Te Tīmatanga / Introduction

As Chair of the Committee of Management of Ātihau-Whanganui Incorporation, I am pleased to present our annual report for the financial year from 1 July 2021 to 30 June 2022.

You will notice some changes. This year, in response to shareholder requests, we launched an initiative to improve the way we communicate through the annual report.

We have engaged directly with shareholders and worked with KPMG to set a framework for improvement and we hope that in the following pages you will find a more detailed report of the year that has been, as well as more information about our intentions for the future.

It has been a quick turn-around and this is only a starting point. Further improvements are planned over the next three years to provide the detail you have asked for and a more in-depth insight into our business.

Staffing Highlights

Forty percent of Ātihau staff are now uri. This is an important milestone and a further step in the journey to ensure the legacy left by our tūpuna is built upon to empower and support their descendants.

The spread of that 40% is as important as the number: uri are employed not only on the farms but also in our executive, management, and administration teams. Reaching this milestone is, in part, a consequence of the strategic decision to move from outsourcing our accounting and administration needs to establishing in-house teams.

On our farms, we are beginning to see some of our Awhiwhenua cadet graduates taking up senior roles. Again, this is all part of the legacy, bringing focus to the non-financial value of our efforts to enable our people to prosper and engage with Ātihau in ways that allow them to develop, pursue and achieve their goals.

We are pleased to note that our staff have been well cared for during the Covid-19 pandemic. This is reflected in the low workforce turnover during this difficult period and also in high scores for staff engagement, as reported through staff surveys.

I would like to take this opportunity to thank all our Ātihau staff for their commitment and efforts, not only during the year in review but also through the ongoing challenges of a global pandemic.

Apiary performance

As the world works through the impact of Covid-19, New Zealand’s mānuka honey industry has experienced a drop in demand over the past two years. This, and the rapid expansion of the industry prior to Covid-19, has resulted in an oversupply of mānuka honey, forcing a restructure of the industry. Hive numbers across the country have already declined by at least 100,000 and are expected to drop further, and, as cashflow is squeezed, some beekeepers are selling up and leaving the industry.

Our apiary business has for the first time made a loss as we recognise a decline in the market value for honey held at the end of the financial year. For the Committee of Management (the Board), this raises the need to review the business model for our investment in honey. Given the downsizing of activity in the industry and across global honey markets, we will need to consider how best to position ourselves for the future.

It will be both an opportunity and a challenge to navigate this period of industry decline. In the meantime, we have paused the growth of our apiary business and will take the time to focus on efficiency gains. We will also continue to build our relationships with honey buyers and external beekeepers as we work to reduce risk in the sales side of the business.

Farm performance

Our farms continue to be the main source of revenue for Ātihau, and their performance remains a priority. That performance was well supported during the year, as evidenced in the cost inputs.

It must be noted that while revenue has gone up, costs have also increased and therefore the margins between revenue and expenditure during the period have decreased. One of the areas where rising costs have dramatically impacted upon return is fertiliser.

Shareholders will note the varied profitability of our farms, with our finishing and breeding/finishing farms (those on better country) performing better than our straight breeding farms. Historically, these farms have relied more heavily on wool and recently on honey income to be profitable. Some of these properties were particularly challenged during the year by porina, and crop and new grass failures.

Improving farm profitability continues to be a priority for the Board, with the ongoing work of the Farm and Environment Committee focused over the past 12 months on reviewing farm improvement plans and supporting their implementation.

Lifting the reproductive performance of breeding farms remains a key focus for the governance committee, as well as rationalising farmland that may be better suited to an alternative use.

While the farms and executive teams focus on productivity, the Board is increasing its attention to value. It is one thing to produce well, but if we are not able to sell our products, we risk producing a lot for little gain. By way of example, meat prices have been good, but this has been countered by a slowdown in processing and challenges in the wool industry. Similarly, we produced a lot of honey but could not sell it all. Our shareholders expect good productivity but also an economic return.

Looking forward

As we look to the future, the Board is focused on how we contribute to the Ātihau legacy. In the immediate term, this includes preparing for the impact of climate change. That means taking the necessary steps within our business to reduce emissions, while capitalising on the opportunities created through the emissions trading scheme.

This, along with the work completed to optimise land use, will see a change in our landscape over the next few years as we look to lift profit per hectare, and to ensure that every part of Ātihau is contributing to its potential.

In some respects, this is new territory for Ātihau: we are having to respond to circumstances that didn’t exist 20 or 100 years ago. By 2025, regulatory change will require a formal response to reducing our footprint and impact.

Although we will need to be thoughtful and purposeful about that, looking after our land and people, our environment and our animals has always been fundamental to our drive and vision. For generations we have been gearing our activities in this direction; our long-term view is implicit in all that we do.

As we look five to 10 years ahead, we are thinking about what comes next for Ātihau.

Our Statement of Investment Policy and Objectives (SIPO) points to the need to rebalance the spread of our income-generating assets toward those that generate more cash, rather than a combination of cash and capital gain. This involves reviewing our current assets, understanding where we can release capital and where it can be re-invested to generate better cash returns.

Diversification remains a key strategy, firstly to look after what we already have by reducing the impact of our activity on the land, and secondly to generate income, increase our resilience through diverse cash flows, and reduce debt. As a Board, we must forever be alert and mindful not only of

what is happening in the present but also of the potential challenges and opportunities of the future.

A Chairwoman’s legacy

Finally, I take this opportunity to acknowledge and thank my predecessor Mavis Mullins, who steps down this year from the Committee of Management after many years of dedication to the Incorporation, the land and its people.

Her leadership as Chair – and the first woman to lead Ātihau in this way – set the imperative for diversification to ensure that the Incorporation is able to spread risk and strengthen resilience. This year’s financial results demonstrate the wisdom of this approach: despite the difficulties and extremes of the times, we have benefited from the ability to earn income from not just sheep and beef but a diversity of business activities.

Your Committee of Management has appreciated the heart-felt commitment that Mavis exemplified. She concentrated our focus on those things that are most important to us – looking after our land and providing for our people. We are thankful for her wealth of governance experience, foresight, and strategic vision.

Tiwha Puketapu - Chairperson