A N N U A L R E P O R T 2 0 0 4
C O N T E N T S
About Incitec Pivot Limited
Chairman’s Report
Managing Director’s Report
Board of Directors
Review of Performance
Executive Team
Safety, Health and Environment
Financial Report
1
2
3
4
6
9
10
12
In this report the following abbreviations are used:
Incitec Pivot Limited (Incitec Pivot)
Pivot Limited (Pivot)
Orica Limited (Orica)
Incitec Fertilizers Limited (IFL)
Incitec Ltd (Incitec)
Incitec Pivot Limited ABN 42 004 080 264
A B O U T I N C I T E C P I V O T L I M I T E D
...these advantages of scale and geographical diversity enable the Company
to supply about three million tonnes of fertiliser a year, generating sales
revenue in excess of $1.1 billion annually.
Combined, these advantages of scale and geographical
diversity enable the Company to supply about three million
tonnes of fertiliser a year, generating sales revenue in excess of
$1.1 billion annually.
Incitec Pivot is a relatively new company, created by the merger of
two of the powerhouses of the Australian fertiliser industry in June
2003. However, its component enterprises have roots going back
to the early part of last century when Australian superphosphate
production was pioneered.
Having the pedigree and the scale provides Incitec Pivot with the
foundation to take on its next big challenge – becoming the best,
as judged by its stakeholders.
Incitec Pivot Limited is a leading agribusiness involved in the
manufacture and supply of fertiliser to farmers in Australia’s
eastern and southern states. Fertiliser plays an essential role in
enabling Australian producers to achieve the productivity they
need to compete in global markets.
Supplying more than 50 per cent of Australia’s agricultural plant
nutrient needs, Incitec Pivot’s scale underpins its position as a
sustainable low-cost supplier. The Company’s five manufacturing
plants, strategically located import facilities and distribution
network stretching from far north Queensland to Tasmania and
South Australia give it unequalled capacity to meet the
market’s needs.
This broad exposure to diverse crop, pasture and horticulture
markets spread over a wide geographic base helps to insulate
Incitec Pivot from the impact of local seasonal weather conditions
and fluctuating global demand for particular farm products.
Backing up Incitec Pivot’s manufacturing and logistics advantages
is a major soil, plant and water testing laboratory accredited to
the highest standards and supported by a respected agronomic
service. These services ensure farmers can identify the most
cost-effective nutrient solutions to optimise their productivity.
C H A I R M A N ’ S R E P O R T
On behalf of the Board, I am pleased
to report that in successfully
completing its first full reporting year,
Incitec Pivot Limited has established a
solid foundation on which to build for
the future.
The Company ended the year on
30 September 2004 with a net profit
after tax, excluding significant items, of
$80.9 million, an increase of 77 per
cent when compared with the
combined pre-merger businesses. It
achieved this result in a flat market for fertiliser which saw sales
increase only one per cent to approximately 2.9 million tonnes,
generating revenue of $1.14 billion.
Shareholders will receive a final dividend of $1 per share, giving a
full-year payout of $1.29 per share fully franked. This is a sound
reward for all equity holders and is particularly well-deserved by
those long-term shareholders who have maintained loyalty to their
company, in many cases over several decades.
For shareholders who held their shares in Incitec Pivot for the full
year, the capital growth (20 per cent) combined with the total
dividend (8.2 per cent yield) represents total shareholder returns
of 28.2 per cent.
Incitec Pivot’s strong balance sheet shows net cash in reserve of
$20.8 million. This is a tribute to the benefits flowing from the
merger combined with prudent ongoing financial management
and highlights the inherent strength of the business.
Continuing drought
The Company’s strong performance in its maiden year came in
spite of continuing drought in some areas. While rainfall in most
parts of southern and eastern Australia presented farmers with
improved growing conditions, other areas remained dry and water
storages generally remain low.
That the Company should perform well in difficult seasonal
conditions underlines the benefit of Incitec Pivot’s broad exposure
to diverse crop, pasture and horticultural markets spread over a
wide geographical base.
During the 2004 financial year, Incitec Pivot captured all the
synergy savings anticipated at the beginning of the merger
process and went on to identify and achieve further efficiency
benefits flowing from the integration of the two former companies.
In the vital area of Safety, Health and Environment, Incitec Pivot
improved its performance dramatically over the 12 months.
Incidents involving injury to employees were greatly reduced and
our plants reported fewer environmental licence breaches.
In April 2004, after careful consideration, the Company took the
decision to withdraw from the sale of straight ammonium nitrate
fertilisers in the interests of public security. This decision was
taken only after the Company was satisfied that viable alternative
products were available to meet farmers’ needs.
Another major event during the financial year was the securing of
long-term natural gas agreements to supply our ammonia and
urea manufacturing operations at Gibson Island, Brisbane. The
10-year agreements will start in 2007 on the conclusion of the
current agreements and provide the plant with secure and
competitively priced gas sources until 2017. As well as offering
longer-term security to customers and employees, the new gas
agreements extend the workable life of the plant to 2017.
Growth opportunities
Having established a solid foundation for the new company,
Incitec Pivot is also alert to growth opportunities for the future. In
September 2004, the Company announced that it is part of a
consortium chosen from a global field to conduct a feasibility
study into the establishment of a world-scale ammonia/urea
manufacturing plant in Brunei.
While a decision on whether or not the project will proceed will
not be made until late 2005, being part of the consortium chosen
against global competition to progress negotiations with the
Brunei authorities shows that Incitec Pivot has the strength,
fertiliser industry expertise and vision to pursue this major growth
opportunity.
It is appropriate at this point to acknowledge the support Incitec
Pivot draws from its major shareholder, Orica Limited, in a number
of areas. The Company leverages off Orica’s strength and scale to
secure more attractive outcomes when purchasing goods and
services and benefits from drawing on certain shared services to
reduce overhead costs.
Also of great importance is the benefit our young company draws
from being associated with the successful business culture Orica
has developed over the years. In addition, the inter-company link
creates valuable career opportunities for employees of both
companies.
In the area of corporate governance, I am pleased to report that
the Board considers that Incitec Pivot has complied with the
requirements set out in the ASX Corporate Governance Council
Recommendations as detailed in the Directors’ Report.
I thank my fellow directors for their ongoing commitment to
creating a truly great agribusiness and, on behalf of the Board, I
would like to express our confidence in the Incitec Pivot team and
thank everyone for their dedication and sheer hard work during a
gruelling formation period.
The 2004 financial year clearly showcased Incitec Pivot’s
potential to continue to produce strong shareholder returns
while reinvesting in the business and exploring all sound
opportunities for growth. It was a great start by any measure
and will form the baseline on which the Company’s future
performance will be judged.
John Watson, AM
Chairman
2
M A N A G I N G D I R E C T O R ’ S R E P O R T
Despite flat demand for fertilisers in a
highly competitive market, Incitec Pivot
Limited completed its first full financial
year on 30 September 2004 with a
very solid financial performance.
Net profit after tax (NPAT), excluding
significant items, was $80.9 million, up
77 per cent on the combined NPAT for
the former businesses in the 2003
financial year. NPAT including
significant items was $75 million.
Earnings before interest and tax (EBIT),
Another highlight of our manufacturing performance during the
year was the achievement of record production of granular
ammonium sulphate at our Gibson Island plant and Granulock
compound fertilisers at our Kooragang Island operations.
Low-cost and reliable manufacturing performance is a key
element of the Company’s strategy and this was reinforced in
September 2004 with the signing of new 10-year natural gas
supply agreements for Gibson Island. Natural gas is the major
feedstock to manufacture ammonia and urea fertilisers and these
agreements will secure the long-term future of manufacturing at
the site as well as strengthening Incitec Pivot’s position as a
low-cost Australian nitrogen fertiliser producer.
before significant items, was $121.9 million, up 62 per cent on
combined EBIT of the pre-merger businesses.
This notable commercial performance exceeded budget
expectations. Most pleasing is that the improvement in earnings
was largely driven by internally generated efficiencies, including
merger synergies, and also a strong contribution from
manufacturing operations.
Successful merger
In my report for the Incitec Pivot 2003 financial year, I highlighted
three priority targets for achieving the successful integration of
our two previous businesses into one dynamic new enterprise.
This year I am pleased to report that all three targets have
been achieved.
• Enthusiastic support from our employees and business
partners enabled us to blend two separate and previously
competing enterprises into a single unified company with its
own distinctive culture.
• Despite aggressive competitor activity, with continued backing
from our agent and dealer partners, Incitec Pivot retained its
leadership position in the marketplace.
• The new company captured the targeted $30 million in annual
synergy savings identified when the merger was first proposed
and then went on to secure a further $20.6 million in improved
efficiencies.
These successes mark the end of our merger phase and give us
the foundation to start our second full year as an integrated
business on a strong footing.
Performance highlights
One highlight of the year was in our Safety, Health and
Environment performance, with significant improvement being
made in nearly every measure of our performance in this area.
For instance, the total number of recordable injuries fell in 2004
to 13 from the combined totals for the previous businesses of
23 in 2003 and 49 in 2002. While this improvement is a tribute
to the safety commitment of our employees and contractors,
we still have more work to do to meet our vision of
‘No Injuries to Anyone. Ever’.
On the manufacturing front, a major improvement initiative has
significantly improved the competitiveness of the Geelong
single superphosphate (SSP) plant, producing $3 million in
annual savings while increasing plant reliability and performance.
The Company now has three SSP plants able to meet
market demand.
Improving customer service
With the scale of the merger and the amount of change
occurring, there were teething problems during the year which
unfortunately inconvenienced some of our customers from time
to time.
To correct this situation Incitec Pivot has embarked on a major
company-wide program we have named Customer First to
strengthen our customer focus as part of the pursuit of
continuous business improvement. Driving this program to a
successful conclusion is one of the management team’s
highest priorities. By working closely with our distribution partners,
we have identified many customer-benefiting improvements that
will be implemented in the current financial year. Our clear
intention is to offer the best service in the market and earn Incitec
Pivot the privilege of being the fertiliser supplier of choice.
The future
Looking to the future, the Company is now well placed to
examine opportunities for growth. One such project is the
proposal, announced in September this year, to build a new
world-scale ammonia/urea manufacturing plant in Brunei.
This is an exciting project that will now be further investigated by
Incitec Pivot and our consortium partners, with a final decision
expected towards the end of 2005. It is worth noting that as part
of the project, Incitec Pivot has the rights to secure the majority
urea off-take from the project and also to operate the
manufacturing facility.
In summary, having successfully completed its first full year as a
stand-alone company, Incitec Pivot has now established the
baseline against which our future performance will be measured.
I am more confident than ever that we have a great business that
still has much more to deliver before it realises its full potential.
On behalf of management, my thanks go to the Directors for their
support, to our business partners at both supply and distribution
ends of the business, to Australian farmers for maintaining their
preference for our products and to all employees for their hard
work and enthusiasm throughout the year.
Greg Witcombe
Managing Director and CEO
3
B O A R D O F D I R E C T O R S
From left: John Watson, Brian Healey, Graeme Liebelt, Leo Delahunty
John Watson MAICD, AM
Non-Executive Chairman, Chairman of Remuneration and
Appointments Committee
John was appointed Chairman of Incitec Pivot Limited in 2003,
having been a Director and Chairman of the Company from 1998
when it was known as Pivot Limited. He is Chairman of Primesafe
and of the Co-operative Research Centre for Innovative Dairy
Products, a Director of Tassal Group Limited, Councillor of the
Royal Agricultural Society of Victoria and a member of the Rabo
Bank Food and Agribusiness Advisory Board for Australia and
New Zealand. A past Deputy President of the National Farmers
Federation. In 2004, he was awarded a Membership in the Order
of Australia for services to the agricultural and food production
sectors.
Brian Healey FAICD, FAIM
Non-Executive Director, Deputy Chairman
Brian is Chairman of Centro Properties Ltd and Prime Property
Management Ltd and a Director of Fosters Brewing Group Ltd.
He is a former Senior Vice President of Nabisco Inc. and Sara Lee
Corporation, a former Director of Orica Limited, a former
Chairman of Biota Holdings Ltd and Portfolio Partners Ltd and a
former Chief Executive of Nicholas Kiwi.
Graeme Liebelt BEc(Hons)
Non-Executive Director
A Director of Orica Limited, Graeme is also Chief Executive Officer
of Orica’s Mining Services business. He was previously Chairman
of Incitec Ltd, General Manager of Orica’s Plastics business and
Managing Director of Dulux.
Leo Delahunty FAICD
Non-Executive Director
Leo has been a Director of the Company from 1999 when it was
known as Pivot Limited. He is a grain and livestock farmer at
Murtoa in Victoria’s Wimmera Region. He is a co-founder and
shareholder of the agricultural investment management company
DIRT Management Pty Ltd. He is also a Director of Wimmera
Racing Club Ltd.
4
From left: David Trebeck, Barbara Gibson, Anthony Larkin, Allan McCallum, Greg Witcombe
David Trebeck BScAgr(Hons), MEc, MAICD
Non-Executive Director
David is a Principal of ACIL Tasman Pty Ltd, an economics, policy
and strategy consultancy company and a former Managing
Director of ACIL Consulting Pty Ltd. He has grain farming and
grazing interests in southern New South Wales. He is a Director of
GrainCorp Limited and Maersk Australia Pty Ltd (and its
associated companies in the region). He is a former Director of
Pipers Brook Vineyard Limited and was previously a Director of
Incitec Ltd.
Barbara Gibson BSc, FTSE, MAICD
Non-Executive Director
Barbara is the General Manager Chemicals Group with Orica
Limited and has held several senior management positions during
her 19-year career with Orica. She is a Director of Biota Holdings
Ltd and a former Director of Incitec Ltd.
Anthony Larkin FCPA, FAICD
Non-Executive Director, Chairman of Audit and Risk
Management Committee
Until 2002, Tony was Executive Director Finance of Orica Limited.
He previously held the position of Group Treasurer BHP Ltd. His
38-year career with BHP included senior finance positions in its
steel and minerals businesses and various senior corporate roles.
From 1993 to 1997 he was seconded to Fosters Brewing Group
as Senior Vice President Finance and Investor Relations. He is a
Commissioner with the Victorian Essential Services Commission,
Director of Corporate Express Australia Limited, Zinifex Limited
and Ausmelt Limited. He was Chairman of Incitec Ltd from July
2000 to April 2003.
Allan McCallum Dip. Ag Science, MAICD
Non-Executive Director, Chairman of Governance Committee
Allan has been a Director of the Company from 1998 when it was
known as Pivot Limited. He is a farmer in northern Victoria. He is
also Deputy Chairman of GrainCorp Limited and a Director of
Grain Growers Association Limited, Medical Developments
International Ltd and Tassal Group Limited.
Greg Witcombe BSc
Managing Director and Chief Executive Officer
Greg joined Orica Limited in 1977 and has held several senior
management positions since then. Prior to his current role, he
was the Managing Director of Incitec Ltd.
5
R E V I E W O F P E R F O R M A N C E
Incitec Pivot delivered significant value for shareholders in 2004 – the
Company’s first full financial year. Weather conditions were mixed, with
earnings largely driven by internally generated efficiencies and a strong
contribution from manufacturing. The result provides a solid foundation
for the future.
Financial highlights
Securing the future
• Net Profit After Tax (NPAT) including significant items for the
year ended 30 September 2004 was $75.1M, an increase of
$93.7M over 2003 (2003: $18.6M loss).
• NPAT excluding significant items was up $45.8M to $80.9M
(2003: $35.1M).
• Earnings per share (EPS) 129 cents per share (cps)
(2003: loss 32 cps).
• Profit returned to shareholders with a fully franked final
dividend declared of 100 cps. Total 2004 dividends of
129 cps (fully franked).
• Strong closing financial position with net cash of $20.8M at
year end (2003: net debt $74.4M).
• 2004 returns above the cost of capital, with economic profit of
$19.1M, return on net assets of 18.6% and return on
shareholders’ funds of 13.4%.
Gibson Island gas
• 10-year gas supply agreements signed with Queensland Gas
Company Limited together with Pangaea Oil and Gas Pty Ltd,
and Origin Energy CSG Marketing Pty Ltd.
• Competitive gas pricing in the new agreements underpins
Gibson Island plant economics to 2017.
• Major maintenance shutdowns are now scheduled for 2007
and 2012. The 2007 shutdown expenditure will be
approximately $45M.
• The economic life of the Gibson Island plant and associated
Big N infrastructure has been extended from 2007 to 2017 for
depreciation purposes in line with the new gas agreements
(six months impact booked in 2004 accounts).
Potential investment in Brunei ammonia/urea plant
• Plant capacity of 1.2M tonnes per annum of urea – largest in
Asia and equal to current world’s largest.
• Lowest decile global operating costs based on low-cost gas
and world-competitive construction and operating costs.
• Plant cost of US$600M, largely project financed.
• Incitec Pivot would have equity in the project, have rights over
the majority of the plant’s off-take and provide operations and
maintenance services to the plant.
• The feasibility study is in progress with scheduled completion
end 2005.
6
External sales revenue
Significant items
External sales revenue increased by 66% or $450M over 2003
to $1,136M (2003: $686M).
Significant items were $5.8M after tax (2003: $53.7M) and relate
to merger restructuring and implementation costs.
• The increase primarily resulted from the inclusion of a full
12 months sales from the Incitec Fertilizers business
(2003 included only post-merger sales for the four months
to September).
• Sales volumes were otherwise flat as a result of patchy rainfall
and robust price competition – particularly in southern regions.
Earnings summary
NPAT including significant items was $75.1M compared with a
loss of $18.6M in 2003. Excluding significant items, NPAT was up
$45.8M to $80.9M (2003: $35.1M). Major factors for the
improvement were:
Dividend
A fully franked final dividend of 100 cps will be paid to
shareholders on 9 December 2004.
The total 2004 dividend is 129 cps (fully franked) equating to a
yield of 8.2% based on the opening share price of $15.66 on
1 October 2003.
For 2004 distributions are consistent with the Company’s dividend
policy of distributing available franking credits, targeting a normal
dividend pay-out ratio of between 65% and 75% of NPAT and
utilising other mechanisms such as special dividends to distribute
surplus funds when available.
• A $62.8M increase in EBIT to $121.9M. This was due to:
– EBIT from a full 12 months of the merged Incitec Fertilizers
In 2003 a special fully franked dividend of 140 cps was paid to
Pivot Limited shareholders who were registered pre-merger.
business (refer sales revenue above).
– Business efficiencies – up $44.5M to $50.6M.
– A full 12 months of merger goodwill amortisation
(up $6.8M on 2003 to $9.9M).
• Net interest costs reduced by $1.4M on 2003 to $5.4M.
• Tax expense increased by $18.4M to $35.6M in line with
improved earnings.
External sales revenue
Dividend
Cents per share
Final dividend
– normal
– special
– sub-total
Total year dividend
– normal
– special
– sub-total
Yield at:
– opening share price on 1/10/03 – $15.66
– average share price for 2004 – $17.33
– closing share price on 30/9/04 – $18.80
Year Ended September
Franking
2004
70
30
100
90
39
129
100%
100%
100%
100%
100%
100%
8.2%
7.4%
6.9%
A$million
Fertilisers
Discontinued businesses
Sales to Incitec Fertilizers pre-merger
Total external sales
Year Ended September
2003 Change
2004
1,136
–
–
1,136
655
20
11
686
73%
–
–
66%
Earnings summary
A$million
EBIT
Underlying fertiliser business
Efficiencies
Amortisation of merger goodwill
Discontinued businesses
Total EBIT
Net interest
Tax expense
NPAT excluding significant items
Significant items after tax
NPAT including significant items
Year Ended September
2003 Change
2004
81.2
50.6
(9.9)
–
121.9
(5.4)
(35.6)
80.9
(5.8)
75.1
56.4
6.1
(3.1)
(0.3)
59.1
(6.8)
44%
730%
(219)%
–
106%
21%
(17.2)
(107)%
35.1
130%
(53.7)
89%
(18.6)
>100%
7
R E V I E W O F P E R F O R M A N C E ( c o n t i n u e d )
Financial position
Incitec Pivot finished 2004 in a strong financial position.
Trade working capital (TWC) management was pleasing, with the
September year-end balance $25.4M below 2003. Average
TWC/sales was 19%, with a continued focus on controlling the
investment in working capital around the winter cropping season.
On finalising the 2004 accounts, an $8.4M ($12.0M before tax)
adjustment was made to merger goodwill, reflecting an increase
in pre-merger environmental provisions for the Parafield Gardens
site in South Australia. Goodwill amortisation was $9.9M
(2003: $3.1M).
Net investing cash flows were an outflow of $29.4M
(2003: outflow $8.5M) resulting from sustenance capital
spending at $30.8M, which was 100% of depreciation.
Financing cash flows include:
• Dividends paid of $16.9M (2003: $24.5M paid to Pivot Limited
shareholders registered pre-merger).
• A movement in net debt of $95.2M comprising a decrease
in short term financing of $31.0M and an increase in cash
on hand of $64.2M.
Other items
Incitec Pivot ended 2004 with net cash of $20.8M compared with
net debt of $74.4M in 2003. Average gearing was 9.7%.
Employees
• Full time equivalent employee numbers were 801 at the end of
Cash flow
Net operating cash flows were an inflow of $141.5M
(2003: $96.2M). Major factors were:
• EBITDA of $167.2M (2003: $83.4M) up $83.8M reflecting the
addition of the Incitec Fertilizers business and associated
business efficiencies.
• Tax paid of $15.4M (2003: refund of $3.1M) reflecting
increased earnings.
• $16.6M spent on merger implementation costs
(2003: $30.1M).
September 2004 (2003: 850).
Safety, Health & Environment
• Excellent progress was made in safety with a recordable case
rate1 of 1.09 compared to 2.1 for the 2003 full year. This
equates to 13 recordable injuries2 for the Company in 2004
compared to 23 injuries in 2003.
• An additional provision of $8.4M after tax was booked against
goodwill recognising an increase in the expected costs for the
clean-up of the Parafield Gardens site in South Australia. This
takes the total clean-up provision to $17.0M before tax.
1 Recordable case rate is defined as the number of ‘recordable injuries’ to all
• Cash inflow of $25.4M from reduced trade working capital
workers per 200,000 manhours worked.
(2003: $58.8M).
2 Recordable injuries are those injuries to all workers which result in absence
from work, restrictions from normal work activities, or are medically treated.
Financial position
Cash flow items
A$million
Trade working capital
Net property, plant & equipment
Goodwill
Net other assets
Net assets
Net debt/(cash)
Equity
Total capitalisation
Gearing – year end
Gearing – average (2003 proforma)
Sept
2004
170.4
296.1
183.8
(39.6)
610.7
(20.8)
631.5
610.7
NA
9.7%
Average trade working capital/sales
19.0%
Sept
2003
195.8
296.6
185.4
(30.0)
647.8
74.4
573.4
647.8
11.5%
19.0%
22.0%
A$million
Net operating cash flows
EBITDA
Net interest paid
Net income tax paid
Trade working capital movement
Merger costs
Other
Total
Net investing cash flows
Proceeds from asset sales
Capital spending
Total
Financing cash flows
Dividends paid
ASX listing fees
Movement in short term financing
Increase/(decrease) in cash on hand
Year Ended September
2003 Change
2004
167.2
(5.6)
(15.4)
25.4
(16.6)
(13.5)
141.5
1.4
(30.8)
(29.4)
(16.9)
–
(31.0)
64.2
83.4
(8.1)
3.1
58.8
(30.1)
(10.9)
96.2
7.1
(15.6)
(8.5)
(24.5)
(1.3)
(81.5)
(19.6)
83.8
2.5
(18.5)
(33.4)
13.5
(2.6)
45.3
(5.7)
(15.2)
(20.9)
7.6
1.3
50.5
83.8
8
E X E C U T I V E T E A M
Greg Witcombe
BSc
Managing Director and
Chief Executive Officer
Wayne Elmer
BEc, MCom
General Manager Human
Resources
James Fazzino
BEc(Hons), CPA
Chief Financial Officer
Kerry Gleeson
LLB(Hons)
General Counsel and
Company Secretary
Greg joined Orica Limited in
1977 and has held several
senior management positions.
Prior to his current role, he
was Managing Director of
Incitec Ltd.
Wayne has extensive senior
management experience in
human resources and
commercial management in
a range of manufacturing and
resource organisations. Prior
to his current position he
was Executive General
Manager Human Resources
of Pivot Limited.
Before joining Incitec Pivot,
James had many years
experience with Orica Limited
in several business financial
roles, including Project Leader
of Orica’s group restructure in
2001 and Chief Financial
Officer for the Orica Chemicals
group. Immediately before
joining Incitec Pivot, he was
Orica’s Investor Relations
Manager.
Kerry is admitted to practice
as a solicitor in Victoria,
England and Wales. Kerry was
appointed to her current
position in February 2004,
having previously practised
with Blake Dawson Waldron.
Prior to emigrating in 1999,
Kerry was a partner of an
English law firm.
Richard Hoggard
BEng
General Manager
Manufacturing and Safety,
Health and Environment
Richard has extensive
experience in the
manufacturing industry in a
variety of senior and
managerial roles. Prior to
joining Incitec Pivot Limited he
was Incitec Ltd’s General
Manager Manufacturing.
John Lloyd
BSc, MBA
General Manager Commercial
Daryl Roe
BSc
General Manager Planning
John has over 20 years
experience and held various
senior positions in the
agriculture industry. Prior to
his current role, John was
Pivot Limited’s Executive
General Manager – Sales
and Marketing.
Daryl joined Incitec Pivot
Limited from Orica Limited in
January 2004. Prior to this,
Daryl has held a variety of
commercial and management
roles since 1984, his most
recent being with Orica Mining
Services as Regional Manager
East Australia and Pacific.
John Warnock
BE(Chem), MBA
General Manager Logistics
and Supply Chain
Prior to his current position,
John has worked in a variety
of roles with Incitec Ltd
starting in 1973, the most
recent being Incitec’s Logistics
and Supply Chain Manager.
9
S A F E T Y , H E A L T H A N D E N V I R O N M E N T
Incitec Pivot’s strong focus on Safety, Health and Environment
(SH&E) in the year to 30 September 2004 led to significantly
improved performance in a number of key areas. Notably, the
total number of recordable injuries fell from 23 in 2003 to 13 in
the past year.
The quarterly figures for 2004 show an encouraging trend, with
the number of recordable injuries progressively declining during
the year. This decline coincided with a company-wide safety
awareness campaign highlighted with the launch of the Think
Safe, Act Safe, Be Safe program in April.
All employees have signed individual SH&E Charters pledging to
promote safety in the workplace and away from work as the
Company pursues its vision of ‘No Injuries to Anyone, Ever’.
Most areas of environmental performance also improved
markedly in 2004. Only two distribution incidents occurred in
2004 compared with eight in the previous financial year, and non-
complying environmental licence tests at manufacturing plants
were reduced by 54 per cent.
Significant improvements also occurred during the year, with
overall environmental performance at the manufacturing plants
improving 70 per cent in the second half. The major
environmental improvement works were at Incitec Pivot’s single
superphosphate plant at Portland in Victoria where $500,000 was
invested to direct dryer emission through the hygiene scrubber.
Since year end, it has been decided to proceed with a $1.9
million project to capture and clean fugitive fluoride emissions at
the plant.
SH&E Performance summary
2004
2003
2002
Recordable injuries
13
23
49
Lost workday case rate
Recordable case rate
0.50
1.09
0.29
1.69
1.07
3.07
Environmental
Distribution incidents:
Category 2
Losses of containment:
Category 2
Environmental licence
non-complying tests
Hygiene monitoring
Tests under occupational
exposure limit
2
1
8
1
7
0
82
152
265
97.0%
98.1%
–
Figures prior to 1 June 2003 are Incitec Pivot equivalent figures compiled from
the former Incitec Fertilizers and Pivot businesses. Some adjustment has been
made to the figures published in the 2003 annual report to more accurately
reflect measures used by the Occupational Safety and Health Administration.
Definitions
Recordable injuries
Recordable injuries are those injuries which result in absence
from work, restrictions from normal work activities, or are
medically treated.
Recordable case rate is defined as the number of ‘recordable
injuries’ to all workers per 200,000 manhours worked.
Distribution incidents
These are incidents not on a company site, arising from the
transport or storage of raw materials, products, intermediates or
wastes owned by the Company or prior to delivery to the
customer. A Category 2 incident is one in which there was
significant loss of containment, injury and/or damage to
equipment, property or the environment and/or major traffic
disruption.
Losses of containment
An unplanned release or spill on a company site of a material
from a vessel, tank, pipe pump, container or package in which it
was designed to be contained. A Category 2 loss of containment
is an incident which causes injury or damage, impacts the
environment or causes concern in the surrounding community.
Environmental licence non-complying tests
Such non compliance is an excursion outside statutory discharge
or emission limits, as measured in a scheduled test.
10
Product stewardship
Sustainability
Product stewardship is the responsible and ethical design and
management of products throughout their entire lifecycle in order
to protect public health and the environment.
Incitec Pivot is committed to running all of its businesses in a
sustainable manner. This philosophy has been embodied into the
SH&E Policy as follows:
Fertilisers are an essential nutrient source in productive and
profitable farming systems. They have many positive effects,
but may impact on the environment. Therefore it is important
that fertilisers are used at appropriate rates and in a
responsible manner.
Addressing product stewardship, Incitec Pivot’s SH&E Policy
states that the Company will:
• sell only those products that can be produced, transported,
stored, used and disposed of safely;
• provide appropriate information and/or training to our
customers and consumers on the safe transportation, use and
disposal of our products; and
• seek to develop new or improved products and processes to
enhance the contribution we make to the quality of people’s
lives and to minimise the impact on the environment.
Soil and plant tissue tests are important tools in managing the
soil’s nutrient status and formulating fertiliser programs. Incitec
Pivot has consolidated its analytical services into a single
laboratory at Werribee near Melbourne, where work is continuing
to update soil and plant tissue interpretative data and develop
nutrient decision support tools. These advances will allow farmers
to make better decisions on nutrient management and
application rates in order to minimise any potential adverse
environmental impact.
Incitec Pivot also addresses product stewardship at an industry
level, through organisations such as the Plastics and Chemicals
Industries Association (PACIA) and the Fertilizer Industry
Federation of Australia (FIFA).
During 2004, PACIA product stewardship self-audits were
conducted within Incitec Pivot. The Company also participates in
FIFA EcoEfficiency initiatives with Environment Australia.
An ISO 14000 accredited Environmental Management System
has been developed for the management of the Company’s
primary and regional distribution facilities.
A comprehensive training program is in place covering the
distribution of anhydrous ammonia, which is used for direct
injection into the soil as a nitrogen fertiliser.
During the year Incitec Pivot withdrew ammonium nitrate fertiliser
from the market on public security grounds. Because effective
substitute fertilisers are available, the continued sale of straight
ammonium nitrate fertiliser was regarded as creating an
unnecessary risk to suppliers, farmers and the community.
‘We will manage all our activities with concern for people and the
environment and will conduct our business without compromising
the quality of life for future generations.’
To help better understand the requirements of a sustainable
organisation, Incitec Pivot is involved in an Orica group project to
promote sustainability issues. This work was facilitated by The
Natural Step, an organisation founded in Sweden in 1989 which
provides a framework that is increasingly being used by
companies around the globe to help them address sustainability.
Flowing from this project will be a set of short and longer-term
measures or improvement targets. These targets will continue
Incitec Pivot’s focus on resource conservation through the efficient
use of water and energy, reducing greenhouse gas emissions and
minimising waste generation.
Legacy sites
A key requirement in the drive towards a sustainable future is to
ensure that business activities do not degrade land and the
environment. Incitec Pivot has remediated and sold a number of
redundant sites and is continuing to plan the restoration of other
sites to a standard acceptable to the regulatory authorities and
the community.
Responsible care
Orica has been an active participant in PACIA’s Responsible Care
Program since 1989. The Responsible Care Program is an
initiative of the international chemicals industry aimed at improving
its safety, health and environment performance and
communicating openly with all sections of the community. The
Program was started by the Canadian Chemical Producers’
Association in the mid 1980s. There are now chemical industry
associations in 45 countries participating in the Program.
PACIA is mandated by the International Council of Chemical
Associations to oversee the Program in Australia. Participating
companies are required to sign on to a set of Guiding Principles
and to implement a series of Codes of Practice.
A detailed SH&E report can be found on www.incitecpivot.com.au.
11
Financial Report
Directors’ Report
Statements of Financial Performance
Statements of Financial Position
Statements of Cash Flows
Notes to the Financial Statements
Directors’ Declaration on the Financial Report set out on pages 12 to 67
Audit Report
Shareholder Statistics
Five Year Financial Statistics
13
25
26
27
28
68
69
70
71
12
Incitec Pivot Limited
Directors’ Report
The directors of Incitec Pivot Limited present the financial report of the Company and its controlled entities (collectively “the
consolidated entity”) for the year ended 30 September 2004 and the auditor’s report thereon.
Directors
The directors of the Company during the financial year and up to the date of this report are:
J C Watson AM, Chairman
B Healey, Deputy Chairman
G J Witcombe, Managing Director and CEO
L M Delahunty
B J Gibson
A C Larkin
G R Liebelt
A D McCallum
D B Trebeck
Particulars of directors’ qualifications, experience and special responsibilities are detailed on page 4 to 5 of the annual report.
The office of Company Secretary is held by Mrs Kerry Gleeson. Particulars of her qualifications and experience are detailed on page 9
of the annual report.
Directors’ interests in share capital
The relevant interest of each director in the share capital of the Company as at the date of this report is as follows:
Director
J C Watson
G J Witcombe
L M Delahunty
A D McCallum
D B Trebeck
Fully paid
ordinary shares
2,700
(1) 59,778
6,478
6,818
4,000
(1) This interest includes shares acquired pursuant to long term incentive plans; a general description of which is provided in note 32, Employee share
plans.
Further details of directors’ interests in share capital is set out in note 35, Director and executive disclosures.
Directors’ meetings
The number of directors’ meetings (including meetings of committees of directors) and number of meetings attended by each of the
directors of the Company during the financial year are listed below:
Director
Board
J C Watson
G J Witcombe
L M Delahunty
B J Gibson
B Healey
A C Larkin
G R Liebelt
A D McCallum
D B Trebeck
Held (1)
10
10
10
10
10
10
10
10
10
Attended
10
10
10
9
10
10
10
10
10
Audit and risk
management
Held (1)
Attended
Remuneration and
appointments
Held (1)
1
Attended
1
Governance
Held (1)
3
Attended
3
1
1
1
1
1
1
1
1
1
1
1
1
1
1
3
3
3
3
4
4
4
4
4
4
(1) This column shows the number of meetings held during the period that the director was a member of the Board or Committee.
Principal activities
The principal activities of the consolidated entity during the course of the financial year were the manufacture and distribution of
fertilisers.
No significant changes have occurred in the nature of these activities during the financial year.
Review and results of operations
A review of the operations of the consolidated entity during the financial year and of the results of those operations is contained on
pages 6 to 8 of the annual report.
Incitec Pivot Limited
13
Directors’ Report
Dividends
Dividends paid or declared in respect of the year ended 30 September 2004 were:
Ordinary dividend paid by the Company on 8 July 2004 at the rate of 20 cents per share on 58,281,027 ordinary
shares, fully franked at the 30% corporate tax rate
Special dividend paid by the Company on 8 July 2004 at the rate of 9 cents per share on 58,281,027 ordinary
shares, fully franked at the 30% corporate tax rate
Dividend paid in respect of redeemable preference shares by Incitec Fertilizers Limited on (1)
27 November 2003
27 February 2004
27 May 2004
27 August 2004
$000
11,656
5,246
737
737
737
737
(1) The dividend in respect of the redeemable preference shares is payable quarterly at 5.36% per share unfranked. It is accrued in the financial
statements on a monthly basis. These dividends have been charged to the Statements of Financial Performance as borrowing costs because these
shares are classified as liabilities.
Changes in the state of affairs
There have been no significant changes to the consolidated entity’s state of affairs.
Events subsequent to balance date
Since the end of the financial year the directors have declared a final dividend of 70 cents per share and a special dividend of 30 cents
per share. Both dividends are 100% franked at the 30% corporate tax rate and are payable on 9 December 2004.
The directors have not become aware of any other significant matter or circumstance that has arisen since 30 September 2004, that
has affected or may affect the operations of the consolidated entity, the result of those operations, or the state of affairs of the
consolidated entity in subsequent years, which has not been covered in this report.
Likely developments
Likely developments in the operations of the consolidated entity and the expected results of those operations are covered generally in
the review of operations of the consolidated entity on pages 6 to 8 of the annual report.
Further information as to likely developments in the operations of the consolidated entity and the expected results of those operations in
subsequent financial years has not been included in this report because, in the opinion of the directors, disclosure would be likely to
result in unreasonable prejudice to the consolidated entity.
Executive director and executive remuneration
The Company’s remuneration policy is directed at underpinning a high performance organisation. The focus of its remuneration
strategy is on performance and accountability. Executive remuneration packages are designed to support the delivery of outstanding
returns for shareholders by aligning performance related reward with value delivered to shareholders.
It is the broad policy of the Company that the remuneration structure will:
(a) support the Company’s philosophy and values;
(b)
(c) provide a common interest between management and shareholders; and
(d) be sufficiently competitive in the markets in which the Company operates to attract, motivate and retain high calibre executives.
reinforce both the short and long term objectives of the Company;
Details of remuneration of specified executives (including the specified executive director) are set out in note 35, Director and executive
disclosures.
Base salary
For each executive, base salary is determined by reference to independently provided external remuneration data for comparable
positions in comparable organisations and having regard to the qualifications, experience and performance of the individual, and the
scope and responsibilities of the position. Base salary is reviewed on an annual basis and may be adjusted to reflect changes in
comparable external remuneration arrangements, and individual performance.
14
Incitec Pivot Limited
Directors’ Report
Incentive plans
Short term and long term incentive plans offered by the Company are designed to reward executives in circumstances where minimum
acceptable standards of performance at a personal and Company level are exceeded in respect of financial and other outcomes which
contribute to sustainable growth in shareholder value. Incentive compensation is at risk for each executive and is not awarded, or is
reduced, if the required targets are not met.
Short term incentive plan
The short term incentive plan provides the opportunity for incentive compensation in the form of a cash reward based on the
achievement of performance targets which are specified at the commencement of each financial year and measured at the completion
of the financial year. Performance targets represent a stretch beyond minimum requirements and include measures related to
earnings, economic profit, return on funds employed, cash flow, safety performance and environmental compliance levels. The Board
considers superior outcomes in these areas to be fundamental to the well being of its employees, the community and the financial
performance which creates growth in shareholder value.
For specified executives, target incentive levels are 15% or 20% of base salary which reflect prevailing relevant external remuneration
benchmarks. These incentive levels can increase to 30% or 40% of base salary respectively where performance exceeds target
measures.
Long term incentive plans
Under the long term incentive plans the Company may grant awards to executives as follows:
Retention Plan
At the time of the merger of Incitec Fertilizers Limited and Pivot Limited, the Board recognised that a crucial element to the success
of the new enterprise was the retention of key executives to ensure the capture of synergies and the uninterrupted delivery of
service to our customers. To that end a one-off award was granted to participating executives (including specified executives and
the specified executive director) in respect of the period from 1 June 2003 to 30 September 2005, satisfied by the provision of an
interest free, limited recourse, unsecured loan by the Company, applied to the purchase in aggregate, of 107,925 shares in the
Company. The shares may be forfeited by a participating executive if that executive ceases to be employed by Incitec Pivot prior
to 30 September 2005. The loan is repayable on the earlier of the executive ceasing to be employed by Incitec Pivot, the executive
selling his/her shares or three years after the loan is made. Upon satisfaction of the retention criteria, the amount of repayment
due in settlement of the loan will be 48.5% of the outstanding balance. Any dividends will be applied on an after tax basis to
reduce the loan balance. The executive cannot deal in these shares until 30 September 2005.
For participating specified executives, the loan represents 25% per annum of base salary as at 1 June 2003 (being the date of the
merger) applied for the 2.33 years represented by the period 1 June 2003 to 30 September 2005. For the Managing Director and
CEO (the “specified executive director”) the loan is based on 35% per annum of base salary as at 1 June 2003 applied for the 2.33
years represented by the period 1 June 2003 to 30 September 2005.
Performance Plan
Participating executives (including specified executives and the specified executive director) may be eligible to receive an award
under the Long Term Performance Incentive Plan, dependent on the achievement of certain performance measures over a rolling
three year period. Adoption of this longer term incentive creates the opportunity, and provides the discipline, for participating
executives to contribute to short term performance but with full regard to the delivery of sustainable growth in shareholder value.
For the period from 1 October 2003 to 30 September 2006, participating executives were each advanced a limited recourse,
unsecured loan by the Company, to be applied towards the purchase of shares in the Company. In aggregate 92,856 shares have
been allocated to participating executives. The shares may be forfeited by a participating executive if that executive ceases to be
employed by Incitec Pivot prior to 30 September 2006. The loan or part thereof will be waived on or after 1 October 2006, subject
to the Company achieving certain financial performance hurdles. Upon the waiving of any loan amount, the executive will have full,
unrestricted ownership of shares to the value of the loan waiver. Prior to any loan waiver being awarded, executives cannot deal in
these shares. The loan is immediately repayable by an executive ceasing to be employed by Incitec Pivot via the sale of shares
purchased under the plan terms. The loan is considered to be repaid in full upon the transfer to the Company of the total share
sale proceeds. Loans, or portions of those loans, can also be repaid via direct payment from participating executives. Interest is
charged on this loan at the FBT benchmark rate (currently 6.55%). Net cash dividends after personal income tax obligations will be
applied to reduce the loan balance. The employee cannot deal in these shares until 1 October 2006. Shares may be sold after the
loan on those shares has been fully repaid.
For specified executive’s, the loan represents 25% of base salary as at 1 January 2004. For the specified executive director, the
loan represents 70% of base salary as at 1 January 2004.
Awards may be offered under the terms and conditions of the performance plan each year, subject to a cap of three times the
executive’s maximum annual remuneration under the terms and conditions of the plan. The ultimate benefit received by executives
is dependent upon performance over the rolling three year period.
Incitec Pivot Limited
15
Directors’ Report
There is currently no Australian Accounting requirement to record an expense for the fair value of the shares (which have been treated
as options) issued in 2004. However AASB1046: “Director and Executive Disclosures by Disclosing Entities” require Incitec Pivot to
derive a value for these items and include the value in the director and executive remuneration disclosures. An option pricing model
was adopted to derive a value. Loan forgiveness is incorporated into the option valuations.
Remuneration of Managing Director and CEO – Outline of employment contract
The Company has entered into an employment agreement with the Managing Director and CEO, Greg Witcombe. The agreement
provides for an annual base salary of $644,000 and other benefits on terms commensurate with his position, the industry and the size
of the Company including termination entitlements of 1.68 times his base salary, other than for gross misconduct. The agreement,
including base salary is reviewed annually, having regard to comparable external remuneration arrangements and individual
performance and may be adjusted accordingly. The agreement may be terminated by three months notice given by either party and
includes provisions relating to confidential information and post termination restraints.
The agreement also includes an entitlement for the Managing Director and CEO to participate in the annual Short Term Incentive Plan.
This is based on 30% of base salary and is subject to achievement of certain performance targets, and for over performance of such
targets, can increase to 60% of base salary. In addition the Managing Director and CEO is eligible to participate in the Long Term
Performance Incentive Plan. His participation in the Retention Plan is based on 35% per annum of base salary applied to the 2.33
years (representing the period 1 June 2003 to 30 September 2005) and in respect of the Performance Plan, for performance from 1
October 2003 to 30 September 2006 is based on 70% per annum of base salary, subject to achievement of certain performance
targets, and for over performance of such targets can increase to 140% per annum of base salary.
Post retirement benefits
The consolidated entity contributes to a number of superannuation funds that exist to provide benefits for its employees. There is a
combination of defined benefit and accumulation type plans. All specified executives and the specified executive director are members
of accumulation plans.
Other benefits
Other benefits which can be paid under specified circumstances include relocation allowances, rental assistance and gap payments in
relation to health expenses. Additionally, all executives are eligible to participate in an annual health assessment program designed to
ensure executives have their health status reviewed on a regular basis.
Non-executive directors’ remuneration
Non-executive directors’ fees, including committee fees, are determined by the Board within the aggregate amount of $1,000,000 which
was approved by shareholders at the December 2003 Annual General Meeting. In determining the level of fees, the Board reviews
external professional advice and survey data on fees paid by comparable companies and considers this against the level of
remuneration required to attract and retain directors of the appropriate calibre. Non-executive directors are not entitled to any form of
incentive payments.
The Board decided to phase out retirement allowances and any directors joining the Board subsequent to 30 May 2003 are not entitled
to receive a retirement allowance. Retiring non-executive directors appointed before 1 June 2003 will retain their contractual
allowances. This policy entitled these directors to a retirement benefit after 10 years of service equal to the total of the benefits received
from the Company in the 3 years immediately preceding the date of retirement. The retirement benefit will be paid pro-rata for less than
10 years of service.
Environmental regulations
Manufacturing licences and consents are in place at each Incitec Pivot site, determined in consultation with local environmental
regulatory authorities. The measurement of compliance with conditions of licences and consents involves numerous tests being
conducted regularly. The sites record their compliance and report that there is continued high compliance. Any breaches are reported
to the authorities as required. More specific details of Incitec Pivot’s safety, health and environmental performance, including
management processes, are available in the Safety, Health and Environment section on pages 10 to 11 of the annual report.
Indemnification and insurance of officers
The Company’s constitution provides the Company must indemnify any person who is, or has been, an officer of the Company or its
wholly owned subsidiaries, including the directors, the secretary and other executive officers, against any liability incurred by such an
officer including for any liability incurred as a result of appointment or nomination by the Company or subsidiary as a trustee or as an
officer of another corporation, unless the liability arises out of conduct involving a lack of good faith.
The Constitution further provides that subject to the Corporations Act 2001(Cth), the Company may enter into agreements with officers
or former officers to give effect to this right of indemnity. The Company has entered into Deeds of Access, Indemnity and Insurance
with each of its officers and pursuant to those Deeds the Company has paid a premium in respect of a contract insuring officers of the
Company and of controlled entities against a liability for costs and expenses incurred by them in defending civil or criminal proceedings
involving them as such officers, with some exceptions. The contract of insurance prohibits disclosure of the nature of the liability insured
against and the amount of the premium paid.
16
Incitec Pivot Limited
Directors’ Report
Auditor Independence
KPMG have provided written assurance of their independence, and no officer of the Company was a former partner or director of
KPMG.
Rounding
The amounts shown in this report and in the financial statements have been rounded off, except where otherwise stated, to the nearest
thousand dollars, the Company being in a class specified in the ASIC Class Order 98/100 dated 10 July 1998.
Incitec Pivot Limited
17
Directors’ Report
Corporate Governance Statement
Since Incitec Pivot's listing in July 2003 on the Australian Stock Exchange (ASX), the Board has implemented and operated in
accordance with a set of corporate governance policies adopted to reflect the ASX Corporate Governance Council Principles of Good
Corporate Governance and Best Practice Recommendations (ASX Recommendations) which were introduced on 31 March 2003. The
Board considers that Incitec Pivot complies with the requirements set out in the ASX Recommendations.
For ease of reference, the table below notes those ASX Recommendations that deal with information to be disclosed in the Corporate
Governance Statement and indicates where that information can be found in this report.
Disclosure required by the ASX recommendations
Functions reserved to the Board and those delegated to
management
Skills, experience and expertise relevant to the position of
Director
Details of directors considered by Incitec Pivot as independent
and the criteria/thresholds applied
Procedure for independent professional advice
Directors’ terms of office
Names of the Remuneration and Appointments Committee
members and attendance at meetings
Composition of Board, Chairman, role of Chairman and
Managing Director and CEO
Code of conduct for directors, executives and employees
Share trading policy
Risk oversight
Audit and Risk Management Committee members and
qualifications
Audit and Risk Management Committee meetings and
attendance
Risk management and internal controls
Financial statements sign off and structure of Audit and Risk
Management Committee
Procedures for ASX disclosures
Shareholder communications strategy
Attendance of auditor
Performance review
Company’s remuneration policies and disclosure
Retirement benefits for non-executive directors
Codes of conduct to guide compliance with legal and other
obligations
Reference
Role of Board on page 19
Information on Directors on pages 4 to 5 and pages 19 to 20
Independent non-executive directors on pages 19 to 20
Access to information and independent advice on page 19
Information on directors on pages 4 to 5
Remuneration and Appointments Committee and Board
meetings of directors on page 13
Role and composition of Board on page 19
Incitec Pivot codes of conduct on page 24
Share ownership and dealing on pages 24
Audit and Risk Management Committee on page 22
Audit and Risk Management Committee on page 22
Meetings of directors on page 13
Internal control and risk management on page 23
Audit and Risk Management Committee on page 22
Procedures for ASX disclosure requirements on page 18
Procedures for ASX disclosure requirements on page 18
and Incitec Pivot website (www.incitecpivot.com.au)
External audit on page 23
Board evaluation on page 20
Director’s remuneration on pages 14 to16 and also in note 35,
Director and executive disclosures
Director’s remuneration on pages 14 to16 and also in note 35,
Director and executive disclosures
Codes of conduct on page 24
This Corporate Governance Statement outlines the key aspects of the Company's governance framework which was established, and
will be continually reviewed, by the Board. Summaries of the charters, policies and codes referred to in this statement are available on
the Incitec Pivot website, www.incitecpivot.com.au.
Procedures for ASX disclosure requirements
The Company is subject to continuous disclosure obligations under the Listing Rules of the ASX, which are supplemented by Australian
corporations legislation. Subject to some limited exceptions, under the continuous disclosure requirements the Company must
immediately notify the market, through the ASX, of any information which a reasonable person would expect to have a material effect
on, or lead to a substantial movement in, the price or value of its shares.
To achieve these objectives and satisfy the regulatory requirements, the Board has established a continuous disclosure policy and, in
accordance with this policy, will provide information to shareholders and the market in several ways, including:
•
•
•
18
communicating with all shareholders in annual reports and financial statements, releases of results to the ASX each half year and
at the Company's Annual General Meeting;
releasing price sensitive announcements and other relevant significant announcements directly to the market via the ASX,
conducting briefings with analysts and institutions from time to time – in doing so, Incitec Pivot recognises the importance of
making sure that any price sensitive information provided during these briefings is made available to all shareholders and the
Incitec Pivot Limited
Directors’ Report
Corporate Governance Statement
market at the same time and in accordance with the requirements of the ASX and the Australian Securities and Investments
Commission; and
providing information on the Company's website, which contains information about the Company and its activities, including
statutory reports and investor information.
•
The Company Secretary is responsible for providing announcements to the ASX.
Board of directors
The Board is responsible for directing the business of the Company towards increasing shareholder wealth and promoting the interests
of Incitec Pivot's other stakeholders such as employees, customers and the community. The Board has adopted a delegated and
reserved powers policy which details those powers which are delegated to the Managing Director and CEO for exercise by businesses
or corporately. The policy also reserves a number of key matters for consideration and decision by the Board, these include:
• Direction and objectives - charting and monitoring the direction, policies and financial objectives of the Company;
• Compliance - ensuring and monitoring compliance with legal requirements and standards of performance;
•
Ethical - implementing procedures and principles to ensure the Company carries on its businesses ethically, with openness,
honesty and integrity; and
• Managing Director and CEO and other officers - appointing, terminating and reviewing the performance of the Managing Director
and implementing appropriate succession planning for the Board and management.
Access to information and independent advice
Directors are entitled to full access to the information required to discharge their responsibilities. Subject to obtaining the prior approval
of the Chairman, the directors have the right to seek independent professional advice at Incitec Pivot’s expense to assist in carrying out
their Board duties.
The Board is assisted by the Company Secretary, who advises on the management of meetings, the implementation of governance
procedures and compliance with regulatory requirements.
Composition of the Board
The Board comprises nine directors, including eight non-executive directors and one executive director (the Managing Director and
CEO).
The Board collectively brings significant commercial, business, operational and financial experience in a range of industries. The
directors all bring skills and expertise which, in aggregate, combine to form a Board which is equipped to discharge its responsibilities.
The directors' biographies along with their term of office and information about their skills, expertise and experience are on pages 4 to 5
of the annual report.
The Listing Rules of the ASX require that no member of the Board (other than the Managing Director and CEO) may serve for more
than three years without being re-elected by shareholders at an Annual General Meeting of the Company.
The Company's constitution provides that, at each Annual General Meeting one-third of the directors (not including the Managing
Director and CEO) must retire and are eligible to be re-elected by the shareholders. The constitution sets out specific retirement
provisions regarding John Watson, Allan McCallum and Leo Delahunty. Each of these directors will hold office until the third Annual
General Meeting after the constitution was adopted (the constitution was adopted in April 2003) and are eligible for re-election. If re-
elected Allan McCallum is to retire at the fourth Annual General Meeting, and if re-elected Leo Delahunty is to retire at the fifth Annual
General Meeting, after the date the Constitution was adopted. As John Watson was last elected as a director by the shareholders in
February 2001 and Allan McCallum and Leo Delahunty in February 2002, they will each hold office for a term in excess of three years.
However, this was agreed to as part of the merger negotiations to ensure continuity of these directors for defined terms in the first three
years of Incitec Pivot's operations following the merger. Given the requirements of the Listing Rules, as referred to above, the
Company sought and obtained, from ASX, a waiver from its requirement in the Listing Rules with regard to terms in excess of three
years in relation to each of John Watson, Allan McCallum and Leo Delahunty. The Managing Director and CEO serves as a director
until he ceases to be the Managing Director and CEO.
The Board, excluding the director in question, will regularly assess the independence of directors, in light of any interest disclosed by
them. The Board considers all of the circumstances relevant to a director, in determining whether the director is independent and free
from any interest, relationship or matter which could, or reasonably be expected to interfere with the director's ability to act in the best
interests of the Company. The Board's consideration has been undertaken in recognition of its status as a subsidiary of Orica Limited.
Among the circumstances considered by the Board in assessing the independence of its directors are a range of factors, including
those set out in the ASX Recommendations.
In assessing the independence of a director, in addition to the relationship of the director (if any) with Orica Limited (as to which see
further below), consideration is given to the underlying purpose behind any relationship a director may have with a third party that is
identified as relevant to the assessment of independence and the overall purpose of independence. In determining whether a
Incitec Pivot Limited
19
Directors’ Report
Corporate Governance Statement
sufficiently material relationship (as defined in Box 2.1 of the ASX Recommendations) exists between Incitec Pivot and a third party for
the purposes of determining the independence of a director, the Board has regard to all the circumstances of the relationship, including
among other things:
•
•
•
the value (in terms of aggregate and proportionate expenses or revenues) that the relationship represents to both Incitec Pivot and
the third party;
the strategic importance of the relationship to Incitec Pivot's business; and
the extent to which the services provided by or to Incitec Pivot are integral to the operation of Incitec Pivot's business, including the
extent to which the services provided are unique and not readily replaceable.
The Board considers that each of John Watson, Brian Healey, Allan McCallum, Leo Delahunty and David Trebeck are independent
when assessed on the criteria above, taking into account all the relevant interests, matters and relationships of the particular director.
Notwithstanding that Mr Larkin was employed by Orica until January 2002 as Executive Director of Finance, the Board considered the
shortness of his term of employment with Orica, his role as Chairman of Incitec, and the role of the Governance Committee in dealing
with related party transactions. After assessment of these matters, and the criteria referred to above, the Board considers that Mr
Larkin is independent.
In summary, among the nine directors, the Board considers six directors are independent.
In addition, Orica Limited has agreed that, at any time when Orica is the ultimate listed holding Company of Incitec Pivot and Incitec
Pivot is listed on the official list of ASX, Orica will exercise its power as holding Company to support that Incitec Pivot will be governed
in accordance with the following principles, that:
•
•
•
•
at least three members of the Board will have at least 10 years practical experience in managing a commercial farming business;
the Board will adopt policies and procedures according to the principles of good governance consistent with those adopted by a
substantial number of ASX 200 companies;
it is desirable that the Board at all times includes a diversity of experience, expertise and community connections so that no
individual or small group of individuals can dominate it; and
robust documented protocols are maintained between Orica companies and Incitec Pivot companies to govern the transactions
between the two corporate economic entities and to ensure the independence of Incitec Pivot companies.
In addition the Board has a special Governance Committee which is responsible for reviewing related party transactions and making
appropriate recommendations to the Board.
The roles of Chairman and Managing Director and CEO are separate.
Performance evaluation
Board
Under its charter, the Board is to undertake an annual performance evaluation, comparing its performance against its charter, setting
objectives and effecting any improvements to the charter. In March 2004, the Board engaged Our People Plus Pty Ltd to undertake an
operational Board review, addressing Board structure, processes, people and dynamics. The Board is in the process of undertaking its
2003/2004 performance evaluation which comprises the Board setting its 2004/2005 objectives, taking account of the
recommendations made by Our People Plus Pty Ltd and reviewing its charter.
Board committees
In line with the Board's own charter, each Board committee is to review its performance at least annually, review its charter annually,
recommend any changes to the Board and to report regularly to the Board as to its activities.
Directors
With the exception of John Watson and Allan McCallum, who were each appointed on 30 January 1998, and Leo Delahunty who was
appointed on 8 November 1999, all other current directors were appointed on 1 June 2003.
Incitec Pivot recognises the importance of regular performance evaluation of the directors. Assessment of individual directors
performance and the Board as a whole is a process determined by the Chairman and the Remuneration and Appointments Committee.
A Board operational review took place between March and September 2004 and individual directors performance will be reviewed
throughout the 2004/2005 financial year and will include one-on-one interviews with directors and the Chairman, as well as discussions
on succession planning. Those directors retiring and standing for re-election at the 2004 Annual General Meeting will be subject to a
specific performance review prior to their nomination for re-election.
20
Incitec Pivot Limited
Directors’ Report
Corporate Governance Statement
Executives
All Incitec Pivot executives are subject to annual performance reviews.
The annual review involves each executive being evaluated by their immediate superior, normally the Managing Director and CEO.
The executive is assessed against agreed performance objectives including business/financial/operational targets,
functional/managerial goals and personal accountabilities.
The outcomes of performance reviews are directly related to remuneration levels for all executives. The Remuneration and
Appointments Committee has overall responsibility for ensuring performance evaluation processes are in place for all executives and
that such evaluations are linked to executive remuneration. Incitec Pivot's broad policy in relation to executive remuneration is set out
on pages 14 to 16 of this report.
The Remuneration and Appointments Committee also considers the performance and remuneration of the Managing Director and CEO
and makes recommendations as to his remuneration to the Board, including regarding his participation in the Incitec Pivot Long Term
Incentive Plan. This Plan takes into account, among other things, the Company's performance and relative shareholder return and the
value of similar incentive arrangements for Managing directors at comparable companies.
The performance evaluation of the Managing Director and CEO is conducted by the Chairman and Board. This evaluation involves an
assessment of a range of performance standards as determined by the Board, including the overall performance of the Company.
Board meetings
Details of the Board meetings held during the 2003/2004 financial year are set out on page 13 of this report.
Procedures are also in place to ensure that directors can meet to consider and decide urgent matters, as and when they arise.
Materials for Board meetings are circulated to directors in advance. The agenda for meetings is formulated with input from the
Managing Director and CEO and the Chairman. Directors are free to nominate matters for inclusion on the agenda for any Board or
Board Committee meeting.
Presentations to the Board are frequently made by senior management, and telecommunications technologies may be utilised to
facilitate participation.
Directors' remuneration
Incitec Pivot's broad policy in relation to non-executive directors' fees and payments is to ensure that these fees and payments are
consistent with the market and are sufficient to enable Incitec Pivot to attract and retain directors of an appropriate calibre.
Under the Company's constitution the maximum remuneration payable by the Company for the services of non-executive directors in
total must not exceed the amount approved by shareholders in general meeting, which is $1,000,000 as approved at the annual general
meeting held in December 2003. The total remuneration paid to the non-executive directors during the financial year ended 30
September 2004 was within the maximum amount approved by shareholders.
Non-executive directors receive remuneration based on membership of the Board and Board Committees. Non-executive directors do
not receive any performance-based incentives and no retirement benefits will be provided for directors other than those disclosed in this
report. Details of remuneration paid to the non-executive directors is set out in note 35, Director and executive disclosures.
Details of remuneration paid to the executive director is set out in note 35, Director and executive disclosures of the financial report.
Committees of the Board
As part of Incitec Pivot’s corporate governance, the Incitec Pivot Board has established the following committees:
Audit and Risk Management Committee;
•
• Remuneration and Appointments Committee; and
• Governance Committee.
The committees operate in accordance with charters established by the Board. Other committees of the Board may be formed from
time to time to deal with specific matters. Materials for the Board committee meetings are circulated in advance and minutes are
circulated to all directors. In addition, regular reports of the committees' activities are provided to the Board.
Incitec Pivot Limited
21
Directors’ Report
Corporate Governance Statement
Audit and Risk Management Committee
The Audit and Risk Management Committee assists the Board in its review of financial reporting principles and policies, controls and
procedures, internal audit and the integrity of the Company's financial statements, the external audit and the Company's compliance
with legal and regulatory requirements.
The qualifications of those directors appointed to the Audit and Risk Management Committee are set out on pages 4 to 5 of the annual
report.
The current members of the Audit and Risk Management Committee are Anthony Larkin (Chairman), David Trebeck and Allan
McCallum. Although Anthony Larkin was previously employed by Orica, for the reasons set out above (under the heading Composition
of the Board) the Board considers he is independent for the purposes of chairing this committee.
The attendance of the members of the Audit and Risk Management Committee at each meeting held during the financial year to
30 September 2004 is set out on page 13.
The primary objectives of the Audit and Risk Management Committee, as set out in its charter, are as follows:
Financial reporting
•
review of reports and analyses - review management, internal audit and external audit reports and analyses of financial reporting
issues;
review of financial statements - review all audited financial statements and all other financial information being made public;
accounting policies - review the critical accounting policies with external auditors and management; and
•
•
• Managing Director and CEO and CFO certification - review the certification provided by the Managing Director and CEO and the
Chief Financial Officer on annual and half yearly reports.
Internal control and risk management
•
risk management strategies - receive reports from management concerning the Company's risk management principles and
policies, assess and manage business, financial and operational risk;
risk reports and monitoring - receive reports on and oversee credit, market, balance sheet and operating risk and monitor risk
implications of new and emerging risks, organisational change and major initiatives and also monitor resolution of significant risk
exposures and risk events;
reports on change in the environment - monitor anticipated changes in the economic and business environment and other factors
relevant to future strategy;
compliance - oversee compliance with applicable laws relating to the operation of its business; and
insurance - monitor the insurance strategy of the Company and recommend approval or variation of insurance policies.
External audit
•
appointment/replacement - make recommendations to the Board on the selection, evaluation and replacement of the external
auditor;
terms of engagement - review and agree with the external auditor the terms of engagement;
effectiveness and independence - monitor the effectiveness and independence of the external auditor including requiring the
external auditor to prepare and deliver an annual statement as to their independence;
scope of audit - review the scope of the external audit with the external auditor; and
non-audit services - review and assess provision of non-audit services by the external auditors, provide pre-approval or otherwise
of all non audit services which may be provided by the external auditor and ensure disclosure to shareholders of the committee's
approval to all non-audit work.
•
•
•
•
•
•
•
•
Internal audit
•
•
•
•
appointment - recommend the internal auditor;
scope of audit and plan - review and assess the scope of the audit and the internal audit plan;
internal audit findings - receive reports from internal audit, management's response and the internal audit recommendations; and
assessment - conduct an annual assessment of the effectiveness of internal controls and financial reporting procedures.
Remuneration and Appointments Committee
In recognition of the need to ensure that proper processes are in place to deal with succession issues at Board level, the Board
established a Remuneration and Appointments Committee which is to comprise at least 3 independent non-executive directors.
The Committee comprises all Incitec Pivot Board members except for the Managing Director and CEO, Greg Witcombe, and is chaired
by the Chairman, John Watson. The Committee’s charter was approved by the Incitec Pivot Board on 3 June 2003 and sets out the
Committee's responsibilities. The main items of responsibility of the Committee are:
22
Incitec Pivot Limited
Directors’ Report
Corporate Governance Statement
•
•
•
•
•
•
to identify those individuals believed to be qualified to become Board members;
in consultation with the Managing Director and CEO, to review and recommend to the Board for approval the Company's approach
to compensation and to oversee the establishment of those compensation proposals;
to identify Board members qualified to fill vacancies on any committee of the Board (including the Remuneration and Appointments
Committee);
to recommend the appropriate process for evaluation of the performance of the directors;
to consider the appointment, performance and remuneration of the Managing Director and CEO; and
to review and make recommendations to the Board as to appropriate incentive schemes for employees.
The attendance of the members of the Remuneration and Appointments Committee at each meeting held during the financial year to 30
September 2004 is set out on page 13.
Governance Committee
This Committee was established pursuant to Incitec Pivot's constitution in recognition of the Company's status as a subsidiary of Orica.
Under its charter, the Governance Committee is to comprise at least 3 independent non-executive directors. The current members of
the Committee are Allan McCallum (Chairman), John Watson and Leo Delahunty.
The primary purposes of the Governance Committee are to ensure:
•
•
•
•
all executives of Incitec Pivot are aware of the rules relating to related party transactions;
that Incitec Pivot, its subsidiaries and its employees all comply with the Company's related party transactions policy;
that any transactions that are likely to constitute related party transactions comply with the law; and
that any related party transactions, where appropriate, are disclosed.
Except as may be provided in a power of attorney given to the members of the Committee by Incitec Pivot (in order to procure that
Incitec Pivot appropriately enforces Orica's agreement with regard to corporate governance matters, as summarised under the heading
Composition of the Board), the Governance Committee has no executive powers with regard to its recommendations and does not
relieve the Board of its responsibilities.
Internal control and risk management
The Board has overall responsibility for the Company's systems of internal control. These systems are designed to ensure effective
and efficient operations, including financial reporting and compliance with laws and regulations, with a view to managing the risk of
failure to achieve business objectives.
The Board reviews the effectiveness of the internal control systems and risk management on an ongoing basis, and monitors risk
through the Audit and Risk Management Committee.
The Board regularly receives information about the financial position and performance of the Company. For annual and half-yearly
accounts released publicly, the Managing Director and CEO and the Chief Financial Officer will sign off to the Board:
•
•
the accuracy of the accounts and that they represent a true and fair view, in all material respects, of the Company's financial
condition and operational results, and have been prepared in accordance with applicable accounting standards; and
that the representations are based on a system of risk management and internal compliance and control which implements the
policies adopted by the Board, and that those systems are operating efficiently and effectively in all material respects.
External auditor
KPMG is the Company's external auditor.
The audit partner and review partner of the Company’s external auditor will rotate every 5 years. The current audit partner and review
partner were first appointed for the 2002/2003 audit of the Company.
Restrictions are placed on non-audit work performed by the auditors and projects outside the scope of the audit require the approval of
the Chairman of the Audit and Risk Management Committee. Further details are set out in note 6, Auditors remuneration.
The Company requests that KPMG attend the Company's annual general meeting and be available to answer questions from
shareholders.
Incitec Pivot Limited
23
Directors’ Report
Corporate Governance Statement
Share ownership and dealing
Details of shares in the Company held by the directors are set out on page 13 of this report, and also in note 35, Director and executive
disclosures.
The Board has adopted a share trading policy which regulates dealings in the Company's shares. The policy aims to ensure that
Incitec Pivot's associates are aware of the legal restrictions on trading in securities while a person is in possession of the Company's
inside information.
Under the Policy, all directors, employees, advisors, auditors and consultants (associates) are prohibited from trading in the Company's
securities or Orica's securities, while in possession of inside information. Moreover there are certain 'black out' periods, from the end of
the financial year or half year until the relevant results are announced.
In addition, all employees in the legal, finance, commercial and marketing business units and all other associates, who are not
employees, and all directors are not permitted to trade in Incitec Pivot securities or Orica securities at any time outside designated
trading windows, without a current no objection notice. Under the policy, a no objection notice is issued by the Company Secretary, or
in the case of a Director, the Chairman, upon the relevant person (excluding a director) confirming he or she is not aware of inside
information.
The ASX is notified of any share dealings by a director within 5 business days.
Incitec Pivot codes of conduct
Incitec Pivot is committed to operating to the highest standards of ethical behaviour and honesty with full regard for the safety and
health of its employees, customers, the wider community and environment.
The Company has codes of conduct which set ethical standards for directors, senior management and employees. The codes describe
core principles ensuring ethical conduct is maintained in the interests of shareholders and other stakeholders. Such principles address
legal compliance, honesty and integrity, the avoidance of discrimination, separation of personal transactions from dealings with the
Company, the maintenance of confidentiality in its dealings with customers, avoidance of actual or potential conflicts of interest (or in
the case of non-executive directors, matters which may affect their independence) and the avoidance of personal gain from those doing
business with the Company.
Safety, environmental and quality policies
Incitec Pivot has adopted policies in relation to safety, the environment and quality, details of which are summarised below:
Safety policy
Incitec Pivot has adopted a policy on safety, which seeks to ensure a safe working environment and safe systems of work thereby
preventing injuries and reducing associated costs.
The objectives of Incitec Pivot as set out in the policy include meeting all regulatory authority requirements, establishing compliance
mechanisms, striving to achieve zero work related lost time injuries, ensuring a consistent focus on the management of safety and
providing rehabilitation services to workers who have suffered an illness or injury in the course of their employment with the Company.
Environmental policy
Incitec Pivot has adopted a policy on its commitment to preserving the environment, preventing pollution and ensuring the health and
well being of its workforce and the community in which it operates. The objectives set out in the policy include meeting all regulatory
authority requirements for groundwater, air emissions, stormwater, noise and soil contamination, establishing compliance mechanisms
and maximising reuse of waste materials.
Quality policy
Incitec Pivot has adopted a policy on its commitment to providing products and services that meet its customers' needs. The objectives
of the policy include meeting all regulatory requirements and establishing procedures and operating mechanisms consistent with
accepted international standards.
Signed on behalf of the Board in accordance with a resolution of the directors of Incitec Pivot Limited.
John C Watson, AM
Chairman
Dated at Melbourne this 29th day of October 2004
24
Incitec Pivot Limited
Statements of Financial Performance
For the year ended 30 September 2004
Revenue from ordinary activities
Operating expenses
Changes in inventories of finished goods and work in progress
Raw materials and consumables used and
finished goods purchased for resale
Employee expenses (including significant items)
Costs recovered from subsidary under agency agreement
Write-down of investments in controlled entities (significant items)
Depreciation and amortisation expense
Borrowing costs
Purchased services (including significant items)
Repairs and maintenance
Property, plant & equipment retired/disposed (excluding significant items)
Outgoing freight
Lease payments - operating leases
Net assets disposed from sale of business (significant items)
Asset write-downs, clean-up and environmental provisions (significant
items)
Other expenses from ordinary activities including significant items
Profit/(loss) from ordinary activities before income tax expense
Income tax expense attributable to (loss)/profit from ordinary activities
Profit/(loss) from ordinary activities after income tax relating to
members of Incitec Pivot Limited
Non-owner transactions in equity
Net increase in general and other reserves
Net decrease in forfeited shares reserve
Net decrease in capital profits reserve
Net reduction in equity due to initial adoption of AASB 1028
Employee Benefits
Total changes in equity other than those resulting from
transactions with owners as owners
Notes
(3)
(33)
(5)
Consolidated
Company
2004
2003
2004
2003
$000
1,137,898
$000
696,567
$000
978,275
$000
586,648
40,060
(61,751)
156,438
(33,734)
(810,573)
(83,524)
-
-
(45,317)
(5,960)
(51,830)
(26,580)
(673)
(31,044)
(8,638)
-
(349,830)
(66,403)
-
-
(24,353)
(8,289)
(44,667)
(13,062)
(3,043)
(23,692)
(7,914)
(3,867)
(892,585)
(38,617)
24,853
-
(10,193)
(2,825)
(48,756)
(24,549)
(673)
(31,044)
(8,638)
-
(290,284)
(50,743)
-
(67,497)
(11,426)
(6,886)
(34,053)
(7,411)
(1,382)
(15,480)
(6,334)
-
(679)
(37,837)
(679)
(37,152)
(6,011)
(1,030,769)
107,129
(32,090)
(64,093)
(708,801)
(12,234)
(6,389)
(4)
(7)
(3,226)
(880,494)
97,781
(14,077)
(2,049)
(564,431)
22,217
(4,979)
75,039
(18,623)
83,704
17,238
(23)
(23)
(23)
(23)
-
-
-
-
1,499
(8)
(1,491)
(328)
-
-
-
-
8
(8)
-
(191)
(24)
75,039
(18,951)
83,704
17,047
Earnings per share
Basic earnings per share:
Ordinary shares
Diluted earnings per share:
Ordinary shares
cents
cents
(8)
(8)
129
129
(60)
(60)
The Statements of Financial Performance are to be read in conjunction with the Notes to the Financial Statements set out on
pages 28 to 67.
Incitec Pivot Limited
25
Statements of Financial Position
As at 30 September 2004
Current assets
Cash assets
Receivables
Inventories
Other
Total current assets
Non-current assets
Receivables
Other financial assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Other
Total non-current assets
Total assets
Current liabilities
Payables
Interest bearing liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Interest bearing liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained profits
Total equity
Consolidated
2004
$000
2003
$000
Notes
Company
2004
$000
2003
$000
(9)
(10)
(11)
(12)
(10)
(13)
(14)
(15)
(16)
(12)
(17)
(18)
(19)
(20)
(18)
(21)
(20)
(22)
(23)
(23)
(24)
83,846
123,745
246,292
7,047
460,930
3,248
-
296,132
183,809
17,108
10,166
510,463
971,393
192,854
63,055
16,277
26,877
299,063
-
19,049
21,762
40,811
339,874
631,519
532,445
35,922
63,152
631,519
21,269
108,988
205,643
14,699
350,599
1,924
-
296,615
185,354
19,101
13,553
516,547
867,146
130,899
40,663
6,312
37,133
215,007
55,000
14,268
9,489
78,757
293,764
573,382
532,445
35,922
5,015
573,382
83,846
142,245
246,292
2,268
474,651
188
474,179
114,918
-
13,730
2,296
605,311
1,079,962
385,019
8,055
1,246
22,460
416,780
-
4,526
15,372
19,898
436,678
643,284
532,445
43,694
67,145
643,284
14,440
42,713
74,366
7,834
139,353
1,924
474,179
85,009
-
13,194
-
574,306
713,659
50,480
61,479
-
22,525
134,484
-
-
2,693
2,693
137,177
576,482
532,445
43,694
343
576,482
The Statements of Financial Position are to be read in conjunction with the Notes to the Financial Statements set out on
pages 28 to 67.
26
Incitec Pivot Limited
Statements of Cash Flows
For the year ended 30 September 2004
Notes
Consolidated
2004
$000
Inflows/
(Outflows)
2003
$000
Inflows/
(Outflows)
Company
2004
$000
Inflows/
(Outflows)
2003
$000
Inflows/
(Outflows)
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Borrowing costs
Dividends received from wholly-owned controlled entity
Rental income
Royalties
Other trading revenue received
Net income taxes received/(paid)
Net cash flows from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Proceeds from sale of property, plant and equipment
Proceeds from sale of business
Net cash flows used in investing activities
Cash flows from financing activities
Net movement in short term financing
Payments for expenses relating to listing on Australian Stock Exchange
Dividends paid
Net cash flows used in financing activities
(33)
(26)
(3)
(3)
1,121,161
(959,165)
388
(6,038)
-
289
-
191
(15,351)
141,475
812,715
(714,836)
1,472
(7,966)
-
433
10
1,291
3,113
96,232
(30,814)
1,427
-
(29,387)
(15,578)
2,659
4,393
(8,526)
(31,032)
-
(16,902)
(47,934)
(81,545)
(1,274)
(24,478)
(107,297)
Net (decrease)/increase in cash held
Cash at the beginning of the financial year
Cash at the end of the financial year
64,154
19,692
83,846
(19,591)
39,283
19,692
(26)
863,755
(704,217)
531
(446)
16,000
244
-
-
(8,842)
167,025
(28,724)
1,431
-
(27,293)
(51,847)
-
(16,902)
(68,749)
70,983
12,863
83,846
525,959
(468,252)
1,770
(6,808)
354
10
640
-
53,673
(8,923)
852
-
(8,071)
(43,038)
(1,274)
(24,478)
(68,790)
(23,188)
36,051
12,863
The Statements of Cash Flows are to be read in conjunction with the Notes to the Financial Statements set out on pages 28 to 67.
Incitec Pivot Limited
27
Notes to the Financial Statements
For the year ended 30 September 2004
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
28
Significant accounting policies
Segment report
Revenue from ordinary activities
Profit/(loss) from ordinary activities before income tax expense
Individually significant items
Auditors' remuneration
Income tax expense
Earnings per share (EPS)
Cash assets
Receivables
Inventories
Other assets
Other financial assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Payables
Interest bearing liabilities
Current tax liabilities
Provisions
Deferred tax liabilities
Contributed equity
Reserves and retained profits
Total equity reconciliation
Dividends
Notes to the statements of cash flows
Commitments
Contingent liabilities
Standby arrangements and credit facilities
Amounts receivable and payable denominated in foreign currencies
Additional financial instruments disclosures
Employee share plans
Related party disclosures
Superannuation commitments
Director and executive disclosures
Investments in controlled entities
Deed of Cross Guarantee
Impact of adopting AASB equivalent to International Financial Reporting Standards
Events subsequent to balance date
Incitec Pivot Limited
29
31
33
33
34
35
35
36
36
37
37
37
38
38
39
39
39
40
40
40
41
42
43
44
44
45
46
46
48
48
48
51
53
54
55
63
64
65
67
Notes to the Financial Statements
For the year ended 30 September 2004
1. Significant accounting policies
The significant accounting policies adopted in preparing the
financial report of Incitec Pivot Limited (‘the Company’ or
‘Incitec Pivot’) and of its controlled entities (collectively ‘the
consolidated entity’) are stated to assist in a general
understanding of this financial report. These policies have
been consistently applied except as otherwise indicated.
(i) Basis of preparation
The financial report is a general purpose financial report
prepared in accordance with Accounting Standards, Urgent
Issues Group Consensus Views, other authoritative
pronouncements of the Australian Accounting Standards
Board and the Corporations Act 2001(Cth).
The financial report has been prepared on the basis of
historical cost and except where stated, does not take into
account changing money values or fair values of non-current
assets.
(ii) Change in accounting policy
During the financial year ended 30 September 2004, there
have been no changes in accounting policy.
(iii) Consolidation
The controlled entities included in the consolidated financial
statements are listed in note 36, Investments in controlled
entities. All inter-entity transactions and balances have been
eliminated on consolidation. Where entities are not controlled
throughout the entire financial year, the consolidated results
include the results of those entities for that part of the year
during which control existed.
(iv) Revenue recognition (see note 3)
External sales, royalty income and other income are
recognised when the goods and services are provided.
Interest income is recognised as it accrues. Gross proceeds
from sale of businesses, controlled entities and other
non-current assets are recognised when there is a signed
unconditional contract of sale. Dividends are recognised in
the statements of financial performance when declared.
Revenues are recognised at fair value of the consideration
received net of the amount of GST payable to the taxation
authority.
(v) Borrowing costs (see note 4)
Borrowing costs include interest, amortisation of discounts or
premiums relating to borrowings and amortisation of ancillary
costs incurred in connection with the arrangement of
borrowings, including lease finance charges. Borrowing costs
are expensed as incurred unless they relate to qualifying
assets. Qualifying assets are assets that take more than
twelve months to get ready for their intended use or sale.
Where funds are borrowed specifically for the production of a
qualifying asset, the interest on those funds is capitalised, net
of any interest earned on those borrowings. Where funds are
borrowed generally, borrowing costs are capitalised using a
weighted average interest rate. Ancillary costs incurred in
connection with the arrangement of borrowings are capitalised
and amortised over the life of the borrowings.
(vi) Research and development costs (see note 4)
Research and development costs are expensed as incurred.
(vii) Taxation (see note 7)
Income tax has been brought to account using the income
statement method of tax effect accounting.
Income tax expense is calculated on operating profit adjusted
for permanent differences between taxable and accounting
income. The tax effect of timing differences, which arise from
items being brought to account in different periods for income
tax and accounting purposes, is carried forward in the
Statements of Financial Position as a future income tax
benefit or a provision for deferred income tax. Future income
tax benefits are not brought to account unless realisation of
the asset is assured beyond reasonable doubt, or if relating to
tax losses when realisation is virtually certain.
Capital gains tax is provided in the Statements of Financial
Performance in the year in which an asset is sold.
(viii) Inventories (see note 11)
Inventories are valued at the lower of cost and net realisable
value.
Cost is based on a weighted average method. For
manufactured goods, cost includes direct material and labour
costs plus an appropriate proportion of variable and fixed
overheads based on normal operating capacity of the
production facilities. For merchanted goods, cost is net cost
into store.
(ix) Maintenance, repairs and other costs (see note 12)
Expenditure for maintenance, repairs and replacements of a
minor nature is expensed as incurred. Major cyclical
expenditure is undertaken at the principal manufacturing
plants in three to four year cycles. These plants operate
continuous production processes twenty-four hours per day,
seven days per week. Major cyclical expenditure,
incorporating new capital expenditure, enables these plants to
extend their estimated useful lives and improve their
performance. This expenditure is deferred and amortised
over the period to which future economic benefits relate,
which is generally until the commencement of the next cycle.
The unamortised expenditure is added to the respective net
book values of the major plant for the purposes of assessing
recoverable values.
(x) Other financial assets (see note 13)
The Company’s interests in controlled entities are stated at
cost. Where, in the opinion of the directors, there has been a
diminution in the carrying value of an investment, the
investment is written down to its recoverable amount. The
expected net cash flows included in determining recoverable
amounts are discounted to their present values.
(xi) Property, plant and equipment and depreciation
(see note 14)
Property, plant and equipment, other than freehold land, is
depreciated on a straight line basis at rates calculated to
allocate the cost less the estimated residual value over the
estimated useful life of each asset to the consolidated entity.
Depreciation and amortisation rates and methods are
reviewed annually for appropriateness. When changes are
made adjustments are reflected prospectively in current and
future periods only.
Incitec Pivot Limited
29
Notes to the Financial Statements
For the year ended 30 September 2004
1. Significant accounting policies (continued)
Estimated useful lives of each class of asset are as follows:
Buildings and improvements
Machinery, plant and equipment
Software
20 to 40 years
3 to 30 years
3 to 7 years
The carrying amounts of all non-current assets are reviewed
half-yearly to determine whether they are in excess of their
recoverable amounts. If the carrying amount of a non-current
asset exceeds its recoverable amount, the asset is revalued
downwards to its recoverable amount and the decrement is
recognised as an expense in the Statements of Financial
Performance.
The expected net cash flows included in determining
recoverable amounts of non-current assets are discounted to
their present values.
Profits and losses on disposal of property, plant and
equipment are taken to the Statements of Financial
Performance.
(xii) Leased assets
Operating leases are not capitalised and lease rental
payments are taken to the Statements of Financial
Performance as incurred.
(xiii) Goodwill (see note 15)
Goodwill represents the excess of the cost of acquisition over
the fair value of the net assets acquired. Goodwill is
amortised on a straight-line basis over the period in which the
benefits are expected to arise, not exceeding twenty years.
The carrying value is reviewed half-yearly and written down to
recoverable amount if considered necessary. The expected
net cash flows included in determining recoverable amount of
goodwill are discounted to their net present values.
(xiv) Provisions (see note 20)
A provision is recognised when there is a legal, equitable or
constructive obligation as a result of a past event and it is
probable that a future sacrifice of economic benefits will be
required to settle the obligation and the timing or amount is
uncertain.
If the effect is material, a provision is determined by
discounting the expected future cash flows (adjusted for
expected future risks) required to settle the obligation at a pre-
tax rate that reflects current market assessments of the time
value of money, being risk free rates on government bonds
most closely matching the expected future payments, except
where otherwise noted and the risks specific to the liability.
The unwinding of the discount is treated as part of the
expense related to the particular provision.
Environmental liabilities
The cost of monitoring operations and treating operating
wastes is taken to the Statements of Financial Performance
as an operating cost as incurred.
Estimated costs relating to the remediation of soil,
groundwater and untreated waste that have arisen as a result
of past events are usually taken to the Statements of Financial
Performance in total as soon as the requirement to remediate
is identified and a reliable estimate of the liability is identified.
However, where the cost relates to land held for resale then,
to the extent that the expected realisation exceeds both the
book value of the land and the estimated cost of remediation,
the cost is capitalised as part of the holding value of that land
as it is incurred.
Employee entitlements
Provisions are made for liabilities to employees for annual
leave, sick leave and other current employee entitlements that
represent the amount for which the consolidated entity has a
present obligation. These have been calculated at nominal
amounts based on the wage and salary rates that the
consolidated entity expects to pay as at each reporting date
and include related on-costs. Liabilities for employee
entitlements which are not expected to be settled within twelve
months of balance date, such as long service leave, are
accrued at the present value of future amounts expected to be
paid. The present value is determined using interest rates
applicable to government guaranteed securities with
maturities within the next ten years.
Contributions for superannuation are taken to the Statements
of Financial Performance in the year in which the payment is
made (see note 34).
A liability is recognised for bonus plans when there is no
realistic alternative, the benefit calculations are formally
documented and determined before signing the financial
report and past practice supports the calculation.
Dividends
A provision for dividends payable is recognised in the
reporting period in which the dividends are declared, for the
entire undistributed amount, regardless of the extent to which
they will be paid in cash.
Restructuring and employee termination benefits
A provision for restructuring, including employee termination
benefits, related to an acquired entity or operation is
recognised at the date of acquisition where:
•
the main features of the restructuring were announced,
implementation of the restructuring commenced, or
contracts were entered by the date of acquisition, and
a detailed formal plan is developed by the earlier of three
months after the date of the acquisition and the
completion of this financial report.
•
The provision only relates to costs associated with the
acquired entity, and is included in the determination of the fair
value of the net assets acquired. The provision includes
liabilities for termination benefits that will be paid to employees
of the acquired entity as a result of the restructuring.
Other provisions for restructuring or termination benefits are
only recognised when a detailed plan has been approved and
the restructuring or termination benefits have either
commenced or been publicly announced, or firm contracts
related to the restructuring or termination benefits have been
entered into. Costs related to ongoing activities are not
provided for.
(xv) Foreign currency translation
Foreign currency transactions are translated at the exchange
rate prevailing at the date of the transaction. Foreign currency
receivables and payables outstanding at balance date are
translated at the exchange rates current at that date.
Exchange gains and losses are taken to the statements of
financial performance.
(xvi) Cash flows (see note 26)
For the purposes of the Statements of Cash Flows, cash
includes cash at bank, cash on hand and deposits at call
which are readily convertible to cash on hand and which are
used in the cash management function, net of bank
overdrafts.
30
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2004
1. Significant accounting policies (continued)
(xvii) Derivative financial instruments (see note 31)
Derivative financial instruments are used to hedge interest
rate and foreign currency exposures. Accordingly, hedge
accounting principles are applied, under which gains and
losses on derivatives are brought to account on the same
basis as the gains and losses on the underlying physical
exposures. Derivative financial instruments are not held for
speculative purposes.
The effect of interest received, paid or accrued under interest
rate swap and forward rate agreements is included in the
calculation of net interest expense. The amount receivable or
payable at balance date is included in assets or liabilities
respectively.
Anticipated transactions
Where hedge transactions are designated as a hedge of the
anticipated purchase or sale of goods or services, purchase of
qualifying assets, or an anticipated interest transaction, gains
and losses, on the hedge arising up to the date of the
anticipated transaction, together with any costs or gains
arising at the time of entering into the hedge, are deferred and
included in the measurement of the anticipated transaction
when the transaction has occurred as designated. Any gains
or losses on the hedge transaction after that date are included
in the Statements of Financial Performance.
The net amount receivable or payable under open swaps,
forward rate agreements and futures contracts and the
associated deferred gains or losses are not recorded in the
Statements of Financial Performance until the hedged
transaction matures. The net receivables or payables are
then revalued using the foreign currency, interest or
commodity rates current at balance date.
When the anticipated transaction is no longer expected to
occur as designated the deferred gains and losses relating to
the hedged transaction are recognised immediately in the
Statements of Financial Performance.
Gains and losses that arise prior to and upon the maturity of
transactions entered into under hedge strategies are deferred
and included in the measurement of the hedged anticipated
transaction if the transaction is still expected to occur as
designated. If the anticipated transaction is no longer
expected to occur as designated, the gains and losses are
recognised immediately in the Statements of Financial
Performance.
(xviii) Redeemable preference shares
Redeemable preference shares which provide for mandatory
redemption are included in liabilities as they are, in substance,
borrowings. Dividends payable on these shares are
recognised in the Statements of Financial Performance as
borrowing costs on an accruals basis.
(xix) Goods and services tax
Revenues, expenses, assets and liabilities other than
receivables and payables are recognised net of the amount of
goods and services tax (GST), except where the amount of
GST incurred is not recoverable from the relevant taxation
authorities. In these circumstances the GST is recognised as
part of the cost of acquisition of the asset or as part of an item
of expense.
The net amount of GST recoverable from, or payable to, the
relevant taxation authorities is included as a current asset or
liability in the statements of financial position.
Cash flows are included in the Statements of Cash Flows on a
gross basis. The GST components of cash flows arising from
investing and financing activities which are recoverable from,
or payable to, the relevant taxation authorities are classified
as operating cash flows.
(xx) Comparative figures
Where necessary, comparatives have been reclassified and
repositioned for consistency with current year disclosures.
2. Segment report
Reports for business
During the year ended 30 September 2004, the consolidated entity operated in one business segment in which the principal activities
were the manufacture and distribution of fertiliser, and in one geographic location, Australia.
During the year ended 30 September 2003, the consolidated entity operated in two business segments, Fertiliser and Divested
Business, and in one geographic location, Australia.
Incitec Pivot Limited
31
Notes to the Financial Statements
For the year ended 30 September 2004
2. Segment report (continued)
2004
Revenue
External sales
Sales to entities subject to common control
Total sales revenue
Other revenue
Total of all segments
Total consolidated revenue from ordinary
activities
Result
EBIT - Segment
Net interest
Profit before tax and significant items
Significant items
Profit from ordinary activities before tax
Income tax expense
Profit from ordinary activities after tax
Assets
Segment assets
Liabilities
Segment liabilities
Other information
Acquisition of property, plant and equipment
Depreciation and amortisation of segment assets
Other non cash expenses - write-downs and provisions
2003
Revenue
External sales
Sales to Incitec Fertilizers Limited pre acquisition
Total sales revenue
Other revenue
Total of all segments
Total consolidated revenue from ordinary
activities
Result
EBIT - Segment
Net interest
Profit before tax and significant items
Significant items
Loss from ordinary activities before tax
Income tax expense
Loss from ordinary activities after tax
Assets
Segment assets
Liabilities
Segment liabilities
Other Information
Acquisition of business
Acquisition of property, plant and equipment
Depreciation and amortisation of segment assets
Other non cash expenses - write-downs and provisions
32
Incitec Pivot Limited
Fertiliser
Divested
Consolidated
Notes
$000
Business
$000
(3)
(5)
(4)
1,107,098
28,490
1,135,588
2,310
1,137,898
1,137,898
121,862
(5,406)
116,456
(9,327)
107,129
(32,090)
75,039
971,393
339,874
30,814
45,317
6,170
Fertiliser
$000
655,503
10,500
666,003
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Divested
Business
$000
20,304
-
20,304
(3)
666,003
20,304
59,401
(251)
(5)
(4)
867,047
293,721
467,900
15,578
24,343
45,197
99
43
-
-
10
-
$000
1,107,098
28,490
1,135,588
2,310
1,137,898
1,137,898
121,862
(5,406)
116,456
(9,327)
107,129
(32,090)
75,039
971,393
339,874
30,814
45,317
6,170
Consolidated
$000
675,807
10,500
686,307
10,260
696,567
696,567
59,150
(6,816)
52,334
(64,568)
(12,234)
(6,389)
(18,623)
867,146
293,764
467,900
15,578
24,353
45,197
Notes to the Financial Statements
For the year ended 30 September 2004
3. Revenue from ordinary activities
External sales
Sales to entities subject to common control
Other revenue from operating activities
Royalty income
Dividend income
wholly-owned controlled entities
Interest income
common controlled entities
wholly-owned controlled entities
external parties – banks
Loan forgiveness from controlled entities (significant items)
Rental income
Other income
From outside operating activities
Sale of business
Sale of property, plant and equipment
Total other revenue
Total revenue
Consolidated
Company
2004
$000
2003
$000
2004
$000
2003
$000
Notes
1,107,098
28,490
686,307
-
913,084
28,397
472,484
-
-
-
33
-
521
-
289
40
(33)
(5)
(5)
10
-
-
34,500
10
-
-
-
1,473
433
1,292
33
56
530
-
244
-
476
-
1,372
110,459
354
641
-
852
114,164
586,648
-
1,427
2,310
1,137,898
4,393
2,659
10,260
696,567
-
1,431
36,794
978,275
4. Profit/(loss) from ordinary activities before income tax expense
Profit/(loss) from ordinary activities before income tax expense is
arrived at after crediting:
Profit on sale of business
Profit/(loss) on sale of property, plant and equipment
Net gain/(loss) on foreign currency transactions
Profit/(loss) from ordinary activities before income tax expense is
arrived at after charging:
Cost of goods sold
Borrowing costs paid/payable to
entity subject to common control
external parties
Depreciation on property, plant and equipment
buildings and improvements
machinery, plant and equipment (1)
Amortisation
goodwill
deferred maintenance expenditure
Amounts set aside to provide for
employee entitlements
environmental liabilities
inventory losses and obsolescence
other provisions
restructuring
Bad debts written off in respect of trade debtors
Lease payments – operating leases
Research and development
Superannuation contributions
(5)
-
2,238
705
526
(100)
115
-
2,238
597
-
6
(21)
770,513
471,135
736,146
324,019
1,669
4,291
942
7,347
8,288
22,336
4,767
14,875
9,945
4,748
4,137
270
1,276
487
-
95
8,638
277
8,113
3,128
1,583
13,492
7,033
-
2,297
20,650
232
7,914
121
4,482
1,677
1,148
5,070
5,123
-
-
840
270
1,276
487
-
95
8,638
277
3,336
942
5,944
3,660
7,766
-
-
11,435
7,033
-
2,297
20,359
232
6,334
121
2,431
(1) The remaining useful lives of certain manufacturing assets have been extended in the second half to align the depreciation charge with actual
expected remaining useful lives. The impact on the current year was $5.7m and the impact for prospective years will be $11.4m.
Incitec Pivot Limited
33
Notes to the Financial Statements
For the year ended 30 September 2004
5.
Individually significant items
(Loss)/profit from ordinary activities includes the following
revenues and expenses whose disclosure is relevant in
explaining the financial performance of the entity:
Consolidated
Merger implementation costs
Employee redundancies and allowances
Environmental
Corporate launch
Site-clean up and rationalisation
Asset write-downs
Transaction and implementation costs
Accounting policy adjustments
Total merger implementation costs (1)
Other
Profit from business divested (2)
Profit from sale of property, plant and equipment
Write-down of carrying value of inventory (3)
Over/(under) provision of income tax in previous years (4)
Total other
Individually significant items
Company
Merger implementation costs
Employee redundancies and allowances
Environmental
Corporate launch
Site-clean up and rationalisation
Asset write-downs
Transaction and implementation costs
Accounting policy adjustments
Total merger implementation costs (1)
Other
Write-down of investments in controlled entities (5)
Loan forgiveness from controlled entities (5)
Profit from sale of property, plant and equipment
Write-down of carrying value of inventory (3)
Over/(under) provision of income tax in previous years (4)
Total other
Individually significant items
Gross
$000
2004
Tax
$000
Net
$000
Gross
$000
2003
Tax
$000
Net
$000
(6,255)
(270)
(1,498)
-
(409)
(895)
-
(9,327)
-
-
-
-
(9,327)
(5,485)
(270)
(1,498)
-
(409)
(895)
-
(8,557)
-
-
-
-
-
-
(8,557)
1,877
81
449
-
123
269
-
2,799
-
-
697
697
3,496
1,645
81
449
-
123
269
-
2,567
-
-
-
-
828
828
3,395
(4,378)
(189)
(1,049)
-
(286)
(626)
-
(6,528)
-
-
697
697
(5,831)
(3,840)
(189)
(1,049)
-
(286)
(626)
-
(5,990)
-
-
-
-
828
828
(5,162)
(10,108)
(7,300)
-
(7,883)
(22,654)
(12,666)
(2,881)
(63,492)
526
224
(1,826)
-
(1,076)
(64,568)
(9,883)
(7,300)
-
(7,884)
(21,968)
(10,019)
(2,881)
(59,935)
(67,497)
110,459
224
(1,826)
-
41,360
(18,575)
3,032
2,190
-
1,231
3,927
2,354
864
13,598
(158)
(67)
548
(3,009)
(2,686)
10,912
2,965
2,190
-
1,230
3,722
1,560
864
12,531
-
-
(67)
548
(3,167)
(2,686)
9,845
(7,076)
(5,110)
-
(6,652)
(18,727)
(10,312)
(2,017)
(49,894)
368
157
(1,278)
(3,009)
(3,762)
(53,656)
(6,918)
(5,110)
-
(6,654)
(18,246)
(8,459)
(2,017)
(47,404)
(67,497)
110,459
157
(1,278)
(3,167)
38,674
(8,730)
(1) Merger implementation costs in 2003 and 2004 relate to the restructuring and reorganisation activities following the acquisition of Incitec
Fertilizers Limited. The classification of these costs is consistent with the September 2003 financial statements and the merger information
memorandum.
(2) On 20th February 2003 Pivot Nutrition Pty Ltd, a wholly owned subsidiary of the Company, divested the operating assets and business of the
Carrick Stockfeed Mill for $4.4m.
(3) Inventory written down and prior year losses relate to the grain business which ceased operations.
(4) Adjustment to income tax expense to reconcile to income tax returns as lodged.
(5) Write-down of investment in controlled entities following reassessment of carrying value as a result of intercompany loans forgiven.
34
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2004
6. Auditors’ remuneration
Total remuneration received, or due and receivable,
by the auditors for:
Audit services
Auditors of the Company - KPMG
Auditors of the Company - Deloitte Touche Tohmatsu
Non audit services
Auditors of the Company - KPMG
taxation services
other services
Auditors of the Company - Deloitte Touche Tohmatsu
taxation services
other services
Consolidated
Company
2004
2003
2004
2003
$
$
$
$
200,000
250,000
200,000
70,000
200,000
320,000
200,000
250,000
70,000
320,000
95,754
8,415
40,300
24,460
95,754
8,415
40,000
24,460
126,578
180,526
371,864
691,864
126,578
180,526
371,564
691,564
104,169
304,169
104,169
304,169
From time to time, the auditors provide other services to the Company, which are subject to strict corporate governance procedures adopted by the
Company which encompass the selection of service providers and the setting of their remuneration. The Audit and Risk Management Committee
must approve non audit services provided by KPMG above a value of $20,000. Taxation services relate to the 2002 tax returns, their engagement
was prior to appointment as external auditors.
Consolidated
2004
$000
2003
$000
Company
2004
$000
2003
$000
7.
Income tax expense
The amount of income tax attributable to the financial year differs from the amount
prima facie payable on the operating profit/(loss). The differences are reconciled as
follows:
Income tax expense attributable to operating profit before significant items
Prima facie income tax expense calculated at 30% (2003 at 30%)
on profit from ordinary activities before significant items
Tax effect of permanent differences which increase/(reduce) tax expense:
non-allowable depreciation of buildings
research and development
dividends from wholly-owned entities
tax under/(over) provided in prior years
non-allowable goodwill amortisation
non taxable profit on sale of property, plant and equipment
sundry items
Income tax expense attributable to operating profit before significant items
Income tax expense attributable to significant items
Prima facie income tax benefit calculated at 30% (2003 at 30%)
on loss from significant items
Tax effect of permanent differences which increase/(reduce) tax expense
merger implementation costs
write-down of investments in controlled entities
loan forgiveness from controlled entities
tax under/(over)provided in prior years
Income tax benefit attributable to operating
loss from significant items
34,937
15,701
31,901
12,238
450
(287)
-
(2,098)
2,984
(512)
112
35,586
472
(409)
-
929
939
(452)
121
17,301
41
(287)
(10,350)
(1,853)
-
(592)
(1,388)
17,472
229
(263)
-
2,704
-
(67)
(17)
14,824
(2,798)
(19,371)
(2,567)
(5,573)
(1)
-
-
(697)
5,450
-
-
3,009
-
-
-
(828)
5,450
20,249
(33,138)
3,167
(3,496)
(10,912)
(3,395)
(9,845)
Income tax expense attributable to operating profit
32,090
6,389
14,077
4,979
Income tax expense comprises:
provision for income tax
deferred income tax
future income tax benefit
18,510
5,478
8,102
32,090
2,063
(3,662)
7,988
6,389
3,594
7,382
3,101
14,077
-
-
4,979
4,979
35
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2004
7.
Income tax expense (continued)
Recovery of future income tax benefits included in deferred tax assets (see note 16) depends on future taxable earnings and the
continuation of existing tax laws and compliance therewith.
There are no future tax benefits attributable to tax losses carried forward by controlled entities (2003 $nil).
8. Earnings per share (EPS)
Basic and diluted earnings/(loss) per share
including significant items
excluding significant items
Consolidated
2004
Cents
per share
2003
Cents
per share
Notes
129
139
(60)
113
Number
Number
Weighted average number of shares used as the denominator:
Number for basic and diluted earnings per share (1)
58,281,027
31,120,472
Average market price of ordinary shares
$17.33
$15.39
Reconciliation of earnings used in the calculation of basic earnings
per share including individually significant items
$000
$000
Profit/(loss) from ordinary activities after income tax expense
Earnings used in calculation of EPS including individually significant items
75,039
75,039
(18,623)
(18,623)
Reconciliation of earnings used in the calculation of basic earnings
per share excluding individually significant items
Profit/(loss) from ordinary activities after income tax expense
Deduct individually significant items after income tax
Earnings used in calculation of EPS excluding individually significant items
(5)
75,039
(5,831)
80,870
(18,623)
(53,656)
35,033
(1) The 2003 weighted average number of shares used as the denominator calculated over the 12 months ended
30 September 2003 takes into account the issue of 40,796,719 shares on 1 June 2003. No shares were issued during
2004, thus the weighted average number of shares represents issued shares at year end.
9. Cash assets
Cash at bank and on hand
Deposits at call
entity subject to common control
Consolidated
Company
2004
$000
2003
$000
2004
$000
2003
$000
Notes
705
6,851
705
22
(31)
83,141
83,846
14,418
21,269
83,141
83,846
14,418
14,440
36
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2004
10. Receivables
Current
Trade debtors
external
entities subject to common control
Less provision for doubtful debts
external
Sundry debtors/loans
external
entities subject to common control
wholly-owned controlled entity
Non-current
Sundry debtors/loans
external
related parties
Significant terms and conditions
Trade debtors are carried at amounts due.
Consolidated
2004
$000
2003
$000
Company
2004
$000
2003
$000
Notes
98,384
3,892
101,050
3,309
98,384
3,892
41,876
-
(762)
101,514
(866)
103,493
(762)
101,514
(666)
41,210
(33)
18,988
3,243
-
22,231
123,745
4,584
911
-
5,495
108,988
18,988
3,243
18,500
40,731
142,245
1,425
-
78
1,503
42,713
3,248
-
3,248
253
1,671
1,924
188
-
188
253
1,671
1,924
The collectability of debts is assessed at balance date and specific provision is made for any doubtful debts based on a review of all
outstanding amounts at year end. Bad debts are written off during the year in which they are identified.
Sundry debtors generally arise from transactions outside the usual operating activities of the consolidated entity.
Net fair values
The directors consider the carrying amount of receivables to approximate their net fair values.
Credit risk
Credit risk in debtors is managed in the following ways:
- payment terms are generally 30 days and payment compliance is high.
- a risk assessment process is used for all accounts, with a stop credit process for long overdue accounts. Interest may
be charged where the terms of repayment exceed agreed terms.
11.
Inventories
Raw materials and stores
At cost
Less provision for inventory losses and obsolescence
Finished goods
At cost
Less provision for inventory losses and obsolescence
12. Other assets
Current
Deferred maintenance expenditure
Less accumulated amortisation
Prepayments
Non-current
Deferred maintenance expenditure
Prepayments
18,775
(468)
18,307
18,186
(468)
17,718
230,130
(2,145)
227,985
246,292
189,298
(1,373)
187,925
205,643
18,775
(468)
18,307
230,130
(2,145)
227,985
246,292
3,287
(468)
2,819
72,170
(623)
71,547
74,366
(1ix)
(1ix)
16,789
(12,041)
4,748
2,299
7,047
7,870
2,296
10,166
12,132
(7,292)
4,840
9,859
14,699
13,456
97
13,553
-
-
-
2,268
2,268
-
2,296
2,296
-
-
-
7,834
7,834
-
-
-
Incitec Pivot Limited
37
Notes to the Financial Statements
For the year ended 30 September 2004
13. Other financial assets
Non-current
Interest in unlisted controlled entities
At cost (36)
-
-
474,179
474,179
Consolidated
2004
$000
2003
$000
Company
2004
$000
2003
$000
Notes
14. Property, plant and equipment
Land, buildings and improvements
At cost
Accumulated depreciation
At recoverable amount
Accumulated depreciation
Total net book value
Machinery, plant and equipment
At cost
Accumulated depreciation
Capital works in progress
Total net book value
Total net book value of property, plant and equipment
Carrying value of freehold land
(included with land, buildings and improvements)
Land held for resale
At cost - current
At cost - non-current
Total (included in value of freehold land)
202,790
(90,308)
14,028
(693)
125,817
203,982
(87,952)
14,913
-
130,943
66,763
(31,481)
14,028
(693)
48,617
66,046
(32,989)
14,913
-
47,970
414,938
(259,244)
14,621
170,315
296,132
418,273
(266,158)
13,557
165,672
296,615
130,408
(78,728)
14,621
66,301
114,918
122,515
(99,033)
13,557
37,039
85,009
56,135
47,018
7,025
4,596
9,381
-
9,381
10,462
356
10,818
-
-
-
2,319
-
2,319
Current valuations
The most recent valuations of freehold land, buildings and improvements, which are prepared every three years, are listed below.
These valuations are not incorporated in the financial statements.
At directors’ valuation
2004
$000
148,271
2003
$000
148,898
Valuations of land and buildings
The valuations were independently determined in 2003 on a market value for existing use basis except in relation to properties held
as investments or for disposal in which case the valuations were determined on a market value for alternative use. Capital gains
tax has not been taken into account in these valuations.
Capitalised borrowing costs
No interest was capitalised during the financial year (2003 $nil).
38
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2004
14. Property, plant and equipment (continued)
Reconciliations
Reconciliations of the consolidated carrying amounts of property, plant and equipment at the beginning and end of the
current financial year are set out below.
Notes
Consolidated 2004
Carrying amount at the beginning of the financial year
Additions
Disposals
Depreciation expense (4)
Write-down to recoverable amount
Carrying amount at the end of the financial year
Company 2004
Carrying amount at the beginning of the financial year
Additions
Disposals
Depreciation expense (4)
Write-down to recoverable amount
Movement in allocated assets within group
Carrying amount at the end of the financial year
Land,
buildings and
improvements
$000
Machinery,
plant and
equipment
$000
130,943
3,706
(499)
(8,288)
(45)
125,817
165,672
27,108
(129)
(22,336)
-
170,315
47,970
2,938
(499)
(5,070)
(45)
3,323
48,617
37,039
25,729
(129)
(5,123)
-
8,785
66,301
Total
$000
296,615
30,814
(628)
(30,624)
(45)
296,132
85,009
28,667
(628)
(10,193)
(45)
12,108
114,918
15.
Intangible assets
Goodwill, at cost
Less accumulated amortisation
Total net book value of goodwill
Consolidated
2004
$000
2003
$000
Company
2004
$000
2003
$000
Notes
196,882
(13,073)
183,809
188,482
(3,128)
185,354
-
-
-
-
-
-
Goodwill at cost has increased by $8.4m (net of future tax benefit of $3.6m) as a result of the recognition of an additional $12m
environmental provision relating to a site which was acquired as a result of the 2003 acquisition of Incitec Fertilizers Limited.
16. Deferred tax assets
Future income tax benefit (1vii)
17,108
19,101
13,730
13,194
17. Payables
Current
Trade creditors
external
entity subject to common control
wholly-owned controlled entity (33)
Sundry creditors and accrued charges
external
wholly-owned controlled entity (33)
entity subject to common control
177,240
134
-
15,480
-
-
192,854
113,152
-
-
17,669
-
78
130,899
177,240
134
120,911
15,234
71,500
-
385,019
26,703
-
19,435
4,264
-
78
50,480
Significant terms and conditions
Trade creditors, including expenditures not yet billed, are recognised when the consolidated entity becomes obliged to
make future payments as a result of a purchase of goods or services. Trade payables are normally settled within 32 days
from invoice date month end or within the agreed payment terms with the supplier.
Net fair values
The directors consider that the carrying amount of trade creditors and other payables approximate their net fair values.
Incitec Pivot Limited
39
Notes to the Financial Statements
For the year ended 30 September 2004
18.
Interest bearing liabilities
Current
Secured
investment deposit debentures
Unsecured
bank overdrafts
redeemable preference shares
other loans
investment deposit scheme
wholly-owned controlled entity
Non-current
Unsecured
redeemable preference shares
Consolidated
2004
$000
2003
$000
Company
2004
$000
2003
$000
Notes
-
39,086
-
55,000
8,055
-
63,055
1,577
-
-
-
40,663
-
-
55,000
55,000
-
-
-
8,055
-
8,055
-
-
39,086
1,577
-
-
20,816
61,479
-
-
Significant terms and conditions
Interest expense is recognised progressively over the life of the loan. Refer to note 31 for financial instruments disclosures.
Net fair values
The directors consider the carrying amount of borrowings to approximate their net fair values.
Redeemable preference shares
A subsidiary of the consolidated entity issued 11,000 redeemable preference shares at $5,000 per share on 27 May 2003,
redeemable on 27 November 2004 at face value. Holders receive interest at 5.36% per annum. Redemption in the sum of $55m will
be funded by the subscription by the Company for ordinary shares in Incitec Fertilizers Limited and be funded by borrowings from
Orica Finance Limited, a common controlled entity.
Investment deposit scheme and investment deposit debentures
Customers may invest funds with Incitec Pivot by way of unsecured notes in the Investment Deposit Scheme issued under the
prospectus dated 19 December 2003, as lodged with ASIC. The interest rate offered at the date of this report is 5.1%. This scheme
replaced the secured investment deposit debentures.
19. Current tax liabilities
Provision for income tax (1vii)
16,277
6,312
1,246
-
20. Provisions
Current
Employee entitlements
Restructuring and rationalisation
Environmental
Other
Non-current
Employee entitlements
Restructuring and rationalisation
Environmental
Aggregate employee entitlements
Current
Non-current
7,823
6,130
11,393
1,531
26,877
9,101
-
12,661
21,762
7,823
9,101
16,924
9,386
12,979
12,471
2,297
37,133
8,666
823
-
9,489
9,386
8,666
18,052
3,406
6,130
11,393
1,531
22,460
2,711
-
12,661
15,372
3,406
2,711
6,117
4,815
8,113
7,300
2,297
22,525
2,161
532
-
2,693
4,815
2,161
6,976
The present values of employee entitlements not expected to be settled within twelve months of balance date have been calculated
using the following assumptions:
Assumed rate of increase in wage and salary rates
Average discount rate
Settlement term
4.0%
5.4%
10 years
Employees at year end
Full time equivalent
Number
801
Number
850
Number
391
Number
352
40
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2004
20. Provisions (continued)
Reconciliations
Reconciliations of the carrying amounts of provisions at the beginning and end of the current financial year are set out below.
Current Provision - Dividends
Carrying amount at the beginning of the financial year
Provisions made during the year
Payments made during the period
Carrying amount at the end of the financial year
Current Provision - Restructuring and rationalisation
Carrying amount at the beginning of the financial year
Transfers from non-current restructuring provision
Transfers from subsidiary
Asset write-downs
Payments made during the period
Carrying amount at the end of the financial year
Current Provision - Environmental
Carrying amount at the beginning of the financial year
Transfers from subsidiary
Provisions made during the year
Transfers to non-current environmental provision
Payments made during the period
Carrying amount at the end of the financial year
Current Provision - Other
Carrying amount at the beginning of the financial year
Provisions made during the year
Asset write-downs
Payments made during the period
Carrying amount at the end of the financial year
Non-Current Provision - Restructuring and rationalisation
Carrying amount at the beginning of the financial year
Transfers to current restructuring provision
Carrying amount at the end of the financial year
Non-Current Provision - Environmental
Carrying amount at the beginning of the financial year
Transfers from current environmental provision
Carrying amount at the end of the financial year
Notes
(25)
(25)
Consolidated
$000
-
16,902
(16,902)
-
Company
$000
-
16,902
(16,902)
-
12,979
823
-
(345)
(7,327)
6,130
8,113
532
4,574
(95)
(6,994)
6,130
12,471
-
12,270
(12,661)
(687)
11,393
7,300
5,123
12,270
(12,661)
(639)
11,393
2,297
487
(170)
(1,083)
1,531
2,297
487
(170)
(1,083)
1,531
823
(823)
-
532
(532)
-
-
12,661
12,661
-
12,661
12,661
21. Deferred tax liabilities
Deferred income tax 1(vii)
19,049
14,268
4,526
-
Consolidated
2004
$000
2003
$000
Company
2004
$000
2003
$000
Notes
Incitec Pivot Limited
41
Notes to the Financial Statements
For the year ended 30 September 2004
22. Contributed equity
Share capital
Ordinary shares - 58,281,027 (2003 - 58,281,027)
Company/Consolidated
2003
$000
2004
$000
532,445
532,445
Movements in issued and fully paid ordinary shares of the Company during the past two years were as follows:
Details
Date
Opening balance
Employee share plan buy-back
Conversion from ordinary shares to investor shares
Shares issued in consideration for purchase of Incitec Fertilizers Limited (1)
Conversion of balance of investor shares to ordinary shares
Transaction costs arising pursuant to the listing of Incitec Pivot Limited on the
Australian Stock Exchange
1 Oct 02
17 Oct 02
1 Oct 02 to 31 Jan 03
1 June 03
3 July 03
Number of
shares
14,037,142
(222)
(6,400)
40,796,719
3,453,788
Issue price
$9.00
$9.00
$11.47
Balance
Balance
30 Sep 03
58,281,027
30 Sep 04
58,281,027
$000
52,122
(2)
(56)
467,900
13,755
(1,274)
532,445
532,445
(1) The issue price of $11.47 represents the midpoint of an independent valuation prepared by Ernst and Young as at 17th March 2003 of the
combined Incitec and Pivot fertiliser businesses.
Terms and conditions
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at
shareholders' meetings.
Movements in issued and fully paid investor shares of the Company during the past two years were as follows:
Details
Opening balance
Conversion from ordinary shares to investor shares
Conversion of balance of investor shares to ordinary shares
Balance
Balance
Date
1 Oct 02
1 Oct 02 to 31 Jan 03
3 July 03
30 Sep 03
30 Sep 04
Number of
shares
3,447,388
6,400
(3,453,788)
Issue price
$9.00
-
-
$000
13,697
58
(13,755)
-
-
Investor shares enabled ordinary shareholders who ceased to be customers (and their beneficiaries) to continue to have equity interest in
the Company, and to facilitate employee and commercial equity investment. A new company constitution following the acquisition of Incitec
Fertilizers Limited provides for a single 'ordinary class' of shares. Consequently each investor share has been transferred to the 'ordinary'
class of shares.
42
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2004
23. Reserves and retained profits
Reserves
Realisation and revaluation of assets
General and other
Reserves at the end of the financial year
Movement in reserves during the financial year
Realisation and revaluation of assets
Balance at beginning of year
Increase in revaluation reserve
Balance at end of year
General and other
Balance at beginning of year
Transfer from capital profit reserves
Transfer from forfeited shares reserve
Balance at end of year
Forfeited shares reserve
Balance at beginning of year
Transfer to general and other
Balance at end of year
Capital profits reserve
Balance at beginning of year
Transfer to general and other
Balance at end of year
Consolidated
2004
$000
2003
$000
Company
2004
$000
2003
$000
Notes
34,423
1,499
35,922
34,423
1,499
35,922
43,686
8
43,694
43,686
8
43,694
34,423
-
34,423
1,499
-
-
1,499
-
-
-
-
-
-
34,423
-
34,423
-
1,491
8
1,499
8
(8)
-
1,491
(1,491)
-
43,686
-
43,686
43,686
-
43,686
8
-
-
8
-
-
-
-
-
-
-
-
8
8
8
(8)
-
-
-
-
Retained profits
Retained profits at the beginning of the financial year
Net decrease in equity due to initial adoption of revised AASB
1028 Employee Benefits
Operating profit/(loss) after income tax attributable
to members of Incitec Pivot
Less dividends paid:
2004 interim and interim special dividend
2003 special dividend
Retained profits at the end of the financial year
Nature and purpose of reserves
5,015
48,444
343
7,774
-
(328)
-
(191)
75,039
(18,623)
83,704
17,238
(25)
(25)
(16,902)
-
63,152
-
(24,478)
5,015
(16,902)
-
67,145
-
(24,478)
343
Realisation and revaluation of assets: The realisation and revaluation of assets reserve includes the net revaluation increments
and decrements arising from the revaluation of non-current assets in accordance with AASB 1041.
General and other: The general reserve has been created as a result of transfers from other reserve accounts and is available for
non-specific purposes.
Forfeited shares: The balance of the forfeited shares reserve has been transferred to general and other reserves.
Capital profits: The balance of the capital profits reserve has been transferred to general and other reserves.
Incitec Pivot Limited
43
Notes to the Financial Statements
For the year ended 30 September 2004
Consolidated
2004
$000
2003
$000
Company
2004
$000
2003
$000
Notes
24. Total equity reconciliation
Total equity at the beginning of the financial year
Total changes recognised in the statements of financial performance
Transactions with owners as owners
Dividends provided for or paid
Contributions of equity
Expenses relating to the listing on the Australian Stock Exchange
Total equity at the end of the financial year
573,382
75,039
150,185
(18,951)
576,482
83,704
117,287
17,047
(25)
(22)
(22)
(16,902)
-
-
631,519
(24,478)
467,900
(1,274)
573,382
(16,902)
-
-
643,284
(24,478)
467,900
(1,274)
576,482
25. Dividends
Dividends paid or declared in respect of the year ended 30 September were:
Ordinary Shares
Special dividend of $1.40 per share, fully franked at 30%, paid 16th June 2003
Interim dividend of 20 cents per share, fully franked at 30%, paid on 8th July 2004
Interim special dividend of 9 cents per share, fully franked at 30%, paid on 8th July 2004
Total ordinary share dividends paid in cash
Redeemable preference shares
Quarterly dividend at 5.36% per share unfranked paid in cash on
27 November
27 February
27 May
27 August
Total redeemable preference share dividends paid in cash
Total dividends paid in cash
Subsequent event
Since the end of the financial year, the directors have declared the following dividends:
Ordinary shares
Final dividend of 70 cents per share 100% franked at 30% payable on 9 December 2004
Final special dividend of 30 cents per share 100% franked at 30% payable on 9 December 2004
Company
2004
$000
2003
$000
11,656
5,246
16,902
737
737
737
737
2,948
19,850
24,478
24,478
737
737
25,215
40,797
17,484
-
-
The financial effect of the final ordinary dividend has not been recognised in the year end financial report and will be recognised in
subsequent financial reports.
Redeemable preference shares
Dividends payable in respect of the redeemable preference shares are accrued in the financial statements on a monthly basis, and
are paid quarterly at 5.36% per share, unfranked. Dividends on these shares have been charged to the Statements of Financial
Performance as borrowing costs because the shares are classified as liabilities (see note 18, Interest bearing liabilities).
Franking credits
Franking credits available to shareholders of the Company at the 30% (2003 at 30%) corporate tax rate after allowing for tax payable
in respect of the current year's profit of $2,273,063 (2003 $3,241,743). The ability to utilise the franking credits is dependent upon
there being sufficient available profits to declare dividends.
44
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2004
26. Notes to the Statements of Cash Flows
Reconciliation of cash
Cash at the end of the financial year as shown in the Statements of
Cash Flows is reconciled to the related items in the statements of
financial position as follows:
Cash
Bank overdraft
Reconciliation of (loss)/profit from ordinary activities
after income tax to net cash flows from operating activities
(Loss)/profit from ordinary activities after income tax expense
Depreciation and amortisation
(Decrease)/increase in net interest payable
(Increase)/decrease in dividend income receivable from wholly-
owned controlled entity
Write-down of property, plant and equipment (significant items)
Write-down of property, plant and equipment
Write-down of investments in controlled entities
Loan forgiveness from controlled entities (significant items)
Net profit on sale of business (significant items)
Net (profit)/loss on sale of property, plant and equipment
Changes in assets and liabilities excluding the effects of
acquisitions and disposals of businesses
(increase)/decrease in trade and other receivables
(increase)/decrease in inventories
increase/(decrease) in deferred taxes payable
increase/(decrease) in payables and provisions
increase/(decrease) in income taxes payable
Net cash flows from operating activities
Disposal of business
Consideration
cash received
disposal costs
Fair value of net assets of business disposed
receivables
inventories
property, plant and equipment
other assets
other provisions
Profit on sale of business
Consolidated
2004
$000
2003
$000
Company
2004
$000
2003
$000
Notes
(9)
(18)
83,846
-
83,846
21,269
(1,577)
19,692
83,846
-
83,846
14,440
(1,577)
12,863
(4)
75,039
45,317
(243)
(18,623)
24,353
324
83,704
10,193
2,291
17,238
11,426
-
(33)
-
-
(18,500)
-
(5)
(5)
(5)
(5)
-
-
-
-
-
(2,238)
(8,138)
(40,649)
6,774
55,648
9,965
141,475
-
-
-
-
-
-
-
-
-
-
22,143
(782)
-
-
(526)
100
42,943
63,421
4,573
(46,624)
4,930
96,232
4,553
(160)
4,393
1,800
1,971
174
58
(136)
3,867
526
-
-
-
-
-
(2,238)
-
-
(74,456)
(171,926)
3,990
332,721
1,246
167,025
21,754
(782)
67,497
(110,459)
-
(6)
(4,535)
36,153
4,979
10,408
-
53,673
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Disposal of entities
During the 2004 financial year there have been no disposals of businesses. During the 2003 financial year, the operating assets and
business of the Carrick Stockfeed Mill were divested.
Incitec Pivot Limited
45
Notes to the Financial Statements
For the year ended 30 September 2004
26. Notes to the Statements of Cash Flows (continued)
Acquisition of businesses/controlled entities
Consideration
non-cash consideration (shares issued)
net cash acquired
Fair value of net assets of businesses/controlled entities acquired
receivables
inventories
property, plant and equipment
other assets
payables and interest bearing liabilities
provision for employee entitlements
provision for restructuring and rationalisation
provision for environmental
provision for tax
Goodwill on acquisition
Consolidated
2004
$000
2003
$000
Company
2004
$000
2003
$000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
467,900
(103)
467,797
114,770
159,175
208,178
27,786
(184,636)
(11,552)
(9,216)
(5,244)
(19,946)
279,315
188,482
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Acquisition of entities
During the 2004 financial year there have been no acquisitions of businesses. During the 2003 financial year, the consolidated entity
acquired Incitec Fertilizers Limited. Restructuring and rationalisation provisions were established in order to merge its operations into
the existing fertiliser business.
27. Commitments
Capital expenditure commitments
Capital expenditure on property, plant and equipment
contracted but not provided for and payable:
no later than one year
Lease commitments
Lease expenditure contracted for at balance date but not
recognised in the financial statements and payable:
no later than one year
later than one, no later than five years
later than five years
Representing
non-cancellable operating leases
28. Contingent liabilities
413
413
1,557
1,557
413
413
1,128
1,128
8,374
16,432
24,179
48,985
8,871
16,115
18,066
43,052
8,374
16,432
24,179
48,985
3,495
8,248
11,695
23,438
48,985
48,985
43,052
43,052
48,985
48,985
23,438
23,438
The following contingent liabilities are generally considered remote, however the directors consider they should be disclosed. The
directors are of the opinion that provisions are not required.
Discounted bills of exchange
A discounted bill of exchange facility is in place and is utilised by a number of customers for the purpose of trade finance. The
majority of these discounted bills of exchange are used for periods less than 120 days. In the event that bills are not repaid, there is
100% recourse to the Company. In this circumstance the contingency would crystallise into an actual liability and the Company
would repay the bill. The amount would only be written off if the Company was unsuccessful in collecting the underlying debt. Total
discounted bills of exchange outstanding at 30 September 2004 amounted to $13.7m ( 2003 $9.9m).
46
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2004
28. Contingent liabilities (continued)
Guarantees and warranties
•
The Company has guaranteed seasonal borrowings of certain customers. A $70 million facility is in place with Suncorp
Metway for the calendar year ending 31 December 2004. The amount guaranteed is 4% of the total facility or $2.8 million. In
the event that customers default on the borrowing, there is recourse to the Company of up to a maximum of $2.8m. The
amount would be written off if the Company was unsuccessful in collecting the underlying debt. The previous agreement
provided a guarantee of 6% on the value drawn down on the facility, which equated to a contingent liability of $1.7m at 30
September 2003.
• Under the terms of a Deed of Cross Guarantee entered into in accordance with the ASIC Class Order 98/1418 dated 13
August 1998 (as amended), each company which is a party to the Deed has covenanted with the Trustee of the Deed to
guarantee the payment of any debts of the other companies which are party to the Deed which might arise on the winding up
of those companies. The entities which are party to the Deed are disclosed in note 36, Investment in controlled entities. A
consolidated Statement of Financial Position and statement of financial performance for this closed group is shown in note
37, Deed of Cross Guarantee.
•
•
The consolidated entity has entered into various long term supply contracts. For some contracts minimum charges are
payable regardless of the level of operations, but in all cases the levels of operations are expected to remain above those
that would trigger minimum payments.
There are a number of legal claims and exposures which arise from the ordinary course of business. There is significant
uncertainty as to whether a future liability will arise in respect of these items. The amount of liability, if any, which may arise
cannot be reliably measured at this time. In the opinion of the directors any further information about these matters would be
prejudicial to the interests of the Company.
•
There are guarantees relating to certain leases of property, plant and equipment and other agreements arising in the ordinary
course of business.
• Contracts of sale covering companies and businesses which were divested in current and prior years include normal
commercial warranties and indemnities to the purchasers. The Company is not aware of any material exposure under these
warranties and indemnities.
•
From time to time the consolidated entity is subject to claims for damages arising from products and services supplied by the
consolidated entity in the normal course of business. Controlled entities have received advice of claims relating to alleged
failure to supply products and services suitable for particular applications. The claims in the entities concerned are
considered to be either immaterial or the entity is defending the claim with no expected financial disadvantage. No specific
disclosure is considered necessary.
Environmental matters subject to regulatory environmental requirements
The Company has created provisions for all known environmental liabilities. While the directors believe that, based upon current
information, the current provisions are appropriate, there can be no assurance that new information or regulatory requirements
with respect to known sites or the identification of new remedial obligations at other sites will not require additional future
provisions for environmental remediation and such provisions could be material.
The Company has entered into a voluntary arrangement with the relevant regulatory authority to investigate and remediate where
appropriate land and groundwater contamination at Parafield Gardens (South Australia).
Taxation
Consistent with other companies of the size of Incitec Pivot Limited, the group is subject to periodic information requests,
investigations and audit activities by the Australian Taxation Office. Provisions for such matters will be booked if a present
obligation in relation to a taxation liability exists which can be reliably estimated.
Incitec Pivot Limited
47
Notes to the Financial Statements
For the year ended 30 September 2004
29. Standby arrangements and credit facilities
Committed bank overdraft facilities available
Amount of facilities unused
Committed standby and loan facilities available
Amount of facilities unused
Consolidated
Company
2004
$000
7,000
7,000
220,000
220,000
2003
$000
5,000
3,423
220,000
220,000
2004
$000
7,000
7,000
220,000
220,000
2003
$000
5,000
3,423
220,000
220,000
The committed bank overdraft facilities are provided by banks and are subject to an annual review. The committed loan facilities
are provided by a related party, Orica Finance Limited with repayment terms ranging from overnight to 90 days on arms length
commercial terms.
30. Amounts receivable and payable denominated in foreign currencies
The consolidated entity enters into a range of financial instruments to hedge its foreign currency receivables and payables. At year
end, the consolidated entity was exposed to currency movements on net foreign currency amounts payable of $104.4m
(2003 $89.7m). This exposure was predominantly against the US dollar.
The consolidated entity does not have any material exposure to currency movements on foreign currency amounts receivable and
payable due to the policy of entering into a range of financial instruments to hedge the consolidated entity’s exposures.
31. Additional financial instruments disclosures
The consolidated entity uses several techniques to reduce the exposure to loss from financial risks. The major types of risks are
foreign exchange risk, interest rate risk, liquidity risk and credit risk.
Foreign exchange risk management
Foreign exchange transaction risk management
The consolidated entity is exposed to foreign exchange movements on sales and purchases denominated, either directly or
indirectly, in foreign currencies. Where these exposures are significant and cannot be eliminated by varying contract terms or other
business arrangements, formal hedging strategies are implemented within policy guidelines. The formal hedging strategies involve
collating and consolidating exposures centrally, and hedging specific transactions, after taking into account offsetting exposures, by
entering into derivative contracts with entities subject to common control and external parties in the financial markets. The
derivative instruments used for hedging purchase and sales exposures are option contracts and forward contracts.
For contracts which specifically hedge anticipated sales and purchases, any unrealised gains and losses on the contracts, together
with the premium of the contracts are carried forward in the Statements of Financial Position and will be recognised in the
Statements of Financial Performance at the time the underlying transaction occurs.
The table below outlines the forward foreign exchange contracts taken out to hedge committed and anticipated purchases and
sales denominated in foreign currencies.
Term
Weighted average rate
Forward FX Contract
Buy US dollars / sell Australian dollars
Not later than one year
Buy Euro / sell US dollars
Not later than one year
2004
$
2003
$
2004
A$000
2003
A$000
0.7011
0.6420
110,419
52,618
-
0.5391
-
236
48
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2004
31. Additional financial instruments disclosures (continued)
The profitability of the principal nitrogen manufacturing facility located at Gibson Island is impacted by foreign exchange
movements due to the manufactured inputs (gas, electricity, labour) being Australian dollar linked whilst the manufactured outputs
(urea and ammonia) are sold on a United States dollar import parity basis. These contracts are timed to mature in quarterly
intervals to match anticipated sales of product manufactured at this facility over the following years subject to limits approved by the
Board of Directors. The amount of anticipated future sales is forecast in light of plant capacities, current conditions in domestic
agricultural and industrial markets, commitments from customers and historical seasonal impacts. All sales from the start of each
quarter are designated as being hedged until all hedge contracts are fully utilised.
The table below summarises collar option contracts previously taken out to hedge the output of the Gibson Island plant. These
contracts have now matured.
Not later than one year
Weighted average AUD/USD strike rate
2004
$ $
Bought
AUD call
options
-
Sold
AUD put
options
-
2003
$ $
Bought
AUD call
options
0.58
Sold
AUD put
options
0.43
Contract amounts
2004
2003
US$000
US$000
-
55,000
The Company has also bought a series of AUD Call/USD Put vanilla European options. The amount of the exposure hedged
progressively reduces in future periods in line with guidelines set out by the Board of Directors. The premiums paid along with any
unrealised gains are carried forward in the Statements of Financial Position and will be recognised in the Statements of Financial
Performance at the time the underlying transaction occurs. All costs associated with these contracts have been incurred.
Favourable outcomes will occur when the exchange rate at maturity is higher than the strike rate established at the inception of the
hedge. These contracts allow full participation in favourable outcomes resulting from decreases in the AUD/USD exchange rate,
but limit the unfavourable outcomes resulting from AUD/USD exchange rate increases.
The table below summarises the vanilla option(1) contracts taken out to hedge sales of the output of the Gibson Island plant.
Term
Weighted average
AUD/USD strike rate
2004 2003
$ $
Contract amounts
2004
A$000
2003
A$000
Not later than one year
Later than one year but not later than two years
Later than two years but not later than three years
Later than three years but not later than four years
Total
(1) Vanilla options represent basic foreign currency options where the buyer has the option but no obligation to purchase currency on maturity. The
option would only be exercised if the rate was favourable to the strike rate.
-
20,000
10,000
10,000
40,000
50,000
30,000
15,000
-
95,000
0.6827
0.6824
0.6789
-
-
0.6781
0.6781
0.6781
Foreign exchange translation risk management
The consolidated entity has no foreign operations and therefore is not exposed to translation risk resulting from foreign exchange
rate movements impacting on the AUD equivalent value of self-sustaining foreign operations.
Interest rate risk management
The consolidated entity is exposed to interest rate risk on outstanding interest bearing liabilities and investments. The mix of
floating and fixed rate debt is managed within guidelines determined by the Treasury Steering Committee. These contracts were
established by Incitec Fertilizers Limited prior to its acquisition.
Interest rate swaps
Interest rate swaps provide the consolidated entity with the facility to raise long term borrowings at floating or fixed interest rates
and effectively swap the interest obligation into fixed or floating interest rates respectively. The notional amounts of interest rate
swaps as summarised on the following page represent the contract or face values of these derivatives. The notional amounts do
not represent amounts exchanged by the parties. The amounts to be exchanged are net settled and will be calculated with
reference to the notional amounts and the pay and receive interest rates determined under terms of the derivative contracts. Each
contract involves quarterly or biannual payment or receipt of the net amount of interest.
Incitec Pivot Limited
49
Notes to the Financial Statements
For the year ended 30 September 2004
31. Additional financial instruments disclosures (continued)
The notional principal amounts and periods of expiry of these interest rate swap contracts are as follows:
Not later than one year
Later than one year but not later than five years
Notional principal
Fixed interest rate range p.a.
Floating interest rate range p.a.
Interest rate risk
2004
$000
5,000
-
2003
$000
10,000
5,000
5,000
6.47%
4.98% - 5.58%
15,000
5.45% - 6.56%
4.71% - 5.00%
The consolidated entity’s exposure to interest rate risk and the weighted average effective interest rates on financial assets and
liabilities at balance date are:
Fixed interest rates
1 year or less 1 to 5 years
Floating
interest rate
5 years
or more
Non-
interest
bearing
Total
Weighted
average
effective
interest
rate (1)
Notes
$000
$000
$000
$000
$000
$000
% p.a.
30 September 2004
Cash assets
Trade debtors
Total financial assets
Trade creditors
Other borrowings
Employee entitlements
Interest rate swaps (2)
Redeemable preference
shares
Total financial liabilities
Net financial
assets/(liabilities)
30 September 2003
Cash assets
Trade debtors
Total financial assets
Trade creditors
Bank overdraft
Other borrowings
Employee entitlements
Interest rate swaps (2)
Redeemable preference
shares
Total financial liabilities
Net financial
assets/(liabilities)
(9)
(10)
(17)
(18)
(20)
(18)
83,744
83,744
(8,055)
5,000
(3,055)
80,689
(9) 14,418
(5,000)
(55,000)
(60,000)
(60,000)
102
98,384
98,486
(177,374)
(9,101)
(7,823)
83,846
98,384
182,230
(177,374)
(8,055)
(16,924)
-
(55,000)
5.29
5.10
4.00
6.47
5.36
(9,101)
(9,101)
(185,197)
(86,711)
(257,353)
(75,123)
(10)
(17)
(18)
(18)
(20)
(18)
14,418
(1,577)
(39,086)
15,000 (15,000)
(8,666)
(55,000)
107,901
(113,152)
6,851
21,269
101,050 101,050
122,319
(113,152)
(1,577) 8.25
(39,086) 4.75
(18,052) 4.20
- 6.46
(9,386)
(55,000)
(226,867)
5.36
(25,663) (15,000) (55,000) (8,666) (122,538)
(11,245) (15,000) (55,000) (8,666)
(14,637) (104,548)
(1) Weighted average effective interest rate includes offshore funding at local rates.
(2) Notional principal amount.
50
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2004
31. Additional financial instruments disclosures (continued)
Liquidity risk management
Liquidity risk arises from the possibility that a market for derivatives may not exist in some circumstances. To counter this risk, the
consolidated entity deals only in derivatives in highly liquid markets.
Credit risk management
Credit risk represents the loss that would be recognised if counterparties failed to meet their obligations under the contract or
arrangement. The major exposure to credit risk arises from trade receivables which have been recognised in the Statements of
Financial Position net of any provision for doubtful debts (see note 10, Receivables) and from derivative financial instruments.
The credit risk exposure arising from derivative financial instruments is the sum of all contracts with a positive replacement cost.
As at 30 September 2004, the sum of all contracts with a positive replacement cost was $4.3m (2003 $16.7m).
Net fair values of financial assets and liabilities
On-balance sheet financial instruments
The directors consider that the carrying amount of recognised financial assets and liabilities approximates their net fair values. Fair
values of monetary financial assets and financial liabilities not readily traded in an organised financial market are determined by
valuing them at the present value of contractual future cash flows on amounts due from customers, reduced for expected credit
losses, or amounts due to suppliers. Cash flows are discounted using standard valuation techniques at the applicable market yield
having regard to the timing of the cash flows.
Off-balance sheet financial instruments
The net fair values of the consolidated entity’s unrecognised financial assets and liabilities at balance date are:
Interest rate swaps
Foreign exchange option contracts
Net fair value
2004
$000
(9)
6,627
2003
$000
(202)
14,098
Net fair values of unrecognised financial instruments are determined according to the estimated amounts which the consolidated
entity would be expected to pay or receive to terminate the contracts. These values are determined using standard valuation
techniques.
32. Employee share plans
Incitec Pivot Executive Long Term Incentive Plans
Under the long term incentive plans, which are administered by Watson Wyatt Australia Pty Ltd the Company may grant awards to
executives as follows:
Retention Plan
At the time of the merger of Incitec Fertilizers Limited and Pivot Limited, the Board recognised that a crucial element to the
success of the new enterprise was the retention of key executives to ensure the capture of synergies and the uninterrupted
delivery of service to our customers. To that end a one-off award was granted to participating executives (including specified
executives and the specified executive director) in respect of the period from 1 June 2003 to 30 September 2005, satisfied by the
provision of an interest free, limited recourse, unsecured loan by the Company, applied to the purchase in aggregate, of 107,925
shares in the Company. The shares may be forfeited by a participating executive if that executive ceases to be employed by
Incitec Pivot prior to 30 September 2005. The loan is repayable on the earlier of the executive ceasing to be employed by Incitec
Pivot, the executive selling his/her shares or three years after the loan is made. Upon satisfaction of the retention criteria, the
amount of repayment due in settlement of the loan will be 48.5% of the outstanding balance. Any dividends will be applied on an
after tax basis to reduce the loan balance. The executive cannot deal in these shares until 30 September 2005.
Performance Plan
Participating executives (including specified executives and the specified executive director) may be eligible to receive an award
under the long term performance incentive plan, dependent on the achievement of certain performance measures over a rolling
three year period. Adoption of this longer term incentive creates the opportunity, and provides the discipline, for participating
executives to contribute to short term performance but with full regard to the delivery of sustainable growth in shareholder value.
For the period from 1 October 2003 to 30 September 2006, participating executives were each advanced a limited recourse,
unsecured loan by the Company, to be applied towards the purchase of shares in the Company. In aggregate 92,856 shares
have been allocated to participating executives. The shares may be forfeited by a participating executive if that executive ceases
to be employed by Incitec Pivot prior to 30 September 2006.The loan or part thereof will be waived on or after 1 October 2006,
subject to the Company achieving certain financial performance hurdles. Upon the waiving of any loan amount, the executive
Incitec Pivot Limited
51
Notes to the Financial Statements
For the year ended 30 September 2004
32. Employee share plans (continued)
will have full, unrestricted ownership of shares to the value of the loan waiver. Prior to any loan waiver being awarded, executives
cannot deal in these shares. The loan is immediately repayable by an executive ceasing to be employed by Incitec Pivot via the
sale of shares purchased under the plan terms. The loan is considered to be repaid in full upon the transfer to the Company of
the total share sale proceeds. Loans, or portions of those loans, can also be repaid via direct payment from participating
executives. Interest is charged on this loan at the FBT benchmark rate (currently 6.55%). Net cash dividends after personal
income tax obligations will be applied to reduce the loan balance. The employee cannot deal in these shares until 1 October
2006. Shares may be sold after the loan on those shares has been fully repaid.
Awards may be offered under the terms and conditions of the performance plan each year, subject to a cap of three times the
executive’s maximum annual remuneration under the terms and conditions of the plan. The ultimate benefit received by
executives is dependent upon performance over the rolling three year period.
Employee Share Ownership Plan
On 28 October 2003 the Board established the Incitec Pivot Employee Share Ownership Plan (ESOP). The ESOP is administered
by the Plan Manager, Watson Wyatt Australia Pty Ltd.
A sub-committee of the Board of Directors determines which employees are eligible to receive invitations to participate in the
ESOP. Invitations are made to eligible employees on the following basis:
•
•
•
•
•
shares acquired are either newly issued shares or existing shares acquired on market.
employees are each entitled to acquire shares with a market value to a maximum of $1,000.
employees salary sacrifice the value of the shares by equal deductions through to 30 June the following year.
employees cannot dispose of the shares for a period of three years from the date of acquisition or until they leave their
employment with the consolidated entity, whichever occurs first.
employees who leave the consolidated entity must salary sacrifice any remaining amount prior to departure.
Grant
date
19-Mar-04
7-Jun-04
Date shares
become
unrestricted
19-Mar-07
7-Jun-07
Number of
participants
30 September
2004
Number of
participants
30 September
2003
350
350
-
-
Shares held at Shares held at
30 September
30 September
2003
2004
9,111
9,210
18,321
-
-
-
These shares rank equally with all other fully paid ordinary shares from the date acquired by the employee and are eligible for
dividends.
52
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2004
33. Related party disclosures
Controlling Entities
The immediate parent entity is Orica IC Assets Ltd and the ultimate parent entity is Orica Limited, both incorporated in Australia.
Specified director and specified executive disclosures
Specified director and specified executive disclosures other than the director transactions listed below are set out in note 35,
Director and executive disclosures.
Other directors’ transactions
Mr Witcombe received a debt waiver of $128,000 from Orica Limited. This debt waiver was triggered as a result of performance
targets being met in 2004, in relation to a share purchase plan from Orica Limited, the ultimate parent entity. These arrangements
were put in place when Mr Witcombe was employed by Incitec Ltd, and were terminated at the time of the merger of Incitec
Fertilizers Limited with Pivot Limited.
The following transactions, entered into during the year with directors of the Company, were on terms and conditions no more
favourable than those available to other customers, suppliers and employees:
• During the year Mr McCallum purchased fertiliser to the value of $26,779 from the Company, the balance owing at
30 September 2004 was $nil (2003 $6,334).
• During the year Mr Delahunty had funds invested in the Company Investment Deposit Scheme. The interest rate offered is no
more favourable than offered to all other investors in the scheme. At the date of this report Mr Delahunty had $nil funds
invested in the Company Investment Deposit Scheme (2003 $18,761).
• Mr McCallum and Mr Trebeck are directors of GrainCorp Limited, to which the Company sold fertiliser products to the value of
$30,070,255 and purchased services (including shed and site rental) to the value of $1,560,080. All dealings with Graincorp
are on normal commercial terms and conditions.
• Mr Trebeck is a principal of ACIL Tasman Pty Ltd which provided consulting services to the Company to the value of $6,000.
Transactions with wholly owned controlled entities
Transactions between Incitec Pivot and entities in the wholly owned group during the year included:
•
•
•
Effective 1 November 2003, the Company was appointed as undisclosed agent for Incitec Fertilizers Limited. The Company
manages certain operations of Incitec Fertilizers Limited, including manufacturing, marketing, selling, invoicing and
distribution, and has assumed management of working capital. Incitec Fertilizers Limited has invoiced the Company for
fertiliser sales made on its behalf, net of variable costs and amount to $71.5m. Fixed costs incurred by the Company in the
performance of its obligations amounting to $24.8m (2003 $nil ) have been charged to Incitec Fertilizers Limited. In addition at
inception of the agency agreement, the working capital of Incitec Fertilizers Limited of $120.9m was bought by the Company
and funded via a loan account.
Prior to being appointed undisclosed agents for Incitec Fertilizers Limited, the Company sold fertiliser to Incitec Fertilizers
Limited to the value of $1.3m (2003 $7.3m).
Incitec Fertilizers Limited declared and paid an interim dividend of $16m and declared a final dividend on 30 September 2004
of $18.5m. This dividend is elimated on consolidation.
• No intercompany loans were forgiven during the year ended 30 September 2004 (2003 $110.5m).
• Management fees were received and paid by Incitec Pivot for accounting and administrative assistance on normal commercial
terms and conditions and in the ordinary course of business.
Transactions with other related parties
All transactions with other related parties are made on normal commercial terms and conditions and in the ordinary course of
business, unless otherwise stated. Transactions during the year were:
•
•
Sales of products (mainly urea and sulphuric acid) to the value of $28.5m (2003 $6.5m) to Orica Australia Pty Ltd.
Sales of sulphuric acid to Orica Australia Pty Ltd at cost of $6.7m (2003 $nil).
• Under various service level agreements, fees of $11.1m (2003 $4.7m) were received / receivable by the Company from Orica
Australia Pty Ltd.
•
Purchases of products and services to the value of $10.7m (2003 $9.9m) from Orica Australia Pty Ltd.
• Under a service level agreement, fees of $8.0m (2003 $4.7m) were paid/payable to the ultimate parent entity in relation to
accounting, information technology, engineering and administrative services.
•
•
Interest expense paid or payable by the Company for money borrowed from Orica Finance Limited was $1.7m (2003 $0.9m).
Stamp duty on the transfer of assets from Incitec Ltd to Incitec Fertilizers Limited of $10.7m has been paid by the ultimate
parent entity Orica Limited under the terms of the merger implementation deed.
• Under the terms and conditions of the merger implementation deed, Orica Limited contributed $2.0m to the corporate costs of
the Company. The corporate cost contribution agreement will cease 30 May 2005.
Incitec Pivot Limited
53
Notes to the Financial Statements
For the year ended 30 September 2004
33. Related party disclosures (continued)
•
•
•
Insurance cover was purchased from Orica Insurance Pty Limited, a wholly owned subsidiary of the ultimate parent entity on
normal terms and conditions to the value of $13.6m for the year ended 30 September 2004 (2003 $1.8m).
Insurance claims were received or receivable from Orica Insurance Pty Limited, a wholly owned subsidiary of the ultimate
parent entity on normal terms and conditions to the value of $9.7m (2003 $nil).
The spouse of Mr Fazzino, the Chief Financial Officer, is a partner in the accountancy and tax firm PricewaterhouseCoopers
from which the Company purchased services of $0.4m. Mr Fazzino’s spouse does not directly provide these services.
Additional related party disclosures
Additional relevant related party disclosures are shown throughout the notes to the financial statements as follows:
Interest income and expense
Cash assets
Receivables
Investments in controlled entities
Payables
Interest bearing liabilities
notes 3, 4
note 9
note 10
notes 13, 36
note 17
note 18
34. Superannuation commitments
The consolidated entity contributes to a number of superannuation funds that exist to provide benefits for employees and their
dependants on retirement, disability or death. The superannuation funds cover company sponsored funds and multi-employer
industry/union plans.
Company sponsored plans
•
•
The principal benefits are pensions or lump sum payments for members on resignation, retirement, disability or death. The
benefits are provided on either a defined benefit basis or a defined contribution basis.
Employee contribution rates are either fixed by the rules of the funds or selected by members from time to time from a
specified range of rates. The employer companies contribute the balance of the cost required to fund the defined benefits or,
in the case of defined contribution funds, the amounts required by the rules of the fund.
•
The contributions made by the employer companies to defined contribution funds are legally enforceable.
Industry/union plans
•
•
•
•
Some controlled entities participate in industry/union plans on behalf of certain employees.
These plans operate on an accumulation basis and provide lump sum benefits for members on resignation, retirement,
disability or death.
The employer entity has a legally enforceable obligation to contribute a regular amount for each employee member of these
plans.
The employer entity has no other legal liability to contribute to the plans.
Flexible Benefits Super Fund
During the year the consolidated entity made employer contributions of $4.1m (2003 $0.8m) to the defined benefit fund. Employer
contributions by the Company to the defined benefit fund during the year were $nil (2003 $nil).
The consolidated entities’ proportionate interest in the accrued benefits, based on the most recent actuarial assessments or
estimates, the plan assets at most recent estimates of net market values and the vested benefits as at the most recent reporting
date are:
Accrued benefits Net market value
plan assets
$000
$000
2004
Net surplus
accrued
benefits to plan
assets
$000
Vested benefits
$000
Net surplus
vested
benefits to plan
assets
$000
The Flexible Benefits Super Fund
72,300
73,100
800
72,300
800
54
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2004
34. Superannuation commitments (continued)
Incitec Fertilizers Limited (which was acquired on 1 June 2003) is an associated employer of The Flexible Benefits Super Fund.
The principal sponsor of the fund is the ultimate parent entity, Orica Limited. Only certain employees of Incitec Fertilizers Limited
are members of The Flexible Benefits Super Fund. The Flexible Benefits Super Fund has a defined benefit member category and
defined contribution member category. The balance date of the fund is 30 June. The full actuarial review as at 30 June 2003,
performed by G E Miller FIAA was completed during the year. The next full actuarial review is due at 30 June 2006.
Asset values are estimated at 30 September 2004, based on audited values as at 30 June 2004, adjusted to reflect estimated
investment performance between 1 July 2004 and 30 September 2004. The estimate for accrued benefits and vested benefits has
been calculated using membership data as at 30 June 2004, adjusted to reflect estimated investment performance, expected
cashflows and benefit accrual between 1 July 2004 and 30 September 2004.
Differences between accrued benefits to plan assets ‘deficits’ depend on many diverse factors and can vary significantly over time
having regard for movements in investment markets, future salary increases and changes in employee patterns. The consolidated
entity’s current intention is to make contributions to defined benefit funds at a rate recommended by the actuary. It is expected that
the contribution rates will be determined after taking into account sound actuarial principles and would be designed to enable all
defined benefits to meet retirement expectations and relevant regulatory requirements as and when they fall due.
35. Director and executive disclosures
Directors
The following persons were directors of the Company during the financial year:
J C Watson AM, Chairman
B Healey, Deputy Chairman
G J Witcombe, Managing Director and CEO
L M Delahunty
B J Gibson
A C Larkin
G R Liebelt
A D McCallam
D B Trebeck
Executives (other than directors) with the greatest authority for strategic direction
The following persons form part of the executive team and are the executives (“specified executives”) with the greatest authority for
the strategic direction and management of the consolidated entity during the financial year:
Name
J W Elmer
J E Fazzino
K J Gleeson (1)
R Hoggard
J M Lloyd
D A Roe (2)
Position
General Manager Human Resources
Chief Financial Officer
General Counsel and Company Secretary
General Manager Manufacturing
General Manager Commercial
General Manager Planning
J R Warnock
General Manager Logistics and Supply
(1) Mrs Gleeson was appointed 9 February 2004, replacing Mr Sharma who was formerly the General Counsel and Company Secretary.
(2) Mr Roe was appointed 1 January 2004, his position of General Manager Planning is a newly created position.
Remuneration of directors and executives
The Company’s remuneration policy is directed at underpinning a high performance organisation. The focus of its remuneration
strategy is on performance and accountability. Executive remuneration packages are designed to support the delivery of
outstanding returns for shareholders by aligning performance related reward with value delivered to shareholders. It is the broad
policy of the Company that the remuneration structure will:
•
•
•
•
support the Company’s philosophy and values;
reinforce both the short and long term objectives of the Company;
provide a common interest between management and shareholders; and
be sufficiently competitive in the markets in which the Company operates to attract, motivate and retain high calibre
executives.
Incitec Pivot Limited
55
Notes to the Financial Statements
For the year ended 30 September 2004
35. Director and executive disclosures (continued)
Base salary
For each executive, base salary is determined by reference to independently provided external remuneration data for comparable
positions in comparable organisations and having regard to the qualifications, experience and performance of the individual, and
the scope and responsibilities of the position. Base salary is reviewed on an annual basis and may be adjusted to reflect changes
in comparable external remuneration arrangements, and individual performance.
Incentive plans
Short term and long term incentive plans offered by the Company are designed to reward executives in circumstances where
minimum acceptable standards of performance at a personal and Company level are exceeded in respect of financial and other
outcomes which contribute to sustainable growth in shareholder value. Incentive compensation is at risk for each executive and is
not awarded, or is reduced, if the required targets are not met.
Short term incentive plan: The short term incentive plan provides the opportunity for incentive compensation in the form of a cash
reward based on the achievement of performance targets which are specified at the commencement of each financial year and
measured at the completion of the financial year. Performance targets represent a stretch beyond minimum requirements and
include measures related to earnings, economic profit, return on funds employed, cash flow, safety performance and environmental
compliance levels. The Board considers superior outcomes in these areas to be fundamental to the well being of its employees, the
community and the financial performance which creates growth in shareholder value.
For specified executives, target incentive levels are 15% or 20% of base salary which reflect prevailing relevant external
remuneration benchmarks. These incentive levels can increase to 30% or 40% of base salary respectively where performance
exceeds target measures.
Long term incentive plans: Under the long term incentive plans the Company may grant awards to executives as follows:
Retention Plan
At the time of the merger of Incitec Fertilizers Limited and Pivot Limited, the Board recognised that a crucial element to the
success of the new enterprise was the retention of key executives to ensure the capture of synergies and the uninterrupted
delivery of service to our customers. To that end a one-off award was granted to participating executives (including specified
executives and the specified executive director) in respect of the period from 1 June 2003 to 30 September 2005, satisfied by
the provision of an interest free, limited recourse, unsecured loan by the Company, applied to the purchase in aggregate, of
107,925 shares in the Company. The shares may be forfeited by a participating executive if that executive ceases to be
employed by Incitec Pivot prior to 30 September 2005. The loan is repayable on the earlier of the executive ceasing to be
employed by Incitec Pivot, the executive selling his/her shares or three years after the loan is made. Upon satisfaction of the
retention criteria, the amount of repayment due in settlement of the loan will be 48.5% of the outstanding balance. Any
dividends will be applied on an after tax basis to reduce the loan balance. The executive cannot deal in these shares until 30
September 2005.
For participating specified executives, the loan represents 25% per annum of base salary as at 1 June 2003 (being the date of
the merger) applied for the 2.33 years represented by the period 1 June 2003 to 30 September 2005. For the Managing
Director and CEO (the “specified executive director”) the loan is based on 35% per annum of base salary as at 1 June 2003
applied for the 2.33 years represented by the period 1 June 2003 to 30 September 2005.
Performance Plan
Participating executives (including specified executives and the specified executive director) may be eligible to receive an
award under the Long Term Performance Incentive Plan, dependent on the achievement of certain performance measures
over a rolling three year period. Adoption of this longer term incentive creates the opportunity, and provides the discipline, for
participating executives to contribute to short term performance but with full regard to the delivery of sustainable growth in
shareholder value.
For the period from 1 October 2003 to 30 September 2006, participating executives were each advanced a limited recourse,
unsecured loan by the Company, to be applied towards the purchase of shares in the Company. In aggregate 92,856 shares
have been allocated to participating executives. The shares may be forfeited by a participating executive if that executive
ceases to be employed by Incitec Pivot prior to 30 September 2006. The loan or part thereof will be waived on or after 1
October 2006, subject to the Company achieving certain financial performance hurdles. Upon the waiving of any loan amount,
the executive will have full, unrestricted ownership of shares to the value of the loan waiver. Prior to any loan waiver being
awarded, executives cannot deal in these shares. The loan is immediately repayable by an executive ceasing to be employed
by Incitec Pivot via the sale of shares purchased under the plan terms. The loan is considered to be repaid in full upon the
56
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2004
35. Director and executive disclosures (continued)
transfer to the Company of the total share sale proceeds. Loans, or portions of those loans, can also be repaid via direct
payment from participating executives. Interest is charged on this loan at the FBT benchmark rate (currently 6.55%). Net
cash dividends after personal income tax obligations will be applied to reduce the loan balance. The employee cannot deal in
these shares until 1 October 2006. Shares may be sold after the loan on those shares has been fully repaid.
For specified executives, the loan represents 25% of base salary as at 1 January 2004. For the specified executive director,
the loan represents 70% of base salary as at 1 January 2004.
Awards may be offered under the terms and conditions of the performance plan each year, subject to a cap of three times the
executive’s maximum annual remuneration under the terms and conditions of the plan. The ultimate benefit received by
executives is dependent upon performance over the rolling three year period.
There is currently no Australian Accounting requirement to record an expense for the fair value of the shares (which have been
treated as options) issued in 2004. However AASB1046: “Director and Executive Disclosures by Disclosing Entities” require Incitec
Pivot to derive a value for these items and include the value in the director and executive remuneration disclosures. An option
pricing model was adopted to derive a value. Loan forgiveness is incorporated into the option valuations.
Post retirement benefits
The consolidated entity contributes to a number of superannuation funds that exist to provide benefits for its employees. There is a
combination of defined benefit and accumulation type plans. All specified executives and the specified executive director are
members of accumulation plans.
Other benefits
Other benefits which can be paid under specified circumstances include relocation allowances, rental assistance and gap
payments in relation to health expenses. Additionally, all executives are eligible to participate in an annual health assessment
program designed to ensure executives have their health status reviewed on a regular basis.
Remuneration of Managing Director and CEO – Outline of employment contract
The Company has entered into an employment agreement with the Managing Director and CEO, Greg Witcombe. The agreement
provides for an annual base salary of $644,000 and other benefits on terms commensurate with his position, the industry and the
size of the Company including termination entitlements of 1.68 times his base salary, other than for gross misconduct. The
agreement, including base salary is reviewed annually, having regard to comparable external remuneration arrangements and
individual performance and may be adjusted accordingly. The agreement may be terminated by three months notice given by
either party and includes provisions relating to confidential information and post termination restraints.
The agreement also includes an entitlement for the Managing Director and CEO to participate in the annual Short Term Incentive
Plan. This is based on 30% of base salary and is subject to achievement of certain performance targets, and for over performance
of such targets, can increase to 60% of base salary. In addition the Managing Director and CEO is eligible to participate in the
Long Term Performance Incentive Plan. His participation in the Retention Plan is based on 35% per annum of base salary applied
to the 2.33 years (representing the period 1 June 2003 to 30 September 2005) and in respect of the Performance Plan, for
performance from 1 October 2003 to 30 September 2006 is based on 70% per annum of base salary, subject to achievement of
certain performance targets, and for over performance of such targets can increase to 140% per annum of base salary.
Non-executive directors’ remuneration
Non-executive directors’ fees, including committee fees, are determined by the Board within the aggregate amount of $1,000,000,
which was approved by shareholders at the December 2003 Annual General Meeting. In determining the level of fees, the Board
reviews external professional advice and survey data on fees paid by comparable companies and considers this against the level
of remuneration required to attract and retain directors of the appropriate calibre. Non-executive directors are not entitled to any
form of incentive payments.
The Board decided to phase out retirement allowances and any directors joining the Board subsequent to 30 May 2003 are not
entitled to receive a retirement allowance. Retiring non-executive directors appointed before 1 June 2003 will retain their
contractual allowances. This policy entitled these directors to a retirement benefit after 10 years of service equal to the total of the
benefits received by him from the Company in the three years immediately preceding the date of retirement. The retirement benefit
will be paid pro-rata for less than 10 years of service.
Incitec Pivot Limited
57
Notes to the Financial Statements
For the year ended 30 September 2004
35. Director and executive disclosures (continued)
For the year ended 30th September
Specified directors
Fees /
Short-term
Non-
Base
salary
Year
$
incentive
bonus
$
monetary
benefits (1)
$
Super-
annuation
benefits
$
Value of
options (2)
$
Termination
Other
benefits
$
$
Total
$
Primary
Post
Equity
Other
employment
compensation
compensation
Specifed executive directors
- Current
G J Witcombe 2004
Managing Director and CEO 2003
- Former
C G Leon 2004
Managing Director and CEO 2003
Specifed non-executive directors
- Current
J C Watson, Chairman 2004
2003
L M Delahunty 2004
B J Gibson (3)
2003
2004
2003
B Healey 2004
2003
A C Larkin 2004
G R Liebelt (3)
2003
2004
2003
A D McCallum 2004
2003
D B Trebeck 2004
- Former
I A Langdon
B S Gilbert
J Hasker
T R Robbins
Total specified director
Total specified director
2003
2003
2003
2003
2003
2004
2003
624,353
199,706
228,749
108,377
-
-
309,116
47,250
193,908
108,335
75,344
47,501
71,500
18,333
71,500
18,333
84,385
23,145
71,500
18,333
93,427
65,835
75,344
20,833
26,667
26,667
26,667
26,667
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
70,609
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,361,261
228,749
70,609
936,138
155,627
-
11,147
3,627
-
7,890
18,855
9,975
7,313
4,659
-
-
3,053
1,650
8,190
2,083
-
-
9,067
6,536
7,313
1,875
2,400
2,400
2,400
2,400
64,938
47,895
79,365
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
945,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
120,000
59,014
42,740
40,077
79,365
-
-
35,891
1,014,223
347,601
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,309,256
212,763
118,310
82,657
52,160
71,500
18,333
74,553
19,983
92,575
25,228
71,500
18,333
102,494
72,371
82,657
22,708
149,067
88,081
71,807
69,144
1,804,922
-
1,206,831
35,891
2,382,382
(1) Non monetary benefits include fringe benefits tax paid and mortgage interest subsidy.
(2) The benefit received as a result of participation by the specified director in the long term incentive plans have been treated as options. The fair
value of the options has been estimated using a Monte Carlo simulation model, which generates possible future prices for the underlying shares
based on assumptions similar to those underpinning the Black-Scholes option pricing model. Multiple simulations were performed to determine the
mean value. The fair value has been allocated evenly over the period from grant date to vesting date, being 30 September 2005 and 30 September
2006 for the retention plan and performance plan respectively. The value disclosed above represents the portion of fair value allocated to this
reporting period.
(3) Fees of $71,500 per director, per annum are paid to their employer, Orica Limited, the ultimate parent entity.
58
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2004
35. Director and executive disclosures (continued)
For the year ended 30th September
Specified executives
Primary
Post
Equity
Other
employment
compensation
compensation
Base
salary
Year
$
Short-term
Non-
incentive
bonus
$
monetary
benefits (1)
$
Super-
annuation
benefits
$
Value of
options (2)
$
Termination
Other
benefits
$
$
Total
$
Current
W Elmer
General Manager Human Resources
J Fazzino
Chief Financial Officer
K Gleeson (3)
General Counsel & Company Secretary
R Hoggard
General Manager Manufacturing & SH&E
J Lloyd
General Manager Commercial
D Roe (4)
General Manager Planning
J Warnock
General Manager Logistics & Supply
Former
A K Sharma (3)
2004
2003
2004
2003
2004
2003
2004
2003
2004
2003
2004
2003
2004
2003
2004
General Counsel & Company Secretary
2003
A McKendrick 2004
Company Secretary 2003
G Smith
Chief Financial Officer
Total specified executives
Total specified executives
2004
2003
2004
2003
268,769
254,335
273,852
86,363
157,554
50,438
47,203
68,672
23,985
29,603
-
-
280,127
86,363
275,622
243,236
171,603
67,133
23,985
74,592
52,155
31,880
-
-
247,602
76,732
62,752
21,320
-
-
16,102
-
-
-
28,443
-
8,799
-
9,254
-
18,671
-
92,002
79,705
-
180,688
-
239,445
-
212,144
18,791
-
-
20,793
-
26,677
-
-
-
11,607
11,246
11,147
3,627
7,113
-
11,147
3,627
35,635
34,720
8,397
-
11,147
3,627
7,083
3,627
-
26,341
-
16,652
12,506
-
12,689
-
4,838
-
12,501
-
13,888
-
5,212
-
11,488
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
124,521
-
-
311,895
-
427,927
-
-
-
-
-
-
-
-
-
-
-
-
1,271
-
-
-
-
-
-
-
343,320
312,784
382,462
113,975
199,108
-
399,351
113,975
408,536
330,111
226,346
-
352,931
101,679
435,750
102,123
-
539,717
-
710,701
1,767,131
385,070
293,413
1,246,867
234,909
-
103,276
103,467
73,122
124,521
1,271
2,747,804
-
739,822
-
2,325,065
1. Non monetary benefits include fringe benefits tax paid and mortgage interest subsidy.
2.
The benefit received as a result of participation by the specified executives in the long term incentive plans have been treated as options. The fair
value of the options has been estimated using a Monte Carlo simulation model, which generates possible future prices for the underlying shares
based on assumptions similar to those underpinning the Black-Scholes option pricing model. Multiple simulations were performed to determine the
mean value. The fair value has been allocated evenly over the period from grant date to vesting date, being 30 September 2005 and 30 September
2006 for the retention plan and performance plan respectively. The value disclosed above represents the portion of fair value allocated to this
reporting period.
3. Mrs Gleeson was appointed 9 February 2004, replacing Mr Sharma.
4. Mr Roe was appointed 1 January 2004.
Incitec Pivot Limited
59
Notes to the Financial Statements
For the year ended 30 September 2004
35. Director and executive disclosures (continued)
Service agreements
Remuneration and other terms of employment for Mr Witcombe, the Managing Director and CEO and the specified executives are
formalised in employment contracts. Each of these contracts provides for the participation in the performance related short term
incentive plan (cash bonuses), the long term incentive plans and other benefits including annual health assessment,
superannuation and participation. A three month notice period for termination of the contract applies. The major provisions of the
agreements relating to remuneration are set out in the table below:
Name
G J Witcombe
J W Elmer
J E Fazzino
K J Gleeson
R Hoggard
J M Lloyd
D A Roe
Date of
appointment to
position
Annual
base salary
(1)
Short term
incentive plan
target levels
Long term
incentive plan
target levels
Notice period
under
contract
Termination
payment (2)
1 June 2003
1 June 2003
1 June 2003
$644,000
30%-60%
70-140%
$284,000
15%-30%
$290,000
20%-40%
9 February 2004
$260,000
15%-30%
1 June 2003
1 June 2003
$283,500
20%-40%
$315,000
20%-40%
1 January 2004
$240,000
15%-30%
25-50%
25-50%
25-50%
25-50%
25-50%
25-50%
25-50%
13 weeks
13 weeks
13 weeks
13 weeks
13 weeks
13 weeks
13 weeks
13 weeks
$1,081,920
$142,000
$287,769
$130,000
$292,223
$157,500
$325,292
$351,482
J R Warnock
1 June 2003
$265,000
20%-40%
(2)
(1) All specified executives are on fixed annual remuneration contracts. Inclusive in the annual base salary amount disclosed above is a
superannuation contribution to an accumulation fund. The minimum regulatory contribution is deducted and paid to this fund.
The termination payment specified in Mr Witcombe’s contract, other than for gross misconduct, is 1.68 times base salary. The termination
payment specified in the employment contracts for all specified executives, other than for serious misconduct or breach of contract is set out
above. The amount payable is calculated based upon a “capped” number of weeks; where the number of weeks is determined by reference to
length of service. The number of weeks ranges from 26 weeks to 70 weeks.
Share based (equity) compensation – long-term incentive plans
Details of employee share plans are set out in note 32, Employee share plans. For the purposes of determining director and
executive remuneration, the awards which the Company may grant under the long term incentive plans are treated as options. The
terms and conditions of each award affecting remuneration in this or future reporting periods are as follows:
Plan
Grant date
Expiry date
Value per
share at grant
date(1)
Date exercisable
Retention plan
1/06/2003
Performance plan - 2004
1/10/2003
30/09/2005
30/09/2006
$1.95
$5.71
From 1/10/2005
From 1/10/2006
(1) External valuation advice from PricewaterhouseCoopers has been used to determine the fair value of the options at grant date. The valuation
has been made using a Monte Carlo simulation model, which generates possible future prices for the underlying shares based on assumptions
similar to those underpinning the Black-Scholes option pricing model. The valuation under the Monte Carlo approach required inputs such as
the expected share price volatility, the expected dividend yield, price at grant date of underlying shares, the exercise price and the expected life
of the options the risk free rates expected interest rates and an assumption for the value of the loans at grant date.
Share based compensation – employee share ownership plan
Details of the employee share ownership plan (ESOP) are set out in note 32, Employee share plans. The specified director and
the specified executives were eligible for this scheme and participated as follows:
Specified director or
specified executive
Number of shares
which become
unrestricted on
Number of shares
which become
unrestricted on
19 March 2007
7 June 2007
J W Elmer
J E Fazzino
R Hoggard
J R Warnock
28
28
28
28
28
28
28
28
Total
56
56
56
56
60
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2004
35. Director and executive disclosures (continued)
Equity interests disclosures relating to the specified director and specified executives
For the purposes of determining director and executive remuneration the award granted to senior participating employees under
the long term incentive plans are treated as options. The number of options awarded under the terms and conditions of the long
term incentive plans to the Managing Director and CEO, and each of the specified executives of the Company in addition to other
shares owned by the Managing Director and CEO and each of the specified executives are set out below:
Name
Balance at the
start of the year
Granted during the year as
remuneration
Other shares
acquired
during the
year
Forfeited
during the
year
Balance at the
end of the year
Specified director – current
G J Witcombe
-
Specified executive – current
J W Elmer
J E Fazzino
K J Gleeson
R Hoggard
J M Lloyd
D A Roe
J R Warnock
-
-
-
-
-
-
-
Specified executive – former
A K Sharma
-
Retention plan
Performance
plan 2004
32,269
27,509
4,332
4,424
2,542
4,325
4,805
2,738
4,042
5,091
5,101
-
5,101
5,667
-
4,534
4,723
-
-
-
-
-
-
-
-
56
56
56
56
59,778
9,479
9,581
2,542
9,482
10,472
2,738
8,632
-
(4,723)
-
Loans issued to the specified director and specified executives under the Incitec Pivot long term incentive plan
There is currently no Australian Accounting requirement to record an expense for the fair value of the shares (which have been
treated as options) issued in 2004. However AASB1046: “Director and Executive Disclosures by Disclosing Entities” require Incitec
Pivot to derive a value for these items and include the value in the director and executive remuneration disclosures. An option
pricing model was adopted to derive a value. Loan forgiveness is incorporated into the option valuations.
Retention Plan
Specified Director or
Specified Executive
Date of
loan
Number of
shares
issued or
acquired
on market
Highest
balance
during year
ended
30 September
2004
Interest paid
and payable
during year
ended
30 September
2004
$
$
Specified Director
G J Witcombe
Specified Executives
- Current
W Elmer
J Fazzino
R Hoggard
J Lloyd
J Warnock
- Former
A Sharma
32,269
22/10/03
498,156
5,091
5,101
5,101
5,667
4,534
22/10/03
22/10/03
22/10/03
22/10/03
22/10/03
78,593
78,747
78,747
87,485
69,994
4,723
22/10/03
72,912
-
-
-
-
-
-
-
Value of loan
30 September
Loan
repayments
Loan
balance
2003
$
2004
$
2004
$
(6,885)
491,271
(1,086)
(1,088)
(1,088)
(1,209)
(967)
77,507
77,659
77,659
86,276
69,027
(72,912)
-
-
-
-
-
-
-
Incitec Pivot Limited
61
Notes to the Financial Statements
For the year ended 30 September 2004
35. Director and executive disclosures (continued)
Performance plan - 2004
Date of
loan
Number of
shares
issued or
acquired
on market
Highest
balance
during year
ended
30 September
2004
Interest paid
and payable
during year
ended
30 September
2004
$
$
Value of Loan
30 September
Loan
repayments
Loan
Balance
2003
$
2004
$
2004
$
Specified executive
director
G J Witcombe
Specified executives
W Elmer
J Fazzino
K Gleeson
R Hoggard
J Lloyd
D Roe
J Warnock
27,509
20/09/04
450,795
4,332
4,424
2,542
4,325
4,805
2,738
4,042
20/09/04
20/09/04
20/09/04
20/09/04
20/09/04
20/09/04
20/09/04
70,989
72,497
41,656
70,875
78,740
44,868
66,237
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
450,795
70,989
72,497
41,656
70,875
78,740
44,868
66,237
There were no loans to the executive director or senior executives in 2003.
The loan under the retention plan is interest free.
Interest on the loan under the performance plan is charged at the FBT benchmark rate, currently 6.55%.
Directors’ transactions in shares
The Company - Incitec Pivot Limited
Acquired
during the
year (1)
2004
Disposed
during the
year (1)
Balance
at year
end (2)
Acquired
during the
year (1)
2003
Disposed of
during the
year (1)
Balance
at year
end (2)
Specified executive
director
G J Witcombe
Specified
non-executive
directors
J C Watson
L M Delahunty
A D McCallum
D B Trebeck
59,778
-
-
1,660
4,000
-
-
-
-
59,778
-
2,700
6,478
6,818
4,000
-
3,350
3,000
-
-
-
-
-
-
-
2,700
6,478
5,158
-
(1) Shares acquired or disposed by directors while they are directors of the Company.
(2) Balance of shares held by directors at balance date.
62
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2004
35. Director and executive disclosures (continued)
Ultimate parent entity - Orica Limited
Acquired
during the
year
2004
Disposed
during the
year
Balance
at year
end
Acquired
during the
year
2003
Disposed of
during the
year
Balance
at year
end
Specified executive director
G J Witcombe(1)
2,139
Specified non-executive directors
-
103,374
4,602
(180,000)
101,235
B J Gibson
B Healey
A C Larkin
G R Liebelt (1)
A D McCallum
D B Trebeck
-
-
59,100
2,428
-
-
-
-
(59,100)
-
(500)
-
250,000
9,300
38,000
396,035
-
9,000
-
-
-
365,510
-
-
-
-
-
-
-
-
250,000
9,300
38,000
393,607
500
9,000
(1) Share acquisitions by Mr Witcombe and Mr Liebelt were made via the Orica dividend reinvestment plan.
36 Investments in controlled entities
Name of Entity
Notes
Company
Incitec Pivot Limited
Controlled Entities - operating
Incitec Fertilizers Limited
Incitec Pivot LTI Plan Company Pty Limited
TOP Australia Ltd
Controlled Entities - dormant
Cripps Bakery Pty Ltd
ECH Investments Pty Limited
Electrical & Engineering Supplies Proprietary Limited
H.M.A. Ltd
Holyman Brothers Proprietary Limited
L.P.I. Finance Proprietary Limited
M & A '95 Pty Ltd
North Western Flour Mills Pty Ltd
Nu-bake Bakery Pty Ltd
Nu-bake Properties Pty Ltd
Phoschem Proprietary Limited
Pivot Agricultural Laboratory Services Pty Ltd
Pivot Employee Share Plan Pty Ltd
Pivot Fertilisers Proprietary Limited
Pivot Motors Pty Ltd
Pivot Nominees Pty Ltd
Pivot Nutrition Pty Ltd
Pivot Supplementary Feeds Ltd
Pivot Transport Proprietary Limited
Saftrans Pty Ltd
Stock Feed Distributors Pty Ltd
in liquidation
in liquidation
in liquidation
in liquidation
in liquidation
in liquidation
in liquidation
in liquidation
in liquidation
in liquidation
in liquidation
in liquidation
in liquidation
in liquidation
in liquidation
in liquidation
in liquidation
in liquidation
in liquidation
in liquidation
in liquidation
All controlled entities are owned 100% and are incorporated in Australia.
TOP Australia Ltd has entered into a Deed of Cross Guarantee with Incitec Pivot Limited in respect of relief
granted from specific accounting and financial reporting requirements in accordance with the ASIC Class order
98/1418.
There are no external reporting requirements for controlled entities in liquidation.
Incitec Pivot Limited
63
Notes to the Financial Statements
For the year ended 30 September 2004
37. Deed of Cross Guarantee
Statement of Financial Position
Current assets
Cash assets
Receivables
Inventories
Other
Total current assets
Non-current assets
Receivables
Other financial assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Other
Total non-current assets
Total assets
Current liabilities
Payables
Interest bearing liabilities
Provisions
Total current liabilities
Non-current liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained profits
Total equity
Closed Group
2004
$000
2003
$000
83,846
142,245
246,292
2,267
474,650
188
467,900
120,710
-
14,205
2,297
605,300
1,079,950
384,534
8,055
23,706
416,295
4,526
15,370
19,896
436,191
643,759
532,445
35,923
75,391
643,759
14,440
42,807
74,366
7,840
139,453
1,924
467,900
91,287
-
15,201
-
576,312
715,765
50,522
61,479
22,525
134,526
-
2,694
2,694
137,220
578,544
532,445
35,923
10,177
578,545
Statement of Financial Performance
Profit/(loss) from ordinary activities before income tax expense
Income tax (expense)/benefit attributable to profit/(loss) from ordinary activities
Profit/(loss) from ordinary activities after income tax expense
Retained profits at the beginning of the financial year
Net increase in equity due to initial adoption of AASB 1028 Employee Benefits
Cash dividend paid
Retained profits at the end of the financial year
97,763
(15,647)
82,116
10,177
-
(16,902)
75,391
(10,384)
(3,226)
(13,610)
48,456
(191)
(24,478)
10,177
Entities which are party to a Deed of Cross Guarantee, entered into in accordance with ASIC Class Order 98/1418
dated 13 August 1998 (as amended), are disclosed in note 36, Investments in controlled entities. A consolidated
Statement of Financial Position and Statement of Financial Performance for this closed group are shown above.
64
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2004
38. Impact of adopting AASB equivalent to International Financial Reporting Standards
This financial report has been prepared in accordance with Australian Accounting Standards and other financial reporting
requirements (Australian GAAP). Incitec Pivot has commenced transitioning its accounting policies and financial reporting from
current Australian Standards to Australian equivalents of International Financial Reporting standards (AIFRPs). The Company has
allocated internal resources, who together with representatives from Orica, the ultimate parent entity, have engaged expert
consultants to perform diagnostics and conduct impact assessments to isolate key areas that will be impacted by the transition to
AIFRPs. As a result of these procedures, Incitec Pivot has graded impact areas as either high, medium or low and has established
a project team to address each of the areas. Half yearly updates are provided to the Audit and Risk Management Committee.
At the date of this report, the project team has analysed most of the AIFRPs and has identified a number of accounting policy
changes that will be required. In some cases choices of accounting policies are available, including elective exemptions under
AASB 1 - First-time Adoption of Australian Equivalents to International Financial Reporting Standards. These choices are still being
analysed to determine the most appropriate accounting policy for Incitec Pivot. Accordingly, there can be no assurances that the
consolidated financial performance and financial position as disclosed in this financial report would not be significantly different if
determined in accordance with AIFRPs.
The differences between Australian GAAP and AIFRPs identified to date as potentially having a significant effect on the
consolidated entity’s financial performance and financial position are summarised below. The summary should not be taken as an
exhaustive list of all the differences between Australian GAAP and AIFRPs. No attempt has been made to identify all disclosure,
presentation or classification differences that would affect the manner in which transactions or events are presented.
Major changes identified to date that will be required to the Group's existing accounting policies include the following:
Impairment of assets
Under the Australian equivalent to IAS 36 - Impairment of Assets the recoverable amount of an asset is determined as the higher of
net selling price and value in use. This will result in a change in the group’s current accounting policy which determines the
recoverable amount of an asset on the basis of discounted cash flows. Under the new policy it is likely that the impairment of assets
will be recognised sooner and the amount of write-downs will be greater. Reliable estimation of the future financial effects of this
change in accounting policy is impracticable because the conditions under which impairment will be assessed are not yet known.
Intangible assets
Under the Australian equivalent to IAS 38 Intangible Assets, internally generated intangible assets (except development phase
expenditure in certain circumstances) will not be recognised and intangible assets can only be revalued if there is an active market.
Reliable estimation of the future financial effects of this change in accounting policy is impracticable as the details of future internally
generated intangible assets are unknown.
Changes in accounting policies
Changes in accounting policies will be recognised by restating comparatives rather than making current year adjustments with note
disclosure of prior year effects.
Classification of financial instruments
Under AASB 139 - Financial Instruments: Recognition and Measurement, financial instruments will be required to be classified into
one of five categories which will, in turn, determine the accounting treatment of the item. The classifications are:
•
•
•
•
•
loans and receivables - measured at amortised cost,
held to maturity - measured at amortised cost,
held for trading - measured at fair value with fair value changes charged to net profit or loss,
available for sale - measured at fair value with fair value changes taken to equity and
non-trading liabilities - measured at amortised cost.
This will result in a change in the current accounting policy that does not classify financial instruments. Current measurement is at
amortised cost, with certain derivative financial instruments not recognised on balance sheet. The future financial effect of this
change in accounting policy is not yet known as the classification and measurement process has not yet been fully completed.
Incitec Pivot Limited
65
Notes to the Financial Statements
For the year ended 30 September 2004
38. Impact of adopting AASB equivalent to International Financial Reporting Standards
(continued)
Hedge accounting
Under AASB 139 - Financial Instruments: Recognition and Measurement, in order to achieve a qualifying hedge, the entity is
required to meet the following criteria:
•
•
•
•
Identify the type of hedge - fair value or cash flow;
Identify the hedged item or transaction;
Identify the nature of the risk being hedged;
Identify the hedging instrument;
• Demonstrate that the hedge has been and will continue to be highly effective; and
• Document the hedging relationship, including the risk management objectives and strategy for undertaking the hedge and how
effectiveness will be tested.
This may result in a change in the entity’s current accounting policy if hedge transactions are designated as a hedge of the
anticipated purchase or sale of goods or services, purchase of qualifying assets, or an anticipated interest transaction. Gains and
losses on the hedge arising up to the date of the anticipated transaction, together with any costs or gains arising at the time of
entering into the hedge, are deferred and included in the measurement of the anticipated transaction when the transaction has
occurred as designated. Under the new policy hedge accounting may no longer be able to be applied to such contracts and gains
and losses on the contracts may be recognised in the Statements of Financial Performance. Reliable estimation of the future
financial effect of this change in accounting policy has not yet been measured.
Income taxes
Under the Australian equivalent to IAS 12 - Income Taxes, deferred tax balances are determined using the balance sheet method
which calculates temporary differences based on the carrying amounts of an entity's assets and liabilities in the Statements of
Financial Position and their associated tax bases. In addition, current and deferred taxes attributable to amounts recognised directly
in equity are also recognised directly in equity. This will result in a change to the current accounting policy, under which deferred tax
balances are determined using the income statement method, items are only tax effected if they are included in the determination of
pre-tax accounting profit or loss and/or taxable income or loss and current and deferred taxes cannot be recognised directly in
equity.
Share based payments
Under AASB 2 - Share Based Payment, the Company will be required to determine the fair value of share based payments issued
to employees as remuneration and recognise an expense in the Statements of Financial Performance. This standard applies to all
share based payments issued after 7 November 2002 which have not vested as at 1 January 2005. Reliable estimation of the future
financial effects of this change in accounting policy is impracticable as the details of future equity based remuneration plans are
unknown. The impact on Incitec Pivot will be to decrease net profit and increase shareholder equity.
Employee benefits
Under AASB 119 - Employee Benefits, employer sponsors are required to recognise the net surplus or deficit in their employer
sponsored defined benefit funds as an asset or liability respectively. This will result in a change in Incitec Pivot’s current accounting
policy which does not currently recognise the net assets/liabilities of the defined benefit superannuation fund. Under the new policy,
the Company will be required to recognise either an asset of the defined benefit superannuation fund for the net surplus, or a
liability of the defined benefit superannuation fund for the net shortfall based on an actuarial calculation of the position of the fund.
The initial adjustment on transition will be through retained earnings and subsequent adjustments will be to net profit or loss for the
period. Reliable estimation of the future financial effects of this change in accounting policy is impracticable because the actuarial
calculations have not yet been completed as at the date of this report.
Goodwill
Under the Australian equivalent to AIFRPs 3 - Business Combinations, amortisation of goodwill will be prohibited, and will be
replaced by annual impairment testing focusing on the cash flows of the related cash generating unit. This will result in a change in
the group’s current accounting policy which amortises goodwill over its useful life, but not exceeding 20 years. Under the new
policy, amortisation will no longer be charged, but goodwill will be written down to the extent it is impaired. Reliable estimation of the
future financial effects of this change in accounting policy is impracticable because the conditions under which impairment will be
assessed are not yet known. The impact on Incitec Pivot (subject to impairment testing) will be to increase net profit and to
increase net assets.
66
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2004
38. Impact of adopting AASB equivalent to International Financial Reporting Standards
(continued)
The above should not be regarded as a complete list of changes in accounting policies that will result from the transition to AIFRPs,
as not all standards have been analysed as yet, and some decisions have not yet been made where choices of accounting policies
are available. For these reasons it is not yet possible to quantify the impact of the transition to AIFRPs on the Company’s financial
position and reported results.
39. Events subsequent to balance date
Since the end of the financial year the directors have declared a final dividend of 70 cents per share and a special dividend of
30 cents per share. Both dividends are 100% franked at the 30% corporate tax rate and are payable on 9 December 2004.
The directors have not become aware of any other significant matter or circumstance that has arisen since 30 September 2004, that
has affected or may affect the operations of the consolidated entity, the result of those operations, or the state of affairs of the
consolidated entity in subsequent years, which has not been covered in this report.
Incitec Pivot Limited
67
Directors’ Declaration on the Financial Report set out on pages
12 to 67
I, John C Watson, being a director of Incitec Pivot Limited, do hereby state in accordance with a resolution of the directors that in the
opinion of the directors,
1. (a) the financial statements and notes, set out on pages 12 to 67, are in accordance with the Corporations Act 2001 (Cth),
including:
(i) giving a true and fair view of the financial position of the Company and the consolidated entity as at 30 September 2004 and
of their performance, as represented by the results of their operations and their cash flows, for the year ended on that
date;and
(ii) complying with Accounting Standards in Australia and the Corporations Regulations 2001 (Cth); and
(b) there are reasonable grounds to believe the Company will be able to pay its debts as and when they become due and payable.
2. There are reasonable grounds to believe that the Company and the subsidiaries identified in note 36 will be able to meet any
obligations or liabilities to which they are or may become subject by virtue of the Deed of Cross Guarantee between the Company
and those subsidiaries pursuant to ASIC Class Order 98/1418 (as amended).
John C Watson, AM
Chairman
Dated at Melbourne this 29th day of October 2004
.
68
Incitec Pivot Limited
Shareholder Statistics
As at 18 October 2004
Distribution of ordinary shareholder and shareholdings
Size of holding
–
–
–
–
1
1,001
5,001
10,001
100,001 and over
Total
1,000
5,000
10,000
100,000
Number of
holders
Percentage
Number of
shares
Percentage
34,664
2,728
80
22
10
37,504
92.43%
7.27%
0.21%
0.06%
0.03%
100%
9,132,044
4,736,388
527,599
465,832
43,419,164
58,281,027
15.67%
8.13%
0.90%
0.80%
74.50%
100%
Included in the above total are 1,302 shareholders holding less than a marketable parcel of shares.
The holdings of the 20 largest holders of fully paid ordinary shares represent 75.06% of that class of shares.
Twenty largest ordinary fully paid shareholders
Orica IC Assets Ltd
National Nominees Limited
JP Morgan Nominees Australia Limited
RBC Global Services Australia Nominees Pty Limited
Australian Foundation Investment Company Limited
Gullane Holdings Ltd
Gwynvill Trading Pty Ltd
RBC Global Services Australia Nominees Pty Ltd
Mirrabooka Investments Limited
Westpac Custodian Nominees Limited
Gregory Witcombe
Citicorp Nominees Pty Limited
Ross Investment (Aust) Pty Ltd
ICM Agriculture Pty Ltd
Securities Exchange Pty Ltd
Tallageira Pastoral Co. Pty Ltd
ANZ Nominees Limited
Ross Investment (Aust) Pty Ltd
Ajay Nominees Pty Ltd
Mrs Diana Eirene Angliss Gibson
Total
Number of
shares
40,796,719
689,061
595,279
453,641
254,260
178,110
118,127
117,274
110,545
106,148
59,778
58,702
44,583
37,533
27,815
23,721
20,428
20,263
17,285
16,624
43,745,896
Percentage
70.00
1.18
1.02
0.78
0.44
0.31
0.20
0.20
0.19
0.18
0.10
0.10
0.08
0.06
0.05
0.04
0.04
0.03
0.03
0.03
75.06
Register of substantial shareholders
The names of substantial shareholders in the Company, and the number of fully paid ordinary shares in which
each has an interest, as disclosed in substantial shareholder notices to the Company on the respective dates,
are as follows:
1 June 2003
Orica IC Assets Limited
40,796,719
70.00%
On-market buy-back
There is no current on-market buy-back.
Distribution of redeemable preference shareholder and shareholdings issued by Incitec
Fertilizers Limited
Size of holding
1
5,001
Total
–
–
1,000
10,000
Number of
Number of
holders
Percentage
RPS
Percentage
28
1
29
96.6%
3.4%
100%
3,400
7,600
11,000
30.9%
69.1%
100%
The holdings of the 20 largest holders of redeemable preference shares represent 92% of that class of shares.
70
Incitec Pivot Limited
Five Year Financial Statistics
Incitec Pivot Limited and its controlled entities
Sales
Earnings before depreciation, amortisation, net borrowing costs and tax
Depreciation and amortisation (excluding goodwill)
Goodwill amortisation
Earnings before net borrowing costs and tax (EBIT)
Net borrowing costs
Rebates
Individually significant items before tax
Taxation revenue / (expense)
Operating profit after tax and individually significant items
Individually significant items after tax attributable to members of Incitec Pivot
Operating profit after tax before individually significant items (net of tax)
Dividends
Current assets
Property, plant and equipment
Investments
Intangibles
Other non-current assets
Total assets
Current borrowings and payables
Current provisions
Non-current borrowings and payables
Non-current provisions
Total liabilities
Net assets
Shareholders’ equity
Total shareholders’ equity
Ordinary Shares
Investor Shares
Number of shares on issue at year end
thousands
thousands
thousands
Weighted average number of shares on issue (investor and ordinary)
thousands
Earnings per share
before individually significant items
including individually significant items
Dividends
Dividend franking
Share price range – High
Low
Year end
Stockmarket capitalisation at year end
Net tangible assets per share
Profit margin (earnings before net borrowing costs and tax/sales)
Net debt
Gearing (net debt/net debt plus equity)
Interest cover (earnings before net borrowing costs and tax/net
borrowing costs)
Net capital expenditure on plant and equipment (cash flow)
Net capital expenditure on acquisitions/(disposals) (cash flow)
Return on average shareholders funds
before individually significant items
including individually significant items
cents
cents
cents
%
$000
$
%
$000
%
times
$000
$000
%
%
2004
$000
1,135,588
167,179
(35,372)
(9,945)
121,862
(5,406)
(9,327)
(32,090)
75,039
5,832
80,870
-
460,930
296,132
-
183,809
30,522
971,393
272,185
26,877
19,049
21,762
339,874
631,519
631,519
631,519
58,281
-
58,281
58,281
138.8
128.8
29
100
$19.30
$15.65
$18.80
1,095,683
7.68
10.7
(20,792)
(3.4)
22.5
29,387
-
13.4
12.5
2003
$000
686,307
83,503
(21,225)
(3,128)
59,150
(6,816)
(64,568)
(6,389)
(18,623)
(53,656)
35,033
24,478
350,599
296,615
-
185,354
34,578
867,146
177,874
37,133
69,268
9,489
293,764
573,382
573,382
573,382
58,281
-
58,281
31,120
112.6
(59.8)
140
100
$15.70
$14.00
$15.66
912,681
6.66
8.6
74,394
11.5
8.7
12,919
(4,393)
9.7
(5.1)
Incitec Pivot Limited
71
Five Year Financial Statistics
2002
$000
604,214
60,873
(15,267)
-
45,606
(13,663)
-
(8,015)
(5,402)
18,526
(2,651)
21,177
-
201,014
116,518
-
-
18,972
336,504
109,073
16,505
60,000
741
186,319
150,185
150,185
150,185
14,037
3,448
17,485
17,485
121.1
106.0
-
-
N/A
N/A
N/A
N/A
8.59
7.5
81,348
35.1
3.3
3,593
(400)
15.1
13.2
2001
$000
627,748
40,563
(21,458)
(187)
18,918
(24,358)
-
(19,897)
7,840
(17,497)
(10,962)
(6,535)
-
204,522
127,825
-
-
25,123
357,470
124,208
15,483
85,000
1,563
226,254
131,216
131,216
131,216
14,059
3,428
17,486
17,486
2000
$000
612,603
35,209
(22,716)
(977)
11,516
(20,160)
-
(22,180)
7,690
(23,134)
(14,195)
(8,939)
14,304
235,013
192,010
3,773
14,959
30,436
476,191
213,312
12,362
100,000
1,665
327,339
148,852
148,852
148,852
14,726
2,777
17,503
16,530
(37.4)
(100.1)
(54.1)
(140.0)
-
-
N/A
N/A
N/A
N/A
7.50
3.0
152,579
53.8
0.8
(9,362)
(75,935)
(4.7)
(12.5)
90
-
N/A
N/A
N/A
N/A
7.65
1.9
260,064
63.6
0.6
12,068
-
(5.6)
(14.4)
72
Incitec Pivot Limited
S H A R E H O L D E R I N F O R M A T I O N
Annual General Meeting
Share Registry
Auditor
2.00pm Friday 17 December 2004
at the Auditorium, Melbourne Exhibition
Centre, 2 Clarendon Street,
Southbank Victoria 3006,
Australia.
Stock Exchange Listing
Incitec Pivot’s shares are listed on the
Australian Stock Exchange (ASX) and are
traded under the code IPL.
ASX Perpetual Registrars Limited
Level 4, 333 Collins Street,
Melbourne Victoria 3000,
Australia.
GPO Box 1736P,
Melbourne Victoria 3001,
Australia.
Telephone: 1300 301 253
(for callers within Australia)
International: +61 3 9615 9317
Facsimile: +61 3 9615 9744
Email: registrars@asxperpetual.com.au
Website: www.asxperpetual.com.au
KPMG
KPMG House, 161 Collins Street,
Melbourne Victoria 3000,
Australia.
Incitec Pivot Limited
Registered address and head office:
70 Southbank Boulevard,
Southbank Victoria 3006,
Australia.
GPO Box 1322L,
Melbourne Victoria 3001,
Australia.
Telephone: +61 3 8695 4400
Facsimile: +61 3 8695 4419
Website: www.incitecpivot.com.au
Incitec Pivot Limited
ABN 42 004 080 264
70 Southbank Boulevard
Southbank Victoria
Australia 3006
Postal address:
Incitec Pivot Limited
GPO Box 1322L
Melbourne Victoria
Australia 3001
Telephone:
+ 61 3 8695 4400
Facsimile:
+ 61 3 8695 4419
Website: www.incitecpivot.com.au
2
0
-
8
0
2
8
I
L
P
e
m