BackTine Directors Report 2018
*Approved by auditor
TINE Milk Supplies was established on 1 January 2004 as a separate administrative operation at TINE SA, with separate accounts. This was because of an agreement concluded on 19 December 2003 between the government and TINE SA concerning clear financial separation between raw materials handling and industrial refinement at TINE SA.
TINE Milk Supplies submits its own audited financial statements with a separate annual report to the Norwegian Agriculture Agency by 1 June each year, partly so that it is possible to document the fact that TINE is complying with its obligations in accordance with the agreement. The auditing of TINE Milk Supplies is carried out by the same audit company that carries out auditing of the annual accounts and consolidated accounts for TINE SA.
The various income, expense and balance sheet items for TINE Milk Supplies are also included in the relevant accounting and balance sheet items in the company accounts for TINE SA. Only the actual profit element at TINE Milk Supplies is eliminated from the profit at TINE SA. Profits or losses at TINE Milk Supplies are offset against the manufacturer by means of subsequent payment or carrying across to a new financial year so that this is included in the basis for determining the base price in the following year.
TINE Milk Supplies deals with all activities relating to the handling of milk as a commodity from milk producers until the milk has been supplied and billed to the individual stakeholders in the milk market scheme. All stakeholders, including TINE as a processing industry, purchase raw milk at the applicable listing price at the time the milk is supplied by TINE Milk Supplies. This is reported to and monitored by the Norwegian Agriculture Agency.
To be able to fulfil its obligations, TINE Milk Supplies purchases services from various function areas at TINE SA based on clearly defined service instructions. Regular reviews are carried out with the service providers in order to clarify the autonomous and independent role of TINE Milk Supplies and ensure that actions are implemented in accordance with adopted plans and targets. Service instructions have currently been established with the following function areas: TINE Consultancy and Member Service, TINE Logistics and TINE Economy & Finance. The instructions are based on a set of agreements devised and quality-assured by the Norwegian Institute of Bioeconomy Research (NIBIO) and approved by the Norwegian Agriculture Agency. All changes to the service instructions must be approved by the Group executive at TINE SA before being submitted to the Norwegian Agriculture Agency.
In 2018, TINE Milk Supplies received 1455.0 million litres (1433.8 million litres in 2017) of cow’s and goat’s milk: 1434.9 million litres of cow’s milk and 20.1 million litres of goat’s milk. 50.1 million litres of the cow’s milk were organic (50.3 million litres in 2017). The usage level for organic milk was 58.0 per cent (57.9 per cent in 2017). Of the total volume of cow’s and goat’s milk, 251 million litres (231 million litres in 2017) were sold to external stakeholders. The fat content in cow’s milk increased from 4.26 per cent in 2017 to 4.29 per cent in 2018. The dry solids content in goat milk stands at 12.16 per cent compared with 11.88 per cent in 2017.
The target price for milk is established by the parties to the agricultural agreement and amounted to NOK 5.41 per litre for the first six months of the year, while it increased by NOK 0.03 to NOK 5.44 per litre for the second six months of the year. TINE Milk Supplies has achieved its target price in the second half of 2018, while the target price withdrawal was NOK 0.01 under in the first six months of 2018.
TINE’s responsibilities as a market regulator are assigned in organisational terms to TINE Milk Supplies. This involves reporting at regular intervals to the Norwegian Agriculture Agency and the Sales Council, as well as providing regular information on the TINE website to stakeholders regarding the market situation and market prospects for milk and milk products.