Whakatutukitanga mahi - Our performance

The climatic impact on our sheep and beef farming was positive overall. Spring was very wet, which meant production was slow to get started but this was compensated for by favourable conditions for good grass growth through summer, resulting in pleasing sheep and beef production. The farms were able to keep stock on to add weight and carried more feed into the winter than usual.

In comparison, our apiary business struggled compared to previous seasons, with cold and wet weather giving our bees fewer opportunities to get out and collect honey. As a result, honey production of 60 tonnes was about half that of a normal season. Despite challenging market conditions for honey, we sold all our older honey at valuation, holding honey harvested in 2023 and 2022 in storage.

General economic conditions however – including falling commodity prices and significant inflationary pressures – made for a challenging year. The results will reflect that. Revenue fell for our main product lines including honey, lamb and milk, with the exception being beef revenue. We have responded by focusing on our priorities and working to prudently manage costs and deliver greater value.

Ahu whenua at a glance

Bees

• 63tn of honey from 3559 hives

• $2.4 mil of honey sold

• $3.2 mil the year before

Lambs

• 90,085 lambs born

• 90,289 in the previous year

• $130 lambs price per head

• $137 the year before

Beef

• $1,934 per head steer price

• $1,885 per head the year before

(Go to pg.28 of the Annual Report 2023 for more detail)

Outlook for next 12 months

We expect the year ahead to be challenging as we lean into the persisting economic headwinds.

Markets/Pricing

We do not anticipate a significant recovery in pricing over the 2023/2024 financial year. Our main international markets remain on a slow recovery path in the aftermath of the Covid-19 pandemic, while at home we will continue to be impacted by inflation and high interest rates.

As a result, the consumer demand we have previously enjoyed for our product lines has been slow to rally and we are expecting to see suppressed pricing across most of our main sales items. We may see a slight easing in the year ahead as inflation comes down, but pricing is unlikely to recover until the following financial year.

Production

Production in the year ahead will track much the same as the year in review. We will deliberately focus efforts on areas that promise immediate returns; this means lifting ahu whenua performance – both farming and apiary – and considering ways to generate additional value within those businesses.

Honey sales

We are forecasting an increase in honey sales in 2023/2024 to approximately 60 tonnes or $3.5 million. In addition, a long-term supply agreement with a key trading partner has progressed to deliver us greater value and certainty around our future honey sales.

Forestry

Planting will continue at Waipuna next year and we will complete preparations for the remainder of the 1400 hectares of new forestry set to be established over the next three years, subject to obtaining consents.

We expect to sell 50,000 carbon credits next year to fund capital improvements on the whenua, including the new forestry initiative and farm development.

Legislation

The government is consulting on the Emissions Trading Scheme and its permanent forestry category and we expect to see some impact on pricing in the year ahead following the deterioration in the carbon price through 2022/2023. We are monitoring developments closely.

2023 is an election year and, as always, this creates some uncertainty around likely central government priorities in the coming year. However, there should be some relief for labour shortages in the primary industries if net migration increases, as is forecast.

Strategic Initiatives Outlook

Toitū te whenua

Further work will be completed on the programme to investigate how best to manage our mānuka resource into the future. In the year ahead, the first trial work will test the best way to remove existing stands of mānuka to evaluate which method results in better recovery and regrowth.

A framework or model for nectar production among non-mānuka species will also be undertaken and the work may be followed by the development of a planting plan.

We have commissioned an independent review of the sheep and beef farms to identify how each farm could potentially be improved, supporting management to identify new opportunities as well as a realistic benchmark for each farm.

We will prioritize growing our ahu whenua performance over the next 12 months and progressing our diversification aspirations e.g. tourism, through collaborations and partnerships. Our financial strategy will remain prudently focused on meeting our treasury requirements, repaying borrowings and securing a cash dividend payment for shareholders in 2023/2024.

We will review and prioritize our Taiao work programme. Our aim over the next year is to develop a system for measuring and reporting on the health and wellbeing of te taiao to provide a better understanding for uri and partners. It will take several years to establish a system and build the picture but preliminary work in the year ahead will help shape the direction.

Toitū te tangata

The Trust will reach out to whānau with a roadshow during 2024 to understand how to better support hapū, marae and uri. Alongside this work, we also intend to increase the number of whānau-focused events held on the whenua.

We will work on delivering business intelligence dashboards to support decision-making across the Group. Our initial focus is providing all levels of the business with better financial information in real-time, as well as integrated information on our apiary business and sheep and beef farming. Over time, the project will grow to support a greater connection for uri to the whenua through online dashboards and information sharing.

Toitū te mana

Our plan to improve cultural competency across the Āti Hau Group will be finalised and we will begin to implement this work over the next 12 months, including a way of measuring and reporting improvements in the use of tikanga, tūpuna knowledge and te reo o Whanganui.

We will also focus on providing better information about wāhi tapu and wāhi tūpuna across our whenua. We have received funding to identify and record the oral history and location of these special places with the aim of ensuring our significant sites can be protected.

Financial performance

Overall Results & Distributions

This year the Āti Hau Group has returned a net loss after tax of $6.7 million (2022: $1.2 million net surplus). The Group has contributed to a shareholder net equity position of $293.0 million, up $60.5 million from $232.5 million last year. An operating loss of $0.8 million was also reported this year, which led to a recommendation by the Board of a $0.80 per share dividend distribution and no distribution to the Te Āti Hau Trust due to sufficient cash reserves within the Trust.

Revenue

This year revenue was $22.6 million compared to $26.3m million in 2022. We recognised a loss from the sale of emission trading units of $1.6 million. Carbon credits were sold during the year to fund capital improvements on our whenua helping to generate additional value in the future.

Apiary revenue of $3.7 million was down $169,000 on the previous year. Livestock revenue of $15.6 million was on par with last year. Other income of $1.9 million is $0.4 million lower than last year mainly due to fewer forestry logs being harvested.

Expenses and Non-Operating Revaluations

We delivered our work programme through operating expenditure of $23.4 million compared to $24.7 million in 2022, a savings of $1.3 million. Farm and apiary expenses of $11.0 million were $2.8 million lower than the prior year due to the impact of poor weather on fertiliser application at some of the stations.

Employee expenses, repairs and maintenance and other expenses of $12.4 million were $1.5 million higher than last year mainly due to inflation.

In addition, our costs of finance this year increased by $550,000 to $2.1 million due to higher interest rates. We recognised nonoperating losses of $4.1 million due to changes in the value of livestock. Commodity pricing has been a key challenge this year.

Taxation

Income tax losses from current and deferred tax have been recognised in both the current and prior year. We anticipate paying provisional tax next year.

Capital Spend

We delivered our capital works programme with capital expenditure of $2.4 million consistent with our planned priorities for farm development, environmental works and staff housing.

Shareholder Equity

Total shareholder equity increased $60.5 million, from $232.5 million in 2022 to $293.0 million this year.

Assets

Property, plant and equipment increased $79.5 million from $197.6 million to $277.1 million, mainly due to land and buildings being independently revalued to fair value. Emission trading units held at 30 June 2023 were valued at $8.7 million. Revaluations accounted for a decrease in our intangible assets of $15.9 million.

We expect to receive 180,000 units (or $7.5 million) once our early emissions return / forestry right is accepted by central government. We also anticipate a more stable carbon market following the review of the ETS and post central government elections in late 2023.

Liabilities

We have a term debt facility of $39.1 million, of which $38.2 million was drawn down as at 30 June 2023 (2022 $37.7 million). We have a seasonal facility of $6.5 million which was not utilised. The value of our stock and biological assets, which is used as security, has reduced in value by $4.3 million to $39.6 million, mainly due to the price of sheep and cattle at the year end. The value of our stock and biological assets exceeds total debt by $1.4 million which means our whenua is protected.

Outlook

As we move forward together, we are mindful of the need to repay our principal loans and increase our distributions. These strategic goals will be achieved by continuously improving our ahu whenua performance, diversifying our asset base over time and making wise use of our resources to achieve our purpose.

• Total Revenue $22.6m (2022: $26.3m)

• Total Expenses $23.4m (2022: $24.7m)

• Operating Surplus (Deficit)* ($0.8m) (2022: $1.6m)

(For a detailed summary of revenue and expenses by business activity see pg.33-35 of the Ātihau Annual report publication.)

Business round-up

Intended to give shareholders a deeper understanding of Ātihau business activities, the following summary provides key statistics, highlights and challenges of the year, and at-a-glance financial and non-financial information for each of our business units.

Ohotu and Tohunga

Overview

The focus of any finishing farm is growing young stock as fast as possible and producing high-quality products – and the team really delivered this season. By selling at a slightly lower weight than usual, the goal of reducing the number of three-year-olds on hand was exceeded with a 72% reduction in the number of older cattle on the farm at the end of the year. The lower weight did not affect the quality of the meat, with more than 90% of animals achieving the required marbling score. The development of the farms was prioritised with subdivision and reticulated water schemes being extended. This has allowed for improved pasture management, resulting in improved weight gain rate in both cattle and lambs.

Key Stats

• 2,690 hectares

• 2,400 effective hectares

Finishing farms

• 5 staff across the two farms

• 32,434 lambs finished

• 465 heiffers

• 2,398 steers finished

Financial Performance

$1.0 million surplus (2022 $1.0 million surplus) before finance costs and non-operating revaluations and tax.

(For a detailed summary of the financial performance data see pg.36 of the Ātihau Annual report publication.)

Te Pā

Overview

Finishing rates were high this year with minimal tail end lambs sold store and 80% of two-year-old steers finished before their third winter, with good marble scores achieved. Faster finishing and a good season enabled the purchase of lambs from other Ātihau farms to finish, not a normal Te Pā practice. A total of 180 heifers and 4000 ewe hoggets were mated. The station was also the venue for an Angus Pure field day entitled ‘What’s The Beef?’.

Key Stats

• 5,730 hectares

• 4,200 effective hectares

Bredding / finishing farms

• 6 full time staff +2 first-year apprentices

• 16,500 ewes

• 16,000 lambs finished

• 90 heiffers

• 370 steers finished

• 1,000 cows

Financial Performance

$1.65 million surplus (2022 $1.0 million surplus) before finance costs and non-operating revaluations and tax.

(For a detailed summary of the financial performance data see pg.37 of the Ātihau Annual report publication.)

Tawanui

Overview

The team at Tawanui are working smarter at their mahi, with improvements to farm infrastructure lifting efficiency. A fenced laneway running alongside Oruakukuru Road up to the woolshed has made it a safer and a more straight-forward task to get the sheep in. Upgrades to the board and catching pens once inside has helped make shearing less arduous. An extension of the water reticulation system to include some of the external lease blocks is also in the works. A total of 1800 ewe hoggets were mated.

Key Stats

• 2,360 Hectares

• 1,750 Effective hectares

Breeding/Finishing farm

• 3 Staff

• 9,000 Ewes

• 8,000 Lambs finished

• 110 Steers finished

• 400 Cows

Financial Performance

$0.5 million surplus (2022 $0.8 million surplus) before finance costs and non-operating revaluations and tax.

(For a detailed summary of the financial performance data see pg.38 of the Ātihau Annual report publication.)

Ohorea

Overview

Despite the challenge of staff shortages at Ohorea Station, several key projects have been completed on farm. These include 3 kilometres of riparian fencing, the installation of water supply to paddocks along the Mangawhero River, and further renovations to staff housing. A total of 120 heifers and 3000 ewe hoggets were mated.

Key Stats

• 5,630 hectares

• 3,850 effective hectares

Breeding Farm

• 7 staff

• 16,000 ewes

• 950 cows

Financial Performance

$1.6 million surplus (2022 $1.3 million surplus) before finance costs and non-operating revaluations and tax.

(For a detailed summary of the financial performance data see pg.39 of the Ātihau Annual report publication.)

Te Paenga

Overview

An increase in the weaning weights of both lambs and calves was achieved this year and is the result of improved grazing management during the calving and lambing periods. All steer calves were sold at weaning in a change to the farm system to allow for a slight increase in breeding cows and the mating of heifers as yearlings. By selling steer calves early we will be able to priority feed weaner heifers, so they achieve the weights required for mating. Some capital fencing was completed at Te Paenga during the year and the construction of a three-bay shed also started so that farm machinery can be stored under cover.

Key Stats

• 3,500 hectares

• 2,530 effective hectares

Breeding Farm

• 5 staff

• 10,500 ewes

• 750 cows

Financial Performance

$0.43 million surplus (2022 $0.57 million surplus) before finance costs and non-operating revaluations and tax.

(For a detailed summary of the financial performance data see pg.40 of the Ātihau Annual report publication.)

Papahaua

Overview

The cause of high losses during lambing was identified as the presence of toxoplasmosis in the one-year-old (two tooth) ewes, despite a vaccination programme. We are working with the veterinary team to address the issue, the source of which may be a high feral cat population on the station. New pastures delivered improved lamb growth rates, and both the calving percentage and weaning weights also improved. The construction of an on-farm home kill facility was completed to a high standard, achieving compliance with farm assurance auditing standards.

Key Stats

• 6,280 hectares

• 1,900 effective hectares

Breeding Farm

• 4 staff

• 8,500 ewes

• 480 cows

Financial Performance

$0.03 million surplus (2022 $0.49 million surplus) before finance costs and non-operating revaluations and tax.

(For a detailed summary of the financial performance data see pg.41 of the Ātihau Annual report publication.)

Waipuna

Overview

The benefit of fencing off gorges on the property is being realised with recorded stock losses reduced. The amount of grass in designated ‘safe’ paddocks was allowed to build up so cows could calve there, which improved the calving percentage. A big focus this year has been on cost control, with a change in cropping policy reducing the chance of failure. The team installed a reticulated water system on the Tower block instead of contracting the work out, and at the same time subdivided the area into smaller paddocks to improve cattle growth rates on the area. Around 70 hectares of the less productive pasture has been prepared for forestry planting, with more to come.

Key Stats

• 5,210 hectares

• 1,100 effective hectares

Breeding Farm

• 3 staff

• 6,000 ewes

• 250 cows

Financial Performance

$0.05 million surplus (2022 $0.17 million deficit) before finance costs and non-operating revaluations and tax.

(For a detailed summary of the financial performance data see pg.42 of the Ātihau Annual report publication.)

Hapuawhenua

Overview

An extremely wet spring led to badly damaged farm races which caused increased instances of lameness in the herd. Efforts to reduce the Somatic Cell Count (an indicator for mastitis) resulted in a 195,000 average for the season, down from 224,000 the previous year – proof of success. Water quality was improved for both cows and humans, with a change of water source for paddocks, dairy shed and farmhouses. New cattle yards have been constructed in the middle of the farm meaning calving paddocks can be used away from the effluent area and pastures more prone to being water-logged. A new manager’s house was completed and a full complement of six team members saw out the season.

Key Stats

• 415 hectares

• 395 effective hectares

Dairy Unit

• 6 staff

• 680 cows

Financial Performance

$0.35 million surplus (2022 $0.87 million surplus) before finance costs and non-operating revaluations and tax.

(For a detailed summary of the financial performance data see pg.43 of the Ātihau Annual report publication.)

AWHI Miere

Overview

Honey production across the country was exceptionally low this season, with many beekeepers producing little or no honey due to poor weather in mānuka-producing regions. Although only half of last season’s record mānuka crop was produced, 53 tonnes of mānuka honey and another 10 tonnes of other honey varieties was a good result for the team. Our partners Oha and Central Plateau Honey experienced similar impacts producing 31 tonnes of honey from close to 2,000 external hives on our whenua.

While the challenging season saw many beekeepers leave the industry and, combined with the poor crop and falling hive numbers nationally (down by 20% from 2019 to 2022 with another drop likely in the past 12 months), this does help to address the recent oversupply of honey. An expected subsequent rise in demand will mean our stored honey inventories will start to reduce. In addition, a long-term supply agreement with our key trading partner Manukora has progressed to deliver greater value and certainty around our future honey sales.

Ongoing issues with pests and disease added to the beekeepers’ challenges. An outbreak of American Foulbrood (AFB) brought in with the introduction of new externally sourced colonies added to ongoing issues with varroa mite during the autumn. AFB is a notifiable disease requiring destruction of the hive within seven days. In response, changes have been made to the mite treatment programme and externally sourced colonies will no longer be brought in, reducing the risk of importing disease.

We expect to make health and productivity gains from producing our own locally bred Queen bees for the first time this spring, to replace ageing or unhealthy matriarchs. This provides greater control over key determinants of hive health, temperament, and production, as well as reducing costs.

Key Stats

Honey Bees

• Almost 3,600 Ātihau hives on mānuka flow

• 63,024 tonne of honey produced

• 11 people across 3 apiary teams

Financial Performance

$0.8 million deficit (2022 $1.8 million deficit) before finance costs and non-operating revaluations and tax.

(For a detailed summary of the financial performance data see pg.45 of the Ātihau Annual report publication.)

Te Hou Farm

Overview

The purchase of the farm next door to Te Hou Farms and the installation of an underpass has seen the dairy platform increase by 100 hectares. A new shed has also been constructed to reduce milking times and allow the herd to grow to 1600 cows. The blueberry operation on the farm is being wound down after failing to deliver the yields expected, and a small area of forestry will be harvested.

Key Stats

Arable, Dairy, Finishing Station

• 1100 dairy cows

• 700 beef cattle

• 33.3% Ātihau Ownership

Forestry and Carbon Farming

Overview

Timber harvesting at Ohorea was completed, and the land replanted for the next crop. The preparation for new planting at Waipuna was also completed with a resource consent granted and spot spraying done. Work was done to take advantage of a fixed price option within the Emissions Trading Scheme. This required an early emission return to be triggered, filled using a mixture of credits and the fixed price option. Because the carbon price is higher than the fixed price option, this created a surplus of carbon credits which can be sold for a profit. Some carbon credits were sold and the surplus reinvested into the whenua to continue priority work required to lift the farms’ performance. About 30,000 credits remain to be released at a later stage.

Key Stats

• 475.3 hectares part of Papahaua joint venture

• 253 hectares at Ohorea, Tawanui, Te Paenga and Waipuna

Shareholder Engagement

Overview

In light of the impact pandemic restrictions had on shareholder engagement in the past two years, there was an increase in the number of events this year. Two farm tours were held, visiting Ohotū Station, the Apiary Shed, Hapuawhenua (Dairy Farm) and Tohunga Station. These saw excellent participation and engagement from shareholders and fostered a sense of appreciation and pride in the operation of the farms and apiary businesses. Shareholder Hunts were again popular and every year we get more interest, especially from uri who live afar and want the opportunity to come home and reconnect with the whenua There was an increase in the number of grants distributed through Te Āti Hau Trust, especially for kaumātua to support them with their wellbeing needs. Supporting our shareholders with share transfers, derivations and dividend information was also a priority this year.

Key Stats

• 9,748 shareholders

• 5,719 missing shareholders

• $3,194,615 unclaimed dividends

Taiao

Overview

Increasing legislation in the environmental space has continued to challenge farm system management and allocation of available budgets. Intensive winter grazing regulations now apply and mean significant efforts in planning for, recording and monitoring the management of crops for both farm staff and management.

We employed a summer student to help map intensive winter grazing areas on the stations, making management, consents, and the future Freshwater Farm Plans easier. Also in the compliance space, our emissions auditing has been completed for the 20212022 financial year and emissions monitoring for the 2022-2023 financial year is underway.

Healthy homes and general house inspections have been carried out on 98% of our houses, and the allocation of budget and resources for identified repairs and maintenance continues, with upgraded insulation and sufficient heat sources being priorities.

Efforts to retire more riparian and bush areas on all stations continue with 2.8 kilometres of new Ngā Whenua Rāhui bush retirement fencing completed on Te Pā Station, and 6.5 kilometres of riparian fencing completed on Te Pā, Te Paenga, Ohorea and Papahaua Stations with support from Horizons Regional Council.

A total of 150 poplar poles have been planted for soil conservation on Ohotū and Te Paenga Stations, and 48.2 hectares of mixed native species were planted at Te Pā. Disappointingly, lower quality seedlings from outside the district and late season frosts have culminated in high mortality, which will need to be addressed.

During the summer, we were privileged to have Ian Ruru from Tairāwhiti facilitate a staff workshop on the Mauri Compass framework. This will help guide native freshwater species monitoring and protection across the whenua. We were grateful for funding support from Te Wai Māori Trust.

The Mauri Compass wānanga was hosted on Te Pā Station. It was empowering, focused on native species and water quality flowing through some of the more intensively used whenua. Staff from Waipuna and Te Pā Stations have become accredited in the Mauri Compass framework, helping to ensure we continue to adapt, and to care for natural resources as best we can while maintaining productive farm operations. Another outcome in this area has been the start of freshwater species monitoring on Te Pā.

As well as the successful funding application from Te Wai Māori Trust, we secured a $130,000 grant from Te Aka Whai Ora for next financial year 2023/2024. This will fund the compilation of wāhi tapu and wāhi tūpuna kōrero, enabling the capture of knowledge for generations to come. An application for funding from Whanganui River Enhancement Trust (WRET) to conduct eDNA testing on Waipuna Station waterways during the 2023-2024 summer was also successful.

People

Overview

The attraction and retention of staff is currently a challenge throughout the farming industry due to a reduction in the number of people available to work. We are working hard to maintain a full complement of staff, while supporting learning and development pathways and cultural competency.

Acting on feedback from the He aha ōu whakaaro mō te koporeihana o Ātihau-Whanganui teams survey, we have actioned extensive leadership training opportunities for our farming teams which has been well received. We have carried out benchmarking to ensure our remuneration levels are in line with the market. We have also focused on building connections across the different teams and have had positive feedback and spent more time aligning our team goals and how we measure our success across the Group.

A focus on contractor engagement and validation has lifted the Health & Safety 365 score to 70, a level we wish to maintain going forward. Clothing to protect our kaimahi from the elements is more sustainably sourced, with an increase in the proportion of woolbased garments to 75% from 60%.

Key Stats

• 72 staff

• 40% uri

• 19.1% turnover

Governance and Corporate Financial Performance

$5.5 million deficit (2022 $2.7 million deficit) before finance costs and non-operating revaluations and tax.

(For a detailed summary of the financial performance data see pg.48 of the Ātihau Annual report publication.)

Ātihau-Whanganui Incorporation - Executive Leadership Team

• Andrew Beijeman - Chief Executive Officer

• Debbie Hyland - Chief Financial Officer

• Whetu Motuataane - Culture & Legacy Manager

• Siwan Shaw - Business Manager Farming

• Dan Adams - Business Manager Apiary

"The Executive Leadership Team acknowledge the hard work of kamahi during the year, both in the work completed during the year, the improvements that have been made which will support us in the future, and for their commitment to the Āti Hau Way –as we work together to achieve the collective aspirations, Āti Hau, mā te rahi Āti hau”