings
Group
Secured bank loan – ANZ / BNZ
Secured bank overdraft – ANZ / BNZ
Nominal
interest rate
Year of
maturity
Carrying
amount 2012
Carrying
amount 2011
5.05%
4.98%
2014
2014
91,768
2,600
74,821
10,300
The secured bank loans and bank overdraft within Synlait Milk Limited are secured under the terms of the Composite Security
Deed dated 26 July 2010, by which all present and future property is secured to the ANZ National Bank and Bank of New Zealand.
As the loans facility maturity period expires in December 2014 these loans and borrowings have been classified as non-current,
except for the annual tranche payments due 31 July each year.
20. TRADE AND OTHER PAYABLES
In thousands of New Zealand dollars
Trade payables
Accruals and other payables
Balance at end of period
2012
35,888
48,731
84,619
2011
31,470
45,005
76,475
page 17
Annual Report 2012 I NOTES TO THE FINANCIAL STATEMENTS CONT...
21. DERIVATIVES
Derivative balances comprise of:
In thousands of New Zealand dollars
Foreign currency forward contracts
Interest rate swaps
Land purchase option
Balance at end of period
Classified as:
In thousands of New Zealand dollars
Non current assets
Current assets
Non current liabilities
Current liabilities
2012
3,756
(3,963)
-
(207)
2012
-
4,109
(1,734)
(2,582)
(207)
2011
4,654
(2,911)
1,869
3,612
2011
36
6,680
(1,027)
(2,077)
3,612
22. RELATED PARTIES
(a) Parent entity
The parent entity is Bright Dairy and Food Limited which
is domiciled in the Peoples Republic of China. Bright
Dairy and Food Limited hold 51% of the shares issued by
the Company with the remainder of shares on issue being
owned by Synlait Limited.
(b) Transactions with key management personnel:
i
Loans to directors
There were no loans to directors issued during the period
ended 31 July 2012 (2011: $nil).
ii
Key management personnel compensation
Other than their salaries and bonus incentives, there are no
other cash benefits to directors and executive officers.
iii Other transactions with key management
personnel
Directors of the Company, indirectly through shareholdings
in Synlait Limited, control 13.3% (2011: 12.9%) of the voting
shares of the company at balance date.
page 18 I
Annual Report 2012 IAnnual Report 2012 iv Other related party transactions:
Purchase of goods and services
In thousands of New Zealand dollars
Bright Dairy & Food Co Ltd – Directors fees
2012
165
2011
61
Synlait Farms Limited – purchase of raw milk
32,804
45,838
2012
14
6,817
2011
61
3,557
Transaction value
Balance outstanding
Sale of goods and services
In thousands of New Zealand dollars
Bright Dairy & Food Co Ltd – Sale of milk powder products
Bright Dairy & Food Co Ltd – Reimbursement of costs
Management fees received from Synlait Farms Limited
Transaction value
Balance outstanding
2012
4,604
181
113
2011
9,107
0
1,196
2012
481
(39)
8
2011
1,655
0
1,704
Synlait Farms Limited is a 100% subsidary of Synlait Limited.
All transactions with related parties are at arm’s length on normal trading terms.
23. OPERATING LEASES
Leases as lessees:
Non-cancellable operating lease rentals are payable as follows:
In thousands of New Zealand dollars
Less than one year
Between one and five years
Greater than five years
2012
840
-
-
2011
633
232
-
The operating leases relate to the leasing of warehouse space. All terms are reviewed on a regular basis.
24. COMMITMENTS
As at 31 July 2012 the Company has no capital commitments (2011: $16.192m).
25. CONTINGENCIES
The company has no contingent liabilities as at 31 July 2012 (2011: nil).
page 19
Annual Report 2012 I NOTES TO THE FINANCIAL STATEMENTS CONT...
26. RECONCILIATION OF NET CASH FLOW FROM OPERATING ACTIVITIES
In thousands of New Zealand dollars
Profit (Loss) for the year
Non-cash and non operating items:
Depreciation and amortisation of non-current assets
Interest costs classified as financing cash flow
Deferred tax
(Increase)/decrease in other receivables
Movements in working capital:
(Increase)/decrease in trade receivables
(Increase)/decrease in prepayments
(Increase)/decrease in inventories
(Increase)/decrease in other current assets
(Decrease)/increase in trade and other payables
2012
6,310
21,000
8,639
9,166
614
2,581
2,510
18,846
349
(21,373)
1,012
3,676
2011
(3,085)
5,030
4,800
4,337
(1,217)
(2,890)
12,563
(23,933)
1,233
13
(1,847)
37,097
Net cash generated by operating activities
29,820
14,508
page 20 I
Annual Report 2012 IAnnual Report 2012
INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDERS OF
SYNLAIT MILK LIMITED
Report on the Financial Statements
We have audited the financial statements of Synlait Milk Limited on pages 3 to 20, which comprise the statement of financial
position as at 31 July 2012, the statement of comprehensive income, the statement of changes in equity and the statement of
cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.
This report is made solely to the company’s shareholders, as a body, in accordance with Section 205(1) of the Companies Act
1993. Our audit has been undertaken so that we might state to the company’s shareholders those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company’s shareholders as a body, for our audit work, for this report, or for the opinions
we have formed.
Board of Directors’ Responsibility for the Financial Statements
The Board of Directors is responsible for the preparation of financial statements, in accordance with generally accepted
accounting practice in New Zealand and that give a true and fair view of the matters to which they relate, and for such internal
control as the Board of Directors determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
Auditor’s Responsibilities
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in
accordance with International Standards on Auditing and International Standards on Auditing (New Zealand). Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.
The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of
the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation of financial statements that give a true and fair view of the matters to which they relate in
order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of the accounting policies
used and the reasonableness of accounting estimates, as well as the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Other than in our capacity as auditor, the provision of information technology services, taxation and financial model assurance
and assistance we have no relationship with or interests in Synlait Milk Limited.
Opinion
In our opinion, the financial statements on pages 3 to 20:
give a true and fair view of the financial position of Synlait Milk Limited as at 31 July 2012, and its financial performance
comply with generally accepted accounting practice in New Zealand;
and its cash flows for the year ended on that date.
Report on Other Legal and Regulatory Requirements
We also report in accordance with section 16 of the Financial Reporting Act 1993. In relation to our audit of the financial
statements for the year ended 31 July 2012:
we have obtained all the information and explanations we have required; and
in our opinion proper accounting records have been kept by Synlait Milk Limited as far as appears from our examination of
those records.
Chartered Accountants
14 November 2012
Christchurch, New Zealand
This audit report relates to the financial statements of Synlait Milk Limited for the year ended 31 July 2012 included on Synlait Milk Limited’s website. The Board of Directors is responsible for the
maintenance and integrity of Synlait Milk Limited’s website. We have not been engaged to report on the integrity of Synlait Milk Limited’s website. We accept no responsibility for any changes that may
have occurred to the financial statements since they were initially presented on the website. The audit report refers only to the financial statements named above. It does not provide an opinion on any
other information which may have been hyperlinked to/from these financial statements. If readers of this report are concerned with the inherent risks arising from electronic data communication they
should refer to the published hard copy of the audited financial statements and related audit report dated 14 November 2012 to confirm the information included in the audited financial statements
presented on this website. Legislation in New Zealand governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
page 21
Annual Report 2012 I
Synlait Milk Ltd
1028 Heslerton Road
RD13, Rakaia 7783
New Zealand
P+ 64 3 373 3000
www.synlait.com
Annual Report 2012 I