nestle new zealand ltd - reportingnzreportingnz.org/wp...nestle-new-zealand-limited-ar.pdf ·...

Nestle New Zealand Ltd

Annual Report

For the year ended

31 December 201 7

Nestle New Zealand Limited Financial Statements for the Year Ended 31 December 2017

Directors' Declaration

Company Directory

Independent Auditor's report

Statement of Comprehensive Income

Statement of Changes in Equity

Statement of Financial Position

Statement of Cash Flows

Notes to the Financial Statements

Contents

3

4

5 to 6

7 to 8

9

10

11

12 to 32

2


Directors' Declaration

In the opinion of the directors of Nestle New Zealand Limited, the financial statements and notes, on pages 7 to 32:

- comply with New Zealand generally accepted accounting practice and give a true and fair view of the financialposition of the company as at 31 December 2017 and the results of operations for the year ended on that date;

- have been prepared using the appropriate accounting policies, which have been consistently applied andsupported 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 2013.

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 Nestle New Zealand Limited for the year ended 31 December 2017.

For and on behalf of the Board of Directors:

P Winter 21st of March 2018 Director

3


Nature of Business:

Registered Office:

Postal Address:

Incorporation Number:

IRD Number:

Directors:

Solicitors:

Auditors

Bankers:

Business Location:

Company Directory

Manufacture of fast moving consumer goods ("FMCG") and its distribution thereof

Level 3 - Building 1 & 2 Carlaw Park Commercial 12-16 Nicholls LaneParnell, Auckland

P O Box 1784, Auckland 1015

46423

10-478-146

Trevor Clayton Christian Abboud (appointed 28 April 2017) Veronique Cremades (ceased 1 May 2017) Daniel Lagger (ceased 30 September 2017) Peter Winter (appointed 1 October 2017) Andrew AIishire (ceased 30 November 2017) Amanda Butler (ceased 8 December 2017) John Davis (appointed 1 January 2018)

Buddle Findlay

KPMG Sydney

ANZ Banking Corporation

Auckland and Christchurch

4

ndeoendent Auditor's Reoort To the shareholders of Nestle New Zealand Limited

Report on the financial statements

OpinionIn our opinion, the accompanying financial

statements of Nestle New Zealand Limited (the

company) on pages 7 to 32:

i. present fairly in all material respects the

company's financial position as at 31 December

2017 and its financial performance and cash

flows for the year ended on that date; and

ii. comply with New Zealand Equivalents to

International Financial Reporting Standards.

� Basis for opinion

We have audited the accompanying financial

statements which comprise:

- the statement of financial position as at 31

December 2017;

- the statements of comprehensive income,

changes in equity and cash flows for the year

then ended; and

- notes, including a summary of significant

accounting policies and other explanatory

information.

We conducted our audit in accordance with International Standards on Auditing (New Zealand) ('ISAs (NZ)'). We

believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

We are independent of the company in accordance with Professional and Ethical Standard 1 (Revised) Code of

Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance Standards Board and the

International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA

Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements and the

IESBA Code.

Our responsibilities under ISAs (NZ) are further described in the auditor's responsibilities for the audit of the

financial statements section of our report.

Other than in our capacity as auditor we have no relationship with, or interests in, the company.

$

fil. Use of this independent auditor's report

This independent auditor's report is made solely to the shareholders as a body. Our audit work has been

undertaken so that we might state to the shareholders those matters we are required to state to them in the

independent 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 shareholders as a body for our audit work, this independent

auditor's report, or any of the opinions we have formed.

A Responsibilities of the Directors for the financial statements The Directors, on behalf of the company, are responsible for:

the preparation and fair presentation of the financial statements in accordance with generally accepted

accounting practice in New Zealand (being New Zealand Equivalents to International Financial Reporting

Standards) and International Financial Reporting Standards;

implementing necessary internal control to enable the preparation of a set of financial statements that is

fairly presented and free from material misstatement, whether due to fraud or error; and

- assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related

to going concern and using the going concern basis of accounting unless they either intend to liquidate or to

cease operations, or have no realistic alternative but to do so.

x,R,,,,. Auditor's responsibilities for the audit of the financial statements

Our objective is:

to obtain reasonable assurance about whether the financial statements as a whole are free from material

misstatement, whether due to fraud or error; and

to issue an independent auditor's report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance

with ISAs NZ will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate,

they could reasonably be expected to influence the economic decisions of users taken on the basis of these

financial statements.

A further description of our responsibilities for the audit of these financial statements is located at the External

Reporting Board (XRB) website at:

http://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-8/

This description forms part of our independent auditor's report

KPMG

Sydney

21 March 2018

6

Nestle New Zealand Limited Statement of Comprehensive Income For the year ended 31 December 2017

In thousands of New Zealand Dollars

Note 2017 2016

Revenue 421,782 405,669

Cost of sales (202,894) (195,242)

Gross profit 218,888 210,427

Sales and marketing expenses (32,635) (32,964)

Distribution expenses (28,203) (26,875)

Administrative expenses (49,982) (45,651)

Other expenses (54,365) (55,690)

Operating profit before financing costs 53,703 49,247

Financial income 105 49

Financial expenses (1,251) (2,163)

Net financing costs 3 (1,146) (2,114)

Share of profiU(loss) of equity accounted investee 8 (39) (352)

Profit before income tax 52,518 46,781

Income tax expense 4 (14,716) (13,100)

Profit after income tax 37,802 33,681

Cash flow hedges (foreign exchange contracts) - net of tax 304 1,642

Actuarial losses on pension plan - net of tax 788 1,503

Other comprehensive income 1,092 3,145

Total comprehensive income for the period 38,894 36,826

The notes on pages 12 to 32 are an integral part of these financial statements

7

Nestle New Zealand Limited Statement of Comprehensive Income (continued) For the year ended 31 December 2017


Profit for the period

Other comprehensive income

Items that will not be reclassified to profit or loss

Defined benefit plan actuarial gain/(losses)

Tax on items that will not be reclassified to profit or loss

Total items that will not be reclassified to profit or loss

Items that may be reclassified subsequently to profit or loss

Effective portion of changes in fair value for cash flow hedges

Net change in fair value of cash flow hedges transferred to profit and loss

Tax on items that may be reclassified subsequently to profit or loss

Total items that may be reclassified subsequently to profit or loss

Other comprehensive income for the period, net of income tax

Total comprehensive income for the period

The notes on pages 12 to 32 are an integral part of these financial s tatements

Note 2017

37,802

1,094

(306)

788

1,380

(957)

(119)

304

1,092

38,894

8

2016

33,681

2,088

(585)

1,503

(975)

3,254

(637)

1,642

3,145

36,826

Nestle New Zealand Limited Statement of Changes in Equity

For the year ended 31 December 2017


Share Note capital

Balance at 1 January 2017 300



Total comprehensive income

Transactions w ith owners, recorded directly in equity

Dividends to shareholders 11

Share based payment transactions

Transactions with owners

Balance at 31 December 2017 300

Share Note capital

Balance at 1 January 2016 300



Total comprehensive income

Transactions with owners, recorded directly in equity

Dividends to shareholders 11

Share based payment transactions

Transactions with owners

Balance at 31 December 2016 300

Remuneration reserve

(93)

9

9

(84)

Remuneration reserve

(93)

(93)

(93)


Hedging Retained reserve earnings Total equity

24 15,058 15,289

37,802 37,802

304 788 1,092

304 38,590 38,894

(44,000) (44,000)

9

(44,000) (43,991)

328 9,648 10,192

Hedging Retained Total equity

reserve earnings

(1,618) 6,374 5,056

33,681 33,681

1,642 1,503 3,145

1,642 35,184 36,826

(26,500) (26,500)

(93)

(26,500) (26,593)

24 15,058 15,289

9

Nestle New Zealand Limited

Statement of Financial Position As at 31 December 2017


Note 2017 2016

Assets

Property, plant and equipment 5 60,149 56,686

Intangible assets 6 9,602 9,602

Deferred tax asset 7 1,646 1,151

Total non-current assets 71,397 67,439

Cash and cash equivalents 16 11,632 7,986

Trade and other receivables 10 35,077 46,595

Prepayments 491 1,130

Inventories 9 36,172 35,125

Interest bearing loans granted - CPW Partnership 16 & 22 212 1,271

Derivative assets 17 1,161 770

Total current assets 84,745 92,877

Total assets 156,142 160,316

Equity

Share capital 300 300

Reserves 244 (69)

Retained earnings 9,648 15,058

Total equity 10,192 15,289

Liabilities

Interest-bearing loans and borrowings 12 62,055 47,373

Employee entitlements 13 636 621

Retirement benefit plan liability 13 3,766 4,149

Other payables 278

Provisions 14 500 458

Total non-current liabilities 67,235 52,601

Short term borrowings 12 19,300

Trade and other payables 15 69,116 65,184

Derivative liabilities 17 402 1,238

Employee entitlements 13 4,651 4,537

Provisions 14 156

Current tax payable 4,545 2,011

Total current liabilities 78,715 92,426

Total liabilities 145,950 145,027

Total equity and liabilities 156,142 160,316


10


Statement of Cash Flows

For the year ended 31 December 2017


Note 2017 2016

Cash flows from operating activities

Cash receipts from customers 487,655 452,845

Payments to suppliers and employees (410,874) (400,877)

Cash generated from operations 76,781 51,968

Interest paid (net) (881) (1,788)

Income taxes paid (13,102) (16,500)

Net cash from operating activities 24 62,798 33,922

Cash flows from investing activities

Proceeds from sale of property, plant and equipment 33 28

Acquisition of property, plant and equipment (11,965) (7,130)

Loans from/ (to) related entities (net) 1,059 (999)

Net cash (used in) investing activities (10,873) (8,101)

Cash flows from financing activities

Net proceeds/ (repayment) of loans and borrowings (4,279) 8,226

Dividends paid (44,000) (26,500)

Net cash (used in) financing activities (48,279) (18,274)

Net increase/(decrease) in cash and cash equivalents 3,646 7,547

Cash and cash equivalents at 1 January 2017 7,986 439

Cash and cash equivalents at 31 December 2017 16 11,632 7,986


11


Notes to the Financial Statements For the year ended 31 December 2017 Significant accounting policies

Reporting entity

Nestle New Zealand Limited (the "Company") is a company incorporated and domiciled in New Zealand.

The Company is based in Auckland and is primarily involved in the manufacture of fast moving consumer goods ("FMCG") and its distribution thereof.

The financial statements of the Company are for the year ended 31 December 2017. The financial statements were authorised for issue by the directors on 21 March 2018.

Basis of preparation

Statement of compliance and basis of preparation The financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice ("NZ GMP"). They comply with New Zealand equivalents to International Financial Reporting Standards -Reduced Disclosure Regime ("NZ IFRS RDR") and other applicable Financial Reporting Standards, as appropriate for Tier 2 for-profit entities that qualify for and elect to apply reduced disclosure reporting concessions.

The entity has elected to report in accordance with Tier-2 For-Profit Accounting Standards on the basis that it does not have public accountability and is not a large for-profit public sector entity.

The financial statements have been prepared on a going concern basis.

Presentation currency These financial statements are presented in New Zealand dollars ($). All financial information presented in New Zealand dollars has been rounded to the nearest thousand dollars ($'000).

Use of estimates and judgements The preparation of a financial report in conformity with New Zealand Accounting Standards requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. These accounting policies have been consistently applied by each entity in the consolidated entity.

The 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 if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Judgements Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the consolidated financial statement is included in the following notes - Basis of consolidation (page 13) and Impairment (page 15).

Significant accounting policies The accounting policies set out below have been applied consistently to all periods presented in these financial statements.

12


Notes to the Financial Statements For the year ended 31 December 2017 Significant accounting policies (continued)

Basis of consolidation

Joint ventures (equity accounted investees) Joint ventures are those entities over whose activities the Company has joint control, established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions. Joint ventures are accounted for using the equity method (equity accounted investees). The financial statements include the Company's share of the income and expenses of equity accounted investees, after adjustments to align the accounting policies with those of the Company, from the date that joint control commences until the date that joint control ceases. When the Company's share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest (including any long-term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that the Company has an obligation or has made payments on behalf of the investee.

In accordance with NZ IFRS 11 and NZ IAS 28, the Company uses the equity method to account for its investment in the joint venture in the financial statements even though the financial statements are not described as consolidated financial statements.

Property, plant and equipment

Owned assets

Items of property, plant and equipment are stated at cost, less accumulated depreciation and impairment losses. The cost of self-constructed assets includes the cost of materials, direct labour, the initial estimate, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located.

On the date of transition to NZ IFRS, 1 January 2006, the revalued amounts of certain items of property, plant and the equipment were taken as deemed cost for those items of property, plant and equipment.

Where material parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Subsequent costs

Subsequent costs are added to the carrying amount of an item of property, plant and equipment when that cost is incurred if it is probable that the future economic benefits embodied with the item will flow to the Company and the cost of the item can be measured reliably. All other costs are recognised in the Statement of Comprehensive Income as an expense as incurred.

Depreciation

Depreciation is recognised in the Statement of Comprehensive Income on a straight-line basis over the estimated useful life of each part of an item of property, plant and equipment. Land is not depreciated. The depreciation rates used for each class of asset, for the current and comparative periods are as follows:

• Buildings

• Plant and Machinery

• Tools, Furniture and Equipment

• Information Technology Equipment

• Motor Vehicle

2-4%

6.7-20%

6.7-20%

33%

20%

The residual value of assets is reassessed annually.

13


Notes to the Financial Statements For the year ended 31 December 2017 Significant accounting policies (continued)

Intangible assets

Goodwill As part of its transition to NZ I FRS, the Company elected not to restate business combinations that occurred prior to 1 January 2006. The goodwill balance at that date is the deemed cost of that goodwill under NZ IFRS.

Goodwill arising after 1 January 2006 represents the excess of cost of the acquisition over the fair value of the identifiable assets, liabilities and contingent liabilities acquired.

Goodwill is measured at cost less accumulated impairment losses. Goodwill is allocated to cash-generating units and is tested annually for impairment.

Other intangible assets Other intangible assets consist of management information systems which have finite useful lives and are measured at cost less accumulated amortisation. Management information systems are amortised on a straight-line basis over five years.

Non-derivative financial instruments

Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables. Cash and cash equivalents comprise of cash balances and call deposits.

Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs. Subsequent to initial recognition, non-derivative financial instruments are measured as described below.

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.

Trade and other receivables

Trade and other receivables are measured at their cost less impairment losses.

Trade and other payables

Trade and other payables are stated at cost.

Interest-bearing loans and borrowings

Interest-bearing loans and borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest payable on borrowings is calculated using the effective interest method. Borrowing costs are expensed as incurred and included in the net financing costs.

Inventories

Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

Raw materials and packaging materials are valued on the first-in first-out principle and include expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of finished goods and work in progress costs are determined on a weighted average basis.

Cost of goods manufactured or in the process of manufacture consists of direct materials and direct labour, together with an appropriate proportion of fixed and variable production overheads.

14


Notes to the Financial Statements For the year ended 31 December 2017

Significant accounting policies (continued)

Impairment

The carrying amounts of the Company's assets other than inventories, prepayments, derivatives and deferred tax are reviewed at each balance date to determine whether there is any indication of impairment. If any such indication exists, the assets recoverable amount is estimated.

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 Statement of Comprehensive Income.

Estimated recoverable amount of other assets is the greater of their fair value less costs to sell and value in use. Value in use is determined by estimating future cash flows from the use and ultimate disposal of the asset and discounting these to their present value using a pre-tax discount rate that reflects current market rates and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss in respect of goodwill is not reversed. Other impairment losses are reversed when there is a change in the estimates used to determine the recoverable amount.

Employee benefits

Defined benefit plans

The Company's net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and any recognised past service costs and the fair value of any plan assets are deducted. The discount rate is the market yield on relevant New Zealand Government Stock at the Balance Sheet date with a similar term as the estimated term of the obligation. The calculation is performed by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Company, the recognised asset is limited to the net total of any unrecognised past service costs and the present value of any future refunds from the plan or reductions in future contributions to the plan.

When the benefits of a plan are improved, the portion of the increased benefit relating to the past service by employees is recognised in profit or loss on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in profit or loss.

Long service leave

The Company's net obligation in respect of long service leave is the amount of future benefit that employees have earned in return for their service in the current and prior periods. The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date.

The liability is calculated by determining the probability that the employee will reach entitlement and is discounted to its present value. The discount rate is the market yield on relevant New Zealand Government Stock at the Balance Sheet date.

15




Provisions

A provision is recognised when the Company has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market rates and, where appropriate, the risks specific to the liability.

Revenue

In general, revenue is recognised only when it is probable that the economic benefits comprising the revenue will flow to the entity and that the flow can be reliably measured. In addition the following specific revenue recognition criteria apply.

Goods Sold Revenue from the sale of goods is recognised in the profit or loss when the significant risks and rewards of ownership have been transferred to the buyer. Revenue from sale of goods is measured at the fair value of consideration received, net of returns and allowances, trade discounts and volume rebates.

Expenses

Operating lease payments

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognised as an expense in the Statement of Comprehensive income in the periods the amounts are payable.

Finance income and expenses

Finance income comprises interest income, 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 and net defined benefit obligation, foreign currency losses and losses on hedging instruments that are recognised in profit or loss. All borrowing costs are recognised in profit or loss using the effective interest method.

Foreign currency transactions

Transactions in foreign currencies that are settled in the accounting period are translated at the settlement rate. Transactions in foreign currency that are not settled in the accounting period, resulting in monetary assets and liabilities denominated in foreign currencies at the Balance Sheet date are translated to New Zealand dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on their translation are recognised in the Statement of Comprehensive Income.

Derivative financial instruments

The Company uses foreign exchange contracts to hedge its exposure to foreign exchange risk arising from future purchases of manufactured goods and raw materials in foreign currencies. In accordance with the treasury policy, the Company does not hold or issue derivative financial instruments for trading purposes.

However derivatives that do not qualify for hedge accounting are accounted for as trading instruments. Derivatives are recognised initially at their fair value with fair value changes recognised in profit or loss unless hedge accounting is applied. Transaction costs are expensed immediately.

Where the foreign exchange contracts are designated as a hedge, the effective portion of changes in the fair value of foreign exchange contracts is initially recognised in the Hedging Reserve, and subsequently transferred to other comprehensive income at the point at which the underlying inventories are recorded in the Statement of Comprehensive Income. Any ineffective portion of foreign exchange contracts is recognised immediately in profit or loss.

16




Income tax

Income tax expense comprises current and deferred tax. 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 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 temporary differences can be utilised.

Goods and services tax

All amounts are shown exclusive of Goods and Services Tax (GST), except for receivables and payables that are stated inclusive of GST.

New standards and interpretations not yet adopted

A number of new standards and amendments to standards are effective for annual reports beginning after 1 January 2018 and earlier application is permitted; however, the Company has not early adopted the following new or amended standards in preparing theses consolidated financial statements.

(i) IFRS 9 Financial Instruments

IFRS 9 replaces the existing guidance in IFRS 139 Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidance on the classification and measurement of financial instruments, including a new expected credit loss model for calculating impairment on financial assets, and the new general hedge accounting requirements. It also carries forward the guidance on recognition and de-recognition of financial instruments from IAS 139. IFRS 9 is effective for annual periods beginning on or after 1 January 2018. Early adoption is permitted. The Company has assessed the potential impact of IFRS 9 on the financial statements and do not expect any material adjustments.

(iii) IFRS 15 Revenue from Contracts with Customers

IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including IFRS 118 Revenue, IFRS 111 Construction Contracts and IFRIC 13 Customer Royalty Programmes. IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018. The Company has assessed the potential impact of IFRS 15 on the financial statements and do not expect any material adjustments.

(iii) IFRS 16 Leases

IFRS 16 Leases removes the lease classification test and requires all leases (including operating leases) to be brought onto the balance sheet. The definition of a lease is also amended and is now the new on/off balance sheet test for lessees. IFRS 16 is effective for annual reporting periods beginning on or after 1 January 2019. Early adoption will be permitted for entities that also adopt IFRS 15 Revenue from contracts with customers. The Company is assessing the potential impact on its financial statements resulting from the application of IFRS 16.

17




1 Expenses

Administrative expenses include: Note 2017 2016

Fees paid to auditors:

- audit fees 47 45

- taxation 7 36

- other 2

Other expenses include: Note 2017 2016

Restructuring costs expensed as incurred 109

Loss on disposal of property, plant and equipment 364 330

Impairment losses on property, plant and equipment 919

Operating lease expenses 18 4,374 3,876

2 Personnel expenses

Note 2017 2016

Wages and salaries 53,068 50,556

Expenses/(lncome) in respect of defined benefit plans 13 884 1,205

Increase in liability for long-service leave 15 184

Recognised in profit or loss 53,967 51,945

Movement in share based payment (9) 93

Movement in defined benefit plans recognised in other (1,094) (2,088) comprehensive income

52,864 49,950

3 Net financing costs

Note 2017 2016

Interest income on bank deposits 105 49

Financial income 105 49

Interest expense (1,251) (2,163)

Net change in fair value of derivative assets through profit or loss

Financial expense (1,251) (2,163)

Net finance costs (1,146) (2,114)

18




4 Income tax expense

Current tax expense

Deferred tax expense

Total income tax expense

Reconciliation of effective tax rate

Profit before tax

Income tax using the company tax rate at 28% (2016: 28%)

Share of (gain)/loss of equity accounted investee

Non-taxable items

Under/(over) provided in prior periods

Imputation credits

Imputation credits available for use in subsequent reporting periods

Note

7

Note

2017

15,636

(920)

14,716

52,518

14,705

11

(31)

31

14,716

2017

(38,246)

2016

13,560

(460)

13,100

46,781

13,099

99

(105)

8

13,100

2016

(42,255)

19




5 Property, plant and equipment

Land Buildings Plant & Motor Information Total machinery, vehicles technology furniture & equipment

Balance at 31 December 2017

Cost 2,491 38,866 100,157 89 4,888 146,491

Accumulated depreciation (19,373) (63,478) (87) (3,404) (86,342)

Carrying value 2,496 19,493 36,679 2 1,484 60,149

Current year depreciation 1,532 5,133 2 519 7,186

Balance at 31 December 2016

Cost 2,165 38,119 93,059 89 4,667 138,099

Accumulated depreciation (17,827) (60,416) (85) (3,085) (81,413)

Carrying value 2,165 20,292 32,643 4 1,582 56,686

Current year depreciation 1,485 5,454 4 394 7,337

20

6




Intangible assets Goodwill Other Total

Intangible Assets

Cost

Balance at 1 January 2016 11,119 8,945 20,064

Additions Transfers

Balance at 31 December 2016 11,119 8,945 20,064

Balance at 1 January 2017 11,119 8,945 20,064 Additions Transfers

Balance at 31 December 2017 11 119 8,945 20,064

Amortisation and impairment

Balance at 1 January 2016 1,517 8,945 10,462 Amortisation for the year

Impairment for the year Balance at 31 December 2016 1,517 8,945 10,462

Balance at 1 January 2017 1,517 8,945 10,462 Amortisation for the year Balance at 31 December 2017 1,517 8,945 10,462

Carrying amounts

At 1 January 2017 9,602 9,602

At 31 December 2017 9,602 9,602

Goodwill relates to the acquisition of Animal Health Food Ltd (1992) and Wyeth New Zealand (2012).

Goodwill acquired through business combinations has been allocated to the cash-generating units below, being the level at which the business is monitored for internal management and reporting purposes, for impairment testing.

Nestle Purina Petcare

Wyeth New Zealand

2017

4,468

5,134

9,602

2016

4,468

5,134

9,602

21




1 Deferred tax assets and liabilities

Unrecognised deferred tax assets and liabilities

There are no unrecognised deferred tax assets or liabilities.

Recognised deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:

Assets

2017 2016

Deferred tax assets I (liabilities) 4,684 4,540

Liabilities Net

2017 2016 2017 2016

(3,038) (3,389) 1,646 1,151

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset and when the taxes are settled on a net basis with the same tax authority.

Movement in recognised deferred tax assets and liabilities

The movement in the deferred tax account is as follows:

Balance at 1 January

Tax on differences recognised in profit or loss

Tax on differences recognised in other comprehensive income

Balance at 31 December

2017

1,151

920

(425)

1,646

2016

1,913

460

(1,222)

1,151

22


Notes to the Financial Statements For the year ended 31 December 2017 In thousands of New Zealand Dollars

8 Equity accounted investees

The Company's share of loss in its equity accounted investee for the year was $39,000 (2016: $352,000 loss).

Summary financial information for equity accounted investee, not adjusted for the percentage ownership held by the Company:

Ownership Current Non- Total Current Non- Total Revenues Expenses ProfiU(loss)

In thousands of New Zealand dollars

2017

CPW New Zealand Goint venture) 50%

2016

CPW New Zealand Goin! venture) 50%

assets current assets liabilities current liabilities

2,216

2,802

asset liabilities

2,216 14,966

2,802 15.474

14,966

15,474

16,219 (16,297) (78)

14,673 (15,377) (704)

23




g Inventories

10

Raw materials

Less: Provision for write down

Finished goods

Less: Provision for write down

Carrying amount of inventories

Note 2017

6,879

(295)

6,584

30,336

(748)

29,588

36,172

In 2017 the write-down of inventories to net realisable value amounted to $1,043,000 (2016: $653,000).

In 2017, inventories of $66,534,000 (2016:$66,971,000) were recognized as an expense during the year and included in Cost of Sales.

Trade and other receivables

Note 2017

Trade receivables 28,305

Trade receivables due from related parties 6,405

Other receivables 367

35,077

2016

7,978

(415)

7,563

27,800

(238)

27,562

35,125

2016

35,285

10,892

418

46,595

Trade receivables are shown net of impairment losses amounting to $46,000 (2016: $78,000) and provision for prompt payment discount amounting to $814,000 (2016: $1,361,000) recognised in the current year.

11 Capital and reserves

At 31 December 2017, share capital comprised 150,000 ordinary shares (2016: 150,000). All issued shares are fully paid.

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company, and rank equally with regard to the Company's residual assets.

24




11 Capital and reserves (continued)

12

Hedging reserve

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of foreign exchange contracts (cash flow hedging instruments) related to hedged transactions that have not yet occurred or not yet recognised in profit or loss.

Dividends

The following net dividends were declared and paid by the Company for the year ended 31 December 2017:

Final dividend $96.66 per share (2016: $33.33) for previous year

1"1 Interim dividend $140.00 per share (2016: $110.00) for current year

2nd Interim dividend $56.66 per share (2016: $33.33) for current year

Interest-bearing loans and borrowings

Current

Unsecured loans

Non-current

Unsecured loans

Share of accumulated loss of equity accounted investee

Note

Note

2017

14,500

21,000

8,500

44,000

2017

55,719

6,375

62,055

2016

5,000

16,500

5,000

26,500

2016

19,300

19,300

41,037

6,336

47,373

Unsecured loans are intercompany loans of $55,719,000 with NTC-MEA (Nestle Treasury Centre - Middle East and Africa) (2016: $41,037,000). Interest is charged at market rates. NTC-MEA has advised there is no current intention to receive repayment in the next 12 months and therefore unsecured loans are shown as non-current.

Current unsecured loans in overnight borrowings made with ANZ were repaid in 2017 by the company.

25




13 Employee benefits

Current

Liability for annual leave

Non-current

Liability for long-service leave

Retirement benefit plan liability

Actuarial assumptions

Note

Principal actuarial assumptions at the reporting date (expressed as weighted averages)

Note

Discount rate

Future salary increases

Future pension increases

2017

4,651

4,651

636

3,766

4,402

9,053

2017

3.25%

3.00%

0.00%

2016

4,537

4,537

621

4,149

4,770

9,307

2016

3.50%

3.00%

0.00%

Assumptions regarding future mortality are based on published statistics and mortality tables. The assumed retirement age is 65 (2016: 65) and the average age of pension beneficiaries is 73 (2016:74).

Reconciliation of Defined Benefit Obligation 2017 2016

Defined benefit obligation at start of period 38,148 40,734

Current service cost (net member contributions) 527 756

Interest cost on DBO 1,294 1,333

Member contributions 291 337

Actuarial loss/ (gain) 1,427 (1,292)

Settlement gain ( 1)

Benefit payments (2,365) (3,720)

Defined benefit obligation at end 39,322 38,148

(1) Settlement gain is included in administrative expense in the Statement of Comprehensive income.

26




13 Employee benefits (continued)

Reconciliation of net plan assets

Assets at start of period

Interest income on Plan assets (at discount rate)

Return on assets greater than discount rate (actuarial gain)

Employer contributions

Member contributions

Administration costs

Benefit payments

Assets at end of period

Pension expense in P&L

Costs I (Income) recognized in P&L (excluding tax)

Contributions tax

Costs I (Income) recognized in P&L (including tax)

Remeasurement effects in Other Comprehensive Income

Remeasurement effects recognized in OCI (excluding tax)

Tax expense

Remeasurement effects recognized in OCI (including tax)

Plan assets allocation

Percentage invested in each asset class at the end of the period

Equity

Global bonds

Cash

Key risks The key risks that the Fund is exposed to are:

2017

33,999

1,157

2,521

173

291

(220)

(2,365)

35,556

2017

884

435

1,319

2017

1,094

(306)

788

2017

55.8%

38.0%

6.2%

the risk that investment returns will be lower than assumed and the Company will need to increase its contributions. the risk that salaries will increases at a greater rate than assumed, which will require an increase in Company contributions.

2016

35,512

1,163

795

190

337

(279)

(3,720)

33,998

2016

1,205

593

1,798

2016

2,088

(585)

1,503

2016

54.8%

38.8%

6.4%

the risk that the underlying mortality of members who are pensioners will be lower than assumed, which will lead to an increase in the required Company contribution rate. the risk that there is an adverse change to taxation basis affecting investment income or Company

contributions, both of which could lead to an increase in the required Company contribution rate.

27




14 Provisions Note 2017 2016

Current

Other short-term provision 156

Non-current

Make good provision 123 123

Other long-term provision 377 335

500 458

15 Trade and other payables

Note 2017 2016

Trade payables 34,092 34,920

Trade payables due to related parties 20,607 19,106

Non trade payables and accrued expenses 14,417 11,158

69,116 65,184

28




16 Financial instruments

Note Trading Loans and Other Total carrying receivables amortised amount

2017: costs

Assets

Cash and cash equivalents 11,632 11,632


Derivative assets 17 1,161 1,161

Interest bearing loans granted 22 212 212

Total current assets 1,161 46,921 48,082

Total assets 1,161 46,921 48,082

Liabilities

Interest bearing loans and borrowings 12 62,055 62,055


Short term borrowings 12 ·--·----· --• --- ··-�·----

Trade and other payables 15 69,116 69,116 --------·-------- -- -- ··-· -- --- - -

Derivative liabilities 17 402 402

Total current liabilities 402 69,116 69,518

Total liabilities 402 131,171 131,573

Note Trading Loans and Other Total carrying receivables amortised amount

2016: costs

Assets

Cash and cash equivalents 7,986 7,986


Derivative assets 17 770 770

Interest bearing loans granted 22 1,271 1,271

Total current assets 770 55,852 56,622

Total assets 770 55,852 56,622

Liabilities

Interest bearing loans and borrowings 12 47,373 47,373


Short term borrowings 12 19,300 19,300

Trade and other payables 15 65,184 65,184

Derivative liabilities 17 1,238 1,238

Total current liabilities 1,238 19,300 65,184 85,722

Total liabilities 1,238 19,300 112,557 133,095

29




17 Financial risk management

The Company classifies its foreign exchange contracts hedging forecast transactions as cash flow hedges. The fair value of foreign exchange contracts used as hedges of forecast transactions at 31 December 2017 was $759,000 (2016: $(468,000)) comprising assets of $1,161,000 (2016: $770,000) and liabilities of $402,000 (2016: $1,238,000).

18 Operating leases

Leases as lessee

19

20

Non-cancellable operating lease rentals are payable as follows:

Less than one year

Between one and five years

More than five years

2017

4,004

9,998

14,002

2016

3,499

6,136

9,635

The Company leases offices, warehouse facilities, car parks, fork hoists and motor vehicles under operating leases.

During the year ended 31 December 2017, $4,374,000 (2016: $3,876,000), was recognised as an expense in the Statement of Comprehensive Income in respect of operating leases. Refer to Note 1 - Expenses (Other expenses -Operating lease expense)

Commitments

2017 2016

Capital commitments 1,839 50

Commodity forward contracts 520

Foreign exchange forward transactions 79,351 77,651

81,190 78,221

Contingencies

The Company has provided a letter of support to the Directors of Cereal Partners New Zealand stating that Nestle New Zealand Ltd will continue to provide working capital funding as required to enable Cereal Partners New Zealand to meet its financial obligations as and when they fall due for at least a period of 12 months from the date the 2017 Cereal Partners New Zealand financial statements are signed.

21 Capital management

The Company's capital includes share capital, hedging reserve and retained earnings.

The Company's policy is to maintain a sound capital base to support the continued development of its business. The Board of Directors seeks to maintain a prudent balance between different components of the Company's capital.

The Company is not subject to any externally imposed capital requirements.

The Company's policies in respect of capital management are reviewed regularly by the Board of Directors.

30




22 Related parties

The immediate and ultimate parent entity is Nestle S.A., incorporated in Switzerland with following related transactions:

Purchase of finished goods from related parties

Royalty payments

2017

10,780

21,517

2016

10,282

20,464

The following summarises Nestle New Zealand Ltd and its controlled entities' material transactions with other related parties not disclosed in detail elsewhere in the accounts:

Sale of finished goods to related parties

Purchase of finished goods from related parties

Purchase of raw and packaging materials from related parties

Purchase of equipment and spares from related parties

Provision of services from related parties

Interest paid to related party

Working Capital Loan - CPW Partnership

Share of accumulated loss of equity accounted investee

23 Subsequent events

2017

58,910

114,279

3,397

82

19,120

1,282

2017

212

(6,375)

(6,163)

2016

60,190

107,235

3,765

313

14,206

1,554

2016

1,271

(6,336)

(5,065)

After the balance sheet date the directors of the Company declared a final dividend of $8,500,000.The dividend has not been provided and there is no income tax consequence. All the dividends paid or declared by the Company since the end of the previous financial year were 100% fully imputed.

31




24 Reconciliation of cash flows from operating activities

Note 2017 2016

Profit for the period 37,802 33,681

Adjustments for:

Depreciation and amortisation 7,186 7,337

Sale of property, plant and equipment (gain)loss 364 330

Impairment losses on property, plant and equipment 919

(Gain) / Loss on equity investment 8

39 352

Interest income 3 (105) (49)

Interest expense 3 1,251 2,163

Share based payment 115 149

Income tax expense 4 14,716 13,100

Operating profit before changes In working capital and provisions 62,287 57,063

(lncrease)/decrease in trade and other receivables 11,518 (6,353)

(lncrease)/decrease in other assets and liabilities (585) (102)

(lncrease)/decrease in inventories (1,047) (2,757)

(Decrease)/increase in trade and other payables 4,975 3,768

(Decrease)/lncrease in provisions and employee benefits (367) 591

Cash generated from operations 76,781 52,210

Interest paid (881) (1,788)

Income taxes paid (13,102) (16,500)

Net cash from operating activities 62,798 33,922

32

nestle new zealand ltd - reportingnzreportingnz.org/wp...nestle-new-zealand-limited-ar.pdf ·...

Documents